Why policy design without theory is useless
from Lars Syll
Taking into account the methodologies that support some policy practices that favour inductive reasoning and randomized control trials of impact evaluation (RCTs), there is a controversy around the utilization of these attempts to build experimental programmes or policy intervention …
As the decision-making policy process in the real world relies on institutional factors that may be different elsewhere, the methodology based on RCTs does not provide a credible basis for policy making. In short, the outcomes of inductive investigation can never be completely transported across time and space …
In fact, the methodology of RCTs runs the risk of considering worthless casual relationships as relevant causalities in the attempt to develop policy recommendations. In short, the use of the outcomes of RCTs as normative orientations for policy making should be put in question.
“What works” in the “sterile” environment of a laboratory does not necessarily work in a real-world where social interactions and the dynamics of institutions are overwhelmed by power relations. Therefore, ethical considerations should be considered in any attemp to build policy proposals.
Indeed, the transformation of the economic policy approach has evidently been a remarkable one. It is worth recalling the words of Lars Syll about the current sad state of economics as a science,
“A science that doesn’t self-reflect and asks important methodological and science-theoretical questions about the own activity, is a science in dire straits. The main reason why mainstream economics has increasingly become more and more useless as a public policy instrument is to be found in its perverted view on the value of methodology.”
Evidence-based theories and policies are highly valued nowadays. Randomization is supposed to control for bias from unknown confounders. The received opinion is that evidence-based on randomized experiments, therefore, is the best.
More and more economists have also lately come to advocate randomization as the principal method for ensuring being able to make valid causal inferences.
I would however rather argue that randomization, just as econometrics, promises more than it can deliver, basically because it requires assumptions that in practice are not possible to maintain.
Especially when it comes to questions of causality, randomization is nowadays considered some kind of ‘gold standard.’ Everything has to be evidence-based, and the evidence has to come from randomized experiments.
But just as econometrics, randomization is basically a deductive method. Given the assumptions (such as manipulability, transitivity, separability, additivity, linearity, etc.) these methods deliver deductive inferences. The problem, of course, is that we will never completely know when the assumptions are right. And although randomization may contribute to controlling for confounding, it does not guarantee it, since genuine randomness presupposes infinite experimentation and we know all real experimentation is finite. And even if randomization may help to establish average causal effects, it says nothing of individual effects unless homogeneity is added to the list of assumptions. Real target systems are seldom epistemically isomorphic to our axiomatic-deductive models/systems, and even if they were, we still have to argue for the external validity of the conclusions reached from within these epistemically convenient models/systems. Causal evidence generated by randomization procedures may be valid in ‘closed’ models, but what we usually are interested in, is causal evidence in the real target system we happen to live in.
When does a conclusion established in population X hold for target population Y? Only under very restrictive conditions!
Ideally controlled experiments (still the benchmark even for natural and quasi experiments) tell us with certainty what causes what effects – but only given the right ‘closures.’ Making appropriate extrapolations from (ideal, accidental, natural or quasi) experiments to different settings, populations or target systems, is not easy. ‘It works there’ is no evidence for ‘it will work here.’ Causes deduced in an experimental setting still have to show that they come with an export-warrant to the target population/system. The causal background assumptions made have to be justified, and without licenses to export, the value of ‘rigorous’ and ‘precise’ methods is despairingly small.
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Gerson Lima / Maria Alejandra Madi
Edward Fullbrook and Jamie Morgan
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Real-World Economics Review Blog 
Maria Alejandra Madi has written a splendid timely paper. Indeed, policy design without theory is useless. What is important in this paper is “theory”. It is not the theories by which to prove or disprove the effects of a policy. The theory may include them, but more important thing is the theories or theory framework by which we understand how the economy and society work (it may comprize behaviors of people but not restricted to those). Without this understanding, policies are mere invention of imaginary thinking at best, and ideological construction at worst.
Lars, you have been criticizing mainstream neoclassical economics. You have amply talked about methodological deficiencies of econometrics and unrealistic ontology of micro and macro economics. Those are rightly pointed. But, now, what is your theory upon which we must create, design, examine and check our policies (no criticisms of mainstream economists’ policies)?
I have been asking your idea or prospect on this point. You have been avoiding answering me with the pretext that your methodology and philosophy of economics have no duty to give any positive indications for re-building economics and they even teach you to refrain doing so. If it is necessary from your methodology to continue doing these negative reactions and reflections to all what is happening in economics, it proves that your methodology is useless or toxic. It has already produced many bad side effects. One of worst and gravest side effects is that you are expelling young hopeful students from serious study of economics in view of its reconstruction.
Agreed, Yoshinori, particularly on Maria’s paper, the bad effects of Lars not joining in the discussion constructively and challenging him to state his own theory of how to do so. My own reaction concerns the necessity not of theory but of policy.
Articulating and agreeing a strategy to achieve a common business objective is one thing, but for half-baked politicians to impose one-size-fits-all laws on both urban and rural populations too large and diverse for their objectives and circumstances to be known is quite another.
Following up Yoshinori’s reference to Kornai below, it seems I need to make clear that my “business objective” is singular and practical, not “governing” a corporation. With finance and big business having taken over government and Vahabi repeatedly citing Hayek, it is important to remember (contra Hayek) that Belloc’s “The Servile State” was a condemnation of Capitalism as well as the Socialist reaction to it. Indeed, Maas told us recently that in the UK the Fabian [Market] Socialists (the Labour Party) followed Jevons and Ricardo rather than Marx. .
The title of this blog is relevant in the extreme. The quantity calculus constrains the nature of the mathematical expressions which are possible quantitative descriptions having theoretical validity. No conventional nor heterodox analysis meets this requirement. I would expect Lars Syll to deal with the incontrovertible fact. It is pointless to continue to present further objections to hypotheses which are already proven wrong by the quantity calculus. His analysis needs to move on to what has the possibility of being valid analysis for any progress to be made.
Agreed, Frank; but the theory of mathematics depends on logic, so it is the quantification of logical relationships (none, one, some or all) and the Boolean/complex number ways of expressing them which need first to be taken into account. See Fullbrook’s Market-value pp.70-71, relating monetary to real value.
now, what is your theory upon which we must create, design, examine and check our policies
My “theory” , as outlined in issue 74, “history as a source of economic policy,” is that economic policy making can learn more about policy from history and its study methods, than from economic theory. I always have.
Surely with the lack of any valid conventional or heterodox quantitative analysis available, all one can do is examine the empirical evidence. That could be described as history.
Robert must be addressing both Lars Syll and me.
As for Lars, let us expect that he will answer Robert’s question in some of his future blog articles. The following is my answer.
History teaches us many things and even great things. Theory is in a sense distillation of history. To evade that history becomes “an exercise in antiquarianism”, as you know well, you need a theory.
However, theories are not always a good distillation of history. An example is neoclassical economics. It was also distilled and abstracted from what the founding fathers like Jevons, Marshall, Walras and Menger observed by themselves and learned from various documents including journals and papers and statistical reports. Unfortunately, their way of abstraction was completely misled in a wrong way. Lars and other heterodox economists have a tendency to accuse mathematization of economics after World War II, the basic rail of neoclassical economics was already paved in the time of those founding fathers’ time (c.1860-1890).
But we cannot start from nothing or tabla rasa. What we need is therefore a modern version of classical political economy. It is not yet readily made. We need enormous theoretical works to create such a new theory. But we have advantages than political economists like Adam Smith and David Ricardo. First we are on the shoulder of those people (Classical political economy). Second, we know much more about different features of market economy and different stages of modern capitalism. Third, we have the failed experience of centralized economy.
However, even if we get innumerable data from history, we cannot understand what really happened and is now really happening. In the we have to learn from excellent scholars. Outstanding person in this field is Kornai Jànos. See for a short account of his struggle to understand the problems of centralized economy, see
Mehrdad Vahabi’s recent paper “Socialism and Kornai’s revolutionary perspective” which appeared in Public Choice in September 2019.
If Robert read Chapter 3 of our new book Microfoundations of Evolutionary Economics,
you will understand how we have learned from Kornai and through him from the experience of controlled economy.
Our book is a pure theory book, but it is a result of deep human experience. I believe that our theory is more proof against abuse of state intervention, because we know the limits or difficulties of controlling economies. This is an important check function of economic theory for policy design.
“Lars and other heterodox economists have a tendency to accuse mathematization of economics after World War II, the basic rail of neoclassical economics was already paved in the time of those founding fathers’ time (c.1860-1890).”
Agree: see Harro Maas: “Mechanical Reasoning: William Stanley Jevons and the Making of Modern Economics”. The tendency Yoshinori is complaining about seems to have come from Philip Mirowski’s “Machine Dreams”.
“But we cannot start from nothing or tabla rasa. What we need is therefore a modern version of classical political economy.”
With this I disagree. Logical representation of evolution starts from nothing, and the addition of three axioms: something, how to symbolise it, and how to change it (the law of least action). If the something is energy, matter can be derived from it, but not vice versa. Two lines of science have evolved, to represent both the something and the representations, i.e. physical and information science. Mathematics (as an information science) has learned how to distinguish variables from values, and how to physically control them.
A concept is a representation of a variable, like a circle large enough to contain all points within it. As physical science tells us the universe is expanding, so initially a small circle represented just energy, but now the circle representing all is represented by concentric circles containing less and less but more specialised objects within it (c.f. an arabic number format like 1,234 with thousands includding the lesser units). From the layer representing the evolution of a mankind able to represent objects, hence communicate and think, a new type of possibility has arisen: to communicate misrepresentations so as to mislead others in competitive situations (gaming).
We need, therefore, to go behind the relatively small circle of classical and earlier forms of political economics to the more inclusive circle of life and the function of thought within it, and from that to represent what we do and the institutions which guide us that enable us to live and evolve, and likewise the subset of institutions generating falsehoods which impede us, arguably those concerning money, authority and control.
Policy design without this type of macro theory is useless. With it we are led to look at what money really is (not valuable gold but a promise of credit); at how authority is really acquired (i.e. bottom up); and why the theory of automatic mechanical equilibrium is mistaken (so control by imposition of austerity is unnecessary).
Since PID control theory based on corrective information feedbacks demonstrably shows us what is really necessary to maintain equilibria in changing conditions, I say again, economics needs to be re-conceived as an information rather than a mechanical control system.
Arguably, money has been reduced to a credit limit, and this needs to become as taken for granted as the earth going round the sun. The implications of responsible use of interest free credit cards, advisory credit limits and pricing based on Fullbrook’s version of the world’s value, suffice to eliminate the need not only for bank debt and power over it but all sorts of economic complications that has generated, like the need for taxation, insurance, shares, wages and pensions for self-maintenance, paying for monitoring, R & D, investment, infrastructure maintenance, education, house work, health care and other services. Provision of these (including self-care) can justifiably write off credit spent within its advisory budget.
I mostly agree with Lars’ posting. But the question that must be answered is, whose theories?
I’ve said this before, but it’s worth repeating. As social scientists, the way we study ourselves and the things we make along with the other actors that make them with us must change. It is no longer enough to take actors as merely informants offering cases of some well-known types. You must grant them back the ability to make up their own theories of what the social is made of. In our case, what the economic is made of. No longer is it your task as a social scientist to impose some order, to limit the range of acceptable entities, to teach actors what they are, or to add some reflexivity to their blind practice. Rather, you must follow the actors themselves. Try to grasp their often subtle, often wild innovations in order to learn from them what in their hands the collective existence has become, which methods and tools they have expanded and re-formed to make it fit together, which accounts could best define the new associations they have been forced to establish.
Just as natural scientists do their work by “following nature” wherever it leads, so the social scientist must follow the actors who create culture and society wherever they lead. And unlike physical scientists, who have no need to consider the reactions of the universe to their studies of it, the social scientist must be reflexive. They must consider how their work effects the actors and actors’ creation of society and culture. Physical and social sciences are empirical, but in different ways. A spectrometer is useful in some physical sciences but can reveal little about the creation of societies and cultures. Such approaches as participant observation, network studies, textual examination, and artifact studies can reveal details about peoples’ creation of culture and society but are of little use for physical sciences. Establishing the “facts” is difficult in any sort of science. As all sciences are culturally entangled, anchored in a certain culture. Thus, there are always multiple facts about the same observations made by laypersons and scientists. In all instances the judgments of those involved are necessary to choose among these facts.
The job of the scientist is to follow the actor. For physical scientists, the actors are stars, planets, flora, fauna, earthquakes, volcanoes, pollution, energy, etc. For social scientists, the actors are humans and the cultures and societies they create. The two objects of study are in one sense the same, since both are culturally bounded. But they are also different since humans created both, but only one studies its creators. For social scientists the only actions and beliefs that matter are those of the humans they study. Likewise, only the explanations and theories invented by their objects of study to explicate their creations matter to the social scientist. In simple terms the social scientist is the follower, seeking to grasp, reveal, and describe what their objects of study have created. And those objects of study are the leader. A simple game of “follow the leader.” But social scientists, with economists one of the worst offenders too often insist on substituting their own words, theories, and facts for those of the people they study. It should not be the goal of social scientists to investigate, reveal, and describe fellow social scientists. But rather the creative work people perform to make economies, societies, government, etc. and to explain their creations.
Ken Zimmerman is trapped by the anthropology he has learned.
Anthropology started from observations of “primitive communities”. They are all small societies in which all members can know practically all other members of the community. What Ken is preaching in the above post is the importance of participative observation and learning. It is OK as long as it is applied in a small community. But what Ken does not understand is that modern economy is no more small economy inside of a small community. It is a large system of network that expands globally.
It is a pure fantasy to imagine that we can analyze and understand national and global economy by participative observation and learning. Economics needs some different methods of analyses than those anthropology has found.
Yoshinori, anthropology began with alchemists and the proto biologists. It was the effort first to identify and describe all human bodily structures and their relationships. Particularly their relations to the actions of humans. It was doing this work even before Darwin invented evolution.
As we write today virtually every aspect of the world economic network has been and/or is being researched through participant observation. From financial and commodity exchanges to real estate and home and business construction, from insurance and banking to large scale manufacturing. As anthropologists say, humans are made to fit in a group, sometimes several of them. The groups could be banks, private equity funds, Ford Motor Company, American Airlines, Macy’s, Microsoft, and so forth. Each of these participate in economic transactions. And through their participation help create the US and world economies, and to define what an economy is. Are there other approaches for these studies? Of course there are. But we’re considering participant observation right now. So, it seems the world and national economies can be investigated and revealed through participant observation. It’s done every day.
Which Adam Smith, that of the Theory of Moral Sentiment, or the Wealth of Nations. Your theory depends on your choice.
All those pesky judgments humans must make regularly just destroy the truth and rigor of science. Or, if we’re smart enough and mature enough we can build our sciences around those judgments. That’s seems realistic to me, considering what we know of the history of our Species.
Ken,
I would have said cultural anthropology. I am not talking about natural anthropology.
Can you not differentiate participants and a system composed of participants as elements? Small communities (even if they are as big as Microsoft, Google and others) and economy. If economy can be controlled like a company, how can you explain why socialist economy failed? There is essential difference between small community and large system. It is completely wrong to apply small community knowledge and insight to large system.
To make the question simple, economics is concerned with system and its working, while many human sciences like psychology, cultural studies and “social construction of reality” theory is concerned humans and their conceptual world. I know they have their own values, but Ken is contending that anthropology is the unique point of view through which we should understand economy. You are wrong on it.
To tell the simplest example, people have various feeling and sentiments about money. They may concern economics but not the core of it. There are even many self claiming “economists” who think that money fetishism is the essence of economics. You are free to criticize them. It the field of anthropology. But, people (at least majority of people) do not know how much money there is in a country but this quantity may change the state of the economy (N.B. I do not take this theory).There are many other things and relations that exceed individual persons’ perception and “world”. Economics must study these relations as well as how people think, judge and act.
You should admit that economics has to treat dimensions which are beyond human sentiment, feeling and common people’s understanding or world-view. As you are looking economy always through the looking glasses of anthropology, you cannot understand that economics has some dimensions that are not covered by anthropological world view.
Yoshinori,
Networks are made the same way. Each individual human is a network, created through that person’s history of relations and interactions. Likewise, a bank is a network. As is a corporation, a governmental agency, a stock exchange, etc. In fact, the entire economy is a network. Linked from relationship to relationship over time. Like building a railroad that stretches across the nation several times over.
The control in networks is an empirical question. Its form and structure can only be revealed by study, such as participant observation. As to why socialist economies failed. Many did for reasons ranging from internal sabotage to external pressure from neoliberal corporations. And socialism is not a single entity. It is a range of economic arrangements. From the very successful economies of the Nordics to the sort of successful economies of the UK, France, etc. The USSR version of socialism failed because the USSR turned into an oppressive bureaucratic state.
“It is completely wrong to apply small community knowledge and insight to large system” is the strangest statement I’ve ever read. You’d have to believe that “small” and “large” systems are different ontologically to accept the statement. Whether a network is small or large is a result, not the cause of the processes that created the network. And these processes are interactions involving not just humans but also nonhumans such as machines, buildings, geography, etc. A network may consist of only two relationships or more than a million. That too is an empirical question. So, I’m definitely NOT contending that anthropology – as a social science – is the “unique point of view through which we should understand economy.” What I am contending is that the economy is a human creation to which humans attach meanings. My job is to reveal and describe those processes of creation and the meanings attached. You, on the other hand want to assume there are some sort of dividing lines rather than looking to the people who created the networks for the dividing lines they’ve created.
Money is a network. The result of historical interactions, relationships. One of those interactions is between humans who “count” money. From counting the uses for money to counting how many “dollars” exist at any time in a certain geographic region. And the result of that count often depends on the assumptions of those doing the counting. From what is and is not a dollar to how money is created.
“To make the question simple, economics is concerned with system and its working, while many human sciences like psychology, cultural studies and ‘social construction of reality’ theory is concerned humans and their conceptual world” is another strange statement. Money, corporations, banks, etc. exist as human conceptual creations and when performed as events in groups of interactions named money, corporations, banks, an economy, etc.
If, as you contend, “economics has to treat dimensions which are beyond human sentiment, feeling and common people’s understanding or world-view,” then those “dimensions” cannot exist for humans. So, no banks, no corporations, no economy. There simply is no other source for them. That’s not to say that each person in a network is aware or understands every interaction which helped create that network. But, in their totality the interactions are the network. The job of the social scientist is to reveal and describe as many of the interactions as possible. This is an empirical job and a finite one. After all, even social scientists must limit their scope of work and eventually even they must die.
Ken, see what I wrote in my long comment above about the representation of concepts and instances of them.
Dave, three concerns.
First, your “macro theory” seems to have no relationship to the pronouncements you make about the economic life of people. For example, that money is a promise of credit; that authority is acquired bottom up; and the contention that the theory of automatic mechanical equilibrium is mistaken (so control by imposition of austerity is unnecessary). I know many social scientists who would agree with at least some of these, but never asserted a macro theory was necessary to do so.
Second, your final paragraph is not clear to me. What is it you are advocating and why?
Finally, and most concerning, where are the people? People create the cultures that guide and protect their lives and economic well being. Your comments it seems to me go out of their way to “forget” both the people and the cultures they create. You are part of that culture and as such have a part in creating it. But what about all the others who also are members and play a part in creating it? You seem intent on leaving them out of the story of creating that part of culture called the economy and economics. Am I wrong?
Ken Zimmerman >> “It is completely wrong to apply small community knowledge and insight to large system” is the strangest statement I’ve ever read.
This only shows that Ken has only very narrow knowledge about sciences and systems theory. The following is a citation from Friedrich Hayek’s chapter. Emergence is one of most famous topic in systems study. This is not a new concept. As you see it, Hayek’s paper was originally published in 1967, more than half century ago.
The “emergence” of “new” patterns as a result of the increase in the number of elements between which simple relations exist means that this large structure as a whole will possess simple relations exist means that this larger structure as a whole will possess certain general or abstract features which will recur independently of particular values of the individual data, so long as the general structure (as described, e.g., by an algebraic equation) is preserved.10 Such “wholes,” defined in terms pf certain general properties of their structure, will constitute distinctive objects of explanations for a theory, even though such a theory may be merely a particular way of fitting together statements about the relations between the individual elements. (The Theory of Complex Phenomena, originally published in Hayek (1967) Studies in Philosophy, Politics and Economics, London, UK: Routledge & Kegan Paul, pp. 22-42. This is a famous paper and there are several reprints. You can freely download some of them.)
The Hayek quote merely shows Hayek in his usual light; more wrong that right in whatever he writes.
But the heart of your comment is emergence, so let’s go back to basics. When an interaction occurs either changes happen in the network or there are no changes in the network. The former is the emergence you write about. To take a simple example: a lover enters into a existing marriage. It’s likely, based on past experiences that the relationship will change. That a new relationship will emerge. But in some instances, the relationship won’t change. These are empirical questions. An economic example. During the period 1950 to 1970 American corporations changed little. They had no competitors, were tightly regulated, and highly taxed. Although they experienced hundreds, perhaps thousands of new relationships during this period, none created major changes in the corporations. But along comes Ronald Reagan and his associates in the Republican Party, and by 1990 massive changes in most American corporations were taking place. These interactions changed the make-up of American corporations by 2000 and then moved to change American politics and governance. How exactly this occurred is an empirical question which can be studied and revealed. Just like networks (systems, if you prefer) emergence in networks is not a mystery or mysterious. Just needs detailed studies to reveal. The number of actors in a network can sometimes increase the chance of emergent changes to the network, but not always. I cite to my example of American corporations during 1950 to 1970 to support this statement. With hundreds of thousands of actors involved, during this period these corporations changed little.
Yoshinori, your major error here is citing as axiomatic what are empirical questions, requiring empirical research to answer, so much as they can be answered in full or in part.
What do you mean, Ken, that American corporations changed little in in the last third of the 20th century, not true, this period brought about a burst of entrepreneurial in high tech firms, that brought about a rapid growth in entrepreneurial studies in US business education (the entrepreneurialism produced the entrepreurial study programs, not the other way around as Europeans mistakenly believed). In my book, The Entrepreneurial Shift, I called it “Phenomenal Silicon Valley and the Second Americanization.” What you are talking about Ken is the first Americanization and its social ramifications carried out in Reagan, Bush, Clinton era..
Robert, I’m a little confused by your comments. I am commenting on American corporations beginning in 1950 to about 1970. I agree that after that, beginning in the 1970s, speeding up with Reagan American corporations changed a lot.
To Ken Zimmerman at September 26, 2019 at 8:18 am Reply
Whether Hayek was right or wrong does not matter. Emergence is an old concept and you did not know it. Something essentially different things / questions emerges when scale of a system changes. One of main reasons why this occurs is that the large scale system (economy, world) exceeds the small world that a person (even a big company) sees and participates in.
Hayek wasn’t just wrong, he was a hack and propagandist. Not an economist.
Emergence is better thought of as the creation of something unexpected from an interaction in a network. And I’ve known about the notion since graduate school, 45 years ago. As I said, the number of nodes (to use the engineering term) in a network can effect emergence, and sometimes not. These are empirical questions. It can’t be predicted in advance. It’s an error to believe that “the large scale system (economy, world) exceeds the small world that a person (even a big company).” Sometimes there is a hierarchical relationship, other times not. This too is an empirical question. Each network has a history. Investigating that helps answer such questions.
I wrote the following before my post at September 26, 2019 at 3:54 am. I did not post it because I thought that Ken Zimmerman would not understand my explanations. But, this may be useful for other readers who are sincerely trying to study economics as students and as researchers.
*********************************
September 26, 2019 at 2:02 am >> If, as you contend, “economics has to treat dimensions which are beyond human sentiment, feeling and common people’s understanding or world-view,” then those “dimensions” cannot exist for humans
Those dimensions do not exist for human ordinary consciousness. It requires scientific research and accumulation of our knowledge. As you are always living inside of the given socially constructed reality and cannot escape from it, you do not even imagine the existence that is out of senses and beyond everyday world.
Please read our recent book:
https://www.researchgate.net/publication/334508762_Microfoundations_of_Evolutionary_Economics
If you like, I will send you PDF of our book. (Send me an e-mail to y@shiozawa.net)
Chapter 1 treats human-system interface. What you are talking about is treated in this chapter. But, the economics does not stop there. Chapter 2 and Chapter 4 treat respectively price system and quantity adjustment process as the economy as a whole. Individual human agent (including legal person like giant firms) set prices and try to keep their stocks in an appropriate level. However, these are only the premises of our study.
How can you find and prove the Minimal Price Theorem and Convergence to the Minimal Price Theorem (Chapter 2) with your anthropology or culture imbeddedness? How can you find and prove convergence or stability of the stock adjustment process as a whole of all individual actions (Chapter 4)? In the latter case, you can only know that habitual stock-out avoiding of each individual agents works almost all cases by experience but you can never know the reason or the mechanism why the economy as a whole behaves like that.
To understand these features of economy, we need to formulate our everyday behavior and study how system works. More precisely, we must study how a state of the economy develops as a process through time by the behaviors of agents. Inquiry or investigation is necessary (and at this point culture may be a reference point) but if we stop here we can know practically nothing that is important for economics. In order to know the behavior of the system we need a kind of “algebraic theories” that Hayek was hinted by J. W. N. Watkins and find useful.
Lars Syll and Tony Lawson studied economy as econometricians and do not know the above discussed aspect or dimension of economic research. This is one of the reasons that they think mathematical reasoning is in general unfitted (ontologically). They do not know mathematics or logical formulations helps our understanding of a complex sytem. Of course, the possible range of mathematical reasoning is limited as I have argued in A Guided Tour of the Backside of Agent-Based Simulation (published in 2016 as Chapter 1 in Kita et al. (eds.) Realistic Simulation of Financial Markets: Analyzing Market Behaviors by the Third Mode of Science)
https://www.researchgate.net/publication/279177719_A_Guided_Tour_of_the_Backside_of_Agent-Based_Simulation
But what we need is not to expel mathematics but to create new mode of scientific research. I want to ask Ken Zimmerman: Is your anthropology useful for creating these new tools of scientific research? Please raise at least one concrete example?
This is about as dysfunctional a view of science as I’ve ever read. Good for worshipers of science bad for the objects of social scientific study and entire societies.
I’ll help you with research by citing to something old. Anthropology is sometimes defined as the study of humanity in full. Everything is open to study, including what humans call economics. One approach utilized by anthropologists and historians but hardly ever by economists is comparative examination. Even most anthropologists, particularly before the 21st century were embedded in the anglo-world created by the UK, the US, and their satellites. Certainly, most economists today remain so entangled. Comparative study provides context for this limitation by revealing and forcing economists to deal with the great variety of paths humans have taken to create and organize economic life. This clearly shows that capitalism of the UK or US sort is not the necessary way to organize economic life, currently or historically. It also spotlights the aggressive imperialism that is the hallmark of both traditional and neoliberal capitalism. It’s my view these are important topics for study by economists.
All trials of counter arguments simply show that Ken is not adapted to think about systems theory. Systems thinking is alien to him. As I have put it the other day, he is trapped by his anthropology and cannot escape from his narrow world.
I stop our discussion here. I have learned one important thing from this discussion. It is a discovery that there are persons who can think nothing other than directly experienced world and worlds which are imaginable by analogy. For them there is no theoretical construction. This is a great discovery. I have to thank Ken for this discovery.
Yoshinori, theory is just fine so long as it has as the founders of this blog might say “some foundations in the real world.” Yours seem not have any such foundations. But I didn’t learn that from you. I’ve had this conversation previously with others.
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Ken thinks if we are just “smart enough” then he can transcend his own culture — world view, values, prejudices, biases, and escape those pesky value judgements and thereby pontificate on “realistic” science as he does so verbosely here on RWER. Yet, he contradicts himself repeatedly on RWER arguing we are ultimately embedded in our own creations — culture — and can only view it through the lens of our cultural experience. Ken wants his cake and he wants to eat it too. He has openly expressed contempt for philosophy, religion, and treats human values with the caricature of “pesky judgments of humans,” further implying he is smart enough to build a science “around those [value] judgments” thereby claiming — albeit erroneously — he is doing science value-free and neutral.
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But such is a delusions of his own making and his own inconsistency is proves it categorically. Söderbaum sums it up well:
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Appreciate the comment, Rob, but you totally misread my comment. My apology. I’m not always good at writing satire. My comment was intended as satirical. That is, I’m satirizing scientific purists who want science to be logical and to provide truth for humans, omitting the need for any human judgments based on such as intuition, every day experience, or estimates. Which is, of course how a large part of scientific work functions.
” One approach utilized by anthropologists and historians but hardly ever by economists is comparative examination. Even most anthropologists, particularly before the 21st century were embedded in the anglo-world created by the UK, the US, and their satellites. Certainly, most economists today remain so entangled.”
As an historian, I stumbled on to economics. I mean I started looking at the role that industrial development played in great power politics, since Germany merged after 1850 as the primary power in Europe, I looked at the German sources of economic prowess after 1850. Then, I joined the European Institute for Advanced Studies in Management in Brussels, for two years (1982-84), to discover, that the European Institute, in its study methods ignored Germany. How was it possible for a “European” institute in 1980 to ignore German industrial experience? The answer, because, the european institute was really an American institute for the advanced studies of management. This means that a proper comparative examination of economic development was never done in Anglo-saxonia.
For example. In Germany, the study of business economics runs parallel to the development of business schools in the US. When looking at the origins of these studies, J-C Spender found it in the chairs of mercantilism established in German (Prussian) universities in the 18th century; others (Daastol) found German studies rooted in the historical and institutional chairs of economics in 19th century Germany universities.
WRONG. German business economics (Betriebswirtschaftslehre) did not originate as state institutions, but private-civic institutions just like US business schools at the turn of the 19th/20th century. German BWL served and still serves the interest of firms; it was not transformed into a “science” in academic schools of management, like US business schools, when they shed their mundane origins in the US post-1960, when US business schools tried to make management mba education a science. Read Khurana’s history on the subject for the US.
Managers not MBAs, Japan and Germany did not have generalist Management teaching and research programs in academia.on the American model, because management is not an academically teachable subject for them.
If you want to get your comparative facts straight, ask an historian who has studied the subject. If you don’t want to get the comparison’s straight, then keep repeating the mistakes.
Thank you, Robert. Will keep this for future reference and I’ll pick up a copy of the book you recommend.
Ken, I wrote at the beginning of Ch. 5, on German Busliness Economics: The Educational Achievement (inThe End of the Practical Man, 1984, pp. 199-200.
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“In 1900 the Prussian State made the following contributions to institutions of higher education: universities RM10,238,535; technical institutes RM2,196,160; agricultural institutes RM1,571,000; and veterinary institutes RM1,264,589. … Not one pfennig, however, was provided for the new business schools. But the state’s failure to support them is not surprising; it reflected traditional practice. A young man destined for a commercial career did not get a higher education. … The business schools (Handelshochschulen) were not, then, state institutions. Initially, they relied on chambers of commerce and industry, municipalities, and wealthy business benefactors for financial support. That the nonstate funds were quite adequate can be seen from the rapid growth of these schools, 2,528 students graduate from these new schools during the first few years of their existence (up to 1914), that is before the state ever proferred aid.”
Actually the German university professors of economics opposed the new business schools and denigrated their faculties.
Today (2017) 30% of the students in the top ten majors of German higher education study business economics (some version of German Betriebswirtschaftslehre). Its a 20th century educational event, just like the American graduate business school, not to be compared with the historical and institutional economics developed in German universities. And nonetheless quite different from US MBA education.
Add this to your thinking, Robert, on the American side of the Atlantic. “Yet the dramatic contrast between the CEO as superhero and the CEO as antihero has obscured the underlying links between these two types, which have appeared on the scene only in the last twenty-five years or so. Moreover, not even the profusion of corporate scandals since the beginning of the current decade has prompted the question why it is that managers run corporations.” (Khurana, Rakesh. From Higher Aims to Hired Hands) And, often run them badly, illegally, or both.
@Ken,
“Moreover, not even the profusion of corporate scandals since the beginning of the current decade has prompted the question why it is that managers run corporations. …”And, often run them badly, illegally, or both.”
Correct. And the answer to that question is, that despite the genuine and very helpful insights regarding management,….it still misses the mark because it does not identify the real problem, namely the necessity of a new monetary and financial paradigm. Hence it is only reform. Hence it leaves the most underlying problem unresolved. Hence the over 5000 year old monetary and financial paradigm continues to wreak havoc upon economic systems and human civilizations…as we see looming up before us NOW.
If this forum REALLY wanted to live up to its moniker of “New World” it would be focusing ONLY on deciphering a new monetary, financial and hence also economic paradigm.
“It’s the monetary and financial paradigm, stupid.”
Craig, its the governance systems in corporations, decision power that matters. As long as you let the top decide on who gets the emoluments, guess who will get them? Set up a compensation committee in firms and let all stakeholders have representation. You leave the governance of firms, the decision-makers with all the power.
Robert,
I don’t disagree that power is at the crux of the matter at all. However, that power will never be assailed until the monetary paradigm changes from scarcity to guaranteed abundance….for all.
That way neither the deep pocketed corporations nor the banks will be able to use “the reserve army of the unemployed”, artificial intelligence or even climate change to fight their battles….because the power to FREELY determine commercial survival will be passed “into the many hands of the individual.”
Micah 4:4 But everyone shall sit under his vine and under his fig tree, And no one shall make them afraid;
An extremely significant discussion above has become dispersed among others, so I repeat it below to give it due prominence and enable it to be followed more easily. This being a blog rather than an academic paper I gave a very abbreviated summary of my theoretical position and the conclusions I have drawn from it, and Ken very helpfully picked out holes in it which need filling in. His reply got lost in “noise” he helped to create: I’ve only just seen it.
September 26, 2019 at 6:01 pm
Yoshinori said: “But we cannot start from nothing or tabla rasa. What we need is therefore a modern version of classical political economy.”
With this I disagree. Logical representation of evolution starts from nothing, and the addition of three axioms: something, how to symbolise it, and how to change it (the law of least action). If the something is energy, matter can be derived from it, but not vice versa. Two lines of science have evolved, to represent both the something and the representations, i.e. physical and information science. Mathematics (as an information science) has learned how to distinguish variables from values, and how to physically control them.
A concept is a representation of a variable, like a circle large enough to contain all points within it. As physical science tells us the universe is expanding, so initially a small circle represented just energy, but now the circle representing all is represented by concentric circles containing less and less but more specialised objects within it (c.f. an arabic number format like 1,234 with thousands including the lesser units). From the layer representing the evolution of a mankind able to represent objects, hence communicate and think, a new type of possibility has arisen: to communicate misrepresentations so as to mislead others in competitive situations (gaming).
We need, therefore, to go behind the relatively small circle of classical and earlier forms of political economics to the more inclusive circle of life and the function of thought within it, and from that to represent what we do and the institutions which guide us that enable us to live and evolve, and likewise the subset of institutions generating falsehoods which impede us, arguably those concerning money, authority and control.
Policy design without this type of macro theory is useless. With it we are led to look at what money really is (not valuable gold but a promise of credit); at how authority is really acquired (i.e. bottom up); and why the theory of automatic mechanical equilibrium is mistaken (so control by imposition of austerity is unnecessary).
Since PID control theory based on corrective information feedbacks demonstrably shows us what is really necessary to maintain equilibria in changing conditions, I say again, economics needs to be re-conceived as an information rather than a mechanical control system.
Arguably, money has been reduced to a credit limit, and this needs to become as taken for granted as the earth going round the sun. The implications of responsible use of interest free credit cards, advisory credit limits and pricing based on Fullbrook’s version of the world’s value, suffice to eliminate the need not only for bank debt and power over it but all sorts of economic complications that has generated, like the need for taxation, insurance, shares, wages and pensions for self-maintenance, paying for monitoring, R & D, investment, infrastructure maintenance, education, house work, health care and other services. Provision of these (including self-care) can justifiably write off credit spent within its advisory budget.
Ken responded on September 27, 2019 at 12:24 pm
“Dave, three concerns.
“First, your “macro theory” seems to have no relationship to the pronouncements you make about the economic life of people. For example, that money is a promise of credit; that authority is acquired bottom up; and the contention that the theory of automatic mechanical equilibrium is mistaken (so control by imposition of austerity is unnecessary). I know many social scientists who would agree with at least some of these, but never asserted a macro theory was necessary to do so.
“Second, your final paragraph is not clear to me. What is it you are advocating and why?
“Finally, and most concerning, where are the people? People create the cultures that guide and protect their lives and economic well being. Your comments it seems to me go out of their way to “forget” both the people and the cultures they create. You are part of that culture and as such have a part in creating it. But what about all the others who also are members and play a part in creating it? You seem intent on leaving them out of the story of creating that part of culture called the economy and economics. Am I wrong?”
So, my response to Ken’s three concerns.
First, the apparent disconnect of theory and practice. What are missing are Newton’s laws of motion, the inverse relationship between freedom of motion and control, and information as a difference which makes a detectable difference. (We can see electromagnetic waves, but not energy of zero frequency, nor on human timescales a very slow expansion and evolution of the universe). By the law of least action, waves and matter (spray) have to be formed from the energy of the Big Bang at the limit of the universe, much as they are where the oceans meet a beach. Particles of matter now have a position, but by Newton’s laws of motion they also have a speed, acceleration and forces generating the acceleration. Indeed, particles can only have a position if the motion of the Big Bang’s energy is made to orbit by being captured by itself; likewise with the accelerating force which may or may not have independent motion. These represent the four empirical entities of physics: photons, electrons, protons and neutrons. Now the relationship between freedom and control, the point being the order in which they arise. The energy of the Big Bang is free to go in three directions, a circuit only two, acceleration only one, and in a neutron none: the motion is fully located or controlled. But this is not the only way in which electrons and protons may be combined. They may do so to form atoms, and the atoms may in turn form chains and loops and cells, which in turn evolve into plants and animals and humans, and from our subconscious instinctive feelings we develop (in this order) awareness of the present, past and future, these providing the PID feedbacks which enable us to control our actions. In answer to Ken’s concern, this applies just as much to economic life as it does to other actions, and it is precisely at the evolutionary level of people and their actions. By the analogy with arabic numbers, it can be represented as a number with four digits rather than ten, including not just the last digit (human actions, including lying) but – significantly, given the state of the earth – humans still growing up, other life, and the very earth and solar system in which we live. As a mathematical theory it doesn’t tell us very much, but it does show us where to look, and when we look there we find it empirically justified at every level. Its application to navigation shows how, if understood, it gives us enough of a handle on events to usually get to where we want to go. Hence at the significance for the future of what money and authority have become as against how they look to “children” seeing the past in the present and how we actually see (put simply, by turning towards, “tuning in to” and interpreting sound and electromagnetic waves). They are hearing Jevons’ language of balancing weights and measures and equilibrium in barometric u-tubes (the Maas thesis). We now have electronic money communicated by electromagnetic waves with three degrees of freedom. We need to be looking at how internet controls communication by packaging, addressing and if necessary encrypting data, which is more or less what a credit card does. It packages our own debt separately, sends records just us our account, and effectively encrypts them (makes them appear meaningless) when it writes off what we have earned.
So, secondly, Ken is not clear on what I am advocating, and why. Fair enough: it is important for me to know that. I feel like saying I’m not an advocate, so I’m not trying to advocate anything: I am just (as John Locke and Tony Lawson have put it) “under-labouring” to help make justifiable advocacy possible. This blog is, after all, about “why policy design without theory is useless”. We have theory of a sort, but we are nearly all agreed: that is not sufficient; it needs to be justifiable theory. That is what I have been trying to provide. My “thesis”, if you will, is that it is not just economic theory but its outdated philosophical underpinnings in mainstream logic, mathematics, Newtonian physics, Darwinian evolution and chaotic systems concepts that are unjustifiably flawed, basically because of failure to understand parallel circuits, C E Shannon’s computer circuit switching logic, information theory and his “steering” reliably/truly by correcting errors.
As to why (at 82) I am still bothering to “under-labour”, for sure it is not to make money or a name for myself! More an awareness since childhood that if you go the wrong way you are likely to end up in the wrong place, leaving me looking for right ways whenever I see people ending up in the wrong places. Right now the world is on the point of becoming uninhabitable, and though at my age I may escape that, my descendants and their contemporaries will not. That is the sufficient (though not the only) reason for my plodding on, looking beyond my more satisfactory theory towards realisation of the right way by tentative mapping of it onto policy design. There has been a great deal of satisfaction in discovering a theoretical basis in which not just people but the world we live it, its resources and the life forms we depend on provide the stage on which economics (household management) plays out, with money reduced to its merely instrumental role.
Finally, Ken says (in his own way) he couldn’t see the people in my words about them. That is an apparent disconnect between theory and practice which I hope my first and second clarifications will have helped to dispel.
Thinking of how to reduce all this to a sound bite, it seems to me the French revolutionary’s “Liberty, Equality and Fraternity” roughly translates into something like today’s Catholic ideals of “Subsidiarity, Solidarity and Integrity”.
Fullbrook’s sharing total Market-Value and my identifying and getting rid of the lies built into economic institutions can both be said to be about Integrity, this being a condition of Liberty.
Dave, instinctual behavior is limited among Homo Sapiens. Most sapiens’ action is learned (from parents, siblings, etc.). Thus, culture is the dominant aspect of human life and societies. Ruth Benedict in “Patterns of Culture” uses metaphor to tell us about culture. Her first metaphor is that of a great arc across which range the possible interests provided by the environment, the age cycle, and human activities. Each culture is created from that arc, when people choose from that arc of possibilities, choosing to emphasize one or several, giving that culture its particular pattern. As Benedict says, “Its identity as a culture depends upon the selection of some segments of this arc. Every human society everywhere has made such selection in its cultural institutions. Each from the point of view of another ignores fundamentals and exploits irrelevancies.” One culture hardly recognizes monetary values; another has made them fundamental in every field of behavior. In one society technology is unbelievably slighted even in those aspects of life which seem necessary to ensure survival; in another, equally simple, technological achievements are complex and fitted with admirable nicety to the situation. One builds an enormous cultural superstructure upon adolescence, one upon death, one upon afterlife. The point in all this according Benedict is to value, not to judge. She rejects the view that Western society is the best, the most evolved, and asserts that each culture must be seen as it sees itself. These are the tenets of cultural relativism, a much-needed approach even in a world where we have adopted a nonrelativistic code of universal human rights and seek to protect the rights of women and children everywhere.
Dave, your assertions provide a relatively complete recital of those aspects of western culture through which your life has evolved. Interesting though it is, it does not help us understand how that culture has and is now changing, or how it compares to, say Chinese culture.
Dave, your ‘under-labouring,’ as you call it is clearly expressive of certain portions of historical western culture. Speaking for myself, I would like to hear more about why you believe economic theory and its philosophical foundations are flawed and need changes. I find your references to parallel circuits, computer circuit switching logic, information and steering theory interesting, but not relevant. Since culture can be made up of any mix of the possible interests provided by the environment, the age cycle, and human activities, what you suggest is possible. It concerns me that such a culture would be too narrow and subject to collapse to protect human survival. Or, to use your words, Sapiens might end up “in the wrong place.” Most likely extinct. You miss this simple conclusion because you neglect to consider that culture is a chaotic feedback process. Culture provides opportunities for people which people may fail to make use of, thereby changing the cultural opportunities. Other actors, apart from people (e.g., geography, weather and climate, geology, biology) may also create the same forms of results. And since the events are chaotic, we can never be certain how or why they begin or end.
Which merely goes to show the truth of what Yoshinori wrote above at September 27, 2019 at 12:38 pm:
“All trials of counter arguments simply show that Ken is not adapted to think about systems theory. Systems thinking is alien to him. As I have put it the other day, he is trapped by his anthropology and cannot escape from his narrow world.”
I would put Ken’s limitation at an even more fundamental level than not understanding systems theory. On this evidence he doesn’t understand the difference between a concept and a generalisation. Yoshinori stopped further discussion with him as pointless. So do I. His seemingly polite extended waffle here is not discussion of the point at issue, it looks like a defence lawyer trying to to take the jury’s mind off arguments damaging to his own case. This happens so often it needs moderating.
I respond below for the benefit of the jury. Ken says:
“Why you believe [our current] economic theory and its philosophical foundations are flawed and need changes”?
Because I’ve been studying them for 67 years, starting from a critical awareness of pre-Capitalist economic philosophy; and in any case, “By their fruits you shall know them”.
“Most likely extinct. You miss this simple conclusion because you neglect to consider that culture is a chaotic feedback process”.
Rhubarb! The likelihood of extinction is, as I said, precisely what is now driving me, and apparent chaos is a fundamental in my own disciplines of physical and information science.
In any case, the discussion was not of culture but of how to map economics. Not, in the steering analogy, about seeing random journeys evolve into safe trade routes, but the underlying theory of how any course may be plotted and pursued with the aid of just latitude, longitude and time.
I’m trying this one more time, then I give up. So, pay attention.
Translating Gabriel Tarde from French, he states, “…everything is a society and that all things are societies. And it is quite remarkable that science, by a logical sequence of its earlier movements, tends to strangely generalize the notion of society. It speaks of cellular societies, why not of atomic societies? Not to mention societies of stars, solar systems. All of the sciences seem fated to become branches of sociology.” (Tarde 1999: 58) I don’t agree with the “branches of sociology” comment. I’d rather say, all of the sciences seem fated to study systems (networks). Generalizing Leibniz’s monads, but without a God, Tarde’s project reverses the link between micro and macro: “In a multitude of forms, though on a smaller scale, the same error always comes to light, namely, the error of believing that, in order to see a gradual dawn of regularity, order, and logic in social phenomena, we must go outside of the details, which are essentially irregular, and rise high enough to obtain a panoramic view of the general effect; that the source and foundation of every social coordination is some general fact from which it descends gradually to particular facts, though always diminishing in strength; in short, that man acts but a law of evolution [motion, heat, etc.] guides him. I hold the contrary, in a certain sense.” (Tarde 1899/2000: 75)
“Instead of explaining everything by the supposed supremacy of a law of evolution [or laws of thermodynamics, of motion, etc.] which compels collective phenomena to reproduce and repeat themselves indefinitely in a certain order rather than explaining lesser facts by greater, and the part by the whole-I explain collective resemblances of the whole by the massing together of minute elementary acts-the greater by the lesser and the whole by the part. This way of regarding phenomena is destined to produce a transformation in sociology similar to that brought about in mathematics by the introduction of infinitesimal calculus.” [Tarde was also a mathematician and city administrator] (Tarde 1899/2000: 35)
This is how systems are constructed and function. Consider: solar system, human body, educational system, economy, etc. Systems are actions and events assembled over time. People are a major element of the process. Though, they do not control the process. The fate of all systems is in the hands of the process. No human or event or action assembled into the system can control what it becomes. Since the process is non-linear, it is not predictable, is sometimes patterned and sometimes not, and thus is not reproducible. Therefore, for these reasons, I say most aspects of systems are not philosophical or theoretical concerns, but rather empirical ones.
Good fortune to you all.
What if chaos is a misnomer? And in fact grace is the actual basic NATURAL reality cloaked by a biased scientism? Such a pan-entheism invites examination of reductive, abstract and reactive scientism and a truly integrative pan-scientific viewpoint.
Craig, sent your question to a friend at Sandia Labs. His response. “If grace is just another way to get God into the equation, forget it.”
Ken Zimmermann said “why you believe economic theory and its philosophical foundations are flawed and need changes”. This is simple. The quantity calculus requires theoretically valid quantitative relations to have integer exponents. There are no conventional nor heterodox quantitative relationships which meet this requirement. Therefore all are wrong!
Frank, doesn’t GDP meet the requirements of the quantity calculus?
Thank you Craig and Frank for your more sympathetic interventions, both of which I agree with so far as they go. I just see them in action.
As I’ve recently explained to Craig, if the universe starts with the Grace of God, that is expressed in his Providence (gifts providing for us) and the appropriate response is Graditude, which perpetuates the Grace by making us graceful in our turn.
He’s right; but taking the long view we live in time, which orders all the events whose diverse results we see now, more or less statically, apparently conflicting.
When Frank starts talking about “integer exponents”, his argument has moved on from counting first arithmetical units, then algebraic variables, to counting geometrical dimensions: integer when they are conceived as completely separate and therefore countable. I’m seeing also the dimensions of TIME, represented geometrically so they can be seen: a point in time, and the present, past and future becoming such in that order, with increasingly inclusive 1, 2 and 3 dimensions (and there having to be a present before there can be a past or future). Newton’s laws of motion and PID control feedbacks are represented similarly, but with negative exponents.
It is good to have reason to spell this out, so it can be seen how it looks more difficult than it really is. Just looking at it, one sees a lot of words, but if one reads them they explain a cumulative process which, just as familiarity with the arabic number format enables one with practice to read numbers whole, enables one to grasp the significance of multi-level processes. It just takes time to get one’s head around it.
The significance of this in economics is manifest in Keynes’s “General Theory”. Famously, “The classical theorists resemble Euclidean geometers in a non-Euclidian world who, discovering in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight”. (Lines are one-dimensional, and parallel lines point in the SAME direction). Less well known will be the first note in Chapter 2, concerning those who understand the concept of ‘all’ and those who, like Ken, thinks it means all they can [or want to] see. “Ricardo expressly repudiated any interest in the AMOUNT of the national dividend, as distinct from its distribution [“the division of the produce of industry among the [four Platonic] classes who concur in its formation]. … But his successors, less clear-sighted, have used the classical theory in discussions concerning the causes of wealth”.
So Ken’s systems (September 30, 2019 at 10:07 am) are mathematical concepts which do nothing. His ships are not steered but go where the wind, currents and obstacles take them; we all end up dead.
That is not steering but Keynes’s parallel line thinking: maps of forces paralleling courses with no side effects we can learn how to perceive and to react to. Tarde (1899) was rightly building his whole from its parts, but not seeing what is ALSO true, that such parts must – in the non-parallel time dimension – exist before the whole can exist and structure its own activities.
“Must exist.” What is that? Hokum, I think.
@ Ken,
“Craig, sent your question to a friend at Sandia Labs. His response. “If grace is just another way to get God into the equation, forget it.”
A typical non-integrative scientifically religious response. And not correct in regard to anything I have ever posted here. The experience of god is entirely a natural one, and grace as in utter integrative, interactive and dynamic free flowingness is the scientifically accurate and personally beatific reality.
Culturally hide bound scientism and orthodox religiosity are both passe’.
Frank Salter: I am a simple guy and don’t think I understand what you mean by the quantity calculus. A “valid” theory is one whose domain of application can be defined, that is not self-contradictory and that has not (yet) been falsified by empirical observations. What has that got to do with integer exponents? When calculating whether my business is making money basic arithmetic seems to work pretty well. When I want to work out when a given project will run out of money I can resort to bit of algebra, even a differential equation. That seems to work too. I am not sure why these simple techniques are inappropriate when we talk about economic aggregates. I don’t know what my philosophical foundations are; I suppose, epistomelogically I am a naïve realist and I don’t have a philosophy of mathematics. The bottom line is I don’t know what you are on about, which doesn’t matter, except if I don’t at least 95 per cent of humanity don’t either. I daresay you’re right – try putting your point another way.
Gerald, I am going to defend Frank because he is right, though I don’t find the phrase “quantity calculus” helpful either: it smacks too much of the algebraic form of differential equations, which are where most people lost the plot altogether. Incidentally, I’m saying this as someone who, unlike Frank, has worked with rethinking the foundations of mathematics for computers, i.e. encoding it digitally rather than symbolically. That was not because I am not simple myself: I just happened to be there.
What the algebraic way of representing components loses is that there are different types of number, so that saying n2 (n squared) looks like n x n, with the result also a number. This works out for what Frank calls “dimensionless numbers”, but in the Euclidean geometric form, where the numbers represent the length of a line (of dimension 1), the two n’s may be the same size but they are at right angles. These completely different directions represent complete independence. The result is not another line but an area: literally a square. Likewise n3 is literally a cube. The dimensionality of the result is the sum of the dimensions of the terms, just as Frank says, so that of any number of units of dimension 0 is still 0.
There is another sting in the tail of this in that the concept of dimension can be applied to the number of digits in an arabic number format, producing the familiar logarithms used in the calculation of interest repayments but fallacy when applied to free trade models equating no constraint with no dimension. Economics is not just about money. As Fullbrook’s new book begins to make clear, it is about value for money. When it comes to aggregating that, the value of apples is not the same as the value of bananas, though doubtless Ken will argue that it is. As Fullbrook says, the world as a whole has a unitary value. We should be dividing it up, not trying to differentiate or ignore the different types of fruit.
Gerald, I would like to add to what Dave has said. The quantity calculus states what mathematical operations can be applied to physical quantities for the manipulations to represent theoretical validity. It states: for addition and subtraction the quantities must be measured in identical units; multiplication and division can be carried out on any physical quantity; exponentiation and the taking of logarithms is forbidden from having theoretical validity.
Therefore the Cobb-Douglas production function is NOT theoretically valid. Its exponents are NOT integer. It is no better than any arbitrary equation. All that it achieves it a concrete representation of a single data set. The reason why this is so is discussed in “Transient Development” (RWER-81) section 4.5 “The aggregate production function” pp. 154−159. Figure 4 (p. 156) plots the different forms of equation used by Solow and shows they fit only within a restricted range whereas the form based on equation (17). p 144. fits over the whole possible range. The exponent “-mt” is not a physical quantity so the operation conforms to the quantity calculus. The concrete form representing the Solow data is shown as equation (31), p. 159, should read q-dot. The dot is lost on the other side of the equation.
As demonstrated, specific examples to explain the significance of the quantity calculus are very lengthy.
To reiterate my original comment, no theoretically valid quantitative relationship exists in either orthodox or heterodox analysis. They are all falsified by empirical (e.g. figure 4) and theoretical reasons.
Frank, I ask again. Doesn’t GDP meet the requirements of the quantity calculus?
Ken, I had hoped that my comments had been sufficient. Your question has yes, no and may be as valid answers to the question. As simply as a total of money, the answer is yes. In that single sense it is not falsified by the quantity calculus. If aggregating money is used as a proxy to add incommensurable quantities then it is strictly not valid. However if money is an affine transformation of the values of strictly incommensurable quantities then it is useful quantity. This is shown in the case of the Solow data discussed in my earlier answer. Where my equation (31) provides an acceptable proxy for the quantities of output for the whole of US manufacturing in the years 1909−1949, which is surprising considering they include the great depression and two world wars.
Frank, a few questions if you don’t mind. First, what is a “physical quantity?” Physical quantities, and qualities I might add, are all based on human judgments and assessments. Which can be, of course mistaken. When you say you are examining a physical quantity, how do you verify that assumption? Second, you state that propositions, and I assume also “first principles” are theoretically valid. First, what is theoretical vs. non-theoretical. Second, what’s the process to establish their validity? Third, in your RWER paper you make numerous assumptions about fitting. Could you list all the assumptions you make? Some seem missing. Fourth, in RWER you call your work a “first principles quantitative assessment.” How did you choose the first principles? How would your assessment change if I suggested other first principles to replace those you chose? Fifth, what is your response if I propose that money is not a physical quantity? It is rather (and this is usual among humans) something physical serving cultural purposes, which in turn change its physical condition. Sixth, you state, ”it is a critical tool ensuring that symbolism conforms to reality but is little used in economic analysis. Barnett (2004) and Mayumi and Giampietro (2010) point out that the requirements of dimensional analysis are frequently neglected in economic publications.” What is the “reality” to which our analyses must conform? Finally, my assumptions differ from yours. I assume no first principles, aside from humans and everything else are tossed in together, run into and interact, and from that process comes reality. So, in order to find out what reality is and how it works, examining this process of interactions is the only route. Would you find this assumption acceptable?
Ken, that is quite a collection of questions.
Physical quantity: The Bureau International des Poids et Mesures brochure, The International System of Units (SI) section 1.1 Quantities and units states:
The value of a quantity is generally expressed as the product of a number and a unit. The unit is simply a particular example of the quantity concerned which is used as a reference, and the number is the ratio of the value of the quantity to the unit. For a
particular quantity, many different units may be used. For
example, the speed v of a particle may be expressed in the form v = 25 m/s = 90 km/h, where metre per second and kilometre per hour are alternative units for expressing the same value of the quantity speed. However, because of the importance of a set of well defined and easily accessible units universally agreed for the multitude of measurements that support today’s complex society, units should be chosen so that they are readily available to all, are constant throughout time and space, and are easy to realize with high accuracy.
The International System of Units is intended to minimise human judgement in discussing physical quantities. I do not see an assumption when dealing with measured values.
In scientific use a first principle is an axiom of reality. So the concept of length might be used as a first principle, where appropriate.
The validity of quantitative relationships needs to be taken in context. So the Cobb-Douglas production function may be valid as a concrete description of a set of data if it produces values consistent with the data set. It is always invalid if it is claimed to be an abstract description of production. It is the quantity calculus which establishes whether a relationship might be valid. The final determination depends upon whether it concurs with the empirical data.
I do not understand what you mean by making assumptions about curve fitting the Solow data. I describe how the fitting was carried out. My analysis is not dependant on curve fitting as is found in many papers.
The first principles I used are the definition of productivity which is that universally used and that technical progress is the first derivative of productivity. If you started from some other first principles then you would be solving a different problem.
Dimensional analysis and the quantity calculus deal with the same problem. They are well established in science as the basis of valid quantitative descriptions of the universe we experience. The reality is that quantitative descriptions must be empirically valid.
The universe, reality, exists and it follows the physical courses we can observe at all scales. Humans have been around for only a fraction of its 13+ billion years.
Frank, thank you for your detailed answers to my questions. I like to know the starting points for any discussion moving forward. I assumed that you utilize the SIU standards for measurement. These have a long history (18th century) that is filled with controversy, debate, argument, and uncertainty. In the end the standards agreed on are accidents of history, based on years of negotiations and tests of power. Which means of course, they don’t minimize human judgments. They simply turned the judgments eventually judged “correct” into cultural institutions passed on from one generation to the next. As institutions, reference measurements of length, weight, etc. stay in place till they fail.
There was a period not too long ago when the foot was literally the length of the average man’s foot. So literally an average man’s foot length would be a first principle, as you define first principle. Except, of course the average man does not exist, since he is the result of averaging. This is the reason I asked the questions about “reality.” Reality is a slippery notion. Literally, impossible to pin down in most situations.
Quantitative is, like reality a belief difficult to assess in any permanent and fixed way. Common uses include, an indefinite amount or number; a determinate or estimated amount; total amount or number; a considerable amount or number —often used in plural (e.g., generous quantities of luck); the aspect in which a thing is measurable in terms of greater, less, or equal or of increasing or decreasing magnitude; the subject of a mathematical operation; an individual considered with respect to a given situation (e.g., an unknown quantity … as attorney general); duration and intensity of speech sounds as distinct from their individual quality or phonemic character, specifically: the relative length or brevity of a prosodic syllable in some languages (such as Greek and Latin); the relative duration or time length of a speech sound or sound sequence. How quantity, qualitative is used depends on the specific situation involved and the culture in which the situation is set. And, of course all of this changes with time. Another notion difficult to assess outside the specific situation and culture. So, yes quantitative relationships need to be taken in context. But that context is complex (non-linear) with relationships having no permanent recurring pattern.
When curve fitting one must make at least two assumptions. First, answer the question: what is a curve? Second, answer the question: what is fitting? You note that your curve fitting is not how it’s done in “other papers.” But don’t write about how you do the job.
Frank, the first principle you deploy is not historically correct. Technical progress is not always the first derivative of productivity. Many technological innovations we see follow a non-linear pathway. This non-linearity is observed most clearly in examples which show rapid evolution following an important enabling innovation. Two examples of such trends I use in talks often are: the take-off of human flight, and the sequencing of the human genome.
Finally, I agree that dimensional analysis and the quantity calculus are well established in science as the basis of valid quantitative descriptions of the universe humans experience. Both have been established through a long history of choices and anti-choices by humans. After all, for humans, human interpretations through interactions with the things around is the basis of creating what is real and what is not. And in this process, only humans interpret and create reality. The Moon is a satellite of earth, a lesser space body than the Earth because humans, mostly scientists created it as such over the last 400 year. During that same 400 years the notion of a link between what humans can touch, see, manipulate with reality in a universal sense has been created and spread throughout most of the world’s population through detailed socialization (e.g., formal schooling, everyday speech, job requirements, etc.) Those who put forward this linking, also put forward the notion of empirical validity as the way to test it.
So, Frank you’re not wrong in the assumptions on which you rely. But you do fail to understand the history of the processes through which humans created and now use these assumptions.
Frank, you state with such authority and certainty, “The universe, reality, exists and it follows the physical courses we can observe at all scales.” What’s your authorization to make this statement? How do you plan to convince any who might disagree with the statement?
Mathematics is just one more language, like the other hundreds of languages humans have invented. It’s great flexibility and diversity of uses distinguish it from those other languages, however. But they also result in mathematics having less connection to human experiences. All languages express human experiences. Is mathematics better at that than the other languages? Not, really.