The Knowledge We Have Lost in Information: The History of Information in Modern Economics by Philip Mirowski & Edward Nik-Khah

Author:Philip Mirowski & Edward Nik-Khah [Mirowski, Philip]
Language: eng
Format: azw3
Publisher: Oxford University Press
Published: 2017-06-01T04:00:00+00:00

Figure 10.1. Orthodox Trajectory Through Information Space, I.

We situate our history in this Information Space to help isolate the most significant aspects of the intellectual dynamic within which the orthodoxy finds itself situated, and to capture the options introduced in earlier chapters. Interactions between Hayek and the orthodoxy drew our attention to important issues of agent epistemology, which have often escaped notice. Hayek influenced the activities of many at Cowles, and the Cowlesmen acknowledged his influence. We illustrated this most vividly for the case of Hurwicz, but as we will see later, nearly every notable economist concerned with information felt compelled to respond to Hayek in one way or another. The range of attitudes held by Hayek toward knowledge also assumed significance for structuring the activities of the orthodoxy: these are topics encountered in the following chapters.

Moreover, the diagram helps us to recognize that individual economists are not uniformly distributed throughout this space. Rather, a given economist’s position along the first dimension has tended to be coupled to his position along the second dimension; “off-diagonal” information–knowledge combinations, while not impossible, have proven unstable.

The centrality of information to the economy has become a pervasive theme in modern economics, but it turns out there is one subset of modern economics that should play a particularly significant role in any intellectual history of the economics profession. This is the shift within the modern profession from the description of markets “from the outside,” as it were, to participation in the design and implementation of markets as hands-on engineers of the economy. It should be obvious that this is an epoch-making departure in the history of the praxis of economics, but also, it is an irreversible change in the stance of the economist toward the agents that populate his models. Hence, issues of agent epistemology actually rise to the top of concern when economists claim to be able to go one better than existing markets. Ground zero in this Great Transformation has been the theoretical tradition of so-called market design.

Acknowledgments that market design theory and practice provide the exemplary instance of modern information economics are commonplace: one survey of the field pronounces Vickrey’s (1961) game theoretic study of auctions as the Wealth of Nations of information economics.11 Equally significant is the widespread impression that today’s markets are “all about data and information.” Markets were apparently being reconfigured so the conveyance or masking of information could assume a central role—one thinks here of the securitization of mortgages and the use of markets to allocate wireless communications licenses—forcing market designers to adjust their approaches to claim they were on top of these developments. Markets were becoming something different from what they had been before WWII; and economists would not defer to others to serve as prophets of the new order. Thus, the history of market design constitutes the backbone of any future history of the economics of information, and it constitutes the topic of the rest of our book.

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