Friday, September 24, 2010

Economists stunned

(Translated from "Les économistes atterrés")

Some French economists published recently a very interesting manifesto ("Economistes atterrés"). I signed it.

The crux of their argument is as follow: while the market for consumption and investment products converges towards their equilibrium prices due to the interplay of supply and demand, conversely prices of patrimonial assets (financial products, buildings, stocks of raw materials) diverge.

On this latter market, a price increase fuels the anticipation of a higher price in the future ("it goes up, so it will continue to rise"). The hope of a capital gain causes an increase in demand that still increases the price, until the anticipation turns ("it has risen too far, it's not going to continue"). Then the price collapses, crosses the equilibrium price without stopping and decreases until a new turn of anticipations ("it has dropped too much, this decline will not continue").

Hence the price for patrimonial assets undergoes large oscillations, while for consumption or investment products an increase of the price is moderated by a decline in demand (except perhaps for luxury goods).

Saturday, September 11, 2010

Nature and us

(Translated from "La nature et nous")

We can see Nature in at least two different perspectives:

- We think it is the physical world, whose order obeys immutable laws and that is external to human knowledge and action;
- Or we think Nature is the “state of things", that is to say everything that confronts our intentions and desires as an obstacle or a tool, and that is transformed by the expansion of our knowledge and by our action.

The first view considers only the physical nature whose complexity is a challenge: our knowledge, cutting a finite sphere in an unlimited space, can never be complete and absolute. Physical nature is as unknowable as God in Judaism.

The second point of view adds to the physical nature the sphere of our present knowledge, skills and artifacts, a sphere whose gradual extension transforms the obstacles and tools that nature presents us. The art of navigating transforms the ocean, a road transforms a wilderness, building a house transforms the ground, our waste pollutes soil, water and atmosphere.

This later point of view transforms the concept of Nature in including, in addition to physical nature, human nature and social nature. It is in this sense that Durkheim said “we must consider social facts as things".