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More Complexity

from Peter Radford

Economists have been talking about complexity for a very long time.  This may surprise many of you given the state of mainstream economics, but it is true.  A good place to discover a preliminary history of complexity in economics would be the short volume edited by David Colander published in 2000.  The papers it contains were all presented at a History of Economics Society Conference in 1998.  Colander provides a good introduction and tries to put complexity into the context of economics since its inception.  There are times when, in my opinion, he errs a little too much in favor of the older methodologies as if he finds it difficult to shed old habits himself.  Nonetheless the papers in the volume cover a wide and interesting territory, including the similarities between biology and economics.

There is no point in presenting a summary of the various papers here, but perhaps it is worth mentioning that in Colander’s own contribution he evaluates some of the more well-known names in the history of economics and determines whether they would be more or less important were their standing simply built upon their understanding of the role of complexity.  The people coming under his scrutiny are a who’s-who of economic thought: Smith, Malthus, Ricardo, Mill, Marx, Walras, Marshall, Hayek, and Keynes all get a going over.  Happily for those us unconvinced by the dead-end that is called general equilibrium Walras gets a solid demotion, as does Ricardo.

In my last note I mentioned that economics has, traditionally, been heavily interested in what I called “a battle with scarcity”.  This seems to have confused people.  It is not exactly a novel idea on my part! Robbins put it this way in 1932:

“The economist studies the disposal of scarce means. He is interested in the way different degrees of scarcity of different goods give rise to different ratios of valuation between them, and he is interested in the way in which changes in conditions of scarcity, whether coming from changes in ends or changes in means—from the demand side or the supply side—affect these ratios. Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

This quote is familiar to you all I am sure.  So quite why my suggestion that economics has been interested in the battle with scarcity befuddles me.

Perhaps it is because we now live in an era of relative abundance and can spend more of our time concerning ourselves with the distribution of that abundance.  Perhaps, also, it is because we take for granted the enormous accumulation of practical knowledge over the past two centuries that have made this abundance possible.  There is a difference between thinking of the earth has being an abundant home for us all, and thinking about just how tractable that abundance is to us.  Obviously that part of the potential natural resources available in a practical sense is a function our ability to get at them.  This is why many of the narratives describing imminent depletion of resources have fallen foul of technological advance.  This is also why Malthus fell from grace despite having a very sophisticated view of the dynamism of an economy.  Indeed it is arguable that Malthus had a more sophisticated view of the complexity of reality than his famous rival, Ricardo.  What neither took into account was the consequence of constant learning and its impact on our ability to generate accessible wealth.  In other words our ability to overcome scarcity.

An added wrinkle, while I praise Malthus for his understanding of the dynamics of social change, is that his influence on Darwin remains controversial.  Economists took somewhat of a wrong turn when they put all their emphasis on competition as a driver of change, clearly reality includes cooperation as well, but they are not alone.  Altruism remains a tough subject for  evolutionary biologists to deal with — is it just a subtle form of selfishness?  In any case these words by Darwin could easily have been written by Malthus twenty years or so before him:

“all nature is at war, one organism with another, or with eternal nature.  Seeing the contented face of nature, this may at first be doubted; but reflection will inevitably prove it is true.”

Yes there are theoretical upper limits on how much we can take from the earth, but a more useful discussion is about our technological capability to approach that limit in anything remotely like a cost effective manner.  Theoretical and practical abundance are two separate things and the battle with scarcity is the battle to expand the space of the practical within the space of the theoretical.

This in no way diminishes concerns about ecological damage, it is simply a statement that economics has a historic concern with scarcity, which is an uncontroversial fact of history and not a shocking invention on my part.

Decision makers in an economy are constantly bumping into the reality of complexity, and since getting at a single “solution” or arriving at a single “equilibrium” is not reliably possible in a complex system they have a tendency to conflate it with a higher order of complicatedness.  I don’t blame them for this.  Indeed the essence of business strategy is to carve off a piece of reality and attempt to control it in order to make decision-making both possible and relevant.  So decision makers substitute a complicated system for a complex one and hope that the former is a good enough approximation to the latter such that their decisions yield the desired results.  Economists have gone down this path.  Rather than shift entirely into a complex mode of thought, they continue to model as if the economy is just extremely complicated.  Apparently Murray Gell-Mann’s saying that “the only model of a complex system is the system itself” has failed to penetrate far enough into economic thinking.

There are numerous features of a complex system that set it apart from a merely complicated one.  From my perspective the most important is that complicated systems rely on exogenous effects to induce change, whereas a complex system has within itself the ability to adapt and learn.  This is the single most appealing reason to think of an economy as a complex system.  Economies constantly learn.  Each iteration of an economy — each computation — allows it to build experience and allows it to include novelty in the next iteration.

This is why I split economic knowledge into two categories: primary and secondary.  Business activity centers on taking novelty and making it routine.  Routine knowledge, what I refer to as primary knowledge, is the grist of all business activity.  It is easily replicable, scalable, and controllable.  It is easily codified into business processes that can be managed towards a specified goal.  It is how we, to use Hidalgo’s term, embody knowledge into the products and services that form the core of economic transacting.  But primary knowledge has a great flaw: it depends on a static context.  By this I mean that the code assumes an unchanging environment in order to retain its efficacy.  There is no use in having the best buggy whip code when the future of transport is the internal combustion engine.  Secondary knowledge is that which allows us to adapt to such changes in context.  It is more heuristic and expensive to maintain.  It relies on experimentation and superior cognitive abilities.  It is the source of our ability to try new things in the face of the changed environment.

This simple division of knowledge is my adaptation of the work of people like the evolutionary psychologists Plotkin, Tooby, and Cosmides.

By the way I am not entirely sure that Gell-Mann meant that quote I gave above.  In his own description of algorithmic information content [AIC] he allows complex systems to be tractable to algorithms shorter than a description of the system itself.  He reserves the one-to-one description for chaotic systems.  In any case, the continuous rise of practical knowledge that underlies our rising prosperity can be looked at through the lens of AIC.  Early discoveries were in a space occupied by lower information content products and services.  They were easy to code, replicate, and produce.  Newer technologies gave us the ability to penetrate the space occupied by more complex systems with longer algorithms.  Each wave of discovery has allowed us to push further from the early simple systems.   But the ongoing goal of business is to find routines that make what appears to be complex into something more simple.  Inevitably that increases the interdependencies of the production process and moves us from a world of self-sufficiency into one of communal group dependency.

Which brings us back to Adam Smith and the division of labor, and the historic interest of economists in complexity.

Whatever that is.

  1. Yoshinori Shiozawa
    July 15, 2020 at 7:36 am

    Peter Radford > “Since reading Ilya Prigogine ages ago I have never understood how anyone could not view the economy through such a lens.” (Radford on July 10, 2020)

    There are economists who see the economy through the lens of dissipative structure. Our book (2019) Microfoundations of Evolutionary Economics (Springer Japan, Tokyo) is based on the fundamental understanding that economy is a dissipative structure, although we do not emphasized this point explicitly except in Subsection See also my old short presentation in Keihanna Prigogine Conference:
    Shiozawa, Y. (1996). Economy as a dissipative structure. A presentation made in Keihanna Prigogine Conference, organized and sponsored by Keihanna Co. and Sankei Newspaper, May 28 1996. Available at: https://www.researchgate.net/publication/236149834_Economy_as_a_Dissipative_Structure

    If we see economy through the lens of dissipative structure, it is easy to understand that scarcity or the boundary conditions in the name of natural endowment have little to do with the everyday process of the economy.

    In difference of equilibrium analyses, our analyses consist of proving that economy re-creates similar state assuming an on-going economy and that agents react to the situation with the limited knowledge and rationality. Basic type of action is routine behavior. Stability depends on the situation and behavior. Main work is to depict the conditions in which economy works rather well, or semi-automatically. If the economy comes out of a narrow range of these conditions, it faces various troubles and incidentally falls in a partial collapse. We do not use equilibrium or maximization. What is not done by Brian Arthur and Cesar Hidalgo is the theory on how the complex system of economic interactions does work. We have succeeded in formulating price and quantity adjustment theory of the real economy as opposed to financial economy. Of course, they have their own advantages. Synthesis is not yet made but it is in scope now.

  2. Taco Bottema
    July 16, 2020 at 12:27 pm

    I have read the piece of Peter Radford with great interest, because:
    1. he re-invoked convincingly that the body of economics is more than the products of academic economic faculties, because it is primarily the whole set of knowledge that determines and surrounds decision making, and,
    2. there is a fascinating parallel of his distinction between primary and secondary knowledge with Mannheim’s two types of knowledge, routine based knowledge and the “matrix” in decision-making, stemming from around the 1930s.
    Here is the quote from the 1936 translation of Ideology and Utopia by Wirth and Shills.
    “Nevertheless, the contrast between the “routine affairs of state“, and “politics” offers a certain polarity which may serve as a fruitful point of departure. If the dichotomy is conceived more theoretically, we may say:

    “Every social process may be divided in a rationalized sphere consisting of rationalized and routine procedures in dealing with situations that occur in orderly fashion and the “irrational” by which it is surrounded. We are, therefore, distinguishing between the “rationalized” structure of society, and the “irrational” matrix”.

    Mannheim based this generalization on the work of the economist/bio-sociologist Schaeffler (1831 – 1903), who was very influential from the 1850s through to the 1870s carrying his influence through his books and teachings in later life.

    So, Peter Radford’s key idea finds support from Schaeffle (through Mannheim) Schaeffle being the one man who influenced the Austrians and the German Historical School alike.

    While Mannheim described the Matrix (in politics) as essentially irrational; he pointed out that a great deal of rationality has to go into managing the process. He also pointed out with great clarity that it is here where ideologies hit the political systems; if only, to minimize cognitive cost. Knowledge, as is power, is asymmetric indeed. In business that induces in the back office the creation of firewalls between carriers of vital information; and, if vision & resources are available, the creation of public information in the front office. In states the same occurs for millennia as far as we know.

    Radford concludes by saying that the ongoing goal of business is to find routines that make what appears to be complex into something more simple. And cheaper, if I may add. I agree that is what businesses do; all innovation industries and digital technologies are a living example, at least when they are at the investment stage. It is at that moment that the great simplifications hit home, reducing cognitive cost towards innovation. I can not help wondering about what happens in the state apparatus, government bureaucracies, when we think the logic of shortening the routines though. Central banks work electronically, taxation also, but services? Governments make their role more expensive through time…

    Back to Weber…😊

    • Yoshinori Shiozawa
      July 22, 2020 at 2:54 am

      I do not know how Mannheim argued the fact that there are two types of knowledge. In economics existence of two types of decision making was pointed by Katona (1951) Psychological analysis of economic behavior. More recently Kahneman made a similar observation in his book Thinking fast and slow (2011), which became a best seller probably owing to the fact that the author was a Nobel prize winner.

      I have also argued similar topic in Chapter 1 in our book Microfoundations of Evolutionary Economics (2019). (I am sorry that Chapter 1 has the same title as the book itself and I am making an unnecessary confusion.) The core of my argument is the complexity of solving optimal solutions. In many cases, it is more reasonable to be satisfied by a certain implementable solution. Please see Subsection 1.5.2 Hierarchy of Time Span and Controls and the note 34. This note does not appear in the first draft of 2016. Decision making requires time and efforts. If we consider of the existence of these costs, it is rather doubtful to make a contrast between rational and irrational decision making.

      Economy is a network of interactions of human behaviors (including business firms). Mainstream economics is based on the assumption that these human behaviors are best characterized by optimization. If we observe closely what we are doing, this is not a good formulation. This is also justified by the ubiquitous existence of intractable problems. Most of our economic behaviors are routines and these routines are justified by the fact that economic process as a whole has also an on-going characteristics. This is the reason why we should observe our behaviors through the lens (theoretical framework) of evolution.

      It is important to know that our economic system (which is a network as big as the global economy) works not by optimization behavior as mainstream economics assumes but by a network of simple routines. Our book proved that this vision is justifiable and reasonable.

  3. Yoshinori Shiozawa
    July 18, 2020 at 7:21 pm

    One of the great failings in mainstream economics is its futile insistence that all theory must stand on the shoulders of what are called “micro foundations”. Such an insistence is a clear denial of the complexity of a modern economy and that within such complexity phenomena worthy of study can emerge at different levels of detail.
    Peter Radford “Certain decisions” March 24, 2019.

    I totally agree with Peter Radford on this comment. However, a problem comes out on the concept of “microfoundations”. The comment above is attached to a citation from Marr’s book “Vision”. I reproduce a part:

    Almost never can a complex system of any kind be understood as a simple extrapolation from the properties of its elementary components. Consider, for example, some gas in a bottle. A description of thermodynamic effects — temperature, pressure, density, and the relationship among these factors — is not formulated by using a large set of equations, one for each of the particles involved.

    This is a classical example when one consider the relations between micro and macro level and also the concept of “microfoundations”. We must remind here how our understanding proceeded. As history of thermodynamics tells us, it started from macroscopic laws like Boyle-Charles law. In the second half of the 19th century, these laws were theorized in a form of kinetic theory of gazes. At the turn of the century (from the 19th to 20th), it evolved to statistical mechanics and then to quantum statistical mechanics. All these physics were based on the assumption that the system of molecules is in a state of thermal equilibrium. However, equilibrium assumption excluded many important entities like living things. It was Brussel school, represented by Ilya Prigogine, which started to study non-equilibrium thermodynamics. He presented an idea of dissipative structure. It is a stable open structure that is only possible far from equilibrium. A most simple example of dissipative structure is a lit candle frame. Life is never in thermal equilibrium, because if it is it is dead.

    It is obvious that we should reframe economics from that based on assumption of equilibrium to that on dissipative structure. The trouble is that even the new economics based on dissipative structure requires micro foundations. Therefore, it is necessary to distinguish two micro foundations: one based on equilibrium, which is neoclassical economics, and one based on dissipative structure.

    How is it possible to construct economics of the second kind? It is not possible for the conventional macroeconomics like current Post Keynesian economics (not to talk about New Keynesian or New Classical economics). Most of Post Keynesians refuse to consider mechanics or phenomena that emerge from interactions of individual agents. The difficulty that Prigogine faced was to explain the thermodynamics of dissipative structure. It necessarily comprised molecular-level interactions. Macroscopic thermodynamics (Boyle-Charles laws and others) could not even set this question.

    As I have explained in the first comment in this page (July 15, 2020 at 7:36 am), the first step of the new economics (that based on the dissipative structure), I believe, was founded by our book Microfoundations of Evolutionary Economics (Springer, 2019). As we have emphasized in the Preface, our theory provides micro foundations not only of evolutionary economics but also of Post Keynesian economics. These micro foundations are completely different from New Keynesians micro foundations. The latter is micro foundations of the first kind and our is micro foundations of the second kind.

    Please see Marc Lavoie’s review of our book. He admits the possibility that our new theory gives new framework of Post Keynesian economics.

    • July 19, 2020 at 3:41 pm

      Yoshinori, let me first say that I think this a splendid contribution, but secondly, that you grasp the point only to throw it away again. You say:

      “The trouble is that even the new economics based on dissipative structure requires micro foundations. Therefore, it is necessary to distinguish two micro foundations: one based on equilibrium, which is neoclassical economics, and one based on dissipative structure.”

      TWO micro-foundations: not one or the other! Remember Keynes on parallel lines and the need for a non-Euclidian geometry? What you need to be looking at is not two theories but founding them in a complex mathematics whose orthogonal coordinates allow one to consider not one parallel or the other but any direction in between. [See again the draft I sent you of “Complex Truth and Honest Money”].

      What Keynes and I have in common was that he wrote a “Treatise on Probability” and my research was into “The Reliability of Reliability Theory”: that (as in the use of redundant systems to improve the reliability of space vehicles) being a spin-off from Shannon’s work on Information theory. Also, we both had an interest in the theories of mathematics current in the 1890’s. Keynes obviously; in my case via Frege’s attempt to derive arithmetic from logic, Russell’s paradox recognising the need for different types of logic, my working with Algol-68’s typed logic and finding (in catholic literature) that G K Chesterton (in “G F Watts, 1904) had discovered the answer to the paradox in the complex numbers of surveyor’s trigonometry (their orthogonality reaching back before Euclid to Pythagoras’s right angles); in the indexical relationship of words to objects; in the inversion of names in one-eyed economic “Heretics” (1905) and bifocal “Orthodoxy” (1908): this leaving his small-is-beautiful, need-for-work-focussed “Outline of Sanity” (1926) dismissed as highly unorthodox.

      With the present discussion in the back of my mind, I read a Dummett quote from Frege and had the extraordinary experience of several disconnected bits of my picture falling into place, one after the other. Here’s the quote, echoed probably in Keynes’ “parallel lines”:

      “Admittedly, we often conceive of the matter [direction] the other way round, and many teachers define: parallel straight lines are those which have the same direction. The proposition: ‘If two straight lines are both parallel to a third, they are parallel to each other’ can then very conveniently be proved by appeal to the analogous proposition about identity. Only the trouble is that this is to stand the true state of affairs upon its head. For everything geometrical must surely be originally given in intuition. Now I ask whether anyone has an intuition of the direction of a straight line. Of a straight line, indeed; but do we distinguish in intuition the direction of the line from the straight line itself? Hardly. The concept of direction is first arrived at through a process of intellectual activity that takes its start from the intuition. On the other hand, we do have an idea of parallel straight lines”.

      Einstein showed the need to add time to Euclidian geometry, so we live in an expanding and curved rather than an unendingly straight-line universe: like being on the surface of a balloon being blown up, or the number of digits in arabic numbers expanding as units are added. Peirce retroduced his starting points from intuition, and Ranganathan distinguished such abstraction (like picking out the tune being played by an orchestra) from generalisation (focussed on which instrument is playing the tune by seeking the first, or the which one is currently taking the lead). Perhaps counting came first in mathematics, so most people think of complex numbers as complications of counting numbers, despite their being uncomplicated (indeed uncomplicating), Pythagoras’s theorem being ancient, and mathematicians showing the simpler forms to be abstractions from the trigonometrical or complex numbers which are necessary and sufficient to account even for expanding time.

      No need for anyone to be put off by not already being familiar with all this The words are like an index to a book which I am very well aware has taken me almost seventy years to write: just an invitation to look further into anything you find interesting. What I am now going to share is even more likely to be unfamiliar, being new even since I sent my draft to Yoshinori.

      Going back to arabic number formats expanding as units are added, what I had focussed on
      was Newton’s four laws of motion corresponding to position, motion, acceleration and the forces causing acceleration, leading up to complex numbers and an economy being a PID control system. Sticking to the economy, what I have now seen is the economy spread over different regions of the earth, with cultural diversity arising from adaptation through time to the different dangers and resources available locally. Going back to the number format logic, what I have realised is that a is a space big enough to hold n units, n needing to be 4 (0 to 3) to accomodate objects which we either know or don’t whether they exist or not, or to represent the Newtonian dynamics of their coming into being. What I found interesting was the expansion of the number format: in decimals the first holding ten ones and the second beginning from one ten. In terms of the degrees of freedom familiar from statistics, empty digits are entirely free to hold units, but the freedom declines as the number of units rises.

      What can be learned from this is to look at control and adaptation in economics as both gains in capability and losses of freedom, regained ultimately by staying within the limits of local self-control, or having spawned a new variable (money), separating out the variables by e.g. fixing incomes and rationing distribution. That, anyway, is to unravel the complications of monetarist thought by mapping it to the separate (orthogonal) dimensions of complex number, and likewise with the Keynesian mapping of ‘macro’ economics to his half-baked PID system of self-control. That leaves plenty of scope for economists in different industries and parts of the world for find ‘micro’ ways of applying it.

      I’d better end by reacting to Yoshinori on dissipative structures. To me that means ‘entropy’: a measure of the randomness of motions. When Shannon uses the term he is thinking ‘neg-entropy’: i.e. that looked at conventionally an information-rich signal may LOOK random, but decoded, or inverted by graphing against frequency rather than time, it may be anything but random. On the internet, lots of different bits of signal are chopped up, have identities attached to them, and get transmitted in order of priority rather than time of origin, but remove all the rubbish and the original signals can usually be separated out, reconstructed and sent only where they are needed. So are we to think of what we see happening in the economy in terms of ‘entropy’ or Shannon’s ‘neg-entropy’? I think the latter.

    • Yoshinori Shiozawa
      July 19, 2020 at 6:01 pm

      Most probably, what you don’t distinguish is theory and ontology. Keynes’s Treatise on Probability is not a book of economics. It may give us some hints on economics at the ontological level but there is no economic theory in it. Even if we see that dissipative structure is important, to make an economic theory on that idea requires concepts, propositions we can draw on, process analysis and often proofs that it works as we assume. You may be full of ideas but you must organize them into a coherent theory. If not, most of people would not understand what you want to say. There will be no progress in side of you.

      Keynes implicitly boasted that he has succeed to escape from Euclidean geometry to a more general non-Euclidean space (as a parable). He wanted to say that he could escape from what he named “classical economics” (in fact neoclassical economics of Marshallian type) but if I read his General Theory sincerely (meaning not as a bible but as a scientific textbook), Keynes’s theoretical framework is not radical enough. He may have escaped from some fixed ideas but he is still thinking in most of the cases in Marshallian framework. Citing some phrases from Keynes is only a syndrome that you are still a slave of Keynes and as a consequence of neoclassical economics.

      • Yoshinori Shiozawa
        July 20, 2020 at 6:22 pm

        Erratum: syndrome > symptom

    • July 20, 2020 at 5:19 pm

      Most probably, Yoshinori hasn’t made the connection between ‘theorem’ and ‘theory’. Most probably, Yoshinori doesn’t even recognise the difference between fundamental theory (in which the concepts are ontological or mathematical ) and applied theory (in which the concepts are epistemological: arbitrarily selected from the history, status and mathematics of what other people have said). Most probably, Yoshinori doesn’t understand that the meaning of a discussion lies not in the terms used but in the relationship between them. [Re ‘Keynes on Microfoundations] the inference to be drawn from stringing together a load of Keynesian quotes is not hagiography but a summary of the What, Why, When, How and Who? of his argument. The inference to be drawn from Keynes studying probability and my studying the reliability of the theory of it is that we were both looking at the same reality rather than the same words. Likewise the inference to be drawn from Keynes (1936) echoing Frege and Algol-68 (1968) eliminating Frege’s paradox: that like Frege we have both been pioneering students (not yet professors) of modern mathematics. The Keynes of 80 years ago is to be judged not for using the terminology of 80 years go but by the success of his diagnosis and prescription compared with that of his detractors. “By their fruits you shall know them”.

      I may be hoping in vain that at least some of the 18,340 readers signed up to this blog may be more willing than Yoshinori to learn to see with me what I am seeing rather than saying. However, “Those who never made any mistakes, never made anything”.

  4. Ken Zimmerman
    August 2, 2020 at 11:03 am

    The exploits of army ants are an oft cited example for the mysteries of many natural and social systems that we think of as “complex.” Note the wording. “That we think of as complex.” Complexity is an element of human culture. Humans invented it to explain a text, event, or situation. For humans, explanation always involves interpretation. A choice between different possible explanations drawn from the interpreter’s cultural milieu. A milieu that reflects a place and time, and the history of that place and time. From ancient times the term made use of for this process is hermeneutics. The word comes from the ancient Greek language (hermeneuein = to utter, to explain, to translate), and was first used by thinkers who discussed how divine messages or mental ideas are expressed in human language.

    At times, hermeneutics has stood for a set of interpretive rules designed to clear up difficult textual passages, events, or situations. Hermeneutics is more than the interpretive principles or methods we resort to when immediate comprehension fails us. Rather, hermeneutics is already unconsciously at work even when we grasp the obvious meaning of a red light. Hermeneutics is the art of understanding and of making oneself understood. The art is to understand and be understood. One is engaged in hermeneutics whenever one tries to grasp the meaning of something—be it a conversation, a newspaper article, a Shakespeare play, an account of past events, or a ‘natural’ event such as the Sun’s setting. The goal of hermeneutics is understanding. Although understanding may be guided by analytical principles, it cannot be reduced to them. Understanding requires art rather than rule-governed science. Engineering can tell us about how a castle was built. But it cannot tell us why humans wanted to build castles.

    Hermeneutics is how people create and pass on meaningful understanding. What is called data and information may be involved but can never substitute for such understanding. For hermeneutics, knowledge is more than naming and describing objects; it involves understanding meaningful structures (cultures) in which we already participate. This is not only true in the case of science, but also in the humanities and social sciences. Take, for example, the study of history. The “disinterested” viewer argues that we dispassionately observe history from the outside and present merely the facts to arrive at objective truth about past events. By contrast, hermeneutic viewers argue we can understand history in the first place only because we are fully historical beings. We are part of history and shaped by it. “Disinterested” viewers argue we should suppress our personal beliefs or prejudices to escape the ideological blinders of tradition. Those who champion a hermeneutic view of truth, however, object that past texts, events, discoveries, etc. hold meaning for us only because we stand within a tradition (culture) that has provided us with the beliefs through which we are connected to the past in a meaningful way. And, I might add to the future in a meaningful way as well. We view the world through the eyes our cultural traditions provide for us. Without these conceptual lenses that allow us meaningful access to reality, we would be blind.

    While scientific method(s) remains an important tool, scientists have realized that the process of research is more intuitive and uncontrolled than formerly imagined. Now, objectivism and relativism appear as two sides of the same coin. Both extremes are based on the same faulty concept of objectivity. So, with this toppling of the simple opposition between subjective and objective truth, a position beyond objectivism and relativism became possible. Among a growing number of researchers there is now an emerging consensus to regard the attainment of objective truth less like watching a spectator sport and more like playing a game. In a board game or a football match, there are rules and conventions one must observe to play, but at the same time, each performance is unique and requires passionate involvement to succeed. It is only by being deeply involved that there can be any understanding of the play and the game. For hermeneutic viewers this is how all knowledge works. Objective understanding of the world, others, and ourselves requires personal engagement and passionate curiosity. Acknowledging personal engagement in obtaining knowledge does not invite relativism. After all, to claim that all knowledge is relative to a cultural standpoint is not at all the same as claiming that only individual perspectives exist and are all of equal value. It is only to claim that we are not gods who look down on our world, but finite creatures deeply affected by the course of history. The hermeneutic claim that our knowledge is always relative to a certain cultural and personal context would only be relativism if actually we are isolated selves, unformed by history or language. In truth, however, our standpoint always includes a universally valid context of meaning, or what theorists call a ‘horizon.’

    In terms of the hermeneutic framework what then is complexity? Each complex event, discovery, or system exhibits a distinctive property called emergence. Roughly translated emergence is the notion that ‘the action of the whole is more than the sum of the actions of the parts.’ Many aspects of human cultures and what those cultures depict exhibit complexity. Including, markets with their varieties of buyers and sellers, organized into groups participating in mutual funds; economies with hierarchies of workers, departments, firms, and industries; multi-celled organisms consisting of proteins, membranes, organelles, cells, and organs; the Internet with users, stations, servers, and websites; to name a few. Even viruses with what seems a simple structure exhibit complexity after entering the body of a living host.

    • Yoshinori Shiozawa
      August 2, 2020 at 7:00 pm

      Paul Ricoeur distinguished two types of hermeneutics: hermeneutics of faith and hermeneutics of suspicion. It would be silly to apply hermeneutics of faith to neoclassical economics. Ken, please apply your hermeneutics of suspicion to demistify neoclassical economics narrative. Let me see how you will succeed. If you succeed in it, I will be happy to admit that hermeneutics is useful for economics. Demystification of economics may become an important field of economics.

  5. Yoshinori Shiozawa
    August 2, 2020 at 3:43 pm

    Complex numbers are not complex in the modern sense of the word “complex” which is related to complexity. A complex number is only a couple of two real numbers with four specific arithmetic operations. Quaternions are couples of four real numbers and octonions are couples of eight real numbers with similar arithmetic operations. The former makes a non-commutative associative field and the latter forms a non-commutative non-associative field. There is no other normed fields. But they are many other algebras. Real numbers and complex numbers, quaternions and octonions form only four examples of non-associative algebra. Lie algebra was introduced to study infinitesimal transformations and forms an example of algebras. Combined with representation theory of Lie groups, Lie algebras form basic mathematics for particle physics. They are high-level mathematics but nobody think they are complex in the modern sense of the word. Complexity is very different idea than complex numbers.

    • August 2, 2020 at 5:28 pm

      What is “modern” in logic is recognition of change. Santa Fe type complexity is about a number of numbers (static units), whereas complex number is about units capable of accounting for processes (which are directional and dynamic). The Santa Fe theorists re-invented Shannon’s bits of information; the post-Shannon cybernetic theorists redefined Newton’s equations of motion in the form of PID information systems. The modernity (recency) of a fashion is in any case irrelevant to this argument.

  6. Ken Zimmerman
    August 4, 2020 at 4:23 pm

    Like Gadamer, Ricoeur held that all thought occurs in language, so that even our innermost reflections take place within linguistic structures we can explore and interpret. In this way Ricoeur was a mediator between Romantic and Structuralist views of interpretation. Ricoeur rejected Romantic hermeneutics’ advocacy of the reader’s empathic identification with the author’s experiences, Ricoeur rather asserted that the aim of interpretation is the meaning of such experiences as transcribed and traceable in linguistic and symbolic expressions. At the same time, however, he rejected the notion the self is merely a passive channel of pre-existing language systems. For him, language does not speak. Rather, people do. Similarly, Ricoeur wanted to combine critical views of language and the self as inherently unstable (advocated by the ‘hermeneutics of suspicion’ represented by Marx, Nietzsche, and Freud), with a basic trust in the reliability of meaning and its communication as found in ancient interpretation, but also in Husserl and Gadamer. Ricoeur argued that the masters of suspicion help us destroy naïve conceptions of unmediated contact with reality, thus asserting the need for interpretation. Yet this necessary critical detour is not the final situation, lest one remain mired in skepticism but forms merely part of the greater effort to grasp meaning more profoundly within a ‘second naïveté.’

    • Yoshinori Shiozawa
      August 4, 2020 at 4:52 pm

      You are tested if you can surpass Marx. It would be a good test whether Ken’s anthropology and philosophy can contribute to economics or its real critique.

      • Ken Zimmerman
        August 4, 2020 at 4:58 pm

        I’m not as critical as either Marx or Ricoeur. But I keep trying. I still have at least one foot in the usual social conventions.

  7. Robert Locke
    August 5, 2020 at 1:22 pm

    I have throublle believing that economic innovators learn from economists about innovation. When I studied the men (man, Benoist d’Azy) who was a charcoal furnace fueled iron manufactuer who imported the coke burning mass production furnaces into France from England, 1840s), I had the good fortune to find in his family archives letters from and to the people involved in this transfer process. I had them published (Robert R. locke, Les forges and foundries d’Alais, 1829-1875). In none of the letters did I find any reference to classical economists or economic theories, etc. Benoist d’Azy used engineers, mostly, innovative ones, like Frederic le Play, Charles Manby, Emile Martin, to find the expertise and transfer it most in and from the UK. He turned to friends, rich conservative landlords, to find the operating capital needed to succeed. And got into politics to pursue the state=subsidies necessary to build railways to which he supplied the rails. Nobody was referring to economics within this community. I found the same think when I look at innovators in the 2nd industrial revolution in Germany, the university people with whom the innovators worked were not economists, but scientists and technologists. German historical economists did not work in industry, with the exception of Friedrich List, but work in academia. Only when the German Betriebswirte developed a new field in the 20th century did a connection exist between firms and thinkers, but no economists could be counted among them.

    • August 5, 2020 at 6:14 pm

      I have even more trouble believing that Ken’s hermeneutics have anything to do with complexity. Whereas I have been trying to draw attention to the two sides of the brain (spoken and visual memory) having sensory and emotional effects (a complex system having four parts), hermeneutics is more about a one-sided brain translating from one written language to another. Objects form a language in that they represent themselves, but interpreting objects we sense in terms of the communications language we know is usually called intuition rather than hermeneutics. My book by Gadamer is called “Truth and Method”, the point being a true translation needs to point to the same real object as the original. I’ve had to ask google about Ricoeur, who seems more interested in the interpretation of dreams and analogies than reality. I can see what Ken means by his “suspicion” of intuition, which is why mine ends up not in another intuitive interpretation but in an open-eyed evidence-based choice between distinguishable possibilities.

      As for what you are saying about engineers being the innovators, Robert, I found myself recalling Francis Bacon faced with a worsening of the state of economic affairs described in
      book 1 of Thomas More’s Utopia, and calling for a science taking things to bits to see how they worked “for the glory of God and the relief of Man’s estate”. Was that science or philosophy of science? If the latter, could it be that economics ought to be philosophy of the art of provisioning, i.e. relieving Man’s rather than the economist’s or his paymaster’s estate?

  8. Yoshinori Shiozawa
    August 5, 2020 at 2:38 pm

    Robert Locke, how do you situate Josef A. Schumpeter? He has renamed his concept of neue Kombination into a new name innovation which became very popular not only among economists but also among business people. Now innovation is the most often referred keyword in management schools. Of course, young managers learn about general idea of innovation and its importance. But, when they really innovate something, their idea must come some other details on products, needs, new technology and others.

    It is true that current state of economics is not much emphasizing innovations except (Schumpeterian) evolutionary economics. But, the task of economics is not to teach entrepreneurs the arts of innovation. Economics is more concerned how innovations occur, how they continue, what influence they engenders, how they are linked to economic growth, and others.

    I do not understand why Robert wrote the above post. Even if economic innovators do not learn from economists about innovation, this fact alone does not stand for the irrelevance or non-utility of economics. At least, it is not the central concern of the economics.

    • Robert Locke
      August 5, 2020 at 5:17 pm

      Schumpeter’s History of Economics was published posthumously by his wife in 1952. He hasn’t done anything recently, although he made a reputation c.1900 for stressing the role of the entrepreneur in innovation, and then about 1912 the role of the firm, the innovative firm like Dupont. The visible hand of firm management replaced the invisible hand of market economics as the force of innovation.

      Economists do not pay much attention to this, but historians do, especially business historians who focus on the history of the firm, e.g., Alfred D. Chandler Jr., whose visible hand, a Pulitzer winning history book, was published in 1977. The economists ignore the visible hand, historians do not. That is all I am saying, except that to ignore the visible hand is to ignore the principle force behind innovation, and, in a world where the innovativeness of firms and nations is the principle preoccupation of people, economics (as my studies indicate) is not much help. I have been trying to make historical figures important, since I joined this blog in 2011. you are telling me to go away so that you can pursue, as any historians would tell you is a fruitless task, the creation of a prescriptive science of economics . I’m wasting your time, but so are you the time of those of us who want economics to really be prescriptive and deal with the visible hand.

      • August 5, 2020 at 6:19 pm

        Well said, Robert. Precisely.

  9. Yoshinori Shiozawa
    August 5, 2020 at 10:57 pm

    Robert, you are misunderstanding me. Although I am tired of many unreasonable people who claim to have found some important facts and principles to economics but never explain concretely how they are related to economics.

    Probably, when you say “you”, it includes many persons without distinguishing each person.
    I have never written that you should “go away so that you[=we] can pursue the creation of a prescriptive science of economics”. I had no intention to do so, because I do not think that economics must be a prescriptive science. I believe economics should be descriptive before it can be prescriptive. I am against mainstream economics, not because it recommends bad policies, but it is wrong as descriptive science. I only hope that economics should be not only superficially descriptive, but must contribute to a deeper understanding of how economy works. Even we may be minority, there must be a considerable number of economists who believe like me.

    It is true there are many policy mongers in this blog who constantly ask this and that policies without any interest in what is happening or will happen in the economy. They are political activists. They are sincere persons but not true economists. It is necessary to distinguish those people and more sincere economists.

    As an example, please read our book. (I am sorry to lead you to Amazon.co.jp but I cannot find the same item in Amazon.com. You can read Preface written by Taniguchi. If you cannot, please read a book review by Marc Llavoie) Our book does not rely on an assumption of equilibrium or in your expression “invisible hand“. We gives explicit statements on how firms behave in setting prices and how much they produce in response to market demand expressed for their products. The book has succeeded to explain how a large economy as big as world economy works without appealing to invisible hand. Our book is still a minimum foundation and does not contain firms or entrepreneurs as innovator but I have written a paper (not yet published) titled A new framework for analyzing technological change. In this paper, of course, it is entrepreneurs as innovators who introduce new products. These acts contribute to enhance the aggregate demand to grow and make economic growth possible. There is no need for invisible hand. You should pay attention what is happening in the current economics before you accuse economists in general. We are not as powerful as mainstream economics but you have the chance to know how we are fighting against mainstream economics.

    • August 6, 2020 at 10:25 am

      Please excuse me butting in to thank you for being so open about your opinion:

      “I believe economics should be descriptive before it can be prescriptive.”

      That surely proves Robert’s point; but why is he right? Because a description of a sick economy is like describing the symptoms of an illness, which encourages people to reach their own understanding and prescribe their own pet remedy if you don’t go on to diagnose the illness and recommend a prescription for them.

      By contrast, what I myself am trying to describe is what an economy IS, so that one distinguish what are the symptoms of its normality from those due to its illness. My prescription can then apply only to the differences, reinterpreting and correcting rather than killing off the host.

      Robert too is saying there is “no need for the invisible hand”, for the hand [of co-operative company management] is [in Germany] still visible unless – being preoccupied with describing what you do see – you are not looking for it. My concern about that is that most of us are too busy just getting on with living [in e.g. the UK and US] to actually be looking for cooperation in German [or as you have told us, Japanese] firms. Thus there is a need to draw the attention of not-yet-committed students to how guidance by an as-yet-invisible hand is built into the purpose and institutions of an economy. Hence my schematic systems diagrams making visible the invisible, and PID explanation (not description) of how it works as a system.

  10. Yoshinori Shiozawa
    August 6, 2020 at 8:46 pm

    Robert Locke Please read my answer on August 5, 2020 at 10:57 pm. It is addressed to you.

    • Robert Locke
      August 7, 2020 at 10:48 am

      I have read Lavoie’s review of the book. Your approach reminds me of Tom Johnson;s “relevance lost,” and of his attempt to replace accounting with the Toyota Kata. You don’r menrion Kaplan and Johnson and the failure of accounting as a control mechanism.

    • Yoshinori Shiozawa
      August 7, 2020 at 1:23 pm

      Robert Rocke One cannot argue everything in a book (in my case, two chapters in a book). I was once impressed by Johnson and Kaplan (1988) Relevance Lost. I mentioned on it in a paper Economics and Accounting AAAJ 1999. See p.35. In the same page, I mentioned on the limits of OR.

      Please read the contents. I argued that economics must learn more from accounting. I also believe that economics must learn more from business management.

      I am now writing a paper with a title: Dynamic Capabilities of Nations. In this paper, which is delayed much more than I imagined, I have criticized classical and endogenous growth theories, because they all treat production as some fixed relations between inputs and outputs. What is changed is the new arguments counted in the production function. Although they have added human capital and R&D, they have failed to take into count the learning by doing that occurs in the production site. Human capital (higher education) may help understand the learning process more rapidly but the productivity increase occurs not by bigger human capital but by experience and challenge. On this point, I an\m inspired by Toyota Production System.

      • Yoshinori Shiozawa
        December 5, 2020 at 2:53 am

        The plan to write a paper “Dynamic Capabilities of Nations” has been disrupted because of my eye disease: binocular dilopia. After three months, I have got much better but I have for the moment no power to continue my original plan, although I have not abandoned it.

      • Yoshinori Shiozawa
        December 5, 2020 at 3:27 am

        Binocular dilopia should be written “binocular diplopia”. Its main symptom is that everything seems double.

  11. Meta Capitalism
    August 7, 2020 at 12:26 am

    It is a pretty sorry science that cannot help mankind confront actual circumstances. (Robert Locke, RWER: Proper use of math in economics, 12/22/2014)
    Perhaps they should have just gone out and grown food somewhere? …. Maybe rather than play at economics writing poetry would be better to help the starving?
    (Ishi, RWER: Proper use of math in economics, 12/29/2014)
    I have said this before and I am going to continue to repeat it until it sinks in. It’s time to get going people. When you are a child you are expected to play at childish things. Now that you are adults it’s time to act responsibly. We need to come up with a game plan to turn the current momentum that promises to destroy mankind around. Ideas anyone. It can’t be that complicated.
    (Donald Sagar, RWER: Proper use of math in economics, 1/6/2015)

    • August 7, 2020 at 12:12 pm

      Than you, Meta, for reminding us of Robert, Ishi and Donald Sagar already objecting, long ago. (Donald with reservations: it IS “that complicated”. The macro problem is how to uncomplicate it – reduce it to mere complexity). Yoshinori’s problem, it seems – following his link to Lavoie – is that he doesn’t want to.

      Somewhat more politely than his reaction to my polite apology for “butting in”, let me admire his professorial awareness of highlights surfacing from those complications while feeling it proper in this public conversation to share what I actually found in the excellent Lavoie.

      “The aim of the authors is to provide theoretical foundations to evolutionary economics (and thus post-Keynesian economics) … Their goal is to show why it is that a market economy “works”, that is, how a fully decentralized input-output production economy will not be driven to chaos, and thus will converge to a stable quantity structure.

      “The book is named after evolutionary economics but offers a selective interpretation of what this stands for. It builds on the concept of satisficing but does not deal with innovation, technical change, or technical progress—standard subjects of evolutionary economics as often understood … [because] change is everywhere—in economic behavior, knowledge, commodities, technology, or institutions.

      “Shiozawa (2016) provides more information on what he calls the revival of the classical theory of values or a cost-of-production theory of value.

      “The only drawback of the achieved results, as briefly mentioned at the end of chapter 5, is the lack of aggregate demand feedback.

      “A great breakthrough—an achievement of paramount importance as the authors say—for the analysis of the modern industrial economy. [But] (the financial sector requires a completely different story).

      “As the authors say a number of times, their foundations are akin to the study of effective demand at the level of the firm; what remains to be incorporated is macroeconomic effective demand.

      So this is all about economics as it might be seen from within an industrial firm, ignoring the group of feedbacks from the FIRE economy (due to money and hence rents, taxation and interest being thought of as commodities) which is key to aggregate demand pricing even in a production economy which is anything but “fully decentralised”, handing those with large fully paid for inventories (i.e. owned capital) a massive advantage in financing development, subsidising loss leaders and weathering temporary crises.

    • Craig
      August 7, 2020 at 6:58 pm

      “The macro problem is how to uncomplicate it – reduce it to mere complexity).”

      Yes! And that is precisely what 50% discounts at retail sale and at note signing do. It takes the fact that retail sale is the sole integrative point between the micro and macro economies because it is the most significant aggregative point of the micro economy, and macro-economics is about aggregates. It is also the terminal ending point of the the legitimate economic/productive process, that is where production exits the economy and becomes consumption, which makes it a genuine and potential pivoting/inverting/paradigm changing point.

      Emergence/evolution and complexity are facts of life in the temporal universe and hence regulation is always inevitably necessary, but paradigm changes are the slayers of “emergent factors”. No amount of tweaking was ever going to eliminate the “emergent” factors of Ptolemaic cosmology….because what was necessary was a paradigm/entire pattern change. As in cosmology, so in economics and money systems.

  12. Yoshinori Shiozawa
    August 8, 2020 at 6:11 am

    Thank your for reading the book review of Marc Lavoie on our book. If you like, please read another book review by Yoshiro Inoue (pronounced i.no.u.e). He argues an aspect that Marc Lavoie did not discussed in his book review. Indeed, Inoue argues “two ideological implications of this study [=our book]”. One of the two concerns the significance of “formal theory.”

    Please check (around the end of Section 5) if you are not a romanticist who believes the incompatibility of Rationalism and Romanticism. Inoue considers that “Romanticism tends to regard rational or formal thinking as being shallow and inessential. As a result, Romanticism is often critical of building formal theories, and tends to have a pessimistic view on how well a formal theory works before any testing.” But, this attitude has its own weakness. You must have objections.

  13. August 8, 2020 at 12:22 pm

    Dear Yoshinori, thanks for responding to clarification of my attempt to be friendly with this extraordinarily interesting book review by Inoue (in which the mathematics is irrelevant to the present discussion). I do hope other readers here will study and reflect on it equally carefully.

    May first frame my response by pointing out to Craig that a paradigm is an example (if you like a theory embedded in a particular practice), and what happened to Ptolemy’s cosmology was its replacement by a more realistic fundamental theory. That assumed the perfect circles of geometry, which Newton effectively transformed into “rubber” topology, allowing for not only balloon-like inflation of boundaries but for their deformation by outside and internal forces.

    Before Newton, Descartes had invented co-ordinate geometry, enabling a two-dimensional picture of a balloon to be represented graphically by a sine wave representing quantitative variation of size with time: the stock in trade of electrical engineering and music. What this does not allow for is variation, as in the difference between a tune as played on a penny whistle and the same tune played by an orchestra. Look ahead to Shannon’s information science, and all he is sure of (i.e. knows) is not the actual magnitude of the sine wave, but just four values, like a complex number or the quarter hours on a clock face (as against the hands measured against them). Their being a right angles doesn’t have to be countable: they can be constructed by symmetry as in twice folding a piece of paper. Anyway, I’m with Newton and Einstein and Shannon, frustratedly seeing most economists still thinking in terms of magnitudes and/or unchanging circles.

    So how to move on via evolution from the expanding balloon (Hubble’s Bubble) to your “micro-macro loop” version of the evolution of economic theory? I’ve pictured it as like an arabic number, starting at 0 but counting only up to 4 before having to add a new digit: countable and indefinitely extendable using the same process. You seem to be seeing new theories evolving, discernably but not measurable by scientific induction, where as a family man I see children learning as they grow up, some of them faced with extraordinary difficulties which trace back to their having four functionally different parts to their brain (as you say, “organically” arranged) and (as G K Chesterton said of academics) not using all of them. What GKC said and Inuoe here says about capitalism thwarting people’s mental development is certainly one side of that, but accidents of birth and genetic inheritance also add to the evidence. What Inuoe perhaps doesn’t get round to is the Darwinian story of adaptation to environmental constraints and “survival of the fittest”: this last “the elimination of the unfit”. Which is where I have ended up with money and the so-called FIRE economy.

    As in the progression from microbes to linear plants to mobile animals to intellectually mobile humans, I see 2 coming after 1, 3 after 2 etc as new capabilities constrain three-dimensional freedom. Microbes feed wherever the wind takes them, linear plants root themselves in their energy supplies, animals circulate them and we learn to go in search of them. Societies like species adapt to whatever is available.

    Am I a Romantic? Yes and no. The choice is not just between being romantic or rational, it also includes being reasonable or emotionally sensitive. Like you cannot have 4 without having also 1,2 and 3, you cannot be Romantic or Rational without at least the possibility of becoming (or at times being) Reasonable and Sensitive. My mature personality profile suggests I am a relatively rare (1%) breed who tends to be all four at once. Inoue’s criteria might suggest I am Romantic, but as a practitioner I like the efficiency of Rationalising, the Romance of exploring what can’t yet be done, the Reasonableness of sticking to what can be done and (working with sick machinery and handicapped children) I’ve had to learn to be Sensitive to the unintended side effects of Rationalistic thinking. In short, I am critical only of theories which purport to predict an unknowable and unbounded future, thereby misleading those who have not yet learned formal theories are like maps: only able to suggest where to look.

    • Craig
      August 8, 2020 at 6:31 pm


      “May first frame my response by pointing out to Craig that a paradigm is an example (if you like a theory embedded in a particular practice), and what happened to Ptolemy’s cosmology was its replacement by a more realistic fundamental theory. That assumed the perfect circles of geometry, which Newton effectively transformed into “rubber” topology, allowing for not only balloon-like inflation of boundaries but for their deformation by outside and internal forces.”

      Of course a paradigm is a theory. It must be, as it is also an entire pattern, and a new paradigm is a new theory/pattern that fits seamlessly into all of the valid insights and workabilities of the present pattern. What you’re not including is that a paradigm old or new is also a SINGLE concept whose aspects and applications define a present pattern and in a new paradigm effect an entirely new pattern.

      The problem with paradigms are most basically twofold. 1) Unconsciousness of the present one’s singular concept and 2) what is the new paradigm derived from discerning both the valid insights and the delusions of the present one as hints about what the new paradigm concept and its applications might be.

      Given that the three major reform ideas “out there” are Minsky’s FINANCIAL instability, Hudson’s financial parasitism and Mosler’s Modern MONETARY Theory it very strongly suggests that the problem ACTUALLY IS in the present monetary and financial paradigm.

      Another less discussed problem we are presently facing is habituation to the current paradigm for inquiry, namely Science Only, which inhibits what is most important in any search for the truth, namely discernment, which is just another word for wisdom…and which integrates science wholly within its method and mindset. Wisdom is BOTH ontology/understanding AND science.

      So rather than continually examining the entrails of the current monetary and economic paradigm a Wisdomics-Monetary Grace as in Gifting-Gracenomics appears to hit all of the relevant marks.

      • August 8, 2020 at 9:19 pm

        Craig, I’m not trying to disagree with you, so yes, a paradigm – defined in my dictionary as an example, and used as such by Kuhn in his essay on scientific revolutions – is a theory in my sense, in that one example can show “doers” how to look at a topic. But the inverse is true: a generally applicable theory is not a paradigm (an example). You can see an example; you can’t see (though you may have learned how to and even how to explain in words) HOW you are looking. Take another example: you may be able to hit an approaching tennis ball with a racket, but you can’t actually see how you do it. Again, the theory can be wrong but the example just is.

        So we are totally agreed that, as Minsky, Hudson and MMT suggest, the problem is in the financial system. We disagree primarily in that I call it what it is – the one complicated financial system we have now – but you persist in calling the various conflicting theories of it “a” paradigm.

        I think we are totally agreed, too, that Wisdom involves discernment and being Graceful (or perhaps being grateful for small mercies). Where we seem to be disagreeing secondarily is your assuming scientific method helps discernment, when my position is that the dominance of Hume’s epistemological focus hinders it; that the wise scientist knows what we don’t know, but commits to the best available conventions (e.g. to driving on the right side of the road and giving way graciously).

  14. Yoshinori Shiozawa
    August 8, 2020 at 10:22 pm

    Craig, how can you explain what happened in the 20th century and problem now many countries face? For, example, how do you explain with your three ideas of monetary reform what Richard Koo presented as his vision in his article “Inequality challenge in pursued economies” in RWER number 92. Of course, it is a rough description and you may easily find this and that exceptions. But it is not the core. He points that many people are still thinking in the old “golden era” paradigm, although many countries are in pursued phase. In one of his conclusion, he put it like this:

    Unfortunately, there has been virtually no macroeconomic theories or models that address the policy implications of capital earning higher returns abroad than at home, and very little of the policy debate in advanced countries is couched in these terms. On the contrary, economist’s continued emphasis on the efficacy of monetary policy and disdain for fiscal policy are all based on the assumption that the economy is still in a golden era where the private sector is faced with a surfeit of attractive domestic investment opportunities.

    It seems for me that what Craig demands as monetary reforms is still in an old paradigm of the efficacy of monetary policy.

    • Craig
      August 9, 2020 at 1:58 am


      That would be true if those monetary policies were of the indirect, largely fallacious and monopolistically enforced kind that neo-classical economics foists on us. Fortunately the 50% discounts, universal dividend and debt jubilee monetary policies are direct to the consumer and equally direct and reciprocal back to the merchant. As I have often posted here one of the primary aspects of the natural philosophical concept of grace which is the operant concept behind the new monetary and financial paradigm is directness. In fact that same aspect of the operant concept was the one effecting the new paradigm of The Reformation, that is that humans could have a direct relationship with god instead of having to slavishly perform the Church’s monopolistic sacraments in order to obtain grace.

  15. gerald holtham
    August 9, 2020 at 12:01 am

    Economists ignore the visible hand – really? Ronald Coase (Nobel 1991), Douglas North (Nobel 1993), Oliver Williamson (Nobel 2009) spent their careers analysing institutions and organisations – where the market stops and corporate bodies begin and why. H.A.Simon (Nobel 1978) was a polymath who did many things but he was honoured for his work on organizations. He was building on a US tradition of institutional economics going back to John Commons and Thorstein Veblen. Other countries have parallel traditions.
    We are all entitled to our opinions but it would be nice if we could share the same facts. Economics is a large and diverse field. It is not encompassed by a basic text book written in Chicago.

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