Home > The Economics Profession > The Neoclassical conspiracy against Post Keynesian Economics (1)

The Neoclassical conspiracy against Post Keynesian Economics (1)

from Steve Keen

Paul Krugman recently posted on predictions of the crisis before it happened, in a piece entitled “Non-prophet Economics”. It had a set of propositions about how one should evaluate such claims with which I completely and utterly agree. I’ll quote it in its entirety, because it’s an eminently suitable starting point for evaluating whether a prediction was in fact made:

So as I see it, we should first of all be evaluating models, not individuals; obviously we need people to interpret those entrails models, but we’re looking for the right economic framework, not the dismal Nostradamus.

Second, we should be evaluating models and the individuals who claim to have these models based on broad performance, not single events; if your approach (say) predicted the housing crash but then also predicted runaway inflation from Fed expansion — I assume everyone knows who we’re talking about [for those that don’t, Krugman is referring to Peter Schiff] — it’s not a good approach.

Finally, I think we’re looking for conditional predictions — what happens given events that are themselves not part of the model — not absolute predictions. It was, for example, very hard in the fall of 2011 to know how the ECB would respond to the escalating financial crisis in Europe; failing to predict that Mario Draghi would find a way to funnel vast sums to debtor nations through discounting would have lost you a lot of money, but wasn’t really a failure of the economic model.

This is an excellent set of criteria—all I would add is one more in a similar spirit, that the model has to be evaluated on its own grounds, and not on grounds that suit a different approach to modelling. For example, a model that is purely a simulation can’t be rejected because it doesn’t make an empirical prediction based on current data, nor can models that acknowledge “the butterfly effect” (that a complex system can’t be predicted beyond a very limited horizon) be criticized for not getting the timing of an event right.

With that one addition, Krugman’s guidelines state precisely what I wish Neoclassical economists (and others) would do. Unfortunately it’s not what they do—and that includes the piece Krugman referred to by Noah Smith that led to him writing the above in the first place:

A few days ago Noah Smith had a good piece on the many people who beat their breasts and loudly boast about having “predicted the crisis”. As he says, by and large, the louder the boasting, the thinner the evidence for any special achievement.

Smith’s piece focused upon me, and prior to Krugman’s post—and a tweet by the influential Neoclassical academic Justin Wolfers (see Figure 1)—I was going to ignore it, precisely because it failed to properly evaluate my models, and instead “played the man rather than the ball”.

Figure 1: Wolfer’s tweet about Smith’s post to his 36,000 followers

WolfersTweet

One would think, from Krugman’s comment that Smith “had a good piece”, that it had met his extremely sensible criteria for evaluating a claim to having predicted the crisis. Instead, there was no considered evaluation of the models I developed; there was instead just trash talking. I’ll give just one instance of this from Smith’s piece: his claim that a website (in fact the blog for the Real World Economics Review, part of the World Economics Association, in its announcement that I, Nouriel Roubini and Dean Baker had won the “Revere Award”) alleged that I had predicted “an imminent global recession as early as 1995” (see Figure 2).

Figure 2: Smith’s comment on the Revere Award citation

NoahSmithQuote2

Well, it was possible that “this website” made such a claim. But here’s in fact what it said:

Figure 3: The actual Revere Award reference to my 1995 paper

ReverePrizeQuote1

I hope it’s obvious that “drawing heavily on his 1995 theoretical paper” is not the same thing as “predicting an imminent global recession as early as 1995”. There are many other such distortions and inanities in Smith’s piece, but the point here isn’t Smith—or even Krugman. It’s the failure of the economic mainstream to seriously engage with rival traditions in economics, and its tendency to dismiss and disparage them instead.

This makes no sense if you think of economics as a dispassionate intellectual discipline. But it makes plenty of sense if you think about it as a set of competing religious faiths—and situate yourself in the days before Ecumenicism as well.

The one way in which that analogy stretches reality is that, when one religion trash-talked about another, that other religion had a strong base of its own from which to return the favour. In economics instead, the Neoclassical religion dominates almost all academic economic departments, the most prestigious economic journals, and virtually every official economic body (the exceptions here are the Bank for International Settlements, and recently the IMF which is starting to display some non-dogmatic economic thinking).

Even though the crisis has led the public to be more sceptical of economics in general, the dominance of Neoclassical economics has if anything increased in academic institutions, while  the Post Keynesian approach—to which I belong—is even more endangered than it was before the crisis began.

That’s the light in which I interpret Krugman’s promotion of a piece that broke every guideline he gave for how a claim to having predicted the crisis should be evaluated. As he has himself stated, Krugman pushes the Neoclassical envelope, but he doesn’t break it: he is “a maximization and equilibrium kind of guy”:

I like to think that I am more open-minded about alternative approaches to economics than most, but I am basically a maximization-and-equilibrium kind of guy. Indeed, I am quite fanatical about defending the relevance of standard economic models in many situations. (Krugman 1996)

I’m not going to make too literal an interpretation of the word “fanatical” in that statement: part of Krugman’s appeal is his colourful use of language, and I’m hardly one to throw stones on that front either. But conventional economics does defend itself against rival approaches in a way that is much better characterized by the word “fanatical” than by the sensible, dispassionate criteria that Krugman put forth in his post.

  1. azzamli
    June 11, 2013 at 2:07 pm

    But in all economic crises that have occurred, only the Keynesian recipe that has been used to solve crises!! (in your face Neoclassical)

    • June 12, 2013 at 12:36 am

      Economic forecast is impossible. How can anyone make such outrageous claims to forecasts? Government intervention cannot possibly be based any sound economics, because there is as yet no sound economics. The economic profession is so corrupt and pretentious that it simply ignores its blatant and monstrous failures.

  2. June 11, 2013 at 2:27 pm

    I predicted the Debt Crisis with my 2006 animated feature “Money as Debt”, viewed by tens and perhaps hundreds of millions worldwide in 24 languages, 7 alphabets. In 2009, I completed Money as Debt II which provided a very simple model of WHY crashes are inevitable and I challenged Steve Keen to refute my model which he said he would but never did.

    The WEA published my paper explaining my model earlier this year. It was ignored by the entire roster of WEA economists except for the Editor who invited me.

    http://peemconference2013.worldeconomicsassociation.org/?paper=proposed-new-metric-the-perpetual-debt-level

    The empirical proof is here. http://moneyasdebt.net/M2-M1.htm

    Once again I challenge Steve Keen (and Paul Krugman for that matter) and any of the economists listed to the right to refute my theorem. If PhD’s in their chosen field can’t confront a layman cartoonist on a matter of simple logic and grade school arithmetic, then what use are they?

    http://paulgrignon.netfirms.com/MoneyasDebt/twicelentanimated.html

    http://paulgrignon.netfirms.com/MoneyasDebt/Incorrect_Diagnosis.pdf

    • Hepion
      June 21, 2013 at 11:34 am

      Hi Paul,

      if you really want refutation of your theories I invite you to come to neweconomicperspectives.com, on comment sections there are many people who actually understand monetary operations and even broader workings of the monetary system.

  3. Gunnar Tómasson
    June 11, 2013 at 2:33 pm

    Steve writes: In economics instead, the Neoclassical religion dominates almost all academic economic departments, the most prestigious economic journals, and virtually every official economic body (the exceptions here are the Bank for International Settlements, and recently the IMF which is starting to display some non-dogmatic economic thinking).

    Comment.

    During my time at the IMF (1966-1989), it dawned on me after the collapse of the Bretton Woods system that one effect thereof was that the rate of world liquidity creation was growing at a rate far in excess of the rate of world output growth.

    I concluded that this could not continue indefinitely – that at some future point, that could not be predicted, under circumstances, that could not be known in advance, imbalance between the growth rates of “paper” and “real” wealth would result in a crash.

    In 1996, I concluded a brief letter to Professor Patrick Minford, economic advisor to Margaret Thatcher with respect to post-Bretton Woods world monetary arrangements as follows:

    “This house of cards is certain to come crashing down.”

    In the meantime, in 1982 I had lectured on the subject matter in Iceland, but at the IMF my supervisor denied me permission to circulate working papers on the subject matter and related issues in the IMF’s Working Paper series.

    For, as he explained, “Mr Tomasson thinks that he is right and that the world is wrong.”

    The gentleman in question, A. Shakour Shaalan, is now Dean of the IMF Executive Board.

  4. June 11, 2013 at 2:47 pm

    Your book, Debunking Economics, is akin to “The Ninety Five Theses” to challenge orthodox economic thought. It may not change things but it’s a shot across the bough. The confluence of the global financial crisis, great recession, and inanity of much of the orthodoxy to stay the course (and in some quarters embrace austerity) given the faith based belief in economy as self correcting system, combined with a connected social media world has given greater voice to RWER, WEA, INET, and other groups that would have been ignored and ridiculed in the past.
    You cannot be ignored; you are part of the conversation.
    You can still be ridiculed — comments from ignorant readers to your posts (typically individuals who have never heard of Kalecki, know little of Keynes, and even less of Kaldor) typically conflate Post Keynesianism with quackery whilst promoting neoclassical economics in all its incarnations as ‘science’.
    But something funny has happened: the ridicule isn’t enough any more.
    The High Church feels threatened so it has sent out an attack dog, Noah Smith, to dispense with you, hoping that you will go away. We know that won’t be the case. This is not to say that the ‘heterodoxy’ is in unanimous agreement with you; from my observations debate and discussion remains as vigorous as ever particularly in terms of getting the accounting right in your program “Minsky”. But anyone with an interest in a capitalist economy who has a modicum to reason critically should not and must not take the likes of Krugman and Smith and the words they write as gospel.

  5. Steve
    June 11, 2013 at 2:58 pm

    I completely agree that DSGE models are missing some things. Unfortunately I completely agree Neo-Keynesian/MMT/etc. models…are also missing some things. And besides the fact that they are all too busy disagreeing with each other to acknowledge ONE of the things that they are missing is that there are particles of truth and untruth in all of their models and also in the various orthodoxies that they all share….and that an integration of those models might actually be a clue to a few of the other things they are missing. Integration beats heck out of reaction…99.9% of the time. Now there is a falsifiable prediction for you. :) So why not integrate two mechanisms into economic and financial policy that actually integrate micro and macro-economics…like a continuing universal dividend payment directly to the individual (micro) and a retail discount to consumers which is macro-economically rebated back to merchants?

    Oh, velocity theory you say….well no, actually. And here’s why. Because velocity THEORY misses the fact that any money entering OR re-entering commerce/production initiates/re-initiates the problem….that all theorists are missing. And that problem is to be found in the empirical data AND the relationships between the data always found in the subset of double entry bookkeeping, called cost accounting. And here is the conclusion that is rather easily drawn from cost accounting’s data and that renders velocity theory irrelevant….even if money does re-circulate. The act of production itself will create, except perhaps during the momentary aberrant and highly unethical circumstances of war or the equally momentary and wholly unsustainable imperative of massive capital investment, (falsifiability) a scarcity of total individual incomes in comparison to total prices. And again, that’s in the process of production so that means ALWAYS (above two exceptions excluded)….no matter how much might re-circulate…..this scarcity ratio is going to be in effect. So velocity is an appendix.

    Here’s the formula for production: In < Pr. That's total individual incomes are less than total prices. And of course you can't resolve the obvious solution to this very potent problem….by applying into the economy because production will just create more of the problem. So all you have to do is GIVE money directly to individuals….FIRST.

    • June 12, 2013 at 3:46 am

      Steve, what are the particles of untruth in MMT?

      • Stephanie Kelton
        June 12, 2013 at 6:56 pm

        Waiting ….

      • Steve
        June 12, 2013 at 8:17 pm

        Actually I really like MMT. However, to answer your question, the thing that MMT lacks is the same thing that every other economic and monetary theory lacks….a brutally honest confrontation of the effects of Production itself….and then the honesty and the guts to make that inequality equate in the only way possible. Refer to my post #33 at 5:03 PM.

        And remember, velocity theory….is, and can only be….within production itself.

  6. June 11, 2013 at 3:09 pm

    I believe that the time distance from the outbreak of the GFC is now considered sufficient by many neoclassicals to get away with muddying the waters, re-writing history and smearing the few economists who actually predicted (based on some reasonable criteria) the crisis. Therefore and depressingly, much more of this is to be expected.

    • Steve
      June 11, 2013 at 7:00 pm

      Yes Trond,
      This is why we, as many of us as possible, need to get out there and create the new Chautauqua tents, speak up in whatever forums both cyber and temporal, and evoke confidence, hope and the necessity of gifting each and all of us with money……so that the system actually functions.

      “Things” like hope and grace and renewal….sell. And they don’t need a Bank, Central Bank or government to create, “hand in glove” comply with some idiot creation or extinguish them. They’re already there awaiting….for someone to loudly declare that the system needs to catch up with them.

      And no matter that hope and grace and renewal are self liquidating by a negative text from the girlfriend, a full bladder or an interested glance from the opposite sex….the effect can still linger. That is the historical precedent.

  7. June 11, 2013 at 3:48 pm

    Is there any basis for determining what is a reasonable time lag between cause and effect in economics? I ask because it seems from the outside that it takes a very long time, and that is what I would expect. For example, you can take a public sector department and import “market” thinking, thus changing the ethos. But you will not change it quickly because the people who work there have their own ideas about what they are for, and what is important. They will work around the obstacles you put in their way to try to continue to achieve what they believe their purpose to be. They will be miserable but they will obstinately continue to do that until the department sacks all its experienced personnel, or they retire. Which is ultimately what happens. I always get a little twitchy when the debate talks in short term periods (like the 5 years or so politicians favour) because that just does not seem long enough to judge much.

  8. sergio
    June 11, 2013 at 3:53 pm

    Marx was the first one who predicted this mess 150 years ago! Do not stick to capitalism, its days have past already. Socialism is utopia? Free market is even more utopia. Socialism is totalitarian? Enjoy tyranny of neoclassical optimizers who thinks that inefficient ones better die. Beautiful word of Free Market hides anti-human neoliberal ideology, openly promoted by neoclassical economists.

  9. sergio
    June 11, 2013 at 4:46 pm

    How Did the Neoclassical Paradigm Conquer a Multi-disciplinary Research Institution?

    http://regulation.revues.org/9429?&id=9429

  10. June 11, 2013 at 4:49 pm

    I’ve noticed the fanatical defense of the notion that money MUST ALWAYS be debt. Yet I challenge anyone to point out any NECESSARY debt with the use of common stock as private money.

    Some fiat can be debt-free too (ignoring the actions of the central banks since they are neither necessary nor good), for all practical purposes, if the monetary sovereign SOMETIMES runs budget deficits, NEVER runs budget surpluses and NEVER borrows. In that case, non-extinguishable (since fiat creation exceeds fiat destruction) fiat accumulates to the sum of those deficits. And if that fiat cannot be extinguished then how is it debt? Is it not a form of aggregate equity instead?

  11. June 11, 2013 at 5:59 pm

    Thanks Steve for this reply to Krugman.
    I agree with your remarks about churches etc.
    I would appreciate if you could comment more on Smith’s remarks about your mathematical model.
    It’s interesting to see neoclassical economists have found only one strategy: to avoid dialog with others approaches and/or flame them, instead of trying something to repair their failed models. That’s mean one thing: any of them know for sure they aren’t able to repair anything in the currently collapsed field of economy. They know they are wrong, that they have failed, that they cannot stop any new and relevant approach we could create or design, that they will loose every intellectual and academic position and reputation. They’re just trying to save little more time.
    Et pendant ce temps, others are making significant progress; Read what the Laboratoire Europeen d’Anticipation Politique have published EVERY month since 2006:

    http://www.leap2020.eu/Excerpts-and-public-announcements_r41.html?start=170&show=&order=

    The method they are using (and teaching) is fully respecting the criteria listed by Krugman, expect that there is no mathematical model… yet. And there is a robust reason for this.

  12. Gunnar Tómasson
    June 11, 2013 at 6:38 pm

    Whatever its origin, all “money” in circulation represents “purchasing power” and its holders hold “claims” that are redeemable in marketable goods and services.

    As such, all “money” is the LOGICAL equivalent of IOUs – debt – “issued” by suppliers of marketable goods and services to any and all holders of “money” in circulation.

    And so it must always be.

    • Steve
      June 11, 2013 at 7:11 pm

      Yes Gunnar, the SYSTEM can actually be free with that limited definition and AUSTERE monetary attitude toward…the individual. I believe it’s called fascism. Actually it could also be called communism with a few cosmetic changes. Now I’m not trying to be harsh, or single you out here at all because the individual and his/her relevance gets dropped out in the economic calculus of many if not most. But why not try Distributism and its definitions and psychology…instead?

    • June 11, 2013 at 7:37 pm

      As such, all “money” is the LOGICAL equivalent of IOUs – debt – “issued” by suppliers of marketable goods and services to any and all holders of “money” in circulation.

      No it isn’t. Debt is something that must NECESSARILY be repaid. Neither Best Buy&#0153 nor any other seller has any NECESSARY debt to consumers.

      And so it must always be.

      As I said; some people will fanatically defend the notion that money must be debt. But now you should know better.

      • davetaylor1
        June 11, 2013 at 8:45 pm

        You are reading this back to front, FB. “Best Buy” provides goods in exchange for banker’s IOU’s, having itself been provided by numerous people in the supply chain. The debt is thus from the consumer to the supply chain which includes Big Buy(effectively the whole community), not to banks etc which supply IOU’s at virtually no cost to themselves. The same applies even if the “bank” is ultimately a saver, for this is someone who has acquired more IOU’s than he needs to spend, having already been gifted in exchange for IOU’s (not necessarily honestly acquired) more goods than he can use. We’re letting them off their debt; it is only right that they should be tolerant of ours. A debt doesn’t NECESSARILY have to be repaid, for it can always be forgiven, but we certainly OUGHT to be repaying our debt by helping Nature (including mankind) reproduce what we use or lay waste.

        Most people of course don’t yet see this, any more than people those before Copernicus “saw” the earth spinning. From where they were they saw the sun and the moon traversing the heavens every day. From our point of view we get money from the bank; from the bank’s point of view they get profits pouring in.

  13. Gunnar Tómasson
    June 11, 2013 at 8:12 pm

    So what part of money in your pocket is NOT debt?

    • June 11, 2013 at 8:23 pm

      Since the National Debt is morally bogus and should be paid off as it come due with new fiat or even sooner, potentially quite a bit.

      Don’t mistake slavery for the impossibility of freedom. And it’s the truth that sets one free (John 8:31-32).

    • Ben Johannson
      June 11, 2013 at 10:43 pm

      Dollars entering the money supply via loan creation are certainly debt. Not necessarily the holders debt, but certainly the debt of the original borrower. So the money supply in aggregate expands by X dollars when the loan is made and contracts by X dollars plus interest when the loan is paid back.

      Dollars entering the money supply via government spending are a government liability, but I do not believe it is correct to label them as a form of debt. They do not need to be paid back because they are a net gain in private sector financial assets.

      • Vilhelmo
        June 20, 2013 at 12:54 am

        Ben Johannson:
        “Dollars entering the money supply via government spending are a government liability, but I do not believe it is correct to label them as a form of debt. They do not need to be paid back because they are a net gain in private sector financial assets.”

        It is a debt in an accounting sense, true by definition.
        Assets = Liabilities

        Admittedly it is a very special kind of debt, it is the debt in which all other debts are denominated, a debt that is never to be retired, a debt unlike all other debts.

  14. Gunnar Tómasson
    June 11, 2013 at 8:24 pm

    P.S. Debt is something that must NECESSARILY be repaid.

    Thus, debt several times Iceland’s GDP that got wiped out in October 2008, while lost to the lenders, remains as part of “aggregate equity”?

    Or does non-repayment of Private Debt differ from non-repayment of Government debt?

    • June 11, 2013 at 8:40 pm

      What private debt? Banks rely on huge government privileges including a legal tender of last resort and at least implied government deposit insurance to DRIVE people into debt.

      IF Iceland outfoxed the wolves shall we weep for the wolves? But yeah, it appears that Iceland has increased aggregate equity.

      We could do the same or better, if as Professor Keen suggests, the entire population, including non-debtors, was bailed out equally with new fiat.

      • June 12, 2013 at 3:03 pm

        “We could do the same or better, if as Professor Keen suggests, the entire population, including non-debtors, was bailed out equally with new fiat”

        Right now banks need our promises of repayment to create money and our deposits to lend a second time. Give them the entire total debt they created in fiat money and they will simply cut off our credit, bring the economy to its knees, and buy everything outright at fire-sale prices with fiat money.

        Ask Steve Keen why this would NOT happen.

      • F. Beard
        June 16, 2013 at 12:35 pm

        Give them the entire total debt …

        We would not be giving the banks anything except the interest for the loans. The new reserves would simply accumulate as excess reserves and if we were wise we would convert them to REQUIRED reserves by imposing a 100% reserve requirement for new loans – at least temporarily until the banks were fully privatized.

        Of course the bailout has to be metered carefully to prevent net changes in the total money supply but its doable.

      • BFWR
        June 16, 2013 at 10:07 pm

        That’s wisdom. Except you’ll also want to continuously supplement individual incomes with a gift (not loans or even common stock, which aren’t actually free and so are not gracious). That way both the individual and the system can fly and be free flowing…in every moment of their operation.

  15. June 11, 2013 at 8:45 pm

    I found this interesting comment deep after Smith’s article: http://noahpinionblog.blogspot.com/2013/05/what-does-it-mean-to-have-predicted.html?showComment=1370305725688#c3688667518144437878
    Smith did not answer yet. I think he will never do.

  16. paul davidson
    June 11, 2013 at 8:57 pm

    Steve Keen correctly notes there is an implicit-if not explicit- Neoclassical mainstream conspiracy against Post Keynesian economics. Unfortunately, many economists are unknowing co-conspirators — as I will explain below — after a brief mention of history..

    The JOURNAL; OF POST KEYNESIAN ECONOMICS [JPKE] was started 35 years ago by Sidney Weintraub and myself with the some financial support of people like Ken Galbraith. Ken and others wanted to create a publication outlet for economists who were trying to develop an alternative analysis to mainstream economic theory — whether it was the orthodox classical monetarist, efficient market theory of Chicago — or even the Neoclassical Keynesian theory of MIT,

    In fact, Steve’s 1090’s theory article was published in the Journal of Post Keynesian Economics [ and I am reasonably sure it would not have been published in most orthodox economic journals such as the AER, the EJ, RES, etc.] -So the JPKE played an important role in helping Steve generate interest in his theory and analysis.

    Also the John Hicks’ article stating explicitly that he [Hicks] now recognizes that his ISLM model is not a correct interpretation of Keynes’ General Theory analysis was published in the JPKE. [How many think that mainstream journal editors would have published Hicks's repudiation of his 1937 interpretation of Keynes? As a friend of John Hicks, I can tell you he did not think anyone except the JPKE would publish that article.]}

    I could go on with other contributions that have been promoted by the JPKE that might never seen the light of day without the JPKE publication. But now to the coconspirator part of my message.

    How, you may ask, are many economists, heterodox or otherwise, co-conspirators with neoclassical theorists to ignore and thereby contribute to the demise of Post Keynesian theory?

    As universities have see financing difficulties increased, many university libraries (as well as individual professors) have been reducing their subscriptions to professional journals.
    Subscriptions to the JPKE have fallen off significantly in the last four years — since the global financial crisis has created a Great Recession which is still upon us despite some tepid economic growth. I would think that the economics profession needed more, not less, journals promoting economic analysis and policies that did not promise that the market would, by itself, solve our economic problems –in the long run..

    With this significant fall in subscriptionsto the JPKE, consequently, the Journal of Post Keynesian Economics is clearly in danger of having to go out of business unless we can pump up subscriptions so that the publisher at least does not find this publication a drain on his cash flow.

    Professors and members of research institutions are therefore coconspirators if they have not checked to see if their institutional libraries have not continued to subscribe, or do not subscribe, to the JOURNAL OF POST KEYNESIAN ECONOMICS. Hopefully many economists would also have an individual subscription to the JPKE — but especially if they do not, they must insist and put pressure on their librarians to subscribe to the JPKE.

    Help is essential for survival of alternatives to mainstream analysis!

    • A.H. Taylor
      June 17, 2013 at 4:49 am

      Perhaps consolidate with RWER.

  17. Garrett Connelly
    June 12, 2013 at 12:57 am

    Paul Krugman has never uttered a string of words that would fulfill the real-world economist’s prime function. What institutional repairs should we accomplish in this time of approaching environmental disaster? A Doctor of Economics should be able to suggest reasonable cures for real-world economic ailments.

    • Robert Locke
      June 12, 2013 at 7:12 am

      I concur. For those of us who find the neo-classical framework of analysis sterile, who want economics discussed with frames of reference to the national state, educational institutions, legal systems, social systems, to how firms are constituted, etc. these endless discussions of Keynes and neo-classical economics within the frameworks they invented with exclusive self-indulgence references to themselves in the dialogues stymies the purpose of the real-world economics blog. Those trained in the system, cannot seem to overcome the limitations of language and thought incorporated in this discipline in order to speak intelligently, or nonintelligently, to people who are not part of their club.

      • Garrett Connelly
        June 12, 2013 at 1:02 pm

        An interesting opening at the community level is to sponsor a CELDF democracy school. Our region has become, We the People – Pioneer Valley; it’s a working name and logo subject to change at any time. Pioneer Valley won the first American revolution, non-violently, 1874.

      • paul davidson
        June 13, 2013 at 4:25 pm

        Robert:

        The trouble with your criticism of “endless discussions of Keynes” is that you have not read Keynes — but think of Keynes’s analysis as what Samuelson developed as the “neoclassical synthesis Keynesian” system. But Samuelson’s interpretation, as he correctly labeled it, tries to synthesize Keynes into Neoclassical economics! Something Keynes would reject!

        I have a quote from Samuelson in my book indicating one must, as he does, impose the “ergodic” axiom in economics; also I quote Samuelson’s statement that he found Keynes’s GENERAL THEORY “unpalatable” and unintelligible and so he merely assumed it was a Walrasian theory with sticky wages and prices — which is not what Keynes said! Keynes actually has a whole chapter in the GENERAL THEORY explaining why even changes in money wages will not bring about full employment in an entrepreneurial system

        But of course Samuelson found that unpalatable– since his Ph. D thesis [Foundations book] insists that the Walrasian system is the mathematical foundation of all economic theory.

        If you would read my book THE KEYNES SOLUTION:THE PATH TO G;LOBAL ECONOMIC PROSPERITY, or even my text book POST KEYNESIAN MACROECONOMIC THEORY, you would discover that Keynes’s monetary theory is based on the civil LAW of contracts and that the essence of a capitalist entrepreneurial system is that all market production and exchange transactions require money contracts — and CONTRACTS are an essential LEGAL institution.

        Moreover since the State is the enforcer of legal contracts, it is the State that decides what thing or things will discharge all LEGAL contractual obligations.

        So Keynes and the Post Keynesians do meet one of your criteria , namely to introduce a legal system as a fundamental foundation . [Note Samuelson's FOUNDATIONS of a Walrasian system permits recontracting without penalty when one party has made a mistake in teir agreement -- something our legal system strictly prohibits!]

  18. rddulin
    June 12, 2013 at 1:50 am

    Nobody and I do mean nobody has predicted anything. I refer everyone to the fact that even a broken clock is right twice a day. Economics as it exists today is a religion with multiple sects of old prophets and new prophets, each with their own followers who all have so many sunk costs that they can not change their beliefs. It is a junkyard of valuable bits mixed in with a bunch of garbage.
    Economics is a religion not a science because it has no way to measure value. Religion has faith and will argue to the death about whose prophet made what prediction. Science makes accurate predictions by measuring weight, speed. length, time and many other factors accurately by reproducible methods and then making predictions based on known cause and effect.
    Value can not be measured accurately with debt money, lent money, iou money, too much money or no money. If the prices are not right even if someone comes up with a magical equation describing the working of any economy it can not be tested or reproduced without a money system he produces accurate prices.
    The debt money blindness is the first thing that needs to be explained.

    • Garrett Connelly
      June 12, 2013 at 12:31 pm

      Exactly. Humans are warm, dead when cold. Life briefly flows against entropy using self organization to provide a cosmic powered biological manifestation of consciousness. Actual money applicable to real life measures heat flows in products and services and is accounted for using standard accounting practices sans backroom deals of distortion.

      One eco monetary unit = one kilocalorie … the national currency ranking measure efficiency of government and supporting culture by closeness to one.

      • Steve
        June 12, 2013 at 5:03 pm

        (CAPS are for emphasis only)

        Garrett,

        I would say that what is required is two things: an accurate description of the present and moment to moment essential state of production that at the same time includes an accurate description of the totality of the market itself. And I would say that this can be expressed thusly:

        P = In < Pr

        The act of Production is equal to total Individual Incomes being less than total Prices.

        That fulfills the requirements above. The ongoing state of production described with ALL of the ESSENTIAL elements involved, namely INDIVIDUALS with incomes and products with PRICES. And since production ITSELF CREATES this inequality and production does not have a mind of its own, WE, INDIVIDUALS, who DO have minds, must ACT to provide the described element of the inequality…additional individual income.

        The problem is not that macro-economics and microeconomics don’t aggregate. It’s that WE DON’T MAKE THEM AGGREGATE. We must stop worshiping the false god of a non-thinking market, WE ARE THE MARKET, WE CREATE THE MARKET CONDITIONS WHICH WILL GIVE EQUAL CONSIDERATION TO BOTH THE INDIVIDUAL AND THE SYSTEM…..AND YET WE, AS INDIVIDUALS, MUST BE THE ONES ULTIMATELY IN CONTROL….BECAUSE THAT IS THE PROPER RELATIONSHIP BETWEEN OURSELVES….AND THE SYSTEM.

        Social Credit….the right kind of radical individualism.

    • June 13, 2013 at 1:55 pm

      The root problem is more Principal debt than there is Principal with which to pay it.
      This is the DESIGN of the banking system.

      http://moneyasdebt.net/M2-M1.htm

    • Vilhelmo
      June 20, 2013 at 9:03 pm

      rddulin :
      Nobody and I do mean nobody has predicted anything.

      Michael Hudson predicted the housing collapse and subsequent financial crisis in detailed chart form in his May 2006 article for Harper’s Magazine titled “The New Road to Serfdom: An Illustrated Guide to the Coming Real Estate Collapse”

  19. sergio
    June 12, 2013 at 5:11 am

    Neoclassical conspiracy against Humanity.

  20. davetaylor1
    June 13, 2013 at 1:50 pm

    Robert L @ #30: “For those of us who find the neo-classical framework of analysis sterile, who want economics discussed with frames of reference to the national state, educational institutions, legal systems, social systems, to how firms are constituted, etc. these endless discussions of Keynes and neo-classical economics within the frameworks they invented with exclusive self-indulgence references to themselves in the dialogues stymies the purpose of the real-world economics blog.”

    I certainly concur with this, but the “etc” needs to include frames of reference to human diversity, hence to incomplete views of the tools economics has in common with Robert’s other institutions (communication channels and stores like sound, vision, memory, language, logic, criteria of truth and value, science, mathematics, communication, cooperation, competition, self-control, self-giving and trustworthiness built on habitual correction of personal shortcomings, misconceptions, errors, lies and omissions). Otherwise the discussion will remain endless and the means of corrective action unused.

    Robert D @32 (echoing Steve Keen): “Economics as it exists today is a religion with multiple sects of old prophets and new prophets, each with their own followers who all have so many sunk costs that they can not change their beliefs. It is a junkyard of valuable bits mixed in with a bunch of garbage. [It] is a religion not a science because it has no way to measure value”.

    But what is ‘religion’, Robert? You are seeing what happens when different people see it in different ways, not having learned the etymology and subsequent history and of the word, i.e. what re-ligio [as in ligament] stands for (i.e retying as in grateful commitment to the one who has untied you), and since the Reformation, the atheist David Hume opening the way for his moral philosophy based on “democratic” agreement by conflation and re-interpretation of evidence-based Christianity and other moral philosophies (whether fear-based or appreciative) as mythical projections of feelings unsupportable by evidence. Since then, “the powers that be” rather than traditional educators have determined social practice. If you don’t believe me, study the three-volume index of Hume’s “A Treatise of Human Nature” and the references to Hume indexed in Tony Lawson’s “Economics and Reality”.

    The irony of your last sentence is that scientific (evidence-based) religion doesn’t need scientific enumeration, for its logic is ontological (the reality of being valued enabling us not just to feel but to become more valuable); whereas Hume’s epistemology is saying there is no way to measure what cannot be measured (so political economics is not a science).

    • rddulin
      June 21, 2013 at 12:31 pm

      Dave , Religion is a customizable set of different truths for different people depending on their individual circumstances. It definitely has a place in allowing us to come to terms with the unknowable aspects of our existence.
      Science is reproducible, demonstrable truth that applies to everyone.
      It is wrong to use a religion to impose and gain control of other peoples property for self benefit or proposed benefit to third parties. Religion has to be identified when it is used in property acquisition mode.

  21. Robert Locke
    June 13, 2013 at 7:21 pm

    Thread 32. I read Keynes’ General Theory in February 1962. I have the copy with date on the book on my shelf. So you are wrong, I have “read” Keynes and a long time ago. But I have not “studied” him and do not intend to start doing so now. Please, read something else.

    • paul davidson
      June 13, 2013 at 8:02 pm

      Robert [Thread #38]

      Really you read Keynes in 1962 and you still remember what you read?. What a wonderful ,memory you have. But perhaps rereading might help –especially in conjunction with Keynes’s A TREATISE ON MONEY — which goes more into depth about what is money and contracts..

      If you are serious and you “want economics discussed with frames of reference to the national state, educational institutions, legal systems, social systems, to how firms are constituted”, you must read the parts of my book THE KEYNES SOLUTION which explains why the CIVIL LAW OF CONTRACTS are the essence of understanding how our economy and our society works! After all contracts are the essence of our entire social system, as well as our educational institutions that could not operate without tuition contracts to meet the cash flow employment contractual commitments to professors, etc!

      Just think all the contracts people enter into each day: rent contracts, contracts you enter into with public utilities for heat, electricity, etc. Every purchase and order you make every day of your adult life involves a LEGAL money contract !!

      What is more relevant to our social system than that!!

      And why do you want your savings to be in liquid assets???

      If you have liquidity you can meet all current and future contractual commitments. So one can never be too beautiful, too slim, or too liquid! To fail to meet one’s contractual commitments is like a walk to the gallows~

      If assets are truly liquid they are either currency, bank money, or assets that can be readily resold on organized and orderly markets to obtain that thing that the State says discharges all contractual obligations! [After all bank money is not legal tender directly — but I bet you pay most of your contractual commitments either by writing a check — or using the internet to tell your banker who to pay. And if you do you are sure you have discharged your contractual commitments!

      When the derivative securities of subprime mortgages were suddenly discovered to be illiquid, i.e., they could not be resold for money even though they were originally sold to the public as being “as good as cash” by investment bankers, the global financial system collapsed in 2007!

      What is more relevant than understanding what made these supposedly liquid assets suddenly illiquid?? And Keynes and we post Keynesians have that answer. Do you, Robert?

      • Robert Locke
        June 14, 2013 at 6:14 am

        At age 81 I do have a very good memory, but I won’t pretend to remember what I read in 1962. I just put the date in the book. I read the General Theory then because a good friend (an historian of the New Deal) told me that I could not be an educated man if I had not read it. But you are an economists and spent your life on Keynes. We can’t read everything and I have spent my life reading primarily about comparative systems of education, in the US, Japan, France, Germany, and the UK and how they relate to economic-national performance. That has been a full plate, without much time to read Keynes or neoclassical economics. But I thought real-world economics meant to include other things and the other things I rarely find thoroughly discussed. My guess is that this is so not because they are not relevant to understanding economic behavior but because they are deemed irrelevant or insignificant by people who do not read the other things seriously.

      • Robert Locke
        June 16, 2013 at 7:46 am

        Paul, I know you think you have the answers because you rather condescendingly told me to find them in Keynes and in your book. You were talking about contracts and the legal system. I learned about business economics while studying Germany. Then I looked at the US. Germans have a different concept of the firm and of firm governance, as expressed in the constitution of the firm. But Americans are poorly informed about it because of the peculiar cultural limits of their higher education. (Start with Michael Albert, Capitalism Against Capitalism, 1993) Japanese I also learned in the 1980s and 1990s have a different conception of the firm than Americans: US-UK, a proprietary conception that has, after the death of Keynes, in the real world become one of director primacy. Germany-Japan, an organic conception of the firm, expressed formally and informally in forms of employee participative governance. (There is a vast literature from the l980s & 1990s on Japan, see James Abegglen and George Stalk, Jr. Kaisha: The Japanese Corporation, 1988 for starters).
        Do you offer a course in your university that seriously discusses different constitutions of firms and how the differences affect the study of economics? My guess is that you do not because you and your colleagues consider such matters irrelevant. But they are relevant – if you want to understand why German manufacturing is flourishing today look to the German conception of the firm and how it relates to the educational system, or if you want to know why I think Apple is in for a fall, look to it having been taken over by moneymen under the system of director primacy governance in US Investor capitalism.

  22. davetaylor1
    June 14, 2013 at 10:55 am

    The joy of blogs is that sometime’s other people’s conversations (or even people talking to themselves) are really interesting! Thank you Paul for narrowing down Robert’s “legal systems” to the Law of Contracts, on which I have found your comments really eye-opening, not least because of our Law’s historical justification by Hobbes’s myth of a [leonine] Social Contract.

    The etymology of the word ‘contract’ is interesting, too. ‘With’, and ‘tract’ as in ‘tractor': forcing a quart into a pint pot, then dragging more out of it than was put in. Law doesn’t have to be like this, i.e. conceived in terms of letters and accountant’s arithmetic. It can convey a spirit in the language of principle and the algebra of sustainable flow. One cannot take more than there is, and whatever content or share is taken needs to be replaced before it is needed again.

    Money defines entitlements without specifying content, but whatever content we humans take defines our responsibility for its replacement, though without specifying by whom. Many rivers of liquidity run into an ocean, the molecules of which evaporate, disperse, condense and fall again, not usually in the same river. Too much liquidity (floods) and drying up rivers are both problematic, but the short-term solution of supplying the trickles from the floods will not resolve problems of evaporation, dispersion, condensation and rivers streamlined by us to relieve floods. The long term solution will not be more money but more human investment in irrigation infrastructure to regenerate dense forests – nature’s infrastructure. These absorb solar energy and greenhouse gases: the local cooling diverting winds, producing condensation and locally recycling water and other resources. Whether this real world economics is deemed irrelevant or insignificant I’m not sure, Robert. I think it is just not noticed by urban economists.

    • davetaylor1
      June 14, 2013 at 12:55 pm

      PS. This link I’ve just received looks highly relevant.

      • davetaylor1
        June 14, 2013 at 1:05 pm

        Whoops! Try again? Allan Savory on How to Green the World’s Deserts:

      • charlie
        June 15, 2013 at 7:15 pm

        we live in the SE of AZ, I am trained as a forester, but retired to manage cattle in the desert. We have made some progress in land redemption locally, using principles we feel are consistent with Savory. Hence I have a biological interest in human caused desert damage, where modern economic culture is destroying much of our heritage. I suspect a biological approach to economics is critical to human future. Most of the economics I see here and elsewhere is gross rationization. Total human greed justification. I am still looking for a system that makes economics biological not just human centered.
        interesting to find Savory here.

      • BFWR
        June 15, 2013 at 8:27 pm

        Extraordinary video and concept.

      • Garrett Connelly
        June 18, 2013 at 12:28 pm

        Yes, the video is very interesting. I’ve also seen pictures of land restored by population increase og people gardening with hedge rows etc.

  23. June 14, 2013 at 7:46 pm

    True. True. True.

    I remember seeing somewhere that we should use the simplest model possible, especially to convince those ensnared by conventional economics.

    The simplest model I have seen was enunciated by the Andrews Sisters in the song “Them that has, gets.”

    Couple that with the widely familiar guideline “Never dip into capital.”

    What does that mean? It means that as long as your expenses are less than your income from dividends and interest, all is well.

    But is it? No, because your wealth – your capital – will keep increasing if you keep expenses below that maximum.

    With what inevitable result? “Them that has, gets”. The more you have, the more you get.

    Leading to the inexorable growth of inequality we are experiencing, so more and more of what we produce keeps going to “them that has”.

    Until there is a financial collapse because those whose livelihoods are not paid for by interest and dividends lack the purchasing power to buy what society could produce. Even the robots are stilled, not earning any money for their owners.

    No amount of pump priming will cure this, nor will “getting the government off the back of the job creators”. Them that has, gets, and they don’t buy enough to keep all the robots busy.

    Gotta get them robots back to work, producing output for people and earning profits for their owners.

    The only way to do this is to insure that their output can be bought by the workers they have displaced – those now un-economic ex-workers need to have the money to buy what the robots can produce.

    I see no alternative but a Basic Income Guarantee, paid for by a progressive income tax. The robot-owners must be brought to see that the only way they can hang on to their wealth is to give some of it up.

    It’s the only way to save capitalism, in my opinion.

    It requires income redistribution and a whole new attitude toward jobs. We have to realize that the jobs are gone and they are not coming back. We have succeeded after 500 years at replacing many workers with machines, and we must face up to the implications.

    The means of production have long been listed as land, labor and capital. We have been working hard to replace labor expense with capital expense, and have at last succeeded in eliminating many jobs forever. Not all jobs, just enough to cause the Global Financial Collapse. But it will not be reversed by any of the means proposed by “conventional” economists. The Age of Aquarius is upon us, and we need a new economics.

    Like that of Steve Keen.

  24. Paul Schächterle
    June 15, 2013 at 1:40 pm

    Seems like Paul Krugman is reconsidering. He is in fact becoming himself somewhat of a crisis predictor: http://krugman.blogs.nytimes.com/2013/06/15/worthwhile-canadian-comparison/
    And with a Keen’ian explanation at that!

  25. davetaylor1
    June 16, 2013 at 5:16 pm

    Charlie @ #46: “Most of the economics I see here and elsewhere is gross rationization. Total human greed justification”.

    Tom @ #47: “I remember seeing somewhere that we should use the simplest model possible, especially to convince those ensnared by conventional economics”.

    Tom, I hope your two models are ironical, or you are just confirming what Charlie so sadly said. [“Them that has, gets. ... Never dip into capital"]. But let’s remember Einstein’s objection to the “simplest possible”: “Keep things simple; but not TOO simple”. Yours are too simple.

    Money doesn’t simply flow from the poor to the rich or slide down a graph from the many to the few. It has to be created, and flows – indeed circulates – not only between the poor and the rich but between the different members of biological households, investors attending to the different needs of the households, and bankers who bottle most of it up (circulating it in a gambling ring), so they have an excuse to charge investors and households for creating more. But that is not about economy: it is merely about money-making (chrematism). As a minimum, a model of an economy needs to account for biophysical inputs and outputs, human ideas and equipment, and the flow of monetary information round multiple circuits. Neither words nor equations can do this simply without complicated decoding and ambiguity.

    The simplest model of a monetary economy is thus an iconic diamond of four points interconnected, rooted in nature. It represents specialised human roles and the circulation of goods and tools with the help money fed (like the water of a central heating system) from a bank or “expansion tank” at the top. The channels can be separated out to model each transaction separately without affecting the diagram, and logically, what is true of all is true of any one. The simplest and most easily visualised model thus represents a single household: the Kids (in particular) consuming everything, Dad having to help Nature produce some more, Mum to distribute it fairly and the Old Folks trying to invent and produce better tools, help nurse and teach the kids and manage the use of buffer stocks by modelling them in terms of money in the Piggy Bank.

    Charlie is “still looking for a system that makes economics biological not just human centered”. Is this the sort of thing you were looking for, Charlie?

    What’s gone wrong with the present system is that chrematists have replaced the Piggy Bank expansion tank with dynamic storage in their Stock Market. Bankers leave the tap running as they circulate money between asset, debt and insurance price bubbles, not expecting to be “last man standing” in this game of Musical Chairs.

    • BFWR
      June 16, 2013 at 10:17 pm

      The real problems the economic and monetary systems are struggling with are…..the necessity of their own transcendence. Ironically, humanity already has evolved the NATURAL capabilities of transcendence. It is the system which needs to provide the correct policy inputs (gifts of money in the forms of a citizen’s dividend and a discount on prices which is also rebated back to merchants)….in order to symmetrically evolve upwardly to human ability.

    • davetaylor1
      June 18, 2013 at 8:43 am

      My comments having not obviously been about Steve Keen’s post, let me try and criticise what I have said in light of that. First, I see the conspiracy as not just against Post-Keynesian economists but against powerless people living in the post-Keynesian world, so I wasn’t terribly interested in predictions of particular events. Krugman, “looking for the right economic framework” and “broad performance, not particular events”, says something similar about predictions, and Steve agrees with him, adding that different types of model have to be evaluated on its own grounds. I agree with Steve.

      What’s left, then, is different models needing different criticisms. I find it very hard to criticise Steve’s model since he hasn’t said what it is. All he has done here is defended simulation and chaotic models, which you can still have without having “the right economic framework”. I’ve criticised his “modern” interpretation of the word ‘religion’ (which potentially throws the baby out with the bathwater), but not his resultant analogy.
      If he agrees with Krugman that “we’re looking for conditional predictions – what happens given events that are not parts of the model”, then I suggest his perspective may need to be inverted. Given the real world, what types of event can cause logical predictions to go wrong? Two such are models having parts missing or wrongly related, as in Neoclassical and other numerical models which, unlike Keynes’s, lack even notional reference to human variability, co-operation, functional specialisation and error correction.

      How then to criticise my own “framework” model, with goods and tools as well as money circulating in parts of the framework? Obviously one can criticise its presentation here, for I have justified neither its logical completeness nor how it can account for particular events. (I can, but in the probably unfamiliar terms of computer logics, information systems analysis, quaternions and Fourier mathematics). What I have done is to continually test my understanding with the evidence, like the Gestalt experiment in which one eventually sees what you suspect or have been told is there to be seen (here errors or omissions. What I have seen is chremistics, economics and ecology represented by the just most significant digits in an algorithmic (arabic) number, which sums up units in the form of four-handed analogue clocks which have been counting up all that has happened each day since the Big Bang. When a clock moves on to its next day, what it is accounting for is not lost but carried forward to a more significant digit. The advice of the Citybank executive that the real economy was numerically insignificant compared with Wall Street chremistics was thus as wrong as it could get.

      • BFWR
        June 18, 2013 at 5:54 pm

        Dave,
        Yes, Keen is being the good (and cautious) scientist. But eventually scientists and all of us are going to have to confront the economic instability of the productive process itself. P + In < Pr The act of production equals a fundamental scarcity of total individual incomes to total prices. Businesses will always have costs other than labor. They will never be able to pay all costs to labor. Even if they eventually can Star Trek-like synthesize the warp drive and dilithium crystals for nothing…who's going to pay for the grease doughnuts for the robotic secretary pool? And of course, more importantly, who is going to have the purchasing power to buy a loaf of bread?

        If economists don't stop leaping in and out of present time with mathematical abstractions that miss the elemental empirical data of cost accounting then the above humorous example will eventually become an absurd reality.

  26. June 17, 2013 at 3:42 pm

    “Neoclassical Conspiracy against post-Keynesian Economics” ? …”The national debt is morally bogus” ?… ” Most Economics is just Total human greed justification “. Really guys ?
    Wherever he may be, The great & morally concerned J.M. Keynes must be rocking with laughter…of the “I told you so” variety.
    Remember what J.M.K. said about the icon of so many “progressives” and their conspiracy obsessed cousins? Like the old time Social Creditors, whose “A+B {double -counting} theorem” bears such a close resemblance to old Karl’s even more twisted “theory of surplus value” ?
    [1] “My feelings about [the content of] Marx’s Kapital ? It’s dreary, out-of-date academic controversializing seems so extraordinarily unsuited for this [or any other?] purpose. Is there any defect in my understanding [of Marxism” ?
    [2] “I can see that they [Marx's acolytes] have discovered a certain method of carrying on.
    …..”And a vile manner of writing. Which their successors have maintained with fidelity. But if you tell me that they have discovered a clue to the economic riddle, I’m beaten.[i.e.mystified] ”

    [3] “I feel just the same about the Koran…”How could either of these books have carried fire and sword round the world ? It beats me. Clearly there is some defect in my understanding”

    Norman L. Roth Toronto Canada. Please GOOGLE: [1] Norman Roth, Origins of Markets
    [2] Norman Roth, Economics of Technology [3] Telos & Technos, Roth

    • BFWR
      June 17, 2013 at 5:26 pm

      Double counting? No, its actually just a closer look at the empirical data of cost accounting and confronting the relationship between incomes and total costs to be found there. Elements don’t change unless you add something to them, and the elemental state of production which is characterized by a scarcity of total individual incomes in ratio to total prices will not change unless you supplement individual incomes in a way that does not incur additional cost. Is adding $5 of income to -$5 of ability to liquidate a price double counting? No, its the closer look at economic reality (as opposed to the once removed and hence prone to less accurate theorizing about it) …that will enable “free” market THEORY to become free market reality.

      • BFWR
        June 17, 2013 at 5:48 pm

        Velocity theory fails to consider that re-circulation of money in the economy once again places it back in the context of commerce which inevitably incurs more cost (and with technological advancement continually increasing cost) than are wages produced. Hence it misses the inherent scarcity produced by….production itself, and also fails to discern the correct economic metric that bedevils economic theory…the ratio of total individual incomes to total prices needed to be liquidated.

    • davetaylor1
      June 18, 2013 at 9:02 am

      “Clearly there is some defect in my understanding”.

      Clearly, Norman. You are not understanding the history of usury from the perspective of its slaves, the need for Mohammed and Marx to articulate it and the justice of violent retribution. I doubt you understand the Christian alternative either, which recognises violence as counter-productive and advocates the pursuit of truth and conversion..

      • Robert Locke
        June 18, 2013 at 10:14 am

        Amen, brother Dave,, the issues are moral not economic and mathematical. But Norman calls Keynes “great and morally concerned.” Can’t Keynes’ moral concern mirror Marx & Mohammed, because neoclassical economics certainly doesn’t. For that don’t read Das Kapital, but the Communist Manefesto & the 18th Brumaire of Louis Napoleon. Marx was a sparkling journalist you know, who had a pretty good grasps of events unfolding around him. Would we were half so wise.

      • Garrett Connelly
        June 18, 2013 at 12:03 pm

        Theoretical christian non-violence ignores the reality of endless wars by all three monotheistic schools of thought originating in the middle east, and does so in a parallel manner with modern economics which ignores planetary destruction by pirates violently extracting wealth from civilization and the environment.

      • davetaylor1
        June 18, 2013 at 5:37 pm

        Robert, the issues may superficially be moral but the dubious mores issue from Nature and Nurture, i.e. the type of personality that is oblivious to other people’s feelings, and the Humean doctrine of morality, which redefined it as the mores on which these domineering rulers “democratically” agree, as codified in law. What this type of person doesn’t feel they may perhaps come to understand, and the truths involved, like the falsehoods, ARE economic and mathematical. It is nice to be able to agree with Norman that Keynes was “great and morally concerned”, because he actually persuaded the powerful to change course. So in his own way was Marx, but Das Kapital raised the hackles of the powerful just as surely as The Communist Manifesto raised the hopes of the oppressed.

        Garrett, “theoretical Christian non-violence” comes from the Nurture of Christ, not the Nature of Christians. It is rulers (and sometimes it will be nominally Christian ones) who wage war. Christ didn’t ignore that reality but showed how best to survive it by allowing it to be waged on him. The best defence against war is friendship, and friends are made not by retaliation and oppression but by forgiveness. Compare the endings of WW I and II.

    • June 20, 2013 at 5:29 pm

      Hi Norman:

      How is the A+B theorem a “double-counting” theorem?

  27. Robert Locke
    June 18, 2013 at 8:23 pm

    Dave, there is nothing “superficial” about morality. You just describe the kind of people that are or are not susceptible to moral argument. The Communist Manifesto raised le spectre rouge as much as the hopes of the oppressed. I wish you social scientists knew more about history. Almost all the issues we debate today were being debated in 1848-49, Marx, Montalembert, Benoist d’Azy, Victor Hugo, Tocqueville, etc. That is why the French say, the more it changes the more it is the same. You won’t get at the nuance and depth of human experience through economics and mathematical modeling.

    • davetaylor1
      June 19, 2013 at 7:19 am

      Robert, I don’t think we are disagreeing on this. What I’m trying to do (once again) is to draw attention to the difference between customary behaviour (mores) and the root cause of it (ethos). As I see it the mores are superficial compared with the ethos, which is not to say they are unimportant: far from it. In an earlier response to your post #30 (my #41) I tried to say something similar about economic behaviour, which is superficial compared with humanity and its ecological situation. Nature (personality) and Nurture (education). Given the problem, the issue for me is what can be done about it. Physiologically unfeeling personalities don’t change, so we are left with their education not relying on feeling, i.e. focussed on a true understanding the facts and the logical choice between a self-centred and an other-regarding ethos.

      Living in Britain, I find you interesting not least because you know your European social history far better than I do and make connections I haven’t been aware of. I hope the converse applies to my familiarity with British scientific history and social philosophy.

      • Robert Locke
        June 19, 2013 at 7:42 am

        It does, Dave. I consider you one of the really intelligent bloggers and learn from you constantly, although the limits of my education in science and mathematics limits what I can learn from you. I learned history from books and sources but I also learn it from living in the countries for prolonged periods of time and talking with people there — with, for example, people who lived through the 1930s and have their particular stories about Hitler’s accession to power, or with a nun, in France, whose family was in the Vichy regime and saw her parents murdered before her eyes when the Maquis “liberated” her town in 1944. It all blends together in my consciousness, books, sources, personal stories, in my grasp of events. And my wife, who is Polish, lived through the 1980s as an executive secretary in a Polish coal company, says “the transition in the 1980s was a murky affaire with the “good guys” often indistinguishable from the bad.”

      • davetaylor1
        June 19, 2013 at 11:09 am

        Thanks for this, Robert. Appreciation makes the effort feel worth while. History here is pretty evident in the remains of Iron Age hill forts, Roman roads and walls, monastic churches, castles, canals and railroads. I’ve always been interested in writtne history, but as a Catholic experienced conflicting versions of it, so soon looked for evidence as near first-hand as I could get. I learned to enjoy old people’s stories in me teens, as I had my hair cut by an ancient barber, and one of my newest friends is a 90-year-old Dutch lady who lived through Nazi occupation. Visiting family in NZ I was amazed at how much so few people could accomplish, but I was put off America when the through passengers of an Air NZ flight were, during refuelling, locked up for two hours by armed guards in a transit lounge without facilities. How NOT to make friends and influence people! “Cowboys and Indians” suddenly felt personal and bloody conspiracy very likely.

  28. Egmont Kakarot-Handtke
    June 20, 2013 at 3:55 pm

    As Schumpeter already observed:

    “Modern psychology and psychotherapy have made us familiar with a habit of our mind we call rationalization. This habit consists in comforting ourselves and impressing others by drawing a picture of ourselves, our motives, our friends, our enemies, our vocation, our church, our country, which may have more to do with what we like them to be than with what they are. The competitor who is more successful than we are ourselves is likely to owe his success to tricks that we despise. As likely as not, the leader of a party not our own is a charlatan. … The importance of this habit for the health and happiness of the normal mind is obvious and so is the importance of a correct diagnosis of its verbal manifestations.” (1994, pp. 34-35)

    The correct diagnosis of this thread’s verbal manifestations is, I think, that there is not much to choose between Neoclassical and Post Keynesian normal minds.

    References
    Schumpeter, J. A. (1994). History of Economic Analysis. New York: Oxford University Press.

    • davetaylor1
      June 20, 2013 at 7:16 pm

      Ad hominem abuse without honest reference? If this was provoked by a complement and a couple of old fellows sharing their interests in history it was particularly wide of the mark.

      I myself don’t have a normal mind [I'm a rare (1%) type of intuitive], so the assumption I have Schumpeter’s habit of mind isn’t “a correct diagnosis” of my habit of putting things in (e.g. historical) context. Normal Neoclassical minds are sensory, living as if history was dead, seeing one object at a time and taught to turn even that into equations stripped of reality. It is they who need to feel right, for seeing one thing at a time they cannot see that our different talents are complementary, not competitive. Talents good for getting things done or verbal debate are not so good on the patience-demanding timescales of insight and discovery. Intuitives find it easier to appreciate people and their differing perspectives for what they are.

      Grow up, Egmont. I may be post-Keynesian and appreciative of the intuitive Keynes, but if one takes the trouble to read #46, #54 and #56 it is obvious to anyone who knows what he is talking about that I am not a “normal Post-Keynesian”.

  29. sergio
    June 20, 2013 at 4:43 pm

    For the purpose of “inquiry of the wealth of nations” (best definition of what economics should be) I would leave only institutional economics, evolutionary economics and economic sociology. Others fields, including neoclassical and post/Keynesian better fit to the purpose of efficiency, allocation of scarce resources for unlimited wants. And that is not economics. That is just efficiencynomics, capitalismonomics, crysisnomics, increasedecreasenomics, treesmakewindblownomics, intellectualexercisenomics, textbooknomics, mankiwnomics, utopianomics, modelnomics.

    • Garrett Connelly
      June 21, 2013 at 2:45 am

      Does institutional economics include socioeconomic histories ? Really. What is efficient ?

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