Home > Uncategorized > Economics — enslaved by the wrong theory

Economics — enslaved by the wrong theory

from Lars Syll

The more I learned about economics, the more I discovered a landscape that is surpassingly strange. Like the land of Mordor, it is dominated by a single theoretical edifice that arose like a volcano early in the 20th century and still dominates the landscape. The edifice is based upon a conception of human nature that is profoundly false, defying the dictates of common sense, before we even get to the more refined dictates of psychology and evolutionary theory. Yet, efforts to move the theory in the direction of common sense are stubbornly resisted.

kickThere is plenty of dissent among economists, and some of the best are working the hardest for change. The folks who award the Nobel Prize in economics don’t like the edifice that much either, and often add their weight by awarding the prize to the contrarians. Yet, even with all that talent, effort, and the prestige associated with the Nobel Prize, the edifice remains standing in one spot like a volcano adding to its own height and spewing out toxic policies. Why does it resist change? One reason is ideological, as we shall see, but another reason involves path dependence. Neoclassical economics provides an outstanding example of the “you can’t get there from here” principle in academic cultural evolution. It will never move if we try to change it incrementally. It must be replaced wholesale with a more realistic conception of human nature.

David Sloan Wilson

Indeed — mainstream economics has to be replaced wholesale!

What most mainstream economists try to do in face of the obvious theoretical and behavioural inadequacies of the theory, is to marginally mend it. But that cannot be the right attitude when facing scientific anomalies. When models are plainly wrong, you’d better replace them! Instead of mending the broken pieces it would be much better to concentrate on developing descriptively accurate models.

Let me just take one example — expected utility theory — to show how right Wilson is in his argumentation.

Expected utility theory is seriously flawed since it does not take into consideration the basic fact that people’s choices are influenced by changes in their wealth. Where standard microeconomic theory assumes that preferences are stable over time, behavioural economists have forcefully again and again shown that preferences are not fixed, but vary with different reference points. How can a theory that doesn’t allow for people having different reference points from which they consider their options have a (typically unquestioned) axiomatic status within economic theory?

Much of what experimental and behavioural economics come up with, is really bad news for mainstream economic theory. It unequivocally shows that expected utility theory is nothing but transmogrifying truth.

But mainstream economists do not see this​ since they have the weird idea that economics is nothing but a smorgasbord of ‘thought experimental’ models. For every purpose you may have, there is always an appropriate model to pick.

But, really, there have​ to be some limits to the flexibility of a theory!

If you freely can substitute any part of the core and auxiliary sets of assumptions and still consider that you deal with the same theory, well, then it’s not a theory, but a chameleon.

The big problem with the mainstream cherry-picking view of models is of course that the theories and models presented get totally immunized against all critique.  A sure way to get rid of all kinds of ‘anomalies,’ yes, but at a far too high price. So people do not behave optimizing? No problem, we have models that assume satisficing! So people do not maximize expected utility? No problem, we have models that assume … etc., etc …

A theory that accommodates for any observed phenomena whatsoever by creating a new special model for the occasion, and a fortiori having no chance of being tested severely and found wanting, is of little real value. It must be replaced wholesale with more relevant and realistic theory.

  1. John Doyle
    November 24, 2019 at 10:16 pm

    Indeed!. The resistance to grinding down the Mordor like mound comes from its size and the dependency it fosters in academia and the media and on down into politics.That Upton Sinclair comment that you can’t get someone to change their mind when their job depends on not changing it is just so on the mark, it really means only revolution will make a difference.

    Somehow the current criticisms emanating from blogs such as this one will be having an effect, but until academia gets the message change will be slow, glacial. Bill Mitchell told me it wouldn’t happen in his lifetime [he’s 64] but I believe now he’s underestimated the path and that it will not take that long. I certainly hope so as the current mess is so very destructive of society by virtue of economic malfeasance.

    MMT is the new path we need to foster. It is the soundness of economics at its basic level that forms the framework for change.

  2. Econoclast
    November 24, 2019 at 11:32 pm

    I strongly recommend reading Wilson’s two-part essay, the first essay linked in Lars’ posting. The second essay concerns Nobel-winner Elinor Ostrom. Wilson’s essays are insightful and even-handed. However, for at least 150 years there has been an intellectual war going on between anti-capitalists such as I and those supporting the power of predatory corporate capital, and Wilson seems to gloss over the conflict: “There was nothing sinister or self-interested about … the laudable attempt to place economics on a mathematical foundation using physics, not biology, as the inspiration.” Likely nothing sinister in the motives of such as neoclassical founder Leon Walras. However, much as Ayn Rand and her malicious followers cherry-pick the ideas of founder Adam Smith, those supporting the power of predatory corporate capital have advanced Walras’ and Jevons’ ideas to weave the emperor’s clothes, orthodox economics. They’ve been remarkably successful in distracting us all from real economics and the subject of ruling power.

    There have been frequent calls in this blog to create a new paradigm to replace the old, and appropriately so. Yet we continue down the same paths, even while criticizing. An essay today from Nobel-winner Joseph Stiglitz offers a good example. He rightly and articulately explains why the main metric used to measure economic progress, GDP, does not do so and calls for an alternative. In spite of the fact that much interesting work has proceeded to fashion a better metric, Stiglitz cites nothing about this and ends his essay without directing the reader to the work being done, simply saying we must do better (https://www.theguardian.com/commentisfree/2019/nov/24/metrics-gdp-economic-performance-social-progress).

    While I’m at it, I advocate that in this blog we have a good debate about Robert Skidelsky’s, “Money and Government: The Past and Future of Economics”, mentioned in a recent Lars Syll posting. I read a review and did something I’ve never done before, buy a book based solely upon one review. I have read enough to recommend this book highly. But let’s have a good debate about it in this blog.

  3. Yoshinori Shiozawa
    November 25, 2019 at 2:02 am

    >> It must be replaced wholesale with more relevant and realistic theory.

    Yes, Lars is right. As he seems to have no intention to propose or even suggest a theory (or set of theories) that can replace wholesale the mainstream economics, I propose one. It is not yet unified in a single coherent theory but gives an easy wholesale overview of an alternative economics.

    (1) Microeconomics (price theory and how market economy works)
    Shiozawa, Morioka, and Taniguchi (2019) Microfoundations of Evolutionary Economics

    (2) Macroeconomics
    Mac Lavoie (2014) Post-Keynesian economics: New foundations

    (3) Evolutionary economics
    3a Richard Nelson et. al. (2018) Modern evolutionary economics; an overview
    3b Geoffrey Hodgson (2019) Evolutionary economics: Its nature and future

    (4) Economic history and historical works
    Lipsey, Carlow and Bekar (2005) Economic Transformations: General Purpose Technology and Long Term Economic Growth

    A brief notes on each numbers:
    (1) This new book of ours presents a theory of price and quantity adjustment at a very fundamental level, which is free of neoclassical holy trinity. i.e. rationality, equilibrium and methodological individualism and can replace Arrow and Debreu equilibrium theory on how large market economy works with minimally rational human agents. This theory provides microfoundations which Post Keynesian and evolutionary economics has been lacking.

    (2) This is rather a summery of already huge Post Keynesian literature. Post Keynesian economics comprises Minsky and MMT as parts of their financial economics.

    (3) Evolutionary economics is spreading into various fields. (3a) shows state-of-the-art evolutionary economics. (3b) is a concise introduction to evolutionary economics and prospects on its future. Evolutionary economics strongest filed is the analysis of technological change. (1) opens the possibility to relate technological change with economic growth.

    (4) Evolutionary economics emphasize appreciative and history-friendly theorizing. (4) gives hints how evolutionary economics explains long term economic change.

  4. Ken Zimmerman
    November 25, 2019 at 12:34 pm

    Perhaps I misunderstand the purposes of the WEA. My understanding is that the WEA wants an open debate among the theories, Marxist, game theory, behavioral, actor theory, etc. that involves students as well as professors and other professional economists. The current crisis, as Lars describes it, seems an inviting opportunity to get that debate underway. Both sociology and anthropology went through such a debate. It was more helpful than harmful, sometimes brutal, however.

  5. November 25, 2019 at 1:49 pm

    To what extent might it be that Mandeville’s “Fable of the Bees, Private Vice, Publik Benefits” is still burried deeply within the woodwork of our thinking, but lives on through Smith’s “Invisible Hand” and the Mont Pelerin Society? https://web.archive.org/web/20060510150308/http:/pedagogie.ac-toulouse.fr/philosophie/textes/mandevillethefableofthebees.htm

  6. Laurent Leduc
    November 25, 2019 at 3:01 pm

    I’m relatively new to this blog and suspect most of you are familiar with Kuhn’s The Structure of Scientific Revolutions. Yet Kuhn was inspired by Ludwik Fleck’s The Genesis and Development of a Scientific Fact which is too often overlooked. I suspect that in economics the difficulty lies in the “power of the textbook”. How can we get students and professors weened off the textbook?

    • Yoshinori Shiozawa
      November 26, 2019 at 5:47 am

      Dear Laurent,
      Tony Lawson is a methodologist of economics and a great figure among heterodox economists. Lars Syll depends much upon him. Lawson often refers to Fleck’s The Genesis and Development of a Scientific Fact. In this sense, Fleck (at least his name) is rather well known among readers of Lars’s post series. But I am not sure if Fleck’s insight is effectively used in the economics methodology arguments. Contributions and opinions like Michael Joffe (who posted the next answer) seems quite rare. His article

      Causal theories, models and evidence in economics—some reflections from the natural scieces

      is an insightful paper and taught me much. He also give us several positive suggestions for considering future research. I recommend all participants here to read the paper.

      • November 27, 2019 at 10:22 am

        Yoshinori, thanks for the recommendation. I found Joffre exceptionally clear on the difference between a theory and a model, i.e. fundamental scientific theory and models left arbitrary by lack of applied science narrowing their axioms down to observable specifics.

      • Yoshinori Shiozawa
        November 27, 2019 at 12:39 pm

        Thank you, Dave. I believe we should all read Joffe’s paper (paper by evidencebas on November 25, 2019 at 3:18 pm)
        and argue the methodology of economics.

        What Joffe teaches us is very different from the methodology among common economists (mainstream and heterodox). Standard methodology is too much influenced by the extraordinary success of Newtonian dynamics. However, economy is a complex system. To attack such an entity, it is more plausible to learn from the history of biology, life science, climatology, geoscience and cosmic science.

        Joffe was first trained as phiologist, then became expert in epidemiologist and then trained again to be economist. He has a very good background to argue more plausible research program of economics.

      • Yoshinori Shiozawa
        November 27, 2019 at 12:40 pm

        Sorry. Joffe was first trained as physiologist.

      • Craig
        November 27, 2019 at 6:54 pm

        99% of the complexity in economics will be eliminated and/or integrated positively and constructively when we recognize that private for profit money creation is NOT a legitimate economic business model, is an incredibly stupid and glaringly contradictory monopoly in supposedly free enterprise profit making economic systems and that the monopoly paradigm of Debt Only as the sole form and vehicle for the distribution of credit/money needs to be integrated with the new monetary paradigm of direct and reciprocal monetary gifting.

        “It’s the monetary and financial paradigm, stupid.”

        BZZZZT! Okay, everyone can go back to figure, figure, figuring on lower levels of analysis than the entire pattern/paradigm.

  7. November 25, 2019 at 3:18 pm

    I agree with the need to start from scratch. With what? There are some suggestions so far in the comments. I’d say, any new (or old!) idea needs to meet the criteria that (a) it fits well with the evidence, (b) deals with the actual causal mechanism, not e.g. “as if”.

    In Lars’ post, he mentions “the basic fact that people’s choices are influenced by changes in their wealth”. Spot on! Also, it’s not just changes in a person’s wealth (or income), but the inequalities between people. This is the germ of a new type of analysis (I’m nervous about the word “paradigm”). The new concept to be introduced here, as fundamental to the economy, is *buying power* – I’ve made a small contribution along these lines in http://www.hrpub.org/journals/article_info.php?aid=6179. Among other things, it’s implicitly an answer to The fable of the bees, although I don’t mention this in the paper.

    The notion of economic power is much broader though – my next project will be on corporate power, and its basis. Note here that the new theory needs to focus on evidence-based causation, *not* ideology! – some of the findings may be uncomfortable to our ideologies. When this happens, it shows that you are doing “science” not ideology. The difference between this approach and standard micro theory is that it gives a central place to flows and stocks – these are present in macro, e.g. as aggregate demand, but missing in micro theory (not necessarily in the practical work of micro economists though!). It shows that traditional micro theory is merely decision theory – it ignores what the decider is deciding *about*. So in practical applications, we find Willingness to pay, but not Ability to pay.

    On the question of GDP, I totally agree with the comment that it also needs to be rethought from scratch. It’s true that Stiglitz’s Guardian article falls short on proposing new ideas, but to give him credit, he and others proposed that stocks should be measured, crucially including those of environmental importance, so that a decline in what some call “natural capital” would be recognised. This was in his report for the Sarkozy (!) government. It’s an idea that could form part of a total rethink. My next project is to devise a measure of national wealth/income that focuses on outcomes – whereas GDP, even at it’s best, is only about outputs. Very broad measures, such as wellbeing, happiness or health are good, but their connection with the economy, and of particular parts of the economy and economic policy, is unclear.

    Anyone interested in these ideas, please email me at m.joffe@imperial.ac.uk.

    Finally, I am attracted both to evolutionary theory and to MMT. But what evidence is there that they are correct?


    • Yoshinori Shiozawa
      November 27, 2019 at 12:46 pm

      Dear Mike,
      I have sent an e-mail yesterday. Have you received it? Please also read answers Yoshinori Shiozawa November 26, 2019 at 5:47 and after.

  8. Geoff Davies
    November 26, 2019 at 3:25 am

    If you look in the right-hand column you’ll see a green cover with an apple. It starts from scratch, using clear observations and modern concepts. It is very broad, despite its brevity.

    Those looking for/advocating a new start might have a look.

  9. Ken Zimmerman
    November 26, 2019 at 12:34 pm

    evidencebasedeconomics, appreciate the comments. Fleck’s “The Genesis and Development of a Scientific Fact” shows how difficult, sometimes impossible it is to meet the objectives you set. “I’d say, any new (or old!) idea needs to meet the criteria that (a) it fits well with the evidence, (b) deals with the actual causal mechanism, not e.g., “as if.” Fleck’s book examines the creation of facts about diseases and their causes, specifically one disease, syphilis. Although he examines only western notions, he does examine them historically. Fleck’s work shows two things. Causality in social sciences can never solely be a question of statistics of any sort. Although, statistical results can often be more helpful in real situations than specifics of a single event. Second, “Most facts have many different, possible, alternative explanations, but we want to find the best of all contrastive (since all real explanation takes place relative to a set of alternatives) explanations. We soon find, however there is no means, and never has been for humans to pick the “best” explanation. We need to reconsider causation. Causation is not a thing. It is a story. A story that explains within the framework of a specific culture how events or actors relate to one another, and how both relate to human society. For example, every society has a creation story that explains the origins of that society and its place in the “universe.” That’s causation, a story. This is from Fleck’s book, “In the context of our special investigation, I believe that the concept of syphilis is unattainable except through a study of its history. It has already been demonstrated here that Spirochaeta pallida alone cannot define the disease. Syphilis is not to be formulated as ‘the disease caused by Spirochaeta pallida. On the contrary, Spirochaeta pallida must be designated ‘the microorganism related to syphilis.’ Any other definition of this microbe is hopeless, and further, because of the question of germ carriers, cannot serve to define the disease unambiguously.” And on the flexibility and volatility of these stories Fleck says, “People argued against Columbus. ‘Could anyone be mad enough to believe that there are antipodes; people standing with their feet opposite our own, who walk with their legs sticking up and their heads hanging down? Is there really a region on earth where things are upside down, where trees grow downward, and where it rains, hails, and snows upward? The delusion that the earth is round is the cause of this foolish fable.’ “Today we know that the real cause of difficulty here was the absolute meaning of the concepts ‘up’ and ‘down’—a problem that dissolves under a relativistic formulation. The same difficulty arises even today if such concepts as existence, reality, and truth are used in an absolute sense.” This uncertainty has not, however stopped people creating causation stories and forming strong collectives to support and defend them.

    • November 27, 2019 at 2:41 pm

      Ken says: “Causation is not a thing. It is a story. … The same difficulty arises even today if such concepts as existence, reality, and truth are used in an absolute sense”.

      I beg to differ, though the differences in what we take as axioms stem from different philosophical choices of starting point: raw energy, energetic particles or imagining the latter.

      In my book, causation is not an imaginary story about the effect of the motion of one material object on another, it is a name for a type of event, including that in which raw energy is localised by chasing its own tail to become a particle. Existence and reality are specific and general names for the persistence in time of energetic motion (“the conservation of energy” whether or not so localised), while truth is a name for a logical (word) relationship such that the set denoted by one word is truly a subset of that denoted by another. Historically, the paradigmatic example has been a true wife giving birth to only her husband’s children.

      • Ken Zimmerman
        November 28, 2019 at 9:15 am

        Dave, you “beg to differ.” Then you lay out your version of a causation story. Fleck describes dozens of stories humans created over the last 1,000 years about the cause of diseases. All were real at the time they were created and used. Just like those we use today.

      • Meta Capitalism
        December 9, 2019 at 3:11 pm

        Ken quibbles over nonsense and pontificates clap-trap. Man once thought disease were caused by ghosts, evil magic, etc. By his BS relativism aka social constructivism the discovery of the cause of disease (viruses, germs, etc.) is no more than another story (while he elevates his baseless stories to THE TRUTH) — nothing more than a so rhetorical slight of hand to evade a simple truth-fact. Science can (scientists actually) discover facts and new meaning that shed light on material reality. Like such things as the true causes of certain diseases. The fact that some theories will be found to have been less than true upon the discovery of further facts does not negate the truth that past discovery has stood the test of time and saved many lives (e.g., vaccines). Ken spreads more manure on this site than a rancher but grows very little produce.

      • Ken Zimmerman
        December 9, 2019 at 3:51 pm

        Meta, rather than listing your comments under the heading of crap, which I should, I’ll refer you to a 50-year debate among anthropologists beginning before WWII. It was a fight over the basics. Is it possible to predict how people will behave? How can rationality be defined? How can you tell if someone is acting out of self-interest? Is the difference between modern and primitive economies one of degree or of kind? Are there universal laws applicable to all societies? And, is the economy always embedded in social structure? There was no winner because the basic question underlying all these questions is one for which humans have no answer. What is the nature of humanity? So being a bit wiser than economists and most philosophers, anthropologists dropped the debate and began working to understand what people create as their ways of life and how they do the creation. Anthropologists then used what they learn in this research to help people work on solving their “real-world” problems. “Head of a pin” debates can be fun but they don’t do much for creating greater economic equality, reducing the power of corporations, reforming governments, stemming the increase and impacts of climate change, etc. For humans relativity seems to come bundled with their lives. Leaves humans with lots of room to create themselves. And the results of those creations cannot be predicted.

      • December 9, 2019 at 4:14 pm

        This is just rubbish. If you are interested in “creating greater economic equality, reducing the power of corporations” and so on, you have to understand how economic power works. I am using “power” here not as an ideological category, but in the sense of causation, the degree of one’s ability to bring something about. It is obvious that in the economy, some people and some organisations (e.g. firms) have more influence than others. What they want to happen is more likely to happen. This is causation, and it is power. So it is nothing whatever to do with the mere theological discussions that Ken Zimmerman appears to think this is about. And it is absent from economic theories (not just neoclassical ones).
        To quote discussions among anthropologists about universal human laws etc is just silly. We have ways of finding out how causation works. In biology and other natural sciences, they have worked extremely well. We have known how the human circulatory system works for 400 years. We know a lot about e.g. the causes of many diseases.
        If economists applied a similar methodology (mutatis mutandis) to the economy, we would have much better knowledge about how it works, causally. And it is an elementary error to confuse the workings of the economy with something like predicting human behaviour, which everybody knows is near-impossible. The behaviour of the economy has many regularities – most of which seem to me to be system properties like feedback, not reducible to the vagaries of human nature. These can readily be understood if one goes about it in the right way.
        And also, to reiterate, this is about understanding causal processes, not about prediction. One of the big flaws (not the only one!) of conventional economics is that it acts as if research is all about prediction. The basis of the natural sciences such as biology is understanding causation. That can help with prediction. But most of all, it means that interventions have a better chance of success. Compare modern medicine, with a scientific basis, with what was going on in, say, the 1850s. Leeches and all that. Economics is still in the pre-scientific age, it is like 1850s medicine.

      • Ken Zimmerman
        December 10, 2019 at 12:06 pm

        Evidencebasedeconomics, I was reared working class. I prefer crap to rubbish.

        As the working class might say, if you can force me to do as you wish even against my wishes, that’s power. Methods to do so varying, of course. And, yes, it’s one description of causation that’s used. Along with many others. This was one of the points of my comments. In general, theory is not a concern for anthropologists. Including economic anthropologists. They begin with people in a certain place and time creating a way of life. Anthropologists assume that any theory of relevance will come from these people and their work in creating ways of life.

        Causation is always being debated, like most of human life. And we’re always inventing new causes of this or that. For example, some economists today, and other social scientists at other times believed the problems of poverty are caused by “illogical,” “irrational,” or even culturally biased behavior on the part of the poor. Our story is different today. Instead, poor people are seen often to do amazingly creative things with their few resources while working long and hard. Many economists now see the causes of the problems of poverty in government agencies, tax systems, unfair policies, and corruption that often also causes rain-forest destruction, the drug trade, urban squalor, mass migration, and the growth of black markets and underground economies. And the causes may change again in the future. And even today some economists and others stick to cause number one. Which of these is the correct explanation (cause) of the problems of poverty? At some times and in some places, each was accepted as correct by at least some people living in those places and times. But considering societies, including economies over centuries such assumptions provide a sense of regularity in beliefs and actions that are practical and useful, for a time and in a certain place. Whether there is one group of assumptions that provides this over all times and all places is impossible to say. What we see in human history is people living with and within the assumptions of their own time and place. With enough failure, chance, and knowledge from other places and times to sometimes “upset the apple cart” and force humans to examine and sometimes revise their assumptions. Scientists are sometimes the worst at this as they take their assumptions as particularly certain and inescapable.

        We can take a more general view of causation. David Hume and Bertrand Russell say causation does not exist. But human history could not exist without causation, inside and outside the physical and social sciences. So, how should social scientists, including economists use causation, or should they use it at all? Many social scientists, most philosophers, and physical scientists generally point out that causation is a tool invented by humans to make sense of observations. To place them into categories of thought that make humans comfortable. Historical studies certainly bear out this hypothesis. Not necessarily a bad thing. Two issues I see with using causation in the social sciences and economics. One, how far should social scientists and economics use causation as an explanatory device? Two, we always need to examine the cultural processes through which our notions of causation are constructed and used?

      • December 11, 2019 at 3:44 pm

        It is just untrue that “causation is a tool invented by humans to make sense of observations”. Or at least, the implication that it is *just* such a tool. You attribute this to “Many social scientists, most philosophers, and physical scientists”. As a former biologist, now an economist, I have a different perspective. Which is that causal processes are at the bottom of how the living world works – pretty much a tautology. They actually exist. When our *ideas* of the causal processes coincide with the ones that actually exist in nature, we have a correct theory. See my paper “The concept of causation in biology” for details on how it works there – it is at https://link.springer.com/article/10.1007/s10670-013-9508-6. And for how economics can learn from the experience of the natural sciences such as biology, see “Causal theories, models and evidence in economics—some reflections from the natural sciences”. If you can’t get access, email me at m.joffe@imperial.ac.uk and I’ll send you a copy. This applies to any reader, not just Ken. To summarise in philosophical language: causation is ontic, not only epistemic.
        Example: insulin really exists, it is secreted by the beta cells of the pancreas. Its molecular structure is known, as is its mode of action on cells. And much more. These are things that really happen inside everyone’s body, except those with type I diabetes.
        Lesson for how to discover the real causal processes in the economy (or in any other domain): start with tractable questions. If I started off trying to answer “What can be done about diabetic comas?” without knowing about insulin, I would get nowhere. What Banting and Best did was to ask basic questions about how the body works. Then that turned out to answer the question about diabetic coma – which nowadays is rare in countries with good access to healthcare, thanks to this basic physiological knowledge and its application to medicine. And more broadly, thanks to therapeutic insulin, type I diabetics now have the same life expectancy as the general population, in such countries.
        Coming now to your example, the causes of poverty. Instead of asking directly about this – it’s an important question, and I want to know the answers (there will necessarily be more than one!) as much as anyone – find out how the relevant bits of the economy work. It will involve basic things such as the sources of economic power (looked at causally); what has been the source of the astonishing growth of some economies since the industrial revolution (but not before); and so on. Basic causal questions. Once they are answered, one can build up from there to more practical issues.

      • Ken Zimmerman
        December 13, 2019 at 12:00 pm

        The usual term for notions like causation, property, supply and demand, price, (sticking mostly to topics that economists find of interest) is “social conventions.” I prefer the term tool. Many institutional economists use the term. See, for example, Abhijit V. Banerjee and Esther Duflo’s new book, ‘Good Economics for Hard Times.’ Their discussion of supply and demand is particularly interesting. They point out several inconsistencies and errors in the “standard story [convention] of supply and demand.” Geoffrey M. Hodgson provides more insight into institutionalists’ use of social conventions.
        The basis of price theory in institutionalism is thus quite different from that in other schools of economics. Neoclassical economics relies on the universal concepts of supply, demand, and marginal utility. Adam Smith, David Ricardo, and Marx relied on the labor theory of value. By contrast, in institutionalism prices are social conventions, reinforced by habits and embedded in specific institutions. Such conventions are varied and reflect the different types of commodity, institution, mode of calculation, and pricing process.
        If prices are conventions then they depend in part on ideas and habits. A theory of price must in part be a theory of ideas, expectations, habits, and institutions, involving routines and processes of valuation. Without such a theory, there is no adequate explanation of how individuals calculate or form expectations of the future. It was in this vein that a great deal of
        empirical and theoretical work on the pricing process was carried out by institutionalists and others in the first half of the twentieth century. Instead of a general theory of price, attempts were made to develop specific theories of pricing, each related to real-world market structures and types of corporate organization. It was in this context that much of the early work on oligopoly pricing was pioneered, including several theories of “mark-up,” administered,” or “full cost” pricing (Tool 1991). No less than other economists, institutionalists want to develop theoretical explanations of such crucial real world phenomena as price. Where they differ, however, is in stressing the practical and explanatory limitations of any possible general theory of all prices.

        Many in physics no longer think in terms of causation but rather in terms of a whole that contains many interactions and relationships. This approach reflects what’s called complexity. Which cannot be expressed in terms of cause and effect. In other words, for much of science cause and effect is becoming a less useful social convention while complexity is becoming more useful.

        In the paper you cite to it’s my view that Joffe is, at least in part discussing complexity while still using the language of causation. He describes multiple interactions and elements to interact. Which include non-linearity. There are likely many others he does not consider. The final sentence of the abstract is in my view wrongheaded. Joffe proposes to “consider this concept of causation from the perspective of everyday language, and of its possible generalisability outside biology.” The notion of causality came from everyday language and originated outside of biology. Taking it back is, therefore nonsense.

        However, I recognize that the use of the notion of causation has a long history among scientists. And it’s obvious you find it useful for both your old and new science. But even the most ardent proponent of causation will agree that therapeutic insulin is almost never the only factor in allowing diabetics to have greater life expectancy or that many factors, including many unknown, and perhaps unknowable factors can influence this outcome as well.

        As for poverty let’s go back to the beginning of the question, as least for social science. Rousseau’s “Discourse on the Origins and Foundation of Inequality among Men” (1754). Rousseau was not concerned with individual variations in natural endowments, but with artificial inequalities of wealth, honor and the capacity to command obedience that came from social convention. In order to construct a model of human equality, he imagined a pre-social state of nature, a phase of human evolution in which men were solitary, but healthy, happy and above all free. All were “noble savages.” At some point humanity made the transition to what Rousseau calls ‘nascent society,’ perhaps to deal with disasters and resource shortages. The rot set in with the invention of agriculture or, as Rousseau put it, of ‘wheat and iron’. Cultivation of the land led to incipient property institutions [property rights] which lead to property disputes which were addressed through a “social contract” expressed by laws. Probably arrived at by consensus, those with more or better property used the contract to secure legal sanction for transmitting unequal property rights in perpetuity. From this inauspicious history the cycle of political and economic revolutions we still see today began. This is one possible story of poverty, but not its causation. It is rather interactions of multiple actors (human and nonhuman, including institutions), the results of which cannot be predicted or fixed. If it plays out as Rousseau describes. It could have been different and with rather small changes might be different in the future. And if you think this could never be the case in any physical science, check out ‘The Pasteurization of France’ by Bruno Latour and ‘Networks of Power Electrification in Western Society, 1880-1930’ by Thomas P. Hughes, and ‘Quarks’ by Andrew Pickering.

        There are many more “stories” from which social conventions emerge about what poverty is and why it happens. One popular in the US for the first half of the 20th century is that the poor are stupid, irrational, and burdened with “bad” habits. These make it impossible for them to do the things that could end their poverty. This one’s still popular among libertarians today. A convention popular today among some but hated by libertarians is that the poor are “disadvantaged.” This story says the poor are robbed of opportunities to leave poverty by denial of education, employment, voting, etc.

      • November 28, 2019 at 10:36 am

        Pathetic! But given your axioms, Ken, what caused Fleck’s causes not to be what the earlier stories imagined they were?

      • Ken Zimmerman
        November 28, 2019 at 11:38 am

        Dave, agreed, pathetic. As to Fleck’s causes, the historian would point out different time, different place. The anthropologist would point out cultural changes. What’s your story?

        As to your contention that “Economics is a PID servo’, steering activity by OUR using error correcting logic.” Which economics is that? The economist’s, the banker’s, the baker’s? And similarly, which logic is that? These are not self-evident terms. Their meanings evolve with use and interaction. Who gets to decide which economics and which logic prevail? In some instances it could be democratic. In America, particularly of the last 50 years it’s decided by those with the most money. Digits in a bank account, or private wealth fund.

      • Craig
        December 13, 2019 at 5:27 pm

        The new paradigm I advocate would cut through all of the complexity around pricing by de-financializing the economy and by emphasizing the economic significance of the re-retailization of it with the 50% discount/rebate policy at retail sale. The generalized beneficial effects of the policy for all agents individual and commercial is a major signature of all historical paradigm changes as are its focusing, integrating and problem resolving effects.

        Complexity is good, wonderful and necessary right up until one cognites on the SINGLE concept which logically and systematically applied changes an ENTIRE PATTERN.

        In other words complexity, like food is good, wonderful, necessary, exists entirely within the digestive tract of a new paradigm….and almost entirely consists of wasteful intellectualization as it leaves that integrative process.

      • Geoff Davies
        December 13, 2019 at 11:19 pm

        Craig, the technical term ‘complexity’ that I use is not ‘complicatedness’. It is elaborate behaviour that can arise from simple interactions among simple components.

        So your remarks do not apply, whatever the merits of your claim of new paradigm, which I admit I have not tried to fathom. Advocate your own, but do not dismiss that which you do not understand.

      • Craig
        December 14, 2019 at 3:37 am


        With all due respect I don’t see any significant difference between complicatedness and “elaborate behavior”. The latter is a description of emergent I believe, but the anomalies that kept emerging from Ptolemaic cosmology in trying to make it fit the motions observed and justify itself were (as it turned out) mere complications and were only resolved by the paradigm changing concept of helio-centrism and the discovery of the ellipse.

        The emergent quality of financial instability likewise is only going to be resolved by recognizing the new monetary and financial paradigm I advocate, which fulfills all of the signatures of historical paradigm changes by the way.

    • December 3, 2019 at 5:16 pm

      Sorry to have missed all this discussion – I was frantically busy all of last week and until yesterday.
      I want to agree with what you said Ken: “Causality in social sciences can never solely be a question of statistics of any sort”. In my work on evidence-based economics, I emphasise the importance of multiple types of evidence, and finding congruence between them – see my website https://evidence-based-economics.org/, especially section A with short articles/blogs discussing such issues. This is true in a natural science like biology as well: statistics showing the association between cigarette smoking and lung cancer, plus the complementary mechanistic knowledge on how tobacco smoke causes cancer. In particular, it is necessary to seek evidence both on the characteristics of the phenomenon (here, the statistical association) and on the responsible mechanism (carcinogenesis). When both types of evidence support the same hypothesis, it is a good indication that one is onto the true hypothesis.
      I haven’t read Fleck, but *if* he is using the history of syphilis in western thought to try and say that we never find the truth, he is simply wrong. I don’t know that much about syphilis, but I can say that diseases like measles and smallpox are well understood causally. This is not the sort of thing that will be “overthrown” by a new “paradigm”. It is secure knowledge. Many philosophers are still ignorant of the cumulative nature of science. (Nevertheless, they still benefit from the growth of science-based medicine, when they need it. And from the eradication of smallpox!) You might say, well I’m just choosing the best-understood infectious diseases. Yes I am, to make the point that true causal knowledge is sometimes attainable. If syphilis is not in this category, all I an say is, hard cases make bad law.
      Is such causal knowledge possible in economics? Yes it is, but the right methodology is needed. There is a lot more to say on this than I can fit in here. But briefly: (a) start from examining the phenomenon, not from some imaginary a priori model; (b) gather as much evidence as possible, of multiple different types; (c) attempt to explain the diverse evidence, especially trying to find the actual causes and their mechanisms; (d) in the economy, there will always be multiple causation (“open systems”) – the same is true in biomedicine; (e) pay special attention to the interaction of causes, e.g. feedback loops – most regularities in the economy are in fact the result of causal loops bringing about some type of feedback.
      The idea that any set of observations can be explained by many theories, and it is nearly impossible to find the right one: this is true in some circumstances. But often the opposite is true: can any of you tell me a theory in the literature that explains the mechanism of modern economic growth that fits with the spatial and temporal evidence of where and when it happened?
      On the idea that causation is just a story – implying that it can be *any* story, e.g. various traditional creation myths (all of which are known to be false by the way): [I have deleted what I just wrote, because it was offensive].

      • Ken Zimmerman
        December 5, 2019 at 1:52 am

        Evidencebasedeconomics, the words you write are telling. Regarding causation in general “it is a good indication” is really the best we humans can do. Historically linking concepts, actions, terms, etc. to one another is how humans establish explanations. Of course, history also shows that more than once humans change their minds on the linkings or sometimes decide to begin again. That’s judgment. It is not reducible to certainty of any sort. Within these limits “true” causal knowledge is possible. But it’s always contextual and contingent. I know social scientists, including economists are often educated to believe that “correct” methodology and theory can fix this issue. That education is wrong. They cannot fix it. And often make the situation worse as economists become blinded to the many judgments they make to reach “facts.” Contextuality and contingency. Keep those notions in mind. As to creation “myths” they’re often shown to be limited, particularly by later generations who did not create them. This is the case whether the myths are created by ancient Vikings or by modern scientists. On the latter, consider the origin mythology for modern microbiology. It’s changed several times since Pasteur. Hasn’t affected the work of microbiologists thus far.

      • December 5, 2019 at 4:02 am

        Any reason why this discussion has to be so convoluted.? for me MMT is reality based, but evidence based works also. Then we should discuss the evidence. The subsequent lengthy commentary about esoterics etc is skewing the story away from the basics.. It doesn’t need a life of its own. We’ll get a lot further if we can work out how to describe the, say, creation of the money supply in as brief a way as possible. That way we can cut through the crap that surrounds the mainstream. Otherwise we are participating in the confusion

      • Ken Zimmerman
        December 5, 2019 at 1:06 pm

        John, unless you assume that there is only one reality, I must ask upon whose reality is MMT based? Or, to make it more comprehensible to a social scientist, upon what data is MMT based? Humans have found many ways to bring order to the phenomenological flow of existence, and money is one of the most important. Money’s importance is that it is itself a metaphor; it stands for something else. More specifically, money is a metaphor that can stand for almost anything else. It allows humans to structure life in incredibly complex ways that were not available to them before the invention of money. This metaphorical quality gives it a focal role in the organization of meaning in life. Money represents an infinitely expandable way of structuring value and social relationships—personal, political, and religious as well as commercial and economic. The struggle to create money, to make it serve one group of interests or another is never ending. Throughout history, whenever one faction or institution seemed to have won control of money, an outside player invented another form based on a new technology, and another struggle erupted. Every culture organizes life around a few simple principles, activities, and beliefs. The other institutions and activities of the society hang from that core like branches from a tree trunk. The center of those principles, activities, and beliefs in the modern world is money. Money has created a unified world economy. Although fluctuations in politics, religion, technology, and even the weather can play a role in any of these endeavors, money constitutes the basis of the entire system and forms the crucial link in establishing value, facilitating exchange, and creating commerce. Money unites them all together into a single global system. It is the tie that binds us all. Thus far money has move through two generations. First, the invention of coins in Lydia nearly three thousand years ago resulted in the first system of open and free markets. The second generation is the invention of banking and the paper money system. This helped destroy feudalism, changed the basis of organization from heredity to money, and changed the basis of economic power from owning land to owning stocks, bonds, and corporations. Now we’re entering the third stage of money’s history. The era of electronic money and the virtual economy. The rise of electronic money will likely produce changes in society as radical and far-reaching as the two earlier monetary revolutions caused in their own eras. The new money is likely to lead to sweeping changes in the political systems, in the organization of commercial enterprises, and class organization. Virtual money promises to make its own version of civilization that will be as different from the modern world as from the world of the Aztecs or the Vikings. And of course, as in the prior two monetary revolutions, people will invent and use dozens of variations of the main cultural configuration of money for special purpose projects and varying special interests.

      • December 5, 2019 at 8:33 pm

        Ken, I just think we need to stay simple. just go with the laws of the land, the constitution and use the various licences etc. That’s what MMT does. I reckon when AOC went into Congress to tout the Green New Deal and MMT in support it was a watershed moment Suddenly realisation started to bite and now the mainstream is moribund, but still kicking furiously and manufacturing straw men by the boatload. It can’t win because it is a construct dependent on assumptions, ones with no scientific backing. MMT has no such problem Bill Mitchell calls it a lens we can look through to see truth. .

      • December 5, 2019 at 11:45 pm

        Ken: I agree when you say ‘“true” causal knowledge is possible. But it’s always contextual and contingent’. Although you make it sound more difficult than it is, and seem to equate causal knowledge derived from good scientific methodology with that derived from mere story telling. In biology there are literally hundreds, probably thousands, examples of established causal knowledge – not because biology is easier than economics, but rather because the methodology has been a successful one (including that biologists ignored what was being said by philosophers during the great period of growth in biological knowledge from the 1850s onwards – including the notion that causation was a useless “vestigial” concept that should be avoided!).

        A biological example: the way the mammalian blood circulation works, established 400 years ago, and undoubtedly correct. An economics example: how money is created in the modern economy – I used this as an example in my article “The creation of money – good practice in evidence-based economics” – see https://bit.ly/33VbvO4. It is explicitly applicable just to a specific economy at a particular historical moment, so “contextual and contingent”. But none the less true for that. So: good, sound causal knowledge is possible in economics – but it is never going to be universal “laws”, always historically and geographically contingent.

        This account of money creation by bank lending etc is a good example of how a group of economists (at the new economics foundation, nef) could describe the actual workings of this bit of the economy by combining different empirical methods, including careful description of actual behaviour by banks, supported by statistical analysis. It is important to note that when “Where does money come from?” was published by nef, central bankers admitted that they knew this all along, and that the economics textbooks were wrong. The Bank of England published a couple of articles two years or so later, admitting the truth of the nef book.

        John: on the evidence for MMT. As I understand it (which is partially – it is not my research area), MMT contains a lot more than this causal account of money creation. I would still like to know what the evidence is for it. I have read the work of Richard Werner (one of the authors of the nef book), and he provides a lot of good evidence on how the monetary system works, but this is not the same as the whole of MMT.

        Craig: your #1 through #4 are brief factual statements describing the monetary system as it currently exists. Once you get to #5 and #6, we are in the realm of judgements and policies. Obviously these are necessary. But we are on stronger ground if we establish the causal workings of the economy in such a way that those who don’t share our political and other values have to accept that we are telling the truth. That was the strength of the nef book: the BoE had to admit that nef was right and the textbooks wrong. That is a good foundation for developing policy, and wrong-foots the opposition. By lumping them all together, the whole argument can easily be dismissed as ideology by those who have vested interests, material or intellectual, in the status quo. This is partly a question of good tactics. It is also a question of valuing the truth for its own sake – the corollary being that if we find that an aspect of how the economy works does not confirm our value system, we have to accept that. It’s not easy – but it does mean that we’re doing “science” not ideology.

        Your #6 and your later post mention power, albeit in an ideological context. It’s not that I disagree with the sentiment. But as a relative newcomer to economics (from biology), it strikes me as really odd that people think they can explain how the economy works without using some concept relating to economic power, or relative economic strength. Inequality of influence is the most obvious feature of the economy! I have done a bit of work on this, just on the aspect of unequal consumers, i.e. buying power (it is all embarrassingly obvious!) – see http://www.hrpub.org/download/20170730/AEB1-11809448.pdf. I am currently working on other aspects of economic power. This is a causation-focused not values-based account. Because the degree of economic power of an individual or organization is what determines how much causal impact she/he/it is able to have on the economy.

      • Ken Zimmerman
        December 6, 2019 at 12:37 pm

        evidencebasedeconomicsequate. Just a few comments. Going with Einstein’s definition of science as enhanced common sense, what is the enhancement that creates “causal knowledge derived from good scientific methodology.” Scientists, unlike the layperson examine data from dozens of sources, acquired via many different tools, methods, etc., and scientists never really stop this process. This is the enhancements. Add to this that this is the professional work of scientists. No part-timers here. But in the end the scientist communicates findings to the public and even mostly to other scientists as a story. A highly footnoted, illustrated, and technically mapped story, but still a story. As with any story that humans make-up, the scientist’s story requires that items are ranked from more to lesser important, that judgments be made about how to gather and interpret information (data), including the use or not of mathematics.

        You use phrases like “undoubtedly correct” and “but none the less true for that” context. These are phrases that hamper, retard study in any field of scholarship, including science. Thus, they have no place in the work of scientists. The New Economics Foundation in my view does good work. But it is undeniably a “progressive” group. Which makes it suspect by 70-80 million Americans. Before we use its work to guide our research and policy, we need to decide how we want to deal with the blowback. Some of that blowback will be violent and brutal.

      • Ken Zimmerman
        December 6, 2019 at 12:28 pm

        John, I agree with you about keeping it simple where we can, within the context of the situation. The situation right now is this. There are least three versions of many parts of the US Code and many state codes. That intended by Congress, which of course doesn’t exist except on some general points. Second, that enforced by executive agencies which at present often has little or no relation at all to the first. Finally, the version upheld by federal and state courts. Right now, that’s a tossup in terms of agreement with number one, depending on which US President or Governor appointed the judge. In other words, the law is not much of a safeguard for the public interest right now. The Green New Deal and MMT applied to governing the US will face all these problems times 10. In addition, they will have to deal with a hyper-partisan attack campaign. This campaign is attacking the MMT-based tax proposals of Senator Warren currently. Repelling that campaign is difficult. Particularly against economic advisors to the creators of the campaign steeped in and absolutely committed to “trickle-down” theories that have dominated the discipline and public policy since Ronald Reagan’s presidency. And as we write this today, the nation is evenly divided between those who insist on a fairytale perfect Constitution of white supremacy and those wanting a Constitution ready and willing to enable a new immigrant-based US. AOC, MMT, the Green New Deal, and many other national and local areas of concern face active hostility along with equally active support. Right now, emotions are running high. Threats of violence are made and carried out. Billions of dollars are invested to build an America that fits the dreams of one faction or another. And no quarter is expected or given. No compromises!

      • Craig
        December 5, 2019 at 6:15 am

        @John Doyle

        Excellent suggestion. KISS is always a good policy. How about:

        1) Loans create deposits

        2) Private banks create 97+% of loans, a virtual monopoly on credit creation

        3) Even the money created by governments via the FED as deficit spending is created as debt.

        4) Hence the monetary paradigm/pattern is Debt Only

        5) A monopoly on both credit creation and also on the ENTIRE pattern of Debt Only, that is as the sole FORM and VEHICLE for the DISTRIBUTION of money/credit is probably

        a) the stupidest,

        b) most naive, (in view of the fact that money in a monetary economy is both the means of security, and the ability to deny it is the power to deny both individual survival and the continuation of commercial enterprise) and

        c) blatantly contradictory fact in an alleged competitive free market economy.

        6) Finding a way to place the power of money “into the many hands of the individual” in such secure abundance that there is no longer “the reserve army of the unemployed” that can be extorted and cowed, that also more abundantly benefits 99.9% of enterprise, that resolves the deepest problems of the current paradigm by literally inverting its realities of individual income scarcity, systemic austerity, balkiness and tendency toward recession or worse and finally of price and asset inflation….would seem to be the order of the day.

      • December 5, 2019 at 6:55 am

        Thanks, Craig. I concur mostly. Obviously your last point depends on the political scene. I read a view today that sheets a lot of blame to the Supreme Court decision which made donations to political parties an “expression of free speech” [instead of corruption] and another one. [I’ve lost the link]So much for the Supreme Court protecting citizens rights! Otherwise economics can move mountains.

      • December 5, 2019 at 7:00 am

        Here is that article,[Truth dig] Why Have No Republicans Turned on Trump? – Truthdig

      • Craig
        December 5, 2019 at 9:39 am

        Yes, Citizens United is a huge political problem and needs to be amended big time. Political partisanism/polarization/obsessive contentious dualism is a sign of advanced civilizational deterioration, and synthesis/integration of the particles of truth in that dualism enabled by the new insight and/or tool that always accompanies paradigm changes is the only solution to the idiotic duel to the death of pols.

      • December 5, 2019 at 7:14 pm

        What reality do we consider that democracy is a bottom up authorisation to rule, [Kingship was top down] from the people? It has been largely supplanted by international bankers’ power to create unlimited credit and the power that goes with it.
        I think we have to reassert that the bottom up has the sole authorisation to create the money supply. Bankers don’t give a hoot to the welfare of the people.The USA is the most “advanced” down that road since alone its economy is 20% of the world total and it shows no instinct except periferal that it’s changing, especially with the billionaire class providing all the candidates for POTUS.

      • Craig
        December 6, 2019 at 5:15 am


        I’m way past all of the caution and intellectualization. When you’ve

        1) integrated the best policies and insights of all of the leading reform movements and heterodox theorists (MMT & UBI-the efficacy of direct monetary distributism,

        2) Keen-financial instability hypothesis,

        3) Hudson-financial parasitism and debt jubilee),

        4) discovered the policy insight of the new paradigm (the power of a high percentage discount/rebate monetary policy at the point of retail sale) and how it resolves the three deepest problems of the current paradigm (individual income scarcity, systemic monetary austerity and chronic price and asset inflation)

        5) discovered the concept of the new paradigm itself (Abundantly Direct and Reciprocal Monetary Gifting),

        6) how it will enabled all of the “knock on” benefits within and without economics including supercharging what we should have been doing to enable ecological survival for the last 50 years….it’s way more than anyone else here or elsewhere has posited and way more than enough to convince…if you simply keep looking at the immediate effects of the policies I repeatedly posted here. It’s a no brainer. And if I haven’t completely visualized and nailed down every little jot and tittle of the the new paradigms integration, as Aristotle said: “We learn by doing.”

        Simplicity is the keynote of paradigm changes not complexity.

      • Craig
        December 9, 2019 at 6:01 pm

        This discussion dramatizes what is wrong with economic theorizing, namely dualistic, obsessive, non-resolving contentiousness.

        What is required is integrating BOTH anthropological AND empirical evidences and then considering and finding a single concept that fits seamlessly within and enables a thirdness greater oneness of such evidences namely a pattern/paradigm change. As I have pointed out here many times before two of the major signatures of a paradigm change are the discovery of a new insight and/or tool and conceptual opposition to the current/old paradigm.

        So the discovery of the power of a monetary policy at the single aggregative ending point for all consumer goods and services, hence the terminal expression point for all economic factors including inflation and purchasing power and finally that fits seamlessly within the very woof and warp of exchange, i.e. economics/the productive process itself…seems to fit such insight.

        And a 50% discount/rebate monetary policy at that point (retail sale) would result in empirically inverting the present realities of individual income scarcity and systemic business revenue austerity into abundance of same thus fulfilling the conceptual opposition signature (and integratively the temporal reality one as well) of genuine paradigm change.

      • December 9, 2019 at 6:12 pm

        I have sympathy with what the first paragraph says – if I understand it right – the problem is that it is expressed in confusing terms. You say “BOTH anthropological AND empirical evidences”, but if anthropological evidence is based on observation, then it is empirical! Are you misusing “empirical” to mean statistical, including econometric? I would rephrase what you say as:
        “What is required is integrating both qualitative and quantitative evidence …”. I totally agree with that, and have said it many times in blogs, papers, etc. I would go a bit further and say, the more different types of evidence – of both types – that can be brought to bear, the better. If a hypothesis then passes the test of corresponding to this diversity of evidence, then it is likely to correspond to what happens in the real world.

      • Craig
        December 9, 2019 at 8:13 pm

        Your suggested changes are fine.

        As paradigmatic analysis is an integration of both a single qualitative (conceptual) and plural quantitative (temporal) realities would you say that it was important to consider such sweeping analysis as well (as opposed to merely scientific and social science empiricism)?

        In fact does that not make it an integrative level above such mere empirical analysis?

      • December 9, 2019 at 8:47 pm

        I’m not sure I totally understand everything in your post Craig, but here’s my viewpoint: the search for knowledge involves an iterative process between theory and evidence. Either of them can come first. It’s when they fit well together – and as I said, with many diverse types of evidence – that one can be said to be getting somewhere. This iterative process applies to smallish contributions as well as to grand upheavals or major contributions – the principle is the same.
        When you say “paradigmatic”, I interpret this as focusing on the “grand upheavals” end of things. I agree with your implied opinion that a grand upheaval is needed in economic theory. But as I say, the basic process is the same whatever the scale of the contribution. I think it would be possible to develop a new economic theory (I dislike the word “paradigm”) that fits with how the world actually works. Based on the experience of successful examples, mainly in the natural sciences but also in economics as with the account of money creation, the new theory is developed by having the totality of the evidence in front of you. And then coming up with a theory that does justice to it. Sometimes it is obvious (and seems like what you call mere empiricism), and sometimes it requires an enormous leap of imagination and reasoning to get there, as with Darwin’s and Wallace’s account of evolution.

      • December 9, 2019 at 10:22 pm

        A paradigm is a working example of a general theory, not of another application.

      • Craig
        December 9, 2019 at 10:38 pm

        Any theory is mere until it includes analysis at the level of the paradigm. If that clearly higher/more integrative analysis is included it can be considered a nearly complete theory. There is an integrative level of analysis above even that of the paradigm, namely the zeitgeist/ethic of the age, A current zeitgeist/ethic of the age influences and drives virtually every mental and temporal factor extant…unless and until one is willing and able to think outside of it.

        Power as the over ridingly most relevant concept and ethic is the current zeitgeist, and the natural philosophical concept of grace which includes, encompasses and integratively transforms the problematic nature of power will someday be the new one.

        I’m for the integration of all forms of analysis reductively complex and wholistically simplified. No one else here has shown the least interest in the latter form (of which paradigmatic and zeitgeist are examples) even though their effects are greater, permanent and more inclusive than the former. Lets up our game scientifically and philosophically.

      • Meta Capitalism
        December 10, 2019 at 1:48 pm

        Meta, rather than listing your comments under the heading of crap … ~ Ken Zimmerman’s crap is piling so high I need a new pair of Sorels ;-)

        Ken likes to engage in the rather silly and transparent practice of name dropping for fallacious appeal to authority, like for example, “Going with Einstein’s definition of science as enhanced common sense …” as though this justifies his crap social constructivism. And speaking of crap, he loves it! To wit: “I was reared working class. I prefer crap to rubbish.” Well, whether one labels it “rubbish” or “crap,” Ken’s social constructivism taken as he pontificates it is balderdash, hogwash, ignorant claptrap masquerading as erudite knowledge. When social constructivism, like any -ism, is taken to the extreme it is well, an ignorant stereotype or as one whose comments are erudite and worthwhile, useless rubbish.

        No wonder there is a crisis of the common man or women believing the so-called experts anymore. To many, like Ken, spread spam for ham.

      • Ken Zimmerman
        December 10, 2019 at 2:20 pm

        Meta, you seem a good jingle maker. Not much else.

      • Meta Capitalism
        December 10, 2019 at 4:56 pm

        Meta, you seem a good jingle maker. Not much else. ~ Zimmern’s Freudian Slip

        Can’t face truth eh, Ken? Your stories are just-so stories. That’s it. Plain and simple. You are trapped in your own pesky value-judgments and can’t seem to escape. Pretty darn pathetic. Trapped in your own stereotypes. Such a shame for a great intellect to be unable to simply see the self-contradictory error of your own ill-logic.

      • Ken Zimmerman
        December 11, 2019 at 12:48 am

        Best description of your position I’ve read. Too bad you didn’t see it when you wrote it. Take it, and run with it. I’m done with wasting time and energy on you.

  10. November 26, 2019 at 6:03 pm

    Kick it over, indeed!! But who is supposed to be doing the kicking?? (Post) Keynesians?.. I’m afraid that when one’s point of departure is a static Y=C+I, there is nowhere to be got from there in a dynamically operating economy either. When Keynes tried it on p. 104 of his GT, he encountered a riddle. Small wonder when his objective (dynamic) point of view, “Consumption – to repeat the obvious – is the sole end and object of all economic activity”, is supposed to be squared with his subjective Y=C+I… Give it up, friends, as long as you’re seeking salvation through paradoxes, you’re fighting a losing battle.

    For a fresh new start, may I suggest going back a couple of hundred years to a (political) economist, who made his analysis of how an economy works _dynamic_ from its very core. His name is Sismondi, and I’ve translated the essence of his magnum opus in reflection of statically indeterminate economic values from his point of view; which is dynamic-Keynesian, in the above sense. In addition to that, annotations were inserted to help that endeavour a bit further along. http://www.vcn.bc.ca/~vertegaa/sismondi.pdf

  11. Yoshinori Shiozawa
    November 27, 2019 at 6:01 pm

    Dear John

    I have read your translation of (part of) Sismondi’s New Priciples and your often long annotations. It may be your style of thinking and explanations, but I wonder whether you cannot explain your idea more concisely and incisively.

    Dear readers
    I also want to ask all readers here: Who has coined the term “Say’s law”? Is it Keynes or is there any predecessor to him? Suppose someone has coined this term. Is it the same idea that John Baptiste Say wanted to express in his famous chapter on Débouchés?

    It seems to me that Keynes attacked self-invented scarecrow.

  12. November 28, 2019 at 9:15 am

    Back to the original: David Wilson saying “The more I learned about economics, the more I discovered a landscape that is surpassingly strange. Like the land of Mordor, it is dominated by a single theoretical edifice”; and Lars Syll saying that “mainstream economists do not see this​ since they have the weird idea that economics is nothing but a smorgasbord of ‘thought experimental’ models. For every purpose you may have, there is always an appropriate model to pick.”

    My contribution thanking Yoshinori: “I found Joffre exceptionally clear on the difference between a theory and a model, i.e. fundamental scientific theory and models left arbitrary by lack of applied science narrowing their axioms down to observable specifics”.

    So Wilson is seeing the reigning theory [equilibrium occurring automatically as a Lockean balance of forces] and economists not, i.e. seeing only their imaginary models. I will add that the philosophical starting point of this was Locke’s Newtonian massive particles, as “transmogrified” by Hume’s “black box” psychology pursuading him it was all imaginary. In his student Adam Smith the theory of the tendency to a balance of power (not to mention its bias in favour of the powerful) has been reduced to an imaginary “invisible hand”), giving way to making models empirically, i.e. of what one is conscious of – which in real life depends on what one is looking at.

    My argument is that “the wrong theory” is actually the wrong philosophical starting point. Mine, “raw energy”, leaves room for radio waves carrying information and human brains able to detect, remember and act upon it rather than the trivial forces of the carrier. The “right theory”, given this starting point, is not an automatic balance of power, it is one in which equilibrium can be achieved by humans responding to messages from the present, the remembered past and what can be seen of the approaching future; controlling their own actions as a means of controlling activities they may well be working on cooperatively with others. I can explain how this works (its epistemology), but in short, the “right” theory” is the ontological one: “Economics is a PID servo”, steering activity by using error correcting logic.

    Unlike Mordor, this is not a single theoretical edifice. It is a structure or network of communication channels from which bits may be missing, and information carriers whose message may be garbled. I myself worked with such control systems back in 1960, in which correction of speed errors had to leave enough of an error to drive the system (analogous to “the reserve army of the unemployed”). Where more accuracy was necessary, this standing error was offset by its rolling average (based on remembering it over a period of time). In 1968 I saw Keynes attempting the same logic: adding the error signal in the form of sustained unemployment left by steering the economy solely by prices. Back in 1956 I had been introduced to pre-war Practical Radio use of positive feedback to boost the efficiency of amplification, and saw the net effects of this were to reduce the bandwidth of the signal (i.e. strip off the harmonics which gave the sound its quality, c.f. small shops disappearing from town centres) and when too much was used, to turn the amplifier into an oscillator (as rediscovered by chaos theorists). The answers to that was to control the efficiency of the amplifiers with negative feedback to make them predictable, leave out the “reaction” (positive feedback) and add Dolby hi-fi (negative feedback overall as well as in each amplification).

    Radio communication is not of course economics, but the argument is that these are different applications of the same fundamental theory, as are its generalised embodiment in a PID servo integrated circuit microchip and its long established paradigm of “cybernetics”: the method of steering ships in an unpredictable sea. You want to see the evidence for this? Look around you. Look for it in its many practical applications, not in economic text books.

    • November 28, 2019 at 10:21 am

      I seem to have omitted a key word, “our”, which allows me to emphasise the point: “’Economics is a PID servo’, steering activity by OUR using error correcting logic”.

  13. ghholtham
    December 6, 2019 at 11:20 pm

    Lars Sylls is still yearning for the new grand theory of everything in economics. Like all nihilists he is a disappointed romantic and my advice is don’t hold your breath. No such theory will emerge. We shall always have suite of partial models which have to be used selectively and with intelligence to tackle specific problems. It is reasonable to expect the models will improve be more empirically grounded and be much better than much of the stuff we have at present. Some models will still be incompatible with others – as quantum theory is incompatible with general relativity. The trick is to know when to use one and not another. We shall not get an economic “theory of everything”. In fact one of the great vices in economics has been trying to turn the neo-classical approach into a theory of everything. The failure should warn us against attempting to replace one shibboleth with another.

    • December 7, 2019 at 10:26 am

      “In the high and powerful words of Mr Belloc, ‘Do not, I beseech you, be troubled about the increase of forces already in dissolution. You have mistaken the hour of the night: it is already morning’.”

      I already have a theory of everything (which includes economics and lies). Why you and Lars are not seeing it is because you are not looking for it. Your theoretical language doesn’t distinguish between fundamental and applied theory: the one establishing what there is (so what to look for), and the other what that is likely to do. See my comments on Maurice Allais.

  14. ghholtham
    December 10, 2019 at 1:33 am

    well Dave I expect to congratulate you on your Nobel prize. a theory of everything, including economics must be worth one at least.

    • December 10, 2019 at 9:44 am

      Yes, embarrassing, isn’t it? What I mean is, you are not looking for a theory which tells you where in your universe to look (for what is important, what is going wrong and in general terms, what to do about it) rather than predict every last thing which has or hasn’t yet happened. There is not much point in that, even in physics. What matters is only ever some particular bit of the ‘everything’, plus our ability to discuss it and learn from each other. Have a think about the theory of how to express every number, i.e. the arabic number construction algorithm.

  15. Meta Capitalism
    December 10, 2019 at 2:26 pm

    well Dave I expect to congratulate you on your Nobel prize. a theory of everything, including economics must be worth one at least. ~ Gerald Holtham a day later and dollar short ;-)

    Gerald, the Nobel has already been claimed on this blog by our resident engineer faux economist, aka Frank Salter, to wit:

    North, in his Nobel lecture, examined this, even though he felt such a paper would never be written. Now, it has. (Frank Salter congratulating himself on his Nobel Prize, RWER, 2/1/2-18)


    “There’s a Nobel Prize waiting for the guy who fleshes this out … for economics.”
    I hesitate [bullshit, no he doesn’t] to make such a claim, but, at least for production theory, this (irreversible time) has been fleshed out in Transient Development (RWER-81). (Frank Salter’s Faux humility congratulating himself on his Nobel Prize, proving The Nobel Factor was right and the Prize is a joke, RWER, 2/16/2018)


    [M]y paper … It is the first to examine the development of manufacturing through real physical time. All previous analysis do not examine in real time. It is well worth reading D. C. North’s 1993 Nobel Lecture, where he discusses just how significant such an analysis through time would be, even though he did not believe one was actually possible. With no example available to him, this is understandable. However, now there is. (Frank Salter claiming he deserves a Nobel Prize, RWER, 2/1/2019

  16. Geoff Davies
    December 11, 2019 at 1:02 am

    You people are polluting my inbox with school yard insults. Please drop it.

    • December 11, 2019 at 10:31 am

      Good to be reassured you are still around, Geoff, after the news we’ve been getting of uncontrollable fires in NSW.

      Yes, the Metacapitalism style is familiar as well as unwelcome, but Gerard’s comment was fair banter: the joke is in the ‘Nobel Prize for Economics’.

      A little more on your book. What I found most helpful was p.119 on catalysts; less so your not clearly relating this to incentives and feedbacks in Ch.10. On Complex Minds (p.134) Capra and his Taoist predecessors have not grasped the significance of the split brain experiments and the difference between serial (word) and parallel (picture) computing. Relevant to the discussion above is p.153: “The purpose of theory is to give us a useful guide to the behaviour of the world we observe”. I am saying that first we need fundamental theory giving us useful guidance to OUR OWN behaviour, i.e. how to observe the world and in general what to do and what not to.

      I was really pleased to see you mentioning Robert Pirsig’s “Zen and the Art of Motorcycle Maintenance” on p.154 (Oh for an index!). From the book I realised (what physiology has confirmed) the first thing activated by the senses are (chemically energising) feelings of specific types of Pirsig’s Quality (good or bad, fight or flee). Have you ever read Pirsig’s other book, “Lila”, in which he argues for morality having four levels, and a sort of ratchet mechanism retaining the lower levels so we can build on them? Though the boundaries may be fuzzy, we can see the progression in [avoiding] evil, wickedness, mistakes and errors.

      • Geoff Davies
        December 12, 2019 at 1:14 am

        Thanks Dave. We’re all safe here for the time being, and there’s a lull in bad weather. But the winds will return and it will get hotter, so it seems inevitable Oz will suffer much destruction. Friends have had some close calls but have made it through. There’s beginning to be a political effect, but not yet clear if we might rid ourselves of the most corrupt, deluded government in our history.

        Thanks for notes on the book. My understanding is brain function is highly parallel and impressionistic, though we like sequential stories and can force ourselves to work through a logical sequence. Haven’t thought about split brains in this context, though the split in functions is not so simple.

        I find deep parallels between how our brains work through metaphor and how science works, explored a bit more in my previous Economia. I think we can work at both levels – understanding ourselves better while making macro stories of economies that subsume our behavioural complexities – a distinction Ken seems to miss.

        Yes Pirsig is a favourite. Quality a rewarding concept. I read Lila long ago. I can’t remember why but I thought there were big holes in his line of argument, so I haven’t retained it.

      • December 14, 2019 at 12:05 pm

        Geoff, I was writing a longer response when a computer interrupt lost it, and I can’t remember much of it. Let me just say I didn’t think Lila’s story was as good, but the ratchet analogy tied in with my argument against Pope Paul V!’s argument against contraception (in any case as translated). Error (physical), Mistakes (mental), Wickedness (to other people) and Evil (persuading other people to think that acting wickedly is good) are categorically different. I can agree that promoting birth control by use of contraceptives and abortion is evil without thereby condemning people whose circumstances make self-control impractical. Wrong or mistaken perhaps, but not evil. Having the appropriate aims and information to know when (in one’s own locality) having another child is appropriate is far better than a “one-size-fits-all” Chinese style limitation of family size. As of now the necessary aims and PID information are not provided because ignorant economists and politicians still think in terms of control as enforcement

  17. December 14, 2019 at 11:32 am

    Ken on Nov 28, 2019 at 11.38 am. “As to your contention that ‘Economics is a PID servo’, steering activity by OUR using error correcting logic. Which economics is that? … And similarly, which logic is that?”

    Ken (knowing only opinions) is making category errors again: mistaking “which meaning of the words ‘economics’ and ‘logic’? ” for the activities of human provisioning and error control.

    Economics is economics even if ill-will and misconceptions in the monetary control of the economy are turning it into chrematism (as animals remain animals even as the development of speech and other forms of communication turns them into fallible human beings).

    Logic is logic even if the recognition of family tree relationships has been generalised, beyond recognition of subsets inheriting the properties of their sets, to the recognition that the properties of activities change over time unless the changes are cancelled. Hence Shannon’s generalised method of error detection by audit trails and correction by information feedback.

    Wiener’s equivalent in the specific case of homeostatic physical interaction, somewhat misleadingly called Cybernetics (steering), was in due course generalised systematically as an activity flow guidance system. A PID servo adds corrective information feedback circuits to this: in the paradigm example of navigation, taking account not only of the ship’s course (Shannon’s communication channel) but immediate error (steering), accumulated error (sideways drift over time) and changes to avoid danger (these creating errors which if not themselves corrected lead to chaos: c.f. chaos theory). .

    “Economics is enslaved by the wrong theory” because economists in general are making Ken’s Humean type of category mistakes: if seeing circulation – rather than quantities of supply and demand – valuing the monetary circulation Adam Smith already condemned as what we now call a Ponzi scheme. [Follow up via the index of WN]. Economists don’t study control theory: they simply assume austerity must be imposed by turning off other people’s taps, rather than us all (with heat death looming over our world) using only what we need: day by day, over our lifetimes, making good together if or when (as now) misfortune strikes.

    • Ken Zimmerman
      December 14, 2019 at 2:38 pm

      Dave, since humans invent the categories, I think they can claim them. I’m just want you to say which of the several economics and logics available you’ve chosen to talk about? You can’t possibly believe as you imply that that all economics is the same. Can you? Or, all logics?

      Your error is to ignore that categories, whether everyday or philosophical are embedded in times and places which reflect the ongoing invention of culture. If we want to understand categories and their application, we need to examine their cultural histories. Hume’s work was based in empiricist categories of the Enlightenment. Outside that place and time, they will be interpreted differently. Economics (classical and neoclassical versions) went wrong by concluding there is only one kind (category) of theory it could pursue if it wanted to be a science. That is universal theory, a theory that would work in every sort of economic action in every time and place in the world. This is the theory that now enslaves economics. In this way these economists could apply without any sort of verification their ready-made concepts. Such as supply, demand, self-adjusting markets, utility maximization, equilibrium, marginal utility, etc. Often, these are not what these economists portrayed them as in the economic settings in which they do exist, and in many other economic settings they don’t exist at all. These economists managed to combine two general errors in one set of working documents. Ignoring history and culture and disrespecting the peoples who create them. You may call these opinions if you wish. But they are what makes the world go around.

      Institutional economists, and other social scientists with a similar foundation escaped this plague, however. Institutionalism has no general theory of price, markets, trading, etc. but a set of guideline approaches to specific problems. These lead to historically and institutionally specific studies which are arguably of more operational value than any all-embracing general theory. Regrettably, specific studies of market institutions and pricing processes have received far less research resources and prestige than general equilibrium and other highly abstract approaches. The sources of this prejudice are no mystery. Wealth and power. The abstractions help the wealthier and more powerful members of society.

      • December 15, 2019 at 6:48 pm

        “Ken (knowing only opinions) is making category errors again: mistaking “which meaning of the words ‘economics’ and ‘logic’? ” for the activities of human provisioning and error control.”

        This is perhaps inevitable, given his commitment to the third of the philosophical starting points I mentioned near the start of this discussion: “The differences in what we take as axioms stem from different philosophical choices of starting point: raw energy, energetic particles or imagining the latter.”

        Let us move on, then. It was I think my mentor in modern philosophy John Passmore who, when asked what was the difference between a category and a class, pointed to the difference between Kant’s categories and Aristotle’s, i.e my first and second choice of starting points.

        Standard microeconomic theory, like Ken, assumes the third option, hence that particles [preferences] are stable over time.
        Says Lars Syll : “mainstream economists do not see this​ since they have the weird idea that economics is nothing but a smorgasbord of ‘thought experimental’ models. For every purpose you may have, there is always an appropriate model to pick.”

        I won’t insult Ken by calling him a mainstream economist, but (I hope unwittingly) he is using their Humean method and producing the same sort of smorgasbord. I can agree with many of his opinions, but when he attributes their changes to human invention he is missing the point that humans have discovered the relatively few stable categories and merely invented names for them, imaginatively adapted to the times they were living in. In other words, the smorgasbord is one of names (that concept being generalised to include descriptions by Bertrand Russell).

        By skipping the human era and (in light of current knowledge) imagining what was left before evolution started, I was able to recognise the residual invariants (energy and lack of it) and define three terms (time and orthogonal coordinates) that enabled me to predict, discover and map the four phases of evolution in each subsequent era. New capabilities build on previous ones by forming 1, 2 then 3-dimensional structures and channels constraining freedom of motion.

        Hence eventually the three information feedback channels in the error-correcting microchip someone has named ‘PID logic’, and the answer to Ken’s challenge: “I’m just wanting you to say which of the several economics and logics available you’ve chosen to talk about? You can’t possibly believe as you imply that that all economics is the same. Can you? Or, all logics?”

        Yes; because ‘economics’ isn’t a stable particle: it is a name for a provisioning system with from 0 to 3 information feedback circuits which can do what it does in different ways, including evolve into a form using a monetarised PID control subsystem properly called ‘capitalism’, and a mutant form called by Aristotle ‘chrematism’, where the capitalist control is complete and ends up ensuring freedom only for its own money-making. Whether one is talking about economics or microchip logic, and whether or not their purpose is understood, feedbacks from the present, past and near future are available, but not always used. Such structural systems differ categorically only in being more or less complete.

        So ‘economics’ started as household provisioning, with face-to-face feedback; with one feedback loop (price) it became community provisioning; with two feedback loops (given unemployment) it added Keynes’ provisioning by a state; given three feedback loops (price of money), a little of the third feedback increased productive efficiency at the expense of employment but too much led to unemployable provisioning of employment, hence inefficiency in distribution.

        One of the first things I learned about economics was the theory of Diminishing Returns, which mathematically is identical to the Maximum Power Transfer Theorem in basic electrical theory. When the likes of Brian Arthur advocate engineering more of this third level positive feedback to increase profits, they have lost the plot.

      • Ken Zimmerman
        December 16, 2019 at 1:01 pm

        Dave, first I don’t agree that what I know is opinions, as you seem to use that term. It is what people construct around which their lives revolve. If that’s what you call a category error, then I plead guilty.

        Yes, we do begin with different assumptions. Nothing to do with philosophy, however. People actually create assumptions without the aid of philosophers. Your starting points appear strange to me. I begin where “the pavement hits the tire,” as they say. With people creating ways of life for safety, security, and most of all to make sense of the world and their lives. I’ve read the works of some philosophers (Serres, William James, Peirce) but I’ve never allowed them to take the place of people on the ground. Everything today seems to contradict your statement that humans have “discovered the relatively few stable categories and merely invented names for them.” That was Newton’s dream and Descartes’ dream. It remains a dream. For example, I believe complexity is a useful approach to study human societies. But it’s not the final approach. Others will come along. Some of greater use in studying human societies. The entire history of humanity supports this conclusion.

        I make only two assumptions. Anthropologists study society with the intent of creating generalizations (not laws or fixed theories). Most of these are local and limited in time. The two broad generalizations I was taught in graduate school are: 1) human culture is the result of human interactions with humans and nonhumans. 2) these interactions provoke humans to perform as creators of society and culture. This process renders actor-networks. They come in all sizes and shapes from the individual person to the largest institutions (US Army, Catholic Church). None of us is ever alone in carrying out any course of action. As is the case with a course of action by a large or even small institution. Another term used in the place of actor-network is association. Let’s face it actor-network is a ridiculous term. If you want to label this messy process feedback, that’s perfectly okay with me. But I warn you, it’s messy. Sometimes interactions don’t change anything. Other times the near identical interaction can change the course of many or even all further events and send interactions off in unexpected and uncertain paths. The same is the case with physical interactions. A small change in the frequency of radiation can change an entire galaxy or the smallest particles of matter. Other times the change in frequency changes nothing. We call this uncertainty. Not probability. Whether in a societal association or an association of atoms, uncertainty sometimes leaves us not knowing and perhaps never knowing how events will play out. Societal associations include an element not found (we believe) in solely physical association, human judgment and choice, along with human ignorance, emotions, lack of attention, and forgetfulness. Which adds new elements of uncertainty. As social scientists we can only attempt to follow along and tell the story we observe as clearly as possible.

        My understanding is that some of the folks on this blog believe economics (the activities, not the academic discipline) began with the needs of maintaining a household. Even in an ancient society such as Greece I can identify dozens of interactions with both humans and nonhumans that might occur. And many scenarios about how these interactions could evolve over time, drop away, or become entangled with one another. And with all that beautiful mapping I still could not predict with certainty whether the household will survive. And neither can you. Nor any economist around today.

      • December 17, 2019 at 7:21 am

        Ken, you’re saying you make only a couple of assumptions. I put it to you that you’re making a few more. You assume that mapping an economy is possible in real terms. But this would mean that demand and effective demand are the same, no? This makes you also assume that an economy exists in terms of its physical components as having determinate (and static) positive values at every step of the way through time, no? And most significantly, your assumptions make it impossible to logically delineate a purposeful economy. Since, from observation, it is beyond our means to answer the question as to why we exist in the first place (i.e. our purpose); and from your assumptions, while you can validly argue economic “whats”, you can’t answer any “whys?”.

        Even though you acknowledge the importance of accounting, you assume away the fact that an (in terms of money) accounted-for economy starts off with supply-negative (expenditure) values. The latter, if not resolved positively later in time through effective demand, will collapse any economy irrespective of its components being physically unharmed, no? In other words, since an economy does exist, the fact that it’s accounted-for turns every conventionally-held assumption, concerning its _apparent_ supply positivity, on its head; and also making the two original assumptions of yours irrelevant to explain the question of “how” our (accounted-for) economy works, because the latter cannot co-exist with those particular assumptions.

        An accounted-for economy is inherently dynamic at its very core, it thus cannot be deduced from static assumptions. As Lars cogently put it at the head of this thread “you can’t get there from here”. But this works both ways, as it isn’t possible to deduce endogenous static values from (your original) dynamic assumptions either.
        Time to wipe the slate clean of all wrong theories and start over*?

        *) Cf. https://washingtonpost.com/opinions/its-time-we-tear-up-our-economics-textbooks-and-startover/2019/06/23/54794ab8-9432-11e9-b570-6416efdc0803_story.html

      • Ken Zimmerman
        December 17, 2019 at 3:03 pm

        Depends on what you mean by “real terms.” The kind of planning modeling in which I’m involved (energy) is inherently dynamic. That is, the operation of the systems in terms of physical resources (including energy efficiency) and customer demand, as well as “lost energy” is modeled daily for the daily markets and day-ahead markets in terms of kWhs and Dekatherms. It’s also modeled monthly and annually in planning for capacity needs. I’ve never modeled an entire economy like this without help. But with the right staffing it is done regularly. The inputs are dynamic.

        In terms of purposes you are correct, mostly. Scenario modeling addresses some limited possible changes in the purposes of the economy. But seldom goes so far as changing basics, e.g., for-profit companies are not a large provider of services and products or the goal is to reduce not increase GDP. But even such remote changes in purpose have been modeled by NGOs. As for whys you’re dead wrong. There are more whys out there accessible for modeling than you can even imagine. It’s choosing one over another that’s always the interesting debate. The rules also provide flexibility in economic operations from day to day and ensure that even when something breaks it will be absorbed. Now, of course there are limits to every set of rules. These are no exception. For example, no accounting rules could fix the events that carried the “Great Depression” along.

        What you say about accounting and beginning balances is certainly the case for some parts of the American economy, for example. But is no longer true for many large corporations and banks. It’s certainly true for regulated parts of the American economy (e.g., public utilities). We invent rules (accounting and otherwise) to prevent what you describe in turning the economy on its head. So long as the rules remain in place and adhered to, the economy clicks along. Also the rules provide confidence that even if the accounting doesn’t show it right now, that everything will “true out” at the end of the fiscal year.

        I agree with the conclusions of the article you cite to. Economic textbooks are a plague on the world. Even Ebola doesn’t challenge the damage they do and deaths they cause. All the economic models with which I’ve been involved are a mix of rules based on data and axioms from economics. The mix varies from one model to the next. But no model uses only economics axioms.

      • December 16, 2019 at 3:32 pm

        Ken, I’m not going to argue with you. Let me say what I had intended to say but didn’t get round to: that I understood institutional economics much better in light of what you wrote about it. When you see what you are saying in light of what I have written about the difference between basic (fundamental) and applied science and the roles of language in them, we may be less at cross purposes.

      • December 16, 2019 at 4:59 pm

        Via the link to Sloane’s paper: “[The Allais paradox] is fundamentally an illustration of the need to take into account not only the mathematical expectation of cardinal utility, but also its distribution as a whole around its average: basic elements characterizing the psychology of risk”.

        Ken, this is a specific example of what I learned from G K Chesterton: that the paradox arises from trying to use linear measures for complex realities. As a mathematician, where you see overwhelming and ever-changing complexity, I abstract (c.f. C S Pierce’s ‘abduction’) all that can be seen and still find the fundamental need for complex numbers.

        As Whitehead put it, “The art of reasoning consists in getting hold of the subject at the right end, of seizing on the few general ideas that illuminate the whole, and of persistently organising subsidiary facts around them”.

        One of the few general ideas that illuminate the whole is how algorithmic (arabic) numbering is able to represent any number by repeated use of the same few symbols and procedures; likewise the same principle applied to non-numeric algorithmic computer programming, and indeed to alphabetic spelling.

      • Ken Zimmerman
        December 17, 2019 at 12:52 pm

        Dave, thanks for you comments. I understand that you believe there is a difference between basic (fundamental) vs. applied science. I do not share that belief. Any distinctions drawn are of little use in understanding how science is constructed or used by people. You know the element you keep leaving out of your comments – people.

        Whitehead’s comment you quote “…seizing on the few general ideas that illuminate the whole, and of persistently organizing subsidiary facts around them” in regard to people and their lives is about “cultural configurations.” Every culture organizes life around a few simple principles, activities, and beliefs. The other institutions and activities of the society hang from that core like branches from a tree trunk. These central acts, institutions, and values form what Anthropologist Ruth Benedict called a “cultural configuration.” So, if you want to get hold of a subject at the right end, as Whitehead says, then the cultural configuration(s) of whatever culture or cultures you’re researching is the place to begin. And since culture is historical, you must include time and place in this research. In terms of the examples you provide this shows their limitations. Arabic numbering can represent any number by repeated use of the same few symbols and procedures. But Roman numbering can do so as well. And there are other numbering systems (e.g., Chinese) that are useful and effective that cannot. And writing systems with no alphabet (e.g. Chinese, Japanese) effectively communicate still.

        As for utility, one of the more useless notions invented by some economists, one simple example seems, for me to end its run. If my utility is happiness, a common one in most western societies, how do I figure out if I am now happy, but before the economic system worked its magic was not? Economists are of no help. And I don’t feel economists today would be satisfied with the answers from ‘happiness experts.’ Such as the following. “The more comfortable you are with yourself and your own opinions, the happier you will be. Happy people don’t tend to get bogged down with other people’s opinions of them.” Health and wellness expert Gabriel Smith tells us, “One of the best ways to tell if you are truly happy is to assess your emotions around failure and underachievement. Are you paralyzed or taken off track by these times or situation in your life? This may indicate that you may not be truly happy with the holistic view of your life.”

        Dave don’t know if there is some place for us to go from here.

      • December 18, 2019 at 12:34 pm

        Ken, there is a place we could go to, but not while you seemingly deliberately misrepresent everything I say.

        You say: “Every culture organizes life around a few simple principles, activities, and beliefs”.

        You say: “You know the element you keep leaving out of your comments – people”.

        The second of these assertions is false. You look at the organisation of societies, I at the internal organisation of people and how differences show in their lives and language.

        Where I at least can go has long been staring me in the face without my seeing it. We can agree that mechanism’ is the wrong word when discussing people. I’ve been using the words ‘architecture’ and “function”, but ‘organism’ (as so often used by others) relates these as [non-mechanical] cause and effect.

      • Ken Zimmerman
        December 18, 2019 at 3:36 pm

        Dave, allow me to simply note that in your comments you write of mechanisms and systems as if their existence is totally unrelated to the people who create them. And the cultures that guide that creation. That’s my gripe with your comments, in a nutshell. And it’s a gripe about most mainstream economists, as well. Somehow, making economies, acting economically, and working to provide for the necessities of life are no longer actions that people perform. Unless, you’re the representative one consumer, one worker, one firm that economists model.

  18. December 16, 2019 at 2:48 pm

    Lars, you tell us “mainstream economics has to be replaced wholesale!” but not how. David Sloane Wilson does: “It must be replaced wholesale with a more realistic conception of human nature”.

    Over several years now I’ve been condemning Hume’s conception of human nature in agreement with Wilson, and trying to advance the argument by referring to physiological confirmation of Chesterton’s split-brain architecture, Myers-Briggs Jungian psychology, the Algol68 Chomskyan scientific language, my own experimental work with indexed data bases, digitisal/analog control, serial/parallel processing and electronic circuit explanations of neurology. Using the simplest form of complex mathematics I have mapped evolution to the point where the significance of ecology and human development become evident in economic systems. Agreeing with Wilson’s “It will never move if we try to change it incrementally”, I’ve indicated the effects of simply cutting off extensions and mistakes due to lies about money.

    Without diagrams and an audience with a similar range of experience I’ve been reduced to “planting seeds”, admitting “little acorns” take a long time into “mighty oaks” to grow. Some years ago I harvested a fine crop of acorns and planted them, hopeful of regenerating some stony ground. None came up. Here, you provided the acorn; I have planted it. When there have been signs of life, it has been smothered with weeds or withered and died.

    Lars, when someone has taken the trouble to plant your acorn, why do you not nurture it with your own evaluation: at least by drawing attention to its green shoots among the weeds? Are you serious about reform, or just complacently encouraging the venting of ill-feeling?

    • Yoshinori Shiozawa
      December 20, 2019 at 1:27 am

      I support your advice to Lars Syll.

  19. December 19, 2019 at 11:45 am

    Richard Planck in the latest ‘Economic Thought’ is interesting on “the wrong theory”.

    “Dr Ellerman’s comments are of a rather different nature. He wrote: ‘The question addressed
    in this paper was already addressed and resolved in the sophisticated discussion by Paul
    Samuelson in his Foundations of Economic Analysis. See the pages for “Wong” in the index.’
    Economic Thought 8.2: 31-45, 2019

    Planck: “While I can agree that the question ‘was already addressed…’ in Samuelson’s text, I
    cannot agree that it was ‘resolved’, regardless of Samuelson’s ‘sophisticated discussion’.
    Granted, the importance of using mathematical sophistication was also [well] ‘addressed’ by
    Professor Chiang (Chiang, 1984) regarding the need to go beyond geometric models:
    ‘…mathematics has the advantage of forcing analysts to make their assumptions explicit at
    every stage of reasoning’ (Chiang, 1984, p. 4).

    “But I suspect that part of Chiang’s preference for using mathematical models is
    because, on p. 4, he also mentions that the drawing a three-dimensional sketch is
    ‘exceedingly difficult’.

    “Regardless of the reason for avoiding a three-dimensional sketch, ‘what if’ the
    mathematically-inclined analyst chooses and uses impeccable mathematics but he has
    chosen the ‘wrong’ mathematics…? Let us pursue this very intriguing question in greater
    depth…. “.

    Click to access WEA-ET-8-2-Full.pdf

    So Planck has objected to a geometric interpretation of the Square of Opposition. Am I wrong to see it, like Wheatstone’s Bridge or Leavitt’s Diamond, as an iconic representation of a network of relations, more or less active? Or are those empirically-minded readers wrong who can see only “straight lines on flat paper”?

    • December 19, 2019 at 11:56 am

      Apologies for not anticipating and erasing invisible ET newlines. Too much to repeat? What a pain it is not being able to make corrections on this site!

  20. Craig
    December 22, 2019 at 8:26 pm

    Life is an emergent quality of the cosmos. And “emergent” qualities in both the hard and social sciences have historically been a sign that there is a missing insight that explains them.

    • Ken Zimmerman
      December 23, 2019 at 2:29 am

      Craig, I don’t know about seeing signs but humans do invent ways to explain life and society. This is all humans, not just scientists. The question is how do people choose among the many explanations they invent?

      • Craig
        December 23, 2019 at 8:09 am

        With reductive science and the integrative mental discipline AKA Wisdom.

      • Ken Zimmerman
        December 23, 2019 at 10:39 am

        Just how does one use “wisdom” to figure out how humans make choices? Is it magic? I have the impression it’s about paying close attention and expressing people’s meanings and not one’s own.

      • Craig
        December 23, 2019 at 5:32 pm

        Well, that’s part of it yes. Paying close attention is the key to it actually. Wisdom is discovered by paying closer attention to the moment. That way one doesn’t get trapped in their own considerations, their own abstractions or abstractions in general. The intense and yet effortless experience of the moment IS a higher state of consciousness according to all of the world’s major wisdom traditions and according to my own experience of it. And there isn’t necessarily anything supernatural about it. Living in the moment is how one discovers/re-discovers oneself, not the abstract egoistic Cartesion self. Science is all well and good, but it makes a fetish out of objectivity. It makes very intelligent people say rather dumb things like:

        I have the impression it’s about paying close attention and expressing people’s meanings AND NOT ONE’S OWN.

      • Ken Zimmerman
        December 27, 2019 at 12:41 pm

        Thanks Craig.

      • Craig
        December 27, 2019 at 5:57 pm

        Yes I apologize for that. I truly meant to critique science in general, and I stand by that, but the last two sentences were not necessary.

        And you’re right paying close attention and expressing people’s meanings is often a sign of wisdom. It’s kind of hard to communicate that truth on a forum where communicating is the only means of input. Silence communicates best in present time amongst other aware individuals.

      • Ken Zimmerman
        December 29, 2019 at 10:51 am

        Your clarifications and details help me in picking up on your understanding of wisdom. It might help some of the others on the blog as well.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.