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Analytical Economics ISSUES AND PROBLEMS Analytical Economics ISSUES AND PROBLEMS NICHOLAS GEORGESCU-ROEGEN HARVARD UNIVERSITY PRESS CAMBRIDGE, MASSACHUSETTS · 1967 © Copyright 1966 by Nicholas Georgescu-Roegen All rights reserved Second Printing Distributed in Great Britain by Oxford University Press, London Library of Congress Catalog Card Number: 65-22061 Printed in the United States of America To OTILIA Gratiam plenam Foreword by Paul A. Samuelson Professor Georgescu-Roegen has been a pioneer in mathematical economics. The times have almost caught up with him; but, unlike the hare, he moves ahead of his pursuers in a divergent series. For along with the gathering together of important papers already published, we have here in Part I a new, long, and profound essay that goes to the very founda- tions of the possibility of a purely quantitative economic science — or for that matter of a purely quantitative science applicable to the physical and biological world. Even without this invaluable bonus, the collecting together from scattered learned journals of certain important essays by Georgescu-Roegen would be welcomed by economic scholars and students. For in Georgescu-Roegen we have a scholar's scholar, an economist's economist. On short airplane rides, when we tire of Agatha Christie, we can benefit much from dipping into Veblen or Rostow. The papers in this volume must be tackled in a very different manner. Each paragraph must be thoroughly chewed — and rechewed. The margin of the page is scarce large enough for our summaries and queries. One cannot, alas, read Agatha Christie twice; but a Georgescu-Roegen article is like the Widow's Cruse — dip into it again and again, and there remains yet more for the taking. Contemplating this assemblage of articles, I came to realize that the whole is greater than the sum of its parts: the 1936 classic on the pure theory of consumer's behavior is, to coin a phrase, complementary with the papers on choice of twenty years later. The great economists of earlier generations — Alfred Marshall, A. C. Pigou, and Lord Keynes — thought that mathematical economics had a slim past and no future at all. Time makes fools even of great men. In the middle third of the twentieth century, mathematics has everywhere swept through economics like an epidemic of measles sweeping through a new continent. He who would occupy a chair at a great university, advise the Prince or the Chairman of the Board, must serve his appren- ticeship in this difficult art. Deplore it or applaud it, the fact is there — like the Dead Sea or Pike's Peak. I shall not pronounce on the utility Unauthenticated Download Date | 5/23/16 6:54 PM viii FOREWORD BY SAMTJELSON of this trend, but I must set the record straight on the aesthetic quality of modern mathematical economics. Marshall, and Keynes and Pigou after him, insisted that mathematical economics lacked the intellectual grandeur of mathematical physics or of pure mathematics itself. And these were not second-rate minds, inno- cent of an art that was conspiring to deprive them of reputation and a living. Yet they should have known better. Consider the famous story told by Keynes — that Max Planck, the Nobel Laureate who started quantum physics, had quit economics early in life because it was too difficult! — and Keynes's quick antidote to the anecdote: "Professor Planck could easily master the whole corpus of mathematical economics in a few days." Or consider the dictum of Pigou: "But to the student of theoretical physics or the pure mathematician, watching from their Everest, the severest of so-called mathematical economists are merely flies crawling upwards to the towering summit of Primrose hill!" When I was a student, I believed such nonsense. For it is nonsense. As these pages show, mathematical economics is difficult enough for anyone. Read the collected works of Max Planck — great man that he was — and you will realize that like anyone else he would have to spend months and years in learning the tools of our trade. Even the genius of Keynes did not throw off, on the train from Cambridge to London, any recorded solutions to the many unsolved conundrums of his day: had Keynes anticipated the correct theoretical solution to the problem of transferring German reparations to the Allies, his Economic Consequences of the Peace might have been a duller book — but it would not have been a less accurate one. And when it comes to intellectual beauty, how can they appraise the beauty of advanced economics who don't know advanced economics? Anyone who has felt his skin bristle — A. E. Housman's test for percep- tion of poetry — when contemplating Hamilton's Principle in dynamics or Gibbs's equilibrium of heterogeneous substances will recognize that Ricardian comparative cost is beautiful. The logic of rational choice, so deeply explored in Part II here, will interest minds when today's sky- scrapers have crumbled back to sand. Professor Georgescu-Roegen is more than a mathematical economist. He is first an economist, and the first to debunk the pretensions of sym- bolic boondoggles. The niceties of marginal productivity and of original utility do not escape his skeptical notice. In one sentence he quotes Aristotle and in the next Pareto or von Neumann. An abstract theorem concerning the possible nonexistence of a positive factor-price suddenly becomes the basis for an insight into the problem of disguised unemploy- ment for overpopulated Rumania and agrarian economies. If a man is an economist and an expert in mathematics, usually you Unauthenticated Download Date | 5/23/16 6:54 PM FOREWORD BY SAMUELSON ix can guess that he is an enthusiast for mathematical economics, often too pretentious in his claims for that subject. Georgescu-Roegen is an excep- tion to this. Because he is so superlatively trained as a mathematician, he is quite immune to the seductive charms of the subject, being able to maintain an objective and matter-of-fact attitude toward its use. Coming from such a scholar, paradoxical views — like the following nuggets in the brilliant new essay — demand the attention of every serious scholar: ". . . we must accept that in certain instances at least, 'B is both A and non-A' is the case"; and his idea that the theoretical precision of Newton's and Einstein's physics, far from being the rule in the realm of physical science and the goal for less developed sciences, is actually the result of physicists' confining their attention to the easy subsets of experience. I defy any informed economist to remain complacent after meditating over this essay. Wassily Leontief's input-output analysis — which statisticians are uti- lizing in the Soviet Union, the United States, and all over the world — has gained much from the papers in Part III of this collection. Thus, the basic theorem on nonsubstitution in a one-primary-factor system is merely one plum among many in the essay entitled "Some Properties of a Generalized Leontief Model" (1951). This then is a book to own and to savor. My old master, Joseph Schumpeter, once hoped to collaborate with Nicholas Georgescu-Roegen on a definitive economic treatise. It has always been a source of regret to me that his prewar dream could not be fulfilled. These selected papers offer economists the best possible consolation. Massachusetts Institute of Technology January 1965 Unauthenticated Download Date | 5/23/16 6:54 PM