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The missing middle?

from Peter Radford

A couple of things before we get started:  when I say that economics is not history, I mean exactly that.  Geology is not history either.  That is not the same as saying that economics ought pay no heed to history.  Let’s not get confused over that.  Economics is its own discipline with rules and territory that its exponents determine.  That might frustrate or annoy some of us who would like to think of it more broadly, but it’s up to us to find doors to open to help in that broadening.

Fortunately there are plenty of such doors because the current core of economics is rather narrow with respect to the full range of interesting topics or phenomena that appear to be economic.  In its endeavor to become a more formal activity economics has ceded swathes of territory to related fields of enquiry.   As I mentioned in the past couple of weeks, it has limited itself so that things like increasing returns are treated as novelties that periodically pop up  and need pressing back down so as not to cause a thorough re-thinking of its core principles.  The list of similar oddities is quite long and results, by and large, from the effort economists have put in to their relentless focus on market activities and their desire to hunt for the mysteries of hidden hands and so on.  Economists have, of course, every right to pursue this narrow and often sterile activity.  And there are many economists who diligently work away at investigating the oddities, although too many seem to want to bend their subject of study to obey the rules of the core rather than to state the more reasonable conclusion that the core itself needs a look at.

My own pet peeve in this regard has always been the great mystery known as the business firm.

Economists have a  terrible grasp of what a firm is, what it does, and why it is impossible to discuss an economy without understanding the role of business.  Far too often people look to economists to talk about business as if a training in economics was relevant to running a business.  It really doesn’t.   As someone who has travelled in the opposite direction I can attest to the weirdness that passes for a “firm” in economics.  A simple way to understand this is to take a look at the curriculum of an average business school.  In one class students study standard micro economics as if that helps them understand what they will face when they get out into the real world.  And in the next class they are taught  a series of tricks and wheezes to confound the market so the businesses they work for can earn profits the “free market” would not provide.  Instead of economics connecting seamlessly with business it is a contradiction of it.

This is not a new problem.  As I have remarked countless times, Ronald Coase threw down the gauntlet back in 1937 with his famous essay “The Nature of the Firm”, the first sentence of which reads thus: “Economic theory has suffered in the past from a failure to state clearly its assumptions”. Well no kidding.  That’s why the sub-discipline of the philosophy of economics is so important.  Economists sometimes are not very clear about what it is they are doing.  There’s a great deal of discussion about growth, production, innovation, and so on, but very few economists actually engage in concrete ways with those things.  Instead they make grandiose abstractions and sweeping generalizations that ignore the way in which, let’s say, innovation, takes place.  To engage with innovation is to engage with learning, discovery, novelty, knowledge, information, and a host of other phenomena that are extremely difficult to fit neatly within a world that assumes perfect information.  So it gets swept under the rug.  Indeed for many decades technological advance was treated as exogenous to the study of growth.

I will get back to Coase in a moment, but I want to be sure we are clear: there is a lot of literature surrounding some of these interesting non-core economic issues.  As a small example, I can recommend the 1967 essay, “Do Machines Make History?” by Robert Heilbroner which tries to tackle the way in which technological development affects its socioeconomic environment.  Technological determinism is, naturally, a contested topic, but I think most of us would agree that the correlation between greater intensification of technological change and greater abundance and prosperity bleeds very heavily into causation.  So why is the topic of learning and innovation not firmly within the core of economics?  And why is knowledge not a fundamental input in that economic oddball, a production function?  Why do we stick with 1800s concepts like “capital” and “labor” neither of which is very precise and muddle the economics of growth with the politics of the class division of the spoils of growth.

In the famous Solow growth model technical progress sits outside and thus unexplained.  In the more recent so-called endogenous growth theories there has been some modest attempt at realism by bringing increases in human capital into the picture with the effect that decreasing returns to capital accumulation were offset by spillover effects from that rising human capital.  In other words we were getting perilously close to bringing knowledge to the foreground with the concomitant nod to the realization that diminishing returns are often eliminated by the intentions of actual human beings.

Think about that: economists kind-of-sort-of realize that human beings deliberately interfere in those equilibrating mechanisms economists dream of in order to subvert the smooth workings of the marketplace.

Which brings me back to Coase.

His central question, which has never been satisfactorily answered despite the best efforts of the transaction cost theorists,  is a simple one: why do firms exist?

The answer to my mind is a lot more complicated than that either Coase or his followers in the transaction cost tradition offered.  That is unless you describe pretty much all of what goes on in a business as a transaction cost.  And this is where we arrive at the dilemma many of us have when we discuss our frustration with economics.

That smooth wonderful equilibrating mechanism, that looks something like a brass clock circa made in 1875, is a description of what would happen in an economy were everyone to stop thinking after the first round of computation given all the usual economics gobbledegook of initial conditions, preferences etc.  The system would glide ever so gently along the path that maximizes the way in which economists like to believe it does.  Economics has stayed within this realm content with understanding how the system evolves towards a steady state.  It makes claims about the properties of this glide path and the the end result.  It defends those claims and studies variations as anomalies rather than as the norm.  Most of the framework of economics dates back to the era of brass clocks: equilibrium, maximization, and marginalism are all concepts born back before the scientific upheavals of the twentieth century.  Economics seems to want to stay there, afraid to engage, except on its periphery, with everything that happened since.

The problem is that people don’t stop thinking.  They learn.  More particularly they learn how to defeat the system.  That so-called human capital is actually an effort to prevent the effects of the market gliding nicely along the path economists so fervently wish it would.

Along with the scientific revolutions that economics appears to have missed is the change in the way in which the economic activity production takes place.  The days of the simple entrepreneurial firm dealing directly with fully informed consumers is long gone.  This gets us to the Coase question in a more concrete way.  Instead of staying within cost efficiency explanations for the firm, a more modern perspective would describe it as a wholly different layer of economic activity, a sort of middle layer, where the processes of production have been enclosed and placed under a centrally planned, information rich, and strategically driven regime precisely to provide a level of coordination unattainable in the open market.  It is not simply a question of cost.  It is a question of possibility.  Modern production requires an extent through time and place, this compounds the uncertainties that surround it.  It requires access to ever greater technical knowledge that involve collectives of people rather than sole-proprietors.  It involves financing, logistics, planning, forethought, control, and many more activities that James Burnham acknowledged in his groundbreaking “The Managerial Revolution” first published in 1941.  It also involves the co-option of the legal form we know as the corporation, which is not at all a modern phenomenon — the Romans had corporations for the same reason we do — and all the legal complications that form brings into the discussion.  Compressing all this into a “production function” is a farce.  Attributing every single aspect of it to the impact of transaction costs is a simplification too far.

Without a solid concept of the firm situated in its core, economics is reduced to a discussion of much economic activity from the outside.  Without engaging with the firm and its consequences, economics has to restrict itself to a more narrow perspective of economic activity.  Which it does and continues to do contentedly.  But it, as a consequence, becomes a very blunt and inaccurate description of what goes on around us in the economy every single day.  It is reduced to a naive version of human behavior on the one hand and a bundled version of aggregate activity on the other, with very little understanding of how the two relate because the process of production and distribution sits somewhere between the two and has properties of its own not included in them.

None of this is novel to anyone familiar with the literature within the traditions of organization theory, economic history, or strategic business management.  From Berle and Means, to Chandler, to Porter, to Foss and their ilk there are countless analysts who have weighed in on how production actually takes place and on how markets are constantly being created and subverted by the actions of the collectives we know as firms.

The problem for those of us who wish economics were a little more engaged with real economies and a little less of a self-referential activity stuck some time ago, the firm is an easy totem of either progress or denial by economists trying to broaden their discipline.  Right now it is not looking too good because most of the activity is on the outside looking in.

But let’s not mock economics for its narrowness.  A gentle chiding will suffice.  For now.

  1. August 11, 2020 at 11:01 am

    With half the world’s population destitute now and a likehood of global warming making the whole world uninhabitable in the foreseeable future, “a gentle chiding” will NOT suffice.

    While one might be merciful to those naive enough to believe their doing good means doing what they are told, what their masters in finance, corporate strategy and politics have told economists to do is to ignore the real world’s problems and join them in getting rich quick. At very least they all deserve kicking out of office, but like the quack doctors stuck in the half-truths of the 19th century they will disappear only as simplified theories allow the likes of germs, vaccination and the need for hygiene to become common knowledge. The quack theories operate on leeches constraining supply and demand; the reality (if you look at it) very obviously involves not only a cycle of consumption, reproduction and distribution but also development – not all of which is good, like Darwin preaching “the survival of the fittest” rather than “the non-survival of the unfit”. Crediting goods rather than people (or even their labour) with money values is one unfitness well past its sell-by date; others are unrestrained mass production and technical development (c.f. E F Schumacher’s “Small is Beautiful”) and the whole of the parasitic “FIRE economy”. Economists are misleading themselves by asking the wrong question: “What do we do?” rather than “Why do we do it”?

    What is so true in what Peter says is how the unfit survive. “The problem is that people don’t stop thinking. They learn. More particularly they learn how to defeat the system”.

    Though I’m engaged with economics as a participant in the economy, I have to say how much I enjoyed Peter’s spectator’s view, looking in. Lots for a participant to agree with; but he’s not being forced by events to try to change what we’re doing.

  2. Robert Locke
    August 11, 2020 at 11:50 am

    What you write is, Peter, so anglo-saxonish, it reveals a mind that absorbed a lot from the english language worlds of scholarship, about the firm in this case. I, accidentally, had another experience. I was researching into the 19th century development of German engineering education, when I found a reference in an article to the Zeitschrift fuer handelswissenschaftliche Forschung. The reference is not an engineering periodiial — engineers quoting nonengineers, that seemed odd to me. So I investigated to find this periodical had been started by Eugen Schmalenbach in 1906. It is now called Schmalenbachs Zeitschrift fuer betriebswissenschaftlische Forschung. a journal written by academic business economists, a new field that deals with the firm that began as a discipline c.1906. We don’t have a periodical to match it in the english speaking world for longevity.

    So I found the journal’s run in the library of the Technical University of Hannover, and spent some weeks reading its from issue 1906 on.. to the second world war.

    These scholars were preoccupied with the firm and its purpose and meaning, And discussed it thoroughly in the second and third decade of the 20th century.– in this and other journals they founded..

    That is how I learned a lot about the firm, from German business economists, Would others who read this blog have, too, if they had they would’t write what you just did, unless ignoring German business economists is ok because Germany lost the war.

  3. Robert Locke
    August 11, 2020 at 5:35 pm

    Peter, The results of this research are in my book, The End of The Practical Man, first published in 1982 by JAI Press, Republished by Elsevier 2006. In the 3 chapers, 4, German Business Economics; The Theoretical Acnievement, 5, German Business Economics: The Educational Achievement, 6, Gerfman Business Economics: The Institutionalization of Management.

  4. Craig
    August 11, 2020 at 6:20 pm

    The way to make the ACTUAL productive process productive, prosperous and stable is to excise the parasite of for profit finance from it and make the ACTUALLY productive agents and their consumers an offer they cannot refuse because it not only serves them so much better than the current mess it also enables the creation of policies that will rapidly begin dealing effectively with climate change. Kind of like the wisdom expressed in Deuteronomy 19: I call heaven and earth to record this day against you, that I have set before you life and death, blessing and cursing: therefore choose life, that both thou and thy seed may live.

  5. Yoshinori Shiozawa
    August 11, 2020 at 6:41 pm

    Even if we do not talk about Germany or any other countries, I wonder why Peter Radford has (intentionally?) neglected a strong tradition in management science: Herbert A. Simon (First Edition, 1945, Fourth Edition 1997) Administrative Behavior, James G. March and H. A. Simon (1958, 1993) Organizations, Richard M. Cyert and J. G. March (1963, 1993) A Behavioral Theory of the Firms, David J. Teece (2009) Dynamic Capabilities and Strategic Management. These are all translated into Japanese and in my personal library. Between Cyert and March and Teece, we have Richard R. Nelson and Sydney G. Winter (1982) An Evolutionary Theory of Economic Change which gave birth to modern Evolutionary Economics and sparkling hint for now strong Dynamic Capability strand. Now there are rather close interaction between evolutionary economics and organization theory.

    It is good to advice economists who are constraint in narrow economics, but outside of mainstream economics, there is now a synthetic attempt which unite evolutionary economics and Post Keynesian economics.See for example Marc Lavoie’s book review of our book. It seems to be time to cease always complaining mainstream economics. It would be better to pay more attention on heterodox economics. What was the the aim when you have founded RWER? To enhance building a sane realistic economics, I suppose it was. No?

    • Yoshinori Shiozawa
      August 12, 2020 at 4:37 am

      It seems to be time to cease always complaining mainstream economics.
      It seems to be time to cease always complaining about mainstream economics.

    • Robert Locke
      August 12, 2020 at 9:27 am

      We are not talking about countries but but the development of a scientific discipline focused on the firm; there were only two of them before 1950, one in the US and another in Germany. I’m surprised you did not take up on Betriebswirtschaftslehre, which was studied by many Japanese prewar, especially at Schmalenbach’s seminar in Cologne. Just before he died, Schmalenbach was given an honorary doctorate at Keio university and his japanese students issued a Festschrift in his honor (1955). German business economics drew students from most of the world before WWII, except the US, France, and the UK, from Japan, Turkey, Spain, Holland, Scandinavia, Czechoslovakia…. and more. That is not exceptionalism.

    • Yoshinori Shiozawa
      August 13, 2020 at 11:28 am


      of course I know German school of management science or Betriebswirtschaftslehre. Although it is not now the mainstream of management science, it is still widely permeated strand in Japan. For example, my former colleague of Chuo University was a specialist of Erich Gutenberg. But, because you talked about only German school, I raised a list of management scientists in the United States.

      The problem of economics is not only the lack of research on firms but that economics and management science are separated in the U.S.A. and everywhere. Of course, there is New Institutional Economics like that of Oliver Williamson, who is in a sense follower and successor of Ronald Coase, and perhaps a small group named Comparative Institutional Analysis lead by late Masahiko Aoki, who was my superior when he was in Kyoto University. However, theoretical links between economics and organization studies (or management studies) are extremely weak and economists in microeconomics do not communicate with organization researchers. Microeconomics is now retaliated by behavioral economics, but there is much more serious problem.

      This separation is not the result of a historical accident. Microeconomics and management science cannot conciliate with each other. This inconciliability mainly owes to theoretical framework of neoclassical economics. Its basic presumption is the existence of demand and supply function. In order that supply function is definable, it was necessary that firms have decreasing returns. However, this contradicts with the observation of cost functions. Microeconomics textbook still preaches that firms face decreasing returns. This hypothesis is not a result of observations. If we study cost functions, the answer is almost always negative.

      In the United States, there was a management economist named Joel Dean (See Joel Dean (economist) in Wikipedia), whose major works were Managerial Economics (1951) and Statistical Cost Estimation (1976). The latter book is a kind of reprint of his report of empirical researches he made in late 1930’s. It was a laborious work, because he tried to measure variations of cost as a function of outputs visiting various firms every month and measured the average cost from the accounting data. He found that average cost remains constant for most of cases. This result is in clear contradiction to the neoclassical economics. However, Dean’s discovery was ignored. Or I would like to say hidden.

      Just after the WW II, there was a famous controversy (Marginalism Controversy) between Richard Allen Lester and other dissident economists versus Fritz Machlup and other adherents to the marginalism. Lester was a labor economist and based only on questionnaire survey. I do not understand why Dean had not intervened in this controversy. By some unknown reason, he did not entered in the controversy and remained in obscurity as a marginal person as economist.

      What is more astonishing is that even heterodox economists do not treat him as he deserves. Frederic S. Lee’s Post Keynesian Price Theory is a good survey of price theories that are out of mainstream price theory. The form of cost curves is one of important topics but Lee treated him as he deserves. Dean’s 1971 book and its original report appear in the Bibliography but there is no entry of Dean in the Index. Dean is referred to in note 9, chap. 9 (in page 147) in which Lee noted that Dean’s research on cost helped to convince Kelacki the constancy of average cost.

      Peter Radford rightly pointed what is happening in the economics classroom:

      In one class students study standard micro economics as if that helps them understand what they will face when they get out into the real world. And in the next class they are taught a series of tricks and wheezes to confound the market so the businesses they work for can earn profits the “free market” would not provide. Instead of economics connecting seamlessly with business it is a contradiction of it.

      However, simply pointing the importance of Ronald Coase, James Burnham and his Managerial Revolution (1941), and a linage from Berle and Means, to Chandler, to Porter, to Foss is not sufficient to change the situation. It is not because economists do not know these works that economics does not change. They are sufficiently famous. But, what prevents them incorporating the reality of production is the theoretical structure of neoclassical microeconomics. Without changing this structure, economics does not change forever. There is no other method to change this state of economics. We must build a new theory of microeoconomics that can compete and supersede neoclassical theory. Such a theory already exists as I repeatedly wrote it in this blog. Please at first read Marc Lavoie’s book review on our theory.

      Our theory of prices is an achievement logically comparable as Arrow and Debreu’s General Equilibrium Theory, although it does not assume “equilibrium, maximization, and marginalism” which Peter Radford caricaturized as “concepts born back before the scientific upheavals of the twentieth century”. This is a real change of price theory and at the same time a change of the vision of how market economy (at least the major part of real economy) works. It is not the invisible hand of the market auctioneer but firms’ behaviors that make demand and supply nearly equal.

      • Yoshinori Shiozawa
        August 16, 2020 at 7:06 am

        I wonder whether Robert Rocke and Peter Radford has read my above post. It is directly addressed to Robert Rocke but indirectly to Peter Rocke. How the business management has been taught in this and that countries is not very important.
        The problem posed by Peter Radford was I believe how economics treated and investigated firms. In my opinion, the separation of economics and management study is the core of Peter’s question. They became independent sciences that cannot understand each other.

        The main trouble lies in the neoclassical economics. In order to regain a more unified discipline that comprises both studies that focus on the internal organization of the firm and studies that see how the inter-firm relations proceed.

      • Robert Locke
        August 19, 2020 at 6:07 pm

        Yosiorishi, when visiting Meiji University in 1990, I gave a thank you talk to the faculty for their visiting scholarship. A Japanese wrote my name on the board as Lobert Rocke. If you want to see what contribution Robert Locke made to the English speaking world’s knowledge about German business economics, read The End of the Practical Man, which is an exposition of the develop of BWL in the first half of the 20th century, which looks at the new discipline as an intellectual achievement, and an educational achievement, in the institutionalization of management.

      • Robert Locke
        August 19, 2020 at 6:41 pm

        “How the business management has been taught in this and that countries is not very important.” Not sure what you mean, but I discovered when the focus is one the firm, how business management is taught in a country is the essence of its management. Yhe late Hartmut Waechter, BWL Professor at Trier University, told me in a flattering moment that my chapter on German Business Economics: The Theoretical Achievement told me that it was the best short exposition of the subject in any language.

      • Yoshinori Shiozawa
        August 20, 2020 at 2:05 am

        Robert Locke,

        sorry for my mistake. Japanese always confuse R and L.

        I was wrong to say “How the business management has been taught in this and that countries is not very important.” I had to say that “It is important but not the point of our discussion.”

        I am questioning the relations between business economics or management science in one part and mainstream economics in the other. Neoclassical economics has its proper logic. Its theory of the firm is quite simple: Behave so as to maximize your profit. Mainstream economics based fundamentally on neoclassical economics is trying to modify this, but it is not a fundamental change of the core formulations. (Most of mainstream economist now admit the bounded rationality.)

        This was recognized from early phase of (American) management science. Let me cite a paragraph from Hebert A. Simon’s book Administrative Behavior (1945):

        [I]f there were no limits to human rationality administrative theory would be barren. It would consist of the single precept: Always select that alternative, among those available, which will lead to the most complete achievement of your goals. The need for an administrative theory resides in the fact that there are practical limits to human rationality, and that these limits are not static, but depend upon the organizational environment in which which the individual’s decision takes place. (Simon 1997 p.322. Emphasis by Simon)


        Without changing mainstream economics, real synthesis of economics and management science (“administrative theory” in the above citation) or Betriebswirtschaftslehre is impossible.
        In this state of economics, simply pointing the lack of theory of the firm in economics has no effects. This is why I emphasize the necessity of changing the core structure of economics.

        In our book Microfoundations of Evolutionary Economics, I emphasized the limited character of human capabilities and proposed how to formulate economic behaviors of human agents. It is to consider human behaviors as a set of C-D transformations (Chapter 1). Based on this idea, I have given how the price theory can be constructed (Chapter 2) and Morioka and Taniguchi proved and illustrated how quantity adjustment process proceeds (Chapters 3 to 6). This is a paramount achievement which is comparable to Arrow and Debreu’s General Equilibrium theory. Post Keynesian and evolutionary economics are now liberated from the yoke of Walras and Arrow-Debreu’s microfoundations. We have now a chance to reunify or synthesize the economics and management science. In this new synthesis, firms obtain a due place that unites two disciplines.

      • Robert Locke
        August 20, 2020 at 7:29 pm

        The most important major in German higher education is Betriebswirtschaftslehre. Economics is 6th on the list. In German study programs the undergraduate studies are divided into BWL and Economics a common program. Every economics grauate must have studied basic BWL, accounting, banking, finance, marketing, before majoring in economics. But economics in the neoclassical mode is incompatible with business ecolnomics, how can they reconcile the two in their academic program.

      • Yoshinori Shiozawa
        August 21, 2020 at 3:49 am

        I have read Chapter 4 Continuities and discontinuities, 1940-1960 of your book Management and Higher Education since 1940. I see how different four countries (England, Germany, France and the US) are. It is not easy to change education system as each country has its own tradition in promotion, research and prestige systems.

        >But economics in the neoclassical mode is incompatible with business economics, how can they reconcile the two in their academic program?

        Economics is a broad church, as Peter put it in his article More on what’s missing. There are many economics that are different from neoclassical economics. Neoclassical dominance was possible, because it was the unique theory that has a system of explanations of all kinds of economic phenomena and a logically solid system represented by Arrow and Debreu style General Equilibrium theory. There are many heterodox economics but each of them could cover rather a narrow topics if I do not say specific. For example, evolutionary economics has a history more than one hundred years and became powerful since Nelson and Winter’s book An Evolutionary Theory of Economic Change (1982). It has a good chemistry with management study and many researchers who are interested in industry and firms welcomed it. As the book shows, it has a framework to analyze evolutionary change, which was borrowed from population dynamics in the evolutionary biology, but it lacked price theory that can replace neoclassical economics. Now, a new theory of prices (in the form of the new theory of value) is provided. Heterodox economics such as evolutionary economics (including Schumpeterian economics) and Post Keynesian economics now share the same basic price theory. As I have emphasized in my previous post, the new theory of value is based on the basic understanding that human capability is bounded, it is compatible with management study. Therefore, we can imagine a strategy to compete with mainstream economics by the combined efforts to unify the (heterodox) economics with management science.

        If we succeed in these combined efforts, both will profit from it. Management science needs solid foundations including price theory and (heterodox) economics can enrich its scope by including the insight accumulated among management science.

        Up to now, heterodox criticisms against the mainstream are mainly based on methodological arguments and political accusations. We can shift this to a new dimension that is based on superiority and richness of the new economics. As it is often said, it takes a theory to beat a theory. The new phase of struggle is now starting.

      • Robert Locke
        August 21, 2020 at 10:45 am

        ” Neoclassical economics has its proper logic. Its theory of the firm is quite simple: Behave so as to maximize your profit. Mainstream economics based fundamentally on neoclassical economics is trying to modify this, but it is not a fundamental change of the core formulations. (Most of mainstream economist now admit the bounded rationality.)”

        I first took this up when in the 1970s evaluating the intrusion of neoclassical economics into history, what is known was the new economic history. See Introduction “The revisionists and their theses, in the End of the Practical Man. (Essevier, 2006) This intrusion failed mostly because of a faulty theory of the firm.
        I then, learned about H Thomas Johnson and Robert S Kaplan’s Relevance Lost: The Rise and Fall of Management Accounting, 1987, which Johnson followed up with Relevance Regained: From Top Down Control to Bottom-up empowerments, 1992.

        Johnson replaced management accounting with the toyota kata, which spawned a major movement in management studies.

        In the meantime, I got involved with the economist engineer Lars Eliasson, who was trying to make economic theory relevant to management practice, He ended up being a Schumpeteran. I discuss this briefly in The Entrepreneurial Shift: Americanization in European High Technology Education, 2004, 8-12, to emphasize the fruitlessness of Eliasson’s attempt to make neoclassical edonomics usefull tomanagement practice.

      • Yoshinori Shiozawa
        August 21, 2020 at 2:56 pm

        I have bought the book The Entrepreneurial Shift: Americanization in European High Technology Education, 2004, but it takes a few days that it arrives to me. Fortunately, it was sold at Amazon.co.jp.

        The person you cited must be Gunnar Eliasson, who was once the president of the International Joseph A. Schumpeter Society from 1994 to 1996. Without reading your book, let me say that his attempt must has been a failure, because in my understanding it is impossible to make neoclassical economics useful to management. Such an attempt lacks a fundamental understanding of the complexity of management.

        As I have cited Herbert A. Simon from his Administrative Behavior in my post on August 13, 2020 at 11:28 am, if the neoclassical economics main tenet is right, management science would be reduced to two lines. There is no possibility to synthesize neoclassical economics and management study.

        This is related to what you have argued in your paper History as a source of economic policyin Real-World Economics Review #74 (2016). The concept of science by Egmont Kakarot-Handtke is too eccentric and does not represent the common idea of science for many economists. Let me cite the latter part of the citation you made:

        Economics is the science which studies how the monetary economy works. Science looks for what remains unchanged in time, i.e. ‘eternal’ laws, history looks at what changes over time. ‘That is why Descartes said that history was not a science – because there were no general laws which could be applied to history.”

        I do not deny that there are many economists who think like that. But, I believe many other economists believe that the core content of economics mainly applies only to modern industrial economy. At least, evolutionary economists think as such. Kakarot-Handtke’s understanding is wrong even for some natural sciences such as geology, geophysics, biology (including paleontology and evolutionary biology), earth physics, cosmic physics (astronomy), and meteorology.

        A reason of why this kind of misunderstanding occurs can be traced to the fact that natural sciences were once understood to be a science that treat problems of simplicity (see Warren Weaver’s paper Science and Complexity 1948). Weaver predicted that a new era, era of sciences that deal with problems of organized complexity, would and should come in the latter half of the 20th century.

        Weaver’s prophecy was a quarter century earlier, but from 1970’s a new concept on sciences became popular. It was the complexity Now complexity is an important key words in arguing features of sciences. History was concerned with complex entities such as human society. That is why history was thought to be very different from natural sciences when natural sciences studied mainly problems of simplicity. As you put it, “historians comprehend an economic-influencing occurrence differently from orthodox economists who observe and explain (Verstand)”. Understand or Verstehen is a mode of science, which is important for complex entity. At a first analysis, we see the object in a very superficial way. When we understand deeper reasons why some phenomena occur, our understanding advances. This is one of major modes of scientific research. Economics cannot be a predictive science but can be a science that deepens our understanding of the economy.

        The complexity is closely related to bounded rationality. Why is some entity complex? Why is some entity is simple? The simplest answer to the second question is that the entity is a system that is composed a few number (two or three) of objects and problems are simple. The boundedness of our rational capability is not very restrictive for such objects. Some problem is complex because many problems surpass our capability to elucidate the nature of the system.

        You now understand that complexity and bounded rationality are two faces of the same phenomena. If we admit that economy is a complex entity, we must possess appropriate methodology that is suitable for the nature of the entity we study. The neoclassical economics ignored complexity/bounded rationality duality. It assumed that our rational capability has no limit. The economics that is developed in our book Microfoundations of Evolutionary Economics starts from the central tenet that economy is a complex entity and our capability is extremely limited when compared with complexity of the economy. (See in particular Chapter 1 of the book, a draft of which you can download easily.)

        Management science is also a science of organized complexity. Economics and management study must stand on the same tenet and understanding; our objects are complex. If once this is understood, the collaboration between the two will become possible. Both disciplines can benefit from other. In the new synthesized discipline, entrepreneurship and new technology must be major objects of research, although it will be forever impossible to predict such and such entrepreneur appears and such and such technology emerges at a precisely determined moment.

      • Robert Locke
        August 21, 2020 at 5:28 pm

        you are right, gunnar eliasson of the stockholdm technical university is our man, confused first name with lars engwall of uppsala. Gunnar spent a ton of moeny bringin economists from all over the world in 1998 to bring about this fusion of economic theory with management science, to no avail for the reasons you state.

      • Craig
        August 21, 2020 at 5:46 pm

        The fundamental problem of economics and economic theory
        is its failure to recognize that the monetary paradigm IS THE ACTUAL PROBLEM.

        As the fundamental concept of terra-centrism was the problematic aspect of Ptolemaic cosmology, so is the dominating, de-stabilizing and stymieing economic problem of the present monetary and financial paradigm of Debt Only. And there will be no significant breakthrough until this fact is completely confronted.

        I have never invalidated anyone’s content here. In fact I have often praised the valid insights of Keen, Hudson and MMTers. But the problem is on the paradigmatic level which is both simple and complex. Simple in that it recognizes that the problem is the SINGLE concept that defines and controls the COMPLEXITY OF THE ENTIRE PATTERN.

        Perceiving the deep and effecting simplicities that resolve dualistic complexity with a pungent thirdness has always been the hallmark of wisdom and is the route to paradigm perception.

        When the fire has chased one to the roof of the building it is folly to refuse to grasp the ladder lowered from the helicopter that is offered in rescue.

      • Meta Capitalism
        August 27, 2020 at 3:28 am

        A reason of why this kind of misunderstanding occurs can be traced to the fact that natural sciences were once understood to be a science that treat problems of simplicity (see Warren Weaver’s paper Science and Complexity 1948). Weaver predicted that a new era, era of sciences that deal with problems of organized complexity, would and should come in the latter half of the 20th century. (A Better Citation Source)

        The journal of Emergence: Complexity and Organization has a “Classical papers section” that includes a reprint of Weaver’s (1948) original paper. Ross Wirth provides a brief, but relevant historical introduction. An interesting paper when viewed in historical context.

      • August 27, 2020 at 11:19 am

        Meta, what an interesting paper (about “the missing middle”?) by Warren Weaver. The pity is it seems to have been written before his discovery of Shannon’s “Mathematical Theory of Communication”, which sheds new light on his distinction between organised and [apparently] disorganised complexity. Shannon in effect separated the two so he could get rid of effects like encryption and “disorganised” noise.

  6. Ikonoclast
    August 11, 2020 at 10:29 pm

    In relation to a number of threads above;

    Pleading for German Exceptionalism moves me as little as pleading for American Exceptionalism.

    The honey in a beehive wax-cell is a hexagonal column. Debating why it is a hexagonal column without reference to the shape of the wax-cells is pointless. Equally so with the shape of the firm in political economy. It partakes of the overall shape of the legal-financial container designed for it by the political economy.

    Matters go further than that static analogy. The firm both takes the form conferred on it by bourgeois legal and financial law and continually seeks to (re-)write bourgeois legal and financial law to suit itself (to re-design its own container).

    Within a modern nation state, there is no such subject as economics. There is only political economy. What is needed is not a Real World Economics Review but a Real World Political Economy Review. One does not overthrow the Church by standing inside it and debating theories of angels on pin-heads.

  7. Yoshinori Shiozawa
    August 12, 2020 at 4:57 am


    do you know something on Yugoslavian self-management experience? Firms had a democratic system (it was workers who choose directors) and they competed in the market (there was no central planning bureau). On the idea level, it was an ideal, splendid system, but it did not work. I hope you learn more from history.

    Please read also my comment (on August 12, 2020 at 4:32 am) on Richard Koo’s article “Inequality challenge in pursued economies” which contains a tacit criticism of your analysis.

    • Ikonoclast
      August 13, 2020 at 12:31 am

      Capitalism is about to collapse spectacularly and catastrophically. I hope we humans (those relatively few of us who survive the collapse) will learn something. The collapse will be about the failure of a normative system (capitalism) to specify correctly what to do in a real system (the biosphere) as that real system is pushed to its asymptote limits.

      What are the real-system-incompatible norms of capitalism? There are many but they all coalesce under one heading. That heading is attempted endless growth. The logic of private property recognizes no upper limit on personal wealth. The logic of modern money (debt-credit creation) recognizes no limit on the creation of debt-credit and hence no limit on its endless growth. That in turn presupposes endless real growth to repay endless debt-credit growth: an unsustainable endless growth formal system on a finite, real-system planet.

      Any and all claims for the efficacy of capitalism completely founder at the asymptote limits. Catastrophic collapse will refute the formal claims of capitalism at one stroke. The collision with real limits is now due well within the length of one human lifetime. Anyone with even another 20 years of life left will see the comprehensive refutation of capitalism, as a normative system, by a series of real system collapses induced by the out-workings of the prescribed algorithms of capital.

      • Yoshinori Shiozawa
        August 13, 2020 at 2:07 am

        > Capitalism is about to collapse spectacularly and catastrophically.
        > Anyone with even another 20 years of life left will see the comprehensive refutation of capitalism.

        I am now 77 years old but I have still about 20 years of life expectancy. I may be able to see if Ikonoclast’s prophesy is fulfilled or not. If you are thinking like that, it is natural that your are not interested in “small” things like income distribution and the kink of real wage curve. But I have a deep doubt if your prophesy has a high probability to be true.

  8. August 12, 2020 at 7:15 am

    Says Yoshinori: ” It seems to be time to cease always complaining about mainstream economics. It would be better to pay more attention on heterodox economics”.

    As he is always misrepresenting rather than developing Keynes, and complaining that heterodox economists (ignoring other well-informed participants in the economy) are not suggesting anything new, are we not entitled to suspect that Yoshinori is a mainstream cuckoo in our nest?

    • Calgacus
      August 18, 2020 at 9:59 am

      I for one have no such suspicion – and do not understand at all the animus directed at Yoshinori Shiozawa, which seems to have no basis at all – and is met remarkably politely by him. The complaint that people here – those who post and comment – complain excessively about mainstream economics – and repetitively, always the same complaints – is well merited.

      Why not just give them numbers, and the conversation could be Complaint 2, complaint 19, complaint 6. The posts and comment threads could be a lot shorter then, and the new stuff easier to find. :-)

      Also quite unseriously, If one wants to entertain paranoid delusions, people might remember the line “The lady doth protest too much, methinks”. Perhaps the most repetitive complainers / protesters are the mainstream cuckoos? :-)

  9. Yoshinori Shiozawa
    August 12, 2020 at 10:54 am

    Dave, have you found anybody who can understand your theory? If there is one, I want to ask him or her to explain what you want to say. I cannot understand what you are saying. I do not comment on what I cannot understand.

    • August 13, 2020 at 5:53 pm

      Yoshinori, you say “I do not comment on what I cannot understand.” There’s the difference between us. If (as is usual when I first come across something) I don’t understand it, that arouses my curiosity and I beaver away until I do, or until other commitments make me leave it simmering on the back burner, picking up clues from what other people are saying until the answer I am trying to find pops into my head. If none of the other contributors here is willing or able to explain what I want to say, let me say more directly what I said in my initial salvo: “There’s none so deaf as economists who don’t want to hear”.

      Ikonoclast has at least picked up the urgency of what I have been saying; Craig too. Robert has latched on to what was valuable about my own education as an apprentice rather than an academic scientist, which it seems the Germans learned long ago. The British learned it during the war but academics in our first post-war Conservative government sabotaged it.

      In any case, a large part of my apprenticeship was about not re-inventing the wheel”: to learn from other people how they went about their business. As long ago as 1954 I was learning from Practical Electronics how radio engineers were using positive feedback to amplify radio signals at the expense of their content (c.f. profits and empty town centres) but finding it causing chaos by using too much (c.f. Lorenz on the weather); by 1958 we had learned how to stabilise the variable gain of the new transistors by using negative feedback (c.f. our achieving equilibrium as against it presuming a balance of forces). It seems to have been 1974 before academics rediscovered chaos, and 2004 before Bryan Arthur at Santa Fe was advocating positive feedback as a way of making profits. By 1997, says wikipedia, Scientific American had been dismissing the “failed fads” of “complexity, chaos, catastrophe, and cybernetics”, whereas I had acquired overviews in Waldrop (1992), Gleick (1988) and Postle (1980) to find out what they were talking about, to supplement what I had long known first hand from my work as well as through Wiener (1948), Shannon (1948) et al. Using indexes, what I found was Waldrop agreeing with Keynes (p.23) that “the economists of the 1930’s and 1940’s were long on insight, but often a trifle weak on logic”, but Brian Arthur (p.24) saying “the game may be crooked, but it’s the only game in town”. Gleick (p.155-; pp.253-62) explains Shannon’s information theory fairly well, but goes in pursuit of Newton’s method of approximation, not the four levels of his equations of motion familiar to me through PID navigation and Algol68R: like most mathematicians and economists, still seeing a numerical exponent rather than too much positive feedback. This needs adjusting for me, as I see solutions rather than questions, but here’s John Holland in Waldrop (p.150): “If you are going to do inter-disciplinary studies and enter someone else’s domain, the least you can do is take their question very seriously. They’ve spent a long time formulating them”.

      • Robert Locke
        August 24, 2020 at 3:01 pm

        Dave it is quire clear that your educational experiences and career milieu promoted your “unorthodox” views in economics, but it seems also clear that the education of the elite economists who hold the prestigious government and academic high places prevents them from understanding your argument. It seems to me that the educational system need reform. What sort of educational reforms are needed?

      • August 25, 2020 at 10:36 am

        Robert, a fair question: successive British governments have been attempting and preventing this since the Hitler war, and c.1964 Lord Fulton’s inquiry was devoted to the issue.

        Your introduction is misguided, however. I had to essentially educate myself: very well aware, for example, that after three years of chemistry I had no idea what it was about until I chanced on a book abut the periodic table. Following Chesterton’s lead in “Orthodoxy”, I’m “unorthodox” only in the sense of being super-orthodox, the so-called orthodox economists having been less than orthodox since replacing households with profitable firms. Following up Chesterton’s lead, I found the explanation of our differences in our not using all the different parts of our brain, and this being due not only to formal education but to genetics and environment and the ordering of events. Genetics seems to determine a fight or flee disposition and an aesthetic which differs between men and women: the one perhaps fascinated by change and the other by forms (as in science and art).

        In any case, to answer your question, I suggest the reform needs to start right at the beginning: in being taught that despite our differences we are all equally God’s children, and that Darwin is about there being a niche habitat for all of us: or as I’ve said recently, not “the survival of the fittest” but the non-survival of those who don’t correct their mistakes. Even this gets muddied in homes where inequality is taken for granted or kids get spoiled.

  10. Yoshinori Shiozawa
    August 14, 2020 at 12:26 am

    If you are thinking that you are understood by Craig, Ikonoclast and Robert, that is fine. Please ask them to explain your theory.

    If you feel that you are understood by nobody, it would be necessary that you change your strategy. Stop explaining about PID and try to explain the usefulness of your theory by showing how it is used in some concrete problems in which other people are interested. Can you give for example any hints why the real wage curve on Figure 5 given by David Rucio has taken a sharp kink in 1970’s? It seems a change of regime occurred, but the change of power balance between capital and labor (as Iknoclast did) is not sufficient. If you can give better and deeper explanation, people will wonder why you can do such a thing. There will be people who really want to study your theory. But, if you have no good idea on this question, it is better that you do not intervene in the discussion. If you continue to contend irrelevant arguments, people will think that your theory has no value. In that case, nobody will try to understand it.

    • August 14, 2020 at 9:45 am

      I don’t “feel” I am understood by nobody, I “know” I am not, and I understand why: because I have had experiences participating in the earliest stages of fundamental changes in physical, electronics and information science that most people have never had and my friends – seeking to earn a living as engineers as today’s learn to use computers – had not the slightest interest in understanding how science works or computers process information. For someone to understand what I have been sharing with them it is not necessary that I change MY explanatory strategy – for goodness sake, I’ve been doing that here for years – it is necessary for readers to change THEIR strategy, and stop doing like my wife does: defending their own dignity by saying “I can’t understand that” and turning off. They need to ask questions or think out and say exactly what THEY don’t understand, so it can be discussed in more depth.

      The clue you have assiduously avoided, Yoshinori, is the distinction between ontology and epistemology. I’ve offered you an ontological explanation of what the economy is, you haven’t understood that because you are looking for an epistemological (current evidence based) model describing what you think economics is about now. It is hardly irrelevant that what people need economics to do for them is not being provided by your type of economics of money-making, the one called ‘economics’ by Aristotle, the other ‘chrematism’. He at least tried to avoid muddying the waters by calling different things by the same name.

      • Robert Locke
        August 23, 2020 at 7:36 am

        dave.Yoshniori, as I have spent decades comparative systems of education in management science and economics, it was enlightening to read that Dave attributed his thinking process to the different educational system he experienced:

        “because I have had experiences participating in the earliest stages of fundamental changes in physical, electronics and information science that most people have never had and my friends – seeking to earn a living as engineers as today’s learn to use computers – had not the slightest interest in understanding how science works or computers process information. For someone to understand what I have been sharing with them it is not necessary that I change MY explanatory strategy.”

        In the German system of education the Grundstudium for majors in economics (Volkswirtschaftslehre and business economics (Betriebswirtschaftslehre) is the same, specialized courses on firm management, accounting, marketing, finance, etc. and an introductory course in economics — before majoring in a subject in the Hauptstudium. Lots a theory in a five year study.

        I don’t think this Grundstudium would make German economics majors more open to understanding the thinking processes Dave encountered in his education, but I do think that the study cycle involved in getting a degree of economics engineer (Wirtschafts-Ingenieur, Dr. Wirts-Ing.) would,. I discuss this in my paper Economics on the Shopfloor, RWER, 2019.

        What do you think Yoshinori?

      • Yoshinori Shiozawa
        August 23, 2020 at 2:42 pm

        I posed a question on the characterization of sciences in your Real-World Economics Review paper “History as a source of economic policy” (RWER #74, 2016). But my objection is only concerned with first three pages. The rest of the paper was interesting. Your treatment of List was stimulating. I was astonished to know that, with regards to economic growth, he had a quite similar opinion as Jane Jacobs. It seems there is no influence from List to Jacobs but both have a great similarity.

        Your book with Katja Schoene has arrived today and I am now peeping this and that parts. I have also read your article “Economics and the shop floor: reflections of an octogenarian” in RWER (#88, 2019). It was fascinating. But it is difficult to say something on it immediately. It requires a long reflection. It must contain a very important issue but I cannot formulate the point. Please give me two or three days.

      • August 25, 2020 at 12:48 pm

        Robert, as I’ve said before, I agree with you on the technical education, which is what I experienced myself. My point was that people don’t speak foreign languages unless they are willing to learn them, and sometimes not even then. There are two points I can make about that. The biggest failing in my grammar school education was that science students were not taught Greek, and thus I never learned the Greek alphabet used in mathematics until I was too old to remember it. The second came up in a discussion with my son of jazz vs classical music, and my realising my having learned to read music I find it very difficult to improvise. Most jazz musicians apparently find this vice versa. When we went to Malta on holiday we were told the people there have to learn to speak four languages, and some people seem to pick up accents and languages without trouble, whereas I still have my Manchester accent and have had to learn to use dictionaries. I’ve heard Latin since infancy and French since I was ten, but I’ve learned more of etymology, pronunciation and the use of prefixes and suffixes than vocabulary. So no hard feelings about not being understood: just frustration when the issues are so important.

  11. August 14, 2020 at 11:02 am

    As this discussion is about “the missing middle” – apparently meaning the firm and its coordinating role not appearing in supply and demand economics – let me point out that Yoshinori had the advantage of a diagram showing what here I could only spell out in words in the comment opening this discussion:

    “The quack theories operate on leeches constraining supply and demand; the reality (if you look at it) very obviously involves not only a cycle of consumption, reproduction and distribution but also development – not all of which is good, like Darwin preaching “the survival of the fittest” rather than “the non-survival of the unfit”.

    How many readers, I wonder, have taken the trouble to translate this observation into a circuit diagram: a diamond interconnecting the four different functions of the economy, with the firm appearing as the top triangle (production and distribution experience leading to development and methodological/equipment changes) and the side triangles showing how these affect people? It is of course not their fault that as they grew up they were not taught how to read circuit diagrams at school, but how can one learn how a TV or a computer works without a circuit diagram and interactive discussion with someone knowledgeable of what is going on in the various stages? I can live with Yoshinori (at the age of 77) not understanding what we’ve not been able to interactively discuss, but not with his having the cheek to lecture me about what he doesn’t yet understand.

    • Yoshinori Shiozawa
      August 14, 2020 at 2:37 pm

      We are in the Corona Virus era. Let us take necessary social distance for the happiness of both of us.

      • August 15, 2020 at 11:49 am

        I want to end up by saying how much I appreciate Yoshinora’s joke here about social distancing. So be it, but I’m finding it hard not to be interested in whether our differences are due to the differences between Romanised English and Japanese grammar. (For example, google turned up a “Controversy over the characterization of nominal adjectives”). That is a pregnant thought he too might like to explore.

  12. August 14, 2020 at 5:45 pm

    Yoshinori: “Can you give for example any hints why the real wage curve on Figure 5 given by David Ruccio has taken a sharp kink in 1970’s? It seems a change of regime occurred, but the change of power balance between capital and labor (as Iknoclast did) is not sufficient. If you can give better and deeper explanation, people will wonder why you can do such a thing. There will be people who really want to study your theory.”

    Ikonoclast’s theory was enough for me to ask myself “Why?” and give the deeper answer: [humanity’s, hence] Hayek’s ability to tell lies, and Mrs Thatcher’s persuasiveness to those naive enough to believe “might is right”. That was so obvious that people didn’t wonder about it long enough to realise it WAS a better and deeper explanation, rooted in the difference between Shannon’s science of information and Newton’s science of forces; getting to the roots of the difference between mankind and animals. In any case, bemused by all the lies and half-truths floating around, it seems they don’t really want to study it.

    Of more interest to me were the staggered kinks in Koo’s diagrams in his RWER 92 paper. I find his diagram valuable in the same way as Kate Rowarth’s “Doughnut” is. That is what my diagram too is about;. Enabling us to see what the problem is (where the money goes) makes it more likely a relevant solution will be found. My theory of minimal complexity shows how far my diagram can be tested and the chaos we observe understood and managed. [Cf. Dummet (1991, on Frege’s philosophy of mathematics, op.132): “in fact, if value-ranges are excised from the logical system of the Grundgesetze, the result is a form of the simple theory of types”, i.e. Russell’s; the Algol68R modes of interpretation]. I’ve suggested the well-known credit card system making the parasitic FIRE economy unnecessary, but that’s for discussion. It’s not a cook book recipe to be enthused about – or more likely rejected because it is “not what we do here”.

  13. Yoshinori Shiozawa
    August 16, 2020 at 7:34 am

    I have posed questions on how to understand kinks of real wage curves in Richard Koo’s Exhibits 4 and 6 and David Ruccio’s Figure 5, I got only one answer by Ikonoclast which seems to me insufficient as analyses of long continued phenomena. I am not saying that the answer was wrong, but it is insufficient or superficial in the sense it remains easiest prompt answer.

    The questions to be examined are not restricted to the above. I had posted my comment on Erik Reinert’s paper Paul Samuelson and the Cold War rebirth of David Ricardo that appeared as one of papers in RWER number 92, a special issue on Inequality. I explain how deeper analyses are possible. I hope readers of this page will read my comment (on August 15, 2020 at 5:10 pm). If you have any objections on particular point of may arguments, please post your answer as a comment to Reinert’s article page (August 15, 2020) in this RWER Blog.

  14. Meta Capitalism
    August 21, 2020 at 1:02 pm

    t takes a model to beat a model has to be one of the stupider things, in a pretty crowded field, to come out of economics. … I don’t get it. If a model is demonstrably wrong, that should surely be sufficient for rejection. I’m thinking of bridge engineers: ‘look I know they keep falling down but I’m gonna keep building em like this until you come up with a better way, OK?’ (Lars Syll, Does it — really — take a model to beat a model?, RWER, 1/16/2020)
    As it is often said, it takes a theory to beat a theory. (Shiozawa Yoshinori Quoting Himself Repeating an Canard Pretending Others Repeat Tropes Like He Does)

    This stupid old canard and empty trope is only “often said” on RWER by Shiozawa Yoshinori. Some theories are just so wrong, like tired old horses they just die, but Shiozawa just keeps beating them as though this empty false canard has any real meaning. It doesn’t have any substance whatsoever but is just an entrée to his all sauce and no meat new theory.

  15. gerald holtham
    August 21, 2020 at 2:59 pm

    Meta, I think you are grossly unfair to YS. He at least is a practitioner who tries to do what he preaches. Most other contributors to this blog are merely commentators ready to pass judgement on the work of others without submitting themselves to the pain and difficulty of trying to do better. Nothing wrong with that but the efforts of the practitioner should be respected. That you can’t beat something with nothing is not only true it is abundantly and self-evidently true. No text book in any subject, never mind economics, is going to say “we don’t know anything”. It will make the best of a bad job until something better turns up. The Bank of England uses a number of models to try and understand movements in the UK economy, including – heaven help us – a DSGE model. They won’t stop using it just because Lars doesn’t like it.. Hell, they won’t stop because I don’t like it or even because David Hendry doesn’t like it. They’ll stop when they find something clearly better.

    • August 26, 2020 at 9:25 am

      Better for what? We’re back here to an epistemologist rejecting ontology again.

  16. August 21, 2020 at 6:51 pm

    I am working on a depiction of the industrial forest firm here in Oregon for a non-economics project related to a Green New Deal proposal. Forest carbon sequestration being the motivating issue.

    I’m trying to state an ontology of the timber firm’s structure and key financial processes. In the Northwest US, timber companies, Weyerhaeuser being the largest, have become marketers, forest planners, financial managers/accountants, public relations and purchasers of services through contract. In the Northwest, timber companies are not actually involved with planting, growing, harvesting and the hauling of saw timber.

    For material forestry operations they rely on a world of relatively small subcontracting firms. Many of those firms further subcontract work. The overall workforce is racially organized. At the bottom of the hierarchy is the Mexican and indigenous Central American reforestation workers – often here on work visas. Needless to say, working conditions and pay are terrible at this level. The logging workforce is made up of white males working for one of the many sub-contractor logging firms.

    The corporate timber owning company is a relatively small part of the total workforce. Some corporate companies do not own land they control. Instead they are Timber Investment Management Companies (TIMOs) on behalf of investor groups who hold fee title to the land.

    The EBITDA number for cash flow from timber operation is quite high. The entire organization of production within the hierarchy of firms appears to be designed to maximize income to investors/owners, provide a secure work environment to the small, white, managing corporate workforce, and firewall the whole underside of forest production operations into an opaque, hellish world of dangerous physical work, competitions and exploitation.

    Of course, neoclassical economics is constructed to not see the above material reality of timber production. The problem goes beyond the supply-demand assumptions. The conceptual ontology of neoclassical economics is grounded in field formalism. As Mirowski and others have pointed out, Jevons et al borrowed Maxwell’s field equations from 19th century energy physics to interpret the economy in a set of de-materialized fields. There are no human workers in Microeconomics. There is the field of labor supply in commodity space.

    Institutional economics recovers much of the lost ontology in neoclassical economics. The economy is a system of power between physical human beings. The world of firms is central to understanding how the world of power operates and how the struggle for resources unfolds.

    • Craig
      August 21, 2020 at 9:15 pm

      Yes, they’ve become financialized. Only the new monetary and financial paradigm will turn us back to the better future of the re-retailization of commercial entities focused on actual production as opposed to synthetic asset crafting.

    • August 23, 2020 at 3:47 pm

      Chuck, how refreshing it was to find you describing the economy as you found it as against the usual despair here about economists and economics as we find them!

      I was a would-be forester/farmer told I wouldn’t have the money to become either of those, who ended up a physical scientist just as computers took off and transistors were invented. Merely to keep up with events I was perpetually retraining and thus became involved in economic management and information science and in control, logistics data, computerised automation and data base architectures. I’m saying this because your take on economics is as a power struggle, whereas mine is an information hierarchy, i.e. we all start off as kids and some of us end up as experts.

      While I totally agree with you about Mirowski on Jevons, and on the whole greatly admire him, I totally disagree with his seeing Shannon as focussed on automation (i.e. mice and chess playing) rather than encoding in computers and communications and automating the control of errors using negative cybernetic feedback. The index to ‘Machine Dreams’ does not even mention Oliver Heaviside, who reduced Maxwell’s field equations to practicality and transformed non-field (telephone) communications by creating ‘inductors’ to prevent the magnetic mixing up of sounds travelling at different speeds, thereby reducing electrical components to just four types definable by complex numbers. But Shannon’s ‘bits’ are also not about field equations, and the point of his using them was to be able to correct errors due to noise which occurred when the Maxwell/Heaviside wave transmissions were relied on.

      The outcome here is that I am at cross purposes with just about everybody, despite what I am saying being tried and tested and in my own lifetime transforming the world we live in. I’m still learning about institutional economics, knowing it from experience and via J K Galbraith rather than Veblen, but my UK background is Schumacherian “Small is Beautiful” and Distributist ‘local’, with for me the best outcome being epidemiological containment and everyone putting right what he can see to be wrong. That, however, is my working hypothesis: only mass produce where we still need to!

  17. Meta Capitalism
    August 22, 2020 at 7:11 am

    The economy is a system of power between physical human beings. The world of firms is central to understanding how the world of power operates and how the struggle for resources unfolds. (Chuck Willer)

    Perhaps in the cloistered world of literature-only economics it takes a theory to beat a theory Gerald. Not in the real world where real economies function for better or worse, change, evolve, devolve, etc., where real power and politics and institutions play primary roles seeking to serve various interest groups in conflict with other interest groups.

    The last ditch defense of the rational choice theory is to insist that it takes a theory to beat a theory, and that the behavioralists have only assembled a collection of empirical regularities without any unifying theory. The behavioralists indignantly respond that they do have a theory, although an incomplete one. The assumption on both sides is apparently that the sine qua non of social science is having a unified predictive theory. But perhaps this is merely another symptom of economics’ famous case of “physics envy.” Physics presents a breathtaking example of mathematical elegance combined with fantastically accurate predictions. But taking physics as the paradigm of science may be a mistake. Today’s great success story among the sciences may well be biology…. But organisms … are extremely complex, and no one seems to think that their features can be predicted in any detail on the basis of a deductive theory. (Daniel A. Farber, 2001)

    The canard is useless and empty and its assumptions are simply false. It assumes the failed theory in question must be “beaten” or it stands. Not the way it works in the real world economies real people live within; perhaps a bunch of arm-chair participants outside the real world like to assure themselves (to justify their paychecks) of such, but it is an empty assurance as the real world moves on.
    Theories are based upon a series of assumptions and arguments and if those assumptions and arguments are by evidence of the real-world-experience proven to be invalid, unsound, and false only a fool clings to them because another theory hasn’t come along to beat the old the old one. That is self-delusion at best.
    This canard is often parroted by those who think the problems facing main street economics is primarily solved by having the right “theory” assuming the issues at hand are ones which can only be properly addressed by a theory. Those who invoke this “it takes a theory” presumption often do so to justify maintaining some paradigm (e.g., neoliberalism and ME) or narrow view of what the definition of science and economics and the role and purpose of economics in peoples lives and wider society. The idea that a failed theory is king of the hill until some well-articulated theory comes along to replace it is not even how scientific advances occur in reality let alone in the real world economies as they play out in society. The stereotype of Kuhn’s scientific revolutions has long ago been updated and proven to be overly simplistic.
    It doesn’t take a theory to beat a really bad theory. Some are using economic theories as heuristic frameworks in an attempt to understand and solve practical real-world problems. Some are searching for holy grails that can purportedly explain “how an economy as big as the world ordinarily works.” Therein lies the difference.

    • Robert Locke
      August 22, 2020 at 2:58 pm

      people who want to work must be capable of learning a job (berufsfaehig) and then ready to do the actual job (berufsfer5ig) In their education theory is learned in academia to give them the capability of becoming economists. Then the fertigkeit, the readiness to be a prac5icing economis5 comes f4om on-the job training and espierience-led thinking. The comments about theory and practice reflection a poor education in the US


  18. gerald holtham
    August 22, 2020 at 4:35 pm

    Some are using economic theories as heuristic frameworks in an attempt to understand and solve practical real-world problems. Some are searching for holy grails that can purportedly explain “how an economy as big as the world ordinarily works.”

    I entirely agree with that statement. My own career has been entirely given to the “heuristic frameworks” approach. But, frankly, that is beside the point at issue. What do most people do when they haven’t got a satisfactory heuristic framework? They use an unsatisfactory heuristic framework. QED

    • Meta Capitalism
      August 23, 2020 at 2:25 am

      What do most people do when they haven’t got a satisfactory heuristic framework? They use an unsatisfactory heuristic framework. ( Another besides the point comment ;-) )

      Unsatisfactory according to what standard Gerald? You are projecting your own values onto the issue in a rather fuzzy way, are you not? Humans are not machines; we don’t (and cannot) compute, for example, Optimal Stopping solutions to every decision we face. Your comment is loaded with the erroneous assumption that good enough is an “unsatisfactory heuristic” when in reality good enough often incorporates insights that computational algorithms are unable to incorporate. This is why four or five year old children are able to perform better on certain cognitive tasks than billion dollar super computers. Bounded rationality is a term that hides much just like the empty terminology of ME when it really means reducing humans to fitness climbing ticks and mere Turing machines. Even in the field of computer science this is known to be a gross over simplification. Alas, for mathematical tractability many abstract and irrelevant economic theories (‘terrible simplifications’) have been born and endlessly fiddled with in ivory towers while Rome burns and social revolutions overtake their grand castles in the sky.

    • Meta Capitalism
      August 23, 2020 at 3:40 am

      I entirely agree with that statement. My own career has been entirely given to the “heuristic frameworks” approach. ~

      I find your <a href="https://rwer.wordpress.com/2020/08/21/how-to-use-models-in-economics/#comment-171993"<August 22, 2020 at 4:10 reply very well said and cogent and in many essential ways what I am trying to say.

    • August 23, 2020 at 1:24 pm

      The one saving grace in Gerald’s comment is the word “most”. What most people do is not what I do, nor is what Gerald admits to doing (despite it being obvious that economic theories built on evidence from today’s world are riddled with flaws that in his biological analogy would over a much longer period of time have been eliminated or inoculated against).

      I’ve started not from today’s evidence but from the beginning, and how to know anything about that, meaning assuming not the extent of future complexity but the meaning of it then: the simply two-dimensional mathematics of complex number allowing any point in space-time to be determined, with variations through time ordered topologically rather than geometrically. The unsurprising but still physically evident fact is that not only is biology complex but so too are human brains, enabling them not only to articulate the complexity they have found but to be differently motivated and have different goals at different times of their lives, and to do what has been found necessary in multi-user computing: to prioritise and give way to each other and as far as possible to watch out for, allow for or put right mistakes as soon as they become recognisable.

      The pertinent comment on this seems to be, sadly, that while discovering the truth can be difficult, unlearning habitual empirical assumptions can be much harder.

  19. gerald holtham
    August 23, 2020 at 3:04 pm

    I think we are all making too much of this because the point at issue is quite simple: to knock out an inadequate theory (ie one that does not work in explaining facts or helping to deal with them) is it necessary to propose an alternative? Or will inadequacy be enough on its own to dispose of a theory or practice? There are exceptions to all rules and I expect we can find instances to support our position. Yet in general I think it is self evidently the case that an alternative has to be found. Doctors used leeches for centuries, despite the inadequacy of the treatment in almost all cases. We won’t stop the Bank of England using DSGE models or first-year text books reproducing inadequate economic theory until there are alternative formulations which serve their purposes better. Neither I, nor Mr Shiozawa are arguing that bad theories in economics are justified because there is no consensus on alternatives. So there is no reason to get cross with us. We are simply making the pragmatic point that it will be very difficult to knock out such theories until we have developed a consensus around alternatives. All theories are to some extent inadequate. Even general relativity leaves some things unexplained. So bad theories seldom fall over on their own.

    • August 23, 2020 at 4:07 pm

      The point at issue is neither anyone getting cross, nor knocking out an inadequate theory. It is more about rose and green tinted glasses, i.e. whether the fundamental theory implies the current practice. Here’s Professor A N Whitehead spelling it out in “Science and the Modern World” (1925, Penguin edn. 1938, pp. 46-7).

      “The paradox is now fully established that the utmost abstractions are the true weapons with which to control our thought of concrete fact. As a result of the prominence of mathematicians in the seventeenth century, the eighteenth century was mathematically minded, more especially where French influence predominated. An exception must be made for the English empiricism derived from Locke. Outside France, Newton’s direct influence on philosophy is best seen in Kant, and not in Hume”.

      Hume, I discovered relatively recently, was Adam Smith’s mentor.

    • Yoshinori Shiozawa
      August 24, 2020 at 4:22 am

      Please read my short note on August 23, 2020 at 7:39 am posted as a comment to Peter Radford’s article “Economics is a waste of time”. My comment has a title: “Again on Peter Radford’s article “Economics is a waste of time””

      Economics, if it is good or bad, primitive or sophisticated, is a framework with which we think of the economy. Those people who want to deny the dictum “It takes a theory to beat a theory” must be thinking that they can be free from (bad) economics if once they are aware of the defects of the economics. They are just like “[p]ractical men who believe themselves to be quite exempt from any intellectual influences.”

      • August 24, 2020 at 9:38 am

        Replies Yoshinori to Peter Radford: “To study the economy with tabla rasa in mind is a sheer fiction”. So why is he arguing with me? Perhaps because he doesn’t see that one has to have ‘tabula rasa’ in mind in order to reject it?

        Y’s link not working, I had to find his source with the list of “Top Posts” to the right. Glad I did: his comment is a good one. From this quote, though, perhaps we can resolve the difference between us.

        “We are like sailors who on the open sea must reconstruct their ship but are never able to start afresh from the bottom. Where a beam is taken away a new one must at once be put there, and for this the rest of the ship is used as support. In this way, by using the old beams and driftwood the ship can be shaped entirely anew, but only by gradual reconstruction. (cited from Wikipedia “Neurath’s boat” in Wikipedia.)”

        I’m not disagreeing with this, but what I’m saying is, in that predicament I would be looking not at the boat but at the water flowing in and thinking of Archimedes discovering the secret of floatation in his bath. I would be looking at how the carpenters had pegged the boat together and wondering whether any ropes, nails, rivets or welding equipment were available to effect repairs, and what in time would be best used to produce a more sea-worthy vessel. In other words I would be seeing the boat as the problem, and looking for answers at a more fundamental level than boats.

      • Yoshinori Shiozawa
        August 25, 2020 at 4:47 am

        Thank you, Dave, for pointing my link does not work. For the sake of other persons who read this or above post, I try again to make my link work.

        Please read my short note on August 23, 2020 at 7:39 am posted as a comment to Peter Radford’s article Economics is a waste of time. My comment has a title: “Again on Peter Radford’s article “Economics is a waste of time”. My comment comes (almost) at the end of Replies.

        I hope it works now.

      • Yoshinori Shiozawa
        August 25, 2020 at 5:52 am

        Now it seems that my link works.

        Neurath and Dave are thinking the same thing.

        Your boat is sinking with water flooding. You are on the boat and are considering to save the people on the boat. In our case, the sinking boat is economics.

        If I use my annotation, the sinking boat is economics I, which is mainstream economics. It is better to replace Economics by
        Theory or Science to interpret Neurath’s parable in a wider situation.

        Economics I
        You know Archimedes principle. You know how the carpenters had pegged the boat together. You wonder whether any ropes, nails, rivets or welding equipment were available to effect repairs.

        In Neurath’s parable, all these are materials that compose a Theory.

        Economics II
        You have to repair your boat. What you have are materials of Economics I. Using these materials, you must remake the boat. Hopefully, the rebuilt boat must be “more sea-worthy vessel”. If you do it successfully, you get Economics II.

        The lesson
        The lesson of Neurath’s boat is that, in science (or sciences), we are always on the boat (in our case economic theory i.e. either Economics I or II). It is good to seek answers at a more fundamental level than boats, but you still stay on the boat. We are in a boot-strap situation. If you step out of the boat, you will fall, not in the sea, but in metaphysics.

        Neurath and his colleagues (Rudolf Carnap, Richard von Mises [brother of Ludwig], Karl Menger [son of Carl Menger, the founder of Austrian school of Economics], Kurt Gôdel, and others), who are often called Vienna Circle (Wiener Kreis), intended to fight against methaphysics including the idea that we can get essence without sciences.

      • August 25, 2020 at 11:32 am

        Dave and logical positivist Neurath are not thinking the same thing at all. Neurath is looking for extant materials, Dave at methods and metaphysics (logical possibilities not yet extant) for the future: of the boat surviving long enough for it to send distress signals and methodological suggestions so a better boat can be built while the existing one (hopefully) gets home.

      • Yoshinori Shiozawa
        August 26, 2020 at 6:04 am

        Your subjective intention does not prove that you are free from a structure. Neurath’s boat is a parable how our thinking is confined in a difficult structure. In whatever way you want to build a new boat, in the domain of thinking, you are obliged to think with the materials you actually have. There is no port for the boat to return. What you can do is to change the combinations of old materials (Theory I) and create new idea and concepts (Theory II).

        N.B. Old materials contain various knowledge known as facts that are products that Theory I has produced.

        Although I have no time to explain the details, the history of scientific revolutions such as Copernican or Einsteinian revolutions teaches us the validity of Neurath’s parable.

      • August 26, 2020 at 9:59 am

        So according to Yoshinori, nothing new can ever be invented or abandoned, nor lessons learned? Of course, if you are already committed to the view that the universe has always existed, you need to assume that. I was able to demonstrate the illogic of empiricism to my six-year-old granddaughter by showing her with a model how there are two explanations of what she sees as sun moves across her horizon from dawn to dusk. She has to choose between an explanation based on what she can see and one based on what she can’t see: that the earth she is standing on is spinning on its axis.

      • August 26, 2020 at 10:16 am

        Apologie: it seems I too have committed the fallacy of the missing middle (Peter Radford seeing the missing firm rather than the missing family). The little girl I’ve just mentioned was my GREAT-grand-daughter, not my grand-daughter!

      • Yoshinori Shiozawa
        August 26, 2020 at 4:21 pm

        It seems Dave does not understand the meaning of “change” and “create”. I have written as follows:

        What you can do is to change the combinations of old materials (Theory I) and create new idea and concepts (Theory II)

        How can he deduce from this that “nothing new can ever be invented or abandoned”.

        I am sorry I have no time to explain what happened in Copernican revolution.

      • August 26, 2020 at 7:58 pm

        ” In whatever way you want to build a new boat, in the domain of thinking, you are obliged to think with the materials you actually have. There is no port for the boat to return.”

        Not true.

    • Meta Capitalism
      August 25, 2020 at 3:26 am

      We won’t stop the Bank of England using DSGE models or first-year text books reproducing inadequate economic theory until there are alternative formulations which serve their purposes better. ~ Gerald’s Naive (and false) Assumption

      Your statement is naïve at best, for power-politics is the real tail wagging the dog, not theory, which is a post-hoc justification for political power policies. The way the Bank of England stops using erroneous DSGE models is when a political regime becomes voted out and a newer younger generation of leaders in various fields assume leadership roles in private and government institutions that have long ago rejected the false models that are little more than cover for ideologically driven economic policies justified and reinforced by economists in cozy relationships with their paymasters.
      When we look at the recent history of the recent GFC (aka Great Recession) it was not a lack of an alternative theory that lead to the failed policies, for such alternative theories already existed, but were shunted aside in the power-politics of Reaganism and the shift to market fundamentalism embodied in the ‘efficient market hypothesis’ preached by financial economists who were financially rewarded by their paymasters in government and private institutions.

      In the aftermath of the financial collapse in the US that began in 1929, it was almost universally believed that unregulated financial markets are inherently unstable, vulnerable to fraud and manipulation by insiders, and capable of triggering deep economic crises and political and social unrest. These economic and political events were compatible with the theories of endogenous financial instability created by John Maynard Keynes and augmented by Hyman Minsky. To protect the country from financial instability, the US government created a strict regulatory system that worked effectively through the 1960s. Economic and financial turbulence in the 1970s and early 1980s led to both a paradigm and a policy regime shift. The neoclassical theory of “efficient” or “perfect” financial markets and new classical macro theory (which assumes that markets always generate full employment) replaced the theoretical visions of Keynes and Minsky. The government, influenced by the belief that efficient financial market theory was sanctioned by economic “science,” radically deregulated US financial markets after 1980. (Crotty 2017, 13)
      Most financial economists argue that lightly regulated financial markets allow individual and institutional investors to achieve the maximum return for a given risk level and choose the amount of risk that is optimal for them. Such markets also allocate scarce resources to their most productive uses, making the real sector of the economy itself more efficient. It would have been much harder to enact radical deregulation if the core of the economics profession had opposed efficient market theory and supported tight regulation, as they did in the 1950s and 1960s. In the words of Nobel Laureate Joseph Stiglitz: (Crotty 2017, 13-14)
      The economics profession bears more than a little culpability [for the global financial crisis]. It provided the models that gave comfort to regulators that markets could be self-regulated; that they were efficient and self-correcting. The efficient market hypothesis — the notion that market prices fully revealed all the relevant information — ruled the day. Today, not only is our economy in a shambles but so too is the economic paradigm that predominated in the years before the crisis — or at least it should be (Financial Times, “Needed: a new economic paradigm,” August 19, 2010).
      Francis Fukuyama, an advisor to Ronald Reagan and the second George Bush, commented on the symbiotic relation between large financial firms and financial economists that he believes contributed to the profession’s support of the efficient market hypothesis:
      Wall Street seduced the economics profession not through overt corruption, but by aligning the incentives of economists with its own. It very easy for academic economists to move from universities to central banks to hedge funds [to government] — a tightly knit world in which everyone shared the same views about the self-regulating and beneficial effects of open capital markets. The alliance was enormously profitable for everyone: The academics got big consulting fees, and Wall Street got legitimacy. And it has kept the system going despite the enormous policy failures it has generated, not to exclude the recent crisis (quoted in Skomarovsky 2011). (Crotty 2017, 14)
      Efficient market theory was not universally supported by the profession’s elite. There were respected financial economists whose criticism of mainstream theory appeared in first-rank economic journals. Some used assumptions of principal-agent conflict, asymmetric information and incomplete contracts to undermine to some unspecified degree the conclusion of market efficiency. Others relied on behavioral financial theory to demonstrate that various forms of psychologically-grounded investor “irrationality” can help explain disappointing empirical tests of market efficiency. But these theories are not intended to be substitutes for the vision incorporated in neoclassical financial theory. Rather, they are meant to be amendments to it that do not challenge its dominant position in the profession. “The behavioral finance literature … simply adopts the neoclassical view with biases added (e.g., overshooting, undershooting, framing, etc.”) (Findlay and Williams 2008-2009, p. 224). Camerer and Lowenstein insist that behavioral finance does not seek “a wholesale rejection of the neoclassical approach to economics based on utility maximization, equilibrium and efficiency” (2004, p. 1). Matthew Rabin, a star in the behaviorist camp, argues that their research program is “not only built on the premise that mainstream economic methods are great, but also that most mainstream economic assumptions are great” (2002, p. 658, emphasis in original). And, like problems of child or spouse abuse, these theoretical disputes were primarily kept within the family of mainstream financial economists. Thus, their existence did not erode the public’s belief that the profession strongly supported deregulation. (Crotty 2017, 14-15)
      The theory of efficient and optimal financial markets appears to nonbelievers to be a rather absurd theory because it is based on a long list of grossly unrealistic assumptions that bear little relationship to the real-world financial system. Moreover, empirical tests of the theory are disappointing. This raises two interesting questions: How could a theory built on an assumption set that bears to resemblance to real-world markets and has very weak empirical support become so widely accepted by financial economists? And why do financial economists reject the much more realistic theories associated with Keynes and Minsky that can explain events such as the recent crisis? (Crotty 2017, 15)
      An important part of the answer to this question resides in the peculiar methodology used by most of the economics profession — the theory of positivism as explained and defended by Milton Friedman in his famous 1953 essay “The Methodology of Positive Economics.” This methodology [is wrong and] … claim[s] that the realism of assumptions has no relevance in judging the validity of a theory …. [The] unrealistic assumptions of mainstream theory mislead regulators and investors in the recent crisis. (Crotty 2017, 15)

      A large part of the reason is because of power, politics, and ideology. Once the political power shift happened and cozy perverse financial incentives are in place between academics in the form of lucrative consulting gigs and the revolving door of government regulators think tanks private banks qua Wall Street educational institutions there is no end to the perpetuation of the elite justifying the status qua even when many know full well it is made of rotten timber for a superstructure. It is just very financially rewarding to maintain the status quo as history shows. Turning a blind eye is very easy when one’s bread & butter depend upon doing so. And today if another regime shift happens policy goals will once again wag the dog and theory will follow in justifying the new policies.

  20. Ken Zimmerman
    August 25, 2020 at 10:24 am

    Allow me to get a few things out of the way. First, economists did not invent the first, or even the second, or even the third, etc. economies. Non-economists of varying sorts did this work. And they did it because it was useful. It met needs they perceived needed to be met. There was no economic theory involved. There was religion, monarchical and oligarchical governance, agriculture, and to a limited extent merchants and traders. Economists’ job is to study this work of non-economists. Not to correct, fix, re-invent, or reform it. Giving advice is one acceptable role for economists to the inventors of economics. Giving orders is not. Second, while economists may not be historians, they still must answer to history. There is no escape from history. People live in history. People make economies. Thus, economies are historical. So, the study of economies must be historical. Also, the methods of social scientists who study economies are historical. Any pretense otherwise merely dooms the study of economies not only to irrelevance but to the attempt to foist falsehoods on non-economists. This makes economists little more than grifters selling that salted gold mine or that gold plated watch with no insides. Finally, if economics and economists are such poor deluded fools, and at times dangerous and cruel fools to boot, why not just give up on it and take up with work and scholars that are neither deluded, nor dangerous, nor cruel who examine economic life more comprehensively and more usefully? Economics would not be the first, nor will it be the last attempt at a social science that failed. No reason to hang on just for the sake of obstinacy.

    Many white supremacists claim they are only opposing those (like Jews and African Americans) who want to kill and replace them. That claim is nonsense. But economists have shown they have a real intent to replace everyone else involved in creating economic life. Now, many of these “real” economics creators have sufficient political power and wealth that they are untouched by such efforts by economists. Only those without such power and wealth are subject to the imposition of economists’ imperialism. And this situation has genuine and harsh consequences for these people. In terms of employment, schooling, childcare, housing, transportation, etc. And the consequences have grown worse with time. Particularly as those with power and wealth use the “prescriptions” of economists to suppress over 90% of the world’s population. So, bad theory and research on the part of economists has widespread pernicious consequences for most of the rest of us. And, to add insult to injury, economists are not only proud of these results but take them as a sign of the scientific integrity of their academic discipline. Or, as many on this blog point out, this economics has switched from description to prescription. But few on this blog have any enforceable suggestions to change this. And besides the oppression and futility of most economists’ work, so called progressive economists such as Paul Krugman speak out of both sides of their mouth. Simultaneously, criticizing many of his colleagues while denying us any actual relief from economics’ malevolence. In short, barring a bullet to the head of economics, we are fucked.

    As part of a society’s culture economic life is created by people to serve certain identified needs. And those are as various as the cultures that create them. Numbering in the hundreds of thousands, at least. For example, economic norms and standards have been created to work for religious, military, family, local community, exploration, etc. needs. But all the economic ways of life we know of have a common core. Economic life is the activities through which people produce, circulate, and consume things, the ways that people and societies secure their subsistence or provision themselves. We should not take this core narrowly, however. ‘Things’ is, in historical context an expansive term. It includes material objects, but also includes the immaterial. Such as labor, services, knowledge and myth, names and charms, and so on. In different times and places, different ones of these will be and has been important resources in social life, and when they are important, they come within the purview of economic anthropologists. The same, unfortunately cannot be said of economists. They who routinely dismiss the mythological and magical, and often even the technological and emotional. Poor, wounded economists. Cut off their noses to spite their faces. Add pity to our feelings about economics and economists. But we should not forget that economists are helping to slaughter many of the rest of us.

    Considered more broadly, economics is part of the cabal that has pushed America and the world into sociopathy. The world, most particularly America is now a sociopathic society. In The Affluent Society, Galbraith scrutinizes the sociopathy of an America that invests in private comforts and luxuries while abandoning the public goods, such as housing, health care, and public transit, essential for the well-being of most members of society and for the survival of any society.

    “Capitalism has never anywhere provided good houses at moderate cost. Housing, it seems unnecessary to stress, is an important adjunct of a successful urban life. Nor does capitalism provide good health services, and when people live close together with attendant health risks, these too are important. Nor does capitalism provide efficient transportation for people—another essential of the life of the Metropolis. In Western Europe and Japan, the failure of capitalism in the fields of housing, health and transportation is largely, though not completely, accepted. There industries have been intensively socialized. In the United States there remains the conviction that, however contrary the experience, private enterprise will eventually serve.” (The Age of Uncertainty, 1977)

    In everyday language Galbraith tells us America feeds the elites and starves the people. Bloating private fortunes and bankrupting the public services that permit society to exist. Again, cutting off the nose to spite the face.

    So, at this point half measures in bringing economics and economists ‘to heel’ cannot be justified, let alone allowed.

    • August 25, 2020 at 12:54 pm

      I want to endorse this as a fully justified polemic. My only suggestion is that the bad guys bought power by pensioning off the king (William of Orange). Can the good guys buy power by pensioning off the bad guys?

    • Robert Locke
      August 25, 2020 at 2:49 pm

      The great reappraisal

      In anglosaxonia (but not just there, in France, too) nations have developed elitist forms of education, which fits well into the growth of management and economic studies in their province; post wwII, Americans, for historical reasons, not knowledge ones, using their power and influence proselytized and others imbibed, its models. But there was one country where the reception of americanization was muted — Germany — because the Germans had developed Volkswirtschafts and Betriebswirtschaftslehre in the first half of the 20th century, which gave them an educational tradition that allowed the society to resist this americanization. The Americanized part of the world ignored and ignores the German exceptionalism.

      I learned about it inadvertently, when I moved to Germany and sent my two children to 16 years of schooling in the country. I was surprised to find out from my daughter, when some of her friends entered apprenticeship programs in the 10th grade (60% of Germans do) that they were not considered to be failures vis a vis their classmates who went on to the university and I was surprised when those who did study in a university concentrated on the subject studied and not the place. All this ranking of top business schools, etc. is not part of the culture.. So most of the elitism that Ken and Dave find in economic studies did not exist in Germany.. MBA’s are somewhat despised and so are those top us schools.

      This has resulted in an educational system that integrates the work world and the academic in ways that prevent the creation of an elitist academic cullture in economics a l’anglosaxonian.

      • Ken Zimmerman
        August 26, 2020 at 2:57 am

        Robert, I agree that the educational portion of German culture is more egalitarian than that in the UK and even the current US. And it appears more practical. The elitism of the American educational arrangements was in the past (prior to 1970) more pro forma than deeply cut into everyday American life. Now that elitism is carved like stone into that life. Witness the recent ‘scandals’ of wealthy parents purchasing admittance into elite colleges for their children. From the first days of the country it was accepted that some schools (preparatory and college) (e.g., Harvard College, Yale, William and Mary, Pennsylvania) were intended primarily for America elites. A hold over from colonial North America. Over American history events made American education both more democratic and more public. With such actions as the creation of public education systems in most major cities, Land Grant Universities, and Junior/Community colleges. That process has entered a strange period with the invention of ‘for-profit’ schools and colleges. Neo-liberalism is wreaking havoc on American education with just about every form of American grifter now founding this or that ‘charter school,’ ‘technical institute,’ or ‘get rich quick’ ‘educational center.’ Trump University is just the so far most egregious example. One other disastrous consequence of these and related developments is the decline of American apprenticeship activities. None of which has thus far, it seems affected Germany.

      • Robert Locke
        August 26, 2020 at 8:52 am

        Ken, if people engaged in economic activity should inform us about the state of the economy, why shouldn’t a study of these people be the source of our knowledge about economics (instead of the gang of theorists we are endlessly discussing).

        My career was devoted to such a study of the practioneers, starting with a big historical question? If France dominated great power relations in 1800, why did Germany replace France in 1900. I looked at industrial entrepreneurs, business journalists grappling with reasons for the rise and fall of nations, educators, etc. Much of what I concluded is in the book, Appreciating Mental Capital (a pun). — a subject that economists dismiss in their theory mongering.,,,in anglosaxoniania, but not in countries who found themselves behand in the great power struggle.

        They became properly obsessed with improving their mental capital, primarily in education, in order to close the gap.

        Talk about frustration, the people who dominate the study and teaching of anglo=saxon economics ignore economists who build up the new educattional systems that sought to modernize economies.Arrogant, Dave calls our economists, culture bound you calll them. I agree with both of you.

  21. gerald holtham
    August 26, 2020 at 12:11 am

    As usual this exchange has become, shall we say, multi-faceted, rather than focused and there are too many balls in the air for anyone to try to catch them all. I agree with meta that it is interests that dictate which theories are dominant. Indeed I have argued that point myself, contradicting Keynes’ assertion that ideas are more important than interests in changing the world. But no-one would deny that both have some importance.. That means having a better theory (better in some scientific sense) is not a sufficient condition for a bad theory to be replaced. It is, however, necessary that a better one be available to help when dominant interests change. The first Labour government in the UK failed because they adhered to the theories of the old governing class, against their own interests. When they were replaced by a national government in an economic crisis it devalued the pound. One of the Labour ex-ministers made the famous remark “they didn’t tell us we could do that”.
    Also, unusually KZ has fallen into contradiction. He asserts on the one hand that the role of economists is to study reality, the actual situation and not to prescribe a different world. In the next breath he blames economists for the state of the world and says “economics is part of the cabal that has pushed America and the world into sociopathy”. To prove it he cites JK Galbraith who, last time I looked, was an economist.
    I’ll be frank. This is just ranting. You can make un-named “economists” the scapegoats for all the evils of the world if it amuses you but that won’t get you or us anywhere. JK Galbraith is not Gary Becker, Keynes and Kalecki were not Milton Friedman, Joan Robinson was not Paul Samuelson, David Hendry is not Robert Lucas. They held and hold diametrically opposite views. All were economists. There is as much political and professional diversity among economists as in any other trade. If one faction gets the most airtime remember Meta’s point – that’s driven by material interests.
    Changing the world is a matter of political mobilisation. Making sure the new dispensation doesn’t defeat itself is a matter of picking the right economic line. For heaven’s sake, calm down and discriminate.

    • Ken Zimmerman
      August 26, 2020 at 3:22 am

      Gerald, what you note is precisely to point I attempt to make. That what is the job of economists is often not what they spend their time and efforts doing. They focus on educating ‘the public’ on ‘correct’ economic understanding while they should focus on understanding the economics related creations of ‘the public.’ It is in the first, and it seems to me often primary role economists see for themselves that they have participated in the ‘cabal’ I mention.

      As to Galbraith’s title, I have always divided social scientists into three categories, for research purposes. Those who day-to-day accept the current state of social science theory and methodology and carry out their jobs in that context. Those who perform their research in hope of changing the current state of social science theory and methodology. And finally, those who focus primarily on criticizing what they see as the multiple and sometimes dramatic shortcomings of all social sciences or one particular social science. I place Galbraith in the final group, with frequent ventures into the second. And then there are those who are not social scientists at all, such as Milton Friedman and Arthur Laffer but who take the title as such. They have varying motivations. From the support of a political ideology to the pursuit of fame to making others look foolish or inept. But all are driven by ‘material interests’ only if one defines ‘material interests’ broadly to include all the motivations named above, plus many others.

      You have it right. Discrimination is my problem. The discrimination of economists (in fact most academics) to set themselves up as arbiters of culture. The deciders of the normal, the good, the worthy.

    • August 26, 2020 at 8:19 am

      Gerald, it is you who seem to have fallen into contradiction (re Keynes). Change requires changed ideas. Interests prevent the change happening..

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