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Re-examining economic laws

from Lars Syll

In mainstream economics, there is a lot of talk about ‘economic laws.’ The crux of these laws that allegedly do exist in economics, is that they only hold ceteris paribus. That fundamentally means that these laws only hold when the right conditions are at hand for giving rise to them. Unfortunately, from an empirical point of view, those conditions are only at hand in artificially closed nomological models purposely designed to give rise to the kind of regular associations that economists want to explain. But — since these laws do not exist outside these socio-economic machines, what is the point in constructing thought experimental models showing these non-existent laws? When the almost endless list of narrow and specific assumptions necessary to allow the ‘rigorous’ deductions are known to be at odds with reality, what good do these models do?

Deducing laws in theoretical models is of no avail if you cannot show that the models — and the assumptions they build on — are realistic representations of what goes on in real life.

Conclusion? Instead of restricting our methodological endeavours at building ever more rigorous and precise deducible models, we ought to spend much more time improving our methods for choosing models! 

julianThere is a difference between having evidence for some hypothesis and having evidence for the hypothesis relevant for a given purpose. The difference is important because scientific methods tend to be good at addressing hypotheses of a certain kind and not others: scientific methods come with particular applications built into them … The advantage of mathematical modelling is that its method of deriving a result is that of mathematical​ proof​: the conclusion is guaranteed to hold given the assumptions. However, the evidence generated in this way is valid only in abstract model worlds while we would like to evaluate hypotheses about what happens in economies in the real world … The upshot is that valid evidence does not seem to be enough. What we also need is to evaluate the relevance of the evidence in the context of a given purpose.

  1. Ron Goldring
    September 24, 2018 at 7:24 pm

    Most posts here sum it by: “It doesn’t work for people, it is based on falsity, and it keeps going on”.
    Yes, I agree. But isn’t it time for offering alternatives?

  2. September 24, 2018 at 8:38 pm

    Mainstream models are “purposely designed to give rise to the kind of regular associations that economists want to explain”, If we sought to explain different regularities (such as even the ‘undeserving’ rich getting richer while the relatively deserving stagnate) then we could use a similar approach to develop alternative models. (For example, wealth buys power which enables the appropriation of more wealth.)

    Lars also claims that: “Deducing laws in theoretical models is of no avail if you cannot show that the models — and the assumptions they build on — are realistic representations of what goes on in real life.” As a mathematician I radically disagree. Given some assumptions which entail a given desired regularity, one should check and monitor the assumptions. If one or more is unrealistic or being undermined (e.g. by increasing debt, novel financial instruments or an eclipsing of a once dominant player – take your pick) then you need to start modelling alternative current and future possibilities. I cant see any other way ahead, and the theoretical models seem essential – as ‘straw men’.

    With reference to the notion of a https://en.wikipedia.org/wiki/Wicked_problem mainstream economists are seeking tame solutions whereas in my view we need to open our minds to the possibility that sometimes some social and economic problems may be ‘super-wicked’, hence requiring a different approach. Thus, to me, the problem is not so much in the models but in how we think of them. Mathematically, they can only ever be conditional, but somehow we seem to treat them as sacred texts. Not good!

    • Frank Salter
      September 26, 2018 at 8:37 am

      I am in agreement with your thinking. I believe that the ‘super-wicked’ is well known ro science but virtually unknown in economic analysis. It is first principles analysis. Valid quantitative analysis needs to be based on underlying axioms of reality NOT of some assumed axioms which may belong to another altogether different universe — which belong to pure mathematics NOT to applied economics.

      As a mathematician, I invite you to consider my analysis, “Transient Development” RWER-81, pp. 137−165. As it makes new predictions which correspond to the empirical evidence (passing both Popper’s and Lakatos’ tests of theoretical validity), it provides a demonstration that economic analysis needs to be carried out with the proper treatment of time based on differential equations — NOT the oxymorons of equilibrium and DSGE analyses.

    • September 26, 2018 at 5:38 pm

      As a scientist I don’t “radically” disagree with Lars, though I agree with you, Dave, the problems we have are “wicked”. Lakatos somewhat saves the face of theories not working by tolerating that so long as we can adapt the reality to put particular limitations right, much as reptiles evolved into mammals with heat control mechanisms. There comes a time, though, when a Kuhnian revolution is needed. [See Lakatos and Musgrave, “Criticism and the Grwoth of Knowledge”, Cambridge, 1970].

      • September 26, 2018 at 8:47 pm

        Dave, A long time ago I was recommended to read that and thought it very superficial compared with Russell et al., lacking anything like a logical model of its subject and being much less helpful in my ‘day job’ (which involved theorising). But if you point me to a particular chapter I might be tempted to blog my thoughts, as it does seem to be quite influential. Then we might have a side debate with distracting economists ;-)

  3. Helen Sakho
    September 25, 2018 at 12:29 am

    Unfortunately, I lost an earlier comment on this, but basically I did say that Mathematical modelling, predictions, theories that are based on very little but see-serving interests of possessors of “expert knowledge” offer very little by way of contextual, historical, logical, or any other non-void space.
    Perhaps more competent econometricians than myself can help develop a new curriculum. I await a response eagerly.

    • September 26, 2018 at 8:40 pm

      Helen, If you replaced ‘mathematical modelling’ with something like ‘mathematical modelling as typically reflected in economics’ I would agree with you. But lets not overlook the whole of the rest of mathematics! (I keep banging on about this, unapologetically.)

      If economists were as widely read as Dave Taylor, and half as thoughtful, we might all be better off. But this is not to claim that mathematics is the only way to truth. On the contrary, it seems to me that there are very many well-respected ‘classics’ that could be part of the solution – if only we could somehow read them aright.

  4. Prof Dr James Beckman, Germany
    September 26, 2018 at 8:55 am

    Helen, one part of the change must be applicability cross-culturally on the micro level & multi-nationally on the macro. Unlike logicians or mathematicians, any social scientist must deal with the data before them, which admittedly has been all but impossible up to now. The AEA has a new discussion forum. A possibility?

  5. September 26, 2018 at 5:13 pm

    Dave, I’ve been delighted by your “wiki” reference to “wicked” problems. It seems Schumacher’s divergent and convergent processes resolve Frank’s problem with the oxymoron of equilibrium in a single gravitational process. (The economy of course isn’t a single process but different types of processes interacting: not just distribution but production, development and the generation of demand by consumption, to say nothing of the financial paperwork involved).

    Helen, contra James, the problem is that social scientists ARE dealing with the data before them, which represent not the real world but the statistics of observations directed to matters of interest – by people taught by Humeans to agree (prior to understanding of how communication and intelligence are possible) on imaginary laws of imaginary realities they have constructed from numbers and words.

    Here’s the truth as expressed in my ‘artifical’ world of computing. One does not have only things and processes but also modes of interpretation: Kantian concepts which refer both to particular types of thing and the range of programs capable of operating correctly upon them. Since a name is a reference to a thing, a concept is a reference to a reference. Since a name in a computer translates into a location, the data starts with the address of its mode, which is itself the address of the list of relevant programs which already exist. If no data has been put in a particular location, i.e. it is ‘unset’, the program will not know what it can do with it. Algol68 programs did not therefore ‘clear’ disc stores by leaving them blank. Instead, if you accessed an unset location, i.e. one not been ‘grounded’ by having real data put in it, the data you found spelled out the word ‘FOOL’.

    • September 26, 2018 at 9:10 pm

      I was taught Algol in a week at Bristol, for which it seems I owe you some of the credit. So thanks for your contribution. Having an explicit ‘fool’ or ‘NaN’ (‘not a number’) is a great advance on having to use some default number.

      Computers and databases are great for computing with data in the sense of ‘given facts’ but become problematic when we have to deal with messy reality. I agree with Russel et al that there are many different ways something that a computer person would call ‘data’ can fail to represent actual facts, and these differences can matter. Often we have to consider not whether some belief is foolish, but what kind of foolishness it is. (Although Helen has some clear ideas!)

      I look at divergent and convergent problems differently from Schumacher. If you have a language which can only represents ‘data as facts’ then you can only solve certain kinds of problem within the language. But you may be able to solve them using a broader logic and then interpret the result back into the narrow language (as in ‘data warehousing). (I suspect we do this all the time.)

      Problems arise when faced with problems for which no person (or culture …) has all the relevant experience and if those who have the experience only have a narrow ‘baby’ language in common. Mainstream economics seems to be like this: it seems to be conducted in (from a mathematical perspective) ‘baby talk’, with way for others to ‘gain traction’. This seems to me an issue in peace talks, economics, national security, … . I would appreciate any pointers to even partial answers.

      From a mathematical modelling perspective it would first seem necessary to recognize the need to go beyond the constraints of the established ‘logic’, something which Lars et al are contributing to, I think. Otherwise we are stuck with a simplistic interpretation of Shannon. But mathematics on its own is useless: experience is essential, but how to encapsulate/institutionalise/communicate it?

      • September 27, 2018 at 8:54 am

        As to contributing to your Algol68 course (Bristol did the work on the revision for RS systems), I always saw my role as the apprentice. What I worked most on was restructuring “birds-nests” programs to make them intelligible and maintainable, then managing the experimental databases with which we were comparing heirarchical, list and [it turned out] relational programming structures; later our own computer and comms.

        On Russell, remember he was trying to make sense of Frege, who used an iconic rather than symbolic language for logic. He ran into trouble with his mathematician’s assumption of a static “equals” rather than a dynamic “becomes” – perhaps something new. His partial solution of “typed” objects seems however to have been one of the inspirations behind Algol68.

  6. September 28, 2018 at 10:26 am

    All this discussion is at root a storm in a tea cup. We need to begin from basics. Basics are that each human “observes” actors and events around the human. Some observations are clear, some are not. Some observations the human finds interesting. Others not so much. All this occurring within one or more human groups that orient observations and provide each human a basic background and vocabulary for interacting. Over several millennia humans invented many tools for use in observing and explaining actors and events observed – clearly and not so clearly. These tools include many “rules of thumb,” several versions of empiricism, logic, mathematics, etc. A later tool is science; fundamentally a refinement of all the actions humans take and tools they use to make their way. We call these gatherings culture. No culture is always reliable. Having results that vary from one instance to another. Nor is every culture effective in helping humans successfully find their way and survive. Each culture that has existed to this point in human history has failed, collapsed, and perished. Two recommendations for would be economists. One, stop elevating science to something it is not. Science is not a transcendent activity unlimited by human history and culture. Science is rooted in both history and culture. Despite, or perhaps because of this rootedness science is just one more effort of humans to observe and understand actors and events encountered. Like religion, art, and sexual intercourse. Two, no matter how we wrap them or the claims we make for them all human theories are simply arrangements of human observations, with all the uncertainty, imprecision, and deceptions that are part of human culture. People sometimes attach words like “real” and “laws” to the cultures they create. Philosophers of science and some others spin this to create realism. An approach to the philosophy of science (including economics) that argues that empirical and experimental investigation is unintelligible in the absence of an external world, and human capacity to intervene in that world and monitor the results of their actions. This is but one of several philosophies of science, however. All have the same origin, and thus the same structure as cultural creations. As social scientists we want to observe and understand (to the extent possible) how humans create cultures. Including why they sometimes attach words like real and law to their creation. This is not the same as accepting any culture as the only option or taking at face value the use of terms like real to describe the construction work.

    • September 28, 2018 at 1:45 pm

      The basics are that the observables exist before the observers, since the same observables can be seen by many observers. As A N Whitehead put it in “Process and Reality” (ignoring differences in level of abstraction), this “relative complexity” provides “yet another reason for discarding Hume’s doctrine, which would debar the imagination from free conceptual production of any type of external object”. More to the point is what concerns Dave Marsay:

      “Problems arise when faced with problems for which no person (or culture …) has all the relevant experience and if those who have the experience only have a narrow ‘baby’ language in common. … . This seems to me an issue in peace talks, economics, national security, … . I would appreciate any pointers to even partial answers”.

      The partial answers I have pointed to are the physiological understanding of the personality differences as mapped by Myers-Briggs, the PID time-domain relationships in interactive logic, the Algol68 classification of objects in terms both of what they can do (as in capabilities of programs) and what can be done to them (by which types of program), and the personal understanding of capabilities by experiencing their use in physical rather than mathematical models (i.e. paradigms or analogies). The technical issues which I have had to resolve for myself include:

      1. Information being detectable differences, and these being typified by differences in sound or electromagnetic waves, it follows that waveless motion (or waves outside the scope of the senses, e.g. electromagnetic waves at sound wave frequencies) cannot be detected. There is no reason, nevetheless, not to believe energetic electrognetic motion exists anyway.

      2. That the energy flowing from a Big Bang is divergent, and a perpetual motion explanation (superconductive circulation, Chesterton’s snake eating its own tail) has to be found for its localisation in “spray” (subatomic particles). Whitead (op cit) sees this more abstractly: “Hume’s difficulties arise from the fact that he starts with simple locations and ends with repetition. In the organic philoosophy the notion of repetition is fundamental. The doctrine of objectification is an endevour to express how what is settled in actuality is repeated under limitations, so as to be ‘given’ for immediacy”.

      3. That sensation does not require an external world to enter a Humean head. The senses can be (and are) directed by the energetic brain to focus on and optimise the reception of information carriers (notably sound and electromagnetic waves) in much the same manner as automatic focus on a digital camera. What we experience is elastic compensation for the impact of energy on our senses (much like its sitting on a ball), and what is remembered is the setting of the senses necessary to reconstruct the pattern of experience.

      4. That even after sixty years of living together, men and women of different personality types still think differently, and are able to co-exist only by giving each other space. When Nash equilibrium was explained to me I saw it exemplified not in government directives but in road traffic keeping clear of itself and giving way on some sort of time-sharing basis at turnoffs and cross-roads: in short, in the conventions of a real constitution rather than enforced laws.

      • September 28, 2018 at 2:03 pm

        Dave, why do you believe the observed exists before observation? Since all human observation and knowledge is performed communally, it’s more likely I think that some humans in some performances of observation create similar observations by working cooperatively. And then similar facts and theories in the same way. And as the form and functions of cooperation change, so do observations, facts, and theories. With all due respect to Whitehead.

      • Craig
        September 28, 2018 at 6:29 pm

        The problem lies with orthodox exclusionary science NOT natural philosophy/wisdom/spirituality….natural philosophy/wisdom/spirituality (NPWS) being the human experiences behind the signposts of religious beliefs.

        Science is a trinity-fragmenting-exclusionary process of hypothesis and the dualistic determination of empirical truth or falsity only.

        NPWS is a trinity-unity-oneness process including the thorough (and indeed scientific) integration of both empirical data and the existential reality of human consciousness which can result in the inclusive thirdness greater oneness of the pinnacle TEMPORALLY APPLICABLE concept and personal experience known as grace, satori-kensho, samadhi, etc.

      • September 30, 2018 at 7:33 am

        Craig, the language you choose is in my view unnecessarily fuzzy. It mystifies what does not need any further mystification. Humans are their experiences. To identify who and why they are and the actions they can take. From these humans invent their cultures that include morals, knowledge, emotions, communities, etc. Humans are self-made, but always in connection with other humans and nonhumans.

      • Craig
        September 30, 2018 at 9:37 am

        There are levels of consciousness above the normal garden variety walking around state almost all of us continually inhabit. There’s no need to and I am not invoking god or any other dogma other than natural philosophy and the techniques used by the world’s major wisdom traditions in attaining and self actualizing such states.

      • September 30, 2018 at 1:25 pm

        Craig, I’m a bit uncomfortable with such phrases as “levels of consciousness” and “natural philosophy,” but other than that I don’t disagree with your statement in any substantial way. I just prefer to say human experience is virtually limitless.

      • September 30, 2018 at 4:01 pm

        The other Dave’s contribution seems to me just as pertinent as Ken’s, and I would very much like to see some meeting of minds.

        My own experience is that we can sometimes ‘agree to disagree’ on which comes first, the chicken or the egg, and that when we do so we can make some progress. But after whatever crisis that forced us to work constructively together is over, we tend to go back to our old ‘chickenist’ or ‘eggist’ ways of thinking. My fear is that this situation is getting worse, such that we no longer have the possibility to socially construct a sustainable theory of economics, or much else.

        Please prove me wrong!

      • October 1, 2018 at 7:03 am

        Dave Marsay, humans are stumble bums. As Sartre notes, humans are thrown into existence, with no knowledge of what’s happening, why, or who’s in charge. Humans create those answers through experience with humans and nonhumans. Their experiences are always collective, since human evolution is by group not individual. We call what humans create in this way culture. Cultures are neither infallible, universal, or permanent. Cultures can be not only inconsistent with one another, but at war with one another. Everything in human life is created in this way. From the nature of life and every word and action in human life to the study of humans and nonhumans. If the goal is to change what humans do and why they do it, helping all humans have the same history of experiences is the way to do that. Or more directly, ensure all humans experience through the same group. A one group world. To do this requires overcoming some of the most widespread and virulent ideas ever created by competing human groups – individualism, competition, superiority, survival of the fittest, capitalism, etc. Hell, of a job!

      • Craig
        September 30, 2018 at 11:04 pm

        Ken, natural philosophy is simply philosophical metaphysics sans religious dogmas or even religiosity at all.

      • October 1, 2018 at 7:00 am

        Craig, I’m aware of the history of natural philosophy. It’s one of the hundreds of ways to explain people and things invented by humans.

    • September 30, 2018 at 3:51 pm

      This debate is getting a bit mind-boggling, so maybe there is something in it.
      I agree with Ken’s thoughts on the impact of culture on human thinking, but with two quibbles.

      First, let’s not take ‘at face value’ words like ‘group’ and ‘culture’, and certainly don’t think that we all conceive them the same. The situation seems to me like ‘species’ in biology: useful to pedagogy but ultimately misleading.

      Second, let us accept that any individual or ‘group’ notion of any particular theory, scientific area or philosophy of science will be necessarily be ‘infected’ by culture, that still leaves open the possibility that there might be some ideals to which critical debate of sufficient quality would tend.

      If not, how do we avoid the messes we are in, not just in economics? If so, how can we foster such debate, and where might we start?

      • October 1, 2018 at 6:57 am

        Dave Marsay, I don’t take such words as group, culture, etc. at face value. I try to let those who use them explain their usage. That way I get something of a collage of the varies uses and connotations of these and other terms. And the changes in uses and connotations over time. Evolution and adaptation apply here just like everywhere else in human cultures. Notions of things like culture, theory, science, etc. aren’t “infected” with culture, they are culture. In our “cold, cruel” world culture is humans’ only security; little as that may be. In that context, “debate” of these notions is endless. I frankly know of no way to stop this debate or fully control it. But it might help if all humans are told that nothing humans believe and do is fixed or everlasting, or universal. Might make humans humbler and more respectful of their limited role in the universe.

      • Craig
        October 1, 2018 at 7:57 am

        What of the experience of only space, time and your self awareness? No consideration, no thinking, no unconscious attitude or emotion when someone stuck their tongue out at you when you were 5 and you’ve carried around for 30-40 years, no cultural beliefs and biases for or against, just the essential you and the graceful flow of the temporal universe…as it is in each moment. A stopping of the cultural “you” and a direct and focused experience of the moment as it flows.

        We exist in the gracious interactive, integrative, largely unexperienced flow of existence on this planet where we and it have evolved over the last couple of billion years….and we’re missing it…..and the personal and scientific lessons it has to teach us.

        How does this apply to economics? Well if ultimate temporal reality is a graceful flow, our economic and monetary systems that are inextricably embedded in same are yet balky, periodically disintegrative and only serve a smallish and diminishing percentage of our fellow individuals as a result of clinging to the paradigm of Debt Only that keep its (un)workable because its continual build up makes debt un-serviceable…then reflectively why ISN’T intelligently integrating the policies of grace as in monetary gifting….the answer to such problems….and a greater oneness with what simply IS???

      • October 1, 2018 at 10:39 am

        Craig, as the customs (habits if you prefer) upon which every aspect of human day-to-day existence hang, humans are only without culture when dead. Your words here about unexpected flows of existence and gracious interactions are part of several culture. Some going back thousands of years. The words are interesting but not outside culture. And even if there were some sort of primordial life outside culture for humans, humans would have no way to describe or explain it.

        I believe you would like economic anthropology. These anthropologists focus on how shared understandings and interpersonal relations infuse and shape the ostensibly impersonal worlds of production, consumption, distribution, and asset transfers: When new forms of economic activity arise, how do ordinary people integrate them into their existing webs of meaning and solidarity? (For example, do people treat electronic currency differently from hard cash?) How do markets and interpersonal networks shape each other? (Is it true, as commonly believed, for example, that marketization drains personal relations of their strength, warmth, and meaning?) Once they are trying to describe and explain the economic lives of households or of children’s friendships, how must analysts modify standard economic models based on firms and production markets? (Should we assume, for example, that efficiency matters less to the viability of economic activity outside of firms and production markets?) Economic Anthropologists reject narrow economic reductionism but without fleeing to the opposite extreme—construction of a fantasy world consisting entirely of beliefs and sentiments. Anthropologists are teaching economists. And that a good thing for both Anthropology and Economics.

  7. October 1, 2018 at 2:58 pm

    Ken objects: “Dave, why do you believe the observed exists before observation? Since all human observation and knowledge is performed communally, it’s more likely I think that some humans in some performances of observation create similar observations by working cooperatively”.

    Thank you, Dave Marsay, for your response to this. Anyway, the “chicken and egg” paradox only exists when one confines one’s thinking to a time when they both already exist. The one thing I “believe” (by which I mean, “am prepared to accept as an axiom”) is that what is usually termed ‘energy’ exists because change happens; and can thus deduce that things (at least energy) existed before they changed into chickens and eggs and eventually into humans capable of observing. As for the second, I deny Ken’s premise when expressed in terms of communities of observers. I observe as a human rather than chicken because my brain is an inter-communicating community of types of capability. Frank Salter (in off-line correspondence) finds it difficult to accept my “Myers-Briggs” interpretation of this, so let’s hear what Alfred North Whitehouse was already saying about it in “Process and Reality” (1929, Ch 8 on symbolic reference):

    A discussion of an Algol68-like chain of reference levels concludes: “it is a mistake to think of words as primarily the vehicle of thoughts.

    “Language also illustrates the doctrine that, in regard to a couple of properly correlated species of things, it depends upon the constitution of the percipient subject to assign which species is acting as ‘symbol’ and which as ‘meaning’. The word ‘forest’ may suggest of memories of forests; but equally, the sight of a forest, or memories of forests, may suggest the word ‘forest’. Sometimes we are bothered because the immediate experience has not elicited the word we want. In such a case the word with the right sort of correlation has failed to become importantly relevant in the constitution of our experience.

    “But we do not usually think of the things as symbolising the words correlated to them. This failure to invert our ideas arises from the most useful aspect of symbolism. In general the symbols are more handy elements in our experience than are the meanings. We can say the word ‘forest’ whenever we like; but only under certain conditions can we directly experience an existent forest. To procure such an experience usually involves a problem of transportation only possible on our holidays. Also it is not so easy to remember forest scenes with any vividness; and we usually find that the immediate experience of the word ‘forest’ helps to elecit such recollections. In such ways, language is handy as an instrument of communication along successive occasions of the historic route forming the life of one individual. By extension … the same means which are handy for procuring the immediate presentation of a word to oneself are equally effective for presenting it to another person. … This discussion shows that one essential purpose of symbols arises from their handiness. … One difficulty in symbolism is that the unhandy meanings are often vague. … This happens even in the case of words: other people misunderstand their import. …”.

    As Dave Marsay says, these misunderstandings “still leave open the possibility that there might be some ideals to which critical debate of sufficient quality would tend.

    “If not, how do we avoid the messes we are in, not just in economics? If so, how can we foster such debate, and where might we start?”

    Frank Salter again was unwilling to consider the clues I’ve just discovered in dyslexia, which 50 years ago had handicapped one of my children (who is nevertheless artistically gifted). It turns out that such people can have difficulty relating written symbols to sounds (i.e. don’t hear what they are reading) and can be confused by small connective words which can’t be understand by pointing to examples of their meaning. Consider then the problem of trying to read not the words but the mind of those who think in moving images. These can be made more “handy” by symbolising them in schematic flow diagrams, but it seems to be the case that people who do not think that way (however familiar they may be with quantitative graphs) see the lines and not any flows “within them”, just as conversely, dyslexics see the written words but get confused by not hearing the sounds they are intended to enliven.

    So what can be done about this? I suggest a variant on the fourth of my partial solutions above: giving each other space on the road we are travelling on together, and waiting for space at roundabouts. Being a visual thinker I don’t have the problem with words (when I read I barely notice the words, being aware of meanings) but I do with whole paragraphs. How I seem to have coped with this is is that I don’t give up on the discussion: I simply note my uncertainty or disagreement, move on and come back to to it later. (Fifty years later for one issue I am now able to deal with, and indeed here again now: on my coming across the phrase summarising the 1920’s understanding of dyslexia). Contrast that with the majority of “wordy” thinkers, who baulk at or object to anything which they don’t already understand.

    Patience is a virtue. Possess it if you can. If a reader doesn’t already understand the relevance of economics to boys and girls growing up into gifted adults, let him imagine Dave’s egg’s parents nursing, feeding and educating it until it is capable of lying away and becoming its own bird. These events can be mapped as lines between the four types of actor: consumers, suppliers, distributors and developers. How did banking get into this?

    • October 2, 2018 at 8:36 am

      Dave, all interesting. Let me suggest another possible hypothesis to you. The human brain is an inter-communicating community of types of capability because of two factors, I present in reverse sequence. A creative capability often summarized in the word, imagination which humans obtained somehow about 70,000 years-ago. Next, living and imagining in collectives (families, tribes, etc.) which apparently has been with the species from its beginning. For me as a social scientist and historian this view is more pertinent and interesting than other possible hypotheses.

      • October 4, 2018 at 10:00 pm

        The other Dave seems to come from a similar culture to me, but even so there are some, to me, significant (but possibly unimportant) differences between the way we think about these things. Ken’s view is typical of socials scientists (including anthropologists) that I have worked with (including on economics) and struggled to understand (quite a while ago). A difficulty for me is that the word ‘culture’ derives from the term ‘cult’, and hence Ken could be read as describing a problem that we Daves would like to overcome. But if we take a cult as a reference concept and apply ideas from evolutionary theory, then we can see cults as equilibrium states whereas ‘culture’ considered more broadly may be though of as an on-going process that produces things that become more or less cult-like within a constant flux.

        The situation is rather like mainstream economics, which has been very cult-like, whereas some of us would prefer it to loosen up so that it has the potential to change.

        Economists are often envious of sciences, which Kuhn describes as typically progressing from cult to cult, with cults persisting until they become ridiculous. But I tend to agree with Keynes that something more fluid and less cult-like might allow us to develop without sudden ‘paradigm shifts’.

        Thus it seems to me that we shouldn’t be looking to replace the paradigms, laws or cultures with different ones, but with some healthier notion of what society and economics are all about, with less reliance on cults. In my opinion this might usefully draw on notions of epistemology that don’t depend on cults. (Hence my blog. But maybe that’s just my hang-up.)

        Does any of this make sense from a contemporary anthropological stand-point? It seems to me that differences of opinion often come down to differences of language: but not always. ;-)

        (https://culanth.org/articles/963-algorithms-and-automation-an-introduction seems relevant, suggesting to me that there is scope to inject some of Whitehead et al’s thinking into the analysis. But I am not a member of the culture at which it seems to be aimed. ;-)

      • October 6, 2018 at 11:08 am

        Dave novel approach. But not wrong in my view. But I would go at it somewhat differently. Culture has the same roots as cultivate. To till the land. To take care of the land. Culture refers to the same with respect to human communities. Culture is the thing that cares for these communities, and protects them, to the extent that is possible. Culture is indeed always changing to the meet the changing needs of the community. Not always successfully, of course. As culture is not fixed, so it is not always linear or singular in direction. Culture can and often does move forwards and back at the same time, while testing out several versions of solutions to similar problems. And cultures often encompass several of what Kuhn called paradigms. With paradigms developing and falling away as their proposals for problem solving fail or are replaced by solutions that work more broadly or with fewer negative side effects. When you say, “we shouldn’t be looking to replace the paradigms, laws or cultures with different ones, but with some healthier notion of what society and economics are all about,” you need some sort of existing or proposed culture to carry this out. Otherwise you merely wander from possibility to possibility with no means to choose among them. Some epistemologies might be useful here. Others not so much. For example, I’m not certain what we could learn today from Aristotelian epistemology that could in any way be useful. Other epistemologies, e.g., existentialist might be useful in some significant ways. But in all of this we should keep in mind that for all their depth no formal epistemology can replace the practical thinking and needs of humans “on the job,” so the speak building culture,

      • Craig
        October 4, 2018 at 10:34 pm

        Arguing for reform as opposed to paradigm change does not make any sense to me as a paradigm change is a permanent progression while reforms are easily gamed and hence negated or even reversed as we saw Keynesianism go to the neo-classical “synthesis”.

        With economics and money systems, as every individual is a culture unto themselves, better that we have a paradigm change that inverts the top down one size fits all character of cults/cultures into assured economic and monetary freedom where each individual can create their own ideal scene/utopia.

      • October 6, 2018 at 11:11 am

        Craig, paradigms are no more permanent that any other part of human culture. And there’s certainly no indication that paradigm change is progressive. That is, changing paradigms does not always improve human culture. All human cultures are created through continuing interactions between humans and between humans and nonhumans. Not reversible and not repeatable. Humans have at times attempted to direct the development of cultures, with only minor successes to the present. Cultures do not change quickly or abruptly, except in times of high societal stress or massive failures of cultural solutions. A review of history shows that cultures have significant variability over time. Also, everyone can as you say, “create their own ideal scene/utopia” only if culture provides the space for such work.

      • Craig
        October 7, 2018 at 12:43 am

        Nothing is permanent as in never changing, but a paradigm change is at least a couple of integrative orders of magnitude change than mere reforms, and it IS always a progressive change….or it wouldn’t be a paradigm change. When and wherever agriculture/homesteading replaced hunting and gathering nomadic existence adapted to it…and never went back as a lifestyle. Paradigm changes do very little destruction actually as remnants of the old paradigm it replaces remain it’s just that the new paradigm assumes primacy. That’s why debt will still be a part of the new paradigm its just that Gifting will become the new primary source for expanding the economy while debt will tend to “wither away”.

        It is true that the universe tends to cycle back and forth between opposite perspectives or emphases, but that is because there are truths in opposite perspectives and cultures are influenced by their dominant ideas. It is no surprise that urbanization/civilization and the Debt Only paradigm arose together, and with the new paradigm of Monetary Gifting that process may well tend to reverse in a kind of swing back toward Arcadia vs Faustian Civilization except urbanized areas will be much more economically and humanly free as well. As I said its a progressive/wider change with little actual destruction but a change in primacy.

      • October 7, 2018 at 8:05 am

        Craig, there’s nothing to indicate paradigms, which are merely one part of culture hold any special place within cultures on a routine basis. Some paradigms in some cultures have been quite important, however. If you call democracy in Germany via the Wiemar Republic a paradigm, its replacement by the Third Reich certainly is not a progressive paradigm change. As to hunting-gathering, some anthropologists believe it was as near to the perfect economic paradigm as is possible and urge a return to it. If they’re correct, all the economic changes since hunting-gathering are regressive.

        Many historians have claimed to identify patterns in history that repeat. The father of modern historical studies, A.J. Toynbee was one such historian. But the cycles are not fixed, and certainly vary between periods and peoples. Whether one accepts this notion really depends on how one defines cycle and repetition of cycles.

      • October 7, 2018 at 9:49 am

        Ken says “Dave novel approach. But not wrong in my view. But I would go at it somewhat differently. Culture has the same roots as cultivate. To till the land. To take care of the land.”

        Unfortunately, I’m not sure that this helps. To me farmers and even gardeners often aim for some definite outcome and often have definite ways of achieving it, involving reducing weeding out variety. They can be single-minded, and thus reflect the same kind of culture as mainstream economists. Of course, as with economists there are some farmers and gardeners that are exemplars, but – it seems to me – they are by no means in a majority.

        Ken goes on “Culture is the thing that cares for these communities, and protects them, to the extent that is possible.” This suggests to me an institutionalised culture whose idea of ‘protecting the community’ is to protect its culture. Sometimes this is to the detriment of the people within the community, in which case the institution and its culture can be a part of the problem. (As with communism and fascism.)

        Ken recognizes the need for some kind of broader culture (such as the British once seemed to have) that tends to steer the more specific component cultures away from doing harm. “Otherwise you merely wander from possibility to possibility with no means to choose among them.”

        What I take from Whitehead et al is that any such broad culture is necessarily of a different type to more definite cultures, with a different type of institution, a distinction which you seem not to make, Ken.

        For example, lets say that an economy has laws for choosing. It would surely be ‘pragmatic’ if these laws were ‘objective’, and mainstream economists seem to search for such laws. But maybe they can only be ‘multi-subjective’, and that the appearance of objectivity can only be saved by institutionalising some significant blinkers, which (in a system subject to co-evolution) is certain to lead to disaster (eventually). In this case we might want to reconsider what we take to be ‘pragmatic’ and what sort of institutions, culture and paradigms we should be looking for.

        My motive here, as a mathematician, is to shift the blame for a whole host of problems away from mathematicians and mathematical models to the cultures in which they are employed. When Ken says “Culture can and often does move forwards and back at the same time, while testing out several versions of solutions to similar problems.”, I’m hoping that we live in a broad culture that will test out some of Keynes’ ideas from his Treatise on Probability. (But fear that we have too narrow an idea of ‘testing out’.)

        Other solutions are also worth testing, and collaboration may be needed.

      • October 8, 2018 at 7:45 am

        Dave, Kuhn uses paradigm in two ways. In the first paradigm designates what the members of a certain scientific community have in common, that is to say, the whole of techniques, patents and values shared by the members of the community. In the second sense, the paradigm is a single element of a whole, say for instance Newton’s Principia, which, acting as a common model or an example… stands for the explicit rules and thus defines a coherent tradition of investigation. I limit paradigm as does Kuhn.

        As I said the role of culture is the survival of human communities. Not all these communities can survive of course. Their cultures fail in whole in part. Or outside pressures force the cultures to the breaking point. At this point the culture and community may be wiped away, or, as in the case on Ancient Rome merely translated and transferred to other locations.

        For people within a culture the culture is in most instances invisible. It simply is their way of life. This changes when the culture is challenged, either from the outside or inside. For instance, for the first time in over 150 years there is cultural conflict significant enough for Americans to speak about the possibility of civil war. A civil war is merely a cultural conflict concerning how a society’s shale appear and function in the future. Cultural conflicts about racism and civil rights (including the rights of female humans) are common in the history of the USA. Thus far, only one civil war has resulted. Socialist and communistic cultures are common in human history. Their record of caring for communities is good.

        Philosophers should study more anthropology and less philosophy. Economic “laws” are cultural creations. To the extent there is conflict over these laws, these are cultural conflicts. Most are settled without bloodshed. For example, by compromises overseen by major institutional actors such as clergy, educators, unions, etc. It can happen that the maintenance of culture is captured by one or more “special interests” in a society. In this case, conflicts are more likely to expand and/or be the subject of propaganda wars, or actual wars. For any period, culture is not a settled singularity the community it serves is in danger. Democratic cultures demand such trouble, however, with their belief that questioning and universal suffrage are worth the risk. This makes democratic cultures among the most fragile of cultures in human history. A fragility preyed upon by real and would be tyrants up to and including Donald Trump.

        Normally, since cultures are created by humans, they are pragmatic. They generally retain only what is useful to protect the community. After all, if the culture fails, the community fails. Which means, of course that some of the ideas, laws, etc. a culture finds useful may be offensive to other cultures. When this becomes a problem depends on how many and how important the differences are. Cultures also tend to experiment in some situations to retain their pragmatism.

      • October 7, 2018 at 9:56 am

        Craig focuses on ‘paradigm’ but this seems to me in need of similar explication and possibly expansion as the term ‘culture’. I don’t want just another paradigm in the sense of Kuhn, but something more like Ken’s vision of accepting multiple possible ‘solutions’ and piloting them. This implies a heterogenous form of globalisation, encouraging economic diversity, as against the homogenising form that lead to the first world war and other crises.

        How could we understand our own (western) cultures/economies without Chinese and Russians to talk to?

      • October 7, 2018 at 10:56 pm

        Dave M, see the quote of Bernanke in my following letter. When you want more than “just another paradigm”, are you not conflating Kuhn’s “model of scientific practice” (a practice which is already heterogenous) with engineering a solution to a particular problem? Craig’s “couple of integrative orders” makes sense in arabic number representations integrating fixed units at lower orders of significance, but Ken’s point that paradigm changes can be regressive is significant for claims that they may need to be.

        Kuhn is perhaps more helpful in the examples he give of paradigm change than in his verbal characterisation of a paradigm. (See his chapter II). The difference between Aristotelian and Newtonian dynamics was not the idea of force but the one requiring force to maintain speed, the other to accelerate and thus (as a special case) to maintain speed by countering deceleration. What is significant is that Kuhn’s book was first published in 1962, before Algol programming replaced Fortran (formula translation) and made multi-user, multi-programming computers possible by enabling automation of their operation. He has therefore not mentioned the paradigm shift which I say is necessary for understanding economics: that from Newtonian “market forces” to Shannon’s “information channelling”, with control of mental market forces by corrective information feedbacks as a special case.

        The multiple possible outcomes you seek appear when you consider people acting on the belief that money is “stuff” that one simply adds or subtracts; or that it is a flow which one controls by resistances and short-circuits like one uses in electrical theory; or that the “electromotive forces” in such circuits are not an external battery supplying money but the energy of or controlled by people who are components in the system; or that the money is not power but information which may or may not be correct; that distinct sets of information can be communicated down the same channel by time or frequency sharing. Each step in this elaboration leads to a different interpretation of the economy we live in; all are true so far as they go, but if on comparing them we conclude that money is not power, what will we want to do differently?

  8. October 7, 2018 at 8:32 am

    Dave Marsay wrote: “Thus it seems to me that we shouldn’t be looking to replace the paradigms, laws or cultures with different ones, but with some healthier notion of what society and economics are all about, with less reliance on cults. … [Ian Lowrie at] https://culanth.org/articles/963-algorithms-and-automation-an-introduction seems relevant, suggesting to me that there is scope to inject some of Whitehead et al’s thinking into the analysis”.

    Jamie Morgan [RWER 66, p.104, on “Information economics as mainstream economics and the limits of reform”] has Ben Bernanke making similar distinctions. “[I]t seems to me that current critiques of economics sometimes conflate three overlapping yet separate enterprises, which, for the purposes of my remarks today, I will call economic science, economic engineering, and economic management. Economic science concerns itself primarily with theoretical and empirical generalizations about the behavior of individuals, institutions, markets, and national economies. Most academic research falls in this category. Economic engineering is about the design and analysis of frameworks for achieving specific economic objectives… Economic management involves the operation of economic frameworks in real time… the recent financial crisis was more a failure of economic engineering and economic management than of what I have called economic science”.

    Lowrie, like most people, has lost the intended meaning of ‘algorithm’ by studying how other historically ignorant people have used or defined the word. The scientists I worked with called their path-breaking programming language ‘Algol’ to promote the systematic structuring of programs as loops, reusing the same sets of procedures and symbols to generate new wholes. Hence the etymology [not epistemology] at https://www.etymonline.com/word/algorithm:

    “1690s, “Arabic system of computation,” from French algorithme, refashioned (under mistaken connection with Greek arithmos “number”) from Old French algorisme “the Arabic numeral system” (13c.), from Medieval Latin algorismus, a mangled transliteration of Arabic al-Khwarizmi “native of Khwarazm” (modern Khiva in Uzbekistan), surname of the mathematician whose works introduced sophisticated mathematics to the West (see algebra). The earlier form in Middle English was algorism (early 13c.), from Old French. Meaning broadened [by those who didn’t take the trouble to find out to what it referred] to any method of computation; from mid-20c. especially with reference to computing”. [Compare the scientists’ Algol60/68 with Cobol60 – the Common Business-Oriented Language – in which sums were written in words]!

    The misunderstanding of ‘algorithm’ has been realised in today’s ‘information economics’. Morgan (op. cit p.99) had said: “So, a major claim of the [Stiglitz] Report is that an underlying knowledge framework was a key constituent in the systemic causation of the crisis because it significantly structured what best practice would be and gave an impetus for the realisation of that ‘best practice’. … The nature of that best practice was an important reason why the crisis manifested first in the core and first in the finance system. The way best practice has been rooted in a knowledge framework is identified, furthermore, as a key avenue for reform. Reform must be a combination of changes to the knowledge framework and corollary changes to best practice (encompassing institutions). It is this relation that is then pursued in various ways across the individual substantive chapters of the Report: stating vulnerabilities created by theory-practice, articulating reforms responding to the recognizable problems of theory-practice, and clarifying how those problems are also causes of the crisis and current limits on solutions to the crisis. … The Report places a central importance on the role of the knowledge framework as an active part of the constitution of the real financial and economic system: it provides the basis for financial instruments, practices and policies, and it provides the justification for regulatory forms and for the use of any existing powers by regulators”.

    Bernanke [above] talks of an engineering framework, Morgan of a knowledge one. To get from the latter to the former, Bernanke’s loose characterisation of science as ‘theoretical’ or ’empirical’ must be clarified by distinguishing the derivation of theories from fundamental axioms from the derivation of mathematical ‘laws’ from synthesis of observations. I’m in the position of having derived an algorithmic theory of economics which starts by explaining the formation of units and goes on finding the same logical dynamics apply as subatomic particles turn into the hundreds of chemicals, millions of life forms and the unimaginable diversity of ’empirical’ knowledge bases among the human life-form which has them. What remains knowable is the life-form itself; its being a life-form, its lifetime and the extent to which individuals use its different capabilities. This is the ‘fundamental’ knowledge base which gets lost when ’empirical’ scientists count individuals as if they were pounds, dollars or euros,

  9. October 9, 2018 at 7:06 pm

    Dave T has indirectly referenced the Stiglitz report. The foreword notes: “It is a habit of contemporary speech to refer to the global economy that we have today as “the economy” and, more insidiously, to present it as a natural phenomenon whose putative laws must be regarded with the same deference as the laws of physics. But, as the enclosed report argues cogently, our global economy is but one of many possible economies, and, unlike the laws of physics, we have a political choice to determine when, where, and to what degree the so-called laws of economic behavior should be allowed to hold sway.”

    It seems to me mathematics, mathematical models and statistics have mostly been used as tools to further agendas within economies ‘as they seem to be’, not to explore alternatives. A lot opportunity, perhaps?

    • October 9, 2018 at 11:03 pm

      Dave, I don’t think it is a lost opportunity in economics so much as a misunderstanding of what mathematics is and therefore what mathematical models are. I recall an advocate of list processing arguing that Algol68 procedures were not mathematics because they could overwrite one result with another and thereby create a missing link in the statement of their proof, his inference being that mathematics is about proof, not truth. Of course, in continuous time there are missing links between observations, so perhaps the Algol approach is the more realistic! The truth, of course, is spelled out in the etymology of the name: ‘math technic’ or ‘techniques of learning’. The techniques themselves have to be learned, and the systematic enumeration in the arabic system and structuring of procedures in Algol68 is much more easily learned than the plethora of physical units of measurement and the “birds nest” interlacing of processes which preceded them (and in commercial programming still does, hence Microsoft’s never-ending updates).

      My algorithmic model of the universe, which eventually narrows down to ecology, economics and parasitic chrematism, doesn’t shut off political choices but clarifies the options by reducing them them to those which are absolutely distinguishable and systematically related in terms of orthogonal cordinates and Newtonian dynamics, hence PID control (with too much D leading to chaos). The political choices in the analogy of travel are not about which car to buy but at the level of advocating pedal power, steam, internal combustion or turbines, this opening up quite different options like electrical power – leaving open, of course, developments, design variations and combinations of these different fundamental options.

      • October 10, 2018 at 9:35 am

        Apologies for the sketchiness of the above. In economic terms it is addressing the need to find a simple mathematical way of understanding the difference between Smith, Keynes and Monetarism, so we can choose between them. I’m seeing the economy not as a mechanism but as a cybernetic PID control system iwhere Smith is assuming continuous P control by pricing, Keynes is adding Integral control of unemployment and the monetarists seeking Different investments when monetary profits stall, too much of this (mistaking positive Differential feedback for Integral negative feedback) differenting the differentials to wipe out all variation. Just as the Arab numbering system doesn’t reduce all numbers to one, so the PID system can apply to the steering of many boats and cars or controlling lots of businesses via the internet.

        Addressing the mathematics, I’m coming at it from Bell’s angle of “The Development of Mathematics”, thinking particularly of the Pythagorean geometers starting it by discovering how to construct circles and right angles, the controversies about Newton’s using infinetisimals to construct continuous ‘laws’ from separate observations, and Brouwer’s twentieth-century mathematical philosophy of constructivism.

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