Trading Spaces



Kian Wilcox is a computer science student with interests in economics, cellular biology, math, neurobiology, and artificial intelligence. He writes about the potential applicability of economic methodology to other fields.

After wading through the various fields that stimulate my interests, it appears that the economic lens is a unifying analytical framework. In other words, any field or system can be reduced to a trading space, a set of traders, the goods they trade, why they trade them, and under what rules. These systems include, but are most certainly not limited to:

· the scientific process
· dating
· ecologies
· cellular biology
· mathematics
· chemistry
· neurobiology
· video game playing
· computer programming
· physics

The clearest example on the list is dating. The marketplace is pretty much everywhere: bars, clubs, bookstores, etc. People are exchanging time, affection, support, stimulation, and status. People date it for recreation, to feel better about themselves, and satiate biological urges. The desires and the rules are set by human biology and culture.

A subtler example is cellular biology. The cell can be described as a marketplace. The actors are proteins, organelles, genes, and RNA among others, exchanging energy, information, atoms, and electrons. The actions they take are for the purpose of self-maintenance. They are constrained in their exchanges by the laws of physics and their current environment.

A more obscure example is mathematics. Mathematical fields, such as algebra, are marketplaces. The actors are the mathematicians. Mathematicians exchange equations within them, one for another. They do this for many reasons, such as to clarify their understanding, for fame, and to build tools for understanding faster and better. The exchanges are limited by their knowledge of mathematical axioms and by the history of mathematics.

So far I’ve found examples of this broadening of the scope of economics in evolutionary psychology, from David Friedman, and many of the posts on this weblog, but I’ve never heard it stated outright that economics might be universally applicable. If this is obvious and old hat, where can I read about it? If not, is it new and interesting, and where do you think it doesn’t apply? Please don’t shy away from journal sources as well; I have access to most of them through my university.

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A more obscure example is

A more obscure example is mathematics. Mathematical fields, such as algebra, are marketplaces. The actors are the mathematicians. Mathematicians exchange equations within them, one for another. They do this for many reasons, such as to clarify their understanding, for fame, and to build tools for understanding faster and better. The exchanges are limited by their knowledge of mathematical axioms and by the history of mathematics.

Echoing eddie's remarks above, I think this is stretching the ideas of economics too far. In the same way you say mathematicians "exchange" equations to "build tools for understanding" you could say researchers in African-American dance studies "exchange" their insights to "build tools for understanding" African-American dance studies, etc. In other words, your claim amounts to saying that any conversation, or indeed any kind of communication at all, is a marketplace. At this point you have your universal applicability, but at the cost (no pun intended) of trivializing the concept of "marketplace".

I and others have found

I and others have found economic models very useful for resource allocation in distributed computer systems, particularly within the domain of peer-to-peer file-sharing systems. Some of the work on trust models within that space might find its way back into economics some day, and should be of particular interest to the ancaps.

Kian, I think you might be

Kian,

I think you might be interested in a book called Nonzero by Robert Wright if you haven't read yet. It's a "grand sweeping theory" of history since the beginning of life of earth based on the observation that higher and higher levels of complexity result form what he calls "non-zero-sum interactions" - the same type of market interactions that you describe between organelles and cell, between cells of different types in an organism, between organisms, etc.

Also I think one area to explore is not merely "free market" exchanges in these other fields, but also involuntary exchanges. I.e., the relationship between organelles and cells can often be described as "exploitive". For example, it is widely believed that mitochondria used to be free organisms before they got incorporated into eukaryotic cells. The cell essentially swallowed the mitochondria in order to meet its power supply needs. Thus, "exploitive". But then again, it was probably in the mitochondria's genentic interest for this to happen. Anyway, I think all these ecologies have both an element of "voluntary cooperation" and also "involuntary interaction".

I like your insight about

I like your insight about trading spaces.
It is related to, but a bit different than, some insights I've run into before. I tend to call this stuff systems theory, and view economics as a subset of it. (Most of the people who call themselves "system analysts" are merely coders, and wouldn't know how to analyze a system as it was biting them.)
Since you access to obscure journal articles, let me recommend the work of mary bates smith. She got her first doctorate by showing that theory of biological evolution can be expressed mathematically. I think for her second doctorate, she showed the math fits a number of systems, not just biology. She shows that that there are paralells between how evolution works at the gene, organism, and population level. Other researchers such as Karl Hess Jr. have shown that ecologies are like markets, which makes sense when you learn Darwin based his work on Adam Smith.
Additionally, a lot of what anthropologists do is apply economic principles to social interactions that are not dollar-denominated.
The jargon of these different fields varies, so sometimes it's not obvious that we are talking about the same stuff in different contexts.

Welcome aboard, Kian. I’ve

Welcome aboard, Kian.

I’ve never heard it stated outright that economics might be universally applicable.

Heck, I said it right here.

Seriously, though. I share your belief that economics can probably be applied to all kinds of stuff. The more I learn about economics, the more I start looking at other things from an economic perspective. I would, however, caution you (and me!) not to get carried away lest all our problems turn into nails beneath the hammer of economics.

I'd point you in three directions, no journals required. Tyler Cowen and Alex Tabarrok of Marginal Revolutions delight in finding new things to apply economic reasoning to; I've gotten quite a few interesting insights and research ideas just from reading their blog. Gary Becker (lately of the Becker-Posner Blog) seems to have built a career out of applying economic analysis to presumed non-economic social issues. And finally Steven Levitt has done the same kind of thing, but in a pop-culture kind of way with his book Freakanomics.

I find Becker too serious, Levitt too frivolous, and Cowen and Tabarrok just right. The difference is instructive.

Becker applies serious hard-core economic reasoning to difficult and debatable social issues, and in the process (in my opinion) tries too hard to mold things to an economic viewpoint. What I've read of his work strikes me as missing the forest for the trees. His work reminds me of the idealist technocrats from the early 20th century: "See! Our equations *prove* that intoxicating liquors cause poverty. It's Science!"

Levitt is bringing economic thinking to the masses (well, okay, a very small segment of the masses) and that's wonderful. Every field needs someone to explain it to the layman and we could do much worse than Levitt. But as a consequence, others have criticised his book for being too hasty with conclusions and too eager to show the world "Look! Economics isn't boring! Really! See?"

Cowen and Tabarrok strike a good balance. They don't take themselves too seriously. They view new areas from an economic perspective without assuming that the economic analysis is accurate or meaningful; instead they say "what *if* we apply economics here... what might that tell us?" Their discussions reveal as much about economics itself as they do the subjects analyzed.

Sometimes the right tool for the job really is a screwdriver, or a drill press, or a grand piano. Economics is a great hammer; just be careful of how many nails you try to drive with it.

Eddie – Thanks for the

Eddie – Thanks for the warm welcome. It’s good to be posting and receiving feedback. There aren’t nearly enough people either a) interested or b) findable within the Santa Barbara area. MR is an excellent read, and has been on my daily reading list for about a year ?. I agree with your analysis of Becker, he’s a bit on the stiff dry side. Is Levitt worth reading over, say, Hayek’s Law, Legislation, and Liberty? I have a lot of books and am scarce on time. Also, is there any econ-like work your familiar with that discusses a topic that doesn’t involve humans as the agents of decision? I’m thinking physics, chemistry, cellular, evolutionary, and ecological biology, or maybe something more exotic that I haven’t listed (that one goes for everybody). I love to read, so lay it on me.

Abitrary Aardvark – Glad you find the trading spaces stuff interesting, and thanks for the obscure references ? Do you happen to have a google scholar link or the names of any of the papers by Mary Bates Smith or Karl Hess? I can’t seem to find them after cursory half-hour google scholar search. I’ve really enjoyed the bio-anthro crossover works a la Tooby’s Adapted Minds, but I’ve never read any straight anthropology. Any recommendations? Also, I like your point about the jargon – one of my goals with the expansion of what you call systems analysis is to unify the jargon between different fields and so banish that which obscures their relations.

Jonathan – Nonzero was a pretty amazing book back when I read it in highschool, but that was before I really knew or understood economics. A friend of mine borrowed it from me and has since added several pounds of (insert link to) book darts (end link) to it. Must be a hint that I should go back and reread it. I’ll follow your suggestion about involuntary exchange – I haven’t finished Rothbard’s MES/MP yet, but I was under the impression that he provides a starting framework for understanding coercive market interactions in Market and Power. Is that the case? Also, I would note that, since cells are meta-entities (markets of markets of markets of…), what may be exploitation of the cell as a whole may be usefully regarded as other smaller entities providing a deeper satisfaction of the constituent chemical economy’s preferences. Is there any other reading you can recommend that discusses involuntary exchange?

Stefan – “Build tools for understanding” was an unfortunate turn of phrase that I used because I don’t know much about the motivations of mathematicians, but I don’t think applying economics (systematics?) to the exchanges that take place in the axiomatic structure of mathematics to be a stretch beyond reason. As a basic example, mathematics has its consumers and producers. The physicists, statisticians, biologists, and computer scientists desire equations that can help them perform certain functions (terrible pun, I know), such as analyzing different aspects of their fields. This consumptive desire flows up the structure of mathematical production to direct the production of goods (equations/etc.) of higher order. In a similar vein, to produce more value in this market, more roundabout methods of production are needed. In mathese, more abstract and general equations, proofs, and axiomatic systems are necessary. In general, a longer calculation method is more prone to error and more time intensive. This provides and incentive to find ways to shorten the length of the exchange path from initial data to final answer, a ratchet that has driven math from the direct, concrete, and calculation intensive to the incredibly abstract. I don’t think this trivializes the meaning of ‘market’ (though I have more trouble with AA studies ;)) I guess my question to you is, what is the difference between a trivial and non-trivial expansion of market logic?

Platypus – There’s a decent amount of economic analysis of distributed computational systems that I have yet to work through. Which insights did you have in mind? I have especially enjoyed Baetjer’s analysis of Object Oriented Programming as a form of property rights and prototypes as a central embodiment of decentralized knowledge, but the only trust/distributed systems economics I’m familiar with come from the people formerly and currently involved in the E programming language. I’m currently working on a generalization and improvement of the very promising Hayek Machine from Eric Baum, but I don’t feel comfortable talking about exactly how that’s going to work, either economically or programmatically, until I get some results. However, I’d be more than happy to post about the economics of the current implementation of the Hayek Machine. Also, a friend and I are working on a generalized bit torrent-like exchange, so I’d be very interested to hear more about the trust and reputation models that you had in mind.

This consumptive desire

This consumptive desire flows up the structure of mathematical production to direct the production of goods (equations/etc.) of higher order.

This might be true were it not for the fact that in pure mathematics researchers are often not at all concerned with the fields you name (computer science, physics, etc), but sometimes merely investigating certain mathematics for its own sake, whether it has roots in one of those fields or not. (Where would you classify the study of 3-manifolds, for example? Physics? Statistics?)

I guess my question to you is, what is the difference between a trivial and non-trivial expansion of market logic?

Echoing eddie's comments, I'm just uncomfortable with saying that any communciation between human beings is a "market". This is taking homo economicus to the extreme. Markets are characterized by some sort of trade or exchange that goes on, usually governed by supply and demand. I don't deny that in some sense mathematicians can be said to "trade" their knowledge to each other, but if so then it must be that in the same sense any time two people communicate there is a "trade", and to me saying that markets are universal in the sense of applying to every human interaction just doesn't make sense; there's already a word for those things, namely "interaction", or "communicaton", or even "socializing". I guess my question to you is, if market logic can be extended to cover all of human interaction, then what precisely is that new logic, and how does it improve our understanding?