By Con George-Kotzabasis—October 03, 2014
A reply
to “of markets and minds” --by professor Peter Bossaerts
Melbourne
University Magazine
Economics is the application of scarce means for the
attainment of countless abundant ends. Since all ends cannot be fulfilled
because of the scarcity of resources, human choice selects those ends that are
more needful or pleasurable to man than those that are less so. The attainment of
those more needful ends is a result of human action. These ends, however, are
the fruits of the future and the inevitable uncertainty that is riveted upon
it. Therefore human action is always speculation based, however, not upon the
throw of the dice but upon ratiocination. Furthermore, actions are determined
by the value judgments of individuals i.e., the ends they are eager to attain.
These valuations differ among individuals due to the different circumstances
and living conditions of these individuals and to the variable desires and
wishes that emanate from the plethora of their personalities. There is no constant relationship between these
valuations, as they emanate from the different wishes, desires and caprices of
an umpteenth of individuals, and are therefore beyond the bailiwick of science
to measure them; what scientific method could measure with precision the
capricious longings of man and the uncertainty that surrounds his existence?
Professor Bossaerts’ attempt therefore, to identify and
control the ‘cells’ of the economy and finance and the complex interactions
that determine their course by the scientific method of neuroscience for the
purpose of rationally directing the process of the economy to a more beneficial
path, is in vain and is bound to fail. Science measures constant relationships in
the controlled experimental environment of the lab but cannot measure
uncontrolled innumerable variants that determine, in our case, the process of a
free market economy. The search, therefore, of finding the inexorably elusive quintessence
of the economic process by the tools of the hard sciences, though a laudable
task, is purblind, as it cannot see nor understand that science is incapable of
measuring the measureless.
The endeavour to supplant and redress, on the one hand, the
imperfections of the free market economy, and on the other, the failures of
government dirigisme to regulate and
direct the economic process of the free market to a more optimal state, by the
powerful algorithmic tools of science, will be found to be another futile
attempt to direct the economy from a central command post, this time by the
methods of neuroscience and not by an omniscient cabal of socialist planners.
In an imperfect and uncertain world, the free market economy
will proceed and move by trial and error and continue to spread its benefits to
mankind. But the intervention of man’s reason and understanding will
substantially diminish the errors by increasing their correction in time by the
power of man’s imagination and ratiocination.
