Comments on Mirowskis Automata Based Economics

Kyle Thompson
Introduction
In his 2002 book Machine Dreams Phillip Mirowski concludes his history of
the relationship between cybernetics and economics with a proposal for an
alternative study program to neoclassical economics. Mirowski is extremely
critical throughout his writing of the neoclassical school, and we should therefore
see his proposal as being invested with a great deal of importance. In fact, it
could be seen as the culmination of the roughly 600 pages of history included
in the book, providing Mirowskis interpretation of what John von Neumanns
economics might have looked like, had he not died of cancer in 1957 before he
could adequately develop his theory of automata. Mirowski sees the neoclassical
economists, and particularly those associated with the RAND Corporation and
the Cowles Commission (such as Koopmans, Nash, and Arrow) as having become
infatuated with certain narrow aspects of von Neumanns work in game theory
and computing while simultaneously having been unwilling to abandon the
fundamental assumptions of neoclassical economics that von Neumann saw as
outdated or simply wrong. He also argues that the neoclassical economists have
been unwilling to take their own theoretical commitments to computing as the
basis of economics seriously enough to accept the consequences of the work of
Godel and Turing for economics.
Providing a full summary of Mirowskis history of neoclassical economics is not
possible here for reasons of time, but I will try to provide an account of some of
the main points. Mirowski argues that the rst neoclassical economists based
their models on theories of energy popular in the classical mechanics of their time,
and that they did not incorporate subsequent developments in thermodynamics
into their eld. The neoclassical economists of the Lausanne School continued
with the classical model until during and after World War II in the United States,
where they encountered the work of von Neumann, who saw thermodynamics as
a model for unifying various sciences. von Neumann, in developing his Theory
of Games and Economic Behavior during World War II, adapted what he had
learned in studying thermodynamics to a study of rationality. In the progress of
his work he found that payos from games became less of an important concern
and information became more of an important concern because of the interaction
between dierent players in the game. To vastly oversimplify the matter, von
Neumanns work on game theory brought this concern with information into the
eld of economics, complicating neoclassical models that previously had dealt
with the allocation of nature-given scarce resources (The account of economics
still given in undergraduate economics classes today). However at the same
time the neoclassicals took only a partial understanding of von Neumanns game
theoretical work without reconsidering their fundamental assumptions about the
nature of the economic agent. Economists like Nash and Arrow also did not
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follow von Neumanns development of his theory of automata, which he based on
his studies of the computer, neuropsychology and biology, despite von Neumann
becoming increasingly disatised with game theory as the account of rationality
he was attempting to achieve.
Computational Problems
The neoclassicals came out of this period with a picture of economic agents using
utility functions to calculate moves in a game that would converge towards a
general economic equilibrium. However, as Mirowski points out, despite their
assumption of the economic agent as a rational computer of preferences based
on utility, they held very little interest in theories of computation. The problems
of computation were simply assumed away with hand waving towards intuition
and pragmatism. Pointing towards this problem, Mirowski puts great importance
on the work of Gerald Kramer and especially on the work of Alain Lewis, who
in the 1980s took seriously the idea of neoclassical agents as calculators and
considered the problem in terms of theories of computation:
Kramer had shown that there was no nite automata that could make
the choices that Arrow said choice functions of rational agents were
capable of doing. Lewis realized that the unaddressed issue really
was one of hierarchies of computational power, and that the benet
of the doubt should be accorded to Arrow by pitching the question
at the level of maximum capacity, namely, the Turing machine. He
did not make the claim that rational agents were Turing machines;
only that appealing to computational viability meant that whatever
was being asserted about agents ratiocination abilities had better
be programmable on a Turing machine, or else by Churchs Thesis
it did not meet anyones criteria of a calculation.. . . The crux of
the issue was the very existence of a logic of rational choice; and
Lewis demonstrated that for any neoclassically relevant domain of
alternatives, Arrow-style nontrivial rational choice had to traverse an
unsolvable graph and therefore stranded beyond recursive realization.
Kramer the political scientist had not been willing to follow this
conclusion to its bitter end: if there was no point to nonviable prefer-
ence representations of rationality, then there was certainly no point
to stacking up cathedrals in the air concerning aggregate demand,
market equilibrium, incentive-compatible institutional mechanisms,
Pareto optima, and every other Walrasian notion beloved at Cowles.
(429)
The general response of the neoclassical profession to this devastating problem
has been on the one had to claim that they are only thinking as if the economic
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agent was a computer, making appeals to intuition, while simultaneously arguing
for quantitative economic rationality. As in the case of their interaction with von
Neumann, they have proved unwilling to abandon the fundamental assumptions
of their research program.
In the nal section of his book, Mirowski considers how computational economics
might overcome this problem and looks at ve alternative research programs.
1. A total denial of any fundamental problems with the neoclassical model
and attempts to simply prove them through the use of computer models.
2. An attempt to reconcile the Lewis results with the neoclassical model.
Mirowsky criticizes it at follows: . . . orthodox gures such as Arrow or
Marcel Richter or John Rust tend to speculate in vague ways how some
future developments - maybe technological, maybe evolutionary - elsewhere
in the sciences will someday break the dreaded deadlock of noncomputabil-
ity for orthodox economists. Beyond the rather ineectual expedient of
wishing for pie in the sky, this literature is itself deceptive, for as we noted
in Chapter 2, Turing noncomputability is a logical proposition and not
predicated upon the unavailability of some scarce resource, and therefore
it is not subject to be oset by any future technological developments, no
matter how unforeseeable or unanticipated. In a phrase, someday in an
advanced technological future it is conceivable that many computational
problems will become less intractable, but it is far less likely that anything
demonstrably formally uncomputable will be rendered computable. The
careless conation of intractability (NP-complete, NP hard problems) with
noncomputability (undecidability on a Turing machine) under some generic
rubric of computational complexity is one of the very bad habits prevalent
in this literature (527).
3. Following Herbert Simons AI-research inspired theories: Simons quest is
to avoid explicit consideration of the formal theory of computation and
instead to build computer simulations of economic and mental phenomena,
largely avoiding prior neoclassical models. In other words, this approach
avoids any attempt to model the big picture or little picture, instead
creating simulations of middle range complexity phenomena, hoping
that Some day, these modular algorithms may be loosely coupled together
to form a massive theory of the economy (or the brain) on some giant
megacomputer; but in the interim, this simulation activity really is the best
we can do, and thus is an end in itself (529). Mirowskis main criticism of
this approach is that simulations have generally proved less useful than
what he calls applied technologies: The lesson of these examples is that
simulations become fruitful when they are developed and criticized to the
point that they can become attached in a subordinate capacity to some
other activity, which is not itself a simulation. His point is basically a
pragmatist one of verication through use.
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4. Another AI-inspired program is that represented by followers of Richard
Dawkins and Daniel Dennett, who combine a certain view of evolution
with a theory of rational choice in order to argue that everything (including
ideas) can be reduced to a question of optimization. They then use
some form of AI automata and set them loose playing repeated games
in a computer program environment, basing their research ndings on
the results. Mirowskis main criticism of this school of thought is that
it simply takes neoclassical theory and expands its application beyond
economics into the physical and ideological worlds, without ever addressing
the computational critique. This bait-and-switch program uses very
sophisticated software designs but neglects to ever consider the fundamental
problems of computation. As Mirowski states: [Dennett] nds that he
must strenuously deny any relevance of Godels Theorem to either Articial
Intelligence or Darwinian evolution, if only to maintain his Panglossian
adherence to Universal Optimization (534).
5. Finally Mirowski proposes his own alternative, which of course he is much
more sympathetic to. Mirowski argues that economics should concern itself
not with economic agents but rather with markets. He proposes that various
types of markets (Instead of the neoclassical vision of THE MARKET)
should be formalized as automata and sorted according to computational
complexity along the Chomsky hierarchy of language-recognition: nite
automata, pushdown automata, linear bounded memory automata, and,
at the top of the hierarchy, the Turing machine (537). He then proposes
the following sort of research:
The agenda would look something like this. Starting from scrutiny of
the algorithmic representation, the analyst would enquire whether and
under what conditions the algorithm halts. (Markets do sometimes
spin out of control, failing to produce plausible prices.) This would
encompass questions concerning whether the algorithm arrives at
a correct or appropriate response to its inputs. Is the primary
desideratum to clear a market in a certain time frame, or is it
simply to provide a public order book in which information about
outstanding bids and orders is freely available? Or, alternatively, is it
predicated upon a simple quantiable halting condition, such as the
exhaustion of arbitrage possibilities within a given time frame? Is it
congured to produce prices of a certain stochastic characterization?
Some would insist instead upon the attainment of some posited
welfare criterion. The mix of objectives will be geographically and
temporally variable: the very hallmark of an evolutionary process.
Next, the Neumannian analyst would gauge the basic computational
capacity of the specic market format relative to its identied ob-
jective or objectives. Is the market a simple nite automaton, or
perhaps something classed as more powerful, approaching the power
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of a Turing machine? If it attains such power, can it be further
classied according to the computational complexity of the inputs
it is prepared to handle? Then one might proceed to compare and
contrast market automata of the same complexity class according
to their computational eciency by invoking standard measures
of time or space requirements (Taylor, 1998). Once the process of
categorization is accomplished, the way is then prepared to tackle von
Neumanns ultimate question: namely, under what circumstances
could a market of a posited level of complexity give rise to another
market format of equal or greater complexity? In other words, in
what formal sense is market evolution even possible?
Mirowski then proposes that reproduction in this sense can be dened as
follows: . . . market automatareproduce" in this technical sense when they are
able to simulate the abstract operation of other markets as a subset of their
own operation - that is, they can perform all the calculations and operations of
the other market" (542). In other words, reproduction here does not refer to
the spread of a market, but rather it refers to the subsumption of less complex
market automata into more complex market automata. He gives the example of
a futures market for grain simulating the future outputs of a local spot market
in grains.
In Mirowskis model, markets are selected by their environment, which is
dened to be people who use the markets. Mirowski therefore denes markets
as evolving prostheses, following von Neumanns denition of automata. Impor-
tantly, this means that Mirowski maintains von Neumanns dualism, which holds
that there are fundamental dierences between machines/automata and human
beings. This is an approach explicitly opposed to the simulation approches
of Simon or Dennett, and Mirowski therefore argues that his approach is a
humanist one, compared to those which adhere to cognitive sciences view of
the brain as a computer.
Many will undoubtedly nd the former [cognitive science] option
sweetly resonant with their own humanist commitments, whereas the
latter [Mirowskis] would be deemed so posthuman as to be drably
dispiriting and dehumanizing. I would implore these interlocutors to
pause for a minute and reconsider this position. Is it really the case
that further conation of our somatic selves with machines is really
the last best hope for a humanist economics? A humanist social
science?. . . Once the computer metaphor goes cognitive, it seems to
be as acidly corrosive to the constitution of the individual human
being as anything nurtured in the wildest polymorphous fantasies
of the postmodernists - selsh genes, devious memes, downloadable
souls, other humans as expendable carbon copies of ourselves. The
hot deliquescence of the Homo economicus is the dirty little secret of
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n-de-siecle neoclassical economics, one that only becomes increas-
ingly apparent with every subsequent game-theoretic model. Nothing
seems poised to reverse the neoclassical hollowing out of human
beings into hulking mechanical shells: not experimental economics,
not evolutionary game theory, not Herbert Simon, not Robert Frank,
not Amartya Sen, not the Santa Fe Institute, nothing. Until some-
one comes along with a better suggestion, it would appear that the
alternative program of treating markets as machines, while provi-
sionally reserving for their human environment all the privileges of
consciousness, intentionality, nonalgorithmic thought, and the entire
gamut of diversity of cognitive capacities and idiosyncratic behavior
is, ironically, the program more faithful to the humanist impulse.
The quest to elevate humanity to deserve the vaunted honoric of
rationality by painting humans as prodigious machines would seem
so neurotically misplaced as to be scandalous, were it not so taken for
granted at the end of the millennium. The arrogation of the epithet
rational on the part of neoclassical economics has been a defalcation
on a grand scale: as we have argued, they have altogether overlooked
the prevalence of price as ratio as one of the prime bits of evidence
that market operations have been restricted to a limited subset of
mathematics - eminently computable mathematics - so that humans
can feel free to impose any interpretation or construction they wish
on economic events. Humans need not be instinctive mathematicians
or intuitive statisticians in order to realize our cognitive potential; at
least in the economic sphere, we can let the machines do it for us. As
Wittgenstein said, life goes smoother when we calculate by machines.
Perhaps the time has arrived to acknowledge a bit more liveliness on
the part of our machines, so that we can ourselves appear a bit less
mechanical. (565)
Concluding Thoughts
I rst would like to mention why I was interested in this topic in the rst
place. My interest stemmed from my studies of socialist economics and the
problems of calculation that socialist economists attempted to solve with the aid
of computers. While I was not able to address the topic at all in this summary,
Mirowski explains at length in the book how a majority of the neoclassical
economists responsible for advancing the the program of advanced mathematics
and game theory in the discipline were in fact socialists looking to rebuke the
criticisms of the famous critic of socialism Freidrich von Hayek. The salient point
to be gained from Mirowskis book in this regard is that al l the proposed models
for socialist economics that are being discussed today, from market socialism,
to Cockshott and Cottrells new socialism, to participatory economics, are
deeply informed by neoclassical ideas, and are therefore susceptible to all of the
same computational criticisms that Mirowski raises to critique the mainstream
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of neoclassical thought. Some books such as Johanna Bockmans Markets in
the Name of Socialism attack neoliberals for appropriating ideas developed by
market socialists and using them to defend capitalism, but this line of argument
is completely ignorant of the basic problems of neoclassical economics that render
the market socialist project just as invalid as the neoliberal one. This suggests
that a far more radical re-examination of economics will be required for any kind
of revival of socialist economic organization.
After that aside, I would like to address Mirowskis claim to be providing a
more humanist kind of social science in his market automata model. Reading
this section of his book, I was struck by the similarity of his approach to that
taken by Jurgen Habermas in drawing his famous system-lifeworld distinction.
Habermas has been described as engaging in a politics of boundary policing,
trying to maintain a space for the lifeworld of communicative rationality and
politics which is separated from the imperatives of the systems instrumental
rationality and economics. Similarly, we see Mirowski here attempting to clarify
the boundary between the human and the machine - between thought and
work. However I must admit I remain too much of a Marxist to really accept
this distinction. When we let the machines do it for us we are not really
separating ourselves from the process of production and exchange so much as
we are acknowledging that we exist in a kind of productive symbiosis with the
machines. Mirowskis proposal may work ne for taxonomizing markets, but
when it comes to using these automata as applied technologies as he suggests,
we will always want to understand how the human element ts into the broader
economic system, and what the interface of the human and the machine looks
like. One of Marxs great insights was that in producing things we produce
ourselves, and I dont think that Mirowskis approach can escape this problem, as
he himself seems to admit in places. That being said, it would be interesting to
further consider his model in terms of the more current approaches to subjectivity
in the eld of philosophy. With some clarication and modication it may be
that the automata approach could prove fruitful.
Finally I would suggest that adopting Mirowskis approach to economics would
lead quickly to the importation of numerous methods from computer science and
the information technology world. It is conceivable that with the taxonomization
of automata he proposes we could come to classify markets according to their
aordances and capacities, and therefore begin to deploy them just like a
systems administrator would deploy a software stack on a server for a given
job. To some who do not have any experience with systems administration,
this might suggest a wonderful harmonious system where every market is suited
to the needs of its users and operates in a larger rational whole, but anyone
actually familiar with systems administration would immediately think of how
the spiraling complexity of systems and the compromises made necessary by
the politics of the user base would render such a dream an impossibility. In
that view I think we should have modest expectations of what such an approach
could actually achieve.
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