The visible hand in economics

Quote: 5) Lionel Robbins – definition of economics

Posted on: October 26, 2008

Lionel Robbins (*):

Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses

This is the fundamental definition of economics that I adher to when I write here. In all honesty this is not the sole definition of what people “see” economics as – however, it THE definition of what I would term “economic science”.

This definition fits neatly with the theoretical and applied versions of micoeconomics – however, without appropriate “microfoundations” it is hard to decide whether marcroeconomics sticks to this definition of what economics is – is macroeconomics raising the TRUE trade-off between scarce resources in the entire economy?

Ultimately, Milton Friedman felt we make macroeconomics consistent with this view (and useful) bu focusing on predictive accuracy – like many economic models, this made sense once you converged to your result, but not out of equilibrium :P

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17 Responses to "Quote: 5) Lionel Robbins – definition of economics"

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The Effectiveness of “Traditional” Neoclassical Economics in Solving current problems

My name is Jeffrey M Doyle. I ATTENDED THE UNIVERSITY OF MICHIGAN, ANN ARBOR AND MICHIGAN STATE UNIVERSITY, RECEIVING MY Ph.D. IN 1977.

FOR OVER THIRTY YEARS MY [AND OTHERS] IDEAS WERE DISMISSED AS UNPROVEN AND NOT RELEVANT. TODAY MOST
OF WHAT I PROPOSED IN A 1977 PH.D. DISSERTATION HAS NOT ONLY GAINED ACCEPTANCE BUT IS BEING ACTIVELY
PROMOTED AND PUT INTO PRACTICE. BETTER LATE THAN NEVER.

IN TERMS OF OUR ECONOMY, WE ARE CURRENTLY IN THE WORST SHAPE SINCE THE GREAT DEPRESSION OF 1929. HARD
CORE, DEEPLY ENTRENCHED ADVOCATES OF NARROWLY DEFINED ECONOMICS WILL STAUNCHLY DEFEND THEIR
ICONIC VIEWS-EVEN IN THE FACE OF ONE DISMAL FAILURE AFTER ANOTHER. GALILEO’S REWARD FOR PROVING THAT
THE EARTH ORBITED THE SUN INSTEAD OF THE OPPOSITE SCENARIO ESPOUSED BY THE VATICAN, LED TO A LIFETIME OF
HOUSE ARREST.

MY WORK IS BEST SUMMARIZED FROM THIS EXCERPT FROM WIKIPEDIA “…Energy economics relating to thermoeconomics, is a
broad scientific subject area which includes topics related to supply and use of energy in societies. Thermoeconomists argue that economic
systems always involve matter, energy, entropy, and information.[12]Thermoeconomics is based on the proposition that the role of energy in
biological evolution should be defined and understood through the second law of thermodynamics but in terms of such economic criteria as
productivity, efficiency, and especially the costs and benefits of the various mechanisms for capturing and utilizing available energy to build
biomass and do work.[13][14] As a result, thermoeconomics are often discussed in the field of ecological economics, which itself is related to
the fields of sustainability and sustainable development.
Georgescu-Roegen reintroduced into economics, the concept of entropy from thermodynamics (as distinguished from the mechanistic
The Effectiveness of “Traditional” Economics in solving Current Problems… http://connect.bioneers.org/profiles/blog/create
1 of 5 10/21/2008 10:36 AM
foundation of neoclassical economics drawn from Newtonian physics) and did foundational work which later developed into evolutionary
economics. His work contributed significantly to bioeconomics and to ecological economics…”

The traditional [1970's] curriculum of natural resource economics emphasized fisheries models, forestry models, and minerals extraction models
(i.e. fish, trees, and ore). In recent years, however, other resources, notably air, water, the global climate, and “environmental resources” in
general have become increasingly important to policy-making.
The economics and policy area focuses on the human aspects of environmental problems. Traditional areas of environmental and natural
resource economics, include welfare theory, pollution control, resource extraction, and non-market valuation, and also resource
exhaustibility,[3] sustainability, environmental management, and environmental policy. Research topics could include the environmental
impacts of agriculture, transportation and urbanization, land use in poor and industrialized countries, international trade and the environment,
climate change, and methodological advances in non-market valuation, to name just a few. These items made up the core of my 1970’s
curriculum.
Natural resource economics also relates to energy, and is a broad scientific subject area which includes topics related to supply and use of
energy in societies. Thermoeconomists argue that economic systems always involve matter, energy, entropy, and information.
[4]Thermoeconomics is based on the proposition that the role of energy in biological evolution should be defined and understood through the
second law of thermodynamics but in terms of such economic criteria as productivity, efficiency, and especially the costs and benefits of the
various mechanisms for capturing and utilizing available energy to build biomass and do work.[5][6] As a result, Natural resource economics are
often discussed in the field of ecological economics, which itself is related to the fields of sustainability and sustainable development.
In recent years more attention has been given people such as Frederick Soddy who in Wealth, Virtual Wealth and Debt, turned his attention to
the role of energy in economic systems. He criticized the focus on monetary flows in economics, arguing that real wealth was derived from the
use of energy to transform materials into physical goods and services. Soddy’s economic writings were largely ignored in his time, but would
later be applied to the development of biophysical economics and ecological economics and also bioeconomics in the late 20th century.
The rise, and absorption into the mainstream of Keynesian economics, which appeared to provide a more coherent policy response to
unemployment than unorthodox monetary or trade policies contributed to the decline of interest in these schools.
After 1945, the synthesis of Keynesian and neoclassical economics resulted in a clearly defined mainstream position based on a division of the
field into microeconomics (generally neoclassical but with a newly developed theory of market failure) and macroeconomics (divided between
Keynesian and monetarist views on such issues as the role of monetary policy). Austrians and post-Keynesians who dissented from this
synthesis emerged as clearly defined heterodox schools. In addition, the Marxist and institutionalist schools remained active.
Hence, while mainstream economics may be defined in terms of the “rationality-individualism-equilibrium” nexus, heterodox economics may be
defined in terms of a “institutions-history-social structure” nexus. Note that there is a different emphasis in distinguishing mainstream and
heterodox economics in this way than is involved in distinguishing them as closed-system and an open-system approaches respectively. It is
often claimed that neoclassical theory is appropriate as a tool only under certain limited conditions, where there is “perfect” or “near-perfect”
competition. While there is a large body of neoclassical analysis of imperfect competition, this terminology may be seen as incorporating the
assumption that non-competitive markets represent minor deviations from an ideal or perfect norm
Fields or schools of heterodox economics
American Institutionalist School
Austrian economics # (partly within, and partly outside of mainstream economics)[20]
Feminist economics #
Binary Economics
Political economy (the term is used in various ways, also to describe certain kind of economics)
Post-Keynesian economics
Post scarcity
Sraffian economics #
Marxian economics #
Socialist economics #
Bioeconomics §
Complexity economics
Evolutionary economics #§ (partly within mainstream economics)
Institutional economics # (partly within mainstream economics)
Ecological Economics
Neuroeconomics
Supply-side economics
Technocracy Incorporated (Energy Accounting)
Thermoeconomics
Ecological economics
Econophysics
# Listed in Journal of Economic Literature codes scrolled to at JEL: B5 – Current Heterodox Approaches.
§ Scrolled to at JEL: C73 – Stochastic and Dynamic games; Evolutionary games.
Research is also being done in the multidisciplinary field of cognitive science on individual decision making, information as a general
phenomena, distributed cognition and their implications on economic dynamicity.
Some schools in the social sciences aim to promote certain perspectives: classical and modern political economy; economic history:
The Effectiveness of “Traditional” Economics in solving Current Problems… http://connect.bioneers.org/profiles/blog/create
2 of 5 10/21/2008 10:36 AM
sociology and anthropology; gender and racial issues in economics; economic ethics and social justice; development studies; and so on.
[edit] References
1.^ a b LAWSON, Tony. The nature of heterodox economics. Published by Oxford University Press on behalf of the Cambridge Political
Economy Society, 2005, in: Cambridge Journal of Economics 2006 30(4):483-505; doi:10.1093/cje/bei093
2.^ Barry, C. (1998). Political-economy: A comparative approach. Westport, CT: Praeger.
3.^ Case, K. & Fair, R. (2008). The principles of economics. New Saddle River, NJ: Pearson.
4.^ http://www.eoearth.org/article/Soddy,_Frederick Soddy, Frederick – Encyclopedia of Earth
5.^ a b DAVIS, John B. The Nature of Heterodox Economics. post-autistic economics review, issue no. 40, 1 December 2006, article 3,
pp.23-30.
6.^ GABRIEL, Satya J. Introduction to Heterodox Economic Theory. , June 4, 2003 Satya J. Gabriel is a Professor of Economics at Mount
Holyoke College
7.^ DOW, S. C. Prospects for the Progress in Heterodox Economics. Journal of the History of Economic Thought 22 (2): 157-170., 2000.
8.^ GABRIEL, Satya J. Introduction to Heterodox Economic Theory. , June 4, 2003, Based on lecture’s notes at the author’s website. Copyright
© 1996-2007, Satyananda J. Gabriel, Mount Holyoke College.
9.^ GABRIEL, Satya J. Introduction to Heterodox Economic Theory. , June 4, 2003, Based on lecture’s notes at the author’s website. Copyright
© 1996-2007, Satyananda J. Gabriel, Mount Holyoke College.
10.^ GABRIEL, Satya J. Introduction to Heterodox Economic Theory. , June 4, 2003, Based on lecture’s notes at the author’s website.
Copyright © 1996-2007, Satyananda J. Gabriel, Mount Holyoke College.
11.^ Colander, D. (2007). Pluralism and Heterodox Economics: Suggestions for an “Inside the Mainstream” Heterodoxy
12.^ Baumgarter, Stefan. (2004). Thermodynamic Models, Modeling in Ecological Economics (Ch. 18)
13.^ Peter A. Corning 1 *, Stephen J. Kline. (2000). Thermodynamics, information and life revisited, Part II: Thermoeconomics and Control
information Systems Research and Behavioral Science, Apr. 07, Volume 15, Issue 6 , Pages 453 – 482
14.^ Corning, P. (2002). “Thermoeconomics – Beyond the Second Law” – source: http://www.complexsystems.org
15.^ Cleveland, C. and Ruth, M. 1997. When, where, and by how much do biophysical limits constrain the economic process? A survey of
Georgescu-Roegen’s contribution to ecological economics. Ecological Economics 22: 203-223.
16.^ Daly, H. 1995. On Nicholas Georgescu-Roegen’s contributions to economics: An obituary essay. Ecological Economics 13: 149-54.
17.^ Mayumi, K. 1995. Nicholas Georgescu-Roegen (1906-1994): an admirable epistemologist. Structural Change and Economic Dynamics 6:
115-120.
18.^ Mayumi,K. and Gowdy, J. M. (eds.) 1999. Bioeconomics and Sustainability: Essays in Honor of Nicholas Georgescu-Roegen. Cheltenham:
Edward Elgar.
19.^ Mayumi, K. 2001. The Origins of Ecological Economics: The Bioeconomics of Georgescu-Roegen. London: Routledge.
20.^ A Companion to the History of Economic Thought (2003). Blackwell Publishing. ISBN 0631225730 p. 452
[edit] See also
Marc Linder, Anti-Samuelson.
Austrian School of Economics”
“competition: Austrian conceptions”
Behavioural economics”
Bioeconomics
“biological applications of economics”
EAEPE
Francis Green & Petter Nore (eds.), Economics: An Anti-Text.
The following are entries for the above from The New Palgrave: A Dictionary of Economics (1987):
Institutional economics
Post-Keynesian economics
Marxian economics
Socialist economics
Sraffian economics
[edit] External links
Association for Heterodox Economics
Brazilian Journal of Political Economy (bilingual)
Cambridge Journal of Economics. founded in the traditions of Marx, Keynes, Kalecki, Joan Robinson and Kaldor
Conference of Socialist Economists
Departments of Economics With Heterodox Interests
Dollars and Sense
Debunking Economics
Evolutionary Economics – John P. Birchall
Green Economics Institute (links, aims, activities)
Heterodox Economics Web
The History of the Economic Thought Website
Institutional & Behavioral Economics
The International Journal of Development Issues, Faculty of Economics and Business, University of Sydney, Australia
International Journal of Green Economics (publisher’s description)
The London School of Economics at the HET website
Post-Autistic Economics Network – heterodox economics: sanity, humanity and science – pluralism in economics
ROBINSON: Research On Banking International and National Systems Or Networks, University of Ottawa, History of Economics Thought
ROUSSEAU, Jean-Jacques.Page at The History of Economic Thought Website
The Effectiveness of “Traditional” Economics in solving Current Problems… http://connect.bioneers.org/profiles/blog/create
3 of 5 10/21/2008 10:36 AM
STEDMAN-JONES, Gareth. Saint Simon and the liberal origins of the socialist critique of Political Economy. King’s College, Cambridge
University
“Teaching Heterodox Economics Concepts”, Andrew Mearman (2007) in “The Handbook for Economics Lecturers”
Union for Radical Political Economics
LINKS: University of Utah. Economics Dept. Heterodox Economics Student Association
[edit] Publications on heterodox economics
Articles
LEE, Frederic S. “heterodox economics,” The New Palgrave Dictionary of Economics, 2008, 2nd Edition, Abstract.
Books
Blatt, John Markus: Dynamic Economic Systems: A Post-Keynesian Approach, Armonk, 1983, ISBN 0710802730
COHN, Steven Mark. Reintroducing Macroeconomics: A Critical Approach. M. E. Sharpe, Inc, December 2006 ISBN 978-0-7656-1450-6
ISBN 978-0-7656-1451-3
DAVIS, John, editor. The Theory of the Individual in Economics: Identity and Value. Routledge, 2003 ISBN 0415202191
FULLBROOK, Edward, editor. A Guide to What’s Wrong with Economics. London: Anthem Press, November 2004 ISBN 1843311488
HARVEY, John T. and GARNETT JR., Robert F. Garnett, Editors. Future Directions for Heterodox Economics, Series Advances in Heterodox
Economics, The University of Michigan Press, 2007. ISBN 978-0-472-03247-1
LAVOIE, M. (1992) Foundations of Post-Keynesian Economic Principles, Aldershot: Edward Elgar.
McDERMOTT, John. Economics in Real Time: A Theoretical Reconstruction, Series Advances in Heterodox Economics, The University of
Michigan Press, 2003 ISBN 978-0-472-11357-6
ROCHON, Louis-Philippe (1999) Credit, Money and Banking: An Alternative Post-Keynesian Approach, Cheltenham: Edward Elgar.
ROCHON, Louis-Philippe and ROSSI, Sergio, editors. Modern Theories of Money: The Nature and Role of Money in Capitalist Economies.
Edward Elgar Publishing, 2003 ISBN 1840647892
Articles, conferences, papers
COHN, Steve. Common Ground Critiques of Neoclassical Principles Texts., 2003. Knox College (Illinois).
COLANDER, D. The Death Of Neoclassical Economics. Journal of the History of Economic Thought, 2002, 22 (3), pp. 127-43. Online
readable, free link – Copyright JHET, All rights reserved
LAVOIE, Marc. Do Heterodox Theories Have Anything in Common? A Post-Keynesian Point of View.
LAWSON, Catherine & LAWSON, Larry (1990). Financial system restructuring: lessons from Veblen, Keynes, and Kalecki. Journal of
Economic Issues 24 (1): 115-31.
LAWSON, Tony. The nature of heterodox economics. Published by Oxford University Press on behalf of the Cambridge Political Economy
Society, 2005, in: Cambridge Journal of Economics 2006 30(4):483-505; doi:10.1093/cje/bei093
MINSKY, Hyman (1996). Uncertainty and the institutional structure of capitalist economies. Journal of Economic Issues 30(2):357-68.
RANSON, Baldwin Heterodox theoretical convergence: possibility or pipe dream? (Notes and Communications)(Report). Journal of Economic
Issues, 01-MAR-07
SECCARECCIA, M. Early Twentieth-Century Heterodox Monetary Thought», Money, Financial Institutions, and Macroeconomics, ed. by A.J.
Cohen, H. Hagemann and J.N. Smithin, Boston: Kluwer Academic Publishers, 1997, pp. 125-39
Retrieved from “http://en.wikipedia.org/wiki/Heterodox_economics”
Categories: Heterodox economics | Political economy

Well, Matt!?

“He criticized the focus on monetary flows in economics, arguing that real wealth was derived from the
use of energy to transform materials into physical goods and services”

isn’t it implied that markets reflect the real wealth of energy? though while some look ahead and see a crash the mob only reflect on the immediate (business as usual), but when the crash happens it’s too late.

[...] Quote: 5) Lionel choreographer – definition of economics [...]

Hi Jeffrey,

Thanks for the substantial comment. I am currently a bit too tied up to write anything substantial – but I will try to have a post up about your comment by the end of the week.

Personally, I think holistic analysis provides a useful tool – however, the goal of a science must be to try and explain phenomena from the bottom up, hence the method of “mainstream” economics. I will get into more detail another time.

More in the same vein:

http://www.nature.com/nature/journal/v455/n7217/full/4551181a.html

Hope you find time to get back to discussing this Matt.

Regards

Indeed, hopefully I do get a chance. I will be away for a couple of weeks – so maybe after that. Definitely by Christmas.

“Personally, I think holistic analysis provides a useful tool”

Sorry I completely mis-read the comment. I will make a useful comment on it in a separate post :P

Ok I have got some timed posts coming up on them.

The 4th of Nov at 2pm I will discuss Dr Doyles piece. The 5th of Nov at 2pm I will discuss the article you linked to Andrew. Feel free to leave comments but I will not be able to reply until the 17th as I will be out of the country.

[...] Conceptions of economics: Comment from Dr Doyle 4 11 2008 A few weeks ago a fellow named Jeffrey Doyle posted a “history of economic thought” type comment/post on the blog, which can be found here. [...]

There something great inthis writing which i will find out soon.(i am a student at the universityof buea.reading banking and finance)

There is something great in this writing which i will find out soon.(i am a student at the universityof Buea Cameroon. Ireading banking and finance)

There is something great in this writing which i will find out soon.(i am a student at the universityof Buea Cameroon. Iread banking and finance)

[...] Comment from Andrew W 5 11 2008 In the same post that Dr Doyle commented on, Andrew W linked to an article which he wanted us to discuss here (article is [...]

Economics is not physics. The behaviour of human beings is not nearly as predictable as matter in physics [be it sub-atomic or macro.] While I understand the desire of many Economists to regard their Discipline as a deterministic, mathematically precise science, the reality is [with notable exceptions conceded] it is not a mechanistically elegant discipline like physics.

INTERDISCIPLINARY UTILIZATION AND INTEGRATION OF PHYSICS, BIOLOGY AND ESPECIALLY THERMODYNAMICS
INTO ECONOMIC ANALYSES, WILL GREATLY ENHANCE OUR ABILITY TO ADDRESS AND SOLVE CURRENT SOCIAL PROBLEMS–ESPECIALLY IN THE THE AREAS OF OF ENERGY AND ECOSYSTEM STABILITY

“The behaviour of human beings is not nearly as predictable as matter in physics”

Indeed. However, we have to ask why – it is a result of the lack of observability of the fundamental building blocks of peoples decisions, their preferences. As we don’t have this we are just trying to come up with the best method for understanding peoples choices – given their preferences.

As far as I can tell you are merely stating that we need to more fully map the scarcity implicit in natural resources when we analyse an issue. This is no different that the essence of the fundamental economic method but it matters when we try to apply the method.

Lionel Robbins quote is about “economic science”, the broad method which we both seem to agree upon. You appear to believe that there are major issues that need to be included in applied work – areas where we mis-specify the very relationship we are trying to analyse. I do not disagree with that, however without some specific detail about how you aim to do this I can’t really say much about it.

Your site is pretty interesting to me and your topics are very relevant. I was browsing around and came across something you might find interesting. I was guilty of 3 of them with my sites. “99% of blog managers are guilty of these five mistakes”. http://bit.ly/ts0ScL You will be suprised how easy they are to fix.

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