Wednesday, September 24, 2008

history, math and misery...

Oh, so let me tell you about my history class.. I had a weird revelation today.  As we were going through all these philosophers and statisticians views on the industrial revolution, I began to think, "wow, all these horrible living conditions, etc. were the result of really poor models of business."  The curious thing is that many of them were (and still are) mathematical models!

For example, with tons of surplus labor, the early industrial businessman seemed able to approximate labor as (people x hours) = value.  As each person cost money in wages, they desired to keep that side low, while simply scaling the hours to 12 or 14 per day (children too).  As time went on, they slowly realized that worker efficiency diminished past a point the more hours worked... so "counter-intuitive" to the earlier model, they had to factor in shorter work days with more breaks.

Another camp believed that you should only pay workers subsistence wages -- because if given more, they would spend it on "recreation" or "procreation" (ha!).  Population was viewed as a fundamental problem because food was determined to rise arithmetically, while unconstrained population grew geometrically (the simple models of the time) -- hence the ideal was to keep the population low by keeping the poor working so hard they had no time for anything else!


But something about all this suddenly struck me as a set of problems that has been undergoing successive refinement over the generations.  For example, Nash's equilibrium is a drastic improvement on Adam Smith that more closely approximates investor behavior... and in so doing, determined the behavior of a whole new generation of economists.

Business always looks so random at the low level, but high-up there is a definite pattern of improvement after horrible costs and destruction -- I hate to think it, but historically speaking, perhaps pain is the best teacher after all?  It's startling to think of this like some big genetic algorithm that is slowly crawling through the optimal ways to run business and increase production.  Still, it's also very exciting, because it means the better the mathematical models, perhaps the less suffering we need before we learn...

Through better math, perhaps we can save the world.

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