December 31, 2014

History in the formal nutshell

Comment on 'Proper use of math in economics'


Here is the answer in the formal nutshell.

Into this formula, which applies to the economy as a whole, the specificities of time and place have to be inserted just as you have to insert these specificities into a physical formula.

Explanation is different from the description of a historical event. For example: from the laws of physics follows how the Titanic sank, but not why ship and iceberg met at the specific time at the specific place. These initial conditions have to be taken as given.

For the theory that underlies the formula above see “The Synthesis of Economic Law, Evolution, and History” URL. It may also be helpful to learn what Popper said about ‘explaining in principle':

“My thesis is that only in this way [explaining in principle] can we explain and understand a social event (only in this way because we never have sufficient laws and initial conditions at our disposal to explain it with their help).” (Popper, 1994, p. 168)

Theoretical economics does not explain specific historical events. No science does. Moreover, the formula above covers the ECONOMIC aspect of history and NOT the social aspect. It does not predict but can be tested with an accuracy of two decimal place with historical data.

With regard to the future, the formula above represents a stochastic simulation that replaces the set of deterministic equations of the orthodox approach. You can run it on a spreadsheet.

Egmont Kakarot-Handtke

Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and
Rationality. London, New York, NY: Routledge.