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The Knowledge We Have Lost in Information: The History of Information in Modern Economics
Information is a central concept in economics, and The Knowledge We Have Lost in Information explores its treatment in modern economics. The study of information, far from offering enlightenment, resulted in all matter of confusion for economists and the public.
Philip Mirowski and Edward Nik-Khah argue that the conventional wisdom suggesting "economic rationality" was the core of modern economics is incomplete. In this trenchant investigation, they demonstrate that the history of modern microeconomics is better organized as a history of the treatment of information. The book begins with a brief primer on information, and then shows how economists have responded over time to successive developments on the concept of information in the natural sciences. Mirowski and Nik-Khah detail various intellectual battles that were fought to define, analyze, and employ information in economics. As these debates developed, economists progressively moved away from pure agent conscious self-awareness as a non-negotiable desideratum of economic models toward a focus on markets and their design as information processors. This has led to a number of policies, foremost among auction design of resources like the electromagnetic spectrum crucial to modern
communications.
The Knowledge We Have Lost in Information provides insight into the interface between disputes within the economics discipline and the increasing role of information in contemporary society. Mirowski and Nik-Khah examine how this intersection contributed to the dominance of neoliberal approaches to economics, politics, and other realms.
Philip Mirowski and Edward Nik-Khah argue that the conventional wisdom suggesting "economic rationality" was the core of modern economics is incomplete. In this trenchant investigation, they demonstrate that the history of modern microeconomics is better organized as a history of the treatment of information. The book begins with a brief primer on information, and then shows how economists have responded over time to successive developments on the concept of information in the natural sciences. Mirowski and Nik-Khah detail various intellectual battles that were fought to define, analyze, and employ information in economics. As these debates developed, economists progressively moved away from pure agent conscious self-awareness as a non-negotiable desideratum of economic models toward a focus on markets and their design as information processors. This has led to a number of policies, foremost among auction design of resources like the electromagnetic spectrum crucial to modern
communications.
The Knowledge We Have Lost in Information provides insight into the interface between disputes within the economics discipline and the increasing role of information in contemporary society. Mirowski and Nik-Khah examine how this intersection contributed to the dominance of neoliberal approaches to economics, politics, and other realms.
312 pages, Hardcover
Published July 3, 2017
About the author
Philip Mirowski
28 books67 followersPhilip Mirowski (born 21 August 1951, Jackson, Michigan) is a historian and philosopher of economic thought at the University of Notre Dame (Carl E. Koch Professor of Economics and Policy Studies and the History and Philosophy of Science). He received a PhD in Economics from the University of Michigan in 1979, and is a Director of the Reilly Center for Science, Technology, and Values.
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Displaying 1 - 7 of 7 reviews
June 17, 2021
I really enjoyed reading this book. Never before have I read a book that so undeniably unpacks the last 75 years of economic's restructuring as a field.
This book is a critical look from inside the tower of disciplinary Economic Theory. The authors are both PhDs in economics. As it happens, there are very few credible economic historians that don't, and this book is exemplary in showing why this is the case. To be an economic historian you need to be heavily mathematically literate, epistemologically aware, a broad sense of where these theories came from within and without the economic tower, and have the sensibility of the quality of historical changes across a vastness of tediously confusing literature.
On order to understand how a book like this comes across as monumental, there are entire chapters here addressing deep theoretical concerns that, outside of economists' interests, looked like merely heavily empirical applications papers. For example, there's a chapter on airline flight times, another on the Federal Communications Commission, etc. Each of these chapters explains the real interest of these "market design" chapters aren't that economists were particularly interested in these industries relative to others, but rather they offered highly experimental models of data that enabled them to ask questions about limitations of rationality in particular ways. The concern was about explaining where and how rationality models fail. When one looks at history of this outside of economics, it's often argued that this is "Economic Imperialism" or "Capitalism running rampant."
Likely critical arguments about the power of economists at directing policy relative to other disciplines are well placed. Also, the point that such power comes from a historically from a disciplinary privilege that manifested itself through western governance attuned to military interests after World War 2 would not be wrong. But the book does not shy away from these issues and addresses them head on with tact. Instead the authors make clear this confuses the symptoms for the diseases and vice versa.
However, as the authors point out, reducing the last 75 years of economic theory to Capitalistic ideology, neoliberalism, and "the Chicago School" approach is entirely misleading. Instead the authors correctly determine a root of distinction: F.A. Hayek's 1945 AEA paper entitled "The Use of Knowledge In Society." This paper crucially did two things at once to the prevailing economic ideologies at the event of its publication. First, it gave the most nuanced and lucid explanation for why centrally planned economies were destined to fail, and thus dismantled any threat that there ever could be a lasting Communist governing system. Secondly, and more subtly, it offered a challenge to capitalistic economists' faith in naturalized market structures. Ironically, it is this second argument which most often fails to be understood, even by Hayek on occasion.
Because of this however, economists have directly or indirectly been coming back to the same failures Hayek pointed out in 1945 ever since. In fact, it has been such a repeated occurrence, this book had to be written in order to make clear the common reason for reoccurring theoretical failures are economists reluctance to admit they are not central designers of markets in which all knowledge exists within their own theories. Markets are context specific to the information they produce and in relation to where knowledge is held (in the minds of individual humans, the market structure, or the communication system of the market as examples). The authors then go on to show how several paradigms of economic theory took place, all with Hayek as their muse. Further, it follows this history through periods of market socialism, other forms of ideological collectivism, and individualism are in necessary relation to each other within economic theory.
There is no unquestionable ideological center to economic pedagogy. The Chicago School of economic thought/"Orthodoxy" of economics loses more than it wins in Economic Theory history. The only reason it remains an "orthodoxy" is because of it's pedagogy of offering logical structure, and the seams by which new ideas leak out, not because of its accuracy or its material power to determine policy. If anything, it was military history of western countries which chose Economic "orthodoxy" not the other way around. The Chicago School ideology exists as a carefully structured warning, with potentials for places to do better that future economists can follow. No book as made that more clear that I am aware of than this one.
In the end, this book points to three main theoretical concerns that economics is required to address in order to move forward: processes of Information, Knowledge, and Cognition. Ironically these three things require arguments that perhaps have been so mathematically tuned that economists might not be aware that they cannot induct or deduct their way to the conclusion through increasing numbers of designs. The infeasiblity of this is due to the shift of Economics from "science" to "design" field.
In order to solve these problems, one must leave economics in today's disciplinary perspective and come back later. It was my masters thesis that convinced me of this first. It was this book that put those thoughts into clearer terms, and for that reason, this book gets full marks.
This book is a critical look from inside the tower of disciplinary Economic Theory. The authors are both PhDs in economics. As it happens, there are very few credible economic historians that don't, and this book is exemplary in showing why this is the case. To be an economic historian you need to be heavily mathematically literate, epistemologically aware, a broad sense of where these theories came from within and without the economic tower, and have the sensibility of the quality of historical changes across a vastness of tediously confusing literature.
On order to understand how a book like this comes across as monumental, there are entire chapters here addressing deep theoretical concerns that, outside of economists' interests, looked like merely heavily empirical applications papers. For example, there's a chapter on airline flight times, another on the Federal Communications Commission, etc. Each of these chapters explains the real interest of these "market design" chapters aren't that economists were particularly interested in these industries relative to others, but rather they offered highly experimental models of data that enabled them to ask questions about limitations of rationality in particular ways. The concern was about explaining where and how rationality models fail. When one looks at history of this outside of economics, it's often argued that this is "Economic Imperialism" or "Capitalism running rampant."
Likely critical arguments about the power of economists at directing policy relative to other disciplines are well placed. Also, the point that such power comes from a historically from a disciplinary privilege that manifested itself through western governance attuned to military interests after World War 2 would not be wrong. But the book does not shy away from these issues and addresses them head on with tact. Instead the authors make clear this confuses the symptoms for the diseases and vice versa.
However, as the authors point out, reducing the last 75 years of economic theory to Capitalistic ideology, neoliberalism, and "the Chicago School" approach is entirely misleading. Instead the authors correctly determine a root of distinction: F.A. Hayek's 1945 AEA paper entitled "The Use of Knowledge In Society." This paper crucially did two things at once to the prevailing economic ideologies at the event of its publication. First, it gave the most nuanced and lucid explanation for why centrally planned economies were destined to fail, and thus dismantled any threat that there ever could be a lasting Communist governing system. Secondly, and more subtly, it offered a challenge to capitalistic economists' faith in naturalized market structures. Ironically, it is this second argument which most often fails to be understood, even by Hayek on occasion.
Because of this however, economists have directly or indirectly been coming back to the same failures Hayek pointed out in 1945 ever since. In fact, it has been such a repeated occurrence, this book had to be written in order to make clear the common reason for reoccurring theoretical failures are economists reluctance to admit they are not central designers of markets in which all knowledge exists within their own theories. Markets are context specific to the information they produce and in relation to where knowledge is held (in the minds of individual humans, the market structure, or the communication system of the market as examples). The authors then go on to show how several paradigms of economic theory took place, all with Hayek as their muse. Further, it follows this history through periods of market socialism, other forms of ideological collectivism, and individualism are in necessary relation to each other within economic theory.
There is no unquestionable ideological center to economic pedagogy. The Chicago School of economic thought/"Orthodoxy" of economics loses more than it wins in Economic Theory history. The only reason it remains an "orthodoxy" is because of it's pedagogy of offering logical structure, and the seams by which new ideas leak out, not because of its accuracy or its material power to determine policy. If anything, it was military history of western countries which chose Economic "orthodoxy" not the other way around. The Chicago School ideology exists as a carefully structured warning, with potentials for places to do better that future economists can follow. No book as made that more clear that I am aware of than this one.
In the end, this book points to three main theoretical concerns that economics is required to address in order to move forward: processes of Information, Knowledge, and Cognition. Ironically these three things require arguments that perhaps have been so mathematically tuned that economists might not be aware that they cannot induct or deduct their way to the conclusion through increasing numbers of designs. The infeasiblity of this is due to the shift of Economics from "science" to "design" field.
In order to solve these problems, one must leave economics in today's disciplinary perspective and come back later. It was my masters thesis that convinced me of this first. It was this book that put those thoughts into clearer terms, and for that reason, this book gets full marks.
May 24, 2022
Brilliant.
But the subtitle should have been: "How is (socialist) central planning different from (smart) market design under neoliberalism?"
Truth is information: The Banality of Truth.
But the subtitle should have been: "How is (socialist) central planning different from (smart) market design under neoliberalism?"
Truth is information: The Banality of Truth.
August 8, 2021
This is an excellent book about the epistemic and ontological nature of information in contemporary economics. This book argues that the economic orthodoxy in the 21st century is anti-humanist because of the ways in which it has conceptualized information.
The last page has two insightful quotes which sum up the message quite well.
One: "The business models that create space for economists participation n the modern transformation of market structures dictate that they promote confusion about how markets can be effectively skewed in favor of some players and against interests of others; consequently, their public proclamation have made real people stupider about actual markets."
and
"If Markets are truly divers and they can be made to order then why should anyone expect a priori that they would reliably reveal The Truth?"
This is a good book to read for anyone interested in epistemology, economics or political theory.
The last page has two insightful quotes which sum up the message quite well.
One: "The business models that create space for economists participation n the modern transformation of market structures dictate that they promote confusion about how markets can be effectively skewed in favor of some players and against interests of others; consequently, their public proclamation have made real people stupider about actual markets."
and
"If Markets are truly divers and they can be made to order then why should anyone expect a priori that they would reliably reveal The Truth?"
This is a good book to read for anyone interested in epistemology, economics or political theory.
March 30, 2024
Based on the interesting, provoking argument put forth; three stars for how it was transmitted in writing.
February 2, 2021
An excellent, if not a bit obscure, volume covering the role of information in economics. As Mirowski shows us, the economics occupation is stubbornly resistant to any historical self-examination; there is no “economics of economics” and as a result, many inconsistencies are to be found. Most fundamentally: If “The Market” is so efficient, why is it de facto so sensitive to interference, and how can it then be claimed to arrive at efficient outcomes?
Much to my surprise, the writing is clear and enjoyable, and the history is thorough and illuminating. Recommended for anyone looking for the origins of neoliberal governance
Much to my surprise, the writing is clear and enjoyable, and the history is thorough and illuminating. Recommended for anyone looking for the origins of neoliberal governance
February 12, 2018
very solid overview of a submerged thread in 20th c econ, runs parallel to nancy maclean's "democracy in chains" in a way that makes the two very complementary
November 25, 2019
A great overview of the developments in the epistemology underlying the predominant conceptions of markets in economics since the 1960's
Displaying 1 - 7 of 7 reviews