Newtonian Mechanics vs Information-Processing for the Future (1958)
.. economics is at present acing two different images of its proper field and future development. ... On the one side we have what might be called the "traditional" view which regards the raw subject matter of economics as essentially a set of time series ... Economics research is then seen as the study of these time series with a view to discovering their "laws of motion." There is an analogy here with astronomy; just as the raw material of the study of the motions of the heavenly bodies is a set of time series of observations of their position, out of which the great generalizations of Kepler and Newton emerged, so it is hoped that by similar study of the motions of economic variables some empirical laws will emerge which will enable us to predict their future course. The work of the National Bureau of Economic Research is essentially focused on this task; ... The main difficulty is that economics is not astronomy! The planets move in much simpler dynamic field than the variables of economics, being moved by angels, or at least by stable second differentials! Prices, outputs and inputs however are moved by men, and men are almost unbearable complicated organizations which seldom exhibit stability in differentials of any order whatsoever ...
It is this sense of the economic system, as being, after all, moved by and concerned with men that pushes economics in the second direction, which might be called "behavioral economics." .. this involves study of those aspects of men's images or cognitive and affective structures, which are most relevant to economic decisions. .. here instead of trying to interpret the future merely in terms of the past, as in the traditional dynamics, we seek to examine a present state of mind out of which grows the behavior that leads to the future. ... behavioral economics can take its stand on the strictly pragmatic grounds that the relationships of society are too complex to be dealt with by mere observation of past variables, ... I do not believe that a human system can ever be analyzed satisfactorily in simple mechanical terms, and that at some point the complexity of the level of abstraction must begin to move towards the complexity of the subject matter. In particular we cannot ultimately avoid economic modes which take explicit notice of the nature of the economic system as an information-knowledge process, very different from the simple dynamic system of the physical world.
"Research in Economics," December, 1958 (unpublished). Kenneth E. Boulding Papers, Archives (Box # 37), University of Colorado at Boulder Libraries.
Back to newtonian mechanics (1968)