Home > Uncategorized > What’s the use of economics?

What’s the use of economics?

from Lars Syll

The simple question that was raised during a recent conference … was to what extent has — or should — the teaching of economics be modified in the light of the current economic crisis? The simple answer is that the economics profession is unlikely to change. Why would economists be willing to give up much of their human capital, painstakingly nurtured for over two centuries? For macroeconomists in particular, the reaction has been to suggest that modifications of existing models to take account of ‘frictions’ or ‘imperfections’ will be enough to account for the current evolution of the world economy. The idea is that once students have understood the basics, they can be introduced to these modifications.

However, other economists such as myself feel that we have finally reached the turning point in economics where we have to radically change the way we conceive of and model the economy. The crisis is an opportune occasion to carefully investigate new approaches. Paul Seabright hit the nail on the head; economists tend to inaccurately portray their work as a steady and relentless improvement of their models whereas, actually, economists tend to chase an empirical reality that is changing just as fast as their modelling. I would go further; rather than making steady progress towards explaining economic phenomena professional economists have been locked into a narrow vision of the economy. We constantly make more and more sophisticated models within that vision until, as Bob Solow put it, “the uninitiated peasant is left wondering what planet he or she is on” (Solow 2006) …

Entomologists (those who study insects) of old with more simple models came to the conclusion that bumble bees should not be able to fly. Their reaction was to later rethink their models in light of irrefutable evidence. Yet, the economist’s instinct is to attempt to modify reality in order to fit a model that has been built on longstanding theory. Unfortunately, that very theory is itself based on shaky foundations …

Every student in economics is faced with the model of the isolated optimising individual who makes his choices within the constraints imposed by the market. Somehow, the axioms of rationality imposed on this individual are not very convincing, particularly to first time students. But the student is told that the aim of the exercise is to show that there is an equilibrium, there can be prices that will clear all markets simultaneously. And, furthermore, the student is taught that such an equilibrium has desirable welfare properties. Importantly, the student is told that since the 1970s it has been known that whilst such a system of equilibrium prices may exist, we cannot show that the economy would ever reach an equilibrium nor that such an equilibrium is unique.

The student then moves on to macroeconomics and is told that the aggregate economy or market behaves just like the average individual she has just studied. She is not told that these general models in fact poorly reflect reality. For the macroeconomist, this is a boon since he can now analyse the aggregate allocations in an economy as though they were the result of the rational choices made by one individual. The student may find this even more difficult to swallow when she is aware that peoples’ preferences, choices and forecasts are often influenced by those of the other participants in the economy. Students take a long time to accept the idea that the economy’s choices can be assimilated to those of one individual.

Alan Kirman What’s the use of economics?

  1. Geoff Davies
    June 8, 2020 at 12:18 am

    Alan Kirman’s language and diagnosis are disappointingly mild, given that he understands complexity and chaos and how radically different is complex behaviour from the mythical (and unstable) general equilibrium. But perhaps he’s afraid for his job or his social standing among peers or something.

    People on this site go on at length about rationality and the representative agent, which is fine because they are obvious nonsense, but overlook the more accessible effect of economies of scale (increasing returns to scale), which generate instabilities all through the economy (e.g. the growth of microsoft, google, …).

    And then there are the financial market crashes. Far from equilibrium, or there would not be a crash.

    The rationality horse has been dead for a long time, stinks to high heaven, but people here keep beating and beating it.

    How about moving on, proposing more sensible ideas. Yes, including mine, in Economy, Society, Nature, featured in the column to the right. It has been nit-picked, misunderstood, mischaracterised and it shows people have trouble grasping a different approach.

    It has been treated (predictably) as just another hypothesis, just another school of thought. But if you can identify instabilities all over the place then you are dealing with a far-from-equilibrium system. That is an inference from observations, not an arbitrary postulate. A lot is known about far-from-equlibrium systems, including by Alan Kirman.

    The attention of this community could be far more profitably spent exploring far-from-equilibrium systems than this tiresome raking over of the same old dead embers.

    • June 8, 2020 at 11:30 am

      Geoff, while I entirely agree with you that economists need to look at the facts, you are not here engaging with Alan Kirman’s main contention:

      ” the economist’s instinct is to attempt to modify reality in order to fit a model that has been built on longstanding theory. Unfortunately, that very theory is itself based on shaky foundations …”.

      That is as true of your empiricism as it is of Humean theorising. Okay, the economic system is “far from equilibrium”, but WHY? What is your explanation of why it is far from equilibrium? I think you are on the nail with “economies of scale” in terms of identifying cause and effect, but what cause has that effect given human agency? You need to argue that in rationalist terms it becomes irrational because it develops habits which bypass adaptive thought, and explain habits empirically as neuronal memories strengthened by repetition.

      I argue on the well-founded basis of information theory that the economy is a PID control system with too much positive feedback, which amounts to same thing but looks very different. You see that the economists theory of rationality is irrational, which is true; I say it is irrational on the firm foundation of humans having sexual differences, with different knowledge and aims as they grow up, so that their agency, as Claude Levi-Strauss pointed out, is that of a family, not that of an individual. Unfortunately that leaves the more knowledgeable leaders able to pursue their own aims at the expense of (rather than synchronised with) the others, which is what needs to be avoided in any economic reconstruction.

      Alan Firman’s diagnosis of “shaky foundations” implies the need for less shaky foundations. The advantage of these being theoretical is that basic theories can apply and therefore be empirically interpreted and tested in many different contexts. I learned the theory of positive feedback in terms of its demonstrable narrowing of the bandwidth and hence information content in radio communications. I discovered it again in the point of chaos in the logistic equation, i.e. when the exponent exceeds 2.5. Our poor economics students are being invited to start from the possibility of equilibrium (keeping the exponent below 2), not being given your “economies of scale” clue about how it might go over. But you say:

      “The attention of this community could be far more profitably spent exploring far-from-equilibrium systems than this tiresome raking over of the same old dead embers [of equilibrium and rationality]”.

      To be fair, I say they only LOOK dead, and I myself (as Kirman is suggesting) have been
      tiresomely trying to explain why, so they can be blown back into more reliably directed life.

      • Geoff Davies
        June 8, 2020 at 1:01 pm

        Dave, I don’t think my comment was aimed in your direction. You, at least, have an approach capable of departing from equilibrium. My concern is with people who can’t get beyond the point that equilibrium theory is inadequate, and who keep saying so over and over but without exploring how you move on.

        My point is simple: there is ample evidence for strong instabilities in real economies. An equilibrium theory is incapable of describing far-from-equilibrium phenomena. In fact ffe behaviours are *radically* different from near-equilibrium behaviours, so the neoclassical approach is not a good first approximation, it is radically misleading. As misleading as treating wild horses as though they are like a rocking horse.

        I *know* Kirman said the mainstreamers would like to modify reality to fit their theories. I’m just coming at it from another angle, the misfit is still there. I can’t imagine why you seem to imply that I also want to modify reality fit my theory. Really I’m tired of being way over-interpreted, but let me phrase it more rigorously: “there are abundant observations that indicate instability in the economy, and that requires a theory of far-from-equilibrium phenomena to describe the economy.” There, I didn’t mention ‘reality’. I don’t know what ‘Humean theorising’ is, I’m sorry, and I’m not very interested, I think what I said is clear enough.

        If you can see the product of instability (e.g. exponential growth of a firm) in observations, then yes, the next step is to inquire what is driving the instability. Of course: I just wasn’t addressing that stage. And apparently you think the foundation I am suggesting is not ‘theoretical’. Is that because I said it was inferred from observations? It is still a theory (to be falsified or not), but isn’t it better to start with a theory you know is capable of describing what you can see, rather than a theory that is completely incapable? That’s all I’m saying.

        And you know what Dave? I don’t understand many of the short comments on this site because the concepts and jargon are presumed, not explained. All the usual suspects here might better sit down and write their monograph laying it our carefully (or telling us where it is), instead of chucking fragments at us over and over. e.g., I don’t remember what a ‘PID control system is’.

        Your last sentence suggests we actually agree, so why does agreeing seem to be such hard work?

      • June 8, 2020 at 4:27 pm

        Geoff, I agreed with your empirical findings, but a theory of in-equilibrium and irrationality is applied economics of the world as it is, suggesting little can be done about them. The point at issue is foundational theory vs applied theory, and I am arguing with Kirman that advance is needed at the foundational level. In your second para you seem to be agreeing with that. In your third you discounted reality, saying “I can’t imagine why you seem to imply that I also want to modify reality it fit my theory”. That’s why. If we can’t know there is a reality to follow changing ideas (incredibly, that is Hume’s story), then changing the ideas reduces to the present academic wrangling about differing ideas. You may not be interested in what’s wrong with Hume and right with PID, but if applied theory is to follow real practice, the practice needs to follow changes in the underlying theory – which indeed may already exists in another field.

        I’m probably not alone in seeing equilibrium as an aspiration, though I may be alone in seeing the problem in positive feedback anticipating uncertain future information (the D dimension of PID feedback). I am almost certainly alone in my (PID) understanding of how the brain works, and hence how to represent theoretically its multi-dimensionality. The PID is not a fragment of the theory, it is an acronym for a summary or more precisely a paradigm of it, long applied in navigation. Given compass North, one can locate any position in terms of South, East and West. I have a book, the Pelican original of H J Eysenck’s “Fact and Fiction in Psychology” (1968), which has on its front cover exactly such a map of personality types.

        Can I put it to you that I didn’t initially understand many of the concepts I have introduced on these pages because at the time I discovered them no-one else had, and perhaps even now no-one has completed the jig-saw bringing them together. Coming to understand and articulate them has taken me years. As Kirman concludes, “Students take a long time to accept the idea that the economy’s choices can be assimilated to those of one individual”. What’s true of old ideas at odds with average practice is even more true of new ideas at odds with the ideas of one particular individual. So patience is a virtue. Try to stop seeing me as a critic: I am a friend trying to help you widen your ideas.

  2. ghholtham
    June 8, 2020 at 8:14 pm

    GD “The attention of this community could be far more profitably spent exploring far-from-equilibrium systems than this tiresome raking over of the same old dead embers.”

    I entirely agree. The reason that doesn’t happen is that it is extremely hard work. Flogging dead horses is much easier.

    Your own book demonstrates the problem. After making sensible remarks about far-from- equilibrium systems and complexity it jumps into issues of monetary policy and banking. The policy prescriptions are reasonably argued but are not derived from any theory embodying complexity or non-equilibrium systems. You use the notion of complexity just to debunk the notion of equilibrium (fairly) and that gives you licence to propose various changes to the economy. Other people have proposed very similar changes for many years without knowing anything about complex systems. There is a yawning gulf between your sensible general remarks and your sensible, if debatable, reform proposals.

    We nearly all recognise that a complex adaptable system, far from equilibrium, is the right vision or conception for an economy. No one knows how to make it operational. We’re all waiting for Godot. One or two correspondents do write as if they’ve met him but their discursions are largely incomprehensible.

    • Geoff Davies
      June 9, 2020 at 3:16 am

      Thanks gh. To clarify a couple of points.

      It’s not that complexity ‘gives me licence’ to propose other changes. It’s that there are a number of fundamental flaws in mainstream economics. One is the conceptual framework used for markets (equilibrium versus complexity). Another is where money comes from. Another is how you do accounting. And so on. If we want to run an economy more sensibly we need to address all of these issues. I just tried to cover all the main deficiencies I have come across and propose remedies. I wasn’t trying for a comprehensive, integrated theory of everything (as I think is made clear early in the book – even physics hasn’t united relativity and quantum).

      As to ‘how to make it (complexity) operational’, I did sketch some approaches, admittedly briefly. Where ever you think you see a pattern you can try to describe it and deduce its implications. E.g. a credit boom and bust. There is a field of ‘complexity economics’ exploring both ‘micro’ and ‘macro’ models for insights (See Beinhocker’s book). So I don’t agree that no-one knows how to proceed. And my metaphor of taming wild horses is not intended to be just poetic, it is meant to suggest how to proceed.

    • June 9, 2020 at 11:01 am

      Gerard, I gather you anticipate my trousers falling down as I wait for Godot. Let me remind you of a much older story (Gen 11:1-9) about the Tower of Babel. It was not that the builders could not understand each other. God saw that, speaking a common language, “nothing they plan to do will be beyond them”, so he mixed language up, and made it incomprehensible. That’s what the onlookers see. He didn’t stop those taking the trouble to build, from building. Modern science has sought a common language in mathematics, but seeking simplicity rather than to understand complexity, it hasn’t agreed on what ‘mathematics’ is.

      Geoff, re-reading your book, and especially the final chapters on how to proceed, I’m delighted to see how much we agree on there. I found you referring to Alan Kirman, but not your ‘wild horses’. If your point is that the horse-whisperer achieved more by kindness than by pain then I’m very much with you. Where we disagree is about reality. Electronic and atomic science have advanced by learning how to detect what cannot be seen directly in behaviour, and the same in communications science: dealing with information capacity which can be compared and indeed measured, as against meanings which vary from person to person. The fundamental laws concern the existence and functions of the communication channels, not the directly observable behaviour. Like veins and brains in biological science.

  3. Norman L. Roth
    June 9, 2020 at 1:00 am

    Here I am again folks. And I’m tired of repeating myself.Some of you {not all} are so far off the mark, that you are best described by the witticism attributed to Erwin Schrodinger about a colleague, circa mid 1930’s,{ less than perfect translation from original Deutsche}: “It’s so bad, it’s not even wrong”. What you are groping for isn’t all that cosmically unattainable. Why do so many of you keep repeating different versions of the same old pseudo-scientific mimicry from other fields, misbegotten mechanistic models from the physical sciences & cybernetics & even navigational science, where human consciousness is not so omnipresent, & keep getting into head-on collisions with the quantification issues {often unawares} that are so basic to the social sciences, especially economics. Every one of your “raked-over embers” are covered in TELOS & TECHNOS”. And I did so by NOT dismissing the great economic thinkers of the past as conniving old reactionaries & ‘mathematically challenged’, as so many of you do. Some of you have simply drifted into the same old panaceas, monetary crankery & sanctimonious ideologies that have spilled oceans of blood across the ages & whose impoverishing depredations are still being suffered in Cuba, Venezuela, China etc. Please accept my comments in the old teaching sense of “erklarung” NOT personal admonitions. GOOGLE: Norman L. Roth

    • Craig
      June 9, 2020 at 8:48 pm

      Sorry Norman, but you’ve fallen into the same complexity traps you (correctly) bemoan. Carping about interest being the sole problem IS monetary crankery. Recognizing that the monopolistic paradigm of Debt Only as the only form and vehicle for the creation and distribution of money is NOT. It (paradigmatic analysis) recognizes that the money cranks have their calculus wrong, but also recognizes that when the power of money and vested interests are stood up against mathematics…mathematics doesn’t matter. Why? Because the wealthiest commercial entities on the planet are financial/money creating ones which shows the economic power of their paradigm. Focus on the real power, the real issue, the real problem…the monetary paradigm. No one here but me has spotted that real problem, analyzed its economic effects and the benefits of changing it. Until one understands and analyzes from a paradigmatic level (which is both conceptually simple and pluralistic as in pattern effects) they are a Ptolemaic analyst.

      Monetary Gifting. Too simple for the intellectual vanities of the erudite. Too temporally earth shaking to deny.

      • June 11, 2020 at 11:50 am

        Craig, Norman not being able to distinguish between a panacea (universal medicine) and rebuilding from the foundations up doesn’t unfortunately make your panacea paradigmatic. You haven’t defined what you mean by money, and paradigm change is about reinterpreting what we can already see.

        Norman is wrong in thinking economics has a quantification issue, when actually it is where the money is going. You propose dealing with the quantification issue by giving half of it back. Half of what? The debt?

        If you reexamine what money is, one finds it has long been Ponzi money: the banks making their profits by selling or renting out non-existent gold and people down the line paying for it with real goods. The banks have lent nothing, so there is no debt to give back. And you are proposing to give nothing? All the banks really do is acknowledge our credit-worthiness.

        If you were to understand giving money as giving credit where credit is due, then that is a paradigmatic change with which I could agree. It points to spending our own credit rather than the banks’ (i.e. to credit card finance paid back by doing good with it) as the practical solution you are seeking. Our savings are worth nothing, but up our credit limit. If we don’t do good with what we buy with them they will gradually disappear.

      • Craig
        June 12, 2020 at 5:59 pm

        Dave,

        Nonsense. I know money and I know what paradigms are and their effects. Money is most basically and importantly accounting, and the current monetary paradigm is Debt Only. That is, virtually all of it is created as only a debt obligation despite the fact such monopolistic nature de-stabilizes the macro-economy with debt deflation. All of the other characteristics of money pale to insignificance by comparison, and utilizing the direct and reciprocal, +,- infrastructure of accounting at retail sale enables the control, direction and benefits of money/credit more than a zillion off target monetary or economic blabberings will ever do.

        It’s exactly like I have said on here a hundred times. Pundits talk all around money and whore after the complexities of the economy when the elemental and deep simplicities which are the keys to perceiving and executing paradigms are what is needed.

  4. Ikonoclast
    June 9, 2020 at 11:52 am

    The key obstacle to theoretical progress is the fact that economics is both a prescriptive and a descriptive discipline. We have not developed an economic ontologly to deal with this issue.

    The real economy is a real system. The natural environment is a real system. The set of legal laws, legal property relations, institutional arrangements, financial rules and calculations which we innovate and use as “rules and score-keeping of the game” are formal systems. How are we to integrate a subject encompassing and utilizing real systems and formal systems? What method can we devise to achieve the integration of such a discipline? These are the fundamental questions for economics. Economics has this foundational ontological problem in that it encompasses two categories of existence, the real and the formal or notional.

    The following example illustrates the problem. Physics studies real systems and uses observational and experimental methods to do that. Experiments (other than thought-experiments and virtual simulations) are done in real systems. The formal system of pure physics (the pure mathematics utilizing SI table dimensions, dimensional analysis etc.) is used to formalize hypotheses, make predictions and analyze experimental test results. What we do not see in physics is a humanly created “rule” entering into the real interactions being studied and thus changing their behavior. Humans cannot make a “rule” which alters a Fundamental Law of real systems. We cannot make a rule, legal law, recommendation etcetera which will alter the Laws of Thermodynamics. This indicates that we are talking here, in physics and the hard sciences of standard “upward causation”.

    In economics human agents, in concord or discord, make and unmake legal laws, property relations, institutional arrangements, customs, mores, financial rules and calculation methods. These are rule systems which each human agent may comprehend or fail to comprehend, obey or disobey, enforce or neglect to enforce and so on. The net effect, in a society with some overall order, is that there is a general but not complete adoption of an extensive rule set and this in operation generates the downward causation effect of that formal rule system inducing real agents (humans) to make intended and unintended changes, according to the rules, to real systems (the real economy and real environment). The human rule system causes changes to the real systems through humans acting in their social milieu and environment. This description simply supports, on one side of matters, the institutional view of economics: that institutions, legal laws, customs and mores all matter and all affect and condition economic outcomes. They are no more neutral or natural than money. They are all artifice, as in made by man. Whatever nominal rule or nominal system is made this-wise by humans could always be made otherwise by humans provided the change was not incompatible with a Fundamental Law as in a Fundamental Law of physics, for example.

    These deep ontological problems in economics have previously been side-stepped because of their intractability and specifically because economic ontology (like religious and ideological ontology) shades off into moral philosophy and metaphysics, even speculative metaphysics. The applied sciences, say engineering and medicine, do not have this problem to anywhere near the same extent. The ontology of engineering is “settled” by physics. The ontology of medicine is “settled” at the physiological end of the spectrum by physics, chemistry, biochemistry and neuroscience but is still contestable at the other end in psychology and psychiatry. Of course, by “settled” I mean here not absolutely settled but adequately settled to a workable degree (not precluding further knowledge progress) such that the applied sciences have a known arena where discovered scientific laws and developed disciplinary principles and practices operate dependably; this being so because more fundamental existents and their properties, plus the causes which apply and the effects which flow from properties and properties interacting, are known to a dependable and manipulable degree.

    Now, side-stepping intractable problems is a pragmatic response which can and does permit progress. At a given state of knowledge we side-step intractable problems if there is a longer, harder way which yet leads to our goal or at least to a goal-approach which satisfices. It is my contention that “conventional” economics has long side-stepped what were once intractable ontological problems at a lower stage of scientific and technical knowledge and that “conventional” economics pragmatically improvised to satisfice; although who gets satisficed and who gets “screwed” (unsatisficed or de-satisficed) is a power question with ideological, moral philosophy, security and military dimensions.

    Scientific progress has been accelerating rapidly since the Darwinian and Einsteinian revolutions and has accelerated much more again post WW2, especially with the advanced computers and instruments revolution from the 1980s to the present days. I am referring particularly to the disciplines of complex systems science and information theory, the latter meaning both computer information theory and general information theory. These disciplines have moved the boundary between “empirical ontology” and metaphysical and speculative ontology very considerably. This boundary shift has radical implications for an ontological reappraisal of economics.

    It is quite clear that empirical ontologies as well as metaphysical ontologies can be developed; they can be brought into systematized existence and demonstrate practical value. Some ontologies refer to the real, like the Relational System Model of modern physics. Some ontologies are formal like those of computer systems science. In each case the ontology “settles” and defines a set of base existents and their properties plus interactive properties to a given degree of resolution (empirical ontology) or definition (formal ontology) with the goal being ultimately pragmatic; discovery of the real (including the socially real) and manipulation of the real (including the socially real) to human ends.

    I don’t think economics as a discipline which encompasses real and formal systems is immune to the need for a “settled” ontology which;

    (a) deals with the real (empirical ontology);
    (b) deals with the nominal (formal ontology); and
    (c) deals with the ontology of interactions and feed-backs between real systems and formal systems.

    There is a way, I contend, to fuse empirical ontology and formal ontology. To sketch it very briefly, the method takes a line from Physics Relational System Monism to Complex System Monism incorporating evolution and emergence (in the frame of priority monism) while utilizing the insights from information science. A key deduction in the “logic chain” implied by the priority monist premise is that since all sub-systems in a real monistic system (the cosmos) must also be real then a formal sub-system in the real monistic system is also real. This leads to the seemingly paradoxical assertion that a formal system is a real system. It is indeed a real system but one with special characteristics. Its operations while real-system instantiated are informationally stored and transmitted (in patterns of matter or energy). Data and the capacity for data operations are stored and enacted in physical media, including computer components and human brains as media. A salient point is that the information content (which exists in patterns in media and which is capable of influencing / producing other real patterns and structures) in these systems is more important than the matter or energy content. This might almost hold as a definition of information efficiency. An efficient information system is one where the information content and/or transmission rate is high relative to the matter/energy requirements.

    Where this theory leads, in part, is to a workable ontological delineation between “fundamental laws” as in the discovered laws of the hard sciences and humanly generated “rules” as in legal laws, regulations, customs and mores. The human agent (the human being) is the key component in all this of course. As a human agent he/she possesses some autonomy (which as a concept would be need careful and extensive definition), a physical body actuated by servos and servo systems (muscles, nerves etc.) and finally and importantly a brain, which among its other capabilities, encodes and decodes information and the rules that the information as instructions (algorithmic and heuristic) can encode. The human agent may then obey rules or disobey rules with the key proviso than a human cannot obey a rule if that would entail breaking or ignoring a fundamental law of nature discovered, or yet undiscovered, by the hard sciences (physics, chemistry and biology).

    Key questions for economics are these. What in “conventional” economics are truly laws? What in economics are “merely” rules? What parts of the moral philosophy presumption for the efficacy of private property as a personal and social good (to use that example) can be related to fundamental laws of nature and what parts can be related to mere prejudicial human prescriptions as human rules? Then, what empirical effects, from effects on the well-being or welfare levels of all social participants (effects especially as differential or unequal effects) to effects on environments and the biosphere can we note from different rules and rule sets and different variants of rules and rule sets for private property and other economic rules and institutions? What factors exogenous to the limited rule inputs we are examining could be affecting the outcomes?

    To sum up, I think conventional economics’ bias is to think rather too often that it has found laws (as in fundamental laws) when rather it has “merely” found some axiomatically guaranteed outcomes of its current prescriptive rule set. It studiously ignores its major axiomatically guaranteed outcomes like rising inequality, accelerating occurrences of novel zoonotic diseases and imminent catastrophic climate change.

    • June 9, 2020 at 10:15 pm

      Very well argued, Ike. I had been going to disagree with your ” Some ontologies are formal like those of computer systems science”, but with the addition of iconic language [Boulding’s “The Image”] I think it can be covered by your (c), dealing with “the ontology of interactions and feed-backs between real systems and formal systems”. Below that you go on:

      “A key deduction in the “logic chain” implied by the priority monist premise is that since all sub-systems in a real monistic system (the cosmos) must also be real then a formal sub-system in the real monistic system is also real. This leads to the seemingly paradoxical assertion that a formal system is a real system.”

      The paradox disappears with iconic forms, for reality represents itself. I agree with your key deduction, but it follows also that the form found in the original monist system will be present in its subsystems, eventually appearing in economies.

      This is where I started from (hum in mains electronic power supplies), but if one starts from an empty (Big Bang) cosmos rather than a pre-existing (Newtonian) one, it has to change for its sub-systems to emerge and become empirically verifiable. So consider this (from ed.2 of my Algol68-R User’s Guide): “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”. Not a thing but a hole! So my derivation starts with a concept being an empty hole and its contents being initially not things but energy becoming waves and particles (spray) formed of energy, through atoms and types of “life form” to man and the subsystems he has formed, including economies. The concept is the surface of the expanding sphere of energy. To formally identify any point one needs the equivalent of latitude and longitude, plus time (defining phases of expansion in the equivalent of quarter hours completed, i.e. 0-3, the third marking transition to the next era). The result is like the digits in a quadratic number, starting at 0 and shifting at 3. Systemisation begins with the latitude and longitude marking off four regions, the inside of the boundaries being topologically interchangeable with the area they mark off. (C.f. an electric current round the boundaries generating a magnetic field through the loop). Jumping to the life era in the derivation, cells in the first phase link as rooted sapped plants in the second phase, mobile circulating blood animals in the third, and forward-thinking neural humans in the third, inventing energy control systems with 0 to 3 information feedbacks (PID servos) in the economy linking four different functions, the third level one spawning a similar shadow monetary subsystem which itself spawns a monism (dictatorship).

      Can we ask you to explain what you understand by a “priority monist system”? Do you also think of priority as ordering in time?

      • Ikonoclast
        June 10, 2020 at 6:42 am

        Priority monism means the whole is prior to parts. It can also mean, in the emergent-evolutionary sense, that the whole generates novelties, new phenomena; new “things” meaning new complex systems and processes. “Things” are “constellations of processes” (Nicholas Rescher). In turn I think we can see that a “constellation of processes” really means much the same thing as “a complex system”.

        Positing the whole as prior to the parts is consistent with the theorized events in early cosmological emergence (e.g. the emergence of atoms) and also consistent with observations of biological evolution (the emergence of new species). New “parts” of priority monist existence arise (emerge or evolve) from the processual operations of the whole.

        In summary, new “parts” may be characterized as emerging as “radical novelty” using Professor Jeffrey A. Goldstein’s definition of this term.

        “Understanding emergence along the lines of self-organization has become so ubiquitous the two terms have just about become synonymous. However, the usual connotations of self-organization result in a misleading account of emergence by downplaying the radical novelty characterizing emergent phenomena. It is this radical novelty which generates the necessary explanatory gap between the antecedent, lower level properties of emergent substrates and the consequent, higher level properties of emergent phenomena. Without this explanatory gap, emergent phenomena are not unpredictable, are not non-deducible, are not irreducible, and thus are not truly emergent. For emergent phenomena to be genuinely emergent, processes of emergence must accomplish the seemingly paradoxical feat of producing an explanatory gap while simultaneously maintaining some degree of continuity with the substrate level.” – Professor Jeffrey A. Goldstein.

      • June 11, 2020 at 12:46 pm

        Ike, thanks for the explanation. Looking at the way a decimal number is written, I think I would also say “the concept has to exist before one account for its contents”.

        Something this threw up recently, which I meant to explain but forgot. It concerns the relationship between freedom and control. The digit in a decimal number can be anything between 0-9. Let us say it has ten degrees of freedom. If we have already counted up to 5 there are only 5 degrees of freedom left, including the option of 10, i.e. 0 along with the emergence of a new digit. What helicopter engineer Arthur M Young argues, in “The Geometry of Meaning”, is that in Newton’s equations of motion there are four degrees of freedom, the third (the force causing acceleration) effectively controlling the others. So evolution proceeds by new types of whole gradually acquiring new types of capability by gaining control over them, until complete control leaves it a new, more capable type of object which has not yet acquired control over its own motions. This is PID control with its 0-3 feedbacks, and more-or-less complete monetary control of the economy requires complete control of the money supply, controlling not the economy but making money.

  5. ghholtham
    June 9, 2020 at 1:07 pm

    GD, I take your points (and I quite enjoyed the book) but still think there is a jump between your discussion of adaptive systems and your discussion of monetary theory and institutions.

    In the latter case you understate the extent to which the case you argue has been well rehearsed in economic literature and policy discussion over the years. Every practising economist who follows the money markets knows about borrowed reserves; I haven’t met one in the last 30 years who thought banks were pure intermediaries or believed in the banking multiplier- even if that stuff is still in some text books. The main text book on money in the UK since the 1980s is Goodhart’s Money, Information and Uncertainty, which acknowledges and teaches something close to reality. Goodhart is hardly left field. He is as establishment as they come. Martin Wolf has been writing articles in the FT since the 2008 crisis arguing for monetary issuance to be a state monopoly separate from commercial credit creation. He is fairly mainstream too. You are criticising a caricature and not acknowledging intellectual antecedents – clever polemics or reading the wrong stuff?
    Anyone tackling economic issues has to make different simplifying assumptions when addressing different questions – horses for courses. It is easy to parody economics in general by taking the most extreme assumptions used (rightly or wrongly) in some models and then to write as if those assumptions were ubiquitous. Yet no economist analysing the economics of the motor car industry or utility pricing has ever failed to factor in economies of scale. Similarly no specialist in monetary economics is inculpated by the assumptions in Chicago-style real business cycle models (which are rubbish even in their own domain).

    All that said, your more general point is perfectly right: that the equilibrium method is used too much in economics – because it’s easy and it’s become a habit. Non-linearities aren’t the issue. You quote Keen’s use of non-linear equations to model cyclical behaviour as if it was a novelty. Kaldor published a trade cycle model involving non-linearities in 1940. Kalecki produced another one, more rigorous, also in the 1940s. Goodwin’s cycle model was published in 1967 and I had to study it as a graduate student. The problem is people became dissatisfied with macro-level equations, linear or otherwise, because they couldn’t give an account of what was happening underneath at less-aggregated levels. Therefore they couldn’t feel confident the macro equation would be stable, especially if subjected to a policy intervention. They need to understand how the underlying self-referential adaptive system works. And there’s the problem: I bought my first book on systems theory as an undergraduate in 1969 (Systems Thinking, ed F.E.Emery). I didn’t know how to use it then and I still don’t know now. Much more accomplished people than me are in the same position. If real progress had been made, they might have heard the news. But I promise to read Beinhocker. If Godot finally arrives, I’ll cheer louder than anyone.

    • June 9, 2020 at 4:52 pm

      Get ready to cheer, then, because Godot has been there all the while. Being as steam is to water, you just can’t see him. Instead of taking the easy way and flogging your own dead horse, face up to St Theresa’s challenge: now Christ has gone, “God has no hands but ours”.

      Iconoclast is raising (at (c)) your “need to understand how the underlying self-referential adaptive system works”, so follow that to find your answer.

    • Geoff Davies
      June 10, 2020 at 3:11 am

      gh, thanks again for constructive comments. Regarding money, I’m following the modern money theorists, and interested in the essence rather than longer history, so it’s just my ignorance (and their neglect?) of that history.

      Of course many economists talk about money (and the talking heads on TV), but the central problem is GE models that leave money out. Likewise people talk about economies of scale, but they’re excluded (beyond point of diminishing returns) from the GE models, which would otherwise not be equilibrium. So I’m aware that such topics are discussed, but the GE models, which claim to justify the whole neoliberal regime, leave them out. In fact I have come to see the ‘mainstream’ modelling of the general economy as a long-term, desperate attempt to exclude instability – hence the absurd assumptions.

      Regarding non-linearities, again it’s my ignorance of Kaldor, Kalecki, Goodwin et al. Steve Keen refers to them but I was mainly interested in a useful example.

      Regarding simplifying assumptions, yes we have to do that, the question is whether our assumptions leave some resemblance to observations. My Chapter 9 on scientific economics explores that. Again my focus is mainly on general economy models, and there the assumptions really are absurd, and grossly misleading.

      My route into systems and complexity was through Waldrop’s book and his account of Brian Arthur’s work. Arthur and the Santa Fe Institute people have, I gather, done a great deal of work exploring ‘micro’ models for their macro behaviour (some recounted in Beinhocker). I haven’t done any of that kind of modelling myself, it does require a different set of mathematical tools and a different expectation. Yet it will be far more productive of useful insights than mucking around under the street light of equilibrium when your keys are somewhere out in the dark.

      Regarding the ‘jump’ from systems to money, again I’m just following the existing aspects of ‘economics’. I do make the point that money and social interaction are the key signalling mechanisms in the system, and the very simple boom-bust model is about how money and debt affect the system in a fundamental way. So there are lines to pursue there.

      There won’t be a Godot moment of revelation. There can be an accumulation of useful insights. And it would not be hard, right now, to do much better at managing an economy than the fools following quite false prescriptions.

      • June 10, 2020 at 12:32 pm

        Geoff, there can indeed be an accumulation of useful insights – that’s what’s happened with me – but there can also be the revelation that that has already happened.

        I agree with you on the significance of Waldrop’s book, but long before it came out I was already familiar with positive feedback in electronics, instability in amplifiers and control systems, providing for complex numbers in computing and using logarithmic (exponential) units in information theory. Unlike Brian Arthur, therefore, I saw the onset of chaos when the exponent reached 2.5 (on a feedback scale of 0-3) as a sign of positive feedback rather than an opportunity for increasing gain; as the pursuit of environmental equilibrium by decreasing immediate and integral (orthogonal) errors being overtaken by the pursuit of increasing monetary returns.

        For me the revelation was that what I had already understood, other engineers had also understood, built into an electronic integrated circuit and given a convenient name: ‘PID servo’. Sadly, we Anglos and economists are notorious for not bothering to master foreign languages.

  6. Alonso Kihano
    June 9, 2020 at 7:44 pm

    What’s the use of economics? I think Alan Kirman’s post is completely off the target. Economics is used to achieve political aims. Politics it the first and major use of economics! The major purpose of economics today is to educate (or brainwash if you prefer) specialists, who can serve, and run the current socio-economic system without understanding it. Therefore, economics is obliged to create complex, but inadequate models. That suits perfectly the aim – the system could not be understood, and economics simulates sciences to gain credibility.
    Why that is necessary? To answer this question we need some retrospection. The contemporary mainstream economics is founded on the school of Adam Smith. Turn back to the political context of that time. Why Smith created his theory? The answer is given by Friedrich list in 1841 in his “National system …”. After summarising the principles of English colonial and trade practices on about 3 pages, he writes “In Adam Smith’s time, a new maxim was for the first time added to those which we have above stated, namely, to conceal the true policy of England under the cosmopolitical expressions and arguments which Adam Smith had discovered, in order to induce foreign nations not to imitate that policy.” The initial use of Adam Smit’s theory was the attempt to delude the other nations of how to reach economic development. Mainstream economics serves exactly the same aim today with exactly the same economic arguments for free trade. Mainstream economics is a nearly 300 years old lie. Yes, it has advanced, but mainly in the methods to conceal the truth by science-like models. The only change in political aspect is that at Smith’s time economics served both national and class interests – globalisation was entirely English. Today the capital is international and the national element is fiercely fought against. Economics is class ideology similar, but worse than the “scientific communism”.
    I am a physicist with 20 years of scientific experience, and I do not see any reason for economics to be named science. Economics is wrong on its basic (actually non-existing) principles. There is major positive feedback in the capitalist economy – the profit. System with positive feedback can not be in equilibrium! It will oscillate, at best, or destroy itself at worst. Debt crises and inequality follow directly from this feedback.
    I live already 30 years in capitalism, and I have never herd “there is no steel”, or “there is no aluminium”, or “there is no arable land”, or “there is no oil or gas”, but I hear everyday “there is no money”. Why? Why the scarcity of resources is a topic in the economics, but scarcity of money is not? Where is the reality there? Economics deals with complex mathematical models, but fails at the basic algebra! Why?
    The answer is quite simple – there is no POLITICAL will for change!
    I understand that the economists will strongly disagree and may even be offended by my opinion, but that is not my goal. I understand them, economics serves very well its aim – it made them see the trees, but not the forest. Once you are in, the way out is quite difficult. My goal is to seed doubt and provoke thinking outside the cage.

  7. Ikonoclast
    June 9, 2020 at 11:45 pm

    Mention of “the political” has been made in several posts above. The general tenor of these comments has been that conventional economics in theory and in praxis is a political lever. I agree. When one person writes that the problem of economics is in ontology and another that it is in politics, there can be a tendency to view these as competing theories or mutually exclusive statements. However, there is no reason that both cannot be true. False ontologies are part of every myth system and every ideological system. False ontologies serve a purpose both rhetorical and propagandistic. None of this is to say that ontologies with some genuine accuracy are easy to develop. The hundreds of years of progress of physics, which project is still ongoing, is testament to that.

    There is a common saying that “A lie can travel halfway around the world before the truth has put its boots on.” The provenance of this saying might be from Jonathan Swift who wrote:

    “Besides, as the vilest writer has his readers, so the greatest liar has his believers; and it often happens, that if a lie be believed only for an hour, it has done its work, and there is no farther occasion for it. Falsehood flies, and the truth comes limping after it; so that when men come to be undeceived, it is too late; the jest is over, and the tale has had its effect.”

    Lies are easy to invent. False ontologies, which are superficially plausible, are relatively easy to develop. The reason Truth (as homomorphic correspondence of model to reality) is “putting its boots on” is that it has to investigate real matters, often painstakingly. Lies can simply be made up. A plausible lie or lie-system, often commences with a kernel of truth which it then embellishes and elaborates upon; building a great inverted pyramid of systematic and connected lies resting and precariously balanced on the one tiny point of truth in contact with the ground of reality.

    The need for private property is a case in point. Let us consider some wisdom from Paracelsus.

    “Alle Dinge sind Gift, und nichts ist ohne Gift, allein die Dosis macht dass ein Ding kein Gift ist.” – Paracelsus.

    Translation: “All things are poison, and nothing is without poison, the dosage alone makes it so a thing is not a poison.”

    This is often shortened to “The dose makes the poison”. As this is true in toxicology could it not be true in the matter of private property? From the point of view of complex system monism (priority monism of the cosmos and this world) it might be expected that certain principles hold true at multiple levels of reality in something (the cosmos) which is complexly connected and “shot through” and connected by the same fundamental laws. This would imply a fractal-like repetition of the validity of the principle that “the dose makes the poison”. It might apply, one can hypothesize, physiologically, then psychologically, then socially and then socioeconomically.

    As Charles Sanders Peirce states: “The best that can be done is to supply a hypothesis, not devoid of all likelihood, in the general line of growth of scientific ideas, and capable of being verified or refuted by future observers.”

    We can note the need of an individual for individual autonomy or freedom. This is natural and necessary for a feeling, thinking being with a mind and body to “dispose”, meaning here “to place or set in a particular order or arrangement or to set into particular types of motion”. The individual “disposes” his or her mind and body in this sense to meet needs physiological, psychological and social. We can note also that a man or woman in society is a tool-making, artifact-making being and that the entire society they live in also demonstrates this characteristic. To survive and move forward, in time and in personal development, a man or woman in a complex society needs tools and artifacts, which means possession and/or access to tools and artifacts. And it is clear that access to tools and artifacts multiplies our power, personal, social and environmental, along both benign and malign vectors.

    The need for personal property or at least easily accessible social and public property arises from these anthropological facts. A house which a family shares is in everyday practice social property within and for that family. They share key spaces and utilities but may also have personal spaces (bedrooms) where they have more personal or special-bond privacy, comfort and space. Yet, at the formal economic level, the paired parents (not the children) might legally-economically “own” the house or a single parent might own the house or it might be a rented house. Yet, other personal property is of a more private and exclusive nature, or most people wish it to be. As one person wrote in a blog topic about socialist ideas, “I do not wish to share my toothbrush”. People need a certain amount of exclusive space and certain amounts of exclusive or near-exclusive tools and artifacts to survive-ably, live-ably and comfortably dispose and develop themselves and those of concern to them.

    The need for personal property thus arises ineluctably in a society, in a civilization. This real anthropological fact is the point upon which the inverted pyramid of bourgeois or capitalist private property is constructed both ideologically and in praxis. The moderate dose of personal property which is clearly efficacious and necessary for each and all is taken to be a principle capable of endless engorgement to any size without toxic effects on other persons or the natural environment. Relative amounts of personal or private property as well as absolute amounts clearly play into this equation.

    All this indicates that the principle of the carte blanche, open-ended right to private property is flawed. Built on a point of truth it is expanded into falsehood. The dose makes the poison. Too much of the needful is toxic. It further indicates that while this principle I put forward is incontestable scientifically and ontologically, the discovery of the right doses of private property and the right doses of social and public property need to be determined empirically and they will vary according to exogenous and even quite likely endogenous factors and conditions.

    This problem is encountered in medicine, in acid-base physiology for example, where the biochemical mathematical models might not be sophisticated or complete enough yet and/or all the patient data available is not comprehensive or timely enough (in a crisis) and/or the ontology (the existences and interactions of the fundamental existents applicable to the probelm) is not adequately elucidated yet (and research continues). In this case the answer to the question “What is the right dose?” is “Enough.” This answer is perfectly empirical in spirit and application. It is known what will move the acid-base balance. It is not known, except perhaps approximately and heuristically, what amount will move the balance into the desired zone.

    The issue of private property must be approached in the same manner. it is clear to all but the invested, self-interested possessors of stupendous amounts of private property (and the power that wealth converts into), clear to all but the ideologues too and their payed theorists as “hired guns” that the amount of wealth concentrated today into a few hands is toxic to the masses, to equity, to efficiency (the inequitable society is inefficient in its use of resources) and toxic to the environment. The empirical data on these issues are incontrovertible.

    • Alonso Kihano
      June 11, 2020 at 5:54 pm

      The question of property was solved in USSR and the other socialist countries, and it is not a matter of dose, as you wrote, but a mater of use. The property used for satisfying personal needs and the needs of your family was called “personal” and was allowed. The property ( including the “means of production”) used for production of goods intended to be sold was called “private property”, and was eradicated with establishing the socialist system. There is no such distinction in the capitalist countries where everything is “private property”. Thus, expression like “I do not wish to share my toothbrush” are just ignorance. But that ignorance was deliberately spread by political propaganda. At some time the propaganda wrote that even the women will be common under socialism. Nothing like that happened ever in USSR, but the propaganda myth is still alive. Do you see the cage?
      Moreover, the principle of personal and private property can be easy generalized to any kind of wealth – if used for consumption then it is OK; if used for profit, i.e. for increasing itself – then it is not OK.

  8. ghholtham
    June 10, 2020 at 8:22 pm

    GD: General equilibrium models are important in pedagogy but they are insignificant in the work of applied economists. If you work for the monopolies commission you aren’t assuming perfect competition! You are using other theory on industrial organisation. If you work for the IMF you are using an open-economy macro-model based on old-time Mundell-Flemming theory. If you are forecasting for a government of a company you may well be using time-series econometrics. If you are devising auctions of wireless spectra you are using game theory. GE, never. It is used to impress on learner economists that everything depends on everything else and interventions in an economy can have unexpected consequences. As a practical model it is useless. We agree that lots of things could and should be better in the way economies are run. Only some of that is down to deficiencies in economic theory. Most of it is the interplay of interests. Which economists does Trump listen to?

    • Geoff Davies
      June 11, 2020 at 2:42 am

      gh: You left out one crucial use of GE models. They are used to justify the nonsense claim that free markets are optimally efficient, and thence to justify the neoliberal ideology that is wrecking the planet. That ideology is really market anarchy, so the brutes can have their way.

      Yes it has been said to me (not that often, but sometimes) “Oh, everyone knows it’s nonsense. No-one really believes it”, about GDP, markets, whatever.

      But where is the chorus of economists saying the global regime is a fraud?

      And I could give you much less harmful ways to teach that everything is connected. It could even extend to society and the natural world, both of which are being destroyed at the moment.

  9. ghholtham
    June 11, 2020 at 11:08 am

    GD: you are right. GE does also serve a function of ideological indoctrination. But events are more powerful. The neo-liberal turn in politics and economics followed the rapid inflation of the 1970s. It got a boost from the collapse of the Soviet Union in 1991. It may be a non-sequitur but a comparison of East and West Germany after the fall of the wall gave a huge boost to the belief in markets – for Hayekian rather than GE reasons. History would not be much different if GE had never been invented. Thatcher read Hayek not Walras.
    But we agree a better macroeconomics would be highly desirable. Devising and fitting seemingly sensible equations to aggregate data is relatively easy. Ensuring they derive from or are compatible with what’s going on under the bonnet is really hard.
    Half the bloggers on this site are saying it’s impossible. The other half are blaming economists for not doing it. I’d do it if I could – honestly.
    As for measuring GDP, that’s an international standard. To change it you need international agreement. Good luck. That’s why individual countries create their own indicators of welfare now.

    • Geoff Davies
      June 12, 2020 at 3:30 am

      gh: “But events are more powerful” – I don’t think so.

      Hayek formed his Mont Pelerin Society in 1945(?) specifically to promote his free-market extremism (and his denial of ‘society’). He got a lot of influential (and rich) support. They waited their chance. Goldwater didn’t quite make it. Then came the oil embargoes of the 1970s (stagnation) and the US printing money to pay for its war (inflation). Inadequate (Keynesian?) economic thinking at the time couldn’t figure “stagflation”. In came Hayek’s mob with their free-market snake oil, and they persuaded the politicians.

      Events were the trigger, but ideas are what led us so disastrously astray. There was no reason the so-called Keynesian approach could not have been updated and the world recover and carry on. Instead we got an extremist ideology that was never going to work (and hasn’t) except to enrich the rich and powerful.

      The pervasive belief that free markets are good, except for ‘imperfections’, derives from the neoclassical equilibrium. And it is completely without valid foundation, theoretical or practical. See my book, and also http://betternaturebooks.net.au/my-books/radical-right/ (with an Australian slant but still relevant globally).

      This is not an ivory tower debate. Neoliberalism is literally destroying the habitable planet.

      On your other points: Some good rough macro models that are actually capable of describing non-equlibrium events would be useful. Micro foundations are really hard, and perhaps not possible when dealing with emergent phenomena.

      The use of GDP as a measure of ‘success’ grossly distorts our priorities. It may have its uses, but it should not be used that way, as its inventor warned. There are proper balance-sheet approaches that are at least a defensible approach. Sorry, it’s not good enough to say it’s an international standard and too hard to change. You just stop ab-using it, as some countries are doing.

      • June 13, 2020 at 1:44 pm

        “Some good rough macro models that are actually capable of describing non-equilibrium events would be useful.”

        In that sense chaos theory is one, and PID control theory is a more explanatory physical version of it. Until the logistic exponent becomes 2 one is seeking equilibrium, up to 2-1/2 one is getting evolution and above 2-1/2 chaos. So we are not achieving equilibrium, but surely that is what we are aiming for in the recycling of the earth’s resources (PI feedbacks) as our ideas about how to do so (D feedbacks) continue to evolve. The problem is that neo-liberalism is pursuing equilibrium and growth not in resources and ideas but both at the same time in fictitious Ponzi money, while at Santa Fe we have the likes of Brian Arthur mistaking chaos theory for complexity theory and advocating increasing returns by using positive (D) feedback. Money-making has not stopped as the exponent approached 2-1/2 but has driven the environmental system into the chaos we see about us.

  10. ghholtham
    June 12, 2020 at 4:01 pm

    People destroy the planet without the need for neo-liberalism. Was the Soviet Union a better custodian of nature? There used to be an Aral sea! Is China any better? Look at the Yangtze. Brazil is a corporatist state based on crony capitalism rather than neo liberalism. Do you think the Amazon is safe? Do you think any of that derives from economic text books? Economic ideas are what the Marxists call an epiphenomenon. Interests rule the world and critical events are the catalyst for change. You’d be better off campaigning to get Morrison voted out than worrying about economists.

    • Geoff Davies
      June 13, 2020 at 1:30 am

      We seem to have reached a nub. I’ll summarise, as I see it.

      Equilibrium economic models are radically misleading. Egregiously wrong, if you like.

      They were used to rationalise deregulation.

      Deregulation, especially of finance, has turbocharged ‘capitalism’, allowing financiers to capture much of the additional wealth generated since 1980, accelerating the destruction of the natural world and promoting extreme inequality that has given us Trump et al and hence is generating dangerous political instability.

      Many people are striving to shift to a less selfish and divided society and to promote the many ways we already have to live in the world without wrecking it, but the ‘free-market’ mantra still has a stranglehold on mainstream political discussion (supported by media monopolies and increasingly fascist policing). This is not just utopianism, societies were functioning better a few decades ago.

      You are right, tyrants have been enslaving people and destroying the world since before the Pharaohs. But economic ideas have been harnessed to their cause over the past couple of centuries, and the neoliberal version is particularly destructive.

      If you let go of equilibrium thinking then it is possible to see that markets *need* to be managed (using the tools we already have – incentives, disincentives, regulation). There is no reason in principle they can’t be managed to the benefit of everyone, and the natural world. That’s actually an imperative: if we can’t manage it our civilisation will collapse.

      So misguided economic ideas are a key part of our current problem.

      I do, regularly, campaign to get Morrison voted out (and our Labor fellow-travellers). I regularly write about the nonsense free-market fig leaf he uses (as well as about his flagrant corruption etc.), but my stuff never makes it into even the ‘left-leading’ mainstream, only the on-line fringe. So I experience the continuing stranglehold of misguided ideas on a regular basis.

      It would be nice to have more company from people who know neoclassical theory is nonsense, but many of those here spend their time debating angels on pinheads (e.g. Ikonoclast’s latest monographs).

      So I’m sorry gh, it’s not personal, but the brutal truth is (I think) the mainstream economics profession causes great harm in the world and urgently needs to be debunked.

      • Craig
        June 13, 2020 at 4:51 am

        The new monetary paradigm would implement the higher ethical and more abundant economic disequilibrium as in the free flowing dynamic, interactive and integrative systemic state of grace, and a policy means of moving post haste toward ecological sanity as well. Do the math, the simple calculus.

    • June 13, 2020 at 2:17 pm

      Gh, as I’ve said above, ideas evolve, and at least some of the events like the drying up of the Aral Sea have been due to ignorance, our ideas at that time not having evolved far enough. Geoff, you are still locked in the neo-liberal ideology if you can’t see the difference between real and monetary equilibrium. Craig below: a paradigm is an example, so perhaps if you translated your words into examples we might understand what they explain.

  11. Ken Zimmerman
    June 27, 2020 at 5:04 pm

    In the remainder of this lecture Kirman offers the following.

    “Some teaching suggestions
    New thinking is imperative:
    • We should spend more time insisting on the importance of coordination as the main problem of modern economies rather than efficiency. Our insistence on the latter has diverted attention from the former.
    • We should cease to insist on the idea that the aggregation of the choices and actions of individuals who directly interact with each other can be captured by the idea of the aggregate acting as only one of these many individuals. The gap between micro- and macrobehaviour is worrying.
    • We should recognise that some of the characteristics of aggregates are caused by aggregation itself. The continuous reaction of the aggregate may be the result of individuals making simple, binary discontinuous choices. For many phenomena, it is much more realistic to think of individuals as having thresholds – which cause them to react – rather than reacting in a smooth, gradual fashion to changes in their environment. Cournot had this idea, it is a pity that we have lost sight of it. Indeed, the aggregate itself may also have thresholds which cause it to react. When enough individuals make a particular choice, the whole of society may then move. When the number of individuals is smaller, there is no such movement. One has only to think of the results of voting.
    • All students should be obliged to collect their own data about some economic phenomenon at least once in their career. They will then get a feeling for the importance of institutions and of the interaction between agents and its consequences. Perhaps, best of all, this will restore their enthusiasm for economics!

    Some use for traditional theory
    Does this mean that we should cease to teach ‘standard’ economic theory to our students? Surely not. If we did so, these students would not be able to follow the current economic debates. As Max Planck has said, ‘Physics is not about discovering the natural laws that govern the universe, it is what physicists do.’ For the moment, standard economics is what economists do. But we owe it to our students to point out difficulties with the structure and assumptions of our theory. Although we are still far from a paradigm shift, in the longer run the paradigm will inevitably change. We would all do well to remember that current economic thought will one day be taught as history of economic thought.”

    This is a mix of some interesting notions and, in my view some fundamental errors. First, in a sense coordination is the issue. But coordination is useless unless durable. In other words, the real main issue for economists is how do people create durable economic arrangements shared by a community over a long period of time. And how do the economic arrangements interact with and perhaps change the community over time. Durability and change are the dilemma. Kirman is correct to note there is no “representative” collective of economic actors and actions. Actors and actions change based on “conditions on the ground of a time and place.” They do not change uniformly or in line with a known equation. Even an equation is subject to the pressures of changing times and places. “Aggregation,” the construction of collectives is something people do. It is not a choice they make. 30,000, or more years ago people did choose to live their lives communally. Both for survival purposes and to explain themselves to themselves. Now all they know is communities. There are only individuals of the shape and content allowed by an identified community. Economists created a community that then created “Homo Economicus.” Economists just refuse to acknowledge either that creation process or their community that performed the creative work. This refusal is also a part of the culture of the discipline called economics. Homo Economicus will change since while durable no community is fixed forever. Thus, no one model of “an individual” is fixed forever. And since the work of economists is only one part of a much larger culture(s), despite assertions to the contrary economists’ models and methods will change in ways unexpected by economists. Economists do not control their own fates.

    I have no objection to teaching ‘standard’ economic theory to any student, economic or otherwise. So long as the theory is not taught as fixed, inviolate, and in no need of testing. As to Max Plank’s assertion, I must ask if physics is what physicists do, then who is it that studies the cosmos? If it is not physicists, let me know who to contact. Just as what is very large and what is very small exists in its own ways, which need no humans (physicist or other) to create, so economic arrangements exist in their own ways based on the works of nonhuman and human actors, with no permissions needed from economists. If ‘what economists do’ misses or obscures the creations of these nonhumans and humans, then of what use is economics? Extraordinarily little, in my view.

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