Economics had its critics even before the financial crisis of a decade ago. Since then doubt has grown over how much economists really know. Much of economics rests on analyses of how individuals – as consumers, or in managing a business, for example – make supposedly optimal decisions in uncertain situations. These analyses have helped shape widespread beliefs about the value of markets, the best way to choose tax rates or how to make environmental policy.
Scrutiny of these ideas is a key theme of research at the London Mathematical Laboratory, initiated by Ole Peters nearly a decade ago, and developed with the collaboration of Alex Adamou and many others since then. This new thinking goes under the term “ergodicity economics.” As Ole describes the effort, “We’re attempting to re-develop economic theory from scratch, starting with the axiom that individuals optimise what happens to them over time, not what happens to them on average in a collection of parallel worlds. The latter, surprisingly, is the starting point of the currently dominant form of economic theory.”
This research has inspired Austrian novelist Marc Elsberg to write a German language novel, Gier, which explores how re-analysis of the basis of current economic thinking could be a threat not only to academics, but also to those who benefit most from the current ordering of economic life. The centres of economic and political power in today’s world often exploit prevailing economic justifications. In the novel, Elsberg imagines how new thinking could provoke a violent response on their part.
An English language translation of the work is being prepared. In an email interview, I asked Elsberg how he learned about Ergodicity Economics, how it helped inspire the novel, and what the reaction to the book has been so far:
MB: How did you come to be interested in Ole Peters’ and LML’s work on Ergodicity Economics?
ME: It was pure coincidence – or perhaps Google’s hidden hand!
I did research on a completely different topic which led me to get a bit deeper into Pareto distributions – in wealth and other areas. And for some reason I stumbled upon a short interview with Ole which sounded interesting to me. So I started to look into Ole’s papers – first about ergodicity breaking and then the evolutionary advantage of cooperation, then others and the lecture notes on Ergodicity Economics.
I didn’t understand a word – or, more precisely, I understood most of the words, but not the equations, because I have not thought about mathematics since leaving school. So I had to contact Ole to understand it.
Luckily Ole and Alex patiently took a lot of time to write many extensive e-mails and to meet me in person to answer my many questions. The more I learned the more I was intrigued. Eventually I realised that I could knit a thriller around it, because these ideas affect things everyone can understand, and that’s what I did.
MB: Talk of economics turns most people off, or tends to make them lose a degree of consciousness. How did you find a way to put this into a thriller?
ME: It was a challenge, because I had to realise how ridiculously bad the average person’s economic knowledge is. How do you explain to someone that some ideas are entirely new and revolutionary, when they don’t even know the status quo? This challenge has been evident in the book’s first few weeks in the market, and the initial feedback: Never before have I got such quick, emotional and polarised feedback to one of my books.
Some people just don’t get it. This I expected, as the subject is much more challenging intellectually than my previous books and than most other in the genre and in mainstream bestsellers. More interestingly, some people do not want to get it, while others are electrified. I am really curious myself how this will continue.
The last reaction might be because the story concentrates on one consequence of ergodicity economics – the advantage of cooperation, and pooling and sharing of resources. So it deals a lot with issues related to “fairness”, including the distribution of wealth and the growing polarisation of our societies. For this reason, I also set up the story to take place in an atmosphere of looming economic crisis and escalating political conflict.
MB: Have you had some reaction from economists themselves?
ME: Yes, their initial reactions covered the full spectrum, from friendly and politely disguised arrogant ignorance to outright – and I‘d say ideologically biased – rejection. Others had trouble understanding, and some had honest interest. The most asked question is “what would this mean in everyday life, business or politics?” This I find quite interesting, although I explicitly explain at the outset that while Ole and his collaborators have developed some actionable solutions in certain fields, we are talking about basic research and insight here. Professionals can’t realistically expect detailed “how to” explanations for every aspect of life already. Give them fifty post-docs, I say, and they will deliver!
The ideas at the heart of the book are also the subject of a recent article published in the journal Aeon.