The ‘basic economic problem in science’ is - in my perception or definition - that some set of concepts can better deal with the data than another set. New ideas are like manna from the sky, but the manna must be collected, stored, compared to the older findings, etcetera, and an optimum must be found, using scarce resources over alternative ends. This ‘basic economic problem in science’ thus is quite different from the ‘mundane (non-basic) economics’ that, say, 5% more truth can be traded against 10% more effort and cost.
The mind has the economic problem of dealing effectively and efficiently with (i) old concepts, (ii) new information and (iii) the construction of new concepts. The name of the game is to have concepts or definitions fit reality as usefully as possible. The definitions must be chosen as strong as possible, so that uncertainty can be shifted to observation (and the problems with observation).
The human mind seems to be occupied with reduction of cognitive dissonance - or, at least, that is a fruitful way to look at that mind. Here I follow Aronson (1992a&b), who provides a definition of cognitive dissonance, and data and tests that lend empirical support for it. It appears that a commonly used method of reduction of cognitive dissonance consists of the rejection of new information to the advantage of older views. Frequently the messenger is blamed for the bad message, and even, after the messenger has been punished, the bad news is neglected since it came from an unreliable source - namely a person who had to be punished (while it is forgotten that, if the news is considered irrelevant, then there was no base for punishment). Man is a rather prejudiced creature, and thus not so effective and efficient at information handling - but man has to handle new information.
Barrow (1998:4) [56] provides us with a useful quote:
“This unifying inclination of ours is a by-product of an important aspect of our intelligence. Indeed, it is one of the defining characteristics of our level of self-reflective intelligence. It allows us to organize knowledge into categories: to know vast numbers of thing by knowing rules and laws which apply in an infinite number of circumstances. We do not need to remember what the sum of every possible pair of numbers is: we need know only the principle of addition. The ability to seek and find common factors behind superficially dissimilar things is a prerequisite for memory and for learning from experience (rather than merely by experience). (…)
All human experience is associated with some form of editing of the full account of reality (‘we cannot bear too much reality’). Our senses prune the amount of information on offer. Our eyes are sensitive to a very narrow range of frequencies of light, our ears to a particular domain of sound levels and frequencies. If we gathered every last quantum of information about the world that impinged upon our senses they would be overwhelmed. Scarce genetic resources would be lopsidedly concentrated in information-gatherers at the expense of organs which could exploit a smaller quantity of information in order to escape from predators or to prey on sources of food. Complete environmental information would be like having a one-to-one scale map. For a map to be useful it must encapsulate and summarize the most important aspects of the terrain: it must compress information into abbreviated forms. Brains must be able to perform these abbreviations. This also requires an environment that is simple enough and displays enough order, to make this encapsulation possible over some dimensions of time and space.
Our minds do not merely gather information; they edit it and seek particular types of correlation. They have become efficient at extracting patterns in collections of information. When a pattern is recognized it enables the whole picture to be replaced by a briefer summary form which can be retrieved when required. These inclinations are helpful to us and expand our mental powers. We can retrieve the partial picture at other times and in different circumstances, imagine variations to it, extrapolate it, or just forget it. Often, great scientific achievements will be examples of one extraordinary individual’s ability to reduce a complex mass of information to a single pattern. Nor does this inclination to abbreviate stop at the door of the laboratory. Beyond the scientific realm we might understand our penchant for religious and mystical explanations of experience as another application of this faculty for editing reality down fo a few single principles which make it seem under control. All this gives rise to dichotomies. Our greatest scientific achievements spring from the most insightful and elegant reductions of the superficial complexities of Nature to reveal their underlying simplicities, while our greatest blunders often arise from the oversimplification of aspects of reality that subsequently prove to be far more complex than we realized.”
This human property should be used in economics to explain actual events. Colignatus (1996d) for example applies Aronson’s findings in social psychology to economics, trying to indicate the actual ‘forces’. Another application is the very analysis in this book, for example where we stated earlier: