Saturday, July 30, 2011

Australian Centre for Commercial Mathematics

I recently blogged about the need for a National Centre for Complexity Economics.

I said the centre should be in an institution with a mathematics department and an IT department able to support it.

Today I became aware of the Australian Centre for Commercial Mathematics, whose "mission is to conduct projects with industry to solve complex problems using advanced mathematics and statistics." It only commenced in January this year so it hasn't taken me too long to discover it.

The centre itself is based on the success over the last thre years of the Australian Research Council Centre of Excellence for Mathematics and Statistics of Complex Systems (MASCOS. This is certainly the right mathematics facility to support the complexity economics work.

The School of Economics at UNSW houses both the Economic Design Network (EDN) and the The Society of Heterodox Economists (SHE).

The EDN supports research and scholarship in economic theory and experimental economics, and in its application to the design of economic policy. They claim;

By encouraging interdisciplinary research and policy innovation, using state of the art techniques in economic theory and experimental economics, it will create practical tools that can be used to solve complex social and economic problems.

By linking Australasian researchers into multidisciplinary teams and networks involving some of the best scholars and centres for economic theory and experimental economics around the world, it will also build on our strengths and help us to create a world class economic design capacity in the region.

SHE represents a collaboration of economists outside the mainstream. Annual conferences, workshops, a working paper series and a virtual forum are also coordinated by SHE.

These two together offer the potential for the development of a centre for complexity economics.

I should note that my earlier post didn't adequately deal with my equivalent for economics of the unified field theory in physics. I touched on some of it on my post about John Quiggin's lecture.

The argument proceeds simply;
1. Neo-classical economics is inadequate as science as its assumptions (especially methodological individualism and methodological equilibriation) do not fit most real world circumstances.
2. Behavioural economics and institutional economics are both attempts to understand economic behaviour as systems - in a way, where do the preferences of individuals come from.
3. Evolutionary economics and economic dynamics attempt to deal with the fact that economic systems are, in reality, seldom in an equilibrium state.
4. The fact that the neo-classicists force economic problems to be tractable as constrained optimisation problems doesn't mean the use of mathematics is wrong, it is just the wrong mathematics.
5. If we posit that preferences are formed by experience of previous market transactions and that the question to study is how changes occur not what happens at "equilibrium" then the mathematics to be applied is the mathematics of complexity.

Finally, I draw a distinction between economic science and political economy that builds on John Neville Keynes original distinction between positive economics, normative economics and the art of economics. For me the latter is a separation of the issue into the three fields - economic science which describes how agents react to actions of other agents in economic affairs, ethics which is what our policy goals are (we should promote equity or we should promote efficiency) which are combined to create the kind of political economy practiced by Adam Smith - advocating policy positions.

I fully acknowledge the claim that many political economists would make that "economic science" is almost never practiced as it claims to be. I would however further assert that other aspects that appear in heterodox economics are either specific examples of institutions (more specifically the way that power is exerted to create preferences) or contentions about unstated ethical goals.

Novae Meridianae Demetae Dexter delenda est

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