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Metaphysics of Economics
Why does Economics Exist?
• Explanatory Power
• Predictive Power
Ideas adopted from:
• Nate Silver
• The Signal and the
Noise
Is the World…
Predictable? Unpredictable?
Go way back…
Chaco Canyon Stonehenge
People realized they could predict:
Shortest and Longest Days Movements of the Moon
The idea of Predicating evokes an age-old
debate between two lines of thought:
Predestination Free Will
Predestination
• Saint Augustine
• Calvinism
• Under this philosophy,
humans might have the
ability to predict the
course they would follow.
But there was nothing
they could do to alter it.
Everything is carried out
in accordance with a
divine plan.
Free Will
• Saint Thomas Aquinas
• Jesuits
• We have free will
• If you want to predict
the future, create it.
Age of Enlightenment
• Knowledge is Power
• Isaac Newton’s laws of
motion and mechanics
• The universe was highly
predictable and orderly,
abiding by simple physical
laws
• Alexander Pope: God said
“let Newton be, and all
was light”
• F=ma
Scientific Determinism
• Pierre-Simon Laplace
• Laplace’s Demon:
– Given perfect knowledge
of present conditions,
– And perfect knowledge
of the laws that govern
the universe
– We ought to be able to
make perfect predictions
Industrial Revolution
• Scientific,
• Technological,
• Economic
• Progress
Adam Smith
• Wealth of Nations
• 1776
• Division of Labor
• Market Economies
• The Invisible Hand of
the marketplace guides
self-interest into
promoting general
economic well-being.
Invisible Hand
Man has almost constant occasion for the help of
his brethren, and it is in vain for him to expect it
from their benevolence only. He will be more
likely to prevail if he can interest their self-love in
his favour, and show them that it is for their own
advantage to do for him what he requires of
them.. . Give me that which I what, and you shall
have this which you want, is the meaning of every
such offer; and it is in this manner that we obtain
from one another the far greater part of those
good offices which we stand in need of.
Invisible Hand
It is not from the benevolence of the butcher,
the brewer, or the baker that we expect our
dinner, but from their regard to their own
interest. We address ourselves, not to their
humanity but to their self-love, and never talk
to them of our own necessities but of their
advantages. Nobody but a beggar chooses to
depend chiefly upon the benevolence of his
fellow citizens.
Wealth of Nations
Invisible Hand
Every individual… neither intends to promote
the public interest, nor knows how much he is
promoting it… He intends only his own gain,
and he is in this, as in many other cases, led by
an invisible hand to promote an end which
was no part of his intention. Nor is it always
the worse for the society that it was no part of
it. By pursuing this own interest he frequently
promotes that of the society more effectually
than when he really intends to promote it.
Profound Insights
Predictive Power of Economics

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Existential Basis of Economics

  • 2. Why does Economics Exist? • Explanatory Power • Predictive Power
  • 3. Ideas adopted from: • Nate Silver • The Signal and the Noise
  • 5. Go way back… Chaco Canyon Stonehenge
  • 6. People realized they could predict: Shortest and Longest Days Movements of the Moon
  • 7. The idea of Predicating evokes an age-old debate between two lines of thought: Predestination Free Will
  • 8.
  • 9. Predestination • Saint Augustine • Calvinism • Under this philosophy, humans might have the ability to predict the course they would follow. But there was nothing they could do to alter it. Everything is carried out in accordance with a divine plan.
  • 10. Free Will • Saint Thomas Aquinas • Jesuits • We have free will • If you want to predict the future, create it.
  • 11. Age of Enlightenment • Knowledge is Power • Isaac Newton’s laws of motion and mechanics • The universe was highly predictable and orderly, abiding by simple physical laws • Alexander Pope: God said “let Newton be, and all was light” • F=ma
  • 12. Scientific Determinism • Pierre-Simon Laplace • Laplace’s Demon: – Given perfect knowledge of present conditions, – And perfect knowledge of the laws that govern the universe – We ought to be able to make perfect predictions
  • 13. Industrial Revolution • Scientific, • Technological, • Economic • Progress
  • 14. Adam Smith • Wealth of Nations • 1776 • Division of Labor • Market Economies • The Invisible Hand of the marketplace guides self-interest into promoting general economic well-being.
  • 15. Invisible Hand Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them.. . Give me that which I what, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.
  • 16. Invisible Hand It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens.
  • 17. Wealth of Nations Invisible Hand Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing this own interest he frequently promotes that of the society more effectually than when he really intends to promote it.
  • 19. Predictive Power of Economics