Saturday, July 2, 2011

Networks Make Us Smarter

By Dr. Lewis Sage

Networks are everywhere.  Literally, of course; but they also seem suddenly to permeate the popular press. 
As an example, take The Limits of Intelligence, Douglas Fox’s cover article in the July issue of Scientific American, in which he addresses the question of whether evolution could make H. sapiens more sapient.  Size isn’t everything.  “[A]s brains get bigger from species to species, they are divided into a larger and larger number of distinct areas,” (40) highly interconnected regions that network theorists refer to as clusters.  In the brain, neural clusters are joined to one another by relatively few large neurons that make shorter data paths possible.  (Reading that, all I could think of was Mark Granovetter’s article, The Strength of Weak Ties, (1973).)  And “shorter paths between brain areas correlate[d] with higher IQ.” (41) In other words, we’re smarter than our dogs and cats, not just because we have higher encephalization quotients, but also because we have better neural technology.
Which makes me wonder whether we economists need to rethink what’s required for the perfect information assumption that underpins the efficiency of competitive markets.  A complete network in which each of us constantly observes and is observed by everyone else is a ridiculous waste of resources, and the Walrasian auctioneer is often on another job.  But perhaps a relatively small number of well-placed arbitrageurs is all we need.

Dr. Lewis C. Sage likes intersections. Since 1991, he has taught Law and Economics, Mathematical Economics, and the Economics of Healthcare. A former Fulbright Fellow (Bulgaria 1995-6), he teaches an interdisciplinary Honors seminar, Enduring Questions, and is studying strategy in the NFL draft with faculty and students in Sports Management and Psychology. E-mail:

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This blog lives under the auspices of the Department of Economics whose mission has been to hold high the lantern beaming an "economic way of thinking" onto the world. Selfishness, rationality and equilibrium have been central to the teaching of an economic way of thinking rooted in the Renaissance. And, in this regard, the department has faithfully stayed the course. The intent of this blog, thinking out loud..., however, is to entertain exchanges which may challenge the centrality of economics as we teach it.