Monday, August 31, 2009

Progress in Social Sciences?

I was interested in politics and economy when I was 20; I read the “Limits to Growth” and economic texts on development by Binswanger and Myrdal. Recently I asked myself what is changed in our understanding of politics and economy since then. The question is not what is different in politics and eocnomy today compared to the 1970 and 80s, but to identify the methodological changes, the changes in our thinking between then and now. How are the tools for analysis advanced? Is there an advance in the way we understand society or do we only have more data and different situations?
The question is about the models underlying our analysis. Economy is, primarily, based on dynamic models and typically interested in equilibrium states; markets tend to an equilibrium between supply and demand - at least in theory as presented by Samuelson. These models typically had 2 actors (or two groups of actors); the suppliers and the consumers, the industrialized and the less industrialized world etc.
In the last years, I see increasingly models with 4 (and sometimes more) actors. The Club of Rome and Simcity made the idea of simulation models by Forrester popular. Models with 4 actors – i. e. multi-agent models – were used to analyze international monetary issues; I have used it to understand why the dollarization in the 1990s in South America did not work (despite the standard static theory and the IMF predicting success) and found a wonderful 3 agent model for corruption.
These multi-agent models seem to me very helpful to explain the situations I could not understand in 1990– e.g. the politics and economy of Africa. The simple “Europe exploited its colonies” model is not correct, as is demonstrated since decolonization. A model with four actors: the elite in the industrialized world, the elite in the third world country and the population in the industrialized and third world country shows the common interest in the economic elites and explains the investments and debts, together with the political pressures observed today..... Similar models can be used to analyze the situation in Afghanistan, Pakistan, or the Iraq. John Perkins wrote “The economic hit man”; very depressing reading about U.S.A. politics in the 1980s, confirming a the model.

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