This Would Be a Great Illustration of Comparative Advantage if It Weren’t Such a Great Illustration of Absolute Advantage

diracPaul A.M. Dirac was a pioneer of quantum mechanics and quantum field theory. His work pervades all of modern physics. He was, by almost all accounts, one of the top 10 physicists of all time, and by many accounts one of the top 2 physicists of the 20th century. And he’s one of my personal heroes.

When Dirac was awarded the Nobel prize in 1933, he was asked to say a few words at the banquet that kicks off the multi-day Nobel celebration — and chose, against tradition, to speak about a subject other than physics. Here is Paul Dirac on the source of all our economic problems:

I should like to suggest to you that the cause of all the economic troubles is that we have an economic system which tries to maintain an equality of value between two things, which it would be better to recognise from the beginning as of unequal value. These two things are the receipt of a certain single payment (say 100 crowns) and the receipt of a regular income (say 3 crowns a year) through all eternity. The course of events is continually showing that the second of these is more highly valued than the first. The shortage of buyers, which the world is suffering from, is readily understood, not as due to people not wishing to obtain possession of goods, but as people being unwilling to part with something which might earn a regular income in exchange for those goods. May I ask you to trace out for yourselves how all the obscurities become clear, if one assumes from the beginning that a regular income is worth incomparably more, in fact infinitely more, in the mathematical sense, than any single payment? In doing so I think you would then get a better insight into the way in which a physical theory is fitted in with the facts than you could get from studying popular books on physics.

True to form, then, Dirac set an agenda that others scurried to follow — the agenda in this case being the exploitation of the Nobel prize as a license to spout economic gibberish. Almost a century later, his program continues to flourish.

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20 Responses to “This Would Be a Great Illustration of Comparative Advantage if It Weren’t Such a Great Illustration of Absolute Advantage”


  1. 1 1 Henri Hein

    Ha, thanks. I needed a good laugh tonight.

  2. 2 2 Harold

    Who is the other top two physicist? Is it the obvious?

  3. 3 3 nobody.really

    Who is the other top two physicist? Is it the obvious?

    It is, but Landsburg is simply too modest to claim it.

    Nice bit of bait and switch! Landsburg says this guy is his hero, and quotes him making a really counter-intuitive economic statement — so I’m primed for some great insight. Oh, well.

    That said, does Landsburg intend to find fault with the linked Krugman column, or just with Krugman in general? Cuz I didn’t find the linked column so bad. As a general proposition, I’d rather live in a state with high per-capita GDP growth than a state with high total growth. Wouldn’t you?

    (Not sure why Krugman chose 1997-2014 as the relevant interval for judging Jeb Bush’s governorship, though….)

  4. 4 4 Sub Specie Æternitatis

    Oh, be nice, Prof. Landsburg! Dirac was only twelve when he won the Nobel Prize (I exaggerate but slightly).

  5. 5 5 Steve Landsburg

    nobody.really: I did not intend to link to any particular Krugman column. The link is to his blog, which changes daily.

  6. 6 6 Mike

    Hahahahahaha!

  7. 7 7 Sub Specie Æternitatis

    This example of Dirac’s ignorance of economics is unfortunately not the only one of great theoretical physicists embarrassing themselves. As a professional student of mathematics, physics, and economics (albeit it one condemned to keep flesh and bone together by toils as a simple country lawyer), I have often run across this.

    Einstein’s understanding of economics was infantile, which did not prevent him pronouncing on it publicly and others–equally ignorant of economics and physics–to take his words as sophistication. More than once, I have encountered competent theoretical physicists declaring that economics is bunk because, for example, some economic welfare optimization theorems don’t hold for the most general model of utility they could devise.

    Conversely, I have never heard a great economist make a fool of himself by pronouncing on physics beyond his ken.

    Why is that?

    One reason is that theoretical physicists and economists both rely heavily on mathematics, but the physicists tend to be more mathematically advanced than even mathematically sophisticated economists (and be well aware of that fact). As soon the mathematicians come up with a new clever bit of intellectual machinery, theoretical physicists swarm over it to see if it could be adapted as a foundation for a theory of everything. Often this has had marvelous results; think of Riemannian Geometry and the General Theory of Relativity, or Lie Groups and Quantum Field Theory, or Algebraic Topology and String Theory. As a consequence, cutting-edge theoretical physicists tend to be the only non-mathematicians up on cutting-edge mathematics. Conversely, economists–while generally pretty well schooled in mathematics–generally don’t go (much!) further in that area that required for studies and research.

    However, what theoretical physicists–confident in their status as Masters of the Apex Science–fail to appreciate is that economics–in contrast to some other university departments I could mention–actually have developed a real, substantial, and sophisticated body of knowledge and understanding over the last 250 years or so. Without a sound knowledge of that body, and in particular all the fallacies and follies exposed by it, you are bound to talk nonsense about the subject, no matter how good you are at math.

  8. 8 8 Steve Landsburg

    Sub Specie:

    1) I think your analysis is dead on for most cases of theoretical physicists spouting economic nonsense. But I’m not sure it applies to Dirac, who, in this passage, is not appealing to any sort of sophisticated mathematics, but simply making bald and obviously false assertions about what real people value in the real world. In particular, he seems to have overlooked the fact that real people are sometimes entirely willing to borrow, or to refrain from opportunities to lend.

    2) I am very glad that your comment reminded me to peruse your blog (which is linked in the blogroll at the right side of this page). It remains terrific.

  9. 9 9 Sub Specie Æternitatis

    Prof. Landsburg,

    1) True enough, but I suspect that if Dirac had understood that there is more to economics than the mathematics (which he probably felt he mastered), he would not have fallen into this error. If somebody had introduced him to key insight that economic value is subjective and the basic idea of a discount rate, he would have realized that his error before he spoke. In fact, I think Dirac was smart enough that if had just known about subjective value and spend a little while introspecting, he probably have come up with something like the discount rate.

    2) Thank you for your kind words. If my occasional eructations entertain and enlighten you a fraction as much as your blog does me, I should be very pleased.

    PS: The link to my blog on your blog roll is out of date since I changed it back to plain old blogspot. It should now be http://specieaeternitatis.blogspot.com .

  10. 10 10 Steve Landsburg

    Sub Specie: Fixed, I think. Let me know if it’s not.

  11. 11 11 Alan Gunn

    Many years ago, a law-school colleague and I agreed on a system for choosing who to vote for and against in elections to the faculty senate (which a that university had some power). It wasn’t practical to get information about many particular people, so we just went by departmental affiliation. Among other things, we agreed to vote for all scientists and engineers, except for physicists. who always got a “no” vote. My guess was (and still is) that physics is such an intellectually challenging field that physicists feel, perhaps rightly, that they are smarter than other people. They then conclude that all other fields must be simple, so that whatever they think about them off the top of their heads must be right.

  12. 12 12 Sean

    Ah, Mr. Gunn, you may very well not realise it (yet), but that observation of yours is in fact deeply profound, and may one day seed an entire field of psychology/economics/politics/evolution/sociology(if you must).

  13. 13 13 nobody.really

    My guess was (and still is) that physics is such an intellectually challenging field that physicists feel, perhaps rightly, that they are smarter than other people. They then conclude that all other fields must be simple, so that whatever they think about them off the top of their heads must be right.

    Economists also have a reputation for arrogance. There’s a joke about the Golden Ratio, referring to the maximum number of economists you can invite to any faculty party without ruining the conversation.

    I conjecture that the stronger your professional paradigm, the more clearly you can receive confirmation of your opinions within your profession, and thus the more readily you may generalize from being confident in your professional opinions to being confident in all your opinions. In contrast, people who work with weaker, less predictive paradigms find themselves with less foundation for their claims, and thus are more deferential to prevailing professional consensus.

  14. 14 14 Sub Specie Æternitatis

    The original post and Mr. Gunn’s comment of course reminded me of this delightful comic from the almost-always delightful XKCD: http://xkcd.com/793/

  15. 15 15 nivedita

    What makes this even more amazing is that Dirac lived in England. Surely he’d heard of consols, which pretty much match exactly his description of “a regular payment through all eternity”, and which weren’t valued at infinity.

  16. 16 16 Capt. J Parker

    Aw,shucks. I love a good smackdown of the Krugtron as much as anyone but, while clicking the link did put a smile on my face, the criticism being voiced is so nonspecific as to be not much more than an ad hominem and as such it seems to me to be a comment unworthy of Dr Landsberg. Sorry to be a party-pooper but that was my reaction. And yes, I do know that ad hominems seem to be the Krugmeisters primary weapon.

  17. 17 17 Sub Specie Æternitatis

    nobody.really wrote:
    “physicists feel, perhaps rightly, that they are smarter than other people”

    I recall an interesting NSF study from 10 or 20 years ago (link not readily googled, but appreciated if somebody has it). What the study did was take a decent-size sample of professors at U.S. research universities and administered what essentially was a more advanced version of math/verbal tests like the SAT or GRE. The tabulation of results by department of the test taker revealed two results, one unsurprising, one surprising (at least to me, then).

    The unsurprising result was on the math test. The mathematicians and the physicists basically uniformly aced it. The other disciplines requiring substantial math in practice (or at least training), such as chem, bio, econ, computers, etc., also did pretty well. Also unsurprisingly, if slightly disheartening, the other disciplines (e.g, English) had a mediocre average with a wide spread–some of them are quite good at math while others apparently can’t even do the basics.

    The surprising result was on the verbal test. As you’d expect, all the disciplines scored very highly–it is very difficult to become a professor at any major university if you are not skilled with words. But the rank ordering of disciplines was basically the same. The mathematicians and physicists were on average better than the English profs, not only with numbers, but also with words!

    So the stereotype of the droning, tongue-tied physics prof–not entirely without basis in fact–seems to be more a reflection of personality type than skill.

    PS: As I mentioned, this is an old study. Now that there are so many science profs at U.S. universities who are not native English speakers, the verbal results may no longer fully obtain if the study was repeated today.

  18. 18 18 Floccina

    Einstein’s understanding of economics was infantile,

    As was the psychology attributed to have come from him (I doubt that he said it). Having dealt with the mentally ill, they have much bigger problems than doing the same thing and expecting different results, which is fairly normal.

  19. 19 19 Brian

    Sub Specie,

    I don’t know about the NSF study, but ETS has from time to time released GRE results by intended graduate major. The results from 1997 – 2000 showed that physics and math were 1 & 2 in the analytical scores and 1 & 3 in the quantitative. Philosophy and English were 1 & 2 in verbal. Physics had the highest non-humanities verbal score, but still only came in #6.

    Of the top 10 combined scores, all were physics/math/engineering except for philosophy (#6) and economics (#5) (economists have no cause for feeling inadequate). The top 6 were

    Physics 1920/2400 (IQ = 132)
    Mathematics 1868 (IQ = 129)
    Mat. Engineering 1858 (IQ = 129)
    Chem. Engineering 1835 (IQ = 127)
    Economics 1833 (IQ = 127)
    Philosophy 1828 (IQ = 127)

    By contrast, the verbally high-scoring English Lit. students had a total score of only 1678 (IQ = 118), indicating how comparatively weak their mathematical skills are.

    So yes, physicists on average are smarter than everyone else, but not necessarily by a lot.

  20. 20 20 Sub Specie Æternitatis

    Thank you, Brian, for this data. It is consistent with my experience attending graduate school in Physics during that decade and not inconsistent with the NFS study which, if I recall correctly, also stems from that same decade.

    The difference in verbal ranking I’d attribute to the difference in demographics between graduate students and professors at that time.

    My class was about one third euro types (all of whom, except for me, were native English speakers), one third of South Asian descent (a majority of whom were native English speakers) and one third of East Asian descent (all of whom were of course fluent in English, but almost none of whom were native speakers). (None of us were of African descent, and the only even arguable Hispanic was an Argentinian fellow from a distinguished Jewish family). If you had put us up against English grad students in a verbal test, we might not have won.

    Conversely, our faculty, about twenty years older on average, were almost exclusively euros and, with the exception of some brilliant Russians, native speakers. If you had put them up against our English faculty (which was so backward that only a single one had been invited to Stockholm), I’m confident the Physics faculty would have easily prevailed.

    As for the relative intelligence of Econ and Phil undergrad majors, my later experience interviewing and hiring fresh law school graduates confirms it. Seeing those undergraduate majors on the CVs was one of the best predictors of a clever candidate. (The number of science graduates in my sample was so negligible that no conclusion could follow).

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