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Two definitions

from Peter Radford

Are economists so befuddled by the elegance of their machinery that
words have lost all meaning?

Two definitions, one for ‘essential’ and the other for the way in which, according to economics, people are rewarded for their work.

In recent weeks we have become accustomed to calling someone an ‘essential worker’.  These are our most important people.  They are, if the dictionary doesn’t lie, indispensable.  They are extremely important.  They are key, crucial, vital, and needed.  They sound pretty darned special to me.  They must be doing things that, were they not doing them, would bring the economy to a screeching halt.

My goodness, they must be paid a lot.  Surely anyone who is a vital cog in the machinery is paid commensurately with that importance.

Not really.  Not at all for most of them — the exception here in the U.S. being doctors.  No, most of our ‘essential workers’ are amongst our least well paid.  They cannot afford to live in the cities or towns where they do their essential work, so they commute and thus expose themselves to the risk of contracting the virus that is our current scourge.  They certainly aren’t paid for that risk, no matter what the finance textbooks tell us about risk and reward. Apparently only the ‘risk’ managed by hedge fund mangers and their ilk matters, even though it turn out they aren’t essential at all.  Instead they sit safely ensconced in their second or third homes, or on their yachts, moving paperwork from one side of the desk to the other, and getting paid very nicely for all that incredible effort.

Economists tells us that people are paid for what they produce ‘on the margin’. Indeed, marginal productivity, as this particular piece of economic fiction is called, is fairly uncontroversial even among the so-called progressive economists. John Bates Clark describes for us the effect of this oddball idea:

“the distribution of the income of society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates”

It’s a natural law!  It sounds pretty sensible too: you get out what you put in.  Sort of.

And it seems to imply that economic theory is comfortable with our most essential workers not adding much to our collective wealth.  Whereas hedge fund managers on their yachts moving paperwork around do.

Which is upside down.  But that’s not unusual for economics, whose most ardent practitioners take a particular delight in being counter-intuitive.  So, whereas those of us poor souls who think words have regular meanings would think that essential workers are those who are adding the most value, economists and their more irregular meanings don’t think that at all.  Isn’t this counter-counter intuitive?  Are economists so befuddled by the elegance of their machinery that words have lost all meaning?

Marginal productivity only exists in order to establish a ‘natural law’ to frighten workers into believing that they have to settle for poor wages — who can overturn a natural law?  The fact that society sees some workers as essential doesn’t matter to economists.  What matters is preserving a variety of interlocking intellectual marvels so that their Ptolemaic apparatus doesn’t implode.  That this produces circumstances where essential seems to mean trivial rather than vital is not an issue.  The goal is to preserve the machinery, it is not to make sense.

So one of the bedrocks of economic theory says that our most important workers are doing something that adds little to no value.  They are essential but, well, not essential.  They are hugely important to the workings of the economy, but ought be poorly paid because of their insignificance.

Am I the only one to find this odd?  I must have missed something really counter-intuitive.

Maybe it’s the pandemic playing with by mind.

And, don’t get me started on ‘revealed preference’!  We can laugh at that another day.

  1. Robert Locke
    May 29, 2020 at 1:51 pm

    Now you know why historians have trouble with economics.

  2. May 29, 2020 at 2:35 pm

    Who’s In Charge?

    One day the different parts of the body were having an argument to see which should be in charge.

    The brain said, “I do all the thinking so I’m the most important and I should be in charge.”

    The eyes said, “I see everything and let the rest of you know where we are, so I’m the most important and I should be in charge.”

    The hands said, “Without me we wouldn’t be able to pick anything up or move anything. So I’m the most important and I should be in charge.”

    The stomach said, “I turn the food we eat into energy for the rest of you. Without me, we’d starve. So I’m the most important and I should be in charge.”

    The legs said, “Without me we wouldn’t be able to move anywhere. So I’m the most important and I should be in charge.”

    Then the rectum said, “I think I should be in charge.”

    All the rest of the parts said, “You?!? You don’t do anything! You’re not important! You can’t be in charge.”

    So the rectum closed up.

    After a few days, the legs were all wobbly, the stomach was all queasy, the hands were all shaky, the eyes were all watery, and the brain was all cloudy. They all agreed that they couldn’t take any more of this and agreed to put the rectum in charge.

    The moral of the story?

    You don’t have to be the most important to be in charge, any asshole can do it.

    • Meta Capitalism
      May 29, 2020 at 2:48 pm

      Five stars one for the grandkids!

  3. ghholtham
    May 29, 2020 at 10:17 pm

    There is no such thing as “economic theory” contrary to Peter Radford’s assertion. There are economic theories, some more useless than others. Some 50 years ago the marginal product theory of wages was disputed by Joan Robinson and Luigi Pasinetti. Piero Sraffa responded with a different theory of value which did not rely on subjectivism or the artefact of aggregate capital. J deV Graaf’s 1957 book on Theoretical Welfare Economics blew a hole through all attempts to use neo-classical theory to draw policy conclusions by setting out all the unreal conditions required for it to apply. At about the same time Simon and March showed that executive pay was related to the number of steps in the corporate hierarchy. Simon’s theory of bounded rationality led on to the evolutionary economics of Nelson and Winter, in which the system is never in equilibrium so marginal equivalences explain nothing. The model that is being criticised is NOT the whole of economics. I doubt if a majority of professional economists believe it. The “economists” of the imagination of so many contributors to this blog are just one narrow, albeit prominent, US sect. I’m bored with diatribes about their faults. I KNOW, as do most practising economists. Before lumping all economists into one bag and spouting about it, why not learn just a little bit of economics? Then you can support the good guys you agree with (there’ll be someone for most tastes) and oppose the others. That is more likely to get progress than a lazy, unproductive caricature of the whole subject. Herb Simon’s methods were utterly different from Milton Friedman’s. David Henry is at the opposite end of any scale from Robert Lucas. They, along with Marx, Schumpeter and Veblen are, or were, all economists.
    And please don’t tell me economics is in a pre-scientific state. I know that too. Some economists, like Simon, have approached it scientifically. others like Lucas have approached it ideologically. It is a slander to bracket them together.

  4. ghholtham
    May 29, 2020 at 10:23 pm

    David Hendry not Henry….

  5. Econoclast
    May 29, 2020 at 11:44 pm

    “Am I the only one to find this odd?”
    Nope, not in the least; great post, lots of nuance and humor.

    “Are economists so befuddled by the elegance of their machinery that words have lost all meaning?”
    In my view, absolutely. On their behalf, as a writer and editor, I find words losing their meaning everywhere, even as what we community organizers call “framing” becomes ever more important. We are post-1984, but … 1984!!! Up is down and right is left and those of us left behind may be left in front and get steamrollered.

    “The goal is to preserve the machinery, it is not to make sense”
    Absolutely. One of my current interests is exploring in depth what I call the power of corporate capital, a collection of words I find more meaningful than the synonymous label “capitalism”. And the power of corporate capital often is the elephant in the discussion room, discussants dancing around it, evidently reluctant to acknowledge its rule. In this interest I find two things among others:
    1. Even progressive economists, including ones I admire, labor to save capitalism from itself, an endeavor that reaches back through Keynes into the John Bates Clark era.

    2. In our capital-dominated culture, such as Clark intentionally fashioned a framework to counter Marx and Henry George (if not less-famous others), to couch their work in such nonsense as “natural law”, and to spawn the era of academic economics in which I was trained. In one way or another, this dominating ideology dismisses Marxian and Georgist economists. I’m sure we all know people to whom such dismissal, or at least disrespectful marginalization, has happened. Probably most of them are David Ruccio’s friends.

    I was trained as both undergrad and grad by true believers, most of them Humphrey-liberal democrats. My favorite teacher in undergrad was an exception, Abba Lerner, who likely might have won a Nobel had he not been an avowed socialist. My favorite teacher in grad school was the late Irv Hoch, a Friedman protege and market fundamentalist true believer throughout his career. I disagreed with Irv on almost everything, but he taught me one valuable lesson: he was such a great teacher and fine human being that we could be at great odds and still find great respect, even love. All this wonderful training was rooted in the John Bates Clark market fundamentalist apparatus. In my case the training was marginal and unproductive and I left in disgust.

  6. Ikonoclast
    May 29, 2020 at 11:56 pm

    ghholtham,

    There is today a dominant economic theory which many people are fighting against. This dominant theory is well caricatured by Peter Radford’s post. At the material and social level this dominant theory is instantiated in the actual forms and practices of the extant economy. Hedge fund managers are making millions and sometimes billions while essential workers are making bare subsistence wages. Wealth and income are very inequitably distributed and bear no relation to contribution to the economy through human physical, mental and emotional effort. These are the facts.The instituted forms and practices of the extant system permit this situation, ideologically support it and in practice facilitate it.

    I am completely unimpressed by academic economists who say, “I don’t support this aspect or that aspect (of dominant theory)” and yet they still support founding aspects of value theory and its false ontology along with supporting the existence of money and markets.

    The universal measure used in conventional (classical and neoclassical) economics, is the theoretical “util” measured in the numéraire (usually the dollar). This is the (faux) standard by which values are computed, compared and aggregated. We can note that the util does not exist in the SI unit table of science. The util is not a discovered dimension of real, objective existence. It is rather a faux dimension of social, fictive construction. This is no mere cavil. It indicates a basic ontological problem for conventional economics. If one gets the base ontology of a discipline wrong, then everything else will be wrong after that. Before the germ theory of disease, the basic ontology of proto-disease theory was wrong, namely the humors theory. Medical science for diseases of pathogenic origin could not be advanced until the humors theory was overturned by the germ theory. The basic ontology had to be “got right” or at least more nearly right for the discipline to advance empirically.

    Conventional economics is a failed and degenerate research program. It has to be thrown out completely. There is no baby in it. It is entirely bathwater. The logical end conclusion is that if the util is non-existent then the numéraire measures nothing real. Rather, it implements and instantiates in practice a power system of arbitrary and unjust rewards along with allocations not aligned with human or ecological requirements. The logical and suitably radical conclusion is that money must be abolished, along with markets and any pretense to an economic theory of value. Of course, one cannot simply abolish a control, allocation and distribution system without creating a replacement. We would collapse society tomorrow if we abolished money and markets overnight. However, we need to evolve the system over time to the point where money and markets are abolished and other mechanisms are used for control, allocation and distribution.

    I could sketch a suggested path but this particular post of mine is already long enough.

  7. Grayce
    May 30, 2020 at 5:20 am

    Risk has monetary value. How do we get that into the mainstream of the measure of a healthy economy?

    • June 4, 2020 at 10:13 am

      Money has no (or even negative) value. For honest folk, risk is a problem, not a valuable. There is currently no healthy economy to measure. Two definitions of economics – one sane and the other dishonestly calling psychopathic chrematism by another name?

  8. Meta Capitalism
    May 30, 2020 at 10:15 am

    You are right Gerald, there are only economic theories. You are also right regarding the BS trotted out that current economics is pre-scientific and if only the right social mathematical formalism can be discovered it will become a “real’ science. That is pseudo-scientific scientism. There is are economists right now that are creatively addressing real-world problems along the line of you recent recommendations. The problem with RWER is it lacks balance. It is a platform for ideological extremes.

  9. Ed Zimmer
    May 30, 2020 at 4:19 pm

    Words, words, words… Step back and look at a maxim from the physical sciences: You can’t manage (or understand) what you can’t measure. The only measurable in all of economics is GDP. The flow of fiat currency is measurable; attempts to measure its stock is senseless. So once again:

    GDP is the measure of our productive economy. GDP is the sum of household, business and government spending (and likewise the income of those sectors equals that spending, because all spending is another’s income). Our economy depends on household spending (2/3 of GDP). That spending is limited by household income (which comes only from those three sectors). Business provides that income to the extent demand (ie., business opportunity) exists, and government provides the rest. All that’s important to the economy is maintaining this flow, and with a fiat currency (whose value, by definition, depends only on currency-users perception), there are no limits other than that perception.

    The household spending in GDP includes everything that the public buys to consume — food, housing, transportation, healthcare, entertainment, etc. The income side of GDP includes neither Federal borrowing nor personal or corporate income taxes – so they do not (and never have) paid for (or funded) that spending. It appears there is a magic money tree.

    So why aren’t economists actively advocating for initiatives that benefit the 99% (rather than wasting intellect on meaningless bickering).

    • June 4, 2020 at 11:17 am

      “The only measurable in all of economics is GDP. The flow of fiat currency is measurable; attempts to measure its stock is senseless.”

      The first statement here presumes what we have now: the insane definition of economics. The second is true, just as one can measure an electric current but not the number of electrons in a circuit. Redefine the economy in terms of information rather than countervailing forces, and no matter how many words it may be dressed up in, it will only tell you where the currents go, hence what they are doing, where they can be diverted and who is controlling these decision points. The choice is between strategic force and constitutional law: giving everyone enough financial slack for us all to do what we need to yet give way to each other.

      As to the rest, I agree with you, Ed. In answer to your concluding question, the problem is everybody – not only economists but their audiences – still thinking of money as coins (currency) and not as the meaning of it (credit-worthiness). The “shovel-ready” solution is to switch from debit cards to interest-free credit cards, governments telling us – as the UK’s has over Covid 19 – not what we must do but what globally needs doing, and local accountants (today’s bankers) writing off our debts when we do what we can.

  10. Ed Zimmer
    May 30, 2020 at 6:01 pm

    Blair,
    Thanks for the occasional article like this. As one who has lived with computer technology since punch-card days and find depressing how poorly those outside the field make use of it, it’s refreshing to see someone not only put it to good use, but find excitement in doing so. As you’ve learned, it’s not that difficult. The capability of the technology has certainly improved over the past 50 years, but putting it to use hasn’t changed that much since early bash days, Articles like these may inspire others to look at expanding their own personal toolkit.

  11. Ed Zimmer
    May 30, 2020 at 6:04 pm

    Sorry for this obviously inapplicable post. If moderator or editor, please delete it.

  12. Herbert
    May 31, 2020 at 6:46 am

    Income distribution is the second series of the economy, the first is the creation of income. The relationship between them is undefined in principle. The issues of justice or distribution law can be defined in the first series, but it is not necessary that these series are related to each other. In my opinion, income distribution is determined by the authority, and income generation is determined by productivity. These two things in most cases do not touch each other.

    • Ed Zimmer
      June 1, 2020 at 10:31 pm

      Herbert,
      Two questions, with my answers. What are yours?

      Why doesn’t government make everyone rich? Because that would change users’ perception of the currency. If too abundant, it would be perceived to have no value. But government could freely spend to pay for the public’s livelihood needs, and likely many of its wants, if it took care to ensure that there was adequate (and competitive) supply before spending. That this is not currently happening is a political problem — not financial.

      Why isn’t government paying for these public livelihood needs? Because it needs a method to ensure that most of the currency paid out gets spent, not saved. Additional dollars spent flow through the economy, creating more business activity (increasing GDP). Additional dollars saved have no benefit to the production-and-consumption economy.

      • Craig
        June 5, 2020 at 5:04 am

        The only economic questions needed answered are: What is the retail price and how much are you going to discount it and rebate the discount back so that total debt diminishes instead of builds up?

        And everything else will fall in line with simple but straight forward regulation to keep corporate decision makers from trying to game the discount/rebate policy…despite the fact that it’s effects are wildly in their interests and to their benefits.

  13. ghholtham
    June 1, 2020 at 3:35 pm

    Iconoclast: far be it from me to defend neo-classical value theory but, look, no-one believes in, or depends on, utils. Neo-classical value theory cannot provide an absolute definition of value and no longer pretends to. It departs from axioms of choice that just impose consistency (which is not always observed in the real world by the way). Assuming consistency the “revealed preferences” of an individual mean you can predict her relative valuation of different things. So far so good and boring. The trouble is that the conditions for being able to aggregate relative preferences to the social level are so restrictive that they cannot be met in practice. That does not mean that prices and wages are not set within limits by the forces of supply and demand; they clearly are. But there is no reason at all to suppose outcomes represent an equilibrium that is in any sense optimal. Moreover, effective demand of course depends on income. We have the relative prices we do because we have the income distribution we do.

    As for money and markets, there is a certain schizophrenic quality to comments on this blog. Some people want economists to be scientists and analyse the world as it is, which certainly includes money and markets. Others seem to think the world was designed by economists and want them to design a better one. Neither money nor markets were invented by economists. The system we have is the product of evolution and has proved itself more persistent for all its faults than alternative systems designed from first principles – whether that was Robert Owen’s co-operative utopia in New Harmony, Indiana or Lenin’s workers paradise in the Soviet Union. Give the beast his due. He may be ugly but he’s durable.

    • June 1, 2020 at 4:29 pm

      Gerard, you say “The system we have is the product of evolution and has proved itself more persistent for all its faults than alternative systems designed from first principles”. What you don’t seem to see is that science also is a product of evolution, but which from time to time discovers a relationship which upsets its previous theories and requires reformulation of the foundations which the analysts and designers and builders of applied system see as its “first principles”. If you don’t yet understand the significance of Isaac Newton’s reformulation of physics then you are surely not going to see the significance of the difference between Claude Shannon’s measurable information capacity and the subjective meaning of the economist’s word ‘value’.

  14. June 1, 2020 at 5:31 pm

    Without a doubt, the economic system exists and is fair in nature, and not according to the subjective idea of ​​justice. But unfortunately, this system does not allow us to see the modern economy. She is busy seeking confirmation of her existence, and this is her main problem. The modern economist does not doubt the question, he doubts the correct answer. Therefore, economists’ ideas about the world have nothing to do with reality. Any economic theory looks like a hallucination caused by another hallucination.

  15. Craig
    June 2, 2020 at 6:31 am

    As Steve Keen is slowly coming to realize macro-economics has suffered from a sad lack of knowledge regarding the economic significance of accounting/double entry bookkeeping. As a result it has veered off into mere mathematics and flimsy theoretics if not complete irrelevance. When one stacks the real world power of mathematics up against self interest, the abstract “truths” of mathematics basically disappear.

    Attending to the conventions and groundings that accounting has on the money system and hence the economy enlightens truth and points the way toward real world economic solutions that are able to nullify the seeming power of both economic orthodoxies and vested self interests.

  16. ghholtham
    June 2, 2020 at 11:59 am

    Dave, I’m not sure we are in dispute. I don’t deny the revolutionary effect of both Newton and Shannon’s work. I am not against the idea of a revolutionary change of perspective in economics. It’s just that it is easier said than done and not only because of ideological biases. The theory of complex adaptive systems has not got very far. Meanwhile as Peter Radford says the text books wheel out the same old tripe, even though most practising economists are aware of its severe limitations.
    Although economic theorems about optimal allocation of resources in highly idealized situations make for poor descriptions of the real world, they can be useful when applied intelligently in specific situations. Leonid Kantorovich, for example, invented linear programming when trying to work out how to optimise resource allocation in factories in the Soviet Union. Little-Mirrlees cost-benefit analysis is of practical use in project appraisal especially in countries where prices are heavily distorted by rationing or monopoly pricing. Game theory is not very illuminating descriptively but has proved very useful in the design of auctions, eg for radio spectra. The trouble is that misusing these theorems in macromodels to justify social organisation in general is an ideological pursuit. I sympathize with Radford’s disdain. I just wish the attack was more focused on the villains.

    • June 3, 2020 at 9:32 am

      Gerard, having looked at my dictionary, I am still not sure I understand what ‘dispute’ means, or whether it is a good or bad ‘thing’ (or process). I’m trying to get you to see a point, which happens to be different to the one you are advocating (so I suppose seeing). Perhaps the difference is I am seeing ‘the old lady in the face of the new’, not a difference in words. It’s just that you are saying “The theory of complex adaptive systems has not got very far”, whereas I’ve spent the last forty years clarifying what a “complex adaptive system is” (its ontology) and taking it a good bit further – via Boolean algebra, Fourier analysis, complex number, Frege/Russell types, Whitehead’s processes and Codd’s relational algebra (rather than linear programming, cost-benefit analysis and game theory). I’m currently re-reading Joan Robinson’s “Economic Philosophy”, which has a lot to say about metaphysics (what you study after you have a working understanding of the physics) and its misuse as ideology.

      I like Herbert’s summary of the problem: “An economic theory looks like a hallucination caused by another hallucination”. Agreed. The question is, whether the underlying hallucination is near enough the reality for the theory based on it to work out (or not, depending on the motives of the ideologue).

  17. ghholtham
    June 3, 2020 at 10:58 am

    Sorry Dave, what is your point? You are right that I am not getting it.

    • June 3, 2020 at 4:29 pm

      Gerard, I have told you my point, but my apologies: more haste makes less speed. I should have said, seeing “the young lady in the face of the old”, the young lady being information science, the old one physical science and the point of the familiar example being the reality of gestalts enabling one to see (intuit) something new. Re Herbert, the point is that there is a reality other than what we are conscious of. A colour-blind man is conscious of a black and white world, but a person with normal eyesight will see (hallucinate) it coloured. In order to communicate coloured pictures it was necessary to up the information content of the transmission.

      Being always willing to learn myself, I’ve learn from your replay to Craig referencing ABM and hope to find the same open-mindedness in you. Wikipedia says:

      “Agent-based models are a kind of microscale model[3] that simulate the simultaneous operations and interactions of multiple agents in an attempt to re-create and predict the appearance of complex phenomena. The process is one of emergence, which some express as “the whole is greater than the sum of its parts”. In other words, higher-level system properties emerge from the interactions of lower-level subsystems. Or, macro-scale state changes emerge from micro-scale agent behaviors. Or, simple behaviors (meaning rules followed by agents) generate complex behaviors (meaning state changes at the whole system level).”

      What I keep trying to tell you bloggers in different ways (hoping that one of you might find the current way intelligible) is that the process of emergence had to pre-exist man for mankind to emerge; given information science the process of emergence can be traced empirically all the way through the phases of evolution and into the structure of economics and parasitic capitalist chrematism: by then a macro-scale model having emerged from the micro-scale. This is fundamental science. One has a choice of metaphysics – Big Bang or Continuous Creation – from which to draw its physical axioms, but the metaphysics comes after the physics, which now points us to a Big Bang consistent with the earlier doctrine of Creation. Mathematical axioms like latitude and longitude generate a complex Boolean truth table.

  18. ghholtham
    June 3, 2020 at 6:29 pm

    Yes. I understand emergence is a ubiquitous phenomenon. The current difficulty is no-one is able to bridge the gap between such high-level generalities and the problems of analysing and managing an actual economy. People are still trying to piece together a theory of complex adaptive systems – I acknowledge the existence of interesting developments – but they are some way from being able to get it to the point where one could derive a technology from it to tackle the problems of real social systems. People are trying to adapt some of the formalism of information theory to tackle economic problems – not my speciality at all, by the way – but so far no cigar. I still can’t see what we are disagreeing about, if we are.

    • June 4, 2020 at 3:37 pm

      “People are still trying to piece together a theory of complex adaptive systems – I acknowledge the existence of interesting developments – but they are some way from being able to get it to the point where one could derive a technology from it to tackle the problems of real social systems”.

      Further to what I just wrote in response to Ed Zimmer (above) , there is a big difference between having a “shovel ready” solution and seeing anybody shovelling! Credit card technology has been about for some time. Not enough of us have understood it well enough to persuade politicians to use it, i.e. pension us all off and get us living voluntarily out of craft
      and charity shops. (Nevil Shute’s last book, though, “Trustee from the Toolroom”, is about a supremely happy model maker, living comfortably just doing what he enjoys doing).

      Further to this discussion (which I hope is not a disputation), it is about “two definitions”. This is surely our problem here. You are discussing what you see us having and I am discussing how we could avoid the worst of our problems by thinking in terms of honest information rather than deceit turning our own forces, ju-jitsu like, against ourselves. You are discussing what academics in Santa Fe have labelled complexity theory, and I am discussing the implications of natural numbers being complex and not the abstract counting and real numbers assumed in the Santa Fe version (which treats logarithms as numbers). You are discussing the formalism of economic theory (the economics of information), I am discussing the meaning of the formalism (information theory as the basis of economics), i.e. the error correction intended in information theory to make use of measurable redundancy.

      So we are all specialists! Do you worry that “others can do what I can’t”, or see that “what I cannot do, someone else may be able to”? Long ago, I learned from George Spenser Brown that “Not knowing is the condition of being able to learn”. It seems instinctive “flight or fight”, however, is a matter not of choice but of personality type, which if not genetic has already been learned. Whatever Radford’s two definitions of “essential” – the one rewarded and the other not – this may be why habitual injustice wins out over common sense.

  19. June 5, 2020 at 11:02 am

    One of the sad facts of life is that if one answers a question one tends to stop discussion of it. There is, however, a counter-tendency: referenced in C S Lewis’s remark that real book-lovers keep re-reading their books, and in my re-reading Nevil Shute and continually seeing gems I hadn’t noticed before. The book I have been re-reading lately has been Joan Robinson’s “Economic Philosophy” (1965), remembering its Keynesianism but finding it a wonderful resume of all the things I need to take into account in my advocacy of interpreting money as credit-worthiness. This is is what I had hoped would come out from discussion, for it is particularly relevant to Edward Fullbrook’s book proposing inversion of the unit of market-value (making the whole the unit rather than an ever-changing sum of its monetary units). We are discussing two definitions, and my question is, do we have to choose one or the other, or can we have both, as physically in “two sides of the same coin” and mathematically as the real (physical) and imaginary (nominal) dimensions of the same complex number? In her final paragraph I found Robinson coming back right on cue.

    “The first essential for economists, arguing amongst themselves, is to ‘try very seriously’ as Professor Popper says that natural scientists do, ‘to avoid talking at cross purposes’ and, addressing the world, reading their own doctrines aright, to combat, not foster, the ideology which pretends that values which can be measured in terms of money are the only ones that ought to count”.

    In mathematical terms, it seems to me that Fullbrook’s version of market-value resolves the imaginary problem, whereas my credit worthiness puts the valuation where it is needed and really belongs: in human kind rather than in the commodities which we buy and sell. Gerard says he doesn’t see “what we are disagreeing about, if we are”. I suggest we are not so much disagreeing as at cross purposes, so he’s seeing the symbol and I’m seeing the children growing up: either getting spoiled or having to learn how to spend their pocket-money wisely.

  20. ghholtham
    June 5, 2020 at 1:39 pm

    The world is full of moral choices and of interesting and complex questions, most of which are connected in some way. Nonetheless, as a simple soul I find it most productive to take the questions one at a time. I don’t know how to tackle questions of ethics, metaphysics, monetary theory and model representations of actual economies all at once. Answers to one question will have implications for others so it is helpful to take your questions in an appropriate order. Even so – one at a time. We are not so much at cross purposes as that you lost me when you started running all over the map.

    • Robert Locke
      June 5, 2020 at 2:03 pm

      Economics regulated by the invisibile hand of market forces, excluded ethics. Economics regulated by the visible hand of directing classes, tried, too, to replace ethics in educational systems with “knowledge,” thereby in higher education, continuing to exclude ethics. But there has always been a thread in education that insisted the moral education of the directing classes is more important than the knowledge quotient.

      • Craig
        June 5, 2020 at 5:34 pm

        Now THAT is wisdom.

      • Robert Locke
        June 6, 2020 at 9:47 am

        When Benoist d’Azy set out to build a modern factory to masss produce railsl in Alais, le Gard, in l1836, he imported his expertise from the UK. When he set out to provide retwirement and health plans for the workers in the factory, he consulted his Catholic faith in form of the social catholic movement.. Moral education does not take place in business schoolls. It is the work of ciilizations.,

      • June 6, 2020 at 11:23 am

        Robert, what you say is very interesting. The knowledge of post-reformation Catholic social teaching here in the UK rarely goes back beyond ‘Rerum Novarum’ of 1891. We’ve just had an article on this in ‘The Newman’, so it will eventually be on-line, though I can get you a copy. If you could cast your historian’s eye over the earlier Continental practice and write us an article on it, I think it would be very much appreciated.

      • June 6, 2020 at 4:12 pm

        The economy is not regulated by a visible or invisible hand. The economy is the result of the interaction of owners of only three types. Thus, economic exchange is simple as a system of three elements, explainable and sufficiently defined.

      • Craig
        June 6, 2020 at 7:30 pm

        We need to heed to the history of paradigm changes and the signatures of their historic accomplishment.

        One of those is that they have always been accompanied by a new tool and/or insight. Like the elementally significant, deep and powerful but simple point where production becomes consumption, namely retail sale, and of a direct and reciprocal price and monetary policy at that point.

        The increased economic workability, universally beneficial applicability, ascendant ethical consideration, and potential affects of such a policy in other problem laden bodies of knowledge/areas of human endeavor and so make such a conscious discovery a potential mega paradigm change of which there have only been two in human history. Those were the accomplishment of conscious self awareness which opened Pandora’s box and the apparent chaos of yea and nae, and the change from hunting and gathering to agriculture, homesteading and urbanization which enabled increased comfort-ability with that chaos but failed to follow through to discover and generally apply the ultimate unitary natural philosophical concept of grace as in love in individual action and systemic policy.

        All of the well-intentioned research and detailed economic erudition would pale to insignificance alongside a pattern change in finance and the money system from Debt Only to Direct and Reciprocal Monetary Grace as in Gifting.

      • Robert Locke
        June 6, 2020 at 7:39 pm

        Dave,
        Benoist d’Azy died in 1884. For the earliers period see

        “Un fidèle ami de Lamennais, le comte Benoît d’Azy. Lettres inédites de Benoît d’Azy à Lamennais (1825- 1833) [article]
        Louis Le Guillou
        Annales de Bretagne et des pays de l’Ouest Année 1966 73-3 pp. 363-444 .

        He and his sons were also involved with Frederic Le Play, reference Frederic Le Play and Benoist d’Azy. all of this in the 1840s and 1850s

      • June 7, 2020 at 10:42 am

        Herbert, with respect, you are missing the point I am trying to make in Complex Truth. The interaction between three types of owners forms a SIMPLE circuit. The interaction of three types of owners with non-owners forms a COMPLEX of four circuits, as in a PID control system with three types of information feedback. Mathematically, there are four combinations of four objects taken three at a time. Restoring the concept of ownership to its original meaning of a right to what you need (as against ‘owners’ having a right to do what they like), the fact that things change requires one to add ‘development’ to ‘production’ and distribution to ‘everybody’ (even to non-workers, children and pensioners. Okay, the PID control system isn’t working because ownership of money generates positive feedbacks, too much of which leads to inflationary chaos. The answer to that is not to control the money with double-entry book-keeping but to make it complex, interpreting net credit expenditure in terms of resource use.

    • June 6, 2020 at 11:03 am

      Gerard, apologies if my mind is more agile than yours. My wife has the same sort of problem you have, keeping track of flashbacks in Nevil Shute’s writing. I suppose I’m used to them.

  21. ghholtham
    June 5, 2020 at 3:31 pm

    Robert, considerations of economic policy of course cannot and should not exclude ethics. One’s ethical standpoint also determines to some extent what questions you address. I expect we would agree about necessary reforms to education curricula. Nonetheless, studying the way a system operates does not necessarily imply approval of the system. Adam Smith who coined the phrase about the invisible hand also wrote The Theory of Moral Sentiments. The messenger can be shot for telling lies but should not be shot because you don’t like his news.

    • June 7, 2020 at 11:12 am

      So Adam Smith didn’t tell lies, he made the mistake of believing David Hume, who made the mistake of concluding one couldn’t know anything, so reinterpreted the objective ethics of avoiding damaging real world consequences with the subjective ethics of doing what you felt comfortable with (one’s sentiments); never mind that that is determined by one’s personality or ideology. I personally wouldn’t shoot the messenger both because I know I make mistakes myself and because my ideology is hopeful: about God loving everybody.

  22. ghholtham
    June 7, 2020 at 7:44 pm

    Dave, your agile mind has obviously never settled long enough to understand Hume, whom you routinely misrepresent. He didn’t share your religious beliefs but that’s no reason to traduce what he wrote.

    • June 8, 2020 at 9:23 am

      Gerald, I smelled a rat in Hume when I first encountered in during philosophy of science lectures in 1958, and after I had bought and read him and Locke’s “Essay concerning Understanding” in 1965 I had already gathered what he was about. As he himself lets slip in his “Inquiry” he was out trying to make his fortune, and as his editor made me aware, Kant was already disagreeing with him within a few years. Over the years I have discovered many who disagree with him on technicalities, few who seem to have read his three volumes first hand and put together the pieces. Back in 1999 I found Tony Lawson following philosopher of science Roy Bhaskar in doing so, and since then I am on record as excusing Hume given the religious, political and economic confusion in his day. However, when up in Scotland I inquired of the Hume family whether he was one of them, and was told with a laugh that he was, if “the black sheep of the family”. So I ask you, Gerald, have you honestly read Hume for yourselves to find out whether or not I really am traducing him?

  23. Ken Zimmerman
    June 19, 2020 at 5:07 pm

    Mathematician David Orrell has tried to figure out what is going on with economics and the sources of its multiple failures. In 2011 with comic book artist Borin Van Loon they published “Introducing Economics: A Graphic Guide.” While providing a history of the study of economics and economies more readable than any “academic” one I have ever read, he also identifies what he believes are the profession’s problems and what he hopes its future will be. “Indeed, mainstream economic theory can be viewed as the ultimate example of the mechanistic, reductionist approach to the world that goes back to the time of Pythagoras. Economists have done much to help understand and defend competitive markets, individual rights, and economic growth. But a new kind of economics is now emerging that overthrows this ancient paradigm. Instead of analysing the ideal of rational economic man, it considers the behaviour of real people who are embedded in nonlinear dynamic networks. Instead of seeing the economy as a competition between disconnected individuals for scarce resources, it also considers the ‘softer’ values of connectedness and sustainability. Perhaps most importantly the new economics places the human economy in its larger context as part of the world system. This is an exciting time for economics.”

    Economics was a conservative discipline that held on to ancient ways too long. And now it is maturing into a discipline like physics, which along with mathematics shared the same problem. Nonlinearity and transactional relationships will soon dominate its work. Or, so Orrell concludes. Speaking like a mathematician and from mathematics, his language is still somewhat remote and formal. But he is trying to change. Are economists trying as well?

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