From: ems@michael.apple.com (E. Michael Smith)
Newsgroups: sci.energy
Subject: Econ a science? Was Re: Re: Running out of oil ->NEVER<-
Date: 26 Aug 92 11:00:12 GMT
Organization: Apple Computer Inc, Cupertino, CA

In article <580008@hplred.HP.COM> curry@hplred.HP.COM (Bo Curry) writes:

> |jgd@dixie.com (John De Armond):
> |
> |>Cost functions are largely political, but probabilities are "sci.".
> |
> |Try that one again.  Political probabilities as science?  Hahahohohehehe.
> |
>
>You should read more carefully. Note the "but". The cost function is basically
>how much we are willing to pay, in this case for oil. It's largely
>political (unless you'd like to argue that economics is "sci."). We
>could conserve, or limit our consumption. I for one would not like to
>see massive strip-mining of oil shales, if it can be avoided. That's
>political.  

Well, economices IS a 'sci.'!  It is nicknamed 'The Dismal Science' (much
as the other sciences have names, which escape me right now ... I think
Mathematics is 'The Queen of the Sciences' ...)  thanks to the early
influence of Malthus (See prior posting about fish...)  When one wishes to 
discuss the more political aspects, one uses the term Political Economy, 
and when one wishes to discuss the more analytical aspects, one uses the 
term Econometrics, but generic Economics is a science that sits on the fence.

While most sciences are divided into either 'hard' sciences, like
physics, chemistry, math; or 'soft' sciences, like sociology and psychology,
Econ is in the un-enviable position of having a relatively large body
of hard science like work, built on a social sciences foundation.  It
is stuck with this halfway house role, like it or not.  While the 
linear programming models used for optimization of production functions
(and much other microeconomics) are clearly 'hard science', the things
such as 'utility functions' are basesd on what are clearly 'soft science'
footings.  (What someone *likes* is clearly not a 'hard science'!)

But 'soft' sciences are still sciences, and Econ is more analytical than
the average social science ... so I think it is fair to class Econ as a 'sci'.
(And an 'ls' of /usr/spool/news/sci does shown 'econ', so even the 
NetGods agree ...).

One final quibble.  You stated 'the cost function is basically
how much we are willing to pay, in this case for oil.'   I think
you have confounded the terms 'cost' and 'price'.  The price function
is how much we are willing to pay, the cost function is what it 
costs the provider to produce the goods.  Normally, a business
expects its price to be higher than its cost and spends a great
deal of its time fretting over this difference, the 'profit margin'.

Costs are subject to all the analysis that money can buy, [actually, 
'all the analysis that money prudently ought to buy' is a more accurate
phrase... but we're trying to avoid re-visiting ALL of microecon...] and
the cost function is clearly subject to scientific manipulation (that
is what all those process and product engineers are hired to do...).
The 'cost function' is not in any way a largely political item.

The price function is a bit more hazy.  It is driven by the intersection
of the cost functions of all the producers and the marginal utility
functions of all the consumers.  Stir in a dose of Marketing Department
efforts to change those marginal utility functions, and season with
governmental market tampering (providing 'incentives' ...) and there
is a much stronger case for the price function being 'political', 
especially in heavy gov't interference markets like Europe.  This does
not, however, make the price function ONLY political.  (much as building
Nuke plants to meet regulatory requirments doesn't make Engineering
'largely political'.  

Given the quantity of energy used in the production of goods (i.e. 
being fed into someone elses 'cost function') I think a good case 
could be made that the price function was largely driven by non-political
forces...  that is:  While the average consumer can be talked into paying
a 20 cent a gallon premioum for 'super' gasoline when all he really
needs is 'regular', most fuels are sold to companies that don't 
respond quite so irrationally.  I would wager that the dominant
forces in energy pricing are not political in the US (YET!) and
will continue to be non-political as long as the governement can
be kept from believing that world oil will run out soon and/or that
it ought to do something about it...

-- 

E. Michael Smith  ems@apple.COM

'Whatever you can do, or dream you can, begin it.  Boldness has
 genius, power and magic in it.'  -  Goethe

I am not responsible nor is anyone else.  Everything is disclaimed.