Atomic economics

Now, Economics is not part of a bigger intellectual construct, but a substitute of such a thing. Economics has been taken over by frustrated astronomers (Paul Romer), sociologists (Becker, Williams), or physicists (Mishkin). They approach Economics as one of those sciences, and therefore forget that it is, actually, about people. The last thing a “good” economist will do is… ask people. Instead, he will resort to a good computer program.

With that perspective in mind, some economists (such as Nobel Prize winner Gary S. Becker, together with his friend, jurist Richard Posen) produced this staggering paper, in which they very clearly state the following:

“That is, it is rational under certainty to commit suicide at t if  ∑ , for all =− ≤Ai ti t β u(i) 0 A = t,t +1,…,T , where T is the known length of life without suicide.”

Messrs Becker and Posen reach the conclusion that human beings kill themselves only when the net present value of their future utility is negative. Translation: when they lose all hope. But, as good scientists, they also remark that, “there may be considerable gain from not committing suicide during various periods of negative utility” (translation: even if the future seems dark, it may be worth waiting a bit before pulling the trigger).

Admirably, there is no evidence (empirical or otherwise) that, after reading the 41 pages of the paper, anybody committed suicide (or even tried). Even if there is no literature regarding the topic, one may suggest that this could be because there is a chance that, other than the authors and their research assistants, nobody was able to read it without falling asleep.

Backer and Posen’s is the serious version of another paper written by Princeton’s Alan Blinder study. The Economics of Brushing Teeth. Equally hilarious, but wonkier still, is Krugman’s The Theory of Interstellar Trade, a 14-page document “chiefly concerned with the following question: how should interest charges on goods in transit be computed when the goods travel at close to the speed of light?”

Krugman, who at the time was an assistant professor at Yale University, ends the paper’s Abstract stating that, “a solution is derived from economic theory, and two useless but true theorems are proved.”

This is the key—the solution is useless, but true. That could very well function in the realm of theory, but Economics is about society, and society is made by human beings, not by atoms.