Asymptosis » The Miasma School of Economics

Asymptosis » The Miasma School of Economics

I’ve been reading Steven Johnson’s The Ghost Map, about the London cholera epidemic of 1854, and one passage reminded me exactly of today’s economics discipline.

The sense of similarity was heightened because I also (instigated by Nick Rowe) happened to be reading Mankiw’s micro textbook section on the rising marginal cost of production — a notion that 1. is ridiculous on its face, 2. is completely contrary to how profit-maximizing producers think, and 3. is based on just-plain incorrect math.* It’s just one of many central pillars of “textbook” economics that are still being taught with a straight face, even though they been resoundingly disproved by the discipline’s own leading practitioners, on the discipline’s own terms, and using its own language, constructs, and methods. These zombie ideas just won’t die. (Or to quote my friend Ole, “People never learn, and they never forget.”)

Businesses usually run on a mixture of chaos and randomness, sometimes then they do think of the rising marginal cost as Iv-B. This is covered in my text Microaperiomics. It can also represent part of a fight between V-Bi Keynesians and Iv-B Austrians. 

Economics today has a profound resemblance to medicine before the germ theory of disease.

Lots of people in 1854 were trying to figure out what caused cholera, and how it was transmitted. The dominant theory was “miasma” — basically bad air emanating from smelly, unsanitary conditions, especially in poor areas with lots of leaking, overflowing basement cesspools full of shit. These were contaminating the water supply, of course, so the real transmission mechanism was people drinking the effluent from previous victims.

This is a choaitc situation where R germs can grow undetected, which is why it was so long before germs were discovered. 

The solution to the miasma problem? Empty the cesspools into the Thames — systematically poisoning the water supply. Yes, that’s what they did.

The miasma theory had incredible staying power, even though it was clearly and patently disproved by the thousands of Londoners whose vocation was slopping through the sewers, day and night (presumably in the thickest of possible miasmas), searching for anything valuable that they could sell. They didn’t get cholera or die at any greater rate — perhaps even less.

Often these proofs are statistical in nature and do not really disprove a chaotic miasma theory. For example a euphoria in a real estate market could be described as a miasma that causes irrational exuberance in people like a virus. Memes can spread on the internet like a kind of miasma. Also even in disease a miasma can still spread, for example if stress weakens the immune system then the stress around sick people in an epidemic might make them get sicker more often. Panic then can flow like a miasma from one to another bringing disease with it. 

Johnson:

Why was the miasma theory so persuasive? Why did so many brilliant minds cling to it, despite the mounting evidence that suggested it was false? … Whenever smart people cling to an outlandishly incorrect idea despite substantial evidence to the contrary, something interesting is at work.

Often a V-Bi process calls an Iv-B idea outlandish meaning that it is deviant or on the edge of the normal curve. 

In the case of miasma, that something involves a convergence of multiple forces, all coming together to prop up a theory that should have died out decades before. Some of those forces were ideological in nature, matters of social prejudice and convention. Some revolved around conceptual limitations, failures of imagination and analysis. Some involve the basic wiring of the human brain itself. Each on its own might not have been strong enough to persuade an entire public-health system to empty raw sewage into the Thames. But together they created a kind of perfect storm of error.

Error is itself a V-Bi term relating to random statistics, error denoting the edges of the normal curve. here then the right idea is the normal one. These ideas can grow reaching tipping points where they caused the health system to do something abnormal. As they reach a ceiling this chaos causes enough bad effects so that the miasma forces go into retreat but still not go lower than a floor.

Miasma certainly had the force of tradition on its side. … Just about every epidemic disease on record has been, at one point or another, attributed to poisoned miasma. …

But tradition alone can’t account for the predominance of the miasma theory. The Victorians who clung to it were in almost every other respect true revolutionaries, living in revolutionary times: Chadwick was inventing a whole new model for shaping public health; Farr transforming the use of statistics; Nightingale challenging countless received ideas about the role of women in professional life, as well as the practice of nursing. Dickens, Engels, Mayhew — these  were not people naturally inclined to accept the status quo. In fact, they were all, in their separate ways, spoiling for a fight. So it’s not sufficient to blame their adherence to the miasma theory purely on its long pedigree.

The perseverance of miasma theory into the nineteenth century was as much a matter of instinct as it was intellectual tradition. Again and again in the literature of miasma, the argument is inextricably linked to the author’s visceral disgust at the smells of the city. The sense of smell is often described as the most primitive of the senses, provoking powerful feelings of lust or repulsion…