Analogy, ergodicity, and the cycle of civilization

Ergodicity, as Jerry has it:

So, if you have mapped out the [phase] space and found that 60% of the volume corresponds to a bad economy, and 40% corresponds to a good economy, then if the system is ergodic, the economy will be bad 60% of the time and good 40% of the time.

If the system is not ergodic, then the amount of time that it spends in each region won't directly correspond to the volume of the region.

 

Ergodicity, as Carroll Quigley has it (from pages 36-37 in the PDF):

The rule of simplicity or economy in scientific hypothesis has a number of corollaries. One of these, called "the uniformity of nature," assumes that the whole universe is made of the same substances and obeys the same laws and, accordingly, will behave in the same way under the same conditions.

 

Ergodicity, as Paul Davidson explains it in relation to economic prediction:

In simple language, the ergodic presumption assures that economic outcomes on any specific future date can be reliably predicted by a statistical probability analysis of existing market data.

In other words: Ergodicity means that given the past, we can predict the future. 

Davidson:

By assumption, New Classical economic theory imposes the condition that economic relationships are timeless or ahistoric ‘natural’ laws. The historical dates when observations are collected do not affect the estimates of the statistical time and space averages.

Ergodicity means: The fact that the economy changes over time does not interfere with our ability to predict the future based on the past.

Davidson:

In mainstream economics, economic data are typically viewed as part of time series realization generated by an ergodic stochastic processes. In fact, Nobel Prize winner Paul Samuelson (1969) has made the acceptance of the ergodic axiom the sine qua non of the scientific method in economics.

Samuelson says ergodicity is an absolutely necessary part of economics.

And Davidson:

if ergodicity is assumed, statistics calculated from past time series or cross-sectional data are statistically reliable estimates of the statistics probabilities that will occur at any future date.

The ergodic assumption is like saying that the laws of economics are equally valid at the height of the Roman Empire and during the Dark Age that followed; during the time that Charlemagne recreated the money economy and the time that Henry VIII made charging interest legal in England; in 1947 when there was about $3.50 of debt per dollar of M1 money in the US, and in 2007 when there was about $35 of debt per dollar of M1 money. 

 

The reason this comes up just now is that I was reminded of it by these thoughts:

The philosopher Paul Bartha ... citing the philosopher of science Cameron Shelly, offers the example of analogical reasoning among archaeologists in the Peruvian Andes. Unusual markings that were found on old clay pots remained mysterious until researchers noticed that contemporary potters used similar marks to identify the ownership of vessels baked in a communal kiln: they inferred that the old markings had a similar purpose.  Similar habits of analogical inference guide scientists in their speculations about features of the cosmos. Even if they cannot empirically verify that a remote corner of the universe exhibits a certain pattern of astronomical phenomena, analogy permits them to infer that the laws that obtain in our galaxy most likely obtain elsewhere, too.

• Archaeologists figure the odd markings on ancient pottery have the same purpose as the odd markings on new pottery.
• Astronomers figure the physics of the universe, where we can't see it, works the same way as the physics of the universe where we can see it.

I might add that similar habits of analogical inference guide economists in their predictions of the future behavior of the economy. Even though they cannot verify that the economy at some future date will exhibit a certain pattern of economic conditions, analogy permits them to infer that the economic laws which describe the past also describe the future.

• Economists figure that the laws of economics operate the same way in the future as in the past.
  

Why? Because they assume ergodicity.

But if the economy is not ergodic, the analogy will fail. And the results of economic prediction often suggest that the economy is not ergodic. 

 

There is, however, another possibility: If the laws of economics are wrong or incomplete or too simply stated, economic prediction can fail easily. This is true whether or not the economy is ergodic.

Given that economic theory has evolved since The Wealth of Nations was published, and continues to evolve, and given the endless schools of economic thought and the endless disagreement between them and among them, I find it safe to say the laws of economics are incomplete and too simply stated, and therefore wrong when it matters.

The cycle of civilization is a massive economic cycle, driven by the concentration and distribution of wealth. The "active" phase of this great cycle determines the "economic relationships" that become what we consider to be "timeless or ahistoric ‘natural’ laws." 

But economists do not adjust or adapt their economic laws to suit the changing conditions imposed by the great cycle. Instead, they pretend business cycles create fluctuations around a persistent upward trend, and that this persistent trend is not slowing and does not slow. In this "fixed" environment that they imagine, they are free to assume that their economic laws are also fixed and unchanging.

But they are not. And the "persistent upward trend" that they imagine is actually part of the gently curving path of the cycle of civilization, always curving downward beneath our feet.

The cycle of civilization is more than a tool to help us correct and improve our understanding of the economy. It is also a road map that can be used to change the future. But economists do not imagine the possibility that we might find ourselves a sweet spot somewhere on the great cycle -- somewhere in the Age of Capitalism -- where growth and productivity are high, inflation and unemployment are low. 

They do not imagine that we might bring our economy to that sweet spot by careful design of policy, and keep it there, avoiding the disintegration of civilization, and allowing us to reach the five-digit years that today we only read about in science fiction stories.