Tuesday, March 12, 2013

Landscapes in everything


One of the issues I have with economics exceptionalism is the word 'everything,' as in "markets in everything" or "the hidden side of everything." Not that there's anything wrong with applying economic concepts to a wide variety of questions (I do it myself), but at some point they become overused and start crowding out ideas that are better in a given context.

Think about all the times you heard phrases like the 'marriage market' often followed by the implicit or explicit suggestion that the tools of economics hold the key to understanding all sorts of human behavior even in cases where the underlying assumptions of those tools probably don't apply. Now, for example, compare that to the number of times you've recently heard someone describe something as a fitness landscape when they weren't talking about evolution or physics (OK, that's not the term physicists generally use but the concept is basically the same).

Landscapes are a powerful and widely applicable concept, arguably more so than markets (they are also a long-time fascination of mine). Ideas like gradient searches, perturbation, annealing and, most of all, local optimization are tremendously useful, both to explain complex problems and to suggest approaches for solving them. Once you start thinking in those terms you can see landscapes about as often as Tyler Cowen sees markets.

You can even find researchers coming up with the kind of unexpected, everyday examples that you might expect in a Steven Levitt column.

My favorite recent example (at least recent to me) is T. Grandon Gill's observation that recipes in a cookbook are essentially the coordinates of local optima on a culinary fitness landscape where the amount of each ingredient are the dimensions and taste is the fitness function (technically we should add some dimensions for preparation and make some allowance for the subjectivity of taste, but I'm keeping things simple).

This is a great example of a rugged landscape that everyone can relate to. You can find any number of delicious recipes made with the same half dozen or so ingredients. As you start deviating from one recipe (moving away from a local optima), the results tend to get worse initially, even if you're moving toward a better recipe.

Approaching something as a rugged landscape can provide powerful insights and very useful tools, which leads to another concern about economic exceptionalism -- economics as a field tends to make little use of these models and many economists routinely make modeling assumptions that simply make no sense if the surface being modeled really is rugged.

I asked Noah Smith* about this and as part of his reply he explained:
But for analyzing the equilibrium state of the economy - prices and quantities - economists tend to try as hard as they can to exclude multiple equilibria. Often this involves inventing arbitrary equilibrium criteria with zero theoretical justification. This is done routinely in micro (game theory) as well as in macro. An alternative procedure, commonly used in macro by DSGE practitioners, is to linearize all their equations, thus assuring "uniqueness". Some researchers are averse to this practice, and they go ahead and publish models that have multiple equilibria; however, there is a strong publication bias against models that have multiple equilibria, so many economists are afraid to do this. An exception is that some models with two equilibria (a "good" equilibrium and a "bad" or "trap" equilibrium) do get published and respected. Models with a bunch of equlibria, or where the economy is unstable and tends to shift between equilibria on its own at a high frequency, are pretty frowned upon.
This doesn't mean that economists can't work with these concepts, but it does mean that as economists increasingly dominate the social sciences, approaches that don't fit with the culture and preferred techniques of economics are likely to be underused.

And some of those techniques are damned useful.

* now with source.

No comments:

Post a Comment