Home > Uncategorized > Seeding doubt to provoke thinking outside the cage

Seeding doubt to provoke thinking outside the cage

from Alanso Kihano (originally posted as a comment)

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.

  1. Ikonoclast
    June 10, 2020 at 7:14 am

    As the above comment has deservedly become a topic starter in its own right, I will add my comment on it here too. I have slightly tidied up my wording to hopefully improve my clarity of argument.

    I agree with Alanso Kihano’s post. Mention of “the political” must be made when it comes to economics. The real subject is political economy, after all. It is clear that conventional economics, in theory and practice, is a political lever, whatever else it is as well. When one person writes that the problem of conventional economics is in ontology and another that it is in politics, there can be a tendency to view these as mutually exclusive statements or competing theories. 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 persuasive 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 might be from Jonathan Swift:

    “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 still “putting its boots on” is that it has to investigate real matters, often extensively and painstakingly. Lies simply can 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 upon, 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 thus “shot through” and interconnected 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 body and mind 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 body and mind in this sense to meet needs which are physiological, psychological and social. We can note also that a man or woman in society is a tool-making, artifact-making and utilizing being and that the entire society they live in also demonstrates this characteristic. To survive, thrive and move forward, in time and in 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 potential, personal, social and environmental, along both benign and malign vectors.

    The need for personal property and/or 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 in our current system, the paired parents (not the children) might legally-economically “own” the house jointly 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 other persons of close 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 enlargement to any scale 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, given the extant empirical data on our modern trajectory, that the principle of the carte blanche, open-ended right to unlimited private property is flawed. Built on a point of truth it is expanded into a gross and bloated falsehood. The dose makes the poison. Too much of the needful is toxic. This further indicates that while this overall principle appears 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 patient crisis) and/or the ontology (the existences and interactions of the fundamental existents applicable to the problem) 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 substance(s) will vary the acid-base balance. It is not known, except perhaps approximately and heuristically, what amount will move the balance into the desired zone in at least some cases.

    The issue of private property must be approached in the same manner. It is clear to all but the already invested and self-interested possessors of stupendous amounts of private property or wealth (and the power that that wealth converts into) and clear to all but the ideologues 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 now becoming undeniable.

    • Alonso Kihano
      June 11, 2020 at 7:58 pm

      Ikonoclast, I have already expressed opinion on your “dose makes the poison” arguments at the page where my post originally was. Here i will repeat only briefly. It is not the “dose” that makes the wealth wrong, it is the purpose. If the purpose is satisfying your personal, and of your family needs, then it is ok. If the purpose of wealth is increasing of the wealth itself then this is a problem. The same apply for the property as a form of wealth. And that solution was applied in socialist countries on practice.

  2. June 10, 2020 at 11:23 am

    I entirely agree with Alonso except for this second sentence: “I think Alan Kirman’s post is completely off the target”. I think he fails to see the sarcasm in Kirman’s final statement. I’m particularly pleased to see him recognising: “There is major positive feedback in the capitalist economy – the profit”. In any case, the fact that economics now is not a science doesn’t mean it didn’t ought to be, though his seeding doubt is having more effect than my offering answers! (Perhaps we need both)?

    It is great to see Iconoclast too getting down to the nitty-gritty. I’ve heard his “The dose makes the poison” in the form “Muck is only good when it’s very thinly spread”, but yes. The problem is that people are supposed to grow up and be educated beyond the deductive thinking of “all or nothing” logic such as we get in UK politics and is very evident in the US. We don’t. We think differently at different ages, we are all at different ages and – if not spoiled children or wage slaves – grow up by facing up to our intellectually different responsibilities. This learning from ownership is what G K Chesterton was on about in quipping “three acres and a cow”.

    I loved Ike’s quip, too, about “sharing tooth-brushes”. What he says about the purpose of and limitations on the rights of ownership is what I have always assumed Pope Leo XIII was taking for granted in his “Rerum Novarum” of 1891. By now many supposedly educated and even poor Catholics think nothing of inequality, childishly believing he meant absolute rights. May our saying this seed doubt in their minds!

  3. C-ReneDominque
    June 10, 2020 at 3:33 pm

    Being a physicist myself and an economist, I can sense the concern Kihano, Iconoclast, and others. However, I would like to clarify two points in Kihano’ remark:

    “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” and

    “…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?”

    As shown below, the core of the theory of exchange indicates that the equilibrium is a sink, but due to changes in parameters, the equilibrium point is a wobbling point. The answer to the second observation is that the system of exchange is over-determined, so money is a good but a special one, i. e.,it is the numeraire. An over abundance of the numeraire would produce a huge increase in all prices.

    Not long ago, I stumble on an article published in Scientific American in which the authors have attempted to model the market system. In my humble view, they make the common mistakes of those who are dissatisfied (understandably so) with mainstream economics. I am posting my answer to Scientific American and hope it might serve a purpose.

    I recently got hold of a copy of Scientific American and I read the article on wealth inequality by Bruce Boghosian (Nov.2019, vol.321) with great interest. It is claimed that many individual researchers think that “agent-based” models could be analyzed with the tools of statistical physics. To substantiate the claim, the author presents a “casino game”, which might be useful in tests for the ergodicity of processes, but according to me at least, that game and its adjoined yard-sale model do not reveal the underlying force driving inequality in the natural process of exchange, nor do they explain the notion of “value” in a market economy. As I will make clear shortly, the gist of inequality in exchange is best analyzed within the framework of the multifractal formalism, which can clearly expose the two principles governing the inequality of outcomes.
    To begin with, let us suppose a pure exchange process with m agents indexed by i and n goods indexed by j. In equilibrium, the value of good j to agent i is equal to a share of agent i’s budget. This simple equation allows the reconstruction of the attractor of the process; that is a stable wobbling fixed point (a sink really) due to changes in parameters. The attractor in turn explains behavior. For example, the demand curve for good j has the form of a rectangular hyperbola. This means that the relation between price and quantity follows a power law (i.e. with a negative exponent). Put differently, the log-log plot of price and quantity is a straight line with a negative slope. All pairwise transactions between agents describe a circular movement (i. e. a cycle), hence, the structure of exchange is self-similar throughout. Finally, the elasticity of the demand curve lies between 0 and -1; economists label this “inelasticity”, meaning that the seller can gain an advantage by raising price if he or she so chooses. It is important to realize that the set of consumers’ preferences, say, X is in ordinal space while the set of prices or budget shares, Y, is in real space. The mapping from X to Y is monotone due to the fact that both X and Y are not completely ordered sets; but X and Y are isomorphic to each other. There is therefore no injustice, cheating, or fairness. As economists like to say:The consumer is king. What is also important at this point is the fact that the mapping is a fractal. It has two characteristics: Self-similarity and power law distribution of outcomes that are carried over to actual markets, despite the complexity (due to feeds forward and back) of the latter.
    The actual market is nonlinear, non-ergodic and contains quadrillions of pairwise interactions, from every micro-markets to the whole due to self-similarity. Its fractal attractor, as shown for the DJIA and the S&P-500, is the Feigenbaum type. Further, as Manfred Schroeder (1991) has apply demonstrated, that attractor contains an uncountable set of aperiodic orbits. Any initial condition must cover a very large number of stable fixed-points, but in what order? Therefore, a Shannon entropy (the nemesis of forecasters) is present. We call this phenomenon random determinism, meaning that a perfectly deterministic process appears random to the naked eye. However, the principle of self-similarity and power distribution are carried over from the simple exchange model. The power law itself can be simplified as follows: The frequency of small size is much higher than that of large size. Such power law appears in ecology, astronomy, linguistics, firm sizes, stars distributions, etc. and not surprisingly Wilfredo Pareto has observed it in income distribution.
    To palliate the undesirable effects of the power law, governments attempt to enact policies designed to break or to increase the power law exponent in absolute term. To measure the state of inequality in an economy, one uses the index (from zero to 1, where zero represents perfect equality) developed by Corrado Gini. With more socially inclined policies, the index is pushed downward, but it has never being observed below 0.25; as it can be seen, the Gini coefficient before taxes and transfers for the year 2020 of countries like Canada (0.32), France (o.29), Germany (0.27), Norway (0.27), Sweden (0.25), etc. Whereas countries with weaker policies, the value is much higher, meaning higher inequality (e, g. USA (0.45), Brazil (0.49), Chile (0.50), Colombia (0.51), Central African Rep. (0.61), South Africa (0.62). etc.

    Therefore, Economics is a genuine social science but its modeling by mainstream economists leaves much to be desired. We should not throw the baby out with the bathwater.

    • Alonso Kihano
      June 11, 2020 at 11:17 pm

      Unfortunately, I will disagree. The correct mathematics does not give correct results if the model adopts wrong concepts of economics. More precisely, what do you mean by money? Which monetary aggregate are you considering when you talk about possible money abundance? I see only severe shortage of money. All governments are heavily in debt! You believe, that they should stay in debt in order not to disturb the property of money to be a measure of value? Are we capable of that? Do you believe the economists when they say “government prints money”? I do not! I was contemplating on the money for long time, and my final conclusion is, that the money is promise; a promise, that the owner of the money will be given certain amount of goods or another promise for a promise. The promise may be written on gold (coin) on silver (coin) on paper (banknote, share etc.) in computer memory or just in someone’s memory. Everyone gives promises of economic nature and therefore everyone is capable of creating money. Each deal for profit creates money. When two mafia bosses make a verbal deal expecting profit, they create money. Economists make us think, that money circulate as a mean of exchange only as it was in pre-capitalist time. That is no more valid.
      On the agents model. I could not get deep into it from the short description, but I do not believe in economic modeling in general. I will describe why later in a general post. But, also general consideration – economists usually forget that there are two unequal participants in the market. The sentence “To begin with, let us suppose a pure exchange process with m agents indexed by i and n goods indexed by j” tells me that your model inherits that problem – your agents are equal. Thus, the conclusion “There is therefore no injustice, cheating, or fairness.” comes naturally from the precondition of equal agents. But if you admit unequal participants at the beginning, then you do not need modeling to tell that market is unfair game. And in principle, justice and fairness are human notions and can not be result of a market functioning or mathematical model. The human defines them and has done so long time ago.
      You may add the countries ordered by number of deaths by COVID-19 per capita to the list of power law manifestations. But the inequality is not there. Pareto distribution describes inequality only among the richest people. Mid and low income distribution is of Gibs-Boltzman type. You may see the works of Yakovenko and coworkers (also physicists) on that mater (V. M. Yakovenko, J. B. Rosser, Jr., „Colloquium: Statistical mechanics of money, wealth, and income”, Rev. Mod. Phys. 81, (2009) 1703–1725). They analysed real data for wealth and income distributions, and suggested that gibs-bolzman distribution is due to additive formation of income, but the pareto distribution is a result of multiplicative formation of the income. In other words – incomes from wages and salaries result in Gibs-Boltzman (exponential) distribution, and from profits – in Pareto distribution. More facts, in the book Cowell, F. A. (2011). Measuring Inequality (Third edit), you may find the household income distribution of Czechoslovakia in 1988 (p. 133) and China in 1986 (p151). Both distributions have no Pareto tail at high incomes and are best described by logistic function. Of course Czechoslovakia and China were not free markets at that time and income by profits was not allowed. That is also a policy hint. How these facts fit to your agents’ model?
      Finally, Gini index from the World bank database: Slovenia 0.231 (2008), 0.242 (2017); Czech Republic 0.207 (1992); Finland 0.222 (1987), 0.229 (1991), 0.235 (1995); Sweden 0.229 (1981), 0.231 (1987), Hungary 0.21 (1987), Denmark 0.23 (1995) 0.238 (2000). I do not know where the limint of 0.25 comes from, but there are numerous examples of lower values.
      So, I am not convinced, that there is a babe in the dirty water of economics. Economics may become a science, but it is not now.

  4. Frank Salter
    June 10, 2020 at 4:12 pm

    To Alanso Kihano

    I agree with most of the blog’s ideas. However, I would suggest that there is one exception to the generalities described. There is one paper which differs from the appreciation made here. It is my analysis of production from first principles. It could also be described as the theory of capital deepening. It is “Transient development” RWER-81, 2017, pp 134-167.

    As a physicist you will understand the significance of a first principles analysis and the mathematics described in the paper. It appears that economists are unaware of the significance o fsirst princilpes analysis and the fact that the mathematics describes all the regularities found in the economy, such as Kaldor’s stylised facts, Okun’s law, Verdoorn’s Law etc. I am preparing further papers based on first principles analysis.

    I would very much appreciate your comments on this paper. My email address is at the end of the paper.

    • Alonso Kihano
      June 12, 2020 at 12:04 am

      I downloaded your paper and will give you feedback at earliest possible moment.
      Yes I understand the first principles approach. First principles were the first think I looked for in the economics. And “found it”. Gregory Mankiw, (2011). Principles of Macroeconomics (6th ed.). Here they are
      1. People face trade-offs,
      2. The cost of something is what you give up to get it,
      3. Rational people think at the margin,
      4. People respond to incentives,
      5. Trade can make everyone better off,
      6. Markets are usually a good way to organize economic activity,
      7. Governments can sometimes improve market outcomes,
      8. A country’s standard of living depends on its ability to produce goods and services,
      9. Prices rise when the government prints too much money,
      10. Society faces a short-term trade-off between inflation and unemployment.

      As you see the “principles” are quite heterogeneous. Economists have no idea of what the founding principles should be. 5 to 7 are conditional statements! 9 is off-topic – central bank independence is now widely established! Economists believe the central bank is “printing” the money. 10 is result, rather than starting principle. Other textbooks reduce the principles of economics to the subset of the mentioned. The scarcity of the resources is also raised in some textbooks.
      Anyway, the heterogeneity of these “principles” reflect very well the nature of the economics. The first principles approach supposes to reduce the task down to basic statements on which to build up logically a complete picture. Anyway, economics is built on mosaic principle – it gives you only pieces of the picture – random statements, concepts and some (usually simple) logical constructions, that not necessarily comply with each other, so that it becomes impossible to comprehend the entire picture. That is how economics create specialists who can run the system without understanding it.

  5. June 10, 2020 at 4:14 pm

    Economics exists in its present form to create a political narrative to support current power structures. Marketing strategies based on the ideas of spin doctors such as Edward L. Bernays’ ideas about engineering consent or Chomsky’s term for a similar concept — Manufacturing Consent — flow from mainstream economists like excrement from a goose. And the problem starts with our understanding of money based on Disney Economics of Scrooge McDuck playing in his vault of money that has been inculcated in every child in the English speaking world. Do the Disney narratives exist in other languages?

    Here are the 8 strategies defined by Bernays. It seems to me mainstream economists follow them at least loosely.

    1. Define your objectives
    2. Conduct Research
    3. Modify your objectives based on that research
    4. Set a strategy
    5. Establish themes, symbols and appeals
    6. Create an Organization to execute your strategy
    7. Decide on Timing and tactics
    8. Carry out your plans.

  6. Ed Zimmer
    June 10, 2020 at 9:37 pm

    Kirman’s “What’s the use of economics?” has kicked off a multitude of words of (in my view) zero (practical) use. Society is sitting here today with a production-and-consumption economy serving those doing the consuming extraordinarily poorly and a FIRE economy totally out of control, both threatening to destroy society itself – and the words posted here are useful (even meaningful) how? Yes, political will is required to effect change – but where is the intellectual substance constructing and comparing viable concrete options for curing such ills, understandable to politicians and public alike. That’s where economists could/should fill a void. Why aren’t they?

    The very idea of trying to “model” an economy is ludicrous. Even usefully modeling the smallest business is impossible. The best the manager of that business can expect is the unexpected. Someone from the past (I assume an economist) gave them the tool of double-entry bookkeeping so they could at least measure their operations to detect their upcoming problems, but solutions to those problems are still too complex to be modeled. Just how is trying to do that for an economy any different than trying to count the number of angels that fit on the head of a pin?`

    • June 11, 2020 at 5:04 pm

      Ed, the effect of words is to narrow options, like looking up a book index enables you to look only at relevant pages. One of the problems is that we have rival indexes, all recommending different things. Another is that there may be many editions of the same book, and most of us (including most economists) still use books assuming mathematics is confined to arithmetic, algebra and algebraic geometry (which it no longer is) and that languages are alphabetical (which just thinking of Chinese shows isn’t true). The words here being alphabetic, I can agree with you they are of zero practical use (except as short-cuts), but as economist Kenneth Boulding pointed out, there is also iconic (picture) language. As an electronic engineer I would hate to have to explain how a complex system like a computer works, trying to convey the meaning of my words without reference to at least a block diagram and a form of mathematics known as directed graphs. I have had exactly that problem “thinking outside the cage” about economics. So “where is the intellectual substance constructing and comparing viable concrete options for curing such ills, understandable to politicians and public alike”? It is writing to you, but the economists, politicians and public alike are not familiar with – so don’t use – the iconic language needed to understand it.

      The idea of trying to model an every-changing economy is not ludicrous. The very few and easily understood rules of the decimal number system enable us to represent any number; add a couple of coordinates and one can identify any position. The problems start when the positions are changing as you try to pin them down, and Newton’s four laws of motion enable us to cope even with that. Up-coming collisions pose a real problem, but that problem has long existed in navigation and has been resolved by one extra rule: large boats give way to small ones. Fundamental science tells you what is possible. Planning show you what is probable: what in practice you will need to allow for.

      • Ed Zimmer
        June 11, 2020 at 9:18 pm

        “It is writing to you, but the economists, politicians and public alike are not familiar with – so don’t use – the iconic language needed to understand it.”

        Are you saying here that it’s impossible to write in a form that economists, politicians and public can all understand? If not, what is the meaning of that sentence applied to my text that you quoted?

        “The idea of trying to model an every-changing economy is not ludicrous.”

        What is your definition of “to model”? Is it an attempt to show a consistent relationship among variables? If so,how do you do that without being able to accurately define and measure the variables? If not,what is your definition?

      • June 12, 2020 at 11:08 am

        Thanks for commenting, Ed: that at least leaves open the
        possibility of understanding each other better.

        I’m not sure “It is writing to you” was what I intended to say, but I had been “talking” about intellectual substance, so I suppose I was thinking something like “people who think in words (the vast majority given our academic educational system) don’t often have the right (or same) memories to be aware what the words refer to”. An iconic symbolism is in effect a model which can can trigger the right parts of active memory directly, as happens in intuitive understanding of what we see.

        If you are still with me, I’m an intuitive thinker, and the image I have is of the split human cortex, with (predominantly) the left side remembering what is seen and the right side what is heard and what to do about it. That’s what I mean by a basic model, whereas economists seem to be looking for behavioural models, not seeing ‘an economy’ means to them just ‘supply and demand’ (not even buyers and sellers, never mind producers and distributors). Firms may be producers and/or distributors or developers but also are consumers of resources. My own basic model has the same fourfold structure as the brain: consumers needing producers and distributors, with developers learning from experience. That basic relationship IS stable, if evolutionary. It doesn’t require the defining and measuring of variables: you can see it if you look for it (Bacon’s idea of science). It is only when you start abstracting even further (using Occam’s razor) or including behavioural details (Hume’s idea of science) that the picture becomes unstable.

        If one focusses on the communication channels between these functions one can visualise the goods and money circulating in them, with the functions creating decision points where things can go wrong. This why I say science isn’t about long-range prediction but about telling us where to look for approaching danger. But that – like making our own money (repaid by earning our keep) using credit cards, and financing government the same way in lieu of tax: that really is thinking outside the existing box!

      • Ed Zimmer
        June 12, 2020 at 4:50 pm

        We may understand each other better than you perceive.
        I’m a deductive thinker – a follows b follows c … The weakness of a deductive thinker is that we tend to fall into ruts. We think something through until we’re certain we’re right & we cling to that “truth” until some inductive thinker comes along to knock us out of it.

        Having an inductive thinker near has always been important (probably better termed “vital”) to me. As an engineering manager, I always made sure to have at least one inductive thinker on my team. My partner in my first tech business was an inductive thinker (& went on to score well over 100 significant patents over the course of his career). My wife is an inductive thinker.

        So I do understand – & understand the impossibility of communicating (especially in writing). I need definitions & measurements & logic & the inductive thinker just sees the “obvious” & is unwilling (or unable) to waste the time. So I’ll just read your posts watching for insights that might click in my world view & call it a day.

        But thanks for reminding me of what should have been obvious. It’s now clear why I finding frustrating, not just your posts, but those of several other frequent posters in the economics blogs I follow.

      • June 13, 2020 at 5:44 am

        Thanks for the understanding, Ed, but please don’t “call it a day”. As an intuitive scientist I think hypothetically (i.e. I always doubt what I see), which why, as Alonso put it, I “think outside the cage”. That means I don’t do the logicial thinking stuff to find out, I do it – and take an interest in what other people are seeing – to try and satisfy myself I am right. Which means I continue re-examining the facts and having new insights; but it also means I need to see what you logical guys ; to seed new doubts and keep me thinking “outside the cage”.

        This so bang on topic that I’m continuing what I want to share with you on the value of your type of thinking that I’ve restarted this below as a new discussion.

      • Ed Zimmer
        June 13, 2020 at 4:36 pm

        My “call it a day” simply meant that we cannot have an extended written conversation. We would just irritate & anger each other, not from the content of what we say but by the way we say it. As I said, I will continue to read (& value) your posts
        & will comment if/when I feel you’re missing something important.

  7. Ikonoclast
    June 11, 2020 at 12:13 am

    Those who continue to think we can mathematicize or find mathematical solutions for the entire political economy are, in all probability, deluding themselves. It is highly unlikely, indeed bordering on impossible, that we will do so. I would suggest a reading or re-reading of “Really Reorienting Modern Economics” by Tony Lawson.

    Specifically, the post by C-ReneDomi exemplifies the dangers of mathematicization in a model which incorporates only two elements of a vast “multi-body” / “multi-dimensional” problem. The terms in quotes are in quotes to indicate that they are really simplifying metaphors referencing the three-body problem of physics. If a three-body problem is insoluble in Newtonian physics, how much more so a “multi-body” / “multi-dimensional” problem in political economy. The political economy consists not only of “bodies” (agents, resources, goods) but also of processes (human agents again as they are also processes plus market processes, production processes, real economy processes, environment processes and so on.

    For example, C-ReneDomi’s sketch of a model attempts to model an exchange process with agent(s) and good(s). The agents are uniform and there is one good. Already this is nothing like a multi-agent, multi-good market place. Every agent is unique. Goods classes are unique. In addition, production is nowhere to be seen in the model. The environment and environmental limits also are nowhere to be seen.

    While arguments for the mathematicization of economics continue, arguments against it will continue. This is the source of all the words which Ed Zimmer deplores. (I understand his frustration. I feel it too.) In our political economy system, four broad avenues to change things would appear to exist;

    (1) Persuasion or elucidation by words (and other symbol systems like maths);
    (2) Voting;
    (3) Direct Action; and
    (4) The forces of nature.

    If you despair of words or math, vote. If you despair of voting, take to the streets in revolution. If you despair of revolution, wait for nature (climate change etc.) to wipe out us or our current form of political economy.

    This account over-simplifies of course. In the face of the “autocatalytic sprawl of pseudo-rational mastery” [1] and the seemingly automatic, auto-pilot features of our political and financial system, the methods apparently available to our personal, social and civilizational agency (1 to 3 above) somehow don’t seem to be operative. The system seems to be unchangeable, it’s logic un-amendable, it’s trajectory to catastrophe unalterable.

    There is much about our current system which seems to make argument useless both as appeals to rationality and logic and as appeals to ethics via moral philosophy. There is much which seems to make voting useless too. First, not enough people vote in the USA and very people get to vote in Russia and China (which nations were State Capitalist when they were called “Communist”). All three, the USA, Russia and China are now all of plutocracies, kleptocracies, kakistocracies, corporatocracies and oligarchies. These systems are all such a hybridized mess of the worse tendencies of late capitalism that only this grab-bag of words thrown at them seems equal to the task of capturing what they are. Our political economy system seems to be a runaway, overloaded truck hurtling down a mountain pass road with the brakes already burnt out.

    That leaves revolution and the forces of nature. I have been saying for some time, in some blog forums, that what was and is required is a salutary demonstration from nature re-enabling and making feasible once more the idea and actuality of revolutionary change in our political economy. I noted that this salutary demonstration from nature would need to cause sufficient economic damage and sufficient deaths (I suspected in the millions) to galvanize revolutionary mass action and to frighten the elites enough to listen and respond to revolutionary demands.

    Now, we have a salutary demonstration from nature (COVID-19), a novel zoonotic disease arising in very considerable part from the production and despoiling methods of capitalism, and approaching a magnitude necessary to tip off revolutionary rebellion. And if this natural crisis is not enough to change the system, the inevitable next one or one after that will be. Really-existing-capitalism (REC pronounced “wreck”) will inevitably generate these crises as it is incompatible with natural systems. So dust off your revolutionary manuals or manifestos or else write new ones. In addition, do the theorizing (almost certainly wordy, not mathy) about what our political economy should look like afterwards, unless we descend into barbarism or extinction. The choice, as far as choice exists, IS for democratic socialism or barbarism or extinction. The emerged nature of a democratic socialism, if we survive at all, will depend in considerable part on democratic debates in words and thence on wordy tomes for its full elucidation.

    1. – The Autocatalytic Sprawl of Pseudorational Mastery- Ulf Martin

    • June 11, 2020 at 5:07 pm

      See my comment to Ed Zimmer disagreeing with you on mathematisation.

    • June 12, 2020 at 2:23 pm

      Trying to get back to answering you, I don’t think the Copernican revolution had people fighting in the streets. And as we are told, Newton didn’t start with his Principia Mathematica. He first saw an apple falling off a tree and only then wrote up the implications of it. Which is what I am saying about maths: it is not all, like language, arbitrary symbols. It started off with iconic Greek geometrical diagrams with constructable visual symmetries.

    • June 17, 2020 at 2:25 pm

      Ikonoclast, I like your four categories of:
      (1) Persuasion or elucidation by words (and other symbol systems like maths);
      (2) Voting;
      (3) Direct Action; and
      (4) The forces of nature.
      My sense is all four work in tandem. The current uprising of Black Lives Matter in the US and other countries is an example. If it wasn’t for the large mass of urban young currently unemployed in the US (due to the forces of nature), and bitter with multiple social grievances that run across class and racial lines, the multiracial uprising would likely never have happened at the scale seen.

  8. Ikonoclast
    June 11, 2020 at 4:43 am

    In addition to my above post, the practical steps to correcting our political economy are relatively obvious. The difficulty lies is getting them through as political programs.

    1. Reverse neoliberalism and nationalize.

    This implies stopping privatizations and nationalizing key features of the economy. We should nationalize;

    (a) Health, welfare and education.
    (b) All water and power utilities.
    (c) All transport and communication infrastructures which constitute natural monopolies.

    2. Implement Functional Finance, Universal Basic Income, Job Guarantee and minimum wages.

    3. Remove all subsidies for private for-profit business.

    4. Re-regulate:

    (a) Heavily regulate the FIRE (Finance, Insurance and Real Estate) sector.
    (b) Implement tough environmental regulations including a strong carbon price for emissions.

    5. Regulate such that heavily hierarchical corporations with shareholder owners are penalized and flat hierarchy worker cooperatives (owned and run by the workers) are not penalized. (Democracy at Work).

    6. Introduce wealth taxes and wealth limit laws such that the open-ended accumulation of wealth and ownership of assets by individuals is not permitted.

    7. Abolish tax havens.

    8. Heavily limit political donations. Ban political advertising on any medium.

    9. Ban advertising of any health damaging products and implement Pigovian taxes on same.

    10. Ban corporate image advertising as opposed to specific product advertising.

    The above would be a practical start. It is not possible that this could be implemented in a big bang approach. The shock to the entire system would be too great. This would need to be a staged and incremental program taking at least 10 years.

    If people say this is impossible or unrealistic then the results will be tragic. It would mean that saving the world, civilization and the environment are all impossible and we will suffer the dire consequences. What will happen, is that as capitalism-induced natural disasters accelerate and intensify, the type of politics implied above will become first more imaginable and feasible and finally absolutely necessary if we are to survive at all.

    The process could remain empirically driven. We have had decades of intensifying neoliberalism and those measures have led us to a worse and worse state and our current impasse. Thus repealing the noeliberal program would imply a trend would be generated to a more livable and survivable situation for most people. The effects could be periodically assessed in a staged and incremental program. If the full repeal of the neoliberal system is successful, there is no need to stop there. Progress into genuine democratic socialism ought to continue.

    • Craig
      June 11, 2020 at 3:01 pm

      “the practical steps to correcting our political economy are relatively obvious. The difficulty lies is getting them through as political programs.”

      Correct. That’s why advocating a policy of a 50% discount/rebate at retail sale would be so effective because it unifies the interests of the traditionally opposed political perspectives of labor and management….against the real problem which is the too big to fail banks and their monopolistic paradigm of Debt Only. A 100% increase in purchasing power for the individual is simultaneously a 100% increase in potential business revenue for virtually every business model but finance after all.

      And functional finance is really nothing more than the palliation of bank dominance and economic de-stabilization.

      • Ed Zimmer
        June 11, 2020 at 9:31 pm

        Craig: The problem with your proposal is that it adds complexity to an already overly-complex system(s) for only a partial solution. If a person has no money, a discount does them no good. Better a UBI or JG with elimination of all parallel currency-disbursement programs.

      • Craig
        June 12, 2020 at 11:50 pm

        Ed: I also advocate for a universal dividend of $1000/mo. which becomes capable of purchasing $2000/mo. of goods and services.And other policies that are needed and would become possible with the two main policies of the dividend and discount/rebate at retail sale. I also advocate for a JG which fits within the new paradigm and is synergized by the 50% discount/rebate policy’s doubling of purchasing power.

        The new paradigm and its policies simplifies and brings directness to the economy and money system. It does not further complicate the rigged indirectness problems of the current systems and paradigm.

    • Ed Zimmer
      June 11, 2020 at 4:49 pm

      Your list is what I’d like to see from more economists, but in a stable, interactive venue where the economist takes a detailed position(s) and actively seeks discussion/disagreement. For example, Bill Mitchell’s early promotion of MMT. My best current example is Richard Murphy at his TaxResearch UK site. I understand that making a living takes precedence (especially under academic constraints), but it’s depressing to watch (what I see as) the waste of all that brainpower.

    • Alonso Kihano
      June 12, 2020 at 6:35 am

      Yes, I would agree to large extent with such plan. But it reminds me the welfare state especially in Scandinavian countries. For me the dismantling of the welfare state is mater of evolution of the capitalism. Yes we can in principle turn it back, but it will evolve again to something like neoliberalism.
      I see nothing about the debt in your propositions. What should be done with the growing debt? Debt can be used as political lever. Remember how Greece was punished in 2012 and forced to privatisation due to debt.

    • June 12, 2020 at 2:58 pm

      Alfonso, I’ve found myself agreeing with almost everything you say. Much as I admire Ike’s ability to express himself, here he’s still not thinking outside the box. He’s still thinking in terms nationalisation and taxation and laws, of governments and lawyers rather than financiers and business men running the show despite their having even less understanding of what they are doing. I suggest a credit card economy funding but creating responsibilities for every individual, cooperative firms and subsidiarist democratic local governments by randomly selected juries – seeking not to lay down the law but to agree conventions at and between local, regional, national and international government. While none of this is new and untried, it is nevertheless thinking outside the box liberal lawyers since Locke have locked us in. If we leave the lawyers in charge, I agree this will evolve back into something like neo-liberalism, which is why I say it needs to be constitutional, ending up internationally in something like a UN Charter of Universal Human Rights and Responsibilities.

  9. ghholtham
    June 11, 2020 at 1:31 pm

    Ed Zimmer, All well-run businesses of any size have a strategy and a financial model of their operations. The fact that it will be overtaken by events or turn out to be wrong does not make it dispensable. The same goes for economic forecasting. If you have to do it, it is “ludicrous” not to have an explicit model for it. You have to identify and keep track of your assumptions or hypotheses and identify what it was that made you wrong when the forecast goes off track. Then you can fail better next time.

    • Ed Zimmer
      June 11, 2020 at 4:17 pm

      You’re using the word “model” where I would use “plan”. One needs a “plan” to do most anything, even go to the store. The more risky the venture, the more thorough should be the plan, To me, to “model” means to attempt to predict (which is typically done via math to avoid these kinds of word problems).

  10. Ikonoclast
    June 12, 2020 at 12:51 am

    A policeman puts his knee on the neck of a black man in Minneapolis for 8 minutes 46 seconds. A statue to a slave trader falls down in Bristol. This recalls the butterfly effect of Chaos theory. There is no humanly constructed model which would allow one to predict the second specific event from the first specific event. A broader probabilistic model might make predictions of protests and demonstrations after the first event, especially in a social media connected world. The model might struggle to predict where the protests would spread to, what form they would take, and especially the ramifications when it occurs synchronously with a virus outbreak and a social and economic lock-down predisposing whole systems of people to react more vigorously. Though, in hindsight the general outcomes do look predictable.

    “You could not remove a single grain of sand from its place without thereby … changing something throughout all parts of the immeasurable whole”. – Johann Gottlieb Fichte.

    The above is a “complex monist system” insight. Yet, chaos theory refers only to deterministic systems. If we accept that non-deterministic aspects to the cosmos and human agency (autonomy) also exist, then we see that the modelling problem for large complex systems becomes even more fraught. The sequence of events is not explained by Newtonian upward causation alone. Certainly The “Newtonian” pressure of the knee killed George Floyd. The Newtonian force of the ropes generated a turning moment and pulled down the statue. Gravity played a role too. But there is more than this relatively predictable upward causation at work.

    Upward causation is the more predictable Newtonian, and even Einsteinian, kind extending from the micro-physical up to the macro-physical. It’s what physicists (other than quantum physicists) and engineers work with. However, when the direction of causal influence extends from ‘higher’ levels of reality down to ‘lower’ levels of reality, we speak of downward causation. Downward causation can be said to occur when a complex system with emergent behavior generates causation that appears to move from the macro-physical down to the micro-physical.

    In a human socioeconomic system, human agents are the main endogenous cause (only endogenous cause?) of downward causation in the socioeconomic system. We manipulate stuff. Actually, we manipulate people, symbols and stuff. In a sense, downward causation is “a wave going back”. I use this metaphor to help shorten this discussion of causation which otherwise could fill a book. When upward waves of causation arrive we react. When downward waves of causation from others arrive to affect us we also react. The interactions are extremely complex. How are we to model all these upward and downward (and sideways) waves of causation?

    I think there is no way to model these things accurately. All we end up with is the illusion of precision and this illusion of precision is encapsulated and instantiated in the money/finance system. The attempt at precision ends in doctrinaire and cruel rigidity which is an entirely different outcome, of course. We can see the cruel and destructive rigidity with which neoliberalism continues to insist on its formulas; insisting on them as the only way to manage the economy. This rigidity results in real and widespread human suffering and environmental damage. Better to apply a fuzzy logic of heuristics informed by moral philosophy.

  11. Alonso Kihano
    June 12, 2020 at 2:20 am

    I am glad to see that my post become a separate topic and sparked some discussion thou still in the cage. I mean, both questions liberalism or socialism and modelling mathematically the economy or not are quite old. They are within the already adopted methods and practices of economics. My opinion is, that both the task and the methods of the economics has to change. It needs a new paradigm.

    The basic approach to the economic system is wrong! It follows the perspective that economy happens to us in its own way. Therefore, the economics has to discover the laws of the economy in the same way, physics and chemistry discover the laws of nature. We can do nothing else apart of obeying those laws. That is conceptually wrong! The economy is not natural phenomena. It is result of our collective action. Laws of economics do not exist! The laws of economy are like the street traffic rules – created by us. Yes, some physical restrictions apply, but they are of natural essence, not social. The human being can think, learn, improve and willingly change its environment including the social one. Therefore, it can not be modelled by agents. Looking for laws of economy denies the free human will. Within this framework, it is wrong to transfer statistical models from physics to economics. Methods of study – yes, bit models – no.

    The “economy happens to us” approach has to be replaced with “we do economy” approach. Then the economics has to look for connection between our combined actions and their result. Finding the connection, we may change our behaviour to avoid unwanted results. Yes, in certain cases the result of our combined actions may have accurate mathematical description, but that are not laws. The income and wealth distribution in Gibs-Boltzman + Pareto tail or logistic form are such example. Another one is the exponential growth of the money.

    The “economy happens to us” approach has also another major flaw. It puts us outside the economy, while we are definitely inside. Once an “economics law” is established, and the knowledge of it widely disseminated, the economic actors correct their behaviour, as they consider appropriate. Occasionally, the change may affect the established “law” in such a way that it is no longer valid. Looking for a “natural” law of economy, we neglect the connection with our behaviour. Without this connection, the result of our learning is random, we do not actually know what we do. Instead of clarifying, the “knowledge” is confusing. We miss the link between action and result. In a “we do the economy” approach the existence of the link between action and result is the object of the study, and no “natural laws” are allowed.

    Second, the economics has to be striped from class bias. The “economy happens to us” is also a class bias result. It takes the standpoint of the producer who is outside the system, and wants to learn how to manipulate it so that he could sell more.

    Consider the definition of demand – it includes “the ability to pay”. Therefore, those who are unable to pay are excluded from theoretical consideration. Why? Simple – nothing can be sold to them, they are not interesting. Is it a surprise that economics has nothing to offer the poor countries?

    Consider the second “principle” in my answer to Frank Salter; “The cost of something is what you give up to get it” – that is the cost from the side of the buyer. What is the cost from the side of the seller? Doesn’t matter? Yes, doesn’t matter – the seller always wants the maximum. But let us name it explicitly – the cost from the seller side is the cost from the buyer side minus the profit.

    Consider the sacred competition. Competition is told to improve the quality and decrease prices. But that is consumer’s side, the consumer products market is meant. But what happens at the labour market. To be competitive on the labour market you have to promise to do more for less. It does not matter how you will achieve it, but for most people it means lower income. That is so good incentive to respond to … with laziness. To be attractive to the “investors” my country sacrificed its wonderful education system and very good healthcare system. Competition on the labour market decreased people’s income, but the quality of the goods mostly decreased and the prises increased – just opposite to the common economic wisdom. Why? Because the better quality become unreachable to the impoverished people. Anyway, everyone is convinced, that countries have to do anything (understand it as to sacrifice something) to attract foreign investors.

    How many economists suggested riches to donate voluntary or at least to credit without interest as a relieve of the corona-crisis? Only credits are considered, an the states will again be the buffer that will absorb the debt. Why the credit is so often called help? Help is gratuitous – credit is not. As a mater of fact, the profit is private tax on the economic activity.
    And so on, there are many many examples of class bias in the mainstream economics. When an economist talks, the investors’ class speaks trough his mouth. It is doubtful if the economics can be set free from class bias. May be we need to strike through everything and start from the beginning.

    • Ed Zimmer
      June 12, 2020 at 9:25 pm

      Alonso Kihano: This has been a really good thread. Thanks for starting it (& thanks to the editor to kicked it up from a post to an article). Summarizing what I think you’ve said above, economics is a false field of study. One that’s tied itself in knots focusing on some nebulous concept(s) of “money”, where it should better be studied as a subset of human behavior.

      To start from the beginning, go back to my one-paragraph description of a nation’s economy – http://tenonline.org/magic-money-tree.html . That’s 6 logically-consistent statements that show the role of government – show that government could support its people even if no businesses stepped up to the plate (but why they would, voluntarily, if government simply allowed them to) – that the whole FIRE economy (except the construction industry that’s already included in GDP) is superfluous to a healthy national economy – that the flow of currency
      (& the world’s perception of the stability of that flow) is all that’s important to such an economy – that wealth and its accumulation is pretty meaningless – and that GDP is all that’s needed to properly manage the economy (just as one would manage any other business.

      That’s as KISS as you can get. Start from there and all the problems of our economy (including those that Ikonoclast outlined) come into focus and we can start asking what are our options for correcting them and possibly coming to some consensus that could be viewed by the public in clear, concise, understandable terms that might then build consensus there.
      That’s likely out only tenable path forward.

      • Alonso Kihano
        June 14, 2020 at 3:16 pm

        Ed Zimmer June 12, 2020 at 9:25 pm
        Yes, your division to essential and non-essential economy is quite close to what I think about capitalist economy. The missing part is the link between them – the profit. In the textbooks of economics you will find the so called “circular flow diagram” that describes the flow of money and goods. Anyway, an important part is missing – profit is generated on each turn of this circular flow. In most cases the profit means privatisation of money. What I mean. One can divide the money into two parts – money that seek consumption, and money that seek investment. The first type of money always change they owner and feed the circular flow of the economy – what you call essential economy. The second type of money change their owner only if he achieves a loss. Abundance of the first type of money creates inflation. Abundance of the second type – growth on the stock exchange. Thus, the profit sucks money from the essential economy. That is the reason of the money scarcity in the capitalist economy I wrote earlier in the original post. That is a point where economics fails at basic algebra level. But it fails deliberately – the class bias forces it to conceal the profit.

      • Ed Zimmer
        June 14, 2020 at 6:03 pm

        Alonso Kihano June 14, 2020 at 3:16 pm

        I see that “circular flow diagram” as misleading. GDP describes the essential flow, and there is no profit in GDP: GDP = GDI. On business books, profit equals earnings minus expenses, but expenses include owner’s or manager’s wages. In GDP, those wages show up as Compensation of employees in GDI, but profits never show because they were not essential to the flow.

        When you go on to talk about “privatisation of money”, I believe you’ve turned your thinking from flow of money to money as a “thing” (ie,. as stock rather than flow). Flow can’t “seek” consumption or investment; can’t “change” owners or their motivations, can’t “cause” inflation, can’t “suck money” from an economy. Flow happens because of consumption and is self-sustaining.

        Profit is a world apart. That’s why I see it as non-essential. The push-cart vendor sees no profit; their profit is their wage. The owner-started business sees no profit early on; they get a wage; their business shows only loss. Eventually that loss turns to profit and those profits start to accumulate. Initially those accumulated profits are seen as “safety margin” – they’re savings the business-owner can fall back on if they hit a dry spell.

        As those accumulated earnings continue to grow, they’re seen (by the owner) as “capital” that can be used productively to improve their product or expand their product line (which I believe shows up in GDP’s Gross private domestic investment account, and hence what I would continue to call “essential”) or non-productively by putting it where it earns rentier income (that is not part of GDP and that I see as non-essential). But recognize this split is an individual owner/manager decision that government has little control over. The best it can do is encourage or discourage.

        I see this distinction between flow and stock as very important and see it confused in economist blogs and comments far too often.

    • June 14, 2020 at 10:05 pm

      Alonso and Ed, we all seem to be agreed there is at least one circular flow in the economy, with the problem in capitalist economics being its omitting or even hiding where profit goes. I want to argue there are actually four circuits, with the circuits channelling not stocks and flows but consumables, capital goods, money and information. The question is, what does the money flow communicate: energy or information? The energy, surely, is accounted for in monetary terms in the costs of production, and the energy required for distribution is triggered by humans giving each other credit, both of which circulate not but information in one form or another. In other words an economy is an instance not of Locke’s balance of forces but of an information system: more particularly a PID control system. Too much development of that has evolved into a monetary control system, and too much of that (via the sale of derivatives) has left the economy in chaos and turned itself into chrematism. That’s not complicated, just complex, with the same complex (multi-channel) pattern in the system repeating in its sub-systems.

      What has occurred to me is that economic equilibrium and profit are not to be found at the money end, they occur when we recycle all the resources we take from nature, or actually leave our world better than we found it.

      • June 14, 2020 at 10:24 pm

        Sorry, another confusing typo! In the sentence beginning “The energy, surely ..”, after ‘circulate’ should have read “not as energy but as information carried by energy in one form or another”. [Supply of stocks of consumables and capital goods convey structural and design information as well as storing energy].

      • Ed Zimmer
        June 15, 2020 at 8:31 pm

        Dave,
        My solution is seeing that there are two economies: an essential (that provides our livelihood, that will continue unless government purposefully stops it) & a non-essential (that I see as just one big out-of-control gambling casino, that I can do nothing about but stay as globally diversified as I can).

      • June 15, 2020 at 8:53 pm

        Ed
        Agreed on the two economies, but why is the non-essential one out of control, and if you had kids, couldn’t you at least warn them about it?

  12. Edward Ross
    June 12, 2020 at 3:48 am

    Alonso Kihano’s Seeding doubt to provoke doubt outside the cage June 10’2020 certainly promoted some good relevant conversation to the worsening economic conditions for most people.
    In particular i refer to Iconoclast June 11, 2020 @4pm.
    Next from my perspective i think i should give a brief accout of my background of my background, because of the effect it has had on my subconscious and promoted neurological pathways that affect my reasoning.
    I was born in 1936 to parents struggling to survive in the great depression. As a result i grew to appreciate how the political application of the Keynesian policies improved the living conditions of millions of people
    Then over twenty years ago i i red Ted Wheelrights description of Keynes warnings against the ‘central of economic liberalism, cited in The Human Costs OF Managerialism. edit ed by stuart and Gordon Rodlet. Then Frank Stilwell who is well known foe his explanation on his emphasis on the importance of understanding history to know how we have arrived at the present. From this background i find your post a breath of fresh air because it clearlt describes the important issues that need to be addressed if economics is to become relevant to all people.
    I also like your your “genuine democratic socialism” definition as against a rather open ended vague statement of socialism/ The way i see it there is a vast difference between socialism as a n ideology and a social conscious . Thus while i think their is a good case for social democracy as political , to me the first step is to nurture a social conscious into politics and economics. So thank you Ikonoclast Ted

  13. Ikonoclast
    June 12, 2020 at 11:29 am

    Alonso Kihano – June 12, 2020 at 2:20 am,

    I agree. One of the things I have been at pains to say in several of my posts is that the cosmos has Fundamental Laws (of nature). Humans make and have rules. The economy is such a rule system. You say “some physical restrictions apply, but they are of natural essence, not social.” Again, I agree.

    I have been approaching this problem, for some time, from an ontological point of view. My approach in summary looks like this. I have posted this before in a RWER blog topic.

    THE COMPLETE COMPLEX REAL SYSTEM

    All-existence (the cosmos) is posited and treated as a single complex system by physics (in the form of relational system monism) and thus the “concrete whole” in the priority monism sense. Parts of the cosmos are sub-systems, sub-systems of sub-systems and so on. The cosmos is a real system. All sub-systems of the cosmos are real systems.

    Metaphysics may take this lead from the relational system monism of modern physics and employ the thesis of a single, connected system to resolve the central philosophical problems of ontology and epistemology. The relational system monism of physics yields successful theoretical and applied results in much of its investigative domain. By extension, relational system monism may be used in metaphysics as an Occam’s Razor (simplest consistent explanation) to generate solutions for some of the most difficult problems in metaphysics and to dismiss philosophical “non-problems”.

    MODELS

    The entirety of human perception and understanding is achieved by modelling. Brain-internal coalesced perception as perceived perception, is a virtual model of perceived external reality. Higher level ideations, concepts and explicit models themselves are also all models. Human perception and understanding (and misunderstanding) is comprised of models and nothing but models.

    TRUTH CORRESPONDENCE

    Truth correspondence exists as the connection of valid congruences or homomorphisms between our brain models or mind models (all modeled perceptions, understandings, statements and explicit models) and reality external to the brain or mind.

    FORMAL SYSTEMS

    Formal Systems are a sub-set of real systems. They are a special subset of real systems where information as patterns is encoded, transmitted, received and interpreted in and via real system media comprised of matter and energy. The formal system is instantiated in real system media.

    MATTER, ENERGY AND INFORMATION

    Matter, energy and information can be passed between real systems. For many open systems, the transfers of all three are important. In the case of human formal systems (instantiated in real systems), the transfer of information is usually the most important component. The transfers of matter and energy are often minimal and even deliberately minimized to achieve a high information transfer rate to energy use and/or matter utilization. These matter and energy savings are a key reason that all models, when they posses some homomorphic congruence relation, are of pragmatic use as tools for investigating reality.
    (Here we see an evolutionary reason for the evolution of brain-internal modelling in higher animals).

    THE HUMAN AGENT (A HUMAN BEING)

    Human Agency is the capacity of human actors to act in a given environment.
    The (or each) living human agent is the connection between formal systems and real systems.

    We can represent this process very simply as:
    Real Systems – Human Agency – Formal Systems

    What is represented by the dashes in the diagram? They are meant to be two-way arrows. What is shown as potentially passing from Real Systems, through Humans exercising agency, to Formal Systems and vice versa? The simplest physicalist answer is mass, energy and information. This is a correct and complete physicalist description according to modern physics and its relational system model of the cosmos.

    SYSTEM BOUNDARIES

    Matter, energy and information can pass through system boundaries depending on permeability or penetrability. A system boundary is a boundary that separates the internal components of a system from external systems. A system boundary can be an interface for the transfer of matter, energy and information.

    The process of empirical detection relies on matter, energy, information (in any combination) coming through a system boundary from the detected existent and passing in through the system boundary of the detecting system (a human or human instrument when taking an anthropocentric view). Thence, the “depths” or internals of any system can only be inferred or deduced (as the case may be) by system boundary phenomena or more correctly by system boundary transferred phenomena.

    Appendix:

    Model: A simplified representation of a more complex original.
    Monism: Attribution of oneness or singleness to a concept or system, e.g. existence.
    Ontology: The study of existence, and emergence, in terms of categories and relations.
    Process: A set of transformations over a period of time.
    System: A system is a regularly interacting or interdependent group of items forming an integrated whole. Every system is delineated by its spatial and temporal boundaries, surrounded and influenced by its environment, described by its structure and purpose and expressed in its functioning.
    Real System: Any system which obeys the discovered Laws of hard science.
    Formal System: Any system of signs based on or forming a language, including mathematics.

    Brief Discussion:

    Of what use is this ontology in investigating economics? One can proceed by way of a discussion of upward causation (deterministic) and downward causation (non-deterministic or even autonomous or “willed”). Among other factors one may specifically discuss in this framework is the key issue of “human rules” versus fundamental natural laws. Humans make the rules and human obey the rules; economically, socially and so on. We might call ourselves rule makers and rule takers which is probably more important and fundamental than being price makers and price takers. Indeed different classes tend to make the rules and to the obey rules, depending on socioeconomic authority and power relations.

    Humans, when fed rules, are somewhat like computers are when fed instructions or algorithms; except that humans are much more autonomous and have real systems (including bio-survival systems) which feed-back, push back and work against certain instructions. Which is why few of us in a normal, healthy, undrugged state would “go jump off a cliff” when told to, even by an important contemporary authority figure in any field. But many of us (including me) have gone to work in unsafe conditions when instructed to by managers and bosses. A combination of the “economic whip” and fear of loss of (class) peer respect can lead to such behavior.

    The next consideration might be to investigate how rule systems generate emergent mass behaviors and emergent environmental impacts. Specifically, considering that rules can be changed sometimes easily, sometimes not so easily, (whereas fundamental laws of nature can never be changed) we should consider more rule changes to save people and environments (for example). Rules tend to lead axiomatically to certain real outcomes. Our extant ownership, market and legal-commercial rules and regulations have lead axiomatically to greater monopolization, greater inequality and greater environmental degradation. The rule sets need to be changed. It’s all rather obvious to the modern scientific mind and we should not need a return to arguments about empirical ontology to prove it except that we are fighting the orchestrated false ontology and false consciousness of capitalism.

    Compared to an integrated and scientifically-derived way of looking at ontology (real systems / formal systems, causation directions, feebdbacks and fundamental objective laws vs. prescriptive rule systems) the artificial ontology of conventional economics looks crude and implausible by comparison.

  14. ghholtham
    June 12, 2020 at 4:19 pm

    I never read such an incoherent discussion in all my life Naive politics based on conspiracy theory, jumbled philosophy with a misuse of terms and sweeping views on economics based on a small knowledge of the subject. I don’t know where to start. So I won’t.

    • June 12, 2020 at 8:48 pm

      Sadly, when Gerard doesn’t understand something he doesn’t try to but saves is own pride by saying the other person’s talking rubbish. I’ve pointed out before that the condition of being able to learn is that you don’t already know.

  15. Norman L. Roth
    June 12, 2020 at 5:37 pm

    Well said M. Holtham ! But I doubt that it will penetrate . What’s next from these chaps ? Old time Technocracy ? And the otherwise great scientist, Frederick Soddy’s ‘energy units’ ? Old time Social Credit ? {a.k.a. ‘Monetary gifting’} More mimicry of Physics misapplied to Economics,like Philip Mirowski flushed into the sewers of pseudo scientific infamy. {1989} And who can forget Paul Samuelson’s pathetic mimicry of Chemical Equilibrium {Le Chatelier’s “law” } ? Truly let us pay tribute the old Haiku: “When the Glaciers recede, old weeds bloom afresh”. But who can resist all that turgidity. tautology & sanctimony ? Or “Nacht und Nebel” ? GOOGLE: Norman L. Roth

    • Craig
      June 12, 2020 at 8:55 pm

      I also advocate for a universal dividend of $1000/mo. which becomes capable of purchasing $2000/mo. of goods and services.And other policies that are needed and would become possible with the two main policies of the dividend and discount/rebate at retail sale. I also advocate for a JG which fits within the new paradigm and is synergized by the 50% discount/rebate policy’s doubling of purchasing power.

      The new paradigm and its policies simplifies and brings directness to the economy and money system. It does not further complicate the rigged indirectness problems of the current systems and paradigm.

    • Craig
      June 12, 2020 at 8:59 pm

      Social Credit was a mere theory. A superior one to neo-clasicalism for sure, but still only a theory. Direct and Reciprocal Monetary Gifting is a paradigm change. Stop comparing apples and oranges Norman. I’m sure you’re smarter than that. The question is are you honest enough to admit the difference between a mere theory and a paradigm change.

  16. Craig
    June 12, 2020 at 9:00 pm

    Social Credit was a mere theory. A superior one to neo-clasicalism for sure, but still only a theory. Direct and Reciprocal Monetary Gifting is a paradigm change. Stop comparing apples and oranges Norman. I’m sure you’re smarter than that. The question is are you honest enough to admit the difference between a mere theory and a paradigm change.

  17. Craig
    June 12, 2020 at 9:03 pm

    Norman:

    Social Credit was a mere theory. A superior one to neo-clasicalism for sure, but still only a theory. Direct and Reciprocal Monetary Gifting is a paradigm change. Stop comparing apples and oranges Norman. I’m sure you’re smarter than that. The question is are you honest enough to admit the difference between a mere theory and a paradigm change.

    • Craig
      June 12, 2020 at 9:05 pm

      Pardon the duplicate posts. A glitch in posting time.

  18. Ikonoclast
    June 13, 2020 at 3:38 am

    People who don’t advance arguments, don’t because they don’t have any. Either that or they have an assumed ontology which is faith based rather than empirically based and they cannot bear to admit any investigation into the ontological a prioris of their position.

    Just as those trapped historically and conceptually in the feudal paradigm could not imagine the advent of capitalism (early stage and late stage), so those trapped in the capitalist money and markets paradigm today tend not be able to imagine anything but capitalism, money and markets. In our case, because we now have knowledge which the feudal mind did not possess, it is nothing less than a failure of intellect and imagination which leads to this continuing conceptual entrapment in the extant political economy paradigm.

    Such intellectual failure was understandable until the advent of the scientific discoveries and consequent philosophical advances related to evolution, relativity, emergence, complex systems science, information science and comparative studies in the social sciences including the intellectual and cultural capacity for self-reflection about our own SISs (socially imaginary significations). Such intellectual failure is no longer understandable or acceptable.

  19. June 13, 2020 at 6:25 am

    Following up Ed Zimmer (June 12, 2020 at 4:50 pm), who (being nice to me) rather understated the value of his own type of thinking, I want to share something I’ve found trying to re-read Michael Dummett’s “Frege” on “philosophy of mathematics” (having found that very difficult first time). It quotes Frege on the value of analytic propositions, considering thus the hypothesis that arithmetical truths were derived from logic:

    “Each would then contain within itself a whole series of inferences condensed for future use, and its utility would consist in our no longer needing to make the inferences singly, but being able to express the result of the whole series simultaneously”.

    In other words, says Dummett, the point of deductive thinking is to encapsulate an inferential subroutine which, once established, may be repeatedly appealed to without itself having to be repeated.

    I’ve seen this in algorithmic computer programming, storing results which are repeatedly needed in different parts of the program. I was rather sensitised to it (and the value of the ‘object-oriented’ programming developed in Algol-68) by the original attempt at a PC, the Amstrad PCW word processor, rewriting the whole screen every time you tried to make a correction in what you were writing. (I don’t want to knock the PCW; it was way ahead of its time and I loved it, but it sure gave you time to think).

    Anyway, thanks again, Ed, for your understanding my intuition. I hope you and Gerard Holtham will continue contributing your logic, though Gerard needs to practice tolerance (so he can learn to listen to others as well as himself).

  20. June 13, 2020 at 9:35 am

    Right back in his original comment (i.e. the blog article) Alfonso emphasises “there is no POLITICAL will for change!” I agree, so what’s to be done about it?

    A TV programme last night had a couple of girls trying to introduce orphan moneys into an established group. What they had to do was introduce them to the alpha animal in the group. If it accepted the orphan then the others would.

    This got me thinking about how Christianity broke through during the period of the Roman empire. It would be no good trying to get at him through dolly birds, who are at the stage in life when their interest is not in politics but in finding a secure home. What seems to have happened was that Constantine was got at through his MOTHER, Helena. I merely float the idea that that is worth thinking about.

    • Robert Locke
      June 13, 2020 at 9:54 am

      The breaktrough for Christianity was not to make this live better but to give eternal life, that is what Conversion meant. Can’t match that in contemporary politics.

      • June 13, 2020 at 12:44 pm

        Robert, you are thinking “either-or” rather than “both” (or indeed, “all”). There are four gospels reaching out to four different types of people, some of whom (given the life they were living) would prefer to drug themselves by looking forward to eternal life; but others would be thinking of sharing the Christian ways of living: in a community sharing its possessions, giving to each according to their needs (Acts); or defusing enslavement by doing things willingly; or focussing on the religious side: being grateful even for small mercies but especially for the love of God shown in Christ. (That is indeed a caricature, but a much more honest one than yours, which sounds like a rubbishing story from atheistic communism).

        So under top-down Communist government the second of these Christian options was a sham. I don’t think self-interest is a sham, but I think it is a mistake. If centralised banking is the problem (as in another thread is being said of the EU’s euro) then implementing option 2 by making and earning our own money with a credit card system can more than match the present capitalist system. The centralised government in China may approach the Christian option of the king serving the public, but sadly, the next king may be in it for himself.

  21. Robert Locke
    June 13, 2020 at 2:40 pm

    Talking about converion and the importance of the gospel

    “tUnlike pagans, Christians claimed there was only one God and that he should be worshiped not by sacrifice but by proper belief. Anyone who didn’t believe the right things would be considered a transgressor before God. And, most significant of all, rewards and punishments would be dispensed not only in this life, but in the life to come: either eternal bliss in heaven or everlasting torment in the fires of hell. Religion had never promoted such an idea before. Christians created a need for salvation that no one knew th”ey had. They then argued that they alone could meet the need. And they succeeded massively.

    i

    It Worked from the Ground Up

    Christianity did not initially succeed by taking its message to the great and the powerful, the mighty Roman elite. It succeeded at first as a grassroots movement. The original followers of Jesus told those close to them what they believed: that the great miracle worker Jesus had been raised from the dead, and that his wonders continued to be performed among those who believed in him. They convinced others. Not most of those they talked with, but some. And as it turns out, small but steady growth from the ground up is all it took.

    One might think that if Christianity went from some 20 people in the year of Jesus’ death, say 30 CE, to something like 3 million people 300 years later, there must have been massive evangelistic rallies, converting thousands at a time, each and every day. That wasn’t the case at all. If you chart the necessary rate of growth along an exponential curve, the Christian movement needed to increase at a rate of around 3 percent annually. That is to say, if there are 100 Christians this year, there need to be only three conversions by the year’s end. If that happens year after year after year, the numbers eventually pile up. Later in the history of the movement, when there are 100,000 Christians, the same annual growth rate will yield 3,000 converts; when there are 1 million Christians, 30,000 converts. In one year.

    The key was to reach people one at a time. It grows from the bottom up, not the top down. The top will eventually convert. But you start below, at the base, where most people actually live.

    Dave, in my episcopilian church in honolulu, we participated in something called the peanut butter mihistry; every sunday church members would cook food for the poor and homeless/ I participated, but many of those in my church objected to our not speindb our time promoting.
    eternal life.

    • Robert Locke
      June 14, 2020 at 8:37 am

      HONOLULU (HawaiiNewsNow) – Do you remember where you were and what you were doing in 1978? George Ariyoshi was Governor and Frank Fasi was the Mayor of Honolulu. On a hot summer day that year, one man was so moved by the need of his fellow citizens that sat in a storefront in Chinatown, and invited those passing by in for a hot cup of coffee and a peanut butter sandwich.

      IHS services begin when individuals and families enter the doors at one of our two service centers (single women and families with children enter at Kaaahi and single men enter at Sumner). Our guests could be a person simply looking for a hot meal (which we serve three times daily, seven days a week, 365 days a year) or a place to take a hot shower. Or, they could be a person or family in crisis who has nowhere to turn for a safe place to sleep and support.

      Often, our guests have had life events (e.g., trauma or domestic violence; mental or physical illness; eviction related to a new landlord) or made choices (substance abuse; criminal convictions) that caused them to lose everything they possessed, and destroyed their circles of supportive relationships.

      IHS remains the only 24-hour walk-in, emergency shelter on Oahu and continues to provide a full range of services to men, women, and families with children who are homeless or are in danger of becoming homeless. The agency operates two facilities in Honolulu. The Sumner Service Center, located at 350 Sumner Street, is capable of housing up to 200 men each night, while the Kaaahi Service Center, located at 546 Ka’aahi Street, serves up to 100 single women in addition to 23-27 families, which can include as many as 60 children. The agency strives to be ADA compliant and makes reasonable accommodations for people with disabilities.

      In 2014, IHS provided services to over 5,000 individuals in our community. In addition we provided a safe place to sleep, eat, and shower for 1,429 unduplicated individual. We helped stabilize housing to 1,423 individuals , 482 homeless individuals moved into stable housing and assisted 698 persons at-risk for homelessness to maintain stable housing. Additionally, we served 276,609 meals to shelter guests and other community individuals in need.

    • June 14, 2020 at 10:49 am

      Yes, Robert, good for them. We have the St Vincent de Paul (“Vinnie’s” in Australasia) and I understand a Dorothy Day movement in the States doing something similar, and also the the Catholic and Anglican evangelicals and the good old Salvation Army. Some of the foundation myths seem a bit mixed up, so the support isn’t always as whole-hearted as one might wish for, but I suppose that’s Babel for you! On bottom-up conversion based on compound interest, and anticipating Edward below, it is not that I don’t support grass-roots activism, but with my way of thinking, I find my getting involved more likely to hinder than help!

      • June 14, 2020 at 11:03 am

        Here in Malvern we have an inter-church arrangement supplying a food bank that, regrettably, is now so needed. This from our parish newsletter:

        Current shortages at Malvern Hills Foodbank:
        tinned potatoes, pkts of Smash, tinned fruit, variety
        pack of cereal, Weetabix, 1 ltr bottles of squash, tins of
        meat eg. stewed steak , minced beef , Fray Bentos
        pies, tins of rice pudding and custard, jars of jam, tins
        of ravioli, Small bars of chocolate and other sweet
        treats for children, antibacterial wipes, Shampoo /
        conditioner for men and ladies, shower gel men’s and
        ladies, men’s razors, toilet rolls , kitchen rolls. Thank
        you all for your generous contributions.

        But have not blogs become our intellectual grass roots? “Man does not live by bread alone …”.

      • Robert Locke
        June 14, 2020 at 12:40 pm

        That peanut butter ministry was not started by religious groups, they (including my episcopalians) just joined in and cooked for them. Good feelig.

  22. Edward Ross
    June 14, 2020 at 2:31 am

    I begin with Dave Taylor June 13,2020:at 9:35pm
    and Alonso’s emphasises There is no political will for change”.
    Then Robert Locke brings up the idea that conversation to Christianity had the motive of eternal life . Dave Taylor brings up the concept that the four gospels were speaking to to particular groups of people in a way that they could understand.
    Then Robert Locke June 13,at 240pm.
    Christianity did not initially succeed by tacking its message to the great and powerful, the mighty Roman elite succeeded at first as a grassroots movement.
    Although i am not an academic or because i am not an academic, I begin by seeing the problem from the perspective of someone in the real world , rather than from a theroest isolated from the real world. Thus i support the importance of a grass roots movement starting at the bottom involving all citizens to reform economics.
    As the above conversations have shown friendly open conversations are essential to clear up misconceptions both in the academic world and the people in the real world.
    I Also think that before we reject capitalism it is necessary to examine why capitalism has failed to operate and contribute to the common good of the whole community. From my perspective and others such as Keynes and some retired school teachers no system works without rules that encourages all participants that are motivated to observe them. Here i think one of the reasons why capitalism has a stranglehold on the majority is the majority have a very limited understanding of the privileges and obligations democracy provides under a particular constitution. here i think that the importance here i found Citizenship and Democracy in a Global Ara Edited by Andrew Vandenberg very informative on the important subject

    • Robert Locke
      June 19, 2020 at 12:04 pm

      “I Also think that before we reject capitalism it is necessary to examine why capitalism has failed to operate and contribute to the common good of the whole community”

      For people of my age (born 1932), the great failure has not been capitalism but socialism, which failed throughout the eurasian continent to contribute to the common good of the whole community. I had the good fortune to learn a lot about social market capitalism in Germany where it has not failed to contribute to the common good of the whole community. I have been engaged in doing comparisons of US proprietary capitalism and German organic Rhineland capital personally, by living in both environments for extensive periods of time and researching and writing for decades about comparisons. (my first publications in the 1970s) You’ll never make the proprietary capitalism discussed in this blog serve the common good, nor will you make a success out of socialism or communism, but as Eduard Bernstein said in the 19th century a reformed capitalism is mankind’s best bet.

  23. Norman L. Roth
    June 15, 2020 at 10:59 pm

    I, for one advocate generosity & indulgence with you chaps.I think James Joyce, who made no claims to being either “szientific”, ‘start all over again from basics’, Robin Hood ‘equalizer’ or full employment by unbridled money printing, would have loved you all, as the foremost practitioners of “stream of consciousness” in the known intellectual universe. Norman L. Roth

  24. Edward Ross
    June 16, 2020 at 2:53 am

    As a practising roman catholic who spent a number of years on development work in a remote area of Papua New Guinea i remain convinced that actions speak louder than words on this basis i am pleased to that many of the comments reflect the commitment many of you have towards others. BUT i think we should remember many that there are others of different faiths that also share that commitment to help others, For example i respect Asad Zaman,s academic ability that is driven by his commitment to help others regardless of their faith beliefs. For my part my interest in economics is to fight for an economic system that breaks down the divide between the rich and the disadvantaged .TED

  25. June 16, 2020 at 10:49 am

    Thank you Ted and Norman for your lovely comments. Ted, a cousin of mine, a nun, was for many years a surgeon in Papua New Guinea. I agree actions speak louder than words, but like most of us my active years were taken up raising a family, and my community employed me trying to understand language and how to find and correct mistakes and counteract lies.
    Paraphrasing G B Shaw, “Those in a position to do, do; those who can’t, teach”. So Norman, I am not claiming to be scientific, I just was. This morning, struggling with Dummett on Frege, I was looking up in a dictionary of mathematics exactly what I am taking for granted using the word ‘basic’, and getting into the difference between natural, ordinal and cardinal numbers. I am convinced the mistake in economics is at this level, with (to quote Ted: “why capitalism has a stranglehold on the majority is the majority have a very limited understanding of the privileges and obligations democracy provides under a particular constitution”) not just the majority but the 1% and the economists among them having very limited understanding of what they are doing.

    Yes, Norman, the need is for our generosity; but for me that means giving credit, not robbing the rich to feed the poor or the government (rather than ourselves) printing money. Not unemployment in the sense of doing other people’s dirty work but being free to employ ourself on dirty work because it needs doing. And yes, Ted, I agree about Asad, and in the UK the manifest generosity of the more tightly knit non-Christian sub-cultures doing admirable work in relieving the effects of covid and unemployment. Good for them.

    • June 16, 2020 at 11:10 am

      Sorry, should have started “ROBERT, Ted and Norman”, looking back to Robert’s final offering on Hawaian food sharing.

    • June 16, 2020 at 11:36 am

      Let’s go back still further to C-ReneDomino (4th comment) saying “Economics deals with complex mathematical models, but fails at the basic algebra! Why?” I generally agree with Alonso, but in replying to this isn’t he trying to stick to economics instead of looking deeper?

  26. Alonso Kihano
    June 16, 2020 at 6:37 pm

    Ed Zimmer
    June 14, 2020 at 6:03 pm
    I still do not see contradiction and agree that some economists do not distinguish between flow and stock. But still, flow may have source and sink. Though the sink, i.e. the destruction f money happens in a crisis only.
    However, economists neglect the fact that money has an owner and the owner has influence on where his money will go. When I wrote “money is privatised” I mean the following: A rich investor gets an amount as a profit he will not buy consumer goods, but will seek to invest somewhere for more profit. If you think for that money as a cash, the cash will return in the real economy, but loaded with the expectation for more cash as profit. When a poor worker, or “investor” gets money he buys consumer goods, and do not expect the cash he spent to return to him with profit. That is an important difference! If there is no profit the essential economy will crash. But there is no chance to have positive aggregate profit under constant amount of money. Therefore, the amount of money in the economy has to grow. And it actually grows – exponentially. And since the real economy is limited, the average profit goes down with the time. In practice it is a bit more complex, and has to do something with the money divided to monetary aggregates by liquidity. Lower liquidity money save a lot the capitalist monetary system, since they allow blowing a bubble outside the real economy. Otherwise it would be inflation.
    I agree that expressions like “money seeking investment” and “money seeking consumption” are how to say… descriptive, but they reflect the intention of their owner, not of the money itself.
    Otherwise there is no way the profit to enter the GDP. I guess some problems of basic algebra will appear. :)

    • June 16, 2020 at 7:00 pm

      This concept of money seems too concrete. It seems to me that money is best thought of as a measure of the value of transactions, goods and services. Like inches or feet or centimetres or meters are a measure of distance or size. Or points put up on a scoreboard measures the transactions of the sporting teams or sporting figures to quote Bill Mitchell.

      If it is a measure, these ideas and terms need to be redefined. Does a builder own the inches or centimetres on his tape measure? Do they flow in circular directions? Money would be a measure of investment not a seeker of it. Or rather the person holding the credit would be using money to measure the value of the investment. I know that arguing from analogy has its pitfalls but perhaps the real money trap people are in is the concretizing of our thinking about money. In other words we are reifying its real abstract nature.

    • June 17, 2020 at 10:11 am

      Fortunately I lost my reaction to this at the last minute, so had to read it all again, trying to find a contradiction.

      So we are seeding doubt, which perhaps explains why we are still pulling the existing economic system to bits instead of provoking ourselves to think outside the cage. What most provoked me in the first place was discovering the role of UK’s king Henry VIII in the re-legalisation of usury (interest demands), and in the second the realisation about 2000 that banks were making money “out of thin air”: that in effect it was Ponzi money. Antireifier is right that discussion of this tends to be too concrete, so an important part of the discussion needs to be not about the economy but how the meaning of the word ‘money’ changed since Henry VIII: from concrete gold, through deposit notes for gold, to deposit notes for imaginary deposits to the present system of paperless communication between banks. The third of these is in effect Ponzi money, which the banks create as credit, rent out and claim indebts us. But all this is theory. The proof of the pudding is to be found in the empirical researches of Richard A Werner: https://www.sciencedirect.com/science/article/pii/S1057521914001070.

      Thinking outside the cage, if the banks can create credit, so can we all, and that is in effect what happens when we use our credit cards, or would if we rather than credit card companies legally owned them.

      Back with Alonso’s “sources and sinks”, at first I envisaged Ed’s twin circuit economy as one circulating both goods and money, like a hot water central heating system circulating both water and heat, but taking in resources from nature at the bottom and storing surplus water in a header tank at the top. The surplus created by the heating of the water is drawn back down when the heating is off. But isn’t this what we and even the animals do in temperate climates: harvest in the autumn and store our food to keep us going through the winter? Why then do we assume people need to be fully employed all the time? Shouldn’t there a time for work and a time for feasting? Actually there is, with batch processing, shift work and holidays, but some of us take time off at different times, e.g. those providing for our needs during the holiday and festive seasons. I’m suggesting we need to rethink our employment and repayment patterns rather than worry about unemployment.

      What doesn’t come out of the one circuit model is that it doesn’t just have a header tank at the top; distributors also keep stocks of goods and producers stocks of resources. Another is where the money comes from, which is where Ed’s gambling casino ‘economy’ comes in. Put briefly, money as an idea developed in the real economy, but is used in the gambling economy not to make goods but to make money, which at times disappears into its own header tank. I agree wholeheartedly with Ed. The money economy is a bad idea which ought to be scrapped entirely, though some of the institutions it has fostered – like pensions, insurance and rewarding good work by profits – need to be replaced by something better.

      Edward (below), thanks for your thanks. It is being grateful that keeps us graceful.

      • Alonso Kihano
        June 17, 2020 at 7:50 pm

        davetaylor1 June 17, 2020 at 10:11 am, thank you for the Richard A Werner’s paper! I red the conclusion only by now, but I see it will fit perfectly for my purposes.

        First, it gives an example of unlearning in the economics. Why it happened? Werner writes that this phenomena has to be studied. I would say – there was political will for such unlearning. The project principle had added much here. And of course – economics is not science. As I wrote, its purpose is to delude the people, not to educate them.
        Of cource, the banking is not the only unlearning in the economics. As you know there are a bunch of heterodox branches of the economics. If you need recopies for economic growth you need the German historical school. Friedrich List, whom I cited in my original post represents this branch. The best contemporary book in this area is “How Rich Countries Got Rich and Why Poor Countries Stay Poor” by Erik S. Reinert. But the mainstream economics has put that knowledge aside as if it does not exist.

        Second, as I wrote several times here in different forms, money are created constantly in the economy. The paper of Richard A Werner seems to prove it. If they are to be thought as flow – it is constantly growing flow. Its growth rate is much larger than the growth in the real economy, and if hyperinflation does not appear it is because of the blocking the purchasing power of the money with lower liquidity in the upper monetary aggregates. To continue the discussion with Ed – there is second, non-circular flow of money across (if that is the right expression) the circular one. At its one end is the creation, i.e. source, of money on the other is modification that can be regarded as sink of the high liquidity money, i.e. of the money used in the consumer market, that are object of the circular flow. That is how I imagine the things are. No proof at this stage.

  27. Edward Ross
    June 16, 2020 at 10:53 pm

    In Reply to dave Taylor thank you for your comments, When my wife and i were in PNG we were in the Aitape dioces , but in isolated place in the bush and seldom got to the coast where their was a nun who was highly regarded by all. In this troubled world it’s not unusual to hear of people saying no body cares for others. Hence i think hearing what some are doing gives hope to many and encouragement to those making an effort in their own way.TED

  28. Alonso Kihano
    June 17, 2020 at 7:16 pm

    The discussion has become long and I have time problem to read everything and summarize. Anyway, from what I read I still see mostly things within the cage. That is of source according to my definition of the “cage”, which may be too radical for many.
    I still need to understand what are the “Social Credit theory” and “Direct and Reciprocal Monetary Gifting” mentioned by Craig. So, I could not comment, but every novelty is welcome for me.

    Quite interesting example for thinking “in the cage” is the comment of Norman L. Roth
    June 12, 2020 at 5:37 pm. Apart of not believing that we are capable to offer something new, Norman L. Roth mentions a series of theories and propositions for modifications or alternatives to capitalism. To my knowledge, none of those were ever applied anywhere in practice. But he forgot the Silvio Gesell’s “free money” and … the Soviet system. Gesell’s system was tested somewhere in Switzerland or Austria long time ago – Norman may just not heard about that. But how he may not have heard about Soviet Union or why he does not expect us to propose something similar to SU economic system.
    Soviet Union is definitely “out of the cage” topic. Even more – it is forbidden topic. The cage has spacial reinforced bars especially for this topic. Anyway, the Soviet Union had very good solution for the monetary system. Money scarcity did not exist on the consumer “market”.

    I see that my statement about the lack of political will for change is of the most discussed. Davetaylor1 June 13, 2020 at 9:35 proposed to think “how Christianity broke through during the period of the Roman empire.” Robert Locke June 13, 2020 at 2:40 pm explained, that “it succeeded at first as a grassroots movement”. That starting point is not bad. We also need a grassroots movement now. But there is a catch! Who wrote the Bible? Who red it to the mostly illiterate average roman people? What I mean? The idea of Christianity was already developed by some educated people. At least its core existed before its going to spread. We need such core today and in my opinion it has to include not only economics, but psychology, politics and even some moral narrative concerning the senselessness (actually, the pathology) of the extreme wealth, consumerism and egoism. There I find the role of discussions like the current one.

    Without such a core, without idea of what to do, the decline of the capitalism will result in random violence. The anti-rasist riots are a glimpse into that. The problems are much deeper, but there is no idea of how to be solved and anti-racism comes as an understandable by everyone substitute. But it will not solve the problems, it will add problems.

    • June 18, 2020 at 8:13 am

      Alonso, I’ve just learned of the existence of ‘bots’ (robotic responders) , and Craig’s mantra about “Direct and Reciprocal Monetary Giving” made me wonder whether he was one, since he never says what he means by it. However, it can be using credit cards to give credit where credit is due much more easily and universally than as Craig’s money refund on purchases.

      Social Credit is another matter. I’ve known about this mainly through Keynes, but I’ve just looked up the wikipedia article and it has astonished me how Douglas’s vision was like a 1920’s version of mine: really interesting. https://en.wikipedia.org/wiki/Social_credit.

      Taking up St Helena’s influence on Constantine, I did suggest purported history, and treated it as a story to help us think outside the box on how to have influence. Here in the UK we have just had a lovely example of a famous footballer getting through to our PM.

    • June 18, 2020 at 12:25 pm

      Alonso, I take you are concluding economic reform needs someone who knows what he is talking about. In the case of Christianity that looks to have been Christ, who certainly knew his Jewish history, then the high-flying St Paul, aided by catholicity: St Peter insisting we are all God’s children. But I’m not convinced that a grass-roots movement is the way to get change moving. Christianity had 12 apostles and that’s about right for a discussion group or a jury. I think that is what is needed here – people able together to grasp the different aspects of the whole – and we are not really getting that in a blog, though we are helping each other learn to think outside our own cages. For which, to you, much thanks and appreciation.

      I’m sure somewhere I’ve downloaded Major Douglas’s book on Social Credit, but looked at his A + B theorem through the uncomprehending eyes of Keynes. I’ve found the wiki article on Social Credit making sense where I hadn’t. It seems Douglas had got as far as Ed Zimmer and I in seeing two economies, whereas Keynes saw not the circulation of money within the second (FIRE) economy but what I’ve seen and Douglas sought to avoid: it overflowing into unconstrained chrematism (money making). Keynes didn’t say Douglas was wrong: he merely belittled him as a private rather than a major. (Joan Robinson said he always was a tease). Anyway, following Craig back to his primary sources has been rewarding. I found Douglas making sense where Craig’s bowdlerised version doesn’t. But if Craig is not a bot, good for him too, for following Whitehead’s advice to “get hold of the big ideas and hang on to them like grim death”.

      • Craig
        June 18, 2020 at 5:59 pm

        Dave, Far from bowdlerizing social credit theory my innovations take it from a better than neo-liberal but still mere theory…to a paradigm changing set of logically aligned policies.

      • Alonso Kihano
        June 19, 2020 at 6:14 am

        Yes, I completely agree. We talk about the same thing thou describing it a bit differently. Creating the idea, or understanding and explaining “the whole” is not for everyone. Few will do that like in Christianity. More people will start spreading it. But it will have an effect when significant part (critical mass) of the people accept it and change their behaviour accordingly. Though I am not sure how large the “critical mass” should be I am completely anti-elitist. In my view, elitism and psychopathology go hand by hand.

      • June 19, 2020 at 12:50 pm

        “We talk about the same thing though describing it a bit differently.” Thank you for that, Alonso, and apologies to Craig. What I’m seeing differently is a critical mass of the ideas needing to be sorted out before people will trust them sufficiently to act on, with the problem being that naive children instinctively trust big mouths and pathological elites like they instinctively trust their parents.

        Your seeding doubt, Alonso, is getting us to ask questions, and perhaps we are coming up with different ways of seeing the one reality because we are asking different questions. I’ve been wondering if elites could be replaced by juries, but why juries of 12? Rudyard Kipling wrote what I’ve always found a very helpful little jingle: “I keep six honest serving men, they taught me all I knew; their names are What? and Why? and When? and How? and Where? and Who?” Add “What’s missing?” and “Why not”? etc and one has the twelve. My characteristic question is definitely “Why?” Craig’s seems to be “How?”, seeking a paradigm (example) which can easily be misinterpreted as a solution that can be adopted as a policy. Major Douglas seems to have had the same problem, arguing he is offering “”the policy of a philosophy” and specifically NOT a political solution. Interesting that Orage was involved with the Distributists (“anti” Party politics Belloc and “for” cooperative local economies Chesterton) as well as Douglas. All three of them would have done well to ask the question, “What is the difference between a Jew and an Israelite?” At the time of Christ and Roman occupation, were the Jews strictly Israel’s 1%: their rabbi’s and political economists?

        The Keynes of 1930 denies Douglas’s argument, that “As soon as the ratio of capital goods to consumable goods slackens, costs exceed money distributed, i.e. the consumer is unable to purchase the consumable goods coming on the market.” By 1936 he is saying the same as Douglas but the other way round: “if there is too much production, the consumer cannot afford to buy it, so production slackens”. The difference seems to be that Douglas’s A + B theorem ignores monetary profit; Keynes more pragmatically got political results by ensuring it. I show where the money goes and chaos starts via iconic maps.

    • Craig
      June 18, 2020 at 5:10 pm

      Alonso,

      Direct and Reciprocal Monetary Gifting refers to the actions taking place at the point of retail sale and also at the point of note/loan signing. The merchant gifts the consumer at that point with a 50% discount to their best competitive price for every one of their goods and/or services. That’s the direct part. The reciprocal part is the monetary authority rebating the entirety of the discounted amount back to the merchant so that they can be whole on their margins and overheads. The result is a 100% increase in the individual’s purchasing power, in other words they can now purchase $100 worth of goods and services….for $50, and a $300k home for $150k, and then at note signing the (now national non-profit bank) gifts/discounts the note 50% so every commercial agent is made whole and the consumer purchases the $300k house for $75k.

      Historically, the actual operations of paradigm changes have always been elemental, simple and conceptually and temporally inverting of the old/present paradigm for instance nomadic life to homesteading and urbanization. The direct and reciprocal operations at retail sale and at note signing become Debt Only vs Monetary Gifting.

      The discount/rebate also aligns with and is seamlessly implemented via the debit-credit nature of double entry bookkeeping/accounting. This is the most basic and powerful nature of the monetary paradigm (accounting) and thus enables huge benefits and a wide variety of policy options that economists say they would like to see occur like lowering the costs of high tech economies, increasing individual income/purchasing power, combatting/eliminating inflation and the incentivizing of ecologically sane economics. Steve Keen, whose de-bunking of DSGE (Dynamic Stochastic General Equilibrium) is a thorough theoretical work, has since been inching toward realizing the power and significance of accounting in economic theory. He has also called for a new paradigm in economics. The one thing he’s missing is an awareness of the new paradigm concept of Direct and Reciprocal Monetary Gifting and how it fits into the accounting infrastructure that the entirety of the economy is sanely and inextricably embedded in.

      The rest of the policies I advocate align with the new monetary paradigm.

      • Alonso Kihano
        June 19, 2020 at 5:58 am

        Craig
        I am a bit perplexed about the direct part. If I was the merchant, I would immediately double the “best competitive price” (and that would do all merchants). With the discount the consumer will pay the same price. He looses nothing. But I will get 100% rabat from the monetary authority.
        Said another way, if the 50% discount is compulsory and known in advance, then the market price will be negotiated with the discount in mind which makes the discount senseless?
        What do I understand wrongly?

      • Craig
        June 19, 2020 at 6:54 am

        In the first place if a merchant immediately raises his prices by 20+ percent and just one of his wily competitors actually lowers his prices, just how much market share is the anti-social inflating merchant going to lose?, and the road to profit is volume of sales not necessarily profit margin.

        Secondly, if everyone’s purchasing power is doubled by the policy and people see the anti-social merchant trying to game the system by eroding their purchasing power is that going to erode that merchant’s good will which is actually the most valuable commodity that any business can have.

        Thirdly, if a merchant attempts what you say despite the fact that with the new paradigm he and all of his employees will save because they’ll no longer have to pay transfer taxes for welfare, unemployment or social security because with the $1000/mo. universal dividend that the 50% discount enables you to purchase $2000/mo. ….then who needs or wants to pay for a welfare, unemployment and social security bureaucracy?

        Fourth, there will be taxation penalties and ultimately an ending of an enterprise’s rebate privileges if, despite all of the cost savings and income/business revenue in increases, an enterprise continues to inflate without actual cost increases.

        Fifth, part of my regulatory program would be to create a new government department named The Department of Competition, Innovation, Boycotting and the Bully Pulpit which will encourage the first two aspects and publicly and very loudly point the finger at anti-social enterprise and also help to organize boycotts of their products and services. Hoist a few corporate heads and their businesses on a pike with this program and you’d likely begin to see rational and healthy appreciation for the benefits of the new paradigm rather than greedy and anti-social idiocy.

        Finally, the idea that we have free markets is foolishness. All markets are manipulated and the money market is dominated by the private for profit banks with their monopolistic paradigm of Debt Only which is not only one of the stupidest realities we have endured for over 5000 years it is a glaring contradiction to the acolytes of “free” markets as well, so that critique by them is meaningless and we need mostly ignore it while communicating how beneficial the new paradigm is for every economic agent individual and commercial…..so long as they remain ethical and appropriately appreciative.

  29. June 26, 2020 at 10:36 pm

    I wonder if anyone actually reads Adam Smith before lumping him in with modern ‘free traders’ who take his name in vain? Nowadays he’d be called a ‘fair trader’. Smith took the closing pages of his first book of ‘Wealth of Nations’ to warn his countrymen *never to trust anything said or suggested by people who live by profit*!

    “*It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. 

    The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. 

    The interest of this third order, therefore, has not the same connexion with the general interest of the society, as that of the other two. Merchants and master manufacturers are, in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion), is much more to be depended upon with regard to the former of those two objects, than with regard to the latter. 

    Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. 

    The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market, and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. 

    The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.*”

    [I’ve not got a hyperlink to this quote, as I copied it longhand, but I’m assuming you all must have a copy to hand.]

    He was dead right about the greatest profits being made in countries that are going fastest to ruin, as we clearly see in the ‘billionnaire’ infested USA and UK; and it is these countries that are behind the fastest trashing of the planetary ecosystem on which we all depend, while ‘economic loser’, Cuba, is the only country to be awarded the status of being environmentally sustainable by the World Wildlife Fund for Nature.

  30. June 27, 2020 at 10:56 am

    Spamletblog, I entirely agree with you that Smith deserves to be read with care, as he is a very acute observer. That doesn’t mean he always interprets things rightly. For instance, if you follow the index entry on ‘circulation’ you will find him objecting to Ponzi money, but I have not found him objecting to banks and usurers using it. Again, he argues about religions (sects) competing for “bums on seats”, not mentioning that we had had a Reformation. There is an awful lot in “The Wealth of Nations” to get one’s head round, but the title gives the game away: he is writing about international trade, and how to make it competitive by specialism in industry and competitive wage-slavery rather than slave-trading. What you don’t find him talking about is the wealth of the nation: only that of mass-producers and merchants and their bought governments.

    What you say about Cuba is not lost on me … .

  31. Ken Zimmerman
    June 30, 2020 at 4:31 pm

    We can learn from great poets. In “Me and Bobby McGee” Kris Kristofferson writes,

    Freedom’s just another word for nothin’ left to lose
    Nothin’, don’t mean nothin’ hon’ if it ain’t free, no no
    And, feelin’ good was easy, Lord, when he sang the blues
    You know, feelin’ good was good enough for me
    Good enough for me and my Bobby McGee

    Similarly, economics is just another word for nothin’ left to fuck up. Economics has fucked all but the 1. And the 99 sang the blues. And prayed for a few moments of feelin’ good. Good enough for me and economic misery.

    I am not a great poet. But at least I am trying. Not quite outside the cage. But pushing the fence.

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