Thickets of three-dimensional diagrams

Robert Oakeshott

Bin 1 hRFLY ECONOMICS: A NEW GENERAL THEORY OF SOCIAL AND ECONOMIC BEHAVIOUR by Paul Ormerod Faber, £16.99, pp. 217

The technicality and difficulty of [contempo- rary and conventional economic] theory is, in the world of academic economics, an asset rather than a liability. It is cynical but true to say that in the academic world the theories that are most likely to attract a devoted fol- lowing are those that best allow a clever but not very original young man to demonstrate his cleverness.

(Paul Krugman in Peddling Prosperity.) With The Death of Economics, first published in 1994, Paul Ormerod won him- self a big following of admirers, at least among amateur or laicised economists, including the reviewer in The Spectator. At its centre was a convincing demolition of the so-called 'competitive equilibrium model' of classical economics and of the `rational economic man', supposedly oper- ating not in society but in economic empty space, which is one of its key postulates. In the last paragraph of that book, the author invoked the shade of Adam Smith in sup- port of a post-Thatcher project of rehabili- tating 'society': as something of which his fellow economists must take account and which 'is more than the sum of its individu- al parts'.

Not least among its virtues, The Death of Economics was wonderfully easy to read, and in effect completely accessible to non- professionals. The great Joan Robinson was indeed quoted for her rebuke of those economists who hide behind 'thickets of algebra'. And there were unexpected liter- ary plums scattered about in the text: like the reminder that Moriarty, Sherlock Holmes' chief adversary, was 'a professor of mathematics at a provincial university'.

So far as plums go, Butterfly Economics is as good if not better than its forerunner. I had quite forgotten the wonderfully condi- tional expression of his Christian faith put into the mouth of the prison chaplain, the Rev Prendergast, in Evelyn Waugh's Decline and Fall:

Provided he were able to overcome his doubt as to why God had made the world at all, he could see that everything else follows Tower of Babel, Babylonian Captivity, Incar- nation, Church, bishops, incense, everything.

I'd also forgotten the old chestnut about the editor's letter of dismissal to his astrol- ogy correspondent which began, 'As you will already know . . And I simply hadn't taken in — or anyway not retained — T. S. Eliot's 'The Dry Salvages', a passage from which is aptly used by the author to intro- duce his chapter headed 'The Illusion of Control'. I quote it in part:

To communicate with Mars, converse with spirits. ..

Describe the horoscope, haruspicate or scry, Observe disease in signatures . . .

release omens By sortilege, or tea leaves.. .

all these are usual Pastimes and drugs, and features of the press: And always will be .. .

And yet, for me at any rate, Butterfly Economics was a big let-down compared with the expectations generated by its predecessor. It is an uphill struggle to read, and without my reviewing assignment I doubt whether I would have bothered to reach the end. I will return to my criticisms later, but I should make clear that they have not much to do either with the 'but- terfly' characterisation of economics in the title or with the main subject-matter.

As most readers will surely know, the `butterfly' in this context is drawn from chaos theory and originates in the disci- pline of meteorology: the flapping of but- terfly wings somewhere in the Pacific may (but equally may not) be the prime mover in a process which ends up with a hurricane in Central America. Those wings are men- tioned in the text. But the butterfly adjec- tive in the title is really no more (though equally no less) than an attention-grabbing device. The book's central idea is quite dif- ferent: namely that, contrary to the doc- trine of rational economic man, the inter- action between human and social agents is a key variable in the analysis of economic experience in general and of the ups and downs of the business cycle in particular.

Intuitively that seems to me to be more true than untrue and also of first-class importance. So I have no quarrel with the subject-matter of Butterfly Ecomomics. I accept too that the case has to be argued with analytic instruments which operate in a more objective world than that of intu- ition. I am even prepared to accept that the necessary tools may include what the author calls 'the discipline of non-linear signal processing' (NLSP), though I would prefer a more workaday description like `variation analysis'. Moreover, I think I can mostly follow the argument when NLSP is applied to actual problems in the text. I am even prepared to accept as a reasonable summary of what Mr Ormerod wishes to say something like: 'Economics is dead; but long live NLSP.' But I'm afraid I could not cope with the author's use of three-dimen- sional diagrams — presumably in an attempt to make his account of NLSP more reader-friendly. Perhaps it is because I have never been any good with my hands, but my hunch is that most readers will find their heads spinning when invited to con- centrate on this passage:

Figure 6.3 is obtained in the following way. Take a value of the variable y at any point in time. Then read off the value of y in the pre- vious period and of y in the period before that. This gives us three values for y — at time t, in the period immediately before t, and in the period two periods before. These can be plotted as a single point in the three- dimensional chart shown in figure 6.3 whose axes are y in the current period, y in the pre- vious period and y two periods ago.

I found both Figure 6.3 and the author's explanation of it quite impenetrably opaque, and I got a sceptical answer when I asked a former engineer from Bulgaria who has been staying with me whether 'the story would become clear' if we construct- ed a full-blooded three-dimensional 'graph' using an open-sided box in the shape of a cube and a piece of semi-rigid wire. He was frankly doubtful. But it has given me an idea for a Christmas holidays project for nieces and nephews.