The knowledge we have lost in information : the history of information in modern economics

313 Pages·2017·2.085 MB·English

by  Philip Mirowski, Edward Nik-Khah

THE KNOWLEDGE WE HAVE LOST IN INFORMATION

THE KNOWLEDGE
WE HAVE LOST
IN INFORMATION
The History of Information in
Modern Economics
Philip Mirowski

and
Edward Nik-K hah
1
1
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Published in the United States of America by Oxford University Press
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© Philip Mirowski and Edward Nik- Khah 2017
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Library of Congress Cataloging- in- Publication Data
Names: Mirowski, Philip, 1951- author. | Nik-Khah, Edward M., author.
Title: The knowledge we have lost in information: the history of information
in modern economics / Philip Mirowski & Edward Nik-Khah.
Description: New York City: Oxford University Press, 2017. | Includes index.
Identifiers: LCCN 2016036012 | ISBN 9780190270056 (hardcover)
Subjects: LCSH: Neoliberalism. | Neoclassical school of economics. |
Practical reason. | Economics.
Classification: LCC JC574.M567 2017 | DDC 338.501—dc23 LC record
available at https://lccn.loc.gov/2016036012
1 3 5 7 9 8 6 4 2
Printed by Sheridan Books, Inc., United States of America
CONTENTS
List of Figures and Tables  vii
Acknowledgments  ix
1. It’s Not Rational  1
2. The Standard Narrative and the Bigger Picture  31
3. Natural Science Inspirations  45
4. The Nobels and the Neoliberals  51
5. The Socialist Calculation Controversy as the Starting
Point of the Economics of Information  60
6. Hayek Changes His Mind  66
7. The Neoclassical Economics of Information Was
Incubated at Cowles  73
8. Three Different Modalities of Information in
Neoclassical Theory  101
CONTENTS
9. Going the Market One Better  124
10. The History of Markets and the Theory of
Market Design  144
11. The Walrasian School of Design  161
12. The Bayes- Nash School of Design  170
13. The Experimentalist School of Design  183
14. Hayek and the Schools of Design  193
15. Designs on the Market: The FCC Spectrum
Auctions  207
16. Private Intellectuals and Public Perplexity:
The TARP  221
17. Artificial Ignorance  233
Notes  243
Bibliography  271
Index  293
VI
LIST OF FIGURES AND TABLES
FIGURES
3.1 Shannon Information Theory  46
8.1 The Block Universe of Relativistic Physics  110
8.2 The Harsanyi Setup  114
10.1 Orthodox Trajectory Through Information
Space, I  153
10.2 Orthodox Trajectory Through Information
Space, II  159
11.1 Reiter’s Schematic  165
12.1 An Equilibrium Bidding Strategy, According to
the Bayes- Nash Approach  177
14.1 Orthodox Trajectory Through Information
Space, III  204
LIST OF F IGURES AND T ABLES
TABLES
4.1 Economics of Information/ Knowledge Nobel List,
1969– 1994  52
7.1 Cowles Commission Members and their Information
Enthusiasms  80
8.1 Three Formal Approaches to Information  102
15.1 Auctionomics’ Product Comparisons  220
VIII
ACKNOWLEDGMENTS
We were inspired to write this book after accepting an invitation
extended by the Institute for New Economic Thinking to pres-
ent a short course on the history of twentieth- century economics.
Both of us, jointly and separately, had written on themes relevant
to this topic: the confusion evident in the sundry treatments of
information by economists, the neoliberalization of the econom-
ics profession, the constructivist turn in economics, and the largely
misunderstood legacy of experimental economics, among others.
Our intention was to summarize this previous work and draw from
it lessons relevant to our post- crisis world: without understand-
ing where orthodox economics is headed, how can the student get
excited about the “new”?
Thus, we set out to explain how the economics profession ended
up in its current state, seen from a doctrinal perspective. We already
had bits and pieces of the story in hand, but setting out to weave
them into a coherent and (we hope) compelling narrative required
that we push far beyond anything we had previously written. What
you hold in your hands is the result.