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Machine Dreams Economics Becomes a Cyborg Science

P. Mirowski

posted on 01 July 2002

reviewed by J. McCauley

I've read about 310 pages and can recommend strongly that anyone with a serious interest in economics and finance should read this fantastic book. The
basis for the text are the contributions of Shannon, Turing, von Neumann, Wiener, Marshak, and Arrow. Covered are RAND, the military influence on
academic economics, and the Cowles Foundation. Mirowski goes on to tell us the main story of the Cowles Foundation, which Bernstein does not at all
hint at in his Capital Ideas. Having praised the book, I will now concentrate briefly on some points of disagreement. One should not confuse
with noise. Systems at the transition to chaos can
define automata that can perform simple arithmetic. That 'cyborg' has it's origin in the physical sciences seems farfetched (the connection between Turing
and physics is supposed to be via Maxwell's demon, but was Turing really motivated by the idea of Maxwell's demon?). Nonlinear dynamics and fractals
('chaos' and fractals) certainly did not evolve from cybernetics or 'system theory' ('system theory' was based at best on an awareness of equilibria and limit
cycles of differential equations, and made vague, unjustifiable allusions to holism). Cybernetics cannot really be seen as the midwife of what is now loosely
called 'complexity' either, rather, that (still undefined) field grew out of nonlinear dynamics, neural networks, computability theory and molecular biology.
Mirowski is right that many scientists confuse simulations with experiment and observations. I have argued against this confusion in papers and books. I
will likely find much more to criticize, but I also find the book to be extremly well-written and certainly worth reading.

Mirowski paints an intriguing picture of (Gödel-influenced) von Neumann, RAND, researchers with awareness of information and computability
limitations leading to agent-based modelling with some respect for empiricism on the one hand, and then on the other Arrow, the Cowles Foundation, later
rejection of empirical tests, and Bourbaki-style existence proofs leading to infinte demands on information requirements on Walrasian agents, and
noncomputable equilibria. To date, agent-based modelling has not explained anything of significance uniquely-empirically, but the head-in-the-sand attitude
of the neo-classical economic theorists is made quite clear in this work. Let me make a stronger statement: everyone working in Econpphysics should make
use of this vast source of historic information. It focuses us on the fact that the Minority Game, which we have made into a small research industry, is only
one example of a game that comes to us (courtesy of RAND-inspired OR) the El Farol Bar.