Home > Uncategorized > The necessity to change the rules of the current economic system is quite obvious.

The necessity to change the rules of the current economic system is quite obvious.

from Ikonoclast

Conventional economics is a prescriptive discipline pretending to be a descriptive discipline. I find it useful, at a first principles level of thinking, to distinguish between “rules” and “laws”.

(1) A “rule” is a prescribed guide for conduct or action by any agent (human or machine).

(2) A “law” is a fundamental law of (physical) nature described by the hard sciences after extensive observation, experiment, deduction and mathematical analysis.

A “rule” is made in a given way by culture, custom, convention, regulation or legal prescription and could be made in other ways. A fundamental law of nature is unchangeable by humans.

A “rule” may be possible or impossible to obey or execute depending on its relation to natural laws. Rules may also be executable for a period of time until natural limits are reached. Executable rules tend to work better if they are consistently obeyed by agents, although this tendency can reverse when consistent obedience leads to trends which run up against natural law limits.

Our entire political economy, at the formal level, is a rules-based system. Its rules are used to construct a combined culture and economy. Its rules, as a system affecting other systems, can be judged by two sets of standards. The first set of standards is that of moral philosophy. The second set of standards are those of hard science. Where the outcomes of economics rules are bad, by widely held moral philosophy standards and/or by scientifically measurable standards then the economics rules need to be modified. [1]

From a pragmatic stance, the necessity to change the rules of the current economic system is quite obvious. It is leading to ever rising inequality (a clear violation of most religious and humanist ethics right across moral philosophy) and it is leading to environmental destruction, the 6th mass extinction and very likely human extinction.

Consistent adherence to the current rule set of capitalism (and the emergent behaviors this adherence leads to) does not lead to a morally or environmentally supportable civilization. This is becoming clear from Piketty’s r > g tendency “law” concerning rise in inequality as growth slows and also from the limits to growth themselves which are playing an increasing role in slowing global growth. Rather than consider certain founding rules of this capitalist system “sacrosanct”, for example open-ended accumulation of private property by a few (it’s always a few), the founding rules themselves need to be changed. This is the only logical conclusion. The founding rules are now inconsistent morally and environmentally with a sustainable civilization.

We have crossed a threshold are now in a different state space. Capitalism only considers formal “dimensions” (really parameters) and notional quantities. We are now at the point where real dimensions, real forcea and real quantities impose a new state space on what the economy can do and be. Persisting with old rules will not work. Rules cannot change fundamental natural laws. New rules consistent with natural laws must be developed.

Note 1: Conventional economics makes the attempt to be entirely self-referential. That is to say, economic rationality (capitalisation and money calculations) is essentially specified as the ONLY valid rationality. Economics seeks to cut itself off from both consequentialist moral philosophy and from hard science and real systems; especially in the latter case from the needs of all real humans, as real physical and conscious systems, and from the operations of the biosphere as a compound complex real system, physically and biologically.

https://rwer.wordpress.com/2019/07/14/why-economic-models-do-not-give-us-explanations/#comments

  1. Robert Locke
    July 19, 2019 at 11:18 am

    I agree, except I would say that economics is a formal, nomothetic “science” that claims to be a prescriptive one, and is not. The problem is the hodgepodge references to the avenues down which economics should travel to make itself relevant, a prescriptive science. One avenue that is neglected is the shop floor, which i discuss in my article, economics and the shop floor, current issue, 88 of rwer. Economists failure to explore this avenue leads to the disciplines irrelevancy in Anglo-saxonia.

  2. Herb Shelton
    July 19, 2019 at 12:32 pm

    In simpler, non collegiate terms, free untethered market, boosted by state welfare (tax free) leads to chaos. The mindset today is that the free market regulates itself, as if it has an inherent mind, governed by the false concept of supply and demand. In other words, you can’t drive a car without brakes! Even a car MUST have an operator. Likewise, the ‘free’ market must be governed!

  3. Craig
    July 19, 2019 at 8:07 pm

    Economics of course, like every other area of human endeavor, needs rules/ethics. The laws of economics, like for instance the paradox of thrift, are not laws at all but only conundrums enforced on the economic system by the current paradigm of the monetary system, namely Debt Only, and would be resolved by integrating the new and primary monetary paradigm of Abundantly Direct and Reciprocal Monetary Gifting.

    It is logical that MONEY is the most potent and significant aspect of a MONETARY economy, so why not look at it using every one of the tools available in order to perceive how to make the money system serve us…instead of floundering around and allowing it to be a huge 5000 year old parasite and quasi psychosis, and so remain the main obstacle to economic free flowingness as it is today?

    The debates about money get as ideologically rigid as the debates over economics. The two main considerations we need to have in examining money are 1) it has many aspects and definitions, but it is most basically accounting and 2) its current paradigm for the form and vehicle of its distribution is monopolistic/exclusionary and has been used to dominate the economy and the populace for the entire history of human civilization….so we most urgently require a new monetary paradigm.

    Paradigms being continuing patterns are virtually hypnotic and so are virtually mentally accepted whole. They are like breathing, an essential activity we are normally unconscious of. Routinely being able to perceive them requires the integrative mental focus and discipline utilized in consciousness raising processes that exist in all of the world’s major wisdom traditions.

    Two of the economists I have learned the most from about economics, Michael Hudson and Steve Keen, are contributors here and emphasize and share the above accounting and parasitical natures of the money system. They’re brilliant but, sorry to say, they’ve not acculturated the means of deciphering paradigms old and new. Hudson’s books about parasitical finance and his recent book about debt are excellent, but he misses the simple (but not simplistic) accounting operation that if intelligently applied as monetary policy would effect paradigm change. Keen looked straight at the new paradigm in recognizing that neo-liberal economics ignored money, debt and banks and yet did not perceive the concept that defines it. He even uses Godley accounting tables to enlighten the monetary effects of debt deflation and so how the flow of excess costs that technologically advanced capital intensive economies are inherently and increasingly afflicted with…must be addressed. But he missed/did not perceive the new monetary paradigm concept and how to integrate it into the economy in ways that would resolve its problems and benefit all agents individual and commercial.

    The superlative mental discipline of wisdom/the integrative state of mind which includes math and science is required to fully perceive paradigms old and new is necessary….the better to perceive the pungently simple and resolving along with the delicious but much less enlightening complexities of only the problem.

  4. Rob
    July 20, 2019 at 1:44 am

    I am now reading Peter Soderbaun’s Economics, Ideological Orientation and Democracy for Sustainable Development. It looks very relevant so far. Have you read it Ikonoclast? Slowly but surely I am working my way through WEA library. Good stuff indeed.

  5. Ken Zimmerman
    July 24, 2019 at 11:39 am

    Inequality comes in many flavors. These include gender, class, caste, race, ethnicity, national origin, and of course economic. These often interact. What’s involved in each of these?
    1. Gender – the social construction of male and female, based on physical features, but more importantly, cultural distinctions.
    a. Through all written human history males are the dominant gender. For the past 500 years, white males dominate other members of their gender.
    b. One reason cited by anthropologists for the dominance of the male human gender is “females are closer to nature since they give birth and nurse their young.”
    2. Class – How groups are ranked within a hierarchically stratified society regarding wealth, occupation, or other economic criteria. The higher the class in the ranking the more its members have access to wealth, often without limit.
    3. Caste – Ranked groups within a hierarchically stratified where group membership is closed. Movement from one caste to another is prohibited, through both custom and law.
    4. Race – Developed in the context of European exploration and conquest beginning about 1500. By the end of the 19th century, light-skinned Europeans established colonial rule over large parts of the world where lived dark-skinned peoples. Thereby creating a global racial order. Europeans justified their dominance and enslavement of dark-skinned peoples phenotypically. That is, by the observable physical or biochemical characteristics of an organism, as determined by both genetic makeup and environmental influences. Race is then a cultural construct.
    5. Ethnicity – Groups whose members distinguish themselves by distinctive cultural features. Such as language, religion, clothing, etc. Ethnicity is a cultural construct created over time. Today, many ethnic groups are also united politically.
    6. Nation or Nation-State – A group of people believed to share the same history, culture, languages, and generally the same physical arrangements of their lives. A nation-state is a political unit where national identity and political territory coincide.
    7. Anthropologists find these forms of inequality are related to many other parts of society. For example, disease, legal justice, educational access and achievement, marriage and sex, voting preferences and access, violence, outlook for the future and the past.

    All these forms of inequality have existed among humans for at least 5,000 years. And most are worse, sometimes substantially so in past periods than they are today. Democracy has improved each of them. In terms of economic inequality, it has steadily improved in the west since the American and French revolutions. The emergence of industrial capitalism in the 19th century in the UK, then the US, and then Europe represents the last spike in economic inequality in the west before the spike of the 21st century.

    But is this the natural situation for humans? Innumerable books, comics, and even scholarly works portray hierarchy, deference, greed and brutality as ‘natural’ features of human behavior. Indeed, there are some who would see these as a feature throughout the animal kingdom, a ‘sociobiological’ imperative imposed by the alleged ‘laws’ of genetics. These caricatures of human actions are simply not borne out by what we now know about the lives our ancestors lived in the innumerable generations before recorded history. A cumulation of scientific evidence shows that their societies were not characterized by competition, inequality and oppression. These things are, rather, the result of culture, and historically rather recent. The evidence comes from archaeological findings about patterns of human actions world-wide until only about 5,000 years ago, and from anthropological studies of societies in different parts of the world which remained organized along similar lines until the 19th and earlier part of the 20th centuries. Anthropologist Richard Lee summarizes the findings:

    Before the rise of the state and the entrenchment of social inequality, people lived for millennia in small-scale kin-based social groups, in which the core institutions of economic life included collective or common ownership of land and resources, generalized reciprocity in the distribution of food, and relatively egalitarian political relations.

    If Lee is correct, why the changes? Many anthropologists say they began with humans’ invention of agriculture. It led to food surpluses, larger populations, the development of clans, and the spread of humans over larger areas of land. This led to competition among the clans (later classes) for the wealth of agricultural production along with land and domesticated animal ownership. This produced distrust and sometimes war. Clans also began to fight for superiority in terms of social standing and prestige, and later political power. The winners became monarchs and aristocrats. The winning clans, fearful of retribution and rebellion pushed the losing clans into inferior positions politically and began to treat them as having low rank. In some instances, forced them into the position of an inferior species. Cultural inertia being what it is, changing these patterns over the next 5,000 years was impossible. 18th century revolutions began the pattern break in the west, and eventually in the rest of the world as well. Inequality among humans is much more than just capitalism. To fix it, if we can fix it, requires more than just the end of capitalism. Although ending capitalism would be a good place to begin.

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