Why a global disaster that could easily have been prevented took place.
from Edward Fullbrook
Steve Keen has a new book out: Can we avoid another financial crisis? Keen, as you probably know, was one of those economists – Nouriel Roubini, Dean Baker, Ann Pettifor, Michael Hudson, Wynne Godley and others – who warned well in advance that the Global Financial Crash was coming if preventive measures were not taken. How did these economists clearly see the crash coming when neoclassical economists did not, not even the day before it happened? Keen’s new book reminds me that a few years ago in an interview I offered an explanation when answering the following question.
The first distinction you draw is that the old paradigm (OPE) is anti-pluralist (as in classical physics), while the new paradigm (NPE) is pluralist (as in modern physics). Can you give me a concrete example or two that illustrates what this means?
Of the ten points that I listed to distinguish between OPE and NPE, the most important is the first: monism versus pluralism. Why? Because it is this choice that sets down the general framework under which the pursuit of knowledge is conducted. And this choice, in terms of its effect on the advancement of knowledge and thereby human welfare, is, as I will illustrate, absolutely enormous.
There is a famous quote from Albert Einstein that points to the reason why for the advancement of science this choice is so critical. “Whether you can observe a thing or not depends on the theory which you use. It is theory which decides what can be observed.”
It just happens that the lead news story today in the UK illustrates Einstein’s proposition. It goes like this.
In 2007 a three-year-old British girl was kidnapped in Portugal while on holiday with her parents. The British Metropolitan and Portuguese police have been investigating the case ever since. Until recently their investigation was guided by the theory that the girl had been kidnapped at about 9:15pm.
But the Guardian reports:
- “In the light of what police describe as “a revelation moment,” altering six years of thinking about the case, investigating officers now believe Madeleine could have been taken up to 45 minutes later in the evening.”
The Chief Inspector explained that this new theory means:
- “that from 9.15pm we’re able to allow the clock to continue forward. In doing so, things that were not seen as significant or have not received the same attention are now the centre of our focus.” (my emphasis)
Whereas the 9:15 theory:
- “meant the focus was always done and dusted by about quarter past. Now it (the new theory) takes us forward to 10pm.”
And low-and-behold, since 2008 the Met has had in its possession efits compiled by private detectives investigating on the basis of a different theory. They are efits of a man seen carrying a child near the scene of the crime at about 10pm. The police are now hopeful not only of finding this man, but also finding Madeleine alive and returning her to her parents.
Many, and probably most, of the wonderful advancements of modern science have, as Einstein and other greats so deeply appreciated, came about in a similar way, that is by altering the “focus” or “theory” or conceptual framework through which a particular realm of the real-world is viewed. Frequently – and this is a key point – new theories are advanced not on the basis of challenging existing ones but rather on the hope that using different preconceptions of a given realm (for example 10:00pm versus 9:15) will enable investigators to see new things. In modern physics this had led to the development of major theories pertaining to the same general realm but which differ in terms of their theoretical preconceptions or, if you prefer, axioms. Sometimes these differences are not directly contradictory, but in other cases, including some of great importance, they are.
Should multiple theories, contradictory or not, pertaining to the same realm be allowed and encouraged? Monism says no; pluralism says yes.
Most modern physics would not exist without belief in a pluralism more radical than any ever dreamt by any economist. The conceptual frameworks of its two basic theories for describing the universe, the general theory of relativity and quantum mechanics, not only differ fundamentally, but also their basic concepts directly contradict each other.
- General relativity conceives of space and time as continuous; quantum theory conceives of them as discontinuous.
- General relativity conceives of matter as particulate; quantum theory conceives of it as a wave-particle duality.
- General relativity conceives of physical objects as having actual properties; quantum theory describes them as having only potential properties within the given physical situation.
- General relativity conceives all physical reality as determinate and all events as in principle having a causal explanation; quantum theory admits indeterminacy and events incapable of causal explanation.
I defy anyone to imagine conceptual differences greater than these. This radical pluralism is physics’ response to the complexity of the object, the universe that they wish to understand. Their wildly divergent methods of approach offer different points of view on that object, like observing Michelangelo’s David from the front and from the rear, thereby revealing different primary dimensions of the physical world.
This of course is not to deny that some physicists, Einstein being one of them, have dreamt of finding a way of reconciling these two great theories. But that is not the point. The point is modern physics’ paradigm of radical pluralism, which has prevailed for a century has enabled an enormous advancement of knowledge. If instead a monism like that of Old Paradigm Economics had been allowed to prevail in physics, the world as we know it today would be very different. Indeed, the IT device on which you have accessed this would not exist.
In the years leading up to 2008 the approaching Global Financial Collapse was not visible through the Old Paradigm Economics window. But in those years a number of economists, including Steve Keen, Nouriel Roubini, Dean Baker, Ann Pettifor, Michael Hudson and Wynne Godley, warned that there would be a GFC if corrective measures were not taken. And their predictions were not off-the-cuff but based on sophisticated analysis. But it was not analysis based on Old Paradigm Economics and therefore, like the efits of the private investigators of the Madeleine case, was given no attention. In consequence a global disaster that could easily have been avoided took place.