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What went wrong with economics?

from Lars Syll

To be ‘analytical’ is something most people find recommendable. The word ‘analytical’ has a positive connotation. Scientists think deeper than most other people because they use ‘analytical’ methods. In dictionaries, ‘analysis’ is usually defined as having to do with “breaking something down.”

anBut that’s not the whole picture. As used in science, analysis usually means something more specific. It means to separate a problem into its constituent elements so to reduce complex — and often complicated — wholes into smaller (simpler) and more manageable parts. You take the whole and break it down (decompose) into its separate parts. Looking at the parts separately one at a time you are supposed to gain a better understanding of how these parts operate and work. Built on that more or less ‘atomistic’ knowledge you are then supposed to be able to predict and explain the behaviour of the complex and complicated whole.

In economics, that means you take the economic system and divide it into its separate parts, analyse these parts one at a time, and then after analysing the parts separately, you put the pieces together.

The ‘analytical’ approach is typically used in economic modelling, where you start with a simple model with few isolated and idealized variables. By ‘successive approximations,’ you then add more and more variables and finally get a ‘true’ model of the whole.

This may sound like a convincing and good scientific approach.

But there is a snag!

The procedure only really works when you have a machine-like whole/system/economy where the parts appear in fixed and stable configurations. And if there is anything we know about reality, it is that it is not a machine! The world we live in is not a ‘closed’ system. On the contrary. It is an essentially ‘open’ system. Things are uncertain, relational, interdependent, complex, and ever-changing.

Without assuming that the underlying structure of the economy that you try to analyze remains stable/invariant/constant, there is no chance the equations of the model remain constant. That’s the very rationale why economists use (often only implicitly) the assumption of ceteris paribus. But — nota bene — this can only be a hypothesis. You have to argue the case. If you cannot supply any sustainable justifications or warrants for the adequacy of making that assumption, then the whole analytical economic project becomes pointless non-informative nonsense. Not only have we to assume that we can shield off variables from each other analytically (external closure). We also have to assume that each and every variable themselves are amenable to be understood as stable and regularity producing machines (internal closure). Which, of course, we know is as a rule not possible. Some things, relations, and structures are not analytically graspable. Trying to analyse parenthood, marriage, employment, etc, piece by piece doesn’t make sense. To be a chieftain, a capital-owner, or a slave is not an individual property of an individual. It can come about only when individuals are integral parts of certain social structures and positions. Social relations and contexts cannot be reduced to individual phenomena. A cheque presupposes a banking system and being a tribe-member presupposes a tribe.  Not taking account of this in their ‘analytical’ approach, economic ‘analysis’ becomes uninformative nonsense.

Using the ‘analytical’ method in social sciences means that economists succumb to the fallacy of composition — the belief that the whole is nothing but the sum of its parts.  In society and in the economy this is arguably not the case. An adequate analysis of society and economy a fortiori cannot proceed by just adding up the acts and decisions of individuals. The whole is more than a sum of parts.

Mainstream economics is built on using the ‘analytical’ method. The models built with this method presuppose that social reality is ‘closed.’ Since social reality is known to be fundamentally ‘open,’ it is difficult to see how models of that kind can explain anything about what happens in such a universe. Postulating closed conditions to make models operational and then impute these closed conditions to society’s real structure is an unwarranted procedure that does not take necessary ontological considerations seriously.

In face of the kind of methodological individualism and rational choice theory that dominate mainstream economics we have to admit that even if knowing the aspirations and intentions of individuals are necessary prerequisites for giving explanations of social events, they are far from sufficient. Even the most elementary ‘rational’ actions in society presuppose the existence of social forms that it is not possible to reduce to the intentions of individuals. Here, the ‘analytical’ method fails again.

The overarching flaw with the ‘analytical’ economic approach using methodological individualism and rational choice theory is basically that they reduce social explanations to purportedly individual characteristics. But many of the characteristics and actions of the individual originate in and are made possible only through society and its relations. Society is not a Wittgensteinian ‘Tractatus-world’ characterized by atomistic states of affairs. Society is not reducible to individuals, since the social characteristics, forces, and actions of the individual are determined by pre-existing social structures and positions. Even though society is not a volitional individual, and the individual is not an entity given outside of society, the individual (actor) and the society (structure) have to be kept analytically distinct. They are tied together through the individual’s reproduction and transformation of already given social structures.

Since at least the marginal revolution in economics in the 1870s it has been an essential feature of economics to ‘analytically’ treat individuals as essentially independent and separate entities of action and decision. But, really, in such a complex, organic and evolutionary system as an economy, that kind of independence is a deeply unrealistic assumption to make. To simply assume that there is strict independence between the variables we try to analyze doesn’t help us the least if that hypothesis turns out to be unwarranted.

To be able to apply the ‘analytical’ approach, economists have to basically assume that the universe consists of ‘atoms’ that exercise their own separate and invariable effects in such a way that the whole consist of nothing but an addition of these separate atoms and their changes. These simplistic assumptions of isolation, atomicity, and additivity are, however, at odds with reality. In real-world settings, we know that the ever-changing contexts make it futile to search for knowledge by making such reductionist assumptions. Real-world individuals are not reducible to contentless atoms and so not susceptible to atomistic analysis. The world is not reducible to a set of atomistic ‘individuals’ and ‘states.’ How variable X works and influence real-world economies in situation A cannot simply be assumed to be understood or explained by looking at how X works in situation B. Knowledge of X probably does not tell us much if we do not take into consideration how it depends on Y and Z. It can never be legitimate just to assume that the world is ‘atomistic.’ Assuming real-world additivity cannot be the right thing to do if the things we have around us rather than being ‘atoms’ are ‘organic’ entities.

If we want to develop new and better economics we have to give up on the single-minded insistence on using a deductivist straitjacket methodology and the ‘analytical’ method. To focus scientific endeavours on proving things in models is a gross misapprehension of the purpose of economic theory. Deductivist models and ‘analytical’ methods disconnected from reality are not relevant to predict, explain or understand real-world economies.

  1. Yoshinori Shiozawa
    January 9, 2020 at 4:06 pm

    Lars Syll and Asad Zaman (in his critical posts on empiricism) pose too much importance on methodology and philosophy. I do not deny that methodology and philosophy influence the development or evolution of scientific research. But, they are rarely dominant factors. Scientists including economists are more eclectic in methods and if they find a new hopeful method they easily transfer themselves from a method to another. Characteristics of the problem they face strongly influence which method is more appropriate than another. Science evolves by internal logic of the discipline than it is influenced by methodology or philosophy.

    Analytical method is a concept that covers wide range of investigation. The actual dead-end of economics does not owe to this too wide possibility but to more concrete defects of the basic framework. Even the criticism of holy trinity of neoclassical economics (i.e. rationality, selfishness and equilibrium and not to say fallacy of composition) is too vast and ambiguous and requires more concrete examination. Much more important thing to do is to present an alternative. Accusing analytical method or empiricism does not produce this concrete alternative. Such a negative arguments can gain applause from wide range of economists, but in fact, each applauds by a different reason. There is no coherence.

    I accused these attitude (accusing methodology and philosophy) sufficiently. To escape from falling in the same negative accusation, let me suggest one point that most of readers easily acknowledge the depth of economics dead-end.

    Let us take the very basic formulation of economics: demand and supply curve. High school economics teaches us that price and quantity are determined at the crossing point of these two curves. It was Alfred Marshall who popularized this. He inserted the famous figure as a footnote (Fig. 19, Principles of Economics 1920, p.288). I contend that this framework itself is already wrong.

    Is this analytic? Is this too empiric? No! It has some flavor of analytic and empiricism. It has some flavor of synthetic and transcendent arguments. Lars Syll cannot refuse demand and supply theory (concepts of demand and supply functions and the hypothesis that prices and quantities are determined by an equilibrium point) by accusing that it is too analytical. Asad Zaman cannot refuse it claiming it is too empirical. The demand and supply theory is by no means empirical but a construction of pure imagination. It may have been partially correct in the 18th century but essentially incorrect already in the end of 19th century. The basic fallacy of modern economics lies in these concepts and theory that draws on them.

    In classical political economy time, there were already similar concepts. Ricardo fought against them but failed as a result. John Stuart Mill who believed to be a loyal successor to Ricardo started to revert to old custom. This reversion lead the economics to neoclassical revolution (or anti-revolution to Ricardian economics).

    The culmination of “demand and supply theory” is the Arrow and Debreu’s paper (1954) “Existence of an Equilibrium for a competitive economy” in Econometrica. DSGE models (standard models for New Classical and New Keynesian economics) usually assume there is only one kind of goods (sic) in the economy (situated in different time points). They totally depend on Arrow and Debreu (1954). Without it, DSGE models cannot pretend to be a model of modern economy which is composed of thousands of millions of goods and services.

    So, if we beat the doctrine of demand and supply theory, whole neoclassical economics falls down. Then, is it possible to construct a new theory? If we free us from deeply imprinted belief of demand supply theory, it is in fact possible. See for a price theory here and, for more total examination, see here.

  2. ghholtham
    January 9, 2020 at 5:16 pm

    Atoms come in different sizes. Some economic theory deals with individual choice. Other theory takes the firm and the household as the atomic units. The application of rational choice theory to war-gaming treats armies as if they were purposeful agents. Lars Sylls has criticised new Classical theory (rightly in my view) for inventing “representative agents” to be the atoms, and they are “representing” or standing in for millions of people.
    Nothing is simple. Even an individual is a complex of physiological and psychological properties. To a biochemist the atoms really are atoms and the individual herself is a complex open system. Any analysis has to select the appropriate level of aggregation to answer the questions it is posing. If you want to understand the monetary system don’t start with the molecular structure of banknotes or all the cultural characteristics of the relevant civilisation – wrong level of aggregation. But the fact is whatever entities you select to be the atoms of your hypothesis, you will be abstracting from some characteristics of those atoms. You rely on the fact that for the questions at issue the internal complexity of your “atom” is considerably less important than its interaction with the other hypothesized atoms and that those interactions are much more important than interactions with other potential atoms you have excluded from consideration. How else does any science proceed? If we can’t compartmentalise we can’t understand. The key is to test the hypothesis empirically. Even if the test is passed the understanding remains partial and provisional but it’s better than nothing. We don’t understand the universe but iPhones work. We don’t understand economies but we know how to prevent hyperinflations and how to stop recessions becoming permanent depressions (though we don’t always act on the knowledge).
    Lars Sylls doesn’t like deducing conclusions from premises whether those are based on observed empirical regularities or axioms of rational choice.And he doesn’t like testing the conclusions either with experimental comparison against control groups or statistical techniques. We get that. What we are forced to wonder is: how on earth is one supposed to understand the causal workings of any system or to test that understanding? Lars offers no clue. I share his distaste for much macroeconomic “theorising” but not his explanation of what went wrong. If his diagnosis of the problem were correct not only would economics be impossible so would any science be impossible. We would all become historians but be forbidden to drawn any conclusions from our narratives. If you demand perfection you can never be satisfied and you end up as a methodological nihilist.

    • Craig
      January 9, 2020 at 7:27 pm

      We need to take an integrative perspective ON ANALYSIS.

      That means you have to take a paradigmatic perspective, as a paradigm is defined as a singleness (a single concept) that defines a pluralness (the manyness of an entire pattern). In fact a pattern and its essence cannot be comprehended without such analysis. I’ve twice asked posters here to give me their best guess as to the new monetary paradigm and all we got was crickets. When in doubt integrate….and keep on integrating.

      No one here thinks on the paradigmatic level. In fact no one here even does an adequate job of reductive analysis of what is the ope-rant problem with economics…which is the money system and its monopolistic paradigm of Debt Only as the sole form and vehicle for the distribution of credit/money. Hence its all mental masturbation and whipping the dead steed while, frustratingly, going no where. Meanwhile, virtually all economists are caught up in trying to make sense out of a nonsensical economic koan….slavishly wed to the parasitical and destabilizing monetary paradigm. This is the conclusion of Steve Keen and Michael Hudson whose books are advertised on this site. They’re work is erudite and well and good. It’s just that they haven’t cognited on the significances and efficacious-ness of a 50% Discount/Rebate price and monetary policy at the point of retail sale.

      You want to change economics?….analyze the monetary and financial paradigm, stupid. That will yield satori. Then its a relatively straightforward rational, logical and reductive process of aligning systemic policy with the new paradigm concept.

      • Yoshinori Shiozawa
        January 15, 2020 at 6:52 am

        I only add my comments on two points of yours above.

        Point 1.
        Li >> The core of AFT is the concept “Instruction”, a mindful entity, which was ignored by all literature relevant.

        You must have read my Chapter 1 so quickly that you have missed one of the most important points for your argument. Readers of this discussion can confirm it themselves. I have uploaded in ResearchGate in May, 2016 a draft before English revision of Chapter 1, which has the same title as the book itself. (I am sorry that so many different documents have the same title.)

        Section 3.3 of Chapter 1 has the title The structure of animal and human behaviors. At the very beginning, I talk about C-D transformation (after Tamito Yoshida). This is just an instruction, because C stands for cognitive meaning and D directive meaning (p.24) More refined formula takes the form qSS’q’ which I derived from Martin Davis’s book Computability and Unsolvability (1958) (p.26).

        As for the concept of instruction, it was Gilbert Ryle in his Concept of Mind who has first emphasized the difference between knowing-how (i.e. Instructions) and knowing-that (Propositions with a truth value). This distinction has been adopted by many philosophers and now it is rather a common concept.

        Point 5.
        Thank you for the link to the table of contents of your book in English. It helps me to guess what you have written in your book. Although it is difficult to know exactly what is written in it, I have some questions.

        Where is your Grand Synthesis Of Economics? The chapter 4 The Grand Synthesis Of Economics is a series of different schools of economics and the section “The Grand Synthesis Of Economics” counts only six pages. Part III Foundations of Algoristhmic Economics seems rather a series of accounts and narratives on various fields or domains of the economy. There are few pages on production (at most 11 pages, §6.4) and price theory (six pages, §6.8). Is it really possible to replace neoclassical economics? I doubt if your book sill lacks core economic theory (theories) that can compete the mainstream economics. Please compare contents of your book with our results from Chapter 2 to Chapter 6. We have a fully developed concrete theories.

        Your book must be a good book as a critique of neoclassical economics. But I doubt whether it can beat neoclassical economics. It seems that it lacks core economic theories which are superior than neoclassical economics. AFT (Algorithm Framework Theory) is a general guideline to develop a new economics but it still remains as a guideline. It seems you have yet to develop concrete theories in economics.

      • January 16, 2020 at 6:47 am

        Dear Yoshinori, thank you for your response.

        1. The concept “Instruction” is unfortunately and widely misunderstood. The first letter of the word is capitalized, showing that it is a jargon of computer science, none of the common word “instruction” although it is really the instruction that a user or a programmer extends to the computer. Some examples of Instructions as: +, -, ×, ÷, And (logically add), Or (logically multiply), Copy, Cancel, Move, Search, etc. Only dozens of Instructions are executable for a computer, then we could suppose that the Instructions of human are similar with the Instructions of a computer, or, the Instructions of a computer are just what human brain “gives”. I have thought of a new word to replace the misleading word “Instruction”, but failed, and finally I realized that it would be appropriate to accept the ready-made jargon, it would be a respect to computer science. It is the concept Instruction that help us analyzing the mixture of human minds and then separating the “transcendental thinking tools” from information, thus we have a pair of concepts: Instruction + information, just like the male married with the female, then happiness take place. Before AFT, I could say, all economics are single, lonely and unhappy.

        2. The “Grand Synthesis” is done by the way as the following. Reasoned from AFT, a system or an embracive picture will be deducted as consequences, and the synthesis is thus implicitly and fundamentally done. In the later chapters, the synthesis is only detailed a little. That is, any topics is tried to be connected only with the whole system and then deemed synthesized. This should be why you are surprised the subsections of my book are quite short. In my opinion, at the early stage of synthesis, we must be careful even suspicious, more challenges and less obedience; as pluralities and conflicts entering as fresh elements, ambiguity would be more or less necessary. A perfect, plump and satisfactory new economics, if any, would be the results of long-time hard work of many scholars in the new century. Further details are of course needed. Anybody, if interested, could work on it as a cooperative or independent job. Thank you very much!

      • Yoshinori Shiozawa
        January 15, 2020 at 6:56 am

        I am sorry. I have mistakenly posted my comment on a wrong place. The above is my comment on BinLI_Algori on January 14, 2020 at 6:27 am below.

      • davetaylor1
        January 24, 2020 at 7:49 pm

        Yoshinori wrote (significantly): “As for the concept of instruction, it was Gilbert Ryle in his Concept of Mind who has first emphasized the difference between knowing-how (i.e. Instructions) and knowing-that (Propositions with a truth value). This distinction has been adopted by many philosophers and now it is rather a common concept.”

        I think you will find G K Chesterton much early saying what amounts to the same thing in practice, distinguishing “Freedom from” [untruth] and “Freedom to” [do, i.e. NOT follow Instructions].

  3. January 10, 2020 at 8:20 am

    1. Although it appears plausible, the post should be another example of over-criticizing mainstream economics. The real illness of mainstream will not be diagnosed until a new healthy economics is established; the illness cannot be cured until the rested healthy parts are identified, or not misunderstood. Complaining are easy, but finding out a solution is now the real problem.

    2. As thinking ability is limited, anybody has to cognize the objects step by step, or “serially”, or “analytically”; and as the combinatorial explosive effect happens, in principle, any object cannot be entirely cognized, whatever it is big or small. For big objects (e.g. the economy), researchers can try to take them as whole, but at the sacrifice of details. This is just like an astronaut overlooking the earth from the space. A remote observer might find something different from those by a close observer, but the way of finding is not essentially from the latter. The author of the post seems dissatisfied with the cognitive limitations, but which, in my opinion, is just the key to reveal the secrets of economics.

    3. In my eyes, the solution of economics is the Algorithm Framework Theory, and the anticipated unified new economics is Algorithmic Economics. Further reading is welcome! Thanks! https://goingdigital2019.weaconferences.net/papers/how-could-the-cognitive-revolution-happen-to-economics-an-introduction-to-the-algorithm-framework-theory/

    • Yoshinori Shiozawa
      January 11, 2020 at 2:48 pm

      I agree with you on points 1 and 2 . They are good criticism on Lars Syll’s argument. As for point 3, I have objections.

      In the Abstract of the paper, you claim that the paper introduces a “highly original theory”, but in my understanding it is rather common idea that has been repeated thousand times. It is called commonly “brain as computer” or “thinking as program“. If you google these terms, you can easily find many papers and articles with such topics. I have cited only an example as links to those terms. There are also already many papers criticizing such ideas. See for example, Searle’s 1990 paper “Cognitive Science and the Computer Metaphor“.

      I do not think that your effort is useless or wrong. There are many defects but also many things that teach us. Your Algorithm Framework Theory can well serve as a preamble to an economics, if you have a more concrete developed theory. I have put a similar chapter for our book as Chapter 1 which has the same title as the book. Please send me an e-mail to my e-mail address: y@shiozawa.net . I will send you a PDF of the chapter. (If any readers want to read the chapter, please as me. I am happy to send a PDF for their private reading.)

      Unfortunately, as you are thinking that your are so original, you do not recognize the limits of this type of thinking. As a methodology of economics, your idea is too fuzzy and ambiguous. Although it may generate various new ideas and may indicate some new directions, it can hardly be a clear guideline for advancing economics. Your paper may have been a good philosophy paper if it was written before the analytic philosophy. Your discourse reminds me in many places Hegelian and MarxIan dialectics. A typical example is a sentence like this: When a market is composed of both flows and stocks, objectivities and subjectivities, commodities and money, it would partially volatile and speculative, and partly stable. It is hard to know what you really want to say. At least, this is not a proposition that can be examined as a part of a science (economics in particular). Dialectic discourses are inspiring but do not gives us scientific theories.

      As I have written above, your paper can serve as a preamble for further economic theories. It contains some good insights. One of the most valuable comments is this: “Both agents and economists are bounded by ratiionalities.(sic)” (But this is not your unique discovery. I have also emphasized the similar observation in my book Economics Essays in complexity and Complex Systems [in Japanese] published in 1997 (Chapter 1, Section 1). As you have written three books in Chinese and you may have developed such “further economic theories”. But as far as I can guess from you paper, it is difficult to imagine that you could have developed a new economic theory.

      Based on a similar idea as yours, it is possible to develop a new economics but for that construction, your general philosophy does not help you much. To transform or rebuild economics requires much deeper and (theoretically) more concrete observations and examinations based on past accumulation. You as an economist have only a bounded rationality. Even if we want to rebuild economics, we can only rebuild a new based on accumulated (old and recent) knowledge of economics and economic history. Abstract and general philosophy or methodology can only hint a possible direction, but it is only a hint and no theory.

      • Yoshinori Shiozawa
        January 11, 2020 at 3:01 pm

        I made a mistake of forgetting a closing tag in sentences in the above post. A correct sentences are as follows:

        Your Algorithm Framework Theory can well serve as a preamble to an economics, if you have a more concrete developed theory. I have put a similar chapter for our book as Chapter 1 which has the same title as the book.

      • January 13, 2020 at 10:16 am

        My email address has been sent to you, and looking forward to your PDF writings. Thank you very much!

      • Yoshinori Shiozawa
        January 13, 2020 at 12:51 pm

        Dear Bin LI,

        your e-mail has been classified as a spam mail. I have sent you PDF of two chapters (Chapter 1 and 2) of our book for your private use.

      • January 14, 2020 at 6:27 am

        Dear Prof. Shiozawa,

        Thank you for your sharing your writings with me. I have skipped the chapters, many topics concerning your writings and the comments above, now the primary echoes as follows:

        1. The Algorithm Framework Theory (AFT) looks like many writings of computationalism, but actually very different from any of them. The core of AFT is the concept “Instruction”, a mindful entity, which was ignored by all literature relevant. Computer is used only as a metaphor of human brain, so AFT is a pure theory on mankind instead of anything else. If some writings are similar to mine on this point, please let me know in detail.

        2. AFT and its consequences relate widely to a great deal of basic topics of economics and social science. It is admittedly an interpretation, concretization and reformation of Bounded Rationality, but I do not think it is a defect. When a simple theory can effect widely, it would be more acceptable, right? To my understanding, the Algorithmic statements can be very subtle and nuanced comparing to any other narratives. Most academicians do not know how big computing economies shape the world, who have struggled on those basic problems for long times, but the harvests are few, why? In a Chinese word, it is called the “Darkness beneath a lamp”. The right, simple even beautiful answer is just hidden inside the existing literature, but unfortunately missed by everyone. If you believe the truth is “nude”, there it is.

        3. As your writing is evolutionary economics, I’d like to say, AFT is just an evolutionary theory on human minds, a perfect one, which should be placed at the center of evolutionary economics. It can be used to clarify what is a person, knowledge, an institution, an organization, a network, a technology, etc. The answers should be coordinated with mainstream economic logics. Before the frameworking is done, no incisive “evolutions” could happen. And, when it is done, evolutionary economics could be the unified economics, or Algorithmic Economics, or anything you like. In my opinion, most of evolutionary economists do not understand mainstream economics, only keeping on criticizing daily. This should be why the mainstream is nonchalant to evolutionary economics. I appreciate that you might agree with some of the above points, so you said AFT could be the “preamble to an economics”.

        4. Moreover, despite of the effectiveness of market economy, which mainstream and your writings underlined, the failures, mistakes, “irrationalities”, conflicts, pluralities, crises and any other negative effects need to be explained simultaneously, which are synthesized with the former positive aspects into a mixture, and the mixture does not necessarily lead to Hegelian and Marxist dialectics. I also criticize dialectics as the latter takes contradictions as a kind of regularity, allowing conflicts first and then eliminating them, just as what evolutionary economics do sometimes. If the negative effects are the facts, why cannot they be included in the objects of economic analyses? If the relationship between the positive and negative aspects is regular, are the negative aspects still “negative”? In my opinion, this is exactly the fault of evolutionary economics, behavioral economics, Marxist economics, game theory, etc. A paper starts from a problem, ends with a clear world, is this a must? If I say “the world is mixed”, am I illegal? Or am I joking?

        5. The table of contents of my book “Foundations of Algorithmic Economics” has be posted in my blog in English for your reference http://blog.sina.com.cn/s/blog_537ce0720102ytup.html Another new introductory paper on AFT, three times longer, has finished, now it is being translated into English by myself. I will release it publicly when it is ready.

        More questions and comments are very welcome!

        Thank you very much!

        Bin Li

  4. ghholtham
    January 10, 2020 at 11:12 am

    For Craig to talk about “whipping a dead steed” is deliciously ironic. He keeps whipping the same steed harder than anyone I know. And he doesn’t seem to have noticed that it isn’t moving.

    • Yoshinori Shiozawa
      January 10, 2020 at 2:33 pm

      ghholtham has a reason. In the blog-world, it seems a kind of Gresham’s law holds. Bad commentators drive out good.

      • Craig
        January 10, 2020 at 3:57 pm

        Not accurate as per usual.

        The problem is I have to attempt to awaken and raise the awareness of the virtually comatose, terminally orthodox and complexity habituated.

        Even though we live in a world dominated by FINANCE capitalism and the leading reform movements in economics are Minsky’s FINANCIAL instability theory, FINANCIAL Parasitism, Modern MONETARY Theory and Public BANKING the above can’t even focus on the correct target let alone examine it with an integrative paradigmatic perspective.

        And even though I keep presenting them the new insight/tool that historically always accompanies paradigm changes they apparently steadfastly refuse to look at it.

        What’s ironic is that the human mind is simultaneously the easiest and most difficult thing to change in the entire cosmos. All it takes is the will to be engaged in the obvious and correct direction.

  5. Dave Raithel
    January 10, 2020 at 1:17 pm

    “How variable X works and influence real-world economies in situation A cannot simply be assumed to be understood or explained by looking at how X works in situation B.”


    Nah, I’m good with the idea that somebody from the 1% is just more likely to have different ideas from someone in the non-1%, the next time such a poll is taken.

  6. Frank Salter
    January 10, 2020 at 2:42 pm

    It is claimed above that “there is no chance the equations of the model remain constant”. The claim is a cry of despair in saying there are no possible solutions. This is total nonsense. My analysis of production theory, “Transient Development” RWER-81, is proof of this. The mathematical analysis demonstrates the reason every known regularity in economic analysis arises, from Kaldor’s stylised facts to Verdoorn’s relationship. It is the only mathematical relationship found in economic analysis which can be considered as valid theory. It conforms to the quantity calculus which is an absolute requirement for any valid theory in science.

    Every one of the mathematical relationships found in conventional and heterodox economic analysis fails the absolute requirements of the quantity calculus and thus they are simply wrong. It would be better to consider this as the reason for the failure of conventional and heterodox analysis. This the real reason for the failure of economic analysis rather than the spurious reasons advanced in this blog.

  7. ghholtham
    January 12, 2020 at 5:30 pm

    Your scheme is for a redistribution of income, achieved through manipulation of the monetary system.
    There are two evident difficulties. The scheme depends on a central authority that hands out money to everyone and subsidises producers. The first difficulty is that the central authority will probably lack the information needed to do this accurately enough to keep the stock of money and the productive potential of the economy in balance. The consequence would be periodic crises, no less than at present. A great deal of bureaucracy would certainly be involved and the political pressures for excess money issuance would be formidable. The second difficulty is that the scheme is utopian in that there are no political formations or powerful interest groups that are going to promote it.
    Income distribution in society is not simply a product of the monetary system but of a complex of social forces. There is a lot to be said for a basic income system, whereby all citizens get an unconditional payment, a share of society’s surplus. It is better to consider how that might work in practice and to argue for it as a matter of principle rather than try and achieve it through manipulating the monetary system. It is an easier notion for most people to grasp than monetary reform. The monetary system is imperfect but reforming it to keep money and potential output of real goods and services in better harmony is difficult enough without confusing the that issue with income distribution and trying to solve all problems with one all-purpose device.
    You appear to favour “monetary gifting” because you conflate the monetary system and the exercise of hierarchical power. It is true that most human societies in history have been hierarchical and undemocratic and most, other than hunter-gatherers, had some form of money. The monetary and social systems will of course be compatible in some sense but it does not follow that by altering one system you necessarily solve the principal problems of the other. The belief that you can do so follows, I suspect, from an over-simplified view of matters. For example, your statement that the monetary system has not changed in several thousand years is self-evidently untrue. It has changed enormously in many respects. Neither Nebuchadnezzar nor William the Conqueror used fractional reserve banking, never mind credit default swaps.
    Whether I am right or wrong about this, you would be showing consideration for your fellow commentators if you did not use almost every other topic as an opportunity to restate the same conviction. Everyone now knows that you hold it.

    • Craig
      January 12, 2020 at 10:46 pm

      “The first difficulty is that the central authority will probably lack the information needed to do this accurately enough to keep the stock of money and the productive potential of the economy in balance.”

      Who says you have to keep the stock of money and the productive potential in balance? Only those whose minds are stuck in the classical/neo-classical concept of equilibrium, that’s who. When you resolve the fearfully “unresolvable problems of unemployment and inflation with the two primary policies of a universal dividend and a 50% discount/rebate at retail sale then everyone can save and macro-economically it won’t matter what the stock of money is. It won’t be the state that withers away, but rather the necessity for finance. That is if we can walk and chew gum at the same time so far as sociological, psychological, anthropological and ecological regulations are concerned.

      “The consequence would be periodic crises, no less than at present.”

      Nope. Especially if you end the idiotic private monopolistic charter to create our money by private for profit banks, and instead create a national non-profit banking, financial and monetary system guided firmly and logically by the concept behind the new monetary paradigm. No more greedy destabilizing derivative financial products in fact very little financial speculation at all except perhaps with priorly created money and profits intermediated by the only truly valid financial business model, that is private investment for fees entities. That way they cannot become “too big to fail” and the habitual gamblers and narco-trafficers can get their fixes without systemic harm. The Great Depression and the GFC were both accompanied by prior speculative excess.

      “The second difficulty is that the scheme is utopian in that there are no political formations or powerful interest groups that are going to promote it.”

      I’ve addressed the inverted thinking regarding utopianism in a prior post. Monetary Gifting will FINALLY enable true decentralized communitarianism that lets every individual create THEIR OWN ideal scene/utopia.

      You don’t think integrating the traditionally opposed political constituencies of labor and management who mutually benefit from abundant individual income/business revenue might be a powerful political interest group?

      “The monetary and social systems will of course be compatible in some sense but it does not follow that by altering one system you necessarily solve the principal problems of the other.”

      The privately controlled monetary system is an almost triumphantly integrated mortal parasite on the economy. One has to confront that fact honestly before the solution of the new paradigm can be clearly perceived. The two primary policies I advocate here will immediately, empirically and mathematically eliminate individual monetary scarcity, systemic austerity and chronic price and asset inflation which are the primary problems identified by the heterodox. It’s just that the heterodox did not/still don’t recognize the point in the productive process where their implementation will affect the paradigm change.

      “The belief that you can do so follows, I suspect, from an over-simplified view of matters. For example, your statement that the monetary system has not changed in several thousand years is self-evidently untrue.”

      You suspect wrong. It comes from a study of historical paradigm changes and their imminent and accomplished signatures, every one of which the new paradigm of Direct and Reciprocal Monetary fulfills.

      I’ve never said the monetary system has never changed. I said its paradigm of Debt Only as the sole form and vehicle for the distribution of credit/money has never changed for that period. And I’m correct in that observation.

      “Whether I am right or wrong about this, you would be showing consideration for your fellow commentators if you did not use almost every other topic as an opportunity to restate the same conviction. Everyone now knows that you hold it.”

      Screw consideration when converging crises are looming and the new paradigm I’m advocating prima facie resolves all of the major problems everyone here says need to be resolved. We’re all big boys and girls here. If I can stand their invalidation and stubborn refusal to look, they can handle me repeating empirical mathematical truth. That, and old and new paradigms are self actualized by the same old dictum that “number of times over the lesson translates to better understanding.”

    • Meta Capitalism
      January 13, 2020 at 12:27 am

      Whether I am right or wrong about this, you would be showing consideration for your fellow commentators if you did not use almost every other topic as an opportunity to restate the same conviction. Everyone now knows that you hold it. ~ Gerald Holtham on Consideration
      Screw consideration … [I am] repeating empirical mathematical truth. ~ Craig

      I enjoy your comments Gerald because overall I find in them something to think about, something to learn, and useful insights. But I think you may be a bit selective in your comment regarding Craig’s repetitive posts on almost each and every topic in that you seem to fail to see this is no different than Salter’s posting pattern, Shiozawa’s posting pattern, and frankly your own posting pattern too. It seems that RWER’s topic comments are like a series of concentric circles over various sizes rotating in different directions, repeating the same essential point infinitely as they rotate past each other, never progressing, never really ending, just infinitely rotating repetition.
      Perhaps that is the nature of blogs.
      What I find interesting about your comments (when not repeating yourself) is when you take the time to carefully articulate your critique of a topic or claim, such as for example you do regarding Kaldor’s stylized facts (a citation would be wonderful). Or your argument (in the best sense of the world) why Craig’s idea of redistribution is problematic. Your plain words that any layman can grasp is a service to this blog.
      I just finished Mirowski’s (1989) More Heat than Light and am working my way through Muzzacato’s (2018) The Value of Everything and Geoff’s Economy, Society, Nature to be followed by Fullbrook’s latest. What have you read that is interesting and worth a read lately? I would be interested to know.

      • Craig
        January 13, 2020 at 1:09 am

        You’re right nearly everyone here has their “insight”. The difference is their’s is a data point or at best a reform that chips away at the weeds of complexity while mine is regarding a new paradigm….which is all the difference in the world.

      • Yoshinori Shiozawa
        January 13, 2020 at 6:34 am


        what you wrote above may be true. I have to write repeatedly the same or similar thing. I have posted many times so that Lars Syll considers about proposing more concrete positive ideas. But Syll does not respond on any comments (except two times in which he apologized that it is what he believes as unique useful way of philosophy of economics) and repeats the similar criticism against mainstream. Do you have any idea to change this state of the blog?

        As you put it, this may be the nature of blogs. I observed that a kind of Gresham’s law holds for commentators in blogs. We read sometimes good insightful comments. But, they are overwhelmed by almost nonsense claims. So bad comments drive out good comments. However, if this state of RWER blog does not change, it is hopeless that economics changes. We have to produce a new culture. Do you have any suggestions?

  8. ghholtham
    January 12, 2020 at 5:51 pm

    As someone remarked of Kaldor’s “stylised facts”, they may be stylised but they are not facts. One of them was that the division of value added into profits and wages was broadly stable. Not so, it has varied considerably; there was in many countries a profit squeeze epoch between WWII and 1980 and a wage stagnation and rising profit epoch between 1980 and 2000 . Another stylised fact was stability of the ratio of capital stock to value added. According to your way of looking at things one can’t even discuss this ratio because aggregation of capital is not by physical units but by adding up values as given by market prices. You want to measure capital as labour time but no actual capital data is recorded in that way. All the aggregates economists have to deal with are value aggregates not physical aggregates. Nearly all economic equations display consistency of units in relating monetary values (eg consumption) to other monetary values (eg income) so do not violate their own quantity calculus. Your complaint essentially is that economics is not a physical science. Well, no. It isn’t. Perhaps there are no stable relations among economic quantities or values but, if there are we won’t find them by trying to reduce economic activity to relations between physical quantities. That would be like trying to understand the monetary system by looking at the physical properties of banknotes.
    I don’t disrespect the work you did on production theory but it is essentially an abstract model, that like all models in economics may be useful for some situations and will miss the point in others.

  9. Ken Zimmerman
    January 13, 2020 at 2:53 pm

    So, does this mean that most people find contemplative, innovative, peace loving, intuitive, etc. not recommendable? No culture is ever so linear. Not even western ones in which the analytical is greatly admired. Almost as much as business acumen. In the same way no society is ever solely and only analytical. In fact, even the parts of a society that announce themselves as analytical are not so. Other approaches to forming and answering questions always figure in. Such as intuition and politics. Scientific judgments, for example are based on insights from many sources, including analytics, of course. But also, history, community ideals, and reputation. This is the situation at both ends of economic arrangements. Examining what already has been created. And creating these arrangements.

    The analytical approach economists pretend to use today is not just delusional but impossible to carry through. As anyone who’s ever had to work in a delusional and impractical situation will attest any conclusions reached are not just useless but contrary to the welfare of human communities. Will this situation change the actions of economists? Unknown.

    Anthropologists want to consider and locate aspects of people’s individual and collective lives, which is to say their lives and societies, in terms of how these aspects relate to one another in an interconnected, though not necessarily bounded or always orderly, whole. Anthropology studies relations. And it studies these both holistically and historically. And all are aspects of humans’ creation of their ways of life for living within a society that has a past. Beyond these there are no “essentials” of human existence. If economists slowed down a bit and focused less on mathematics and abstract modeling, they’d realize that studying these and their many configurations requires more effort, time, and diligence than their faulty studies of marginal utility and micro foundations. And that such studies provide the best possible access to describing and comprehending the worlds that people together create and in which their lives are situated.

  10. Gerald Holtham
    January 14, 2020 at 4:04 pm

    Metacapitalism. thank you for the compliment. I may be simple-minded but I do believe that if something cannot be stated plainly it is probably a muddle. I cannot get my head around Craig’s use of the word paradigm for example and I am afraid that our exchange will get no further in elucidating monetary theory. If I could remember who made the crack about Kaldor’s stylised facts I would have given them credit! His original article was Nicholas Kaldor (1961): “Capital Accumulation and Economic Growth,” in F. A. Lutz and D. C. Hague, editors, The Theory of Capital, New York: St. Martin’s Press, pp. 177-222.
    He cited six facts. I quoted numbers four and five. You can refute them for the UK by looking at National Acounts.

    Lately I have been working too hard and so reading rather technical stuff, relevant to the day job, like the Mirrlees Review of the UK tax system, but I did pick up and re-read Tibor Scitovsky’s wonderful book “The Joyless Economy”. I also read Edward Fullbrook’s “Market Value” and to tell the truth I found it challenging and I am still trying to work out what I make of it

    Ken, I think that the study of human society is inexhaustible and I don’t wish to claim any precedence for economics. You can study all aspects of single society (preferably small) in order to describe and comprehend it, as you recommend. You can also ask what different societies have in common when considering a subset of social relations. No such subset is sealed off from other social interactions but it may be distinguishable. And if there are commonalities in the pattern of interactions in that subset across societies, well that’s interesting too. Hence people study economics and political theory .I’ve been accused of repeating myself so I shall do so knowledge advances by asking questions and trying to answering them (Popper); you can’t answer all questions at once and you get further by taking it one question at a time. The question doesn’t have to be small.

    • Craig
      January 14, 2020 at 6:01 pm

      Money is most basically accountancy. All of its other aspects and the glomming on of cultural biases and political power pale to insignificance once you realize this.

      Debits and credits created by a monetary authority/public utility guided by the natural philosophical and ethical concept of monetary grace as in gifting, and at the terminal ending point of the entire economic/productive process at retail sale where production becomes consumption could be pivotal, inverting and paradigm changing.

    • January 15, 2020 at 9:44 am

      “Knowledge advances by asking questions and trying to answering them (Popper)”.

      Or by seeing problems and trying to resolve them, which takes one out of the language game and leaves open the possibility that in that the solution only appears when one happens to be thinking in a different way (perhaps about something seemingly irrelevant).

    • Meta Capitalism
      January 15, 2020 at 1:22 pm

      Gerald you are certainly not simple minded from where I sit. It is in my view wise to state simply and clearly complex things; at least to the degree this is pragmatically possible. I used to live inside the US Tax Code in one incarnation of my previous careers/roles. Now I largely see it as a manipulative tool used by lobbyists qua politicians qua economists qua ideologues aka the rich and powerful to further enrich themselves at the expense of common good of society. Which leads me to your most recent read, Tibor Scitovsky’s “The Joyless Economy.” It looks good and I have placed it on my reading-list. It looks very interesting and from the little I gleaned so far from the table of contents a healthy corrective to Mainstream Economics (ME). Thanks for tip.

      • Yoshinori Shiozawa
        January 15, 2020 at 2:22 pm

        Meta Capitalism

        Have you read my answer in this page posted on January 13, 2020 at 6:34 am?

  11. January 15, 2020 at 10:05 am

    What went wrong with economics? Lars concludes: “To focus scientific endeavours on proving things in models is a gross misapprehension of the purpose of economic theory”.

    I argue that what went wrong was to focus it on THE purpose of economics theory; that economics is a complex (organic in the sense of organised) system with four different purposes, relative to each of which the others are instrumental (in the sense of supplying capabilities but also – by self-control – leaving space (freedom) for the capabilities needed by the others. Specifically, not just “buying and selling” but consuming, regenerating, timely distribution and capitalisation (homemaking in the sense of providing shelter, tools, lifestyle and organised methods). In this money has long had a role in enabling the life-timely distribution of short-period harvests of material production. What went wrong with that is that the nature of money has changed but the understanding of that has not. Control of distribution of money has generated what is often called a “shadow economy” but Aristotle called chrematism. When slavery ceased to supply energy and Christian co-operation was undermined and militarised by barbaric invasions, chrematism recreated debt-bondage, while powered machinery enabled mass production and marketing before the global effects of (as against local despoilment by) mass fossil fuel usage had been realised.

    Four things thus need to change. Living needs to be included in the theory; so does timing; the concept of capitalisation needs to be generalised to include family as well as industrial home-making, and the theory of the empowerment of self-control (hence the functioning of complex systems like the brain) needs to replace the imposition (or automation) of slavery/austerity as the central concept of economics.

    My attempt to explain this, “Complex Truth and Honest Money”, suggests I should be enthusiastic about Bin-Li’s “Algorithmic Framework Theory”. In fact, writing as one who worked with the scientists (Philip Woodward et al) who introduced the term ‘algorithm’ into computing, and before that with those developing the circuitry and reliability of the earliest stored program computers, I see his paper adopting the onlooker’s misrepresentation of all this in terms of what they see, i.e. computers and programs rather than the structuring of processes as provided for in programming languages.

    The history of this is a bit tricky: not just Americans (Shannon, Wiener, von Neummann and Chomsky providing the concepts, the British (Turing, Flowers, Williams and the likes of myself under Bowes [on transistor circuits] and Woodward [on programming]) making them work in practice, and Americans capturing the market with a bowdlerised product by getting in first [Algol68 being marginalised by ‘C’ much as C/PM was by DOS]. Circuit logic had evolved from Shannon’s synchronised telephone directory connections to his digitised asynchronous pulse form. Programs had advanced from machine codes via mnemonic autocodes, Fortran – formula translator – and COBOL (a Common Business-Oriented Language that for innumerate accountants spelled out mathematical operators in words and equations in sentences and paragraphs) via Woodward’s real-time Coral (for control of continuous processes) and its derivative Algol60 to the Algol68R whose “object-oriented” general-purpose non-numerical computing required scientists to specify not only the objects and variables in their models but how these were to be defined, accessed and interpreted. Again, the corresponding British methods of systems analysis (SSADM and Woodward’s real-time MASCOT) were not “best sellers”.

    So far this is about why Bin-Li’s theory is superficial. Less obviously it is about economics not so much going wrong as having not got as far as Bin-Li in seeing the economy as a continuous process rather than computable equations with a Turing halting condition.

  12. January 15, 2020 at 10:14 am

    To continue. Still less obviously, it is about different forms of language: the alphabetic (like English) and the iconic (like Chinese). We are so used to seeing and automatically interpreting arabic numbers that it is only when we start using binary rather than decimal notation that we distinguish the numerals from their structure and realise that its visual form is an iconic form of programming. This becomes more obvious when a number is spelled out in words: most see “01684” as “naught, one, six, eight, four”, which is right insofar as this is my local telephone dialling code, but its decimal number interpretation is “[no ten thousands], one thousand, six hundred and eighty four”. The point of Algol68 programming (and indeed the construction of words from an alphabet) was to make such differences more obvious by systematically hierarchical construction and ordering of complicated programs.

    Frank Salter’s insistence on iconic use of SI units by scientists was over-ridden in the 1960’s by academics wishing to ensure scientists were more familiar with the great scientists of the past. The term ‘algorithm’ was coined to honour al Khorismi, who developed the Arabic method of representing numbers, without which modern science would have been impossible. (Imagine calculating flight paths using alphabetic Roman numbers). What the Arabic method of enumeration does is to construct a number as large as necessary by re-using a limited set of numerals and a positional shift procedure. What a computational program does is produce a specific number. What an algorithm does is structure the data and procedures to permit not only efficient and reliable computation but also unambiguous and humanly simple (i.e. easily learned) representation of the [time] ordering of results. It is not (as BinLi has it) a program that can be run many times with different data, it is that the program itself is made up of procedures and within them sub-procedures and operations at lower levels of significance which can be repeatedly and indeed [with time sharing] continuously used as required. The same can be seen in human languages in which words and their context (e.g. present, past and future tenses) are constructed from combinations or parts of other words.

    Similar comments can be made about BinLi’s simplistic view of brain architecture, but I want to briefly react to other people’s comments here. Yoshinori, who refuses to accept the idea of fundamental theory, objects to Lars arguing for methodology and philosophy, then suggests BinLi’s efforts may serve as “a pre-amble to an economics”, which is a bit nearer the idea of fundamental theory (though not that’s accounting for context, which is I suppose what BinLi’s curious term “rested” is about, i.e. the rest of reality). Gerard agrees with Lars about “representative agents” being “atomic” at the wrong level of aggregation, which had he been thinking of Algol68 information objects rather than physical atoms would be near what I was saying about levels in structured programming. Craig joins in, being of course right about the practical problem being money but still flogging his dead horse of the answer being a policy of a “50% Discount/Rebate price and monetary policy at the point of retail sale”, not of making credit available where and when needed.

    Dave Rathiel gets back to disagreeing with Lars, to the effect that differences of class rather than context are the source of misunderstandings. Frank I have mentioned; Gerard comes back with splendid advice to Craig on arguing for basic incomes on principle rather than by monetary manipulations, and against conflating monetary with government power. Craig responds with a spirited denial of the latter in terms of monetary equity not rivalling but undermining government power, however attained, and consideration of crisis deniers not being justified when the crises are looming. Meta Capitalism (Rob?) appreciates Gerard’s criticism but finds arguments in blogs (like planets in different orbits?) passing each other by, even his and Yoshinori’s arguments being ultimately as repetitive as Frank’s, Craig’s and Ken’s. So Craig (as I do) wants paradigm change; Yoshinori (as I do) blames Lars’ self-detachment for the repetition; just above, Ken (as I do) wants less modelling and more looking, albeit without my map of where to look. Gerard (as I have done) has least tried to help Frank move on from his fixation on the Quantity Calculus; but here I think it is Frank who is in the right, though he is conflating the international system of physically defined Units of Quantification (see “Frank” para above) with the Quantification of Dimensionality in terms of them. Money values are unstable quantities; economic theories based on them are only psychologically grounded. SI uses Bits grounded in form as Units of Information, but hasn’t yet realised the fact. Fullbrook’s “Market-Value” (right) envisages the whole universe as the Unit, grounding prices in that.

    To sum up in Lars’ terms, what went wrong with economics is that it hasn’t kept up to date with advances in the understanding of logic, language, mathematics, and the fundamental sciences of physics and information. I would rather say it hasn’t yet gone right, economists having learned to earn their keep “by taking in each other’s dirty washing”.

    • January 15, 2020 at 12:31 pm

      Thank you very much for your comments and introduction of some knowledge of computer. It is a pity that I have not grasped your major points yet –why AFT is “superficial”. What you mentioned here seems not denying AFT. My method is a soft-ware approach, irrelevant to hardware, irrelevant to Turing. An actor has to stop his/her computations, not because the computations are expected to accomplish “correctly” within a finite period as Turing hints, but because computing economy and other social considerations; this is one of the differences between human and computer. Computer is used here only as a metaphor, or another referential paradigm so that we can apply Method of Roundabout Production to human thinking actions. It seems you, as other peers, ignore the concept of Instruction, might I have your comments on it again? Thanks.

      The word “rest” is repeated 5 times both in WEA blogs and in my conference paper, but no “rest of reality” as you mentioned, would you please give an example sentence of it? Thank you very much.

      • January 15, 2020 at 11:33 pm

        BinLi, it appears from your list of contents you are a woman; please excuse me for assuming you were a man.

        ‘Superficial’ is another way of saying (literally) ‘on the face of it’, i.e. how something appears to be, not knowing what is going on inside (as when a sad person pretends to be happy). The way children learn language is by hearing words and seeing in their own context what they are being used for. Vocabulary so acquired is superficial and unstable because it is empirical, not (as scientists need it to be) conceptually defined – so it can be logically tested and reliably shared. Also, hardware is a form of software. My “software” goes back to the days when stored programming was achieved by plugging ferrite rods into a matrix of wires, and even modern operating systems have a hardware “status register” managing interrupts and halts. It evolved from Shannon’s “Mathematical Theory of [reliable] Communication” (not Turing’s ‘halt’ criterion of Computability), so your ‘In-structuring’ is a type of Shannon’s ‘In-formation’.

        Apologies for that being hard work. I am indeed not denying AFT. Rather, as a label it is excellent, suggesting exactly what I outlined as a prelude to the economics in my own draft (op cit above). My quibble was with your ‘ordinary language’ reading of the words ‘algorithm’ and ‘instruction’, a similar one with the word ‘information’ and lack of iconic diagrams frustrating my attempts here to interest folk in my version of AFT.

        The word ‘computer’may be a metaphor but an actual computer loaded with its operating system and applications is at the schematic [architectural type rather than circuit structure] level a paradigm example of information systems like us. It has I/O, cache word index memory, encrypted sense object memory and an alarm/selective activation system [if its status register is electronic where ours is chemical].

        You didn’t us the word ‘rest’, you used the curiously inappropriate form ‘rested’, which I tried to make sense of in terms of assignment to context, i.e. the “rest of reality”.

      • January 16, 2020 at 7:57 am

        I appreciate your reply. You were right, I am a man, not a women. I wonder how you know my gender from my blog. If I wrote something misleading, please let me know. Thanks!

        As to the words of Instruction and Algorithm, please refer to the following explanations which I have sent to Prof. Shiozawa just now. It is about Instruction, also applying to Algorithm. By the way, I like the words, they are charming and inspiring to economics. Many thanks to you and other computer scientists! The word “Algorithm” is, as you said, defined a little narrower in computer science, but, as a borrowed concept, that might do not matter too much. I have intended not to “pollute” the words, rather than to promote them and to acknowledge computer scientists.

        I apologize for my English, as I never studied outside China. Currently I am finding an opportunity to be a visiting scholar of an American university, so as to remedy the fault of my experiences. The following is some explanations on the word “rest” in my conference paper:

        1. “Further, a theory as such will surprisingly and reasonably settle the rest of the above problems, the relevant reasoning will continue after the theory is outlined below.” (Chapter “Basic ideas”, page 4); “When the agents (or “actors”) in economic theories are assumed to think in the way above, a great deal of consequences will logically and inevitably happen, the rested problems above will be answered” (Chapter “The extensions and applications”, page 7)

        As some problems were raised in the chapter of “Introduction”, and some of them were mentioned and primarily or implicitly answered in the above paragraphs, the “rest” or “rested” means the problems unmentioned or unanswered yet.

        2. “The rest of the details of thinking are principally similar to a computer.” (Chapter “How a person thinks”, page 7)

        The “rest” means “except what mentioned in the paper”.

        3. “The rested Non-Deductive Instructions are not so reliable for obtaining correct results” (Chapter “The extensions and applications”, page 9)

        The “rested” means “except the Instruction of Deduce mentioned above”.

        4. “As the thinking jobs executed (and, hence, the results of the jobs) are always limited, the rested world is still irrational to some extent.” (Chapter “The extensions and applications”, page 11)

        The “rested” means “except the part of the world explained by the thinking jobs executed”.


      • January 16, 2020 at 1:26 pm

        This is the statement on Instruction:
        The concept “Instruction” is unfortunately and widely misunderstood. The first letter of the word is capitalized, showing that it is a jargon of computer science, none of the common word “instruction” although it is really the instruction that a user or a programmer extends to the computer. Some examples of Instructions as: +, -, ×, ÷, And (logically add), Or (logically multiply), Copy, Cancel, Move, Search, etc. Only dozens of Instructions are executable for a computer, then we could suppose that the Instructions of human are similar with the Instructions of a computer, or, the Instructions of a computer are just what human brain “gives”. I have thought of a new word to replace the misleading word “Instruction”, but failed, and finally I realized that it would be appropriate to accept the ready-made jargon, it would be a respect to computer science. It is the concept Instruction that help us analyzing the mixture of human minds and then separating the “transcendental thinking tools” from information, thus we have a pair of concepts: Instruction + information, just like the male married with the female, then happiness take place. Before AFT, I could say, all economics are single, lonely and unhappy.

      • January 17, 2020 at 6:19 pm

        BinLi, thanks for your replies. On the man vs. woman issue: when I viewed the translation of your chapter list there was a Facebook style portrait on it of a girl, annotated in Chinese. On “rested”, I did understand you correctly: I just offered a more English and logically significant word, ‘context’ [with text, the rest of e.g. the book other than the text]. Bear in mind translation programs follow common rather than logical usage!

        On ‘Instruction’ as against ‘instruction’, I still finding myself agreeing with you in principle, but your examples show you are missing the point on ‘Instruction’ and hence on ‘Information’. Here’s the guide to the original version of the programming language ALGOL68, which should have determined usage.

        Click to access Algol68R-UserGuide.pdf

        You will find that what you call ‘instructions’ are here called ‘operations’, and these don’t exist on their own: one has to give them data objects to work on and they return results. Figure 1 in your WEA paper shows you understand this well enough (though in the preceding text you appear to reverse the meanings of ‘operation’ and instruction’), but it is there you infer what I have argued against: that an algorithm is simply a string of such “Instructions”. Nor is it true that a computer does one instruction at a time, for in order to add it may have to shift the relevant data into place and (in parallel with the computation) check the results. [Dividing by 0 will produce an overflow. Think of the status register as the computer’s “moral compass”]. The Guide shows how in this respect an operation is no different from a procedure [sub-program, sub-routine]; the different name indicates its origins in mathematical as against English [linguistic] usage, such that its symbols have to be redefined (if necessary within a program) for every type of data they are needed for.

        Let us compare English, mathematical and computing usage. The focus of the first is on objects and how they appear, the second on the relationships between objects and the third on actively constructing (realising) the relationships. Compare these with the fields of Newton’s equation of motion :

        Static; Moving; Accelerating; Controlling Force [causing the acceleration]

        Nouns; Adjectives; Verbs; Adverbs [more or less of an activity, as in ‘run fast’]

        Variables; Values; Logical Types [of objects in terms of verbs]; Process [activity controlling activity]

        In Algol68: REFerence (to object); Identifier (of a constant); Mode (of interpretation) = REF REF to object; in list processing, address of next object/instruction is uniquely a REF REF REF, actively gone to by the process of dereferencing.

        Conceptually, the Algol68 REF order can be reversed: data values REF REF REF to their procedures, REF REF to their type and REF to their variables. Physically, computers input and export data through their I/O subsystems, hold file indexes in high speed cache memory, comprehensive data in slow memory and (effectively built in) operating systems developed from the status register. The equivalent four-fold architecture is to be found in the senses, left-cortex sequential verbal memory, right -cortex content-addressable “visual” memory and the content-activating limbic emotional system.

        In conclusion, I’m not telling you all this to say you are wrong. At age 83, I’m trying to help you build your argument on solid ground. We have a saying here: “He who plants pears, plants for his heirs”.

      • January 17, 2020 at 6:34 pm

        PS. omitted due to interruption. Before “visual memory” should have been “parallel-processing”. After “four-fold architecture” should have been “in humans”.

      • January 17, 2020 at 11:08 pm

        PPS. Another omission! BinLi, I thought this delightful and well worth repeating:

        ” It is the concept Instruction that help us analyzing the mixture of human minds and then separating the “transcendental thinking tools” from information, thus we have a pair of concepts: Instruction + information, just like the male married with the female, then happiness take place. Before AFT, I could say, all economics are single, lonely and unhappy.”

        Consider, though, whether the fundamental pair of concepts might be ‘static’ and ‘active’. The words ‘noun’ and ‘verb’ are both static, yet the one refers to an object and the other to an activity. The instruction in a computer program likewise is static; it only becomes active (and therefore capable of going wrong) when the computer loads and activates it. For this reason real computer science is not just about computing, it is about computers, us and general purpose data processing.

        So consider how Algol68 turned computing into general purpose programming. One of its primary jobs was to enable automation of the prioritising and scheduling of multi-user computer operations (previously managed by operators loading jobs). In the “mathematical” way of looking at it:

        Variables; Values; Logical Types; Program ->Process

        the four different types (including microcode-able program instructions) are all variable information objects, and all four types of information are involved simultaneously in ‘executing’ an instruction. In other words, ‘Instruction + Information’ may be thought of logically as ‘species and genus’: not so much like ‘male and female’ as like ‘chicken and egg’, from which may emerge a somewhat different chicken (thinking ‘economy’).

      • January 18, 2020 at 2:43 pm

        Thank you for your explanation on the details of a computer. I will read the famous document recommended. Yes, my work, as I have claimed repeatedly in my books, is only a prelude of the upcoming revolution of economics, and any further work on it is very welcome. If you have any clear suggestion of revising AFT, I would be very grateful. On the other hand, economics is calling a reformative theory so much that I think the desirable theory should be as simple as possible. If a theory could explain the most things, it could be “true”, regardless whether it is a precise interpretation of computer. Human brain is really not a computer. By the way, to my understanding, your opinions are just explaining why Instruction were ignored by most relevant scholars for so long time — otherwise economics, social science and philosophies would have broken through much earlier. Thanks.

      • January 19, 2020 at 1:32 am

        Further, as I said in my books, and as AFT is a re-interpretation of computers (consequently making computer-scientist readers perhaps discomfortable), I wish it could contribute back to computer science, AI, cognitives sciences, and relevant disciplines. The eyes of computer scientists are always full of information and no Instruction, in spite that the latter is really their invention. The issue how a person thinks is different from that how human thoughts are encoded and then executed or simulated by computers. The Cognitive Revolution is deemed initiated by Chomsky rather than a computer scientist, why? In my opinion, Chomsky embedded his linguistic theory on the dual structure of “ apriority + posterity”, or “transcendence + experience”, which is in fact applied implicitly and unconsciously by most relevant scholars. Nevertheless, computer science contributes the accuracy and the discreteness of transcendentalism, where Chomsky failed. AFT could be an upgrade of Chomsky’s theory. Thanks.

      • January 20, 2020 at 8:56 pm

        BinLi, you say ” If you have any clear suggestion of revising AFT, I would be very grateful. On the other hand, economics is calling a reformative theory so much that I think the desirable theory should be as simple as possible.” This is the issue, isn’t it? Einstein’s advice: “Keep it simple – but not too simple”!

        I don’t have any “simple” suggestion for revising an AFT, though it is simple enough to say that as a Chinese you need to aware of the difference between the visually iconic Chinese script and sound-based alphabetic languages like English, the history and peculiarities of English in particular, and the difference between the logical definition of scientific terms and the intuitive evolution of everyday language (modelled in the game of “Chinese whispers” and revealingly explained as “poetic licence”). Hence my comments have been about your use of the words Algorithm and Instruction.

        I am far from an expert on Chinese script, but I understand that it functions in the same way as mathematics: the one written language has the same meaning said differently in hundreds of spoken languages (which of course children pick up before learning to read). Common mathematical symbols like “+” likewise convey the same operational meaning in different contexts, and computers (much to an old Englishman’s disgust!) are for the same reason increasingly using icons instead of alphabetically sortable titles to denote functions. Clever people, these Chinese! But aren’t YOU missing a trick? You are arguing the need for a Algorithmic Framework Theory, but not seeing that the paradigm example of an Algorithm is an arabic number, and seeing these as content and not the Framework which structures and makes intelligible the content – not least by reducing to manageable proportions the number of different symbols needed to represent large numbers.

        In respect of computing, the Framework idea comes up in another form on p.3 of the Algol68-R User’s Guide that I sent a link to. “What type of object is it, which remains constant but can refer to one value at one time and another at another? The answer is, ‘a working space in store’. Without itself changing, it can hold different values at different times”. Isn’t this ‘transcendentalism’? Algol68-R applies it throughout to make not just numbers but every type of object variable, while at the same time insisting that variations from defaults built into its library are defined locally before they are used. This made it possible not only to provide different interpretations for different number formats and alphabets but for objects at the four Newtonian levels of dynamism I’ve tried to draw your attention to above.

        This doesn’t appear in the Guide, but the management of interrupts proved to be major factor in low-level systems programming. The status register is a binary number represented by a set of switches, each of which can also be interpreted as a logical ‘true’ or ‘false’. If the number is 0, then all are ‘true’ and there isn’t a problem, otherwise the ‘false’ switch indicates which problem. Likewise in Christian morality. (I’m just reading an article saying it is not Human Rights that need to be defined, it is the right Attitude). While we Love our neighbour there won’t be a problem, otherwise the Ten Commandments indicate the likely problems, and correcting ours, I joke after 60 years married, is the information we get from our spouses. Is it not its “self-interest” leaves our economics single, lonely and unhappy?

        The Chomsky contribution is not as simple as you seem to think. In “Aspects of the Theory of Syntax” (i.e. framework rather than semantic content) he showed how to specify and language, which was used to specify Algol68. Our contribution was to make that work, and mine to experiment with non-numerical computing: comparing hierarchical, indexed and list-processing architectures, these being overtaken in the event by Codd’s relational indexing. Mathematically these methods can be equivalent, but differ in what happens what data are omitted or lost. Chomsky’s problem anyway was how children of similar ability can learn languages as different as Chinese and English. In computer terms he concluded you had to have a built-in loading program to load other programs, and this had to be variable enough to allow the learning of different and indeed new languages. Hence Algol68.

        My own Algorithmic Framework Theory with its four Newtonian levels of dynamism is like a number counting in fours instead of tens, and owes a lot to Indian library scientist S R Ranganathan’s PMEST solution to the problem of classifying interdisciplinary topics in the hierarchical Dewey system. By abstracting everything that has happened since the Big Bang, one is reduced to deciding whether that is true or false, and a bit of information to represent these possibilities. Whereas with an arabic number one basically adds units to zeros, but shifts and re-zeros to add overflows, here one starts from three degrees of freedom at time zero and successively goes through past present and future phases establishing control by subtracting degrees of freedom, shifting back to three degrees of freedom for a new type of object in a new era when the capabilities of objects in the previous era have developed by becoming fully controlled. Basically this is PID navigation of motion, the logic being the same for any part of as well as the whole of the evolutionary journey, including economics controlled via money having shifted into an era of uncontrolled chrematism. With this as the framework one can argue that not just the chrematism but the present debt-based understanding of money which evolves into it is unacceptable, the practical equivalence and theoretical inversion of the credit and debit card paradigms suggesting self-controlled and earned credit as an already available basis for the non-violent economic and political re-formation now crucially needed.

        BinLi, I’ve shared all this with you in public to leave a reasonably complete record of it, hoping some of the fairly wide and educated readership of this blog will join you in engaging with it. Thank you for having already done so. As I see it, fundamental or Framework Theory is not about providing answers, it is like a map, providing clues on where to look for them. Don’t be discouraged, therefore, by arguments you don’t understand or references you are not familiar with. Keep them in mind as clues if you haven’t the time to research them systematically, and relevant material will “ring bells”. In time gestalts will have you seeing the alternatives for yourself and even shouting “Eureka”!

      • January 23, 2020 at 11:41 pm

        I’d like to add that, as I written in my books, AFT should not be an obstacle to holisms as “gestalts” or “system theory”, but exactly a pathway to them. Why? Because any holism reflects the conjunction, integration or mixture of some comparatively-independent entities, therefore reflecting the limits of both sight and mind. Holism is a “distortive” method of serially conquering the limits, and of interpreting the “bigger”-than-me world. Thanks.

      • davetaylor1
        January 24, 2020 at 9:58 am

        BinLi, thank you for this lovely response. Curiously, my wife and I were discussing the implications of this concerning some long-standing failures in the management of our National Health System, drawing on its analogy with a machine repair system. My background is unconventional, but my equivalent of PhD research was researching the reliability of [effectively Shannon’s] reliability theory, which assumed everything failed, but at a predictable failure rate. I found that this was not always true. When one looked at everything, the odd cases where it failed due to system design defects stuck out like a sore thumb. I later found a similar story in O S Nock’s history of the London, Midland and Scottish Railway, which had built new engines to avoid the troubles of the old one, only to find the new ones had the same problem.

        “[This] might have remained a matter for conjecture had not Sir Josiah Stamp [its General Manager] instituted a system of individual costing of locomotives. The bill for locomotive repair and maintenance was a big one, and as a master statistician he wanted to know where the money was going, not merely in a general way but what was spent on every single locomotive. At first there were some in the department who felt this was bureaucracy gone mad, but before long it was appreciated as a magnificent tool of management. The rapid rise in coal consumption of the Royal Scots was immediately revealed, and the most urgent steps were taken to ascertain its cause”.

      • Yoshinori Shiozawa
        January 24, 2020 at 2:50 pm

        Dear Dave,
        traditional economics ingore that artifacts like a locomotive and and techniques to produce and repair them are complex entities. There are many things that we can understand only ex post by cost accounting, whereas traditional economics assumes that we can optimise any objectives. Your example of Sir Josiah Stamp is one of many examples. Please read my old paper:
        Economics and accouning: A comparison between ohilosophicak backgrounds of the two disciplines in view if cimplexity theory. Accounting Auditing & Accountability Journal 12(1):19-38.

        You will see how complexity matters.

      • davetaylor1
        January 24, 2020 at 3:18 pm

        Had difficulty downloading this without signing my life away, but of course complexity matters. The problem is more complication (tangled relationships) than complexity (many parts of one object). The Algorithm (illustrated by the successive digits of an arabic number) is complex, but allows one to account simply for any amount of complexity in the merely quantitative sense.

      • Yoshinori Shiozawa
        January 24, 2020 at 3:42 pm

        Please read this one: Microfoundations of Evolutionary Economics (a draft paper before English revision, freely downloadable) which I pointed as preamble to our book in my post above on January 11, 2020 at 3:01 pm.
        There are widely spread problems which exceed the human scale of time to compute by any possible algorithms (ubiquity of intractable problems).

      • davetaylor1
        January 24, 2020 at 7:41 pm

        Yoshinori, your book abstract says “The new result gives for the first time in economics how the huge network as big as world economy works by the actions of each human beings who are limited in three capabilities: sight, rationality and execution.”

        In statistics the degrees of freedom are n-1, i.e. to represent 3 terms one also needs a fourth, the dependent variable resulting. One also relies on information, which is only information if it is news, i.e. not a repeat of something one already knows. In our brain we also have parallel processing on a large scale. So I’m not intimidated by your intractible problems. With our genetic origins we may have almost infinite diversity, but independently refining our dependency we have a limited number of biological needs (as against wants), and bye and large, we can only attend to one of these at a time.

      • davetaylor1
        January 24, 2020 at 9:36 pm

        Here is a fine attempt to say what I’ve been seeing (in terms of an algorithm) in language non-mathematicians may find easier. The point I will add is that social positioning in time involves some being the first, second, third and emergent fourth.

        “”A general thesis of the book [Tony Lawson’s “The Nature of Social Reality”, 2019, Routledge] is that reality everywhere (for the social and the non-social alike) is marked by specific processes of emergence. These are processes whereby various elements in existence at any given point in time become relationally organised to form components of some novel or ‘emergent’ totality, with the latter in turn perhaps becoming in due course itself organised as a component of a yet higher-level totality and so on.

        “In all such processes, whatever the level (i.e., whether social or not), the various sorts of elements that come to form components of novel totalities have somehow to bind together. In the non-social world this binding may happen by way of processes of chemical bonding, electrical attraction, collision etc. In the social case constitutive social relations are always involved, where these emerge through individual processes of social positioning. The account I propose of the way it all comes together can, I think, be reasonably termed a theory of social positioning”.

      • Yoshinori Shiozawa
        January 25, 2020 at 11:42 am

        Lawson is one the main sources of Lars Syll’s argument.

    • Craig
      January 15, 2020 at 5:39 pm

      That’s a real good overview Dave. The integration of an overview (paradigm/pattern) and an essence (singular transformative concept aspect of a paradigm) defines and is what is necessary…to accomplish a paradigm change.

      So let’s get on with it….finally…ok?

      To paraphrase: “It’s the new monetary and financial paradigm, which recognized, enables the economic paradigm change as well, stupid.”

      And I might add, recognizing the concept behind that new monetary and financial paradigm of Gifting, leads one to the primary concept behind every historical paradigm change and will enable mankind to examine and integrate it into the current paradigm for inquiry of Science Only so that we can finally begin to mature into a culture of Wisdom.

  13. January 15, 2020 at 11:23 am
    • Meta Capitalism
      January 24, 2020 at 12:53 pm

      “We have forgotten that the economy is a tool to serve the needs of society and not the reverse. The ultimate purpose of the economy is to create prosperity with stability.” 

      — SIR JAMES GOLDSMITH, CEO, the Goldsmith Foundation, 1994, cited in Tyler (2013) What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right.

      Americans have long been proud of their economy. And why shouldn’t we be? From the time we were children, we’ve been told that we live in the best country in the world, with the most expanding and dynamic economy. We’ve been told that our economy allows Americans to enjoy a lifestyle that is the envy of the world. And we’ve been told that we live in the home of the American dream, a country that—more than any other—allows people to rise up from poverty into the ranks of the rich. But is it really true? Unfortunately, the answer is no. These things haven’t been true for a long time. But they used to be true.

      I found many cogent insights into what went wrong in What Went Wrong.

      • Meta Capitalism
        January 24, 2020 at 11:45 pm

        Whoops, that was meant to be a general comment to the post and not specifically to Dave. Must have clicked wrong place.

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