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Showing 1-4 of 4 reviews(5 star, Verified Purchases). See all 13 reviews
on September 19, 1999
This is an amazing book! It exposes what is hidden in Samuelson and every other economics text, namely, that the theory of equilibria and utility were merely lifted from physics (Hamiltonian dynamics) without any support from economic data. What is more amazing is the complete discussion presented by the author that `utility' doesn't exist mathematically because the required differential form is nonintegrable. Economists and statisticians may not be able to undestand this point, but it should be familiar to researchers in dynamical systems theory. The inventors of marginal utility theory, Fisher, Walras, and Pareto, literally did not know enough mathematics to know what they were talking about. Equilibrium can't be reached in a Hamilton system (there is no friction to permit the approach to equilibrium), but this contradiction was no worse than all the others inherent in econo-pseudophysics.
This book should be read and understood by every economics student who reads Samuelson and asks: what has 'utility' to do with the data. A very good complementary book is Osborne's "The stock market from a physicist's viewpoint". Osborne introduced tha idea of lognormal stock prices (thereby paving the way for the Black-Scholes equation and derivatives trading). In his first two chapters, without the benefit of the historic perspective offered by Mirowski, Osborne explains why the supply-demand curves drawn by Samuelson are wrong and misleading, and then goes on to illustrate how one could obtain correct discrete plots real data. For example: if 25 tomatoes are available (supply) then what's the price? Clearly, there is no answer. Price does not exist as a function of supply, nor of demand (nonuniqueness). Osborne goes on to suggest that the three related assumptions of equilibrium, continous price changes and efficiency are not supported by the data, and observes that there are traders who make money out of the inefficiency of the market. Mirowski and Osborne are strongly recommended to anyone who wants to understand economics.
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on February 17, 2000
Since having reviewed this book in September 1999, I was inspired by it to resolve Mirowski's Thesis in a recent paper called 'The Futility of Utility' (Physica A,2000). My resolution shows that both Varian and Mirowski were partly wrong. Mirowski is right in one sense: when dynamics is taken into account in the theory of production then the generic case (nonintegrable dynamics) is that utility is a path-dependent functional, and so doesn't exist mathematically as a function of demand. In this case (as Osborne observed from empirical data) price as a function of demand does not exist (the 'cartoons' passing as graphs in Samuelson's textbook can't be constructed from real market data). Varian was wrong: the most trivial integrability conditions are violated in this case because utility as a function cannot be postulated but either exists or doesn't according to dynamics. On the other hand, Mirowski was wrong that an analog of kinetic energy, or even a conserved quantity, is required. Utility is not, as Mirowski believed, analogous to potential energy: it is analogous to what physicists call the action. When optimization-control dynamics (Hamiltonian dynamics in econometrics) is integrable, then the action is a function, not merely a path-dependent functional (see Liouville's integrability theorem, ca. 1880, also discussed in 1916 by Einstein in the context of why Bohr-Sommerfeld quantization fails).
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on May 14, 2016
Can't recommend enough.
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on February 12, 2015
Item as advertised
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