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Robert, I agree fully with the line of thought you have expressed.
Although I did not write that the perfect knowledge assumption is
merely a simplifying assumption, I agree with Brewer and you that
it functions in this way also.
Indeed, I would go further and discuss the language that is used to
express the perfect knowledge assumption after Knight. If the
simplifying assumption is stated in mathematical form, a whole lot
of unnecessary effort will go into employing an industry of experts
to teach the language and to test competency. This has far
reaching effects, due to the thought processes people use in
deciding whether to study economics and the costs of supplying
credentials. Most students of economics give no deeper thought to
why they are learning "economics" than their bank accounts and
other immediate interests. For them the purpose of attending the
university and majoring in economics is to pass exams and to
write acceptable theses. On the supply side, the cost of making
and evaluating exams on whether the simplifying assumptions are
used wisely is lowest if those exams are about the mathematics.
Mathematical theses are also easier to evaluate. As a
consequence, the industry of teaching economists becomes
biased in the direction of mathematical language learning. This
leads to a number of side effects. The two major ones, I think, are
these. First, the teachers and their supervisors give the use of
mathematics in communicating ideas to peers (i.e., in economics
journals) undue support. Second, the use of mathematics as a
language makes it easier to accept the counter-intuitive idea that
the distinctly human choices of the past can be captured by the
statistical analysis of numerical data. This, in turn, promotes a spin-
off industry of econometrics and the accompanying set of journals
devoted to this field.
Meanwhile the issue of exactly why we use the simplifying
assumption of perfect knowledge in the first place gets shrouded
by a haze of mathematical and econometrics subfields. Even most
of those who intuitively recognize the sterility of these fields are
unable to identify what went wrong. They find it sufficient to merely
state the obvious fact that the assumptions made in mathematical
and econometric models are unrealistic. Moreover, they typically
express their more realistic assumptions in mathematical form!
The question asked by historians of economics about what
constitutes "neoclassical economics" has been influenced by the
historical development of professional economics since the
mathematical language began to achieve an important position in
economic education. Some HESers today associate neoclassical
economics entirely with the mathematical expression of various
ideas and the econometric models used to test hypotheses.
Others, like myself, conceive also of a deeper neoclassical
economics which has been crowded into a relatively small corner of
the profession but which appears to be undergoing a revival of
sorts.
To get back to my point in the opening paragraph, the use of the
perfect knowledge assumption as a counterfactual is, in my view,
quite different from its use as a simplifying assumption. I think that
my message stressed its use as a counterfactual, while Brewer's
message stressed its function as a simplifying assumption. In my
view, both uses are important in our efforts to understand economic
interaction.
Pat Gunning, Sultan Qaboos University, Oman
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