Radical paradigm shifts
from Asad Zaman
The methodology and ideology of modern economics are built into the frameworks of educational methods, and absorbed by students without any explicit discussion. In particular, the logical positivist philosophy is a deadly poison which I ingested during my Ph.D. training at the Economics Dept in Stanford in the late 1970s. It took me years and years to undo these effects. Positivism uses clever arguments to make you deny what you feel in your bones to be true, and make you believe what your heart says must be false — for example our supposed knowledge of subjective probabilities of unknown events. The roots of the problem go back to the famous Cartesian argument that “I think therefore I am”. Although it is clever piece of logic, it has a deadly effect. I know that I am alive because I can feel the blood flowing in my veins, the tingling of my skin, and a thousand other bodily sensations. “I feel therefore I am”. Denying this experience as a valid source of knowledge reduces me to a brain floating in a vat, which is exactly what logical positivism entails. In fact, despite Descartes, it is impossible to REASON our way to certainty. We can only create an illusion of certainty. Descartes’ argument is deeply flawed, and illustrates the weakness of human reason. When we formulate the concept of “I”, isn’t existence automatically part of this? Did I not exist when I was a baby, and was unable to formulate these thoughts? Do I blink out of existence when I go to sleep? This and many other difficulties make this argument incoherent. Modern economics is much like this. It starts by making assumptions which are dramatically in conflict with everything we know about human behavior (and firm behavior) and applies mathematical reasoning to situations where it cannot be applied, quantifying the unquantifiable and coming to completely absurd and ridiculous conclusions. NONETHELESS, speaking from personal experience, the brainwashing is powerful and effective. It is a slow and painful process to undo. read more
Leave a reply to Vladimir A. Masch Cancel reply
—– look inside —– $5.94 / $20.00
—– look inside —– $4.90 / $8.00
—– look inside —– $15.99
—– look inside —– $5.99 / 12.99
—– look inside —– $5.93 / $12.99
—– look inside —– $4.97 / $9.90
—— Ugarteche, Puyana and Madi ——
Gerson Lima / Maria Alejandra Madi
Edward Fullbrook and Jamie Morgan
————— Michael Hudson ————–
Maria Alejandra Madi / Jack Reardon
————- Edward Fullbrook ————-
—————— Steve Keen —————–
————— Richard Smith —————
————– Gustavo Marques————
– Victor Beker and Beniamino Moro –
————– Lars Pålsson Syll ————-
—————– Stuart Birks —————-
Edward Fullbrook and Jamie Morgan
———— Armando Ochangco ———-
Shimshon Bichler / Jonathan Nitzan
————— Mauro Gallegati ————–
————— Herman Daly —————-
————— Asad Zaman —————
—————– C. T. Kurien —————
————— Robert Locke —————-
Real-World Economics Review Blog 
Asad, about that time my friend Bill Sharpe joined the Stanford Biz School faculty. Everyone knew the Econ Dept wouldn’t take him as he “only” did finance. The Nobel Prize in Econ in 1990 came as a shock for many, I expect.
That said, I did my time at Berkeley, coming down for a joint seminar in Theoretical Econ, hosted by Ken Arrow, who after all did good economics if you accepted the assumptions.
However, I was frankly more impressed by competence of the statisticians at Berkeley who both were great at math & trying to find appropriate assumptions.
I quite get that modern interpretations of logical positivism are a part of our problem, but it seems to me that the problem is, in general logic/mathematics + something else, and – as Boole noted – we are free to choose which we ditch.
Keynes made it possible for Wittgenstein to publish his Tractatus, which notably had a notion of probability defined in terms of measures, and many have simply assumed that probability must therefore be measurable, in the sense of measure theory. But Keynes went at great (and tedious) length in his Treatise on Probability to argue that it was not. Russell and Whitehead both endorsed this view. How does this relate to your:
“Positivism uses clever arguments to make you deny what you feel in your bones to be true, and make you believe what your heart says must be false — for example our supposed knowledge of subjective probabilities of unknown events.”?
You later note:
“Even though Keynes succeeded in escaping from the old ideas, most of his contemporaries and followers never did. Some of the key phenomena which were central to Keynesian analysis in his “General Theory” were never understood by mainstream economists, trapped by the mindset created by conventional economic training.”
What do you think of Keynes’ Treatise on Probability, Russell’s On Human Knowledge, etc? Are they ‘logical positivist’ or a recantation?
I had a quick look at your link, but I didn’t get it at all. My understanding of logical positivism is that we can apply a kind of type theory to claims, and that logical positivism identifies and privileges a certain type of claim (as do I). But could any function if they ‘rejected’ all other claims? The lives of Keynes et al suggest to me that they were ‘men of faith’, albeit differently expressed from yours
My own approach to these things is that it always useful to identify the logical, because there is no point questioning it. But one has to be sure, because there are often implicit assumptions hidden in the pseudo-logical. And not just in economics.
What seems to be true is that some took a scholastic approach to logical positivism and created a monster. But I accept the arguments of Russell et al that no useful theory is immune to such corruption. The solution – hopefully – is some kind of faith tempered by experience and dialogue ‘in good faith’. Does this make sense?
To begin with, it is necessary to identify exactly what is meant (or perhaps, what we understand by positivism). Before we agree on what it is, we cannot discuss whether it is right or wrong. To set this out clearly, I give a set of arguments labeled NP and P for non-positivist and positivist.
[NP] The pre-positivist idea of utility says that I choose oranges over apples because I like them more — there is a feeling in my heart, a pleasure/satisfaction I get from consuming it which is qualitative, but comparable, and this pleasure is greater when I consume oranges.
[P] The positivist says that this sentence is not scientific. Because the pleasure in my heart is not observable. Science deals only with observables, because that is all that we have — any inferences or talk about the unobservables must ultimately be reducible to observables, almost by definition.
[NP] But science also uses unobservables like gravity and electrons?
[P] Scientists arrive at these concepts through observables and use them in the manipulation of observables. It should, in principle, always be possible to “translate” these terms by re-expressing them in terms of the observables they explain. These terms are just SHORTHAND for a large collection of observable phenomena. For instance, gravity is shorthand for elliptical orbits which are observable.
[NP] (beginning to get convinced) so utility or pleasure – unobservable — is really shorthand for the observable act of choice. I cannot observe whether X likes oranges or apples, and should not use this as a basis for theory. However, I CAN observe his choice, and it is only from this choice that I can infer his preference. So the scientific approach requires me to use the OBSERVED data, instead of unverifiable speculations about the unobservables, in order to construct empirically valid theories. This requires me to use REVEALED PREFERENCE theory, otherwise known as CHOICE theory. We can make a theory about choices, and axiomatize it, but we should not make theories about preferences of the heart, because there is no way of verifying whether or not these theories are valid
If we can agree that the above correctly captures the spirit of positivism, then we could move on to a critique. Above is the main point for now.
This is not directly relevant currently (to the issue of what postivism means), but you say (and I partly agree):
it always useful to identify the logical, because there is no point questioning it. But one has to be sure, because there are often implicit assumptions hidden in the pseudo-logical.
In fact, logic is often used to MISLEAD people, by turning attention AWAY from the axioms upon which the logic is built. Logic can never reveal new information — information content of axioms can only be articulated in different ways using logic. As Solow said about Lucas and Sargent — there is nothing that they would love more than to get involved in a technical argument, but he want to avoid this because their axioms are ludicrous. Proceeding beyond the axioms, to the logical structure (where few mistakes are made or are even possible) is a grave mistake because it implicitly gives assent to the axioms. WITNESS the famous “I think therefore I am” which is perfectly logical but meaningless because the conclusion of the argument is already assumed in advance, in the articulation of the term used to formulate the argument – such as the concept of I.
“[The positivist] scientific approach … requires me to use REVEALED PREFERENCE theory, otherwise known as CHOICE theory.”
My own reading of Russell et al is quite the contrary. I agree with your objections to what I might call ‘pseudo-positivism’, but am not aware of any support for the view that this is ‘the real deal’, and still cling to the view that there is a much more reasonable interpretation of Russell et al that could be part of the solution. Do you have any reliable sources for your interpretation? (Mine are on my blog.)
Once again, I fear the problem is not logic as such, but corrupted logic. And we surely need some agreed logic?
Asad, for preservation of mankind the paradigm shift must be much more radical than fighting philosophical sophistry. It must me CATASTROPHE AVOIDANCE, instead of MAXIMIZATION OF BENEFITS. The old paradigm starts to play any role only after all risks are reasonably removed or reduced.
I propose that for many years in number of publications. Nobody listens.
One part of the paradigm shift required is that the reality we live in is not EXTERNAL, OBJECTIVE FACTUAL OUT-THERE and IMPOSSIBLE to change. We must deal with it regardless of how we feel or think (positivist view). In fact, if reality is created via an INTERACTION of the objective Thing-out-there with the SUBJECTIVE apparatus used for perception of reality THEN reality is at least partly a SOCIAL CONSTRUCT. This reality is therefore created by our agreeing to a collective vision of it. To change reality, then we must get people to agree, otherwise ideas, good or bad, can never create any impact on our socially constructed world. IN other words, good ideas are a dime a dozen, but whether or not they impact on reality depends on whether or not we can create consensus on them, thereby creating a place for them within the social construct that is reality. This creation of consensus is the real task, and the hard part.
Asad, I agree with some of your reply. The second half is less acceptable. To change reality, we must make decisions. I propose multiscenario optimization models with enormous number of scenarios, mostly “black swan” ones. The models’ solutions just define risks. These risks are viewed by a small group of decision-makers, who reject or curtail emerging solutions to limit risks reasonably. A small set of limited-risk candidate solutions is derived. Out of this set, DMers select the strategy to be approved. Subjectively. No social consensus needed.
If you provide email address to skipandscan@optonline.net, I can send relevant papers.
Yes. You are totally correct. Consider what will happen when we finally realize the red spot on Jupiter is a long cycle varying birth spot of a baby sun? Now we have two suns. Binary system. Talk about global warming.
We look at reality which is an almost unmeasurable something that is mostly nothing that changes before our eyes in the warm bath of our observation; consciousness named Cosmos, purring in the moment, a human cosmos cat that can see itself only because it is also human.
Vladimir, I am listening. Most of your papers wont open for me. The one that would is protected by a patent, so I’m reluctant to read it. I see that you respect Keynes et al? Could you indicate the theoretical basis for your methodology, as distinct with the methodology itself. E.g., do you recommend any particular logic? Just agreeing on that would be useful: I’m always reluctant to follow other folk’s methodologies.
Dave, please read my reply to Asad’s reply.
Yes, I do greatly respect JMK. But he just complained about radical uncertainty. I propose how to deal with it – as far as possible, no farther.
And if you provide email address to skipandscan@optonline.net, I can send relevant papers.
I am afraid I go to the paradigm of catastrophe avoidance by simply showing how to deal with radical uncertainty. No side issues. Just a full-to-the-brim ensemble of methods of, first, constructing reasonably risk-protected candidate strategies and, second, subjectively compare the candidates on the full range of confidence levels. And the ensemble had to be complete. (N – 1) method would not be sufficient.
Was quite busy on developing that ensemble from the 1960s. No time left for frivolities.
Wow. Catastrophe avoidance replaces profit and efficiency measures how well life is supported.
In response to Asad Zaman July 2018
Some comments from a largely uneducated citizen of the real world of real people affected by the policies of wealthy elite and their cohorts the mainstream economists and self serving politicians.
Your first sentence “The methodology of modern economics are built into the framework of educational methods, and absorbed by students without any explicit discussion .”
I support this observation from conversations with students preparing to begin university study.
Again in your first paragraph you describe how early experiences can affect our subconscious mind set and make it difficult to discuss new ideas to solve problems. To me this highlights the importance of teaching people how to think from an early age instead of indoctrinating them with what to think. I also note that you state that depending on our background experience we may have different views of a subject, which obviously requires meaningful conversations to search for answers to problems.
Here I give an example of how different backgrounds and interests can affect our view of a subject. For example your academic view of Descartes is somewhat different to my simple understanding of the importance of learning how to think as a necessary precursor for an unbiased education.
Also on this basis despite the efforts of the French students in 2000 and the support of a number of economists since mainstream economists and their elite masters still support political policy. Consequently I have argued for some time that as you suggest part of the answer is to inform and involve the general public that their are alternatives to the current mainstream economic system. Yes I acknowledge that this may be difficult, however from experience and observation I believe a lot can be done by firstly listening to peoples concerns and then working with them to find solutions. Moreover these conversations could broaden economists understanding of the effect political economic policies affect real people in the real world. Ted.
Edward Ross: As in my response to Vladimir A Masch — positivism teaches us to have an enormous respect for FACTS — because they are OUT THERE and immediately observable and directly verifiable and the same for all. What I see is what is out there, and every one else sees the same thing. So according to this worldview, there can be no disagreement on the facts. Positivism teaches us an equally enormous disrespect for OPINIONS — these are subjective, particular to ME, not shared with others — everyone is entitled to their own, and there is no way to arrive at a consensus about subjective ideas because your point of view will necessarily differ from mine. This worldview is DEADLY. It leads us to believe that all we need to do is to discover the FACTS, and automatically, all rational people will come to believe them. Build a better mousetrap and the world will beat a pathway to your door — That is why, Vladimir, and Egmont, and so many others, have already discovered the right theories — the TRUTH, the FACTS — and now they are waiting for the world to beat a pathway to their doors, and are very disappointed when the world refused to see or agree to what they perceive as objective reality.
If we shift to a non-positivist view, then there are NO FACTS OUT THERE — All things that I perceive as facts are constructed by an interaction between the observer and the observed. So persuading others to see the world as I see it WILL ALWAYS require work. To reconstruct social reality, we must learn how to persuade others to think, and ALSO learn to see the world from the perspective that others have on it. By this cooperative search for truth, with the recognition that all observers are, by definition, biased, it may be possible to arrive at a shared understanding. Creating a consensus is what creates reality, and changing the consensus is what changes reality — this is a very different process, from just trying to explain the FACTS, the OBJECTIVE REALITY, to stubborn people who refuse to listen or who refuse to see the plain truth out these. So once we abandon positivism, and the illusion that we can perceive the objective reality, and therefore someone who does not see eye-to-eye with us is just obstinately refusing to open his eyes. THEN we have to start paying more attention to how other people see the world and how we can come to a shared understanding.
Again, I recognize the claims you make about positivism, but in my own reading I don’t see any justification for them. Clearly, different types of argument deserve different types of respect, but that is far from saying that emotions and intuitions should always be disregarded.
“So once we abandon positivism, and the illusion that we can perceive the objective reality”. I think it enough to abandon the illusion, while keeping the positivism.
“we have to start paying more attention to how other people see the world and how we can come to a shared understanding.” I agree. But don’t write off Russell et al. Read them for yourself as if de novo. Keynes’ ‘Economic Consequences of the Peace’ might be a good start.
Make any sense?
I think we have to clarify terminology. Bertrand Russell advocated logical atomism and was opposed to logical positivism. Here is a quote from wikipedia: Once he shed neo-Hegelianism in his early years, Russell remained a philosophical realist for the remainder of his life, believing that our direct experiences have primacy in the acquisition of knowledge, The positivists reject direct experiences, only observations. The canoncial definitions of positivism are given by A J Ayer in Language Truth and Logic. Positivism is nominalist, while Russell was a realist. The positivist understanding of scientific methodology, even though it was radically wrong, became widely accepted. Samuelson invented Revealed Preference with the explicit intention of removing unobservables from economics, in order to make it a science, and his Nobel Prize CITES this contribution – that Samuelson made economics a science.
TO articulate the difference between postivism and non-positivism, which also explains why postivisim is deadly — When the positivist sees a pattern, he announces that he has made a discovery and expects immediate agreement from everyone — because to him, the pattern he sees is the objective reality, a fact, which everyone must agree to , regardless of their own subjective opinions. When the non-positivist sees a pattern, he understands that this pattern ONLY exists when you look at the world through his eyes. Instead of announcing a great discovery to the rest of world he says to the next person — hey, I see a beautiful pattern, would you like to look at it too? Maybe you will need to move a little to see it. Assuming he can interest the other person in looking at things from his point of view, he will have to instruct the other to move in certain ways in order to get the perspective from which he is seeing, so as to enable him to see the same patterns. Non-Positivism teaches us humility, while positivism leads to pride.
I can only agree with your comments.
I am finding, every day, that:
Despite having demonstrated a pattern for manufacturing which explains many of the so-called paradoxes in economics AND is totally consistent with the empirical facts, there appears to be an enormous reluctance for others actually to join the dots. This, despite the fact that the dots are so close together, that there can be no misunderstanding. I see others who, in essence, are arguing about the number of angels which may dance upon the head of a pin. In general, economic practitioners seem only wish to confirm their own prejudices and fail to examine what is written on the page in front of them. They generate so much irrelevant noise that the signal is apparently lost.
The resolution of the positivist-non-positivist controversy is the trinity-unity-oneness process of Hegel’s dialectic which recognizes that all legitimate, non-blatantly irrational realities are real…. and the integration of all their separate truths is the greater truth/reality.
Then wisdom, which is also a trinity-unity-oneness-wholeness-ethical process and the superlative human mental discipline, factors human consciousness itself into the analysis….so that it becomes more deeply real and understandable. An integrated duality within an integrative trinity-unity-oneness-process is a kind of cosmic code and if one trains their mind to follow and to look with it almost everything in the temporal universe turns out to be an expression of it.
Very nice. Now we are talking my kind of economics.
Negativism is the only way forward. We have tried positivism, empiricism, realism and all other “isms” so let us start with a new paradigm that reflects the state we are in realistically.
Again, for the 4th or 5th time, a paradigm is a new consciousness of a singular concept that also fits seamlessly within most of the objective structures of the body of knowledge it applies to and yet transforms and creates an entirely new pattern. Hence it is both a mental and an objective/temporal universe thing. Paradigms are the ultimate human historically integrative realizations AND events. They are supreme moments of wisdom both because integration is the very process of wisdom itself and because the result of such thorough integrations results in wisdom and wisdom’s highest natural philosophical systemic concept and/or personal experience…AKA grace/atonement/samadhi/ satori-kensho. Realizing a new paradigm is just such an ah ha experience and is what all scientists describe as such in the infrequent breakthroughs they all hope to have.
It is time for economists to awaken to the new monetary and economic paradigm of grace as in Direct and Reciprocal Monetary Gifting and its aligned policies….and also for mankind to realize that an aspect or aspects of the natural philosophical concept of grace has always been the concept behind EVERY paradigm change.…..largely due to the fact that grace as in the continual dynamic interactive and integrative process and flow of everything, i.e. the cosmos is the truest and actual reality.
Tell us more about grace. Does it relate to Cosmos seeing through human eyes that require pollution free material maintenance?
TO further add to my reply to David Marsay — Russell, Wittgenstein, Keynes — all of them explicitly rejected logical positivism, but it was logical positivism which prevailed against them to become the dominant philosophy of science. Positivism ideas became widely accepted, and are explicitly or implicitly incoroporated into the foundations of modern economics and econometrics. Economists have never re-thunk these foundations even after the complete collapse of positivism, and continue to maintain refuted positivist beliefs
Confusion! I thought you were talking about positivism, as at https://www.britannica.com/topic/positivism. This seems to me entirely consistent with any reasonable logic, including Russell et al, and in an ideal world ‘logical positivism’ would be a form of positivism that confined itself to some system of logic, preferably explicit. Unfortunately, as you indicate, the term is widely used for something that, if it is positivist, depends on a bad logic.
Mainstream economics seems to rest on an interpretation of probability theory that, according to Bayes, rests on a priori reasoning. So in this sense I don’t see how it could be regarded as positivist in my sense.
As Russell et al noted, behind most potentially meaningful non-positivist statements such as ‘the probability of rain tomorrow is 50%), lies a more positivist statement, such as ‘according to the accepted methods, the probability of rain tomorrow is 50%’. Operationally, if I struggle to identify such a positivist clarification then, like your logical positivist I doubt that the original statement is meaningful.
So you see, I even have some sympathy with your logical positivism as an espoused ideal. It is just that in practice it has been taken up by people with insufficient concern for the logic (or much else). Perhaps we should call it ‘logical’ pseudo-positivism and blame the bad logic, not the positivism?
At least we seem to agree that it is worth trying to sort this mess out.
David Marsay: quoting from your cited link to Britannica:
POSITIVISM: in Western philosophy, generally, any system that confines itself to the data of experience and excludes a priori or metaphysical speculations. More narrowly, the term designates the thought of the French philosopher Auguste Comte (1798–1857).
As a philosophical ideology and movement, positivism first assumed its distinctive features in the work of Comte, who also named and systematized the science of sociology. It then developed through several stages known by various names, such as empiriocriticism, logical positivism, and logical empiricism, finally merging, in the mid-20th century, into the already existing tradition known as analytic philosophy.
The basic affirmations of positivism are (1) that all knowledge regarding matters of fact is based on the “positive” data of experience and (2) that beyond the realm of fact is that of pure logic and pure mathematics.
NOW we get to the central and core issue: does my PERSONAL experience count as a source of knowledge or does not? This places the logical positivists into a quandary. On the one hand, my experience is directly experienced by me, I cannot deny it On the other hand, YOUR experience is a black-box, NEVER directly observable. I can make inferences about what is in your heart, but I can never OBSERVE what is in your heart (so your preferences or utility is not observable).
This is DEEP DILEMMA to which logical positivists NEVER found the answer. There are two options: (A) Either I accept my own internal perceptions as a valid source of knowledge, and then I acknowledge that YOUR EXPERIENCE which is INHERENTLY unobservable, is ALSO a valid source of knowledge, of (B) I deny YOUR EXPERIENCE and also MY OWN EXPERIENCE for the sake of consistency.
OPTION A DESTROYS the whole system of HUME, DESCARTES, KANT and a host of other Western philosophers, because it admits my personal experience and YOUR personal experience into the picture as valid sources of knowledge. But once we acknowledge this, then we have introduced a HUGE number of UNOBSERVABLES into our system — the feelings and experiences of 7 billion people living on this planet are all valid data and sources of knowledge and it is humanly impossible for us to know about these unobservables This also lets back into the system the books that HUME proposed to burn, which contain no facts, logic, math, or reasoning to certain conclusions, and lets back into knowledge arts literature, fantasies. This denies the impenetrability of Thing-In-Itself, (which is what your internal experiences are to me). This denies rational thought as the sole source of knowledge, against Descartes (the father of Western Philosophy.
Since the consequences of option A are so damaging, the majority of Western philosophers opted for option B — DENYING the validity of your experience and hence ALSO MY OWN experience as a valid source of knowledge. EVENTUALLY as A J Ayer realized when he recanted from logical positivism, this amount to FEIGNING ANESTHESIA — we numb ourselves to our own feelings.
This feigned anethesia of Western epistemology has been TREMENDOUSLY harmful to mankind as a whole. It is reflected in the conventions of western intellectual discourse, which do not allow for expression of feeling, since these are not scientific.
Thus we are not allowed to express the shock and horror we feel at the deliberate destruction of the world for profits, at least as intellectuals.
Asad, I do think you are on to something, I’m just not sure I have made good sense of it. I get easily confused by labels such as ‘positivism’, but I’m pretty sure that many economists and policy makers do too.
It hadn’t occurred to me that Comte and other positivists intended to disregard logic, only metaphysical speculations that went beyond logic. The problem seems to me that some of those who later advocated positivism were using a bad logic. I speculate that if we improved the logic we would do better. Moreover if we discount the metaphysical speculations of Russell et al I think we have a pretty account of the relevant logics which could be part of the solution (as long as we take care to interpret and apply them).
To illustrate my confusion, I quote:
“This places the logical positivists into a quandary. On the one hand, my experience is directly experienced by me, I cannot deny it On the other hand, YOUR experience is a black-box, NEVER directly observable. I can make inferences about what is in your heart, but I can never OBSERVE what is in your heart (so your preferences or utility is not observable).”
I see no dilemma. I do not observe a human Asad. I do not know that you are not a computer. Pragmatically, I may make a judgement, but I wouldn’t bet on it with the same confidence that I would that 2+2=4. I have some uncertainty about my memory and hence my own experience. I have qualitatively more about yours. Pragmatically, I accept that ‘your’ experience is as valid for ‘you’ as mine is for me, but not that what I read of yours should be taken naively and literally, any more than you should take mine thus. John Cleese of Monty Python fame regards literalism as the problem. I agree.
Wonderful.
Policies are the true test of any theory and especially for a new paradigm. What are each of your policies?
To build an economic system based on cooperation and generosity, instead of competition and greed.
Conceptually that is an excellent pair of aspects for policies of a new paradigm. Now consider that wisdom being the integration of opposites as in (thesis x antithesis) that the integration of a duality is also the very model for a cooperative activity and that generosity is a combination of kindness and plenty they are actually also fruits of love and its active form/expression in the temporal universe, grace, aspects of which also just happen to be mutual friendly agreement/cooperation and abundance/plenty. And yes, these are precisely the kind of thinking that policies should align with and follow from.
I think that the Sufi concept of God as the friend also fits seamlessly within the intentions and actions of cooperation and generosity.
I would advocate an economic system based on collaboration and enlightened self-interest, which may amount to the same thing. But my meta-policy is to engage in the widest critical discourse, which in my view would ideally be underpinned by some logic such as I have indicated. At the least, beliefs, theories and policies that are not logically credible ought not to be credited.
@Dave Marsay,
That is a very good seemingly oppositional duality that the wisdom of thorough integration can create a thirdness greater oneness out of….by mentally applying the various aspects of the natural philosophical concept of grace, which is not only the pinnacle concept of all wisdom, but also one of its effects, both personally and systemically is unity…of opposites.
Use the dual axioms of Henry George: “1. Man sees to satisfy his needs with the least excretion. 2. Man’s needs are unlimited” They apply together so we are both greedy and lazy, active and selfish. I find dualism to be contained within the heart of macroeconomics and it is only by combining these concepts (which appear to be opposites) that we can properly understand our place in society and in nature.
These ideas are in George’s “Progress and Poverty” a book that has sold more than 3 million and is still in print.
I think you are placing too much weight on logic. When I make deductions about how you feel, I use my intutions, not logic. Whenever we deal with deductions about unobservables, — like gravity from falling apples — it requires insight, which goes beyond logic. This is our daily life, where we make a thousand inferences on basis of our personal experiences, none of which can be rigorously axiomatically proven using logical methods. This is just the Cartesian mistake, to distrust the feeling that I am alive, and to try to construct a LOGICAL argument for my own existence — this brain-in-a-vat is very damaging.
The Russell program came to a dead-end when Godel proved uncertainty and incompleteness of logical systems. Logic cannot get you to MOST of the truths which exist, and many propositions are undecidable using rigorous logic — you can choose their or their negation, and the only guide is INTUITION (this was the judgment of Godel). For more details see:
Yes, There is science and logic…and then there is beingness. Science and logic are wonderful, interesting and important for a thorough understanding of the temporal universe, but they’re not a complete understanding of Life and all of the cosmos. Just how inadequate it is can be understood by realizing that questions/questioning, which is the tool and method of science, is only satisfying until the questions continue. In other words the only thing less satisfying than having problems….is not having any problems….and/or becoming unsatisfied by the non-completeness of the mental mode of doubt/questioning only/itself. And that is the beginning of an entirely new adventure.
When there are no more questions to answer or dissatisfaction with only questioning a kind of agony can take root that can only be overcome by more questions….or by contemplating beingness itself and learning to enjoy all of the experiences you’ve had all of your life in a deeper, more complete and satisfying way. It’s the difference between the monk who before he attained enlightenment saw rivers and trees and mountains, and the enlightened monk who still saw rivers and trees and mountains but saw them wisely.
A Koan For The Scientific Age and Its Maladies
What Is The Detail of Space?
Asad, not having had much practical experience of many of the trials and misfortunes of life, I do not find my own instinct very useful when considering many (to me) novel situations. (Why don’t they just … ?) So I need to supplement my instinct with logic. When talking to others I try to make my logic (and lack of practical experience) explicit, so that they may judge the relevance of my logic, based on their instinct or logic, as they see fit. Often they will see what experience I do have as irrelevant, so I tend to back-fill my results, trying to justify as much as possible with logic. In getting as far back as Russell and co I seem to reach an equilibrium where my appreciation of logic is not changing much. Hence engaging in debates such as this.
I absolutely disagree that the Russell program came to a dead-end. It showed that the end that people were seeking was a chimera, which was surely useful. It also offered some insights into what make ‘good science’ and good thinking generally, which was intended – I think – to lead to a radically different paradigm. Arguably, at least in the UK, it did. But we have fallen back into our old habits. I am not insisting that what they had was ‘the’ solution, only that, if we are sufficiently desperate, we might learn from their experience, and not just ‘throw it out with the bath-water’.
So, we surely need something to lean on, and I don’t think we should entirely discount logic unless and until we have found a better solution.
I think a fundamental question that needs to be answered first, is whether we are placed at birth within an economy; and thus where feelings, intuitions and the like Asad is talking about are determinate as soon as the as such inspired activities take place, or whether the latter become determinant only as a reaction to previous activities, still being indeterminate in value until such a reaction to them happens within a bounded and purposeful human-made system. Until an acknowledgement one way or the other, it seems to me that these philosophical discussions are like vapouring in empty space.
John Vertegaal,
Yes, that is in fact a description of being at the point of requirement for paradigm perception which modern economics has been at for some time and the money system has actually been at for at least 5000 years. And everyone has the their own tipping point where the alleged questions all seem to be asked and/or become obsessive, terminally orthodox and so limited/incomplete for them.
John, My own view is that, whatever we are born with, by the age of about 3 our habits, intuitions and logics have all co-developed, and continue to do so until by middle-age (at least) the have often congealed. To me logic is one of the tools we can use to help us move on. Not the only one, not definitely indispensable, but – to me – ‘probably’ indispensable. But it needs to be an adequate and appropriate logic.
I think that evolutionary psychology provides some useful insights, but – at least in the west – we seem to have evolved into putting too much weight on the opinions of others rather than thinking for ourselves. Historically, this has led to cultural silos which the Internet may help resolve. (As long as we continue to debate nicely.)
I guess may contention is that there is a kind of ‘ideal’ logic that we could all adopt without sacrificing our essential selves or cultures, that that possibly it is close in some sense that of Russell et al. (Certainly, the main alternatives seem a part of our problems.)
My intuition is that relying solely or mainly on intuition is not ‘the’ answer, but I have to admit that some folk seem to operate ‘in good spirit’ with a result that is much better than those who have been indoctrinated into logics that are not appropriate for any world that we would want to live in.
Dave:
The salient point I’m trying to convey, and what I believe to be missing in this discussion, is that an economy stands and falls neither by its physical activities of existing means and capabilities nor an arrived-at understanding of its workings, but through an accounting of these activities in terms of whatever unit is prevalent. This means that the economic process isn’t an accumulation-depletion of the positive physical things we find in the natural world, but one that inevitably starts off from a debit, debt, obligatory, or negative position. And so a rectifiability of accounts, thus in a dynamic equilibrium over time but in a state of disequilibrium and even indeterminacy in time, is the reality of what we should be concerned with here. Established psychological traits, habits, feelings, and intuitions of its agents are besides the point or at best secondary; and, in any case, their effects are easily counterbalanced by governmental fiscal measures.
Now it may very well be that this depiction of a dynamic economic reality of accounts is missing something essential. But in the three decades I’ve participated in these types of discussions nobody so far has pointed out what that could be. Instead a counter argument has always been conducted from an “is” or static position, rather than a “going-to-be” or dynamic one; with as result an inevitable talking past one another. Indeed my experience has been that heterodox economists are just as loath to give up their invested-in intellectual capital as orthodox ones. But unlike with the latter, at least it’s possible to have a conversation with the former.
As far as logic is concerned, I’ve made my position that all reasoning (even of those who disparage the efficacy of logic) starts from what is held to be true but can never be sure of; and in addition I should mention, that getting wound up in that point of departure’s semantics isn’t helpful either.
John said: “The salient point I’m trying to convey, and what I believe to be missing in this discussion, is that an economy stands and falls neither by its physical activities of existing means and capabilities nor an arrived-at understanding of its workings, but through an accounting of these activities in terms of whatever unit is prevalent. This means that the economic process isn’t an accumulation-depletion of the positive physical things we find in the natural world, but one that inevitably starts off from a debit, debt, obligatory, or negative position. ”
You are correct, both in the fact that the economy begins and expands and contracts based on legal obligations (we are always in a state of feudalism) and that no one wants to discuss this aspect because it reveals too much truth.
As for the former, the Bank of England’s 2014 publications on Intro to Money and Money Creation clearly demonstrates this, and as for the latter, see my other post. Further, as soon as an individual reaches the age necessary to apply for a social security number/tax file number (depending on where you are from), the government must assume your intention is to operate under a property and contractual based system. I don’t see anyone talking about changing the type of relation they hold with government.
Thanks for the consensus, dingo. But while I think we’re both operating on the same political wavelength, our approaches to political economy are fundamentally different. Rereading your previous post indicates a micro-approach contract connection between individuals (like you) and the government, while I reject all micro as a valid methodology to clarify and solve economic problems. The main reason, as part of micro-value indeterminacy as outlined earlier, is the fact that our economy to an overwhelming extent is vertically integrated; with embedded costs, profits, and taxes passed on to -, and assumed by retailers for an economy-deep resolution and a consequently realized unencumbered reproduction process through the sale of final output, to cost, profit, and transfer income receivers. Additionally there are back-feed loops of output to higher economic levels, like machinery to the resource level; all in all making the economic structure far too complex for your approach to have any chance of success.
Apart from an economy as a set of accounts being inherently a fair and non-ideological reality, comprehensive theories of money, capital, profit, inflation, etc. now become within the realm of being written and codified as well. For instance investments, rather that generally understood to be unmitigated blessings to an economy, can now be seen for what they are in this alternative reality: i.e., a foisting of to be resolved debt upon the economy at large, with its financial costs only resolvable by those having drawn an income from the on its behalf charged fees. (i.e.) Investors are now under an obligation of a necessary dynamic resolution, that under current theoretical directives isn’t recognized as such. And furthermore, that the disbursed income associated with additional capital goods production in short order will appear on the retail level, chasing a quantity of final output to which it has no embedded existing claim. This means that the burden of investments isn’t due to some “risk taking”, but always falls on economic agents at large; either because of having to share final output with newcomers so that a theoretical clearing of the market is oversubscribed, or retailers after having gotten wind of increased demand having raised the price level.
As recently posted to another group, my radical paradigm shift encompasses the following:
1. Create an irrefutable set of first principles from which it follows that any economic structure is inherently social.
2. Convince the electorate of the latter.
3. Control and redistribute the flows of profits, naturally accumulating from having learned-by-doing*, fiscally in a social manner; while in the mean time being remunerated through final output produced at a former state of knowledge.
4. Conserve the structure that capitalism built; less by far the greatest part of the FIRE sector.
*) the only source of aggregate profits and with the radically accepted notion of surplus requiring a complete rethink!
“In my post on the Austrian Business Cycle Theory Jan, a regular commenter on Lord Keynes’ blog, once again brought up the Stockholm School of economics. He has been doing this on Lord Keynes’ blog for as long as I can remember and there has so far never been a proper discussion.
What was the Stockholm School? They were a group of economists working in Sweden in the first half of the 20th century who, like Keynes, were followers of the Swedish economist Knut Wicksell who had expanded the latter’s theories to take into account shortfalls in aggregate demand. The two main figures were Bertil Ohlin and Gunnar Myrdal.
I am only really familiar with the work of the latter — and even then, only in a highly abridged edition entitled The Essential Gunnar Myrdal from which I derive all the quotes in the following post. It seems to me that the purely economic work of Myrdal and Ohlin is very hard to come by in English.
In what follows we will focus on what Myrdal considered to be his main contribution to Keynesian theory; that is, the distinction between ex post and ex ante in the analysis of savings and investment.
This distinction, which came from a book called Monetary Equilibrium which the Post-Keynesian economist G.L.S. Shackle called “the most undervalued work of economic theory ever written”, strikes me as being extremely useful in discussing the equilibrium/disequilibrium of savings and investment. Many Post-Keynesians would later come to realise this.
In Monetary Equilibrium Myrdal writes that:
A criticism of Keynes and Hayek would have to begin by pointing out the fact that in their theoretical systems there is no place for the uncertainty factor and anticipations. (Pp32)
This may strike Post-Keynesians as being a rather unusual statement. After all, doesn’t the General Theory contain an extensive discussion of “animal spirits” and action undertaken in the face of uncertainty? Yes, it does but what Myrdal is complaining about is that the actual theoretical framework of the General Theory, which is static, cannot really accommodate these observations. He writes:
It is good proof of Keynes’ intuitive genius that he reaches practical results that in many respects are very much superior to his deficient statements of certain theoretical problems. (ibid)
Myrdal goes on to say that if we introduce the distinction between ex post and ex ante we can avoid much theoretical confusion. Before we turn to this statement let us allow Myrdal to define what he means by these terms:
Quantities defined in terms of measurements made at the end of the period in question are referred to as ex post; quantities defined in terms of action planned at the beginning of the period in question are referred to as ex ante. (Pp34)
He then goes on to make the salient point that it is only by keeping this in mind that the Keynesian framework can fruitfully be applied to the analysis of savings and investment in real historical time:
Looking backward on a period which is finished, we are looking at actually realized returns, costs, etc., as those items are registered in the bookkeeping of business. In such an ex post calculation there is, as we will show later, an exact balance between the invested waiting and the value of gross investment [Phil: he appears to mean savings and investment]. Looking forward there is no such balance except under certain conditions which remain to be ascertained. In the ex ante calculus it is a question not of realized results but of anticipations, calculations, and plans driving the dynamic process forward. Had this distinction been kept in mind, much confusion about “saving and investment” would have been avoided. There is in fact no contradiction at all between the statement of an exact bookkeeping balance ex post and the obvious inference that in a situation in which saving is increasing without a corresponding increase in investment, or perhaps with an adverse movement in investment, there must be a tendency ex ante to disparity. (ibid)
Let us not doubt the importance of this distinction. Myrdal is perfectly correct that it is not to be found properly articulated in the General Theory which was indeed embedded in a static framework rather than one suited to the analysis of economic processes embedded in actual historical time. Indeed, it was the role of uncertainty and expectations that Keynes had to stress in the follow-up 1937 article to the book that attempted to clarify the central argument, The General Theory of Employment.
It is also now widely realised by Post-Keynesians that a failure to properly recognise this problem led to the misrepresentation of Keynes’ central argument in the ISLM diagram; indeed, it was for this reason that John Hicks, the inventor of the ISLM, abandoned the framework in his mea culpa 1980 article ISLM: An Explanation.
With all that in mind I will leave the reader with a quote from Joan Robinson and John Eatwell’s excellent classroom book An Introduction to Modern Economics in which they clearly realise the problem that the idea of a static equilibrium between savings and investment has caused in the minds of economists since Keynes put it forward in his General Theory. What’s more, they also realise this problem in properly Myrdalian terms:
In the early days of the exposition of Keynes’ General Theory it was usual to argue as follows:
Y = C + I
Y = C + S
Therefore, I = S
But, since net investment and net saving are accounting identities, this was not a legitimate argument; it allowed hostile critics to create confusion. An ex-post accounting identity, which records what happened over, say, the past year, cannot explain causality; rather, it shows what has to be explained. Keynes’ theory did not demonstrate that the rate of saving is equal to the rate of investment, but explained through what mechanism this is brought about. (Pp216-217, my emphasis)
Alas, however, it was too late. Such classroom texts soon fell out of print and into oblivion and the ISLM came to reign supreme. It might be interesting to note that Paul Samuelson thought Myrdal’s work to be “anti-climactic”; a sure sign that Post-Keynesians should pay close attention!”
While writing the General Theory, Keynes knew about, started writing about and then explicitly rejected the Swedish ex post / ex ante distinction. I=S here is an accounting identity, the assertion of causality is something different. I=S is more than ex post. As defined by Keynes, it must hold at all times – ex ante, instantaneously and ex post.
The same about causality – all savings is caused by investment. There isn’t any other place it can come from [with the simplifying assumptions or extended definitions used], there isn’t any savings not coming from prior investment that could be used to cause investment.
(As “Some Guy”) I discussed this over at billyblog see this comment and succeeding comments with reference to papers by Claude Gnos &John Fagg Foster & Gladys Foster that immeasurably and irrefutably clear up things.
Jan Milch’s reading ties in with mine, that Keynes was fishing for a dynamic framework and in practice anticipating two-dimensional navigational cybernetics. Even if he didn’t clearly spell out the dynamic framework – i.e. seeking equilibrium rather than having it – the point of the General Theory was to promote job-creating investment in unsaleable public goods rather than counter-productive and [as we now see] bubble-blowing pursuit of monetary savings by austerity. The following quote from p.74 clearly refutes this claim by Calgagus and repeated claims by Egmont that Keynes intended I = S:
“Mr D H Robertson has defined today’s income as being equal to yesterday’s consumption PLUS investment, so that today’s saving, in his sense, is equal to yesterday’s investment plus the excess of yesterday’s consumption over today’s consumption. On this definition saving can exceed investment, namely by the excess of yesterday’s income (in my sense) over today’s income”.
It is time this ignorant or deliberate misrepresentation of Keynes is put to bed.
Of course it depends on how you define things. But there is no question that Keynes said that I=S under his conditions and definitions. Keynes is using Keynes’s General Theory definitions, not Robertson’s definitions, not Keynes’s Treatise on Money exposition that Keynes himself criticizes.
The first sentence in that chapter is
Following Keynes, the Fosters note how many – probably most economists – continued to make complete hash out of things by using different definitions – and never bothering to actually make the definitions!! Or use them consistently- how could they?! IMHO, Keynes & the Fosters are complaining about the Good Old Days of the 30s-70s. This Definitions? We don’t need no feelthy definitions! (criminal) behavior is much worse nowadays. :-(
Robertson does NOT do these ridiculous things. He actually makes different definitions and reasons correctly and consistently with Keynes’s logic and definitions, which is why Keynes praises him.
Again, as Gnos shows, there is no question that Keynes understood and rejected Myrdal’s “dynamic” recommendations. He said so in so many words quoted by Gnos. And Keynes was right to reject that and discard what he wrote about it.
I=S is not an equilibrium condition, or something where there is a process that makes it true, but an accounting identity that constrains all possible states, processes and dynamics. Neoclassical economics doesn’t really distinguish between the two concepts because it assumes that everything is always at equilibrium. Peter Dorman has a relevant paper on this.
That I causes S comes from some arrow of time I guess – scrambled eggs don’t unscramble themselves and return to the shell.
“I=S is not an equilibrium condition, or something where there is a process that makes it true, but an accounting identity that constrains all possible states, processes and dynamics.”
Huh? Are you aware that accountancy, being a deductive discipline, is based on its own set of assumptions? And that as such its accounting identities are subject to an assumed “going concern” (i.e. equilibrium) condition, among the other relevant assumptions made, and thus are meaningless if the “concern” isn’t a “going” one to start off with?
But, rather than a seeking of what Keynes “really” meant, perhaps instead of premising a “fund physicality”, an analysis in terms the economy’s underlying accounts, that may or may not balance over time, is more to the point… Because in the real (business) world expenditures as a rule precede returns from coming in, the economy is in a net deficit (disequilibrium) position at all times, thus never catching up to the net-zero condition that I=S implies; so that any premise or definition (by Keynes or anyone else for that matter) that leads to the latter is simply unrealistic static reasoning in the reality of a dynamic economy.
When holding that, in the aggregate, disbursed income is a negative and consumption is a positive, not only does investment potentially* add to that negative but, while not adding to the negative of disbursed income, saving certainly isn’t the positive factor needed for netting out to zero with investment either. All this implies, that both investment and saving contribute to the same side of the at any time reigning disequilibrium, until this condition can become offset by an available increase in consumption later**. Consumption, or better said: the taking of final output off the market, is the economy’s only determinant; and I ≠ S, no matter how you slice it, as money isn’t a store of value either nor does it have any physical identity as a means. Put differently, the analysis so far indicates that being a unit of account is money’s only coherent function.
Your pointing out that the source of saving can only be a previously made investment, is wholly irrelevant to what I would hold to be the crux of the matter; i.e. as to whether an economy continues to operate at or from a previously achieved level, or stops doing so. Are crucialities in the eye of the beholder? Aren’t you assuming that a comprehensive theory of money (funds) is superfluous to anyone’s assertion that I = S?
*) depending on whether the investment takes place from existing income disbursements or is newly loaned into existence.
**) unless of course plug pulling gets there first, but that’s another story.
John Vertegaal: There is no difficulty in understanding or dispute about what Keynes meant here. Which is I=S, as quoted (in a closed, no net government spending case), Period. The difficulty is in understanding what those who purvey improvements or disagree or criticize are saying, if they actually are saying anything rather than producing word salad, because they often never make the necessary definitions. So understanding them can be like trying to solve a crossword puzzle, figuring out how they must be defining things to arrive at different equations.
Because in the real (business) world expenditures as a rule precede returns from coming in, the economy is in a net deficit (disequilibrium) position at all times.
Umm, no. We are speaking about the whole economy, while the above seems to be concerned with a single firm that might spend before it gets a return. But somebody else is getting their spending, exactly when they spend! In the way that Keynes and good economists and accountants add up things for a whole economy, there are no assumptions made that people don’t use in all fields, in daily life, without comments – like the continuity of going concerns like firms or people or things like Exxon or George Clooney or a pumpkin — That they don’t magically transform into each other, that six pumpkins don’t magically turn into 13 pumpkins or 5 Clooneys or two oil companies.
If I have a dollar and you have none and I give you the dollar, then you get the dollar at the instant I give it to you. My expenditure or investment here is 0, then 1 and so is your income or saving, because my giving and your getting are two ways of saying the same thing. There is always just that one dollar, no matter whose pocket it is in.
The quantity of money transferred = quantity released = quantity received, because all three verbs refer to the same action, the last two verbs having two different perspectives, the first verb having neither perspective. If you agree with that – and I am curious how anyone can disagree – then you must agree with I=S. That’s what Keynes is saying, that’s all. It’s not static or dynamic or non-dynamic. It constrains any statement, static or dynamic and so can be used to say things about dynamics, given some other “dynamic’ definitions or assumptions.
Calgacus:
Although humanity has since moved on for another three generations, the difficulty today is still exactly the same difficulty that Keynes perceived when he wrote the GT’s preface. Words may appear as forming a salad because an “escape from habitual modes of thought and expression [is such] a struggle”. Can we perhaps agree on that?
For an accounting identity to be true, the accounted-for system both in a micro and macro sense needs to be coherent… agreed? Accountants call this their “going concern” assumption, because a system that’s in fundamental disarray cannot be accounted for. Accounting ledgers form two columns, debits and credits i.e. identities, with coherent rules and regulations determining which entry goes where; so that the books can be made to balance over time… agreed? Do we furthermore agree that a general coherency, i.e. thus without either/or (plus/minus) ambiguities, is essential for any line of valid economic reasoning?
Next: “Consumption – to repeat the obvious – is the sole end and object of all economic activity.” Would you agree that this statement, made in Keynes’ GT on pg. 104, trumps any subject-to-definition identity stated elsewhere? Anyway, whether you agree or not, that’s my point of departure. And working backwards from that being the economy’s ultimate determinant, I showed that within the logic of accounting both (I) and (S) are situated on the same (debit) side; while for I = S to be a true accounting identity they each need to be situated on opposite (debit or credit) sides of the = sign; Thus either the accounted-for system, according to Keynesian logic, is incoherent, or Keynes himself is, take your pick; but in any case, I = S is a faux accounting identity. And while otherwise the entire GT is an argument that supply doesn’t determine demand, in the quote above Keynes could just as tellingly have expressed himself as: demand determines the value of supply; which is a sentiment that I would think all accountants can’t help but agree with.
Never mind “somebody else is getting their spending, exactly when they spend!”. This may be determinate activity in an incoherent (subjective) Keynesian approach, in mine and Keynes’ objective view only consumption is the determinant of that earlier spending.
And while it may “seem” to you that my argument concerns a single firm, it’s again your subjectivist blinders that prevent you from being aware that economy-deep-and-wide, no substantial firm escapes from incurring expenditures before returns can come in. The rest of your paragraph is irrelevant piffle…
Of course the big overhanging problem for economists of all persuasions that would come with my approach, is that their favorite pastime “doing economics, while thinking as an economist” is out; as, with or without math, such activity can only be carried out with determinate quantities. So I’m afraid that if economists want to remain relevant and indeed useful from an objective perspective (i.e. as having an acquired ability to evaluate the human-made purposeful system from the outside in) they’ll have to turn themselves into macro-accountants and put their math skills out of reach.
One “habitual mode” of thinking Keynes never was able to extricate himself from is considering money to be a determinate quantity, ahead of systematic consumption. And while in that respect his thoughts aren’t all that much different from those of any other (political) economists, the would-be ones, and its pundits; I’d venture to guess that such a contention without having a comprehensive theory of what money _is_, in the main is still preventing all existing and suggested economic paradigms from reaching a definitive close in thought. Without such a theory however, no one can possibly know what it is they’re talking about when it comes to the economy as expressed in terms of its unit of account. Isn’t (e.g.) your “If I had a dollar and you have none…” just a habitual argument, brought up because it wouldn’t be challengeable from any perspective you knew of? But what exactly is that dollar? We all know that is was loaned into existence as a to be resolved debt; but, pray tell, by what cause of events has the original negative turned into an “obvious” positive?
@ John Vertegaal
This is a very good insight because it exposes the fact that current macro theorists are relying on the surface identities of accounting and not looking at the subset of double entry bookkeeping known as cost accounting where the actual data to do the calculus on is available to them, and that will enlighten them as to the deepest problem of modern economies, namely that the rate of flow of total costs and so prices always exceeds the rate of flow of total individual incomes simultaneously produced in order to liquidate those costs/prices. This compels continual borrowing until the debt service is impossible to pay…..unless of course one awakens to the new monetary and economic paradigm of Direct and Reciprocal Monetary Gifting…..and then economics will become “nice” again.
Also, macro-economics does not distinguish between total money and total free and available to spend unencumbered by present or future debt…..individual income. That is its fatal failed/undiscovered insight.
(I don’t expect to reply more, as it is hard to write anything non-repetitious, as this already is.)
John Vertegaal:Words may appear as forming a salad because an “escape from habitual modes of thought and expression [is such] a struggle”. Can we perhaps agree on that?
Can we agree that sometimes a salad is just a salad?
For an accounting identity to be true, the accounted-for system both in a micro and macro sense needs to be coherent… agreed? Accountants call this their “going concern” assumption, because a system that’s in fundamental disarray cannot be accounted for. Accounting ledgers form two columns, debits and credits i.e. identities, with coherent rules and regulations determining which entry goes where; so that the books can be made to balance over time… agreed? Do we furthermore agree that a general coherency, i.e. thus without either/or (plus/minus) ambiguities, is essential for any line of valid economic reasoning?
Umm, no to all. The coherency necessary is in the very basic and universal rules, as universal as the arithmetic of the natural numbers, not in “the accounted-for system”. If there are ambiguities, just put them in with opposite signs on the ledgers of a creditor and debtor. Then they cancel out, and do not affect the accounting identity conclusion. Keynes makes a similar point when he notes that even the common usage of “investment” as investing in stocks would work as a definition, because of similar cancellation. That definitional ambiguity, that Keynes shows how to deal with, dwarfs any real world ambiguity, which is dealt with the same way.
Next: “Consumption – to repeat the obvious – is the sole end and object of all economic activity.” Would you agree that this statement, made in Keynes’ GT on pg. 104, trumps any subject-to-definition identity stated elsewhere?
Again, no. Not really relevant. Of course “consumption” is also subject-to-definition because everything under the sun is. Those Foster papers, probably as well as Keynes somewhere, note how just what is consumption is subject to definition. What “trumping” would mean is not clear either. Does “hunger” trump “2+2=4”?
Never mind “somebody else is getting their spending, exactly when they spend!”. This may be determinate activity in an incoherent (subjective) Keynesian approach, in mine and Keynes’ objective view only consumption is the determinant of that earlier spending.
Again, there is no “incoherent (subjective) Keynesian approach”, no “Keynes’ objective view”. And as explained above, it doesn’t require any assumption of “determinate activity” or non-ambiguity. There is just what Keynes says, which is quite clear and made even clearer by the citations above, enough to get through my poor head even. Unfortunately many followers and critics are NOT clear – a point of Keynes et al is that the difficulty in understanding them is because again, they are being ridiculously sloppy at best, and at worst, sometimes an apparent word salad is a word salad.
And while it may “seem” to you that my argument concerns a single firm, it’s again your subjectivist blinders that prevent you from being aware that economy-deep-and-wide, no substantial firm escapes from incurring expenditures before returns can come in.
The fact that when somebody spends, somebody else receives income at that instant, and the same for incurring and releasing debts, refutes this, at least according to any chain of reasoning involving any coherent accounting rules that I or anybody else afaik has understood. That’s why it seemed to me you are talking about a single firm. Keynes & the Fosters again treat such points – and observe that such identity-violating suggestions which neoclassical econ is shot through with come from generalizing from one firm, or even most firms, but ignoring the general aggregate effects of each firms’ actions which may be ignorable individually, but not in aggregate.
. . . without having a comprehensive theory of what money _is_, in the main is still preventing all existing and suggested economic paradigms from reaching a definitive close in thought. Without such a theory however, no one can possibly know what it is they’re talking about when it comes to the economy as expressed in terms of its unit of account. But what exactly is that dollar?
There is a comprehensive theory of what money is. It is called “MMT” (and many other names). The first person to basically get everything right to a T, with no garbage added, and explain it with crystal clarity was Alfred Mitchell-Innes. Keynes reviewed Mitchell-Innes papers. While Keynes made some obscure, even nonsensical comments there, he basically got what he was trying to do right in the General Theory, clearly using the MMT theory at the back of his mind.
What is a dollar?: A dollar is a monetary unit of account, often represented by dollar bills or accounting entries on paper or electronically – which are money things. The dollar, the money itself, is a immaterial, negotiable or transferrable relation between two economic agents. Period. Nothing else. Ain’t no spooky mystery of what money is, anymore.
We all know that [it] was loaned into existence as a to be resolved debt; but, pray tell, by what cause of events has the original negative turned into an “obvious” positive?
From the above definition, a dollar is and always was both a negative (to the debtor) and a positive (to the creditor) at the same time. The original and instantaneous and universal accounting identity. There is no “chain of events” – it is like asking what chain of events turned my proboscis into my nose or my snout. ;-) That’s the point of what my reply to Jan Milch, who unfortunately has not responded as I think he made a very relevant and intelligent point that I had only just understood the wrongness of myself.
So consumption, “obviously the sole end and object of all economic activity” as Keynes described it in one of his more lucid moments, and I previously alluded to as “the taking of final economic output off the market into an exogeneity”, “isn’t really relevant”? Well Keynes may have been confused about his paradox-laden theory, but at least you seem to be consistent in your ignorance of valid theories requiring assumptions. Because if on the other hand personal income spending is indeed the the sole end and object of all economic activity, and without you having a coherent theory of physical capital yourself, your entire invested-in “intellectual capital”, in part showing that I = S, would fall apart regardless of any acknowledgement one way or the other. So by all means, hang on to it; and also the notion that accounting identities are true in the absolute, without requiring anything as mundane as a set of underlying assumptions; and, lets not forget, that MMT constitutes a comprehensive theory of money. Good luck with that consistency of disseminated wisdom in attracting a fan base…
“The ideas [of MMT] are not theoretical, and they aren’t particularly modern. What we’re doing is simply describing, operationally, the way government finance works. It’s not a theory; we do not make assumptions, although we are economists. What we’ve been describing to you today is not dependent upon any ceteris paribus condition or any set of assumptions about perfect competition or rational agents or anything else that you get exposed to when you study economics, but rather an attempt to simply describe the way in which the institutional arrangements are set up, and the accounting identities and what happens in a balance sheet framework; when one side of the equation moves, what happens on the other side of the equation? That’s really all we’re up to…”
Stephanie Kelton, Session 2 — 1st Fiscal Sustainability Teach-In and Counter-Conference
George Washington University, Washington DC, April 28, 2010
“The fact that when somebody spends, somebody else receives income at that instant,….”
Actually all money re-circulating through the economy is someone’s business revenue NOT an equivalent amount of INDIVIDUAL income. And that revenue gets expensed against the business’s costs and so is never translated/translatable, moment to moment into an equivalency OF individual income.
Dear Asad,
I’ve been part of schools which have as their primary focus (at least in the initiating stages), purely objective self-observation – objective in the sense that as one observes an emotional reaction, a thought process, a physical movement etc, they must become detached and observe purely as a third party or a scientist might, i.e. without any judgment, criticism, or other emotional reaction (meaning, if one observes something about themselves, such as a childish emotional response, and then becomes emotional about it, they aren’t detached and observing as if they were a third party).
One of the most difficult aspects of this activity (and hence why schools exist as a means to develop the skill), is because the human being does not like being observed. The more one tries to observe oneself, the more the emotional aspect of the human tries to trip up the observing side, mostly, by encouraging one to see what they see from an emotional aspect.
To illustrate, as I began to seriously observe my many emotional responses to people and circumstances around me, it became apparent to me that vanity was at the core, i.e. due to an inherent fear of many things like a fear others wont like me, or a fear that I won’t live up to other’s expectations, I am automatically drawn into an attempt to criticize myself. Put another way, as I observe the vanity in me, my own vanity comes up behind me and says ‘we must change this so we don’t appear vain’.
The reason I am sharing this is for two reasons.
The first, is a personal reason. It is by the long and hard work of observing myself in many situations over quite some time that I was able to see that I am not a homoeconomicus, that I am not an economic agent at heart, and that there is nothing resembling an economic activity which appeals to me. All that I am good at, and am most skilled at I am unable to do for money or under any legal contract without it becoming an emotional prison. And that what I crave more than anything else is to operate under different relations to the one’s that an economy forces us to operate under; i.e. what I crave is trusts with people, not contracts. Trusts which operate under different arrangements, such as the time-honoured profit share arrangement, as opposed to the pre-determined profit rate contractual agreements. What I ultimately crave is the trust that if my crop fails (using an example), the guy next door, or around the corner, whose crop succeeds, will help me out, and vice versa.
The second, which is more for the purpose of this blog, is that when one is able to observe themselves long enough they start to realize (and they must reach this point if they are to be able to observe objectively) that there is nothing they can do on their own to change what is an inherent feature of the human machine, i.e. fear which translates into vanity. However, the more one is able to observe objectively, the more one is able to make their vanity/fear subordinate to their aims in life and actually use these human elements as tools to work in their favour, as opposed to being ruled by them.
Now, the importance of this observation is as follows:
Economics, particularly political economics, is the field which overlooks all the contracting people, which is basically most of us today (as the west increases the size of its footprint). In other words, it sees us as children needing rules and guidance as we spend most of our lives competing against one another.
Now, and here is the most important part. Economics, and in particular, political economics, is like the vanity which doesn’t like being exposed, and will do anything and everything in its power to trip up the observer. We don’t want to be exposed for what we really are, and nor do those who benefit from us.
Many economists (and I confess, I am finding it difficult to openly admit this) are not deliberately making a mess of economics; the mess is coming from an inability to objectively see what are the true causes of why we must engage in economic activities under contractual laws to begin with. Further, even if many were to be able to see it, there is no way it could be changed on a grand scale because everyone must advance to a higher level of operation on their own accord. No one can teach trust, trust must be earned, but it is easy to teach contract and it is easy to operate under contracts, especially when all the rules have been laid out already for us.
However, by the same token, trust cannot be taught unless one is also practicing it, and for these purposes, I mean, to operate under trust outside of the monetary economy. Some of us need to get together and develop these types of models in order to operate under them and then we can begin the task of organically teaching it to others. This we can do without any political economists in the world even knowing we are doing it until it becomes too late for them to do anything to stop us.
Brilliant. I am in 100% agreement with everything you say. It means that change wont come from the top, it must come from the bottom However to add a pessimistic note, we need to build communities and re-create social training within families (the famous family values were to teach cooperation, to observe, critique, and correct behavior of children acting in anti-social ways). With the breakdown of family structure in the West, it would be difficult to carry out this program. In the East, the spread of the internet has led to the spread of the powerful and attractive message of hedonism and individualism, which prohibit development of community, and make individual growth and spiritual progress impossible. There are many other elements of modernity which are spreading rapidly and which are extremely disruptive and inhibit building of community and long term social relations. The power which comes from acting together for a common goal is not available — something which favors a very small group of the 1%. There are several groups big and small making efforts along the lines you mention with varying degrees of success. The hope for mankind rests on their shoulders, but the light seems very dim.
From the excerpts that I read (I have not gotten through the book) Radical Transformation
Oligarchy, Collapse, and the Crisis of Civilization By Kevin MacKay — seems very insightful.
BTW where did you get training in self-observation? I thought this was practiced mainly by Buddhists and Hindus, and such schools do not exist in the West, and are very difficult to find in the East?
“BTW where did you get training in self-observation? I thought this was practiced mainly by Buddhists and Hindus, and such schools do not exist in the West, and are very difficult to find in the East?”
I started out studying the Fourth Way (Gurdjieff), but as time has gone on the schools have lost a lot of connect to the original teachings. Working directly with people has become almost impossible, which only leaves the internet, but this has serious limitations. I have reached a point where I can go no further in this aspect, but I have supplemented my studies and work by studying other subjects such as religion, philosophy, etc, which enabled me to see that the Fourth Way is not original but a modern day re-explanation of the wheel. I see the bulk of religious scriptures, philosophy, and esoteric teachings as being a guide to self-observation but is spoken in metaphors. As an aside, I had the idea for a while that by being able to implement the program I suggested, that this may also be a way to organically grow more schools again – but I have since found that it may not be my place to do this.
Yes I agree as well. It is true that modern man is not contemplative, however, transforming the economy of austerity and scarcity, upon which the better part of everyone’s waking hours and effort is focused and habituated to, into one that enabled everyone to experience leisure (which is not idleness, but self directed focused activity) would be the kind of increased basic infrastructure upon which a culture of contemplation could take root, especially if we also logically followed up on it with a cooperative effort by the clergy, the helping professions and the government with public service announcements about leisure and personal purpose that would help to acculturate everyone to such purposes as well as the efficacy of contemplative disciplines themselves.
Trust can only be achieved within small groups. As a child, I learned through experiences at school, that one could expect to find one untrustworthy individual when group sizes of about thirty arise.
Everyone, I know, has experience of bosses who claim the credit for others ideas etc. I am sure that every one has had similar experiences. The list is endless.
Small mutuals and cooperatives are less likely to suffer trust issues than large alternatives. Small privately owned businesses can be similarly successful. Small numbers allow personal observation, questions to be asked and answered. Integer problems may, however, make larger organisations necessary.
I believe in free market economics. Unfortunately, in reality, free markets do not exist. Most markets are corrupt.
I believe in capitalism, when it means the use of appropriate tools. Capitalists are the corruption of capitalism.
So we need to move to institutions, including governmental, which encourage the attitudes which benefit all and which move against the corruption which the untrustworthy will inevitably try to introduce.
Asad and Frank,
My explanation of the trust was an observation of what I crave but not a full and exhaustive explanation of how I would operate one; any so called co-ops or other community based groups are far from the plan of what I have in mind (at least initially). The trust I have in mind begins with government (the government becomes my partner under a surplus share arrangement and I act as custodian over all resources necessary to meet my social obligations such as access to housing, clothing etc, and any tools I use to produce whatever it is I am good at..under this trust I would renounce private property) and then and only then can it extend to other members of society who may wish to operate the same way, and then and only then can groups start to pool together.
By implication, what I am suggesting is that if I operate under such a trust, I am not forcing my ideals or principles on anyone else, and most importantly (and which has been the subject of my enquiries into economics), my trust comes at no expense to any other, particularly, it comes at no cost to property owners – which means they have no grounds to prevent it’s implementation, especially if it needs to go to court to seek a declaration.
I have no ‘belief’ in free markets, regulated markets, or non-market societies. My observations have shown me that each person is different and whilst some possess the inherent human capacities to operate within markets, there are many who do not.
Unfortunately, from a political perspective, what appears to be happening is that many who believe in free markets or capitalism belive everyone should have to operate within it, regarldess of whether it is for or against their will – likewise, those who believe in socialism or communism have the same type of politcial motive, that we all should operate this way.
I am totally against any ideal which wants to pool all resources (particularly human needs) under ‘one’ system or legal method. Instead, I advocate multiple models which co-exist alongside one another and allow people to hold and treat resources and operate within the respective legal framework which best suits their personalities. This has been what I have been working on for the last 15 or so years of my life, and the more I have worked on it the more I am seeing that each model will benefit more by not trying to crowd everyone on the planet into it.
Although there has been a huge diversity of comments, I believe that a common thread among many is the need to change human behavior — this is conflict with economic methodology which takes human behavior and desires as fixed and exogenous. The idea that we are all selfish, and that this is best for us and for social welfare (the invisible hand), is exactly what leads to the poisoning of the well from which we get our moral bearings. We need to hold up and pursue higher standards of human character and vision. The key to change is transformation of human beings, as discussed in my post below, about how Islamic Economics is about transforming humans.
A noble dream but hardly attainable in this wicked world. Better to seek a fairness in the distribution of wealth and the power relations in decision making by giving all interest a seat at the table, a voice, when the distribution of the rewards of work are managed. In the current constitution of firms the rich and powerful monopolise decision making about who gets what, give the the heretofore economically weak a voice at the table and the possibility of a fairer distribution of the rewards of enterprises emerges. We ignore this subject on this blog when we ignore the governance of the firm, which we do constantly. An economic science that exists within the framework of a power relations dominated by director primacy, will never face up to the question of fairer distribution. Get the power relations straight, then the economic science could be socially useful. Give the unheard voices of non management a voice at the table and the fruits of the ensuing sciences could be interesting.
The UK’s BREXIT debate is useful here. The point of any collective, surely, that it leads to greater efficiency and effectiveness so that everyone is better off. In a ‘good’ collective I think the worst off may seem to benefit the most (from ‘benefits’), but surely the wealthiest benefit the most from defence, the police, the fire brigade, international agreements etc? Psychologically, what matters is a sense of fairness.
Populists promote the view that ‘they’ are benefitting at ‘our’ expense, such that the EU is a ‘bad’ collective. This could be true: a good debate would have illuminated this issue, and would included a little more data and better logic. Similarly for ‘globalisation’, ‘free trade’ etc.
(I agree with Robert!)
Asad. I agree with you (and Keynes et al) that the idea of ‘homo economus’ is past its use-by date. I also agree that it is no use relying on logic alone to get us out of this mess, and that we need to be looking far and wide at less messy approaches, such as you and Robert suggest. But having opened our eyes and hearts, how to narrow our options? Well, wide debate obviously, but my instinct is that we’ll get nowhere without some agreed ‘ground rules’, which need to genuinely agreed and hence ‘abstract’ without being vacuous.
Actually, what I get from Russell and co is that we shall probably need to co-evolve the rules along with the practice. What I might accept is that to dwell on this aspect would be a distraction, but I am genuinely sceptical about the chance of success without at least some genuine logical input.
Islam is not the only religion or ideology that promotes changing behavior and adopting the giolden rule. wild animals also often have forms of the golden rule or appear to.
Entering this discussion belatedly, let me first disagree with Asad’s reading of Descartes – which I agree was pivotal in directing attention to inner experience. For a start the word ‘think’ is a translation, not necessarily reflecting what Descartes had in mind in 1630. (A better translation might be ‘intuit’). He is inferring (by retroduction: reasoning backwards), from his experience of thinking, that he must exist, just as he inferred from the existence of himself and what was then understood of the universe that God must exist [or in temporal logic must have existed].
As I read the history of this, the ‘positivist’ way of thinking developed in three stages: Locke’s ‘tabula rasa’ denying the possibility of thinking before having learned how to (but not the existence of the ‘white board’); Berkeley dispensing with the white board by postulating God rather than ours brains creating the experiences; Hume dispensing with both God and brains by denying backward inference to them (i.e. mistaking intuition for induction from the statistics of what had previously been sensed). Thus Hume restricted thought to sensation, and knowledge to agreement on reports of what had been sensed (reinterpreted as ‘facts’: what unknowable brains had manuFACTured). Intuition, incidentally, is more like seeing possibly relevant patterns in a kaleidoscope than calculating probable outcomes.
Bringing together Descartes and Hume are here Dingo’s Descartes’ style of argument and the then political situation. Unfortunately my earlier response explaining the “strong man’ situation at the time of Moore’s Utopia (1520’s) was for no obvious or explained reason censored. Anyway, Hobbes’ Leviathon (1651) postulated a de facto contract accepting a strong king because without it there would be chaos; Hume (1740) argued for democratic consensus rule (in practice plutocratic) via law enforced by magistrates rather than a royal militia. It seems Rousseau (of “Social Contract” based on elections fame) went to visit Hume and really didn’t get on. The Dingoesque ‘vanity’ in all these schemes is apparent in Britain just now as corruption in its police anti-police-corruption unit is having to be investigated.
I come therefore to the importance of Dingo’s observations on vanity, and his diagnosis of why it is a problem: “the mess is coming from an inability to objectively see what are the true causes of why we must engage in economic activities under contractual laws to begin with.”
I entirely agree, but what is the answer most economists and politicians are not seeing? I have been on about Myers-Briggs personality assessment for some time, but I’ve just acquired a primary source, Myers’ “Gifts Differing”, which in Chapter 3 compares the self-reported profiles of people at different stages in the educational process (intuition becoming more significant with more learning) and those choosing political economics, finance etc over science and engineering (the economists almost entirely sensory and the engineers usually intuitive: Figures 14 and 15). Importantly, even infants differ. Most of us are young and therefore not yet significantly intuitive. Even allowing for less regimented America attracting intuitives from England, less than a quarter of their population is intuitive.
The sensory types tend to see as fact only what they can see: what things look like or “what it says on the label”. Other labels for them are empiricist and positivist.
Intuitive types tend to see how things relate: “looking inside” to see how internal – so invisible – forces and flows “make things work”. Hume’s critic Kant, despite how positivists interpret him, was realist in Descartes’ sense of retroducing a brain able to experience causality; as today’s engineers are in seeing logic not as rules but as electronic logic circuits capable of obeying the rules). See Lindsay’s introduction to the Everyman “Critique of Pure Reason”).
.
How they make decisions about what they can see depends on
Thinking – quickly putting the “labels” in order; painstakingly doing a jig-saw with bits of picture
or “the smell test”:
Feeling – not just “fight or flight” but judging a perception worth looking at or acting on.
The danger with label thinking is not checking out the conclusion. The advantage of jig-saw thinking is that one can remember the outcome, label it okay (or not) and thereafter think quickly about it – though sensory types may see this as jumping to conclusions.
The point, anyway, is that if sensory types are seeing only labels, the labels need to show diagrammatically what is going on inside. Kate Raworth’s success in doing this in “Doughnut Economics” is what leaves me with a glimmer of hope.
If people trust neither each other nor the power of the people over Leviathons, we need to show why, because of our limitations, vanity is inevitable if we act on our own, but how other people’s gifts can complement our own and provide corrective feedback. The objective form of thinking about people is this along the lines of understanding the information feedbacks involved in driving, navigation or guiding missiles. I entirely agree with what Frank is saying about this being more likely to happen in small groups, but I am talking about how to teach kids to understand themselves and each other and the value of cooperating, while they are still impressionable and still in small groups.
Isobel Briggs Myers’ “Gifts Differing” gives an example of why kids often don’t understand mathematics because they have been taught arithmetic by rote, rather than shown how number formats represent things and repeated use of the same invisible algorithmic process. Teachers (including economics professors who have been taught by rote) need more than anyone else to be persuaded by her. I commend her style: she is much more factual than me.
Back to Dingo’s argument for “why we must engage in economic activities under contractual laws to begin with”, I entirely agree because to begin with we are all kids. However, insofar as we grow up with trustworthy parents, we learn that what we see initially as laws are more like parental advice, informing us of conventions and rules of thumb that we ignore at our peril.
PS. to Asad at July 20, 2018 at 1:31 am and July 22, 2018 at 9:02 am; July 21, 2018 at 4:04 pm
These came up while I was busy. In the first pair of these Asad seems to be saying in his own way much the same as me here. In the third, he seems to have a conventional view of logic as following definite rules. From the considerable amount I know about brain and computing architecture I would argue that feeling is like the error detection feedback circuit logic which operates in parallel to conventional central processing logic, while intuition is equivalent to a use of computer logic to drive what was once physically a “content addressable store” but today is digitally mimicked by logic querying a relational database.
davetaylor1: Descartes – which I agree was pivotal in directing attention to inner experience. = do i get it right that Descartes directed attention to INNER experience? I am arguing that he directed attention AWAY from experience and towards ONLY reason as the sole source of knowledge. This is also what Marsay – in a very much weaker form — is suggesting — that logic/reason should be central, though other forms of deduction may be allowed.
The WHOLE point of the example of the young/old woman is that paradigm shift CANNOT be done by logic — it requires shifting frames of reference. The second argument AGAINST logic is that BINARY logic is a catastrophe – again Russell, and many other philosphers, argued that for each sentence, we can assess whether it is true or false and these are the only two truth values. This ignores the role of the subjective — every empirical statement represents truth-to-me and if this can differ from truth-to-you than the role of logic becomes very limited. In fact as Zen emphasized and Islam also teaches, a lot of human reasoning and thinking is built around paradoxes — cases where sentence X and not X are both simultaneously true. In modal logic, we different kinds of truth. There are logics with four truth values true, false, both true and false, and neither true nor false. If this seems outlandish consider the sentence “This sentence is false” — if true then it is false, if it is false then it is true. What do we do with this? Can we get rid of this sentence. In fact the Godel theorems depend on using sentences like this and embedding them into mathematics. So there are HUGE limitations of binary logic, which works well in a VERY RESTRICTED domain. Attempting to universalize application of logic to ALL domains of human knowledge has been truly catastrophic, because it has led to intolerance — I know because I have the sole truth and anyone who disagrees must be an idiot. In a beautiful book Maria Rosa Menocal wrote about The Ornament of the World: How Muslims, Jews, and Christians Created a Culture of Tolerance in Medieval Spain — she mentions how the love of paradox was a crucial element in creating tolerance for other points of view.
Hi Asad. Apologies for stirring you up, for let us be clear: I am on your side, wanting to cooperate and pained by our being at cross-purposes. The problem is, where logic is concerned you (like almost everybody else) are seeing the old lady and I (as an old-timer electronic computer man) am seeing the young one. The difference is about seeing logic as a dynamic process guided by physical programming, rather than as a static set of rules. Thus I am seeing Descartes experiencing his logic/powers of reasoning operating (this normally being subconscious) , but not thereby drawing Hume’s either/or inference that therefore all reasoning was about internally constructed objects. Instead, I understand, he started the rival “Continental” hermeneutical study of external objects. (See, perhaps, Passmore (1966, 1985). [The argument against Hume in terms of encoding is too complex to go into here].
As to whether the gestalt switch from the old to the young woman can be achieved by logic, clearly not by Aristotelean rules, but perhaps by learned powers of redirecting sensory attention to e.g. the upper rather than the lower part of the picture? How does a camera zoom in to reframe an object? How to explain what is so obvious to someone who doesn’t yet “see” it?
Logic is about drawing reliable inferences in language (the word ‘logic’ being an old name for ‘word’), but as I put it, reality represents itself, and as economist Ken Boulding put it in “The Image”, one can have iconic as well as symbolic language. Back in 1904 the paradox-using G K Chesterton had already realised the two sides of the brain provided for both. Shannon showed in 1938 that the rules of logic could be expressed in terms of the iconic language of electric switching circuits, which marked the flow of [in his work, telephone] information just as the flow of a river is marked by its banks. The banks provide objects about which one can reason, whereas the flow itself does not. Similarly, discussing political economic theorising, Chesterton (1908) had said: “the old utilitarian test of pleasure (clumsy of course, and easily misstated)” is a [tangible] test, whereas will [G B Shaw’s superman’s self-interest] is not.
I could go on about Descartes anticipating Peirce’s retroduction by using deduction to deduct unreliable conclusions, like a detective eliminating suspects until there was only one possibility, in light of which the inconclusive evidence could be reinterpreted. However, the personality differences mentioned above suggest most economics readers here will be looking for facts and confused by analogies.
Better then to end with a few references to facts of logic paradigm change worth looking for and reflecting on. Besides Hume (1740) reducing reality to strong sensations and induction to statistics, I would like to mention Boole (1847) expressing deductive logic in the form of a combinatorial algebra; Peirce (1870) anticipating retroduction and multiple truth values; Frege (1879) seeing logic being supplied by both what is directly sensed and references to the phase of the logical process; Russell (1904) seeing in Frege both typed logic and “nonsense” (unset) truth values; Shannon (1938, 1948) discovering the circuit form of logic and the feedback circuit form of error-correcting logic which, combined in Information Technology, are (for worse as well as better) transforming the world’s economic and educational processes; Chomsky (1965) showing how to specify the sort of language which enables infants to learn whatever language they are exposed to. Hence the paradigmatic transition in programming languages from Algol60 algorithmic computing to Algol68 general purpose data processing. [As with Hicks and Keynes, the US adopted the bastardised non-Fregeian form of ‘C’].
Asad, Chesterton’s “Orthodoxy” (claimed by Professor Peter Milward in “The Chesterton Review”, Nov 1981, p.354, to be “without any doubt the greatest work of English literature in the twentieth century”) may have primed me for seeing the young logic in the face of the old, but I had to look for about twenty years before I saw it in my work. You are in good company if you haven’t seen it yet.
Asad, looking at your July 20, 2018 at 1:44 am we don’t really seem to be that far apart, except on the specific issue of whether the Cartesian pot is half full or half empty. I really appreciate the way you brought the discussion here to the problem of pride.
With Frank joining in worrying about “others who, in essence, are arguing about the number of angels which may dance upon the head of a pin”, I would like to bring in paradoxical humour. The point is that the angels of theology are [God’s] thoughts, the joke being these are not localised in space, so it is absurd to imagine them dancing on the head of a pin.
On Dave Marsay’s enthusiasm for Russell, which to some extent I share, I found your distinction between positivism and atomism very helpful. More to the point of what I’ve been saying, at July 21, 2018 at 4:04 pm you say to Dave that “Russell’s program came to a dead-end when Godel proved uncertainty and incompleteness of logical systems”. But surely that pointed to it NOT having come to a dead end? In fact, its difficulties have led to Lakotasian progression into multi-valued, typed, dynamic and error-correcting logics, logic languages and communications protocols.
Similar appreciation along with a significant quibble occurred in your response to Edward Ross on July 20, 2018 at 1:31 am:
“If we shift to a non-positivist view, then there are NO FACTS OUT THERE — All things that I perceive as facts are constructed by an interaction between the observer and the observed. So persuading others to see the world as I see it WILL ALWAYS require work”.
Absolutely. But that means the logic has to do work, meaning there will also be entirely internal information about how far the work has progressed. Which takes us back to Descartes restarting from nothing.
Asad Zaman made a mistake to precede his arguments on logical positivism (from Descartes to Empirical positivism) before his main contention. It invited too many angels on the top of a needle. As a result, the most important part of his proposal was discussed in no replies. This is really unfortunate and disastrous.
Zaman’s most important message is, in my view, summarized in the following paragraphs:
**********************
Despite widespread dissatisfaction, the vast majority of dissidents argue that no paradigm shift is required. Instead of a complete overhaul, we just need to patch-up the problem areas. All of the dissidents have their own favorite culprits – like the DSGE models, rational expectations, ARCH/GARCH methodology for risk assessments, failure to include finance sector, etc. etc. etc.
In contrast to this reformation, I would like to argue for a revolution. We need to re-think the whole project of economics from scratch (see “Questioning ALL of Economics?“).
Just like modern astronomy was created by rejecting the concept of the heavenly spheres on which the stars rotated around the earth, so creating a viable economics for the 21st century requires rejecting the entire edifice of modern economics.
The process by which a paradigm shift can be created differs radically from normal science, which involves looking at problems within existing theory and patchwork modifications. As opponents point out errors and difficulties with the maximization/equilibrium methodology, proponents can find ways to patch up the conventional framework to deal with new challenges. This is how Ptolemaic astronomy evolved. If the original spheres did not suffice, then new spheres were added, and if the second did not suffice to match observational evidence, a third sphere was added. Rethinking the whole framework from scratch cannot be done in a piecemeal way.
(Originally a part of one paragraph.)
**************************
This Real-World Economics Review Blog has no function of knowledge accumulation. Past arguments and discussions were simply forgotten. Let me put at first that I have aslo argued the similarity or parallelism between the Ptolemaic system and neoclassical economics:
Peter Radford Economics 10Whatever June 28, 2017
My reply on July 16, 2017 at 12:04 pm (about 50th reply to this blog post which starts from “I may not be free from ‘physics envy'”)
I have also argued a similar point in my paper:
An Origin of the neoclassical revolution and its consequences. (Section 4)
However, the crucial point to argue is how to view or imagine the new economics which must come after Copernican revolution. Negatively we have a kind of consensus: we are against framework with the maximization/equilibrium. In Zaman’s words: “As opponents point out errors and difficulties with the maximization/equilibrium methodology, proponents can find ways to patch up the conventional framework to deal with new challenges.” The question is how to envisage the new economics (the economics after the paradigm shift). Unfortunately, Zaman talks nothing on it. (IMHO, the construction of the new economics requires a scientific spirit which comprises logical reasoning (mathematics) as well as other kinds of objectivism. This does not deny the active role of our will. The construction of a new economics is itself an act of our will and not an objective entity.)
I have my own envision but first of fall I want to know Zaman and other commentators’ envision on this point.
Thanks for this comment Yoshniori Shiozawa — In the post, I write that: ==This post is a PRELIMINARY examination of the difficulties in making a paradigm shift. Awareness of these difficulties is necessary for those who attempt to launch a revolution, since we need to create converts to a new paradigm == By PRELIMINARY, I mean that I am not going to talk about what needs to be done, as in introducing the Copernican Revolution. I am just going to talk about the difficulties involved in making people change their minds.
In terms of what needs to be done, those fixated on the binary paradigm of truth/false — which is also embedded within positivism — have the naive idea that what needs to done is to show that the current paradigm is false, and that they have a new paradigm which is TRUE. By itself, this would be sufficient to create a paradigm change. Once we take off positivist glasses, we realize that there are no universal truths out there. There is true-for-me and true-for-you because our subjective frameworks interact with the objective to produce the “facts”. So instead of displaying the truth and asking others to just examine it — they will automatically see that it is true and convert to it — we have to think seriously about HOW we can create consensus on new ways of seeing reality. This is where the now forgotten and lost art of rhetoric is required. Also, one needs to be pragmatic — if the truth is so radical that people will not accept it, then the desired social consensus — which is what creates socially accepted truths — cannot be created. This process is completely shunted aside by believers in objectivity of truth and binary logic, when it is CENTRAL to creating a paradigm shift. It is not sufficient for me to be the lone ranger, in solitary possession of the truth which no one else knows about. The process of conversion, by which I persuade others to use the frameworks which I find insightful is central.
FOR this reason, my own efforts lie along the direction of Islamic Economics. Islam has a ready-made framework, widely known to a billion plus adherents, which is in radical conflict with central tenets of capitalism. Constructing an economics based on coooperation and generosity is very much in line with central principles of Islam. The massive effort required in gaining adherents to a radical shift in perspective is bypassed, since every Muslim automatically subscribes to this framework.
Can this strategy be generalized to include non-Muslims? I believe it is possible, because the central principles — cooperation and generosity — or in Mankwian terms, love and kindness instead of selfishness — would naturally appeal to human hearts. I have written a large number of articles on how to construct a new discipline of Islamic Economics based on foundations radically different from those used by neoclassical economics. My study of Polanyi also led me to the conclusion that pre-market societies were much more strongly aligned with Islamic views of society, and creating the required consensus would have been much easier. However, living in market societies shapes minds in certain unpleasant ways, to see all human interactions in terms of the market, with a price attached. Incidentally, this is also a message of David Graeber in his book Debt: The first 5000 years. Social “Debt” is beneficial for society, but when converted to market debt, it becomes deadly and harmful.
So in terms of creating consensus on a new paradigm, we have to find how to persuade minds shaped by market societies to accept non market transactions as being MORE important than market transactions. That is, the most precious things in life are the ones which CANNOT be purchased and cannot be measured and quantified. This is a point that I have tried to make in my essay on Markets and Society. (https://weapedagogy.wordpress.com/2016/01/09/markets-and-society/)
For those interested in Islamic Economics, a good place to start would be my article on Islamic Economics: A Survey of the Literature: (https://ssrn.com/abstract=1282786).
Anyway, the main takeaway here is that it is NOT ENOUGH to have a good idea for a new paradigm — one must have a clear idea about how we can go about creating social consensus for acceptance of this new paradigm — this is one thing that all of the many lone rangers pushing new paradigms which they have discovered all by themselves, and cannot get anyone to consider, seem to ignore completely. This has some resemblance to the dilemma of whether there can be a language which has only one speaker.
The strategy to achieve a paradigm shift may not be unique. We must talk about the strategy or strategies, but also we should embark on trying to produce a new theory. At first, such a new theory may seem to be in chaos. There may be too many self-contending new theories. We should not be afraid of this fact. Do you think that a shift from geocentric system to heliocentric system was possible without the laborious work of Copernicus?
I am continuously presenting objections on the style with which Lars Syll argues closely related topics. He presents in various ways how the mainstream economics is flawed, illogical, irrelevant and out of sense. He shows an enormous aptitude in doing this. However, I always feel frustrated with his style. He finds all bad points of mainstream economics but does not present any new theory or new possible directions. For one example, please read the second comment on the recent post “Mainstream economics and neoliberalism — what is the difference?” dated July 23, 2018. In this case, I complained that his argument is not sufficiently exact.
A very bad result is that Syll’s argument enhance people who are only skeptical of economics, but do not want to work on economics. To achieve a paradigm shift, it needs that we know well about actual state of the discipline and know where the fundamental problems are. Without getting this deep understanding of economics, it is impossible to engender any pertinent new theory.
I agree with Lars that we need to move on from inappropriate economics, mathematics and logic, and in particular to recognize the key role of uncertainty. But I suggest that there might be some mathematics and logic appropriate to what I think are legitimate concerns about the established economics and potential new agendas.
For example, I don’t mind thinking of everyone as selfish as long as we recognize that many people value others, and would rather live in a world free of undue poverty than sit on a mountain of cash and be confined to rich-persons ghettos.
Dave Marsay
I am complaining that Lars Syll only criticize mainstream economics and gives no hint on possible directions. As Asad Zaman says in the following post (after Thomas Kuhn) that paradigm shifts do not occur by critique. We need a coherent alternative. This is the biggest problem but Lars Syll is too awkward to express his opinion on possible alternatives. He is always negative and never be positive. That is disastrous.
Yoshinori Shiozawa — again, I am fully agreed that we need a coherent alternative. Kuhn has noted that paradigm shifts do not occur by critique — an alternative has be present. I have made substantial progress towards developing an alternative paradigm within an Islamic framework. I think it could easily be generalized to one which would be widely acceptable across the board — but I am not working on this very much because the problem of building consensus seems substantially more difficult for such a generalization. However, I think that a diagnosis, which identifies three fundamental flaws at the foundations of modern economic methodology is identified in my post on “Economics for the 21st Century” — https://weapedagogy.wordpress.com/2018/01/25/economics-for-the-21st-century/
A potential cure is identified in my post on Polanyi’s methodology, which provides radically different methodological foundations on which a new approach to economics could be built
Please see my post (a reply to Robert Locke’s comment) in the comment s to your blog post The Invisible Hand (July 22, 2018). I mentioned my own contribution. I believe there are deeper layers of theory making than the ethical feature of economic agents.
Once we accept the idea that the observation and the observer are inextricably entangled — we cannot separate “facts” from “opinions” — then the notion of TRUTH — the same for all — is lost. Once we realize that all truth is truth-for-me which may differ from truth-for-you then the strategy required for paradigm shift changes — instead of arguing about which truth is deeper, it becomes more important to identify: around which truth can we build consensus? I have not looked at your theory nor at Salters – I would not doubt that they provide a coherent model for looking at the world. Before investing time to understand the world-according-to-Salter or according-to-Shiozawa, I would want the answer to two questions: [1] is this easy to communicate to others and to persuade others? If NOT, then there is no point in investing time in it, because we will not be able to build consensus on it. Judging by Salter’s own statements, he has not been able to find many takers, which means that he does not have a good strategy for persuasion. If the creator of the truth cannot market it, it does not seem that I would be able to market it better, and if there is Salter-truth that is valuable, but we cannot create consensus for it, then it would be useless as an instrument to create social change.
NOW I believe that humanity is in imminent peril due to impending environmental catastrophe, and this is due to the spread of short-sighted pleasure seeking on part of everyone strongly encouraged by economics and other dominant philosophies of current times (see Social Revolutions — https://azprojects.wordpress.com/2018/07/18/social-revolutions/). So the second important point with respect to any theory that we must assess is [2] Would this be useful as an instrument for creating social change? The idea of the quest for truth, and how the truth will set us free, is mistaken. We need to look for truths on which we can easily build consensus, and which will have the power to change the ways of thinking and behaving for large numbers of people, sufficient to build a critical mass to create change. Is your-truth capable of doing this? I am quite sure that an ethical-moral truth, based on cooperation and generosity, is both saleable — easy to build consensus on — and useful as an instrument to create positive change in the lives of people. I would like to have these properties in alternative truths, in order to invest time and effort in learning them, and then participating in the difficult battle of popularizing sufficiently to create social change.
Asad: You nailed that one about the importance of marketing and of course I would think so because I also raised that issue in the discussion on New Keynesian macro. Seriously, heterodox snatched defeat from the jaws of victory. Neoclassical failed to navigate the financial crisis in any useful way but what did they do with the victory? Zippo. Nothing. This failure is breathtaking. That should be examined in my opinion and is a self inflicted wound. It is almost like they try to fail. Part of the problem of course, which I definitely found out here as a small example of heterodox, is that for many it is far more fun and interesting to argue about politics and stomp your feet and cry Nazi than to actually do economics. It is fun and easy and cheap to turn the discussion to politics, but the byproduct is to vandalize the subject and alienate those who might be interested in common opinions. The last time I watched the Chairman of the Federal Reserve giving congressional testimony I thought to myself that he has no clue how the economy works. But he has no reason to be aware of any alternatives. So, marketing and not being obnoxious in attacking others over their politics would be a good start.
Asad, may I refer you to my discussion above of visual presentations and personality types on July 23, 2018 at 11:39 am. I will also summarily point out that Polanyi’s pre-market Christian economics was based on the type of moral training you recommend.
The point of the personality type issue is that it is not easy for sensory types to understand intuitives, and in the converse case illustrated by my trying to understand Salter, not easy for me to see why he is fiddling with a mathematical model while the real economy burns. Nor is it easy for those whose judgements depend largely on feeling (perhaps yourself, Asad?) to understand those (like myself) whose judgements depend on thinking. Only by recognising your feelings can my thinking allow for and learn from them, and only by your studying my insights in sufficient dept to judge their relevance can your feelings be satisfied by them.
On the need to build a consensus, then, we agree, but we have got there in different ways. You are looking for truths. Having satisfied myself that there are different ways of interpreting the economy, I’m looking at how best to express them, and concluding a picture involving people and processes of different types and levels of maturity is worth a thousand words.
At your link to Polanyi’s meta-theoretical methodology above, I agree in principle with your items 1-6. Here we are discussing item 2, but aiming for the old social norms doesn’t tell us how to get there. The personality perspective focuses not on individuals, but on teamwork in which the players have different things to contribute. Somewhat similarly, at item 6 the external event was not industrialisation, but the false theory of money which both motivated it and made it possible.
If this thread proves anything it is how diverse we all are as to how we want to treat resources and relations as the means to meet our human needs.
There are many who naturally gravitate toward a free market, speculation, and the rewards which it can bring (such as financial wealth) and by rights these people should know the risks involved.
There are many who would gravitate toward regulated markets, and the relative security it brings, but who also should by rights be willing to give up on any grandiose goals of financial freedom, and simply happy to work a job until they retire, i.e. one really shouldn’t aim at financial freedom if at the same time they demand markets be regulated to try and reduce risk.***
Then there are others who don’t want to be part of any exchange type markets but operate under trusts for reasons different to the two types above.
…and the list could easily go on.
When feudalism was being overtaken by industrialism and the Victoria age, many complained that the security once had under feudal relations was now gone. Some people want to be ruled by a monarch, others don’t etc etc etc.
We are all different, and trying to come up with a consensus from what I can see is only going to come from tolerance, and not a model, i.e. just as we are supposed to becoming more tolerant of our different religious, and non-religious beliefs, our different cultures etc, then we simply need to become more tolerant of our different economic profiles (I really despise using the term ‘economic’, but what I am really referring to is the way we treat resources and the relations we form as a result).
If the wisdom of man today is unable to envision a society where the type of legal relations individuals/families/groups form (beginning with government) creates the economic models they then operate under, and which by virtue of that particular model suits their risk/reward profile, then man today is still not tolerant of the fact that people are different, even if we pay lip service to the fact we are tolerant because we claim to be tolerant of different religious beliefs. If anything, if we claim to be tolerant of different religious beliefs, this should by implication mean we must be tolerant of different economic models.
I know I am alone here, but this has been my lifes work for almost two decades, and I have yet to find any reasons why on any given street in any given suburb in any given city/state etc, that multiple economic models could not be operated based on the relations that each respective household has with government and all that flows on from there.
As an example (and this is just a crude example), if we take the first three groups above;
– the first group would own homes/investment properties and which would be subject to free unregulated markets – they want their homes to increase in value and are willing to take the risk that those values could cycle, boom and bust. All those who participate in this free real estate market are capitalists by nature…
– the second group will only be allowed to own the one home (and possibly a holiday home just like they allow, or used to allow, in Cuba), and this ownership will be for purposes of passing on to generations, but these homes would exist in regulated markets where values do not fluctuate and hence, capital gain or loss would be non-existent, and not the free market which the first group are operating in…these people are not capitalists by nature, probably more socialist, and crave security of regulated markets over potential financial rewards which carry high risks.
– the third group will live in homes owned by the community (i.e. government), and they will manage the home like a custodian, and when they die, the home reverts back to the government
Again, this is a crude example, but an example none-the-less of how a human need such as housing (which I might add is necessary in order for a citizen of any given society to be able to ‘obey all laws’) can be treated in various ways pursuant to the type of person that it houses. Then we expand the same idea on to other needs etc, and also the type of money being used in each particular group (i.e. market sourced, vs non-market sourced etc). The government possesses the powers to fulfill all of the above. It just takes some imagination and thought to see it.
*** there are far too many people out there who think that owning property should come with as little risk as possible, i.e. to have government step in and reduce the risk on their behalf…recently I read of a man who bought a vacant block of land and complained of having to pay rates, which was followed by someone else saying ‘for a capitalist you sure want something for nothing!’, to which I agree.
@dingo34201
You raised three groups (or types) of relations each household has with government. This is a dimension that you can imagine how to design them. But the real problem of economics is not there. Market economy is a network which extends without limits and covers whole world. Participants count more than 8 billion people and a hundred million firms. Commodities count more than 10 million kinds (this depend much on the way of counting). The central problem (or Adam Smith problem after Arrow and Hahn) is to know how this network driven by individual motives works (at least without perpetual catastrophes). Arrow and Hahn (1971) think that Arrow-Debreu general equilibrium theory gives an answer. Let me cite their own words:
The notion that a social system moved by independent actions in pursuit of different values is consistent with a final coherent state of balance and one in which the outcomes may be quite different from that intended by the agents is surely the most important intellectual contribution that economic thought has made to the general understanding of social processes. (Cited from F. D. Hahn 1984 Equilibrium and Macroeconomics, p.64)
The new paradigm should supersede this achievement that Arrow and Hahn boast as “the most important intellectual contribution” in the general understanding of social processes. Only when you understand the essential mechanism how the market economy works, you can argue how to modify its working.
You have written
> We are all different, and trying to come up with a consensus from what I can see is only going to come from tolerance, and not a model, i.e. just as we are supposed to becoming more tolerant of our different religious, and non-religious beliefs, our different cultures etc, then we simply need to become more tolerant of our different economic profiles.
Market is a unique mechanism that permits different people with different beliefs can “cooperate” without explicit intentions to do so.
The difficulty of overcoming neoclassical economics (or theoretical core of mainstream economics) is to find another explanation in which market economy works not according to general equilibrium idea but different mechanisms. This requires total reorganization of economics frameworks. A simple example is to deny the old law of demand and supply. General equilibrium is formulated after the idea of this law. Instead we are proposing that (1) prices are determined mainly by firms on the base of production costs and (2) firms produce as much as products are sold at the price set by the sellers. We can prove that this (very roughly described) system works and establishes near equality of supply and demand if we take a certain time interval. If you want, you can know the details in my paper (Chapter 2 of our book Microfoundations of Evolutionary Economics.). Anybody can get a PDF copy on request.
This is the reason why I wrote that deeper problem of economics lies before us than the ethical dimensions that Asad Zaman emphasizes.
Dingo, the need for tolerance is one way of looking at the problem, but should we tolerate selfish intolerance? The model I have of tolerance is a crowd pressing together going down a street, in equilibrium so long as they are all going the same way but staying that way only if they give way to those wanting to turn off. (A “right side of the road” and “give way at roundabouts” model). Although there will always be a few young or intoxicated people acting idiotically, by and large this has won consensus because it makes sense.
Yoshinori, what you are proposing makes sense to me, i.e. (given a caveat about including environmental costs) on pricing via production costs and reproducing what is consumed at that price. What that excludes is what Frank is on about, i.e. development of tooling etc for the production process being an important part of the economy almost totally neglected in mainstream economics. More seriously, it leaves the free marketeers still setting the agenda: still operating a slave market, producing saleable surplus rather than supplying human necessities, and selling rather than giving the credit markets need to dispose of their goods.
In terms of teamwork, we surely need to focus on understanding the game and our own skills before we start trying to counter the weaknesses of the opposition. Paradoxically, though, we can learn to understand our own game better by observing them, i.e. learning from their strengths and to avoid their mistakes.
“The most influential work on economic methodology of [the twentieth] century” was that of Milton Friedman, famously arguing people act “as if ” their assumptions were true.
https://en.wikipedia.org/wiki/Essays_in_Positive_Economics
Friedman’s weakness was that, being an economist, he drew his assumptions from the economy he worked in, so they were nothing like fundamental enoug, yet by his own argument self-perpetuating.
I myself have two complementary lines of argument, the one rebuilding the religious story of
Creation assuming only the scientific conclusion there was a Big Bang, and the other starting from what economic theorists drew from Keynes, i.e. Samuelson’s over-simplified “hydraulic” model of the economy. [I have the 1964 edition of is “Economics, see e.g. p.231.]
Economics has indeed moved on from market equilibrium, “as if” weighing goods by balancing them against monetary weights, to a circular flow “as if” of water, describable by equations assuming a balance between what comes in at any point and what goes out. How then is the IS/LM relationship to be derived from this? Keynes was arguing “as if” there was more than one circuit, and if one thinks of electrical flows rather than water flows there is a ready made theory. This extends simple circuits into complex parallel, multi-powered “grids” and inter-related circuits like Wheatstone’s Bridge, from which IS/LM-like equilibrium relationships CAN be derived. What is more, as well as supplying energy its circuits may be carrying information, and that typically involves corrections as well as assertions.
I see most people viewing the economy “as if” they were in a simple circuit supplying them and their needs. However, adding development creates not just one but three extra circuits, with monetary banking adding a control system. What people see depends on which circuit they are in, but what they can’t see clearly and therefore cannot see how to allow for are the interactions with other circuits, and indeed with their natural environment. As a practical electrical engineer I see them needing an [architectural] “block” diagram enabling them to position themselves in the whole. As a philosopher of science I see the hard-core theory of the flow circuit as the basis of a different Lakatosian economics research programme, made fruitful as in Information Technology by a series of modifications which add to its complexity. We shouldn’t be fighting over which of these is best; they enthuse different people and we need both, like a football team needs both attack and defence.
davetaylor1
I have also studied Friedman’s Essays on Positive Economics (1953) seriously. But I cannot agree with you. Friedman’s positivism or instrumentalism is but a nut thrown in the science. It is a hindrance to all deep thinking.
Yoshinori, I cannot honestly say I have studied Friedman’s Essays. I have picked up a statement of his which, in my own experience as well as logically, is inevitably true. I agree with you entirely that his economic work has been a hindrance to deep thinking, but I see that as due to his arguing from superficial observation, not from fundamental or even deep axioms concerning the representation of time, motion and truth.
Asad Zaman
Economics started as Political Economy. Neither Adam Smith nor Karl Marx had any grasp of science but in accordance with the Zeitgeist, they had to dress their agenda-pushing up as science. Neither Adam Smith nor Karl Marx nor their respective followers figured out how the economy works. What Walrasians, Keynesians, Marxians, Austrians have put forward as theories does not satisfy the scientific criteria of material and formal consistency.
So, economists have made for 200+ years policy proposals that have no sound scientific foundations. They are too stupid for the elementary mathematics of National Accounting but claim to change society for the better or even to save humanity. Fact is that economists have always been a hazard to their fellow citizens.#1
Economics is a failed science and what is urgently needed is a paradigm shift. Being political agenda pushers, heterodox economists do not understand what a paradigm shift is and think that it is, in essence, the replacement of one political clique by another.
Accordingly, Asad Zaman makes it clear that the whole point of a paradigm shift is not developing the true theory but developing an effective marketing strategy: “Before investing time to understand the world-according-to-Salter or according-to-Shiozawa, I would want the answer to two questions: [1] is this easy to communicate to others and to persuade others? If NOT, then there is no point in investing time in it, because we will not be able to build consensus on it. Judging by Salter’s own statements, he has not been able to find many takers, which means that he does not have a good strategy for persuasion. If the creator of the truth cannot market it, it does not seem that I would be able to market it better, and if there is Salter-truth that is valuable, but we cannot create consensus for it, then it would be useless as an instrument to create social change.”
Clearly, Asad Zaman is not interested in the truth value of a theory but in its propaganda value. Clearly, the soapbox economist Asad Zaman as the methodological loudspeaker of Heterodoxy stands firmly in the tradition of the founding fathers whose business was political agenda pushing.
Just like Orthodoxy, Heterodoxy has ZERO scientific value. Asad Zaman’s claim to bring about a paradigm shift is laughable. Heterodox economists do not know how the economy works.#2 This Radical-Paradigm-Shifts-thread proves beyond all doubt that heterodox economists are as stupid and corrupt as orthodox economists.
Needless to emphasize that it is perfectly legitimate to push an agenda. The economists’ fraud consists NOT of spreading propaganda but of telling the general public that they are doing science. To throw both orthodox and heterodox economists out of science is not a restriction of free speech but the overdue implementation of well-defined scientific standards.
The mission of economics as a science is to produce the true theory ― not more, not less. What has been co-produced hitherto by Orthodoxy and Heterodoxy is nothing but proto-scientific garbage.
Egmont Kakarot-Handtke
#1 Mass unemployment: The joint failure of orthodox and heterodox economics
https://axecorg.blogspot.com/2017/01/mass-unemployment-joint-failure-of.html
#2 For details of the big picture see cross-references Heterodoxy
http://axecorg.blogspot.com/2015/01/the-failure-of-heterodoxy-cross.html
Well Egmont Kakarot-Handtke — as far as I understand it, you have ALREADY produced a true theory, succeeding where everyone else, major thinkers as well as minor, has failed. So the job of finding the truth is done. Well done!! now we can all go home.
I’ve studied Egmonts work for almost two years now. He explains how the monetary economy works better than anyone else I have come across. Admittedly, I come from a law and financial research background (as opposed to economic background), which explains to me why I have been able to grasp Egmont’s work. The two papers released by the Bank of England in 2014 regarding what money is and how it is created (which I’m sure most are familiar with) also backs up his work.
Egmont does provide solutions, particularly with regards to achieving full employment, but he is also mindful of the fact that politicians will never achieve full employment if they don’t understand how the monetary economy works, which most don’t. The over-riding issue is that what households and businesses must do ‘individually’ to reach their own goals is in direct conflict with what the economy as whole requires from all households/businesses in order for the economy as whole to reach it’s goals, such as full employment, or whatever else.
There are also some posters who have posted on this blog who suggest to me a better understanding of the monetary economy than most who I think would benefit greatly from Egmonts work.
Egmont Kakarot-Handtke
>> [1] is this easy to communicate to others and to persuade others?
I have to answer: No, it is not easy to explain my discovery. I am not thinking that a truly new discovery is understood at first by a small number of people, and then spreads to a wider range of people. Do you think Copernican discovery was understood by common people at once? A discovery that is so simple to modern people necessitated about half century until many learned people came to understand and support it.
Sorry. Please omit “not” from my second sentence.It must be read as
I am thinking that a truly new discovery is understood at first (only) by a small number of people, and then spreads to a wider range of people.
Theories, theories, theories. Where are the policies that implement and accomplish the paradigm change???
All you really need to do with theory is discover (for yourself) the concept behind the paradigm itself….and then logically align policies with that concept. There will of course be theoretical and policy changes from the current paradigm…because we’re talking about a paradigm CHANGE after all.
When someone can come up with a set of policies that accomplish more than the following changes BASED on the natural philosophical concept of grace I’ll get on their bandwagon:
transforms systemic and individual monetary austerity into abundance
transforms the system from chronically erosively price inflationary to stably, painlessly and and beneficially price deflationary
makes virtually all transfer taxes paid by both businesses and individuals redundant and consequently eliminate-able
even within a fiat money system enables the ability to significantly reduce individual and business income taxes due to the policies being implemented at the very terminal expression point for any and all inflation, namely final retail sale, thus ending “the necessity” for re-distributive taxation to attempt and fail to accomplish the same goal
frees the government and opposing political parties to pursue rational and ethical monetary and national policy goals instead of being captive to obsessive and compulsive political agendas….that are in fact merely the divide and conquer strategies of private finance’s monopolistic monetary paradigm of Debt/Burden/Additional Costs Post Retail Sale
by eliminating economic concern about unemployment with the policies of a universal dividend and discount/rebate policies throughout the entire course of the economic process, enabling separate national re-industrialization in the most cost effective micro-economic and sane ecological way possible
creates an entirely new pattern (paradigm) by implementing direct and reciprocal debit-credit monetary policies that integrate seamlessly into commerce/the economy using the integrative tool of double entry bookkeeping at the point of sale throughout the entire economic process and also its terminal ending point at final retail sale
Top all of this….and I’m all in on YOUR new paradigm.
If you can device a good policy or policies, there is no need of theory. However, a set of policies without good understanding of economy may turn out to be disastrous. A typical example is the socialist economic planning. It hardly worked but was not as rosy as its proponents first imagined.
Correct Yosh. Of course when the policies and their effects that I enumerated fit seamlesssly with the nature of double entry bookkeeping which is the very infrastructure upon which all commerce and all economic transactions take place, and they also resolve the two biggest problems heterodox economists identify as chronically plaguing modern economies, that is
1) systemic monetary austerity and individual income scarcity and
2) price inflation
its hard not to consider it economically valid, the answer to widely accepted chronic systemic problems and thus by definition the policies of a paradigm change.
There are lots of people who have discovered useful truths, even overwhelmingly powerful truths, but have failed to persuade others — see the first quote by Keynes in my post on:
Keynes describes his own experience with the difficulty of making a paradigm shift.
Anybody who brings new idea into the world has the responsibility for explaining it and spreading it as well (if this is worth doing) — As a teacher, I teach both very difficult and very easy materials. But I take it as my job to inspire and motivate students to put in the work required to master the difficult material. To do this, I have to explain the benefits this will have. I also have to work hard to simplify and make the material accessible.
All those with heterodox ideas (paradigm shifts) should examine the historical evidence. The amazingly deep insights of Keynes NEVER made it to the economics profession. Similarly the extremely important idea of Marx that class struggles drive the economy, and distribution of output is in accordance with relative power of different classes, is hidden from view. Similarly, by deliberate efforts, the extremely popular ideas of Henry George, which are still revolutionary, remain unknown to the public. What is worse, the terminology of economics, the framework used for formulating problems has been distorted so that key concepts required to formulate the ideas cannot even be expressed in the language of economics.By merging LAND with Capital — which is not legitimate for many different reasons — the existence of a parasitical rentier class disappears from view — you cannot even STATE what George said within neoclassical frameworks.
Given how successful the powerful have been in suppressing ideas/truths with challenge the power structure, it seems EXTREMELY NAIVE to ignore all of this and just believe that we can come up with a bold new TRUTH, and very soon the Nobel Prize committee will come knocking on our door. One must take into account the configurations of power, how our truth is aligned with them or opposed to them, where we can get support, how we can sell this truth — BEFORE all of this, we must consider whether it is worthwhile to make the effort. This is what I have expressed in my points [1] and [2] before, but perhaps not very clearly.
NOTE that all of these consideration apply ONLY to paradigm shifts, since these require hard work. What Kuhn calls NORMAL SCIENCE is exempt from the necessity of working out a strategy to win adherents and to prevail in a battle against reigning orthodoxy. If you are PART of the reigning orthodoxy, then your articles will get published, and your ideas will automatically attract attention. I think this distinction — between Normal Science and Paradigm Shift — is the source of the conflict between me and some others in this thread. Discovery of TRUTH is possible and important and indeed the sole objective WITHIN the reigning paradigm, which defines the meaning of truth. A paradigm shift contests the nature of TRUTH itself, and therefore cannot be done in the same way. This point is easily understood within the context of the young/old lady picture.
That is correct Asad. And here is the truth exposed by the new paradigm: Macro-economics as currently composed cannot resolve the major problems of modern economies….because it is:
1) habituated to abstractions instead of being willing to look at the empirical datums of cost accounting FIRST and then doing the calculus that enlightens the actual deepest problem of the economy, i.e. the rate of flow of total costs/prices inherently exceeds the rate of flow of total individual incomes simultaneously produced
2) it has no idea of new paradigms themselves because old paradigms are habitual and hypnotizing and because there has been no study of the signatures of paradigm changes (Kuhn described the general process, but not the specific signs, ingredients, necessities and occurrences that always precede and enable perception of the new paradigm) let alone a study of the concept behind behind every historical paradigm change.
As for the problem of communicating the paradigm, economists and academics are extremely poor salesmen and strategists because they are only preaching to other academics, and worse, mostly to those academics who are ego involved with theories less enlightened than heterodox ones. I’m sorry, but this is stupid. The first rule of marketing and sales is to show (the mass of) individuals how the product, in this case the new paradigm, is in their interests.
My thanks Asad, for mentioning the concept of LANDbeing outside a CAPITALIST activity, as originally shown by Henry George in 1879. Subsequently, using my mechanical (or at least engineering) analogy for representing the Big Picture (see SSRN 2865571 “Einstein’s Criterion Applied to Logical Macroeconomics Modeling”) one can at last envisage a satisfactory representation of our social system without having to describe it in the somewhat flowery words so often seen on this and other blogs.
George’s support to the Smithian presentation for the 3 factors of production has not been properly been followed-up except in my writings (above) and presentation. Alas! without taking this into our realization or mind’s eye, there is little hope of making progress in our understanding of how our social system works! But with it, there are huge expanses of the uncharted region of this newly awakening science–join me in this voyage.
I’m looking forward to how Henry George will explain why the rise of progress brings with it a rise in poverty. I have my own take on it, which I’ll post below if anyone is interested (this is something I had written awhile ago but it is based on the same question), and then compare with George.
Our whole economic world is based on legal agreements. Legal agreements are simply a more modern day and more palatable version of the feudal tenure which consensus says was ruled by force. As a writer once wrote in his treatise of the birth of the distinction between common law and equity in the 13th and 14th centuries ‘if a freeman on the land was unable to pay his rents on time he could expect no mercy’. The reason was not actually sheer meanness, but because every landlord or vassal, including the King himself, was under an obligation to someone else, and hence the forgiveness of obligations was non-negotiable.
We live in a world today which operates under the same problem. Almost everyone is a debtor or under some obligation (which sounds in money terms) to someone else in a self-reinforcing loop which has no end or way out. The economy as a whole needs debt to be continuously expanding, both by sheer level of debt but also in the time frames (mortgages are getting longer in terms, retirement ages are getting higher, government bonds are getting longer in terms, bigger corporations are able to push out the terms of their debts further whilst forcing accounts owed to them to be paid under shorter terms). The population is actually increasing at a slower rate than is the debt, but most of this debt is actually an illusion in the sense that it has very little actual collateral any more. As the Bank Of England pointed out, most financial assets are claims on other financial assets.
A true revolution could occur, not by force, or protest, but merely by a concerted effort on most people to pay down all their debt, reduce their spending to the bare minimums required to survive, and then watch as the whole house comes crumbling down as loan after loan will have to be called in, leaving many a man who thought he had worked hard all his life as a broker or a banker or as an insurance agent or as a salesmen or as an economist, with just the clothes on his back, whilst he comes to terms with the realization that all his wealth was an illusion. Profits will vanish, and with it all employee jobs and all retirement funds. People will then have to barter and operate on credit arrangements based on trust (as was done in Ireland) because there is no money circulating anymore, provided of course, there is still confidence in some level of legal system; however those who are able to obtain credit and those able to furnish the credit will only be those who possess some amount of real resources with some amount of permanency (collateral), and those who lack the means to secure the legal promises of others will suffer – and that is exactly what the poor, the homeless, and the unemployed suffer from today – an inability to secure the legal promises and agreements of others on account of a lack of any access to resources.
The question then becomes, is it mathematically possible for every human on earth to have permanent access to sufficient resources to obey all laws (which implies every human must have access to housing, clothing, food, as a minimum if laws exist which punish those who sleep on park benches, beg, or nude etc), if those resources are ‘all’ treated as collateral? History has demonstrated the answer to be no, but history is not enough to the political economist, he needs to be shown in numbers and formulas.
If we take a situation where there is no money, no debts, no financial assets, no enclosures or private property, and we then divide all the natural resources up equally per person we can call this ground zero. As soon as one person makes a bee-line for another for the purpose of exchange, then ground zero is not effected, until, this exchange is made based on a ‘future’ promise, which if broken, will amount to seizure of resources. Why might this promise be broken? Weather, accidents, mistakes, health, etc. Once the promise is broken, the promisee has now increased his lot of natural resources to the detriment of the promisor, who now has no access, and whose only option at this point is to go and ask the promisee for a job and to rent his house back.
Should the promisee have forgiven the debt? It depends on whether or not the promisee is in fact in debt to someone else. Should the promisor have entertained the idea of exchange itself, and more to the point, should he have risked his resources in pursuit of wanting to engage in exchange? Whatever may be the answers to these questions, it is mathematically obvious that if everyone is treating all their human needs as collateral and our whole economy is based on making and performing legally binding future promises, that all it is going to take is some of those promises to be unfulfilled due to any number of reasons, and the promisors will become indebted to the promisees.
The MABO cases in Australia are a case in point. Native title was granted on the condition that the land not be treated as collateral. Whilst many argued against this and believe that those who posses the native title should be allowed to treat it as economic property, the whole concept is foreign to their culture, and it would not take long for shrewd businessmen to convince them to mortgage it all away.
Now I shall continue reading George.
Throughout his whole book, George, mentions many times, but never questions (and by implication must agree) the economic principle that all humans seek to gratify desires with the least exertion.
He then proves that progress causes poverty because of the fact that land values increase as progress increases, and that in rapidly growing economies, land becomes a speculative commodity, etc etc all of which contribute to land owners getting an increasing portion of the produce without lifting a finger – and yet, is this not the very aim of the economic principle just mentioned?
Ever since I began studying economics, I have always been completely dumbfounded by how presumptuous economists are in describing human beings, and yet criticizing the very effects that this behaviour churns out. If I am true to the economic principle that I will fulfill all my desires with the least exertion then does it not stand to reason that my primary aim in life will be to become a land owner, (or to accumulate sufficient financial wealth so I don’t have to work)?
I suppose a sufficient rejoinder to ” the economic principle that all humans seek to gratify desires with the least exertion” is the number of people who run the London marathon.
Thanks Asad for mentioning Henry George..I had not heard of him and have since reading some of his material (Progress and Poverty).
Although not related to the point of this blog, what I have found interesting in the first few chapters was how much emphasis he had to place on defining the terms ‘capital’ and ‘wages’, a task he was required to do on account of the sheer level of ambiguity among other political economists and scholars of what these terms actually mean, in support of his other task, to refute the idea that wages are drawn from capital. Although George relies on part on a maxim of law in support of his explanations, he probably could have gone further down this path of reasoning, for whilst it is obvious many of us think of terms such as capital in different ways, when it comes to filing our tax returns, there can be no ambiguity lest we face the auditors. The tax laws treat capital one way and one way only, and not how we may like to treat them (something we would have thought many political economists and other scholars would have thought to research themselves before publishing treatises). Taking this further, all our economic activities are subordinate to the laws of our land, not the other way around as many seem to think. Put another way, if one is to truly understand how the economy works, it may help to have some background in law; for the very things which our economy rests on, such as capital, wages, profits, and so forth, are not possible without the law, and are in fact products of legal agreements.
Dingo–, As a reader of Henry George, you must also have seen the other Georgist axiom, that Mankind seeks not only to satisfy his/her desires with the least effort, but that these desires are unlimited! What now seems to be two opposing trends now come together as a single-purpose style of social behavior for our most general good. This is the definition of economics.
With regard to land, George does not claim that we all should turn our hands to farming, indeed the above axioms imply that the work we choose to do should be of the kinds we have the most talent in and can perform the easiest and best. What George is saying is that we should all share equally the RIGHTS to access of the great benefits and bounty that any site can offer. In practice this can most easily be achieved if and when we all pool the economic rent (potential) that the particular sites we may occupy, by providing the nation with this rent as if it were a revenue or tax for the right for holding it out of use from others and making use of it for ourselves.
In writing some definitions about certain terms in economics, George was well ahead of other writers, who seem to be able to manage without properly explaining about what they are dealing–and this problem has not yet been resolved, even today! That is why in my 310 page e-book on “Consequential Macroeconomics”, I spend so much space on definitions for the various flows of money, goods and services that pass between the specific entities of this modern economics society. (Write to me for a free e-copy chesterdh@hotmail.com–and come to grips with how close to a true science this once dismal subject can now become.)
“Dingo–, As a reader of Henry George, you must also have seen the other Georgist axiom, that Mankind seeks not only to satisfy his/her desires with the least effort, but that these desires are unlimited! What now seems to be two opposing trends now come together as a single-purpose style of social behavior for our most general good. This is the definition of economics.”
David, the problem is that I do not agree with either statements, and I base this purely on self-observation – therefore the whole field of economics is based on a fallacy. The only actors which economists are actually describing are the ones who seek economic rent.
The only reason economics gets as much attention as it does is because very few question it’s premises.
I find it interesting that modern “economists” have such great difficulties dealing with interactions labeled economic. A little history is helpful in figuring out this situation. The greatest western power of the 18th and 19th centuries, Great Britain had no “economy.” No interconnected arrangements identified as “the” economy. That construction was not invented till the 1930s during the aftermath of the “The Great Depression.” In the UK as in most of the rest of the western world there was “making a living,” “physical survival,” and “becoming rich.” These are economic, but also involve family life, religion, criminality, love/hate, government, mathematics, and multiple forms of artisanship and science. And the earliest “economists” were moral philosophers, whose focus is on the content of morality and reflexive discussion of the nature of moral judgment, language, argument, and value in human conduct. Lost in all this is the work of millions of “common” persons over thousands of years to deal with these basic questions of life. Just as with most of science today, the work of economists’ rests on this common work, but economists steadfastly refuse to acknowledge that dependence. Rejecting such a relationship in every instance. Western scientists have for over five centuries taken without asking artisan and crafts knowledge to make their sciences. Robert Boyle appropriated craft knowledge to make himself “the first modern chemist.” When asked about it he explained, the craft knowledge would be repaid with interest, “as the naturalist may . . . derive much knowledge from inspection into the trades, so by virtue of the knowledge thus acquired . . . he may be as able to contribute to the improvement of the trades.” Problem is it never happened. The class differences between elites who are scientists and trades and crafts persons and artisans, who are barred from science makes such a mutually beneficial relationship impossible.
“The class differences…” Your last sentence Ken. Depends on the culture. Long ago I learned that whereas in the U.K. and the US there are two cultures, Science and the Arts and Humanities, in Germany there are three, Science, Arts-Humanities, and Technik, the last combining the world of craftsmanship and science, which avoided that class driven gulf between Science and crafts typical in Anglo-Saxonia. Trademen and the apprenticeship system are greatly respected in Central Europe and are part of a great arch of learning that brings the crafts together with science under the umbrella of Technik. I learned about the Germans through my children, in German schools. When their fellow students, grade 10, entered apprenticeship programs, I expected their parents to be disappointed because they did not follow on to the A levels (Abitur) and the university. Only to discovered that nothing of the sort happened. They were delighted to entered apprenticeship training, no pejorative class distinctions there.
Robert, my comments are limited to the western world. And within it mostly to the UK and US. Regarding Germany, you’re correct that the cultural artifact of technical work, combining the theorizing of scientists with craft work and artisanship changes the relationships. It is no longer a direct history of scientists stealing craft and artisan knowledge and practices to fill out science theories from philosophy, religion, and laboratories. Such theft certainly happened in Germany, but unlike the US and UK there were in Germany efforts, sometimes successful to establish relationships in these transactions that benefited both the scientists and the craft persons and artisans. Apprenticeship is the result of some of these efforts. But you still haven’t convinced me that the relationship between artisans/crafts persons and scientists was not and is not plebeian to patrician, as in the UK and US.
Robert, after World War II the Attlee socialist goverment learned from the Germans and set up apprenticeships in experimental science. When Churchill got back in, his conservative elites scrapped those and went back to basing the status of scientists on university education. I know, because I was one of the apprentices whose status was undermined as a result.
I was being trained not as an artisan or crafts person, Ken, but as an engineer, and science is not just a bunch of homoeconomicus patricians but a team of people of different types and capabilities performing different functions in the different phases of scientific research programmes. Not that the artisans should be denigrated as “plebs”. The most observant, inventive and valuable scientist in a once famous research organisation (now defunct) began as a craft apprentice contemporary with myself. He still amazes me.
Dave, in the ancient western world engineers (Rome, Greece) were considered the best of artisans and crafts persons. Most skilled, and most experienced. Many Roman engineers who designed and built the aqueducts, roads, domes, and bridges of the Empire, and who created concrete (opus caementicium) began as artisans or even soldiers. Their work was first about solving problems. But some became so skilled and experienced they rose to high places in Roman society but were never patricians. Western science arising in the 14th and 15th centuries was dominated by “gentlemen.” Men of quality and status, many high born. Some even royal. They stood above both engineers and artisans. But, as I noted often “borrowed” from these engineers’ and artisans’ skills and knowledge to fill out the “scientific” theories created from philosophy, religion, and laboratories. The histories of physics, chemistry, and biology all involve this borrowing. Who knew more about the movements of the Sun, Moon, and planets than ships’ captains and navigators. Most of the instruments for ships to find their way were created by crafts persons (including clock makers) not scientists. Butchers and surgeons had more knowledge of blood circulation and the heart than the best biologists. Astrologers and Druid priests knew more of chemical mixing and interactions than most chemists. The social sciences, including later economics present the most difficult case. The subject of study of social scientists is what is created by other humans. Many social scientists not only crudely borrow from those creations, with favor or scorn but recklessly repackage what they borrow as social science truths or fictions. In some way the sciences have democratized but in many ways the sciences remain closed and elite cultures. Till the last 50 years social sciences remained more closed than other sciences. It’s difficult to imagine a mainstream sociologist, psychologist, or economist before 1960 treating how ordinary people create and live their lives as anything other than fictions and protective curtains to obscure the genuine reasons for human actions hidden in habits, psychological conditioning, or fear of the truth. Economists are certainly still bound to these prejudices. That can be seen on this blog. There is no single real world. There are multiple possibilities. Human choice is one of but not the only factor in reducing the possibilities to just one. Many of the commenters here show the many down sides of considering only one option.
Please watch a short clip on Fox Business News earlier today, followed by what is happening, as it happened before to small businesses at the end of each “recession” everywhere. I would give much to understand what the Fox people are high on! Even Mr. Clinton denied ever inhaling pot when he tried it in England once! Please look up his record. The Foxy people keep talking about a shot of adrenaline, a boost to the moral of business, a spread of positive energy to the whole US economy, etc. And then double check the latest quarterly sectoral analysis and growth sectors released today by U.S. Bureau of Economic Analysis. The elite has never had a need for a real protector, or a real conscience, or real medicines of any kind. They are well by themselves and happy with their own kind. Worse is on the way, and it will be worse everywhere. The poorer the poor, the richer the rich, and that is the only economic reality humanity has ever experienced.
Congratulations, Asad, on initiating and maintaining such a fruitful discussion. It keeps on coming. By contrast, I share the exasperation of Yoshinori, July 25 at 10.39 am, with Lars Syll. I think the difficulty is that unlike you, Asad, Lars is not joining in the discussion.
I need to take issue with your argument on July 25, 4:54 pm. I’m not disagreeing with you so much as presenting a more comprehensive argument. The notion of TRUTH is a representation concerning representations, so we need a complex way of representing it: a fourfold rather than binary measure such that it can indicate not only true or false meaning relative to what we are doing, but whether or not representational errors have been detected.
One can define such a criterion in terms of Cartesian coordinates, in which four true right angles represent the four truth values. If one of these is chosen to represent truth (c.f. true North), then the others are in different ways NOT true. Adding time by seeing this as a clock face, the hand can point to each of the truth values in turn, and also represent probability values in between. To this we can map the different perspectives of the four basic personality types, who perceive what they judge to be truth in different ways, leaving individual differences represented by a point in one of the quarters.
I hope this enables you to see why I keep drawing your attention to the Myers-Briggs research which empirically characterised the Jungian personality types. To sell a new paradigm we are going to have to convince four different types of audience. You say of Salter, “If the creator of the truth cannot market it, it does not seem that I would be able to market it better”. I say, on the contrary, if you can get your “feeling” head round what is true in what Salter is directly “seeing” (i.e. the neglect of development), you are more likely to be able to sell it to your compassionate fellow “feelers” than he is.
What I “see” as an intuitive is the clock rotating amid the archeology of evolutionary history, and an economic future mapped by present memories of our children growing up. A picture would be worth a thousand words were I still able to produce it without help and others (I’m thinking Egmont, Frank and Yoshinori) willing to work out how to read it. Understandably, where I have to use the thousand words I must get boring, but on selling paradigm or research programme change, Asad, it takes two to tango.
Let me briefly agree with David Chester (July 27 at 9.09 am) that his type of diagram is an important improvement on quantitative graphs. This is not about telling people, it is about showing them what to look for. However, his is focussed on what we have now, mine on the order in which things happen.
Dingo’s comments on the significance of Law (e.g. July 28 at 4:17 am) have given me much food for thought. Going along with Craig on grace and gifting I had been satisfied with the Christian ethos of love making the Old Testament emphasis on Law almost redundant: transforming it into fatherly advice. In light of the personality issue that is unlikely to register with the sensory type which sees the “good life” as desirable and enables itself to see how to gain and retain it by turning ambiguous social relationships into contractual and monetised ‘facts’. Do you think, Dingo, law might be constitutionally defined as conventional, so that responsibility for contract failure will be arbitrated, not presumed, and only if it is damaging? That, I understand, is roughly how Roman law worked.
Dave, I have enjoyed your inputs, particularly your posts regarding the difference of personality types.
“Do you think, Dingo, law might be constitutionally defined as conventional, so that responsibility for contract failure will be arbitrated, not presumed, and only if it is damaging? That, I understand, is roughly how Roman law worked.”
As for your question, are you able to elaborate or give an example?
Dingo, these thoughts go back about 50 years to discussions on Britain’s entry into the EEC and whether de Gaulle had been right to exclude us. What was drawn to my attention was the difference between French court procedures and ours in Britain. In our courts one is either guilty or not – this being particularly offensive when a battered wife is judged guilty of murdering her husband. The French law allows for extenuating circumstances, as in its relative leniency in respect of “crimes of passion”. This got me interested in the principles of Roman Catholic canon law, and I also picked up an ex libris 4th edition (1956) of R W Lee’s “Elements of Roman Law”.
These days I see the difference being sensory types running English law and intuitive understanding being involved in European law, so that de Gaulle was right: the British were never going to understand the constitutional principles of the EEC (particularly the advisory rather than legal role of its commission), and should have been kept out. Instead, we have muddied the waters, helped turn the EEC into an American style EU, and now shot ourselves in the foot.
This raises another question. In Britain we have an unwritten constitution, so a government, once elected, can claim the right to change not only administrative regulations but the very constitution itself: the way we do things. In America, changes to the Constitution are (in principle at least) not in the gift of the the government but need the agreement of the Legislature, Executive and Judiciary and acceptance by all the people. So I’m imagining a referendum authorising a Constitution binding government to interpret law more in the French style than its present cut-and-dried “winner takes all” approach; also, to separate the variables of cooperation and competition so that firms compete for fixed prizes rather than growing livelihoods.
That needs a lot more work doing on it but I hope it gives you some idea of what I’m “seeing through a glass, darkly”.
Dave, I must confess, I have only studied the legal systems which are based on the common law system which grew out of Britain (which includes Equity jurisprudence).
I recently read some views on the difference between the common law (UK, US, Australia, Canada, New Zealand, etc) and the civil law (Europe etc), and in summary it was said the common law, in contrast to the civil law, is based on individual autonomy and the right to do anything one wants with the only condition being that it does not prejudice anothers right to exercise the same autonomy (i.e. as you say, the winner take all approach). The effect being that class mobility etc is far easier, but like the game ‘snakes and ladders’, one can slide just as easy as one climbs, and what’s more, they can slide quite far. America, is seen as the epitome of this system; it has produced more entrepreneurs than any other but by the same token, the most failures and bankruptcies per capita (or at least it was the epitome, Jim rogers once quoted that the US is now more communist than China). The civil law system on the other hand is more community based and more forgiving, at least that was how it was explained. So you might be right with the difference primarily being between sensory and intuitive types, however, how much of this has been bred into us is another factor to consider.
It is very easy to see how under such a system (the common law system) the industrial age was able to flourish. At the same time however, English Jurisprudence, borrowing from the Roman Law developed the jurisprudence of Equity (Chancery) to smooth out the harshness of the common law. An example would be, under the common law system if you failed to have a deed executed exactly as the law required, it was deemed void, and yet in equity (if invoked) if the intent and purpose of the parties can be shown to exist, equity would deem the deed valid. The biggest difference between equity and the common law is that all contracts and agreements enforced under common law will sound in damages, whereas, under equity, the doctrine of specific performance would kick in. You as the promisee had the choice, do you want to sue the other party for damages (then go to that court over there), if you want to force the person to perform the actual act he promised (like paint my car red), then go to that court over there. Whilst common law is based on winner take all, equity is based on fairness and equality, if one wants to seek equity, one has to do equity. The distinctions and the principles between these two bodies of law still exist, but the procedures have been merged (although there are still some states in the US which still have seperate courts).
The civil law however sees the common law system with it’s equity big brother, as quite silly. People who grow up and study the civil system can’t understand the common law system when they finally come to see it, and vice versa.
I personally see far more treasure and possibilities in the whole body of law as a means to fix many of the social issues than all economic theories put together, but this can only happen if one studies it enough. Lawyers hold the keys but do not enter the kingdom themselves. The common law system is a great system*, if you understand it inside and out, whereas for most people who haven’t the time or inclination (and just want to get on with their life) a more codified system such as the civil system makes life easier, because it’s all there in black and white and one can clearly see what ones rights and duties are. Our common law countries are becoming more codified as we march forward, and this is mostly due to the fact that more and more people are becoming property owners but simply have no time or motive to study and implement law for themselves and form legal relations which are subject to their own intents and purposes. It is easier to default to contracts already made up by companies/banks etc, and to get legislators to make laws on our behalf, but it comes at a cost because legislators are always dealing with competing interests and they can’t satisfy everyone.
This whole understanding of the different types of legal systems which operate around the world is the basis of my whole ‘multiple economic models approach’. I see no reason why on any given street in any given suburb, in any given city/state, households can’t be operating under different legal systems. In many countries such as ours, it already exists, people just don’t see it. One maxim of the law sums it up nicely for me – whatever binds two people binds the courts.
* there has been long debate here in Australia why we do not have a bill of rights and why we don’t legislate more human rights legislation – and a former Prime Minister once said ‘the common law already possesses all the powers to satisfy human rights’, but what he didn’t say was ‘but you have to study it yourself!
Dingo, thank you for this legal background to the discussion.
It is very helpful to be able to put names to differences one has only seen in practice.
What I’m also seeing is the history of this, and the “radical paradigm shift” in England which transformed what I can now call pre-reformation civil law “equity” procedures (the King’s Justice travelling the country arbitrating disputes) into “common law” procedures based on possession of deeds of entitlement (perhaps so called because they enabled seizure of lands traditionally held in common: a process still happening not only in Africa etc but in company takeovers).
If the old paradigm had been equity (as covertly portrayed in the plot of Shakespeares “Merchant of Venice”), the new paradigm was bankers issuing paper money in lieu of gold. Purchase with paper money generated title to property, and paper money could be borrowed: simply written as credit with one hand and as entitlement to repayment with the other.
Prior to the invention of printing, people were largely illiterate and claimed tenancy rights mainly on the basis of tradition. Book 1 of More’s “Utopia” is still openly about the inequity of evicting tenants to make way for sheep farming, even in church estates. But the event which led to the institutionalising of the new paradigm was Henry VIII’s law re-legalising usury.
When Henry’s flagship Mary Rose was raised from Portsmouth Harbour I understood how this left him at the mercy of those he had borrowed money from to fight off continental catholic opposition to his divorce. When Henry sold off the church estates people could buy title to them with borrowed money.
A recent television documentary on Henry’s chief minister Thomas Cromwell claimed that Anne Bolyn was his neice and way in to major influence in Henry’s court. For further detail see https://en.wikipedia.org/wiki/Thomas_Cromwell.
Please look up the origins of the proverb “day time rubbery” and its association with taxes and light in England. Please also read a selection of poetry on the subject of “the law is the law” in scholarworks.law.ubalt.edu.
And look up hundreds of examples on this very topic by writers and lawyers of all nationalities and also on how “case law” was introduced and why.
On economics, and some key topics covered above please note a brief extract from a publication by the Institute of Race Relations in 1982 entitled “Roots of racism” and how its love-hate relationship shifts from each cycle of changing demand for imported labour from all over the globe:
“If you’re white,
You’re all right,
If you’re brown,
Stick around
If you’re black, get back”.
People’s legal status and legislative legitimacy or otherwise has always been linked with the right to stay or not. Since this publication, things have worsened , and I, fear, worse is on the way.
May, as I understand it, is on a walking rest in Italy? Perhaps come next May, she will be kind enough to grant all undocumented workers who continue to rot in shadow economies, a breath of fresh air? Or must they wait for 14 more years to “choose” naturalisation. Or is this going to be extended to 40 years due to newer austerely measures imposed by foreign powers?!