The counterintuitive problem
from Edward Fullbrook
Scientific education entails taming the authority of one’s intuition. Responsible citizenship in a democracy may entail it as well.
Keynes argued that markets often create inaccurate expectations of economic reality which people then act upon thereby changing reality. This reflexivity that Keynes identified as central to capitalist markets is the opposite of the basic process described by traditional economic theory, both in Keynes’ day and in our own, whereby it is assumed that market expectations are determined by market reality rather than one of that reality’s determinants.
For most people Keynes’ theory of market expectations, like his theory of aggregate demand, is counterintuitive, and therefore difficult to elucidate and popularize sufficiently to become part of public discussion. That is why George Soros’s role as a populariser of Keynes’ theory of expectations is potentially significant. It is my view that in democratic societies the ultimate obstacle to implementing and maintaining laws and policies that will make their economies function reasonably well and fairly is the challenge of intellectually enabling their populations, especially their pundits and politicians, to comprehend the counterintuitive dimensions of economic reality. Without that comprehension democratic societies will always be highly vulnerable to accepting the advice that follows from economic reasoning that excludes counterintuitive propositions and that serves the interests of tiny but powerful minorities.
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Real-World Economics Review Blog 
Perhaps if we discovered a concept and process that embodied the discerning integration of opposing truths, like Wisdom for instance, and then crafted policies that reflected and effected Wisdom’s pinnacle concept….both intuitive leaps may become more self actualized and the economy more abundant for all agents and more flowing as well.
Unfortunately that ‘ultimate obstacle’ is a function of the democratic process itself. It is assumed that ‘maintaining laws and policies that will make their economies function reasonably well and fairly’ is an outcome of democracy, when it is merely one determinant.
Elections are exercises in competitive expectation generation, and those expectations are only founded in reality to the extent that such foundation allows a greater expectation to be constructed. That and no more.
So.. a vicious circle exists between the political market in a democracy, and the economic one, leading to the increasing degradation of both as the reserves of political and economic capital built up are burnt.
In Germany people don’t want shops to be open on the weekends, because there is more to life than making money.
My view is the main problem with democratic societies is the ‘matching problem’—how do people select, get into, and create social positions (eg jobs, relationships) which are in some sense ‘mutually beneficial’,(as well of personal ‘utility’) enhance ‘social welfare’ or even say ‘pareto optimal’. The problem is society is what is called in physics a ‘frustrated system’ and ‘quantized’. Basically there are alot of pre-existing pigeonholes to get into (though they evolve) and they aren’t a continuum (of choices)–they are discrete, or quantized. (Similar to animals in an ecosystem—you dont have every possible kind of animal, just a few–so you end up with pecking orders, runts of the litter (eg like the poor) and then ‘leaders of the pack’ (eg the rich and powerful). Also while these systems can be changed often its easier to go with the status quo.
The status quo is a bit like an addiction or a relationship or job one doesnt like—you know its bad, and there could be better ways, but basically it keeps you alive and may seem like there are no alternatives.
(Soros i think wrote 2 equations describing his model–a variant of ones used by Lotka-Volterra/Goodwin and others –in a sense they capture the basic idea though one could go alot further—soros was mostly into applications (making money) using intuition i think rather than abstract modeling which may have limited applicability —unless you get tenure in academia doing that.
Alot of people into finance like the game and money, and alot of mathematical economists may jmostly like job and practice, and don’t really care if their theory is correct or applicable.
They may try to justify funding their work by saying it can be used by policy makers–but that is more of a political rather than scientific process.
Soros gave away alot of his money for things like climate issues, and others, whcih i guess is good –though imperfect–the world is not utopia yet and funding the transition to it with large fortunes is as questionable as the Noble prizes—funded with money made selling gunpowder). Similarily some of the theoretical models likely have had some locally good effects but like making a fortune, making a theory to solve problems can be so removed from the problems that both processes are part of the problem).
Its interesting that Keynes and Turing were both gay when it was basically illegal in UK. Keynes helped Turing get a job at an elite unviersity, but he couldn’t help him when Turing got prosecuted and sent to jail which basically finished his life. )
About the problem of wisdom and human action, the most thought-provoking synthesis I met in Conze’s summary of the voluminous Prajnaparamita: “1) One should strive to become a Bodhisattva, that is, one who is content with nothing less than all-knowledge attained through the perfection of wisdom for the sake of all living beings, 2) There is no such thing as a Bodhisattva, or as all-knowledge, or as a “being,” or as the perfection of wisdom, or as an attainment. To accept both these contradictory facts is to be perfect.”
Correct….because Wisdom is the integration of opposites and the height and pinnacle concept of Wisdom is such continual integrating also known in the West (and by various other words elsewhere) as the dynamic and evolving concept of a state of grace, whether personal or systemic.
Viz free market economics and free market economic theory, which have historically been plagued by balkiness and without a new paradigm probable unworkability, I would suggest contemplating and integrating into such theory the following aspects of grace: free, a gift, gifting and free flowingness.
Milton Friedman’s Free to Choose also appealed to counter-intuitive reasoning and generated the conclusions that we should do away with the Food and Drug Administration and any laws supporting Union organizations. That was part of the mystique and attraction of monetarism. I think the issue is not that people need to be convinced of counter-intuitive arguments, but that the thought leadership in economics is a much more complicated spaghetti mess of self-interest, lazy academics, money, arrogance, and the like that leads economics in the direction of neoclassical thought.
I use this analogy when I give talks to BODs, industrial groups, etc. Think of your favorite movie. I am a James Bond fan myself. There’s an inside and outside to the Bond films. The inside in the story in the movie itself. Bond’s adventures and dangers are shown. But the fan knows the story well and knows Bond will overcome the villain. The outside of the movie is the creation of the movie by producers, director, cinematographers, actors, etc. This is the result of different sets of rules than the movie story. The fan not immersed in the movie will know that the hero and villains will continue into other movies so long as the movies create a profit for the producers. This is the “commercial” reason to buy a ticket for your favorite movie hero’s next film. The economics profession is the inside of the movie. Created to tell a story and make that story so tangible and “natural” that people lose themselves in it. It becomes part, often a major part of their lives. The outside of the “economics movie” is the actions and interactions that create economics and economies. That create professional economics as an academic discipline and policy tool. That create the economies in which each of us participate, both in terms of ontology and epistemology. Unfortunately, today many economists are immersed in the movie and take little note of the actions and interactions that create the movie, and the world outside the movie. Like Bond the economics movie is interesting and exciting. But it is only one story among a universe of stories that create economics in full.
Good analogy. Here’s mine. Physical-temporal chaos emerges from the utterly integrated-integrative Grace-Consciousness of the Quantum Universe…….not the other way around. And the scientific truth is that both the quantum and temporal universe are always and continually interacting with each other which only underscores the fact that the cosmos is actually in a total and continual state of integrated-integrative grace….despite the chaos. It’s just that, causitively, the physical-temporal universe is the epiphenomenon and apparent reality. The orthodox religious half understand, and modern pundits, mathematicians and scientists can’t or won’t confront that long, oft observed, wise and existential fact.
What the orthodox, whether of religion or science, fail to do is de-habituate themselves to the temporal universe with the superlative mental discipline of Wisdom. “Cleanse the doors of perception, and everything will appear as it actually is….infinite”, eternal and connected.
Look at the concept of integrated bothness…in process…no matter where you may find it and you’ll discover the new paradigm for economics and money systems.