Is Mandeville Useful Today? A Comment

Abstract

Art Diamond 1985 gives quantitative teeth to George Stigler's 1969 pessimism about learning much modern economics from the past. Let me set the issue up in a more general context where we might not be so emotionally involved. Seeking truth can be looked upon as an ore extraction problem where the miner has a choice of mines to explore. There are two important constraints in this setup: there are only 24 hours in a day and we do not know for certain what the quality of any mine will be until after we explore it. What signals in this problem can be used to guide us towards an optimal time use? Suppose we were faced with two old mines, one which could be employed without cost and one for which the owner charged a rental fee. If we assume that the mines are in competitive equilibrium then might not we be able to use the fact that access to one mine is free to be a signal that it is panned out? Conversely, the fact that others are willing to pay for access to another mine is a signal that it has valuable ore to be extracted.