Thursday, October 10, 2013

Thermodynamics and Microfoundations

"In a long discussion over on Brad Delong's blog, Robert Waldmann commented, "For years I have been trying to find a demonstrably empirically useful idea in macroeconomics introduced after 1937," and I responded:
I'm a dilettante bird, but it seems to me the hard question is "Why do the Keynes-Hicks models work?"  (If I understand correctly, this is another version of "What are the microfoundations?")   And no-one seems to know.  We already know how to devise laws, customs, and regulatory practices that work fairly well in maintaining a productive, equitable economy.  But if we could explain why they worked, we could make the case for those in language that everyone could understand, instead of just saying, "Do it this way.  We don't understand why, but it works."

That said, big insights don't come along that often; 50 or 100 years between discoveries of fundamental laws is pretty typical in the history of science.  I am somewhat reminded of the history of thermodynamics.  Between the first designs of workable heat engines in 1700 or so, through Carnot's famous 1824 paper, Maxwell's, Boltzmann's, and Gibbs work in the 1870s, is nearly 200 years.  Carnot, broadly, formulated the macroscopic theory of thermodynamics, and Maxwell, Boltzmann, and Gibbs who finally explained it in turns of what Gibbs called the statistical mechanics of molecules—microfoundations.  (Though Gibbs also made important contributions to the macro theory.)

So we wait for the next insight, and try to figure out how to make the politics work.
But that wasn't the end of the discussion. A few posts and days later, Brad Delong put up a post entitled, "You Don't Need a Rigorous Microfoundationeer to Know Which Way the—Well, to Know Much of Anything, Really," in which he pointed out that it is still not possible to derive chemistry from quantum mechanics, and this isn't important.


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