Home > Uncategorized > Economics needs a new Reformation

Economics needs a new Reformation

from Lars Syll

A more pluralist approach would take account of the complexity of markets, the constraints imposed by nature and rising inequality. So what needs to be done?

luther-theses-painting-1080x675Firstly, listen to consumers, because it is pretty obvious that they are unimpressed with what they are getting. The failure of the economics establishment to predict the crisis and its insistence that austerity is the right response to the events of a decade ago has meant the profession has rarely been less trusted …

Secondly, we should stop treating economics as a science because it is nothing of the sort. A proper science involves testing a hypothesis against the available evidence. If the evidence doesn’t support the theory, a physicist or a biologist will discard the theory and try to come up one that does work empirically.

Economics doesn’t work like that. Theories can be shown to work only by making a series of highly questionable assumptions – such as that humans always behave predictably and rationally. When there is hard evidence that disputes the validity of the theory, there is no question of ditching the theory.

Larry Elliott/The Guardian

  1. paul davidson
    September 9, 2018 at 7:36 pm

    In my book WHO’S AFRAID OF JOHN MAYNARD KEYNES? I indicated that in a 2005 published work I explicitly specified that a large financial crisis was going to occur in the near future. In the book I also explain how Keynes’s liquidity theory brought me to conclusion that a financial crisis would occur soon.

    • Manuel Campos
      September 9, 2018 at 8:07 pm

      Paul, where is the article? I need read!!!!

      Thanks.

    • September 10, 2018 at 4:46 am

      Paul: What about the NEXT one? some are predicting that one is coming up soon?

  2. Edward Ross
    September 10, 2018 at 12:09 am

    Thank you Lars Syll in my humble opinion , Larry Elliot describes what I have believed for a long time. I also seem to remember reading Paul Davidsons statement some time ago.

    Looking at this blog and posts and thinking of Tony Lawson’s willingness with Edward Full brook’s cooperation to put his book up for criticism indicate to me where the conversation needs to focus.
    Furthermore if economists realise that economics is about people, Bill Geddes Economy, environment, ideology and marginalisation in chapter 3 of Anthropology Voices from the Margins, Deakin UNIVERSITY PRESS is really worth reading .

  3. September 10, 2018 at 12:36 am

    If you scroll far enough down the right-hand column here you find the entry

    Revere Award in Economics
    Keen, Roubini and Baker

    given to people who also foresaw the crash.

    • Edward Ross
      September 10, 2018 at 2:41 am

      Thanks for the reminder Ted

  4. Craig
    September 10, 2018 at 5:13 am

    A reformation is only a list of reforms. Economics needs more than that. The two economists I have learned the most from define the problem, but not even they recognize the single concept that will integrate into the new pattern.

    Keen says that as soon as the rate of change in credit falls the economy will enter recession which is just a macro-economic way of saying that aggregate free and available individual income is scarce in ratio to prices and as debt is virtually the only way that money can can currently be injected into the economy and it will incur additional costs even at 0% interest…we’re caught between the rock of treading water forever until the build up of debt overwhelms the ability to service it and the hard place of a recession if we don’t….unless we integrate monetary gifting into the system as the new paradigm for the form and vehicle for monetary distribution in an abundant way.

    Michael Hudson accurately describes finance as the parasitical behemoth that sucks huge amounts of monetary profit out of the economy and sucks just as much vitality and human hope out of it as well. But he doesn’t see the new paradigm.

    Debt Only, as the paradigm for the form and vehicle of monetary distribution IS.THE. PROBLEM. The solution is the intelligent implementation of a sufficient abundance of gifted individual income and a strategically implemented unobtrusive and generally beneficial reduction to prices that ongoingly inverts the scarcity ratio into one of abundance.

    If you’re not thrice removed into some abstraction or wed to some orthodoxy of economics or of mindset….the answer is plain as day.

    • Frank Salter
      September 10, 2018 at 8:05 am

      The single most important concept is analysis dealing rigorously with historical time. Then the results of decisions made become predicable. That is a paradigm change.

      • Craig
        September 10, 2018 at 9:27 am

        If by historical time you mean the temporal universe effects of policy I completely agree with you. I’ve given everyone here my policies a hundred times and have shown them the what and why of their temporal universe effects would be to resolve the two most basic and chronic problems of modern economies. I’ve also defined what a paradigm is, namely a single concept that describes the new paradigm, fits within the complexities of the economy and also creates an entirely new pattern. What are your policies? What are everyone’s policies? Everyone here should get up off their theoretical backsides and declare their new paradigm policies and how they will resolve the economy’s problems. All most of us here do is go on and on about theory. What are your policies?

      • Frank Salter
        September 10, 2018 at 10:28 am

        To Craig: Unfortunately policy arguments for me are a total irrelevancy. I am not in power, neither are you. The only effects I might achieve are through developing valid economic theory and then making others recognise what those theories imply. It takes many people to vote for politicians to achieve meaningful change.

        That’s my method. Your reiterating the same for hundreds of times seems to me like an exercise in futility.

  5. September 10, 2018 at 6:30 am

    While we’re at it, it may be good to pull Economics out of its narrow focus of predicting aggregates. The GDP is not the economy. Neither is the stock market. Aggregate metrics may hold some Physics-like fascination, but for most people aren’t that interesting. Individuals care about their own money and non-money value flows, connection, security, the options they face or the structures they’re in. For most people, Economies are graphs. Study them as graphs.

  6. Craig
    September 10, 2018 at 4:58 pm

    Well, I’m sorry, that’s just what we used to call a cop out. Theories without policies is mere mental wandering. What are your policies everyone? The what, the why, the where and the when of your policies….just so we can be sure they are relevant and effective in the temporal universe….where we all exist. Is that scientific enough for us all to agree upon?

  7. dmf
    September 10, 2018 at 7:23 pm
  8. Craig
    September 10, 2018 at 8:21 pm

    Macro-economics is a very recent body of thought that unfortunately was designed to get caught up in abstraction and complexities and so go no where forever instead of looking at the economy through the utterly integrated empirical tool of double entry bookkeeping, deciphering the significance of the fact that the pricing system, money system and accounting system are all digital in nature and hence that that digital nature is the perfect way to make monetary policy direct, immediate and beneficial for all agents…..and if such policies are sufficiently abundant they invert the scarcity ratio between total individual incomes and total costs and so total prices….into a price deflationary and hence a monetary abundance ratio….that effectively implements the new paradigm of Direct and Reciprocal Monetary Gifting.

    And that is what the policies of a $1000/mo universal dividend paired with a 50% discount/rebate policy at the point of final retail sale….do in spades.

  9. paul davidson
    September 10, 2018 at 11:34 pm

    To Manuel Campos: Read all of Chapter 6 of my book FINANCIAL MARKETS, MONEY AND THE REAL WORLD especially p.117 where there is my written statement that certain actions in financial markets ” to a fast exit strategy at a future date could cause a horrific liquidity problem, unless the central bank is alert to the need for pouring as much liquidity into the system as necessary quickly and promptly”.
    The fast exit strategy occurred in the spot market for mortgage backed derivative (and started to sill over into government bond markets– This fast exit attempt by the security holding public caused the global financial crisis [ which I had called “a horrific liquidity problem”] The solution to this crisis required the Federal Reserve to enter into its QE [quantitative easing] policy which poured billions into the spot financial markets! Similarly the Eurobank adopted a modified pouring in of liquidity to certain European government bond market.This QE policy of central banks stopped the global financial crisis from developing into the Second Great Depression — instead we merely had a Great Recession!

    My analysis was developed from Keynes’s liquidity theory

    • Craig
      September 11, 2018 at 1:04 am

      Yes, that’s an accurate account of what occurred. The problem with the FED’s “solution” was bailing out the bad actors/charter privileged banks…instead of doing the humane and new paradigm exposing thing of gifting the individuals who bought at the top of finance’s bubble thus bailing out the real victims and the system at the same time.

      The basic macro problem is the now ongoing and inherent scarcity ratio between total individual incomes and total prices on the lower bound of costs, the greedy and systemically enabled financial system which is ecstatic to inflate prices on the upper bound of price and the complete absence of a better more rational, ethical, beneficial alternative to attempt to survive by inflating their prices by commercial agents in a monetarily scarce system…when more money is apparently entering the system.

      And the two policies I’ve heralded here would effectively resolve those problems, and along with a few regulations that would encourage their positive effects and inhibit anti-social avoiding of such regulation….would transform the economy with the new paradigm of Direct and Reciprocal Monetary Gifting.

  10. paul davidson
    September 10, 2018 at 11:37 pm

    By the way My FINANCIAL MARKETS , MONEY AND THE REAL WORLD was actually published in 2005,, and not the date I mentioned in my earlier comments

  11. Risk Analyst
    September 11, 2018 at 7:44 pm

    The reformation analogy is lost on this audience despite the parallels between the catholic church and neoclassical economics. Martin Luther did not just post some papers and then sit on his hands. He wrote prolifically, theorized new relationships, taught, met, gave speeches, convinced the skeptical, organized new church structures, and more. The reformation to those here is just posting a paper. For Luther, that posting was a start and not a finish. Do you guys ever consider more than just posting a paper? How about this website????? Luther engaged his opponents directly in all sorts of venues. Here anyone not a leftist progressive is dismissed or driven away. Luther engaged his opponents, here papers and posts regularly call the president a Nazi, or a liar, and the women he has been with hookers. Luther respectfully disagreed with the Pope’s interpretation of the bible. Luther never called the Pope a liar or tyrant. Do you get it? Of course not. That’s why everyone here has the same political viewpoint, and the audience is narrow. Personally, except in a few cases the few posts I try to make are all censored, deleted or left in an “awaiting moderation” purgatory never to be seen. The note on the heading of this site that anyone can post is a lie. But then leftist progressives are blind to hypocrisy of their own. Anyway, to once again repeat my theme, you guys are far too interested in political discussion and really do not seem to care at all about increasing the influence of heterodox. Luther engaged his opponents, you guys drive them out or censor them. Too bad you do not understand the very analogy on reformation that keeps being revisited.

    • Craig
      September 12, 2018 at 12:48 am

      If one is honest they see that the assumptions behind neo-classical economics are bogus. If they don’t see it there’s probably some un-integrated assumption of theirs that prevents such recognition.

      If there was a democratic president that demagogued as aggressively, blatantly lied continually, was as disintegrative of our institutions and obscured already established facts (the Trump Tower meeting) by covering things up as Trump…I’d be with the republican majority in impeaching and convicting him.

      Economists are very smart. If they were also wise they’d see the solutions to the problems they’re stymied by. Look everywhere, especially where no one else is looking and where orthodoxy says you shouldn’t look, and you’ll be much more aware than almost everybody…and you might just change the world.

      To double everyone’s individual purchasing power and hence double the amount of money available for every enterprise’s goods and services, realize that the pricing, money and accounting systems are all digital, and use a digital policy at the point of retail sale to discount prices and have the monetary authority rebate the discount back to the enterprise giving the discount.

      Voila! No more individual income or business revenue scarcity, not just the elimination of inflation, but the painless and beneficial implementation of price deflation into profit making economic systems….and hence paradigm change in economics and money systems.

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