Home > Uncategorized > More on what’s missing

More on what’s missing

from Peter Radford

I suspect economic theorists are not alone in shunting to the side issues or phenomena that might upset the applecart.  But they appear to do it with a determination that other disciplines mind find somewhat alarming.  This is why I relentlessly and repeatedly mention Cause and his 1937 question about the existence of the firm.  It isn’t because I imagine that theories of the firm began in 1937, or that they are somehow restricted to a peculiar Anglo-Saxon view — Coase would have been an ideal advocate of such a view having spent his career on both sides of the Atlantic — but because he typifies the dilemma he raised.  He cannot quite accept the enormous ramifications of his question, and so he wanders off and tries to invent a reason for firms to exist that can be kluged together with the pre-existing purist view of marketplace superiority.  Firms, in the theoretical tradition born to help Coase out of the box of his own making,  are made out to be exceptions rather than the rule.

Well, when you have theorized utopian markets, how can any other phenomenon be anything other than a sullied alternative?  You’re stuck with trying to make everything else out to be a result of some mysterious “failure”.

Economists have done a wonderful job of hiding from the demons that reality might unleash and the damage such demons might wreak on their pristine imaginings.

A much broader scale of avoidance was suggested by Sraffa in 1926:

“In the tranquil view which the modern theory of value presents us there is one dark spot which disturbs the harmony of the whole. This is represented by the supply curve, based upon the laws of increasing and diminishing returns. That its foundations are less solid than those of the other portions of the structure is generally recognised. That they are actually so weak as to be unable to support the weight imposed upon them is a doubt which slumbers beneath the consciousness of many, but which most succeed in silently suppressing. From time to time someone is unable any longer to resist the pressure of his doubts and expresses them openly; then, in order to prevent the scandal spreading, he is promptly silenced, frequently with some concessions and partial admission of his objections, which, naturally, the theory had implicitly taken into account. And so, with the lapse of time, the qualifications, the restrictions and the exceptions have piled up, and have eaten up, if not all, certainly the greater part of the theory. If their aggregate effect is not at once apparent, this is because they are scattered about in footnotes and articles and carefully segregated from one another.”

Whenever economists trip over an uncomfortable counterpoint to their core ideas they have, throughout the course of their discipline’s development, had a wonderful ability to bury inconveniences like the firm in the footnotes.  Sraffa was, of course, trying to put forward a more sweeping critique, but I get the feeling that most economists do what he is suggesting they do whenever they have to tackle production, innovation, and all the other things that firms do.  They compress it into as small a space as possible and bury it in the footnotes where it can be ignored while they press on chatting about the glories of general equilibrium, set-in-stone preferences and the other paraphernalia of orthodoxy.  And, yes, I am aware that economists are a broad church, so don’t waste your time letting me know I am missing something, but I have that annoying habit of looking at what they teach the kids instead of what they argue about behind closed doors.

Speaking of a broad church, this is from Witt in 2006:

“Evolutionary economics focuses on the processes that transform the economy from within and investigates their implications for firms and industries, production, trade, employment and growth.

These processes emerge from the activities of agents with bounded rationality who learn from their own experience and that of others and who are capable of innovating. The diversity of individual capabilities, learning efforts, and innovative activities results in growing, distributed knowledge in the economy that supports the variety of coexisting technologies, institutions, and commercial enterprises. The variety drives competition and facilitates the discovery of better ways of doing things. The question in evolutionary economics is therefore not how, under varying conditions, economic resources are optimally allocated in equilibrium given the state of individual preferences, technology and institutional conditions. The questions are instead why and how knowledge, preferences, technology, and institutions change in the historical process, and what impact these changes have on the state of the economy at any point in time.”

This makes sense.  Notice the introduction of time.  Notice the emphasis on change occurring within the system rather than being some magical “exogenous” phenomenon.  And notice the implied feedback between the creation of knowledge and the state of the economy. I have mentioned too many times that I am at a loss as how to explain the absence of knowledge from the standard production function that serves to suffice as a description of what a firm is in most economic theory.  The increase in our collective inventory of useful knowledge is one of the most obvious features of our relatively modern acceleration towards universal prosperity.  This accumulation of knowledge is far more important to our current state of wellbeing than, for instance, any accumulation of capital.  After all, what is “capital”?  As an aside: those of you foreseeing the imminent demise of “capitalism” need first to stipulate what you mean by capital.  Personally I think it foolish to predict the end of something that remains ill-defined.  Capital, as in the bricks and mortar, or even of the financial assets, of an economy will surely continue to exist.   So if it’s simply the transference of ownership you are predicting, we have examples from history.  Not very helpful ones if you are imagining a great improvement in outcomes.

Anyway, back to the firm as a problem for economics.  This is from Teece and Pisano in 1994:

“What is it, then, about firms which undergirds competitive advantage?

To answer this, one must first make some fundamental distinctions between markets and internal organization (firms). The essence of the firm, as Coase (1937) pointed out, is that it displaces market organization. It does so in the main because inside the firms one can organize certain types of economic activity in ways one cannot using markets. This is not only because of transaction costs, as Williamson (1975, 1985) has emphasized, but also because there are many types of arrangements where injecting high powered (market-like) incentives might well be quite destructive of the cooperative activity and learning. Indeed, the essence of internal organization is that it is a domain of unleveraged or low-powered incentives. By unleveraged we mean that rewards are determined at the group or organization level, not primarily at the individual level, in an effort to encourage team behavior, not individual behavior, in order to accomplish certain tasks well. Inside an organization, exchange cannot take place in the same manner that it can outside an organization, not just because it might be destructive to provide high powered individual incentives, but because it is difficult if not impossible to tightly calibrate individual contributions to a joint effort. Hence, contrary to Arrow’s (1969) view of firms as quasi markets, and the task of management to inject markets into firms, we recognize the inherent limits and possible counterproductive results of attempting to fashion firms into clusters of internal markets. In particular, learning and internal technology transfer may well be jeopardized.”

I include this in my random set of quotes because it both mentions Coase [yeah!], and get to another aspect of economics that seems to be missing: notably that we live in a collective world where some element of solidarity is essential to the understanding of how value is created.  Orthodox economics builds itself up from a purely individual perspective.  This is because it started out as an exploration of demand more than of production.  It attempted to put consumers in the center of the arena, which was forgivable in an era when industry was primitive and production was of simpler goods and services.  But we have moved way beyond that era.  Production nowadays is complex spatially, informationally, and with respect to the time it consumes.  If it depends on the mobilization of “teams” how, exactly, does the concept of a wage being fixed by a person’s marginal production fit in?  The elegance of the marginal approach is its main attraction — economists swoon over elegance — suit its realism in a modern context is somewhat suspect.

And to double down on my view that knowledge is central to any understanding of economic growth, this is from Soo, Devinney, and Midgley in 2002:

“The notion that knowledge is a source of competitive advantage has been advocated extensively in the management literature over the past decade (i.e., Winter, 1987; Quinn, 1992; Nonaka and Takeuchi, 1995). The value of intangible assets increases as goods and services become more sophisticated in content and production and the foundation of competition becomes intensively knowledge-based. As hypothesized by Teece (1998: 76), “the key sources of wealth creation at the dawn of the new millennium will lie with new enterprise formation; the renewal of incumbents; the exploitation of technological know-how, intellectual property, and brands; and the successful development and commercialization of new products and services”.

I think that stands for itself.  Innovation and knowledge accumulation, as expressed through the vehicle we call a “firm” is a central phenomenon of interest to economics.  The missing middle looms large.  But there are a ton of people looking at it.  I wonder when it will be moved from the footnotes and into the main text.

Lastly, just to rub it in.  This is from Simon in 1979:

“In the views of Mason and Friedman, fundamental inquiry into rational human behavior in the context of business organizations is simply not (by definition) economics – that is to say, political economy – unless it contributes in a major way to that purpose. This is sometimes even interpreted to mean that economic theories of decision making are not falsified in any interesting or relevant sense when their empirical predictions of micro-phenomena are found to be grossly incompatible with the observed data. Such theories, we are told, are still realistic “enough” provided that they do not contradict aggregate observations of concern to political economy. Thus economists who are zealous in insisting that economic actors maximize turn around and become satisficers when the evaluation of their own theories is concerned. They believe that businessmen maximize, but they know that economic theorists satisfice.”

He gets us back to Sraffa’s critique.  Economists dither endlessly.  They postulate great certain edifices and then waffle weakly about their foundations.  I have always loved the Friedman dodge on the need for realism in assumptions or on the approximation that theories have to reality.  Economists theorize one way and then live their own lives another.  Just how many of them “optimize” or “maximize” their own economic activity?  How would they know if they did?  And how many of them actually believe that the farce they call a production function is how stuff gets produced and distributed in a modern economy?

I think we can all agree not many do.

They just bury their own experiences in the footnotes so as not to muddle the utopia they teach.



I realize that I used the phrase “universal prosperity” in the above text.  I mean it.  As Philippon recently remakes, economics has two major questions to answer: how is that prosperity grows; and how is it that prosperity is distributed.  The first is about the timeless and universal battle against scarcity.  The second is about the equally timeless and universal apportionment of the spoils of that battle. The great leap forward in our useful knowledge during the past two to three centuries has solved the first.  We know how to overcome scarcity — perhaps a little too well given the abundance of consumerism in some places.  We are yet to solve the second question to everyone’s liking.

So, yes, we are living in an era of universal prosperity.  Whether that prosperity is well distributed is an entirely different matter.

  1. Ikonoclast
    August 20, 2020 at 1:18 am

    I’d like to comment on the addendum. I agree that economics has to answer those two major questions: how is that prosperity grows; and how is it that prosperity is distributed? However, it has other major questions to answer. These are the questions of limits to growth and sustainability.

    We cannot assume that endless growth in population and/or prosperity is feasible. It is NOT possible on a finite planet. Quantitative growth must certainly end. We cannot keep covering the earth with people and infrastructure. In fact, modern ecological science strongly indicates we need to least at least 50% of the earth wild.


    We cannot even assume that endless qualitative growth is feasible. Qualitative growth implies increased complexity although it can also imply increased efficiency, at least up to natural (physical) efficiency limits for various technologies. Increased complexity implies higher energy costs as it costs extra energy to maintain complexity against entropy effects. There will be limits to energy deployment, even of renewable energy. At the same time new technologies and new energy saving technologies will be able to stretch those limits.

  2. Yoshinori Shiozawa
    August 20, 2020 at 5:30 am

    Let me waste my time on correcting what is taught for kids (I understand you mean by kids undergraduate and graduate students). Knowledge and human capital are among indispensable factors even for mainstream growth theories. It is true that knowledge is not incorporated in (Solow type) neoclassical growth theory (it is often called erroneously classical growth theory), but knowledge plays primary role in (Paul Romer type) New growth theory (often called Endogenous growth theory). This fact does not imply that their core formulation based on production function is justified and correct. The very concept of aggregate production function is wrong and often produces toxic advises, especially for developing countries (for example, overemphasis on R&D investment and technology transfer).

    I agree with Peter that smooth production function is accepted simply because of the beauty of marginal productivity theory of distribution, but it excludes productivity promoting effects of the team work, as Peter points it. This is one of toxic aspects of mainstream (classical or endogenous) growth theories. We must criticise the logical structure of endogenous growth theory. If not, we are bewildered as if it has incorporated knowledge in the growth theory. We cannot persuade our kids that the endogenous growth theory is misformulated.

    Of course, I admit that these are small points which are derived from the theoretical structure of neoclassical economics. For this point, please read my posts (my replies to Robert Locke on August 13, 2020 at 11:28 am and on August 20, 2020 at 2:05 am) added as comments to your previous “Missing middle?“. In the second of my Reply to Robert, I have cited Herbert A. Simon. We must focus our argument on why most of economics cannot incorporate firms in a real sense. To repeat myself, we cannot obtain an economics that incorporate firms in a true way without changing the core structure of economics.

    Finally, let me add a remark for general readers. My theory of classical theory of value (including the new theory of international values) is much influenced by Sraffa’s two works: Sraffa (1926) and Sraffa (1960), as it is evident if you read Chapter 2 of our book: Microfoundations of Evolutionary Economics. As for the new theory of international values, you can read a draft of my overview. The paper is published as Chapter 1 in our book Shiozawa, Oka and Tabuchi (eds.) (2017) A New Construction of Ricardian Theory of International Values: Analytical and Historical Approach. This is at least for the moment the unique theory that can explain the emergence, growth and forms of GVCs (global value chains).

  3. August 26, 2020 at 1:05 pm

    Peter has a bit too much “more” for us to comment easily on what he is saying. On the whole, I find myself agreeing with Ikonoclast, baulking at the “small points” Yoshinori admits he is focussing on (insinuating his summary of Peter is about name-dropping and undefined terms). As a participant I have always thought competitive markets operated between firms, cooperative production and development within them; but I saw how management usually appeals to and is influenced by individualist self-promotion: seeing only short-term gain and not long-term disruption of teamwork. The warrant-officer I admired most, when asked why (being far more competent than his officers) he didn’t become an officer himself, replied that he’d rather stay put so he could do what needed doing. In terms of the school economics I learned at 16, we are back with the need to satisfice rather than maximise (i.e. be satisfied with the maximum rather than deny the maximum power transfer theorem). In terms of mainstream economics we are back with Keynes satisfying the need for income and Schumacher the need of people (with every generation having to learn anew) for intelligible “intermediate technology”. Both these luminaries decried by the self-serviant, of course.

    Back to Ike, I agreed on the 50% wild: the maximum power transfer theorem suggests it but of course (being merely mathematical) cannot prove it. Go digital and higher complexity does not imply higher energy usage: consider the complexity of integrated computer circuits. So prosperity involves a trade-off between control of population and control of pro rata consumption? Learn PID control theory, then, and flexible rationing of credit. But there is another scenario about the end of our world. Remember Nevil Shute’s novel “On the Beach” and Edwin Muir’s (1956) poem, “The Horses”.

  4. Ken Zimmerman
    September 1, 2020 at 5:29 pm

    It has been widely accepted for a large part of the last 2000 years that the purpose of a business is to make money for itself and its owners. As self-evident for many as the notion that the Sun revolves around the Earth. In 1539, Copernicus put at least the second part of the statement into limbo. Counter-intuitively for many Copernicus claimed that the Earth revolves around the Sun. Our common sense and senses fool us into believing in the false notion that the Sun revolves around the Earth. Copernicus had no hard evidence to back up his proposal and it had a hard time winning acceptance. In terms of “commonsense” many objected. ‘Cannot we see with our own eyes every day that the Sun revolves around the Earth?’ ‘If the Earth is hurtling at high speed around the Sun, why do we not fall off?’ ‘Does not the Church tell us the Earth is the center of the Universe?’ Among some astronomers and even more astrologers, Copernicus’ claim won converts. But in 1615, the Roman Catholic Church declared the idea a heresy and in 1632 condemned the scientist Galileo Galilei to life in prison for disseminating it. It was not until 1822 that Copernicus’ contrarian notion was generally accepted. Yet today, even the dumbest, most Fascist Trump supporter knows that the Earth revolves around the Sun. Indeed, it is no longer a question that anyone even considers today. After all, it has always been so and could not be otherwise.

    Consider as one Church today the institutional body of economists. A Church based on the glories of general equilibrium, utopian markets, and set-in-stone preferences and the other paraphernalia of orthodoxy. As it was in the time of Copernicus not all the participants in the Institutional Economics Church believe in and support its orthodoxies with the same fervor. But and this is important the Church is a main institution that gives their lives meaning and holds their daily lives together. Giving it up, even in part and even for those who are suspicious of some of its orthodoxies is hard and emotionally threatening. Replacing the Ptolemaic conception of the Solar System took place over a period 200 years. Being generous, work on replacing the currently dominant utopian market-centric mathematically closed model of economic ways of life with an anthropological model of people creating for themselves the necessary institutions of provisioning their needs has been underway for only 50 years. If you want the old Church gone and a new Church in place, these are the four processes that need to occur.

    1. Do not just set out the problems. Set out the actors and define their identities in such a way as to establish themselves as an obligatory passage point in the network of relationships you are building. This double movement, which renders them indispensable in the network, is called problematization.
    2. Now that we have hypothesized actor definitions and relationships, we need next to make them real. But reality is a process. Like a chemical body it passes through successive states. We must test the actors identified and the relationships envisaged. The scene is set for a series of trials of strength whose outcome will determine the solidity of our new Church as it has been problematized.
    3. But mere interest does not always lead to alliances or enrolments. Enrolment does not imply, nor does it exclude, pre-established roles. It designates the device by which a set of interrelated roles is defined and attributed to actors who accept them. ‘Interessement’ achieves enrolment if it is successful. To describe enrolment is thus to describe the group of multilateral negotiations, trials of strength, and tricks that accompany the shows of interest and enable them to succeed.
    4. Finally, the network must be mobilized. Who speaks in the name of whom? Who represents whom? These crucial questions must be answered if the project is to succeed. Each group of actors must be considered when choosing representatives. Will the masses (economists, editors, teachers, politicians, etc.) follow their representatives? For how long and with what reservations, if any? To succeed this work cannot be slap-dash.

    • Meta Capitalism
      September 4, 2020 at 10:14 am

      [I]n 1615, the Roman Catholic Church declared the idea a heresy and in 1632 condemned the scientist Galileo Galilei to life in prison for disseminating it. ~ Ken Zimmerman’s Half-Truth About Galileo Galilei’s Imprisonment.
      As to ‘half-truths’ if you can show me where the simple story of Copernicus and Galileo Galilei, I told was not correct, I will happily correct it. ~ Ken Zimmerman’s Simple Stories Full of Half-Truths. But will he correct them?
      With the possible exception of three days (June 21-24, 1633), Galileo was never held in prison, either during the trial (as was universal custom) or afterward (as the sentence decreed). Even for those three days he likely lodged in the prosecutor’s apartment, not in a cell. The explanation for such unprecedentedly benign treatment is not completely clear but includes the following factors: the protection of the Medici, Galileo’s celebrity status, and the love-hate attitude of Pope Urban, an erstwhile admirer. (Galileo Goes to Jail and Other Myths about Science and Religion (Kindle Locations 792-795). Kindle Edition.)

      (….) In view of the available evidence, the most tenable position is that Galileo underwent an interrogation with the threat of torture but did not undergo actual torture or even territio realis. Although though he remained under house arrest during the 1633 trial and for the subsequent nine years of his life, he never went to prison. We should keep in mind, however, that for 150 years after the trial the publicly available evidence indicated that Galileo had been imprisoned, and for 250 years the evidence indicated that he had been tortured. The myths of Galileo’s torture and imprisonment are thus genuine myths: ideas that are in fact false but once seemed true—and continue to be accepted as true by poorly educated persons and careless scholars. (Galileo Goes to Jail and Other Myths about Science and Religion (Kindle Locations 839-843). Kindle Edition.)

      Simple stories are poor vehicles for complex truth. There Catholic Church (like all human institutions) is full of justifiable blame for the errors of evil and sin, even iniquity, but let the blame be laid on firm evidentiary foundations and not half-truths of simple stores careless with fact and truth.

      • Ken Zimmerman
        September 4, 2020 at 5:59 pm

        This is not my area within the history of science. However, you might consider this. As in most of human culture, truth is missing. Galileo’s prosecution by the Roman Inquisition is not an exception.

        The final volume of the three-volume series on the Roman Inquisition by Thomas F. Mayer is ‘The Roman Inquisition: Trying Galileo.’ Few legal events loom as large in early modern history and the history of early western science as the trial of Galileo. Frequently cast as a heroic scientist martyred to religion or as a scapegoat of papal politics, Galileo undoubtedly stood at a watershed moment in the political maneuvering of a powerful church. But to fully understand how and why Galileo came to be condemned by the papal courts—and what role he played in his own downfall—it is necessary to examine the trial within the context of inquisitorial law.

        By the time of the trial, the Roman Inquisition had become an extensive corporatized body with direct authority over local courts and decades of documented jurisprudence. Drawing from those legal archives as well as correspondence and other printed material, Mayer traces the legal procedure from Galileo’s first precept (charge) in 1616 to his formal trial in 1633. Using the legal underpinnings and bureaucratic workings of inquisitorial law, Mayer compares the course of legal events to other possible outcomes within due process, showing where the trial departed from standard procedure as well as what available recourse Galileo had to shift its direction. Galileo’s trial contained nearly all the required phases (11), albeit not in the expected sequence; the most serious omission was the repetitio (6) (all witnesses previously heard were reexamined along with any defendants). The next most serious irregularity after the missing repetitio involved the expedition (trial/defense), which was jumbled up both with an attempt to end formal proceedings without the necessary outcome as well as with Galileo’s defense. The last part of the trial came close to the normal sequence of steps, including threatened torture in the examination over intention, until the bloody-mindedly literal publication of his sentence (step 11).

        Those who have argued that Galileo fell victim to a “legal impropriety” are partly right, even though they did not know why. His trial contains several elements that might be so qualified. Two of the three “substantial” parts of the defense, broadly speaking, were either handled oddly or skipped altogether, the repetitio and the defense itself. (Assuming that his dossier is complete, as Francesco Beretta has demonstrated most recently.) To be fair, the decree registers almost never explicitly mention the repetitio—only twice—which may be hidden under the formula “datis defensionibus” (‘having been given defenses’). Perhaps significantly, of the six cases that pose exceptions to the general silence, including the two in the registers, four of their suspects had legal representation. There are also questions about Commissary Vincenzo Maculano’s extrajudicial move, apparently designed to secure Galileo’s admission of guilt without imposition of a formal sentence (the extrajudicial confession Maculano wanted also could and did lead to at least the threat of torture against Galileo). Galileo’s attempt to rely on recommendations as one of the two principal planks of his defense proved a crucial blunder, since they were in no case to be allowed. These peculiarities could not but harm Galileo’s ability to argue his case successfully. The responsibility for these damaging deviations from the Inquisition’s usual trial course must be shared among nearly all the participating parties: Pope Urban; Secretary Antonio Barberini, Sr.; Commissary Maculano; probably Assessor Pietro Paolo Febei, who learned his lesson about displaying unswerving loyalty to his Barberini masters; as well as the Congregation, most of whose members were heavily dependent on those same masters. Urban’s penchant for increasingly autocratic behavior, including his housecleaning of the papal administration beginning in mid-1632, and carefree disregard for the law, in which his brother Antonio almost matched him, manifested in many of the cases of the Roman Inquisition.

        Galileo need never have come to that desperate pass. He bears much of the responsibility for finding himself in a formal trial at all. He might have avoided nearly all his difficulties had he told Riccardi—or, better, Urban—about the precept (prohibition issued by Rome to Galileo not to teach the Copernican doctrine) not later than the protracted negotiations over an imprimatur for the Dialogue. Once he missed that opportunity, much of the rest of the problem probably stems from Galileo’s failure to understand the necessity of effective counsel.

        From 1632, until 23 March 1634, Galileo and Niccolini tried repeatedly to get permission for Galileo to return to Florence from his villa at Arcetri, until Pope Urban finally ordered Galileo not to make further appeals. Thus, Galileo’s trial ended first in the banning of his book (Dialogue Concerning the Two Chief World Systems) and then in permanent house arrest.

  5. Robert Locke
    September 2, 2020 at 11:53 am

    Peter Lawrence, in a thorough study of management in West Germany (CROON hELM, 1980) WROTE,

    “when a German manager is asked about the purpose of his enterprise, he never says it is to make money. He is like the Japanese who simply says that profit making is incidental to the greater purpose of the firm, which is to provide a service to its customers, to benefit mankind.”

    Even if capitalists acted as you say, they are not put in charge of the country, not in the land of the pharoes, not in an expanding13th century medieval eoonomy, not in Bismarck’s Germany. Not in postWWII Europe. have a serious conversation. America is an anomaly.

    • September 2, 2020 at 3:12 pm

      Thank you for this, Robert. I found Ken offensive when he tried to divert the discussion, from Peter wanting economists to take proper account of knowledge, onto his half-truths about the relationship between the Roman Catholic Church and Gallileo. (The former is not constituted by its Pope – “first among equals” – so that misunderstanding was with its Spanish leader, not the Church, and this at a time when he had Martin Luther on one side and Suleiman the Magnificent on the other).

      The bit of knowledge American Ken is silent about concerns the “scorched earth policy of the sixteenth century Church reformers in England, laying waste the religiously organised educational, medical and welfare systems. Would-be political reformers in America seem hell bent on using the same method to achieve what twentieth century financing of two world wars failed to achieve because of self-sacrificial scorched earth resistance. Americans are still remembering Martin Luther King like we English Catholics still remember our martyrs, but that didn’t stop our being enslaved by usurious money corrupting the minds of business men and the politicians largely drawn from them.

      The bit of earth that needs scorching is thus our post-reformation financial system. Our new-found knowledge that money is imaginary – logically, a concept not a reality – defines the identities of the actors “in such a way as to establish themselves as an obligatory passage point in the network of relationships” we are not building but destroying. The more fictitious money they think they “have”, the more they will feel they are losing unless – religiously – they learn to be grateful for and use graciously what they actually have. With no monetary advantage, what right has any of them to rule as our representative? Advantages of knowledge give us some right to advise, but the disciplines of democracy begin in our own homes and need sharing cooperatively in business. Not that that is as easy as it sounds, but nationally we are talking not about “laws” but about conventions as uncontroversial as which side of the road to drive: the earth rotates daily; money is a type of variable used in accounting for use and repayment of credit; “Thou shalt not lie”, Ken, nor muddy the water. It is these conventions which need to be established by general consent over the heads of those still claiming to be our rulers.

      Reacting to Yoshinori on Ms Jayati Gosh, Edward Ross wrote “second year economic students knew nothing about the differences between mainstream economics and heterodox approaches”. I am not sure I do, while both remain immersed in post-reformation micro-economics. I favour taking economists like John Ruskin, Frederick Soddy, E F Schumacher and Herman Daly as representative of heterodox economics, with the likes of Hilaire Belloc, Pius XI, Joan Robinson and Tony Lawson its heterodox philosophy. A list short and curious enough to perhaps capture the interest of dissatisfied second year students.

      • Ken Zimmerman
        September 2, 2020 at 6:02 pm

        Dave, I do not understand what is a “proper account of knowledge?” Knowledge is invented by humans. As to ‘half-truths’ if you can show me where the simple story of Copernicus and Galileo Galilei, I told was not correct, I will happily correct it. All you say about the many failures and actual attacks on society by Protestant churches in the UK and US is quite correct, if perhaps a bit understated. Their collective ‘sins’ are in my view much greater than you depict. My only point in the story was to point out how ‘things that could not be otherwise’ have changed to be otherwise frequently in human history.

        Perhaps my understanding of the motivations for the discussions here is incorrect. I believed that the focus was the replacement of an ‘unrealistic’ and harmful economic discipline with one that aids rather than harms society and its participants while portraying as accurately as possible the actual economic ways of life people have created for themselves. Debates about knowledge can only go a short distance in reaching this goal if it is our goal. As I suggested to “win” this struggle we must change what is ‘real.’ That includes of course what is ‘real’ knowledge. Historically, this is how changes in human cultures always occur.

      • September 3, 2020 at 9:04 am

        Ken, what I was objecting to was your identifying the Roman Catholic Church with the person who initially judged Galileo to be a heretic. Now you are doing the same thing with the Protestant churches. I had written “Church reformers”, thinking specifically of self-serving Thomas Cromwell and his clique.

    • Ken Zimmerman
      September 2, 2020 at 5:37 pm

      Robert, agree entirely. In ‘The New Realities’ (1988) and ‘Management, Tasks, Responsibilities, Practices’ (1974) Peter Drucker writes,

      Business enterprises—and public-service institutions as well—are organs of society. They do not exist for their own sake, but to fulfill a specific social purpose and to satisfy a specific need of a society, a community, or individuals. They are not ends in themselves, but means. The right question to ask in respect to them is not, What are they? but, What are they supposed to be doing and what are their tasks?

      Management, in turn, is the organ of the institution.

      The question, What is management? comes second. First we have to define management in and through its tasks. There are three tasks, equally important but essentially different, that management has to perform to enable the institution in its charge to function and to make its contribution.

      1. Establishing the specific purpose and mission of the institution, whether business enterprise, hospital, or university
      2. Making work productive and the worker effective
      3. Managing social impacts and social responsibilities

      Asked what a business is, the typical businessman is likely to answer, “An organization to make a profit.” The typical economist is likely to give the same answer. This answer is not only false, it is irrelevant.

      The prevailing economic theory of the mission of business enterprise and behavior, the maximization of profit—which is simply a complicated way of phrasing the old saw of buying cheap and selling dear—may adequately explain how Richard Sears operated. But it cannot explain how Sears, Roebuck or any other business enterprise operates, or how it should operate. The concept of profit maximization is, in fact, meaningless. The danger in the concept of profit maximization is that it makes profitability appear a myth.

      Profit and profitability are, however, crucial—for society even more than for the individual business. Yet profitability is not the purpose of, but a limiting factor on business enterprise and business activity. Profit is not the explanation, cause, or rationale of business behavior and business decisions, but rather the test of their validity. If archangels instead of businessmen sat in directors’ chairs, they would still have to be concerned with profitability, despite their total lack of personal interest in making profits.

      The root of the confusion is the mistaken belief that the motive of a person—the so-called profit motive of the businessman—is an explanation of his behavior or his guide to right action. Whether there is such a thing as a profit motive at all is highly doubtful. The idea was invented by the classical economists to explain the economic reality that their theory of static equilibrium could not explain. There has never been any evidence for the existence of the profit motive, and we have long since found the true explanation of the phenomena of economic change and growth which the profit motive was first put forth to explain.

      It is irrelevant for an understanding of business behavior, profit, and profitability, whether there is a profit motive or not. That Jim Smith is in business to make a profit concerns only him and the Recording Angel. It does not tell us what Jim Smith does and how he performs. We do not learn anything about the work of a prospector hunting for uranium in the Nevada desert by being told that he is trying to make his fortune. We do not learn anything about the work of a heart specialist by being told that he is trying to make a livelihood, or even that he is trying to benefit humanity. The profit motive and its offspring maximization of profits are just as irrelevant to the function of a business, the purpose of a business, and the job of managing a business.

      In fact, the concept is worse than irrelevant: it does harm. It is a major cause of the misunderstanding of the nature of profit in our society and of the deep-seated hostility to profit, which are among the most dangerous diseases of an industrial society. It is largely responsible for the worst mistakes of public policy—in this country as well as in Western Europe—which are squarely based on the failure to understand the nature, function, and purpose of business enterprise. And it is in large part responsible for the prevailing belief that there is an inherent contradiction between profit and a company’s ability to make a social contribution. Actually, a company can make a social contribution only if it is highly profitable.

      To know what a business is, we have to start with its purpose. Its purpose must lie outside of the business itself. In fact, it must lie in society since business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer.

      Markets are not created by God, nature, or economic forces but by business people. The want a business satisfies may have been felt by the customer before he or she was offered the means of satisfying it. Like food in a famine, it may have dominated the customer’s life and filled all his waking moments, but it remained a potential want until the action of business people converted it into effective demand. Only then is there a customer and a market. The want may have been unfelt by the potential customer; no one knew that he wanted a Xerox machine or a computer until these became available. There may have been no want at all until business action created it—by innovation, by credit, by advertising, or by salesmanship. In every case, it is business action that creates the customer.

      It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for a service converts economic resources into wealth, things into goods. What the customer buys and considers value is never just a product. It is always a utility, that is, what a product or service does for him.

      The Purpose of a Business
      Because its purpose is to create a customer, the business enterprise has two—and only these two—basic functions: marketing and innovation.

      Drucker both lived and taught in Japan and many other nations. Teaching the above ‘advice’ and knowledge about management. Until the 1980s, Drucker was the “go to” person for management. I am not certain how many American economists even know his name let alone his work today.

    • September 3, 2020 at 12:35 pm

      Of course I am not an American economist, but Drucker was still a significant writer when I was studying management, and even more interestingly I have his 1940 book “The End of Economic Man”, in which he discusses many of the things Robert mentions: capitalists “not [like Hitler, Stalin and Mussolini] put in charge of the country, not in the land of the pharoes, not in an expanding 13th century medieval economy, not in Bismarck’s Germany. Not [even as Christian philosophers] in post WWII Europe”. Very relevantly he is saying what I’ve said: that the capitalists have changed the meaning of the word “property”, and even revolutionary Christian conservatives like Chesterton have carried on using the old definition. Ken goes off course when he defines “profitability” in terms of the capitalist meaning of “property”, in a monetary economy where the different things money is being used to buy are illogically aggregated. A previous owner marked the key passages on p.100: the Christian leaders, “who have all come out against totalitarianism, are not less but more representative of the majority in the churches than the pro-Fascist. For they alone … by insisting on judging it on traditional standards, can make sense of it. … And the majority will remain impotent to fight for it. For you can only fight if you have an alternative to offer. … The masses … are only concerned with today, with the actuality and terror of their despair and with the immediate banishing of the demons”.”.

      I have a companion book, Michael Oakshott’s 1940 collection of original writings defining the doctrines of Representative Democracy, Catholicism, Communism, Fascism, and National Socialism. The alternative which has become available since 1940 is that information is neither spiritual nor material: not even a pattern in material but an encoded representation like a written constitution (or its decoded interpretation re-encoded as practice). Thus neither spiritual nor secular leaders exercise absolute power but are subject to interpretation of constitutional documents like the Bible and what Oakshott offers as an illustration of Catholic thinking, the 1937 Constitution of Eire. Interpretations may change, but it is important that what they are interpretations of must not be changeable by the powers that be. This cannot be discussed adequately in a blog: I’m putting it forward as something that needs seriously discussing.

      • September 3, 2020 at 12:45 pm

        For the record, I agree with Ikonoclast that one type of item in the world’s constitution that governments must not be allowed to interpret to suit themselves are its “limits to growth”.

  6. Robert Locke
    September 3, 2020 at 12:51 pm

    IN 1920 Wilhelm Rieger at the Nuremberg business school, called his discipline, private economics (Privatwirtschaftslehre) because he consider the entreprise a money mill (Geldfabik) in which capitalists invest to take out more money from the production and marketing prodess. This is the american view.

    For others the view was much too constraining. For Schmalenbach, (and his view prevailed) prompted his colleagues to shift focus from the capitalist to the firm. For him it mattered not so much what profits were made but how they were made. This resulted in efficiency (Wirtschaftlichkeit) replacing profit (Rentabilitaet) as the principle aim of business activity, and consequently in ‘efficiency thinking” becoming the principal aim of business education.

    • Craig
      September 3, 2020 at 7:13 pm

      Speaking of efficiency twin 50% price discounts at retail sale and point of note signing utilizes the monetary and financial systems in creating a paradigm changing efficiency of monetary distribution and product consumption, and making the second discount applicable to all green products and big ticket items will enable a bottom up accomplishment of economic ecological policy that has been necessary for 50 years.

    • Yoshinori Shiozawa
      September 11, 2020 at 9:59 am

      I visited a hospital to have MRI examination three days ago. On a wall panel, I found an interesting explanation in the history of the hospital. The founder of the hospital, Kanehiro Takagi, learned in England when it was common for medical students to go to Germany (in the last quarter of the 19th century). Around that time, Meiji government adopted a basic policy to adopt German medicine in the Japanese health care system. It was the glorious time of Robert Koch and German medicine. After having returned from England, Takagi tried to educate medical doctors after the more practical English medicine than more theoretical German medicine. He knew that German medicine is more advanced scientifically but he believed that medicine must be more practical discipline than theoretical learning.

      If this description on the wall is right, it seems that, in medicine, styles of research and practice were, in a way, inverted from the those of business teaching.

    • Yoshinori Shiozawa
      September 11, 2020 at 12:01 pm

      Related to German and British medicine in Japan, we know the following ironic history that indicates how science works in the course of its development.

      MORI Ogai (see Wikipedia) with NATSUME Soseki is one of two famous writers in Meiji era and still popular today. He was an army surgeon who learned modern medicine at The University of Tokyo and passed four years in Germany. After the Russo-Japanese War he was promoted to be Surgeon General of the Army (corresponding to Lieutenant General). TAKAGI Kanehiro (see Wikipedia) became Surgeon General of the Navy and the General Office Director of the Navy.

      At the turn of century (from the 19th to 20th), and in the Russo-Japanese War (1904-1905) in particular, beriberi was a wide-spread serious disease for soldiers. The Vitamin B1 deficiency theory was not known at that time. The Army Medical Office and Mori took the microbe theory (later he took the attitude that the true etiology of beriberi was not yet known). The Navy Medical Office headed by Takagi took the food-related disease theory. As an empirical fact, it was known that wheat eating was effective in preventing beriberi. So, the navy took the policy to feed wheat-mixed rice to soldiers while the army took the policy to let them eat pure rice. As a result, the Army counted much more beriberi patients (much more in proportion) than the Navy. There are many arguments about the responsibility of Ogai and the reasons why he approved pure-rice policy and denied Takagi’s empirical policy. Arguments still continue. With regards to beriberi, however, we can say that German modern microbiology-based medicine worked dysfunctionally against finding the real cause of the disease.

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

        half truths and know it alls.

  7. September 12, 2020 at 5:00 pm

    Let’s get back to Peter Radford’s original article. Most of the comments here have gone off at tangents, and I find the tendency to resort to abuse quite off-putting.

    Radford raises some of the most important basic issues in economic theory. They are methodological, and decent economic theory will never be possible without using a different and better methodology – as is universal in natural sciences such as biology (1). Not critiquing the existing methodology (reactive mode), but *replacing* it with a good one. I make no apology for this focus, which is described above by someone as “small points”: if you don’t get the fundamentals right, nothing else will fit into place.

    Good theory is developed in an interplay with evidence. Either can come first, but the key thing is the iteration (1). Empirical observations that seem to contradict the theory are part of the cutting edge of knowledge growth. In economics, they are (as Radford) says, regarded as “puzzles” and typically shunted out of the way, This is systematic in economics. It can occur in natural sciences (I encountered this in my own biological career before becoming an economist), but generally, these discrepancies are seized upon as an opportunity to find a better theory. It might be a modification of an existing theory (like Ptolemaic epicycles), but it may be a totally new theory. In economics, only the former is tolerated in the mainstream, as Radford notes.

    Coase 1937 raised one of the most important questions in economics: the apparent superiority of the (modern type of) firm to small producers competing in a market – whether “free” (price takers; zero economic profit; etc) or not – that is a distraction. My historical research, not yet published, shows the rise of this type of firm in 18th and early 19th century England. It was a learning process in how to organize such firms. The result was the transformation of production, and the beginning of large-scale, continuing economic growth – and more important, reasonable prosperity for the whole population. For the first time ever in human history. The question here is not so much about managers’ motivations, or about knowledge – the harnessing of innovation was part of the way this new type of firm developed – and still less about the reactive question about why the market is less transformative than this type of firm (which brings about creative destruction). It is institutional. But ignored by most current institutional economists. And the consequence in terms of growth/prosperity is a *systems* property, implying that the basic question in behavioral economics should relate to the way such organizations are maintained and become/remain successful. Not preferences and whether or not they are fixed, etc. My hypothesis along these lines is at (2); as I said, the statistical and qualitative analyses are not yet published.

    The supply curve. The whole S&D curve apparatus is questionable – I won’t go into that here. You need to think causally, not in terms of locus diagrams. Sometimes the increased prospect of profit does lead entrepreneurs into a particular activity. So the S curve is not pure rubbish. But it’s derived in theory from the U-shaped curve of marginal costs, which is factually wrong as a generalization: e.g. in manufacturing, the curve is U shaped in only 5 to 11 percent of cases. So the whole theory of the supply/price relationship needs complete rethinking.

    Diminishing returns. A keystone of most economic theories, not just neoclassical. Did you know that it has hardly ever been tested empirically?!!! For a former natural scientist this is totally astounding, it couldn’t happen in science. The two times it has been tested, it was found not to be there (3). Zero. It is probably a myth.

    The assumption of optimization, stable preferences, etc, is unnecessary to explain why most markets (e.g. established products and *non-financial* services) are stable. Don’t take my word for it: see Gary Becker (1962), who was as orthodox a neoclassical economist as you can find. Vernon Smith, another free marketeer, agrees – on the basis of experimental evidence. The market is not a static equilibrium, it is a causal system characterized by balancing (negative) feedback. In fact, most regular economic phenomena are feedback systems, or something similar (4).

    I could go on, but these are enough pointers to the way that economic theory could start to be rewritten. “Theory” here means causal accounts that fit the evidence, not necessarily models, whether mathematical or not. Like in biology (1).

    Coming to Yoshinori’s interesting observations: medicine is not a science, it is a practice. Like engineering/technology. We think of it as scientific, because for about a hundred and fifty years it has become ever-more based on biomedical science. The difference is between science, i.e. how to understand the world, and technology which is an intervention in it. To do it successfully, in a reliable manner, the intervention needs to take account of the science – in Yoshinori’s example, it was a choice between two newish theories: infection vs. dietary. That is the process of diagnosis, that is central to medical practice today.

    Our aim in economics should be to have such theories that are possible causal explanations, and that are empirically justified, for policy makers to choose from. At the moment, the situation is like medicine in the early 19th century: wrong theories such as bodily humors, miasma, etc. Plus interventions that were routinely used in multiple different conditions, and probably did more harm than good – like applying leeches, which is a remarkably good analogy for austerity policies. But I’ll leave that aside for now.

    Mike Joffe

    • Robert Locke
      September 13, 2020 at 9:48 am

      ‘Coase 1937 raised one of the most important questions in economics: the apparent superiority of the (modern type of) firm to small producers competing in a market – whether “free” (price takers; zero economic profit; etc) or not – that is a distraction. My historical research, not yet published, shows the rise of this type of firm in 18th and early 19th century England.’

      if you had studied history at the university of hawaii and opened your mind, you would have learned as professor yui (Dr. Tsunehiko Yui, one of Japan’s foremost economic historians)


      “The notions that “companies are people” and “business is people” resonate with humanism and are outstanding expressions, Professor R. Locke, an American who specialized in the history of economics, was visiting Japan about 20 years ago and happened to see a sign in a certain department store on which was written the words “gratitude and dedication.” He did not understand Japanese and asked me to explain who these words were addressed to and by whom. My rendition of the words was a direct translation and I explained that they were addressed to clients, customers and employees. Upon hearing this, he looked at me in amazement. When I asked him what kind of similar mottos would be used in the United States, he told me, “Profit and money only.” Now it was my turn to feel bewildered. According to Professor Locke, there was no motto other than “profit” that existed in any business school the world over. Even as internationalization progresses, in Japan the situation remains the exact opposite. I found this quite interesting. Looking back at history, we see that both Great Britain and Japan were on the threshold of market economies in the mid-18th century. Nevertheless, there were significant differences between the market economy of Great Britain and that of Japan. Overseas trade was flourishing in Great Britain while Japan’s entire market was domestic and self-sufficient. In Great Britain, on the other hand, trade revolved around exports and, as such, the consumer was not visible and there was little emphasis on “people.” Even with progress of a free economy and towns overflowing with unemployed, these phenomena were perceived as the workings of the “invisible hand.” In other words, it was the will of God. As mechanization progressed, the enclosure movement gained momentum in Great Britain, resulting in a constant migration of people from farming villages into cities. In Japan, on the other hand, the system of alternate attendance, which required feudal lords to go to Edo and reside there to serve the shogun in alternate years, was becoming established and the city of Edo developed and prospered significantly. Furthermore, from the mid-17th century, Japan’s policy of seclusion also became fully established. It was under this system of seclusion that the self-sufficient economy of Japan, a country poor in natural resources, took shape. There was no landfill technology at that time, so there was no means of expanding the country’s land. By the 18th century, approximately 25 million people in a land lacking in resources had to live self-sufficiently, so efficient use of “people” was imperative. Education of people was also valued since ancient times. Just as the words “companies are people” and “business is people” connote, “people” have been a structural attribute of Japanese management since the Edo Period. This is something that can also be understood by both Chinese and Koreans, so perhaps it is an Eastern concept.

      • September 14, 2020 at 9:19 am

        Well done, Robert. A highly relevant contribution in light of last night’s BBC David Attenborough program “Extinction: the facts”. It also throws up new light on the Protestant reading of the Divine Right of Kings. It is one thing for God to appoint them, quite another to be a father wanting his children to grow up, so allowing them freedom to learn from their own mistakes. Unfortunately “the wages of sin are death”.

      • Yoshinori Shiozawa
        September 14, 2020 at 2:28 pm

        i am sorry that we have separated Mike’s main text and references. This is an addendum to Robert’s post on Japanese business ethic:

        There are many famous kakun (family precepts) that origōinate from the Edo period (before 1867 or the Meiji Restoration). The most famous one is the so-called “teaching of Sampōyoshi” (To be good for both three parties, sellers, buyers and the society). This teaching is known as the spirit of Omi merchants (merchants of Omi origin; Omi is the old name of a prefecture). There are various variants of this teaching. According to a study by Hideki Usami, Professor Emeritus of Shiga University, this teaching originates from the teaching of Itō Chūbei, the founder of the House of Itōhchū (now Itochu Cooperation, one of the big three general trading companies in Japan). The original form by Ito Chūbei was something like this:

        The business of a merchant is an activity of Bodhissattva. The preciousness of merchant’s road is to make both seller and buyer profit, satisfies the shortage of the world, and must be gratified by the mind of Buddha.

        NB. “Road” is the translation of “dō” like Bushidō, Sadō (ceremony of tea), or Judō.

        This teaching became shorter and shorter when the teaching was transmitted from generation to generation and from merchant to merchant. Now the teaching is often cited as “Urite yoshi, kaite yoshi, seken yosh.” (Good for seller, good for buyer, and good for the society). The meaning of “Good for the society” is ambiguous. The easiest interpretation is “Obey the common rules”. Some interpret it as an emergent form of the notion of social responsibility.

      • Yoshinori Shiozawa
        September 15, 2020 at 4:03 am

        Ito Chūbei was born in 1842 and died in 1903. Chūbei and his seneor brother Chŏbei started their business in 1858 (ten years before the Meiji Restoration). Both Itochu and Marubeni commemorate this year as the (remote) foundation of their business. My comment above may have been misleading in giving an impression that the teaching of “Sampoyoshi” was the origin of Edo period. In fact, it gave birth at the early phase of Meiji era (1868 to 1912). Of course, there are many other house precepts that originate in Edo period, but they are less famous.

  8. September 12, 2020 at 5:00 pm

    (1) Joffe, M. 2017. Causal theories, models and evidence in economics—some reflections from the natural sciences. https://www.cogentoa.com/article/10.1080/23322039.2017.1280983.pdf

    (2) Joffe, M. 2011. The root cause of economic growth under capitalism. https://academic.oup.com/cje/article-abstract/35/5/873/1699758?redirectedFrom=fulltext

    (3) Nell, Kevin S., and Anthony P. Thirlwall. 2018. Explaining Differences in the Productivity of Investment Across Countries in the Context of ‘New Growth Theory’. International Review of Applied Economics, 32: 163–194. https://doi.org/10.1080/02692171.2017.1333089.

    Plus a paper I have written, that is not yet published.

    (4) Joffe, M. 2020. Equilibrium, instability, growth and feedback in economics. About to come out in a book published by Springer, called “Feedback economics”.

  9. September 12, 2020 at 5:14 pm

    I meant to say, that the whole point of all this is that we need to develop new theory – replacement mode – rather than just to criticize the existing mainstream (reactive mode), or to add yet more modifications (incremental mode). It takes a theory to beat a theory. That should have been obvious, but I forgot to say it.

  10. Yoshinori Shiozawa
    September 12, 2020 at 11:36 pm

    Great!! We can expect in the near future two great books that will revolutionize economic reasoning and historical account. I wish Lars Syll would read these posts and change his mode from reactive to replacement one.

    Reactive mode and replacement mode are insightful characterization of phases of scientific development. These are totally new to me. Are they terms coined by Michael? or is there someone who inaugurated these two characterization? If the latter is the case, I would like to read the article or the book that explain these terms.

    • September 14, 2020 at 12:19 am

      Yoshinori, I introduced the terms “reactive mode”, “incremental mode” and “selective replacement mode” in a paper published in 2011 called “What would a scientific economics look like?” It was published as a chapter in a book, and I have no pdf of it in that version, but I will email you (and anyone else interested) a pdf in my own format. It does not seem to be available online.

      I expanded a bit on the theme in a short article for the Royal Economic Society Newsletter in 2018, adding also “true belief mode” (that theory takes precedent over the awkward facts that contradict it), and “distancing mode” (economists who distance themselves from assumptions of extreme rationality, equilibrium etc, but are otherwise quite orthodox, albeit in a rather non-theoretical way). The article was called “What’s really wrong with economics”. Available on my website at https://evidence-based-economics.org/articles/short-articles-on-evidence-based-economics/whatsreallywrongwitheconomics/.

      While preparing this reply, I did a search on “What would a scientific economics look like?”, and found that it was also the title of an article by Peter Dorman, in Real-World Economics Review, in 2008. I was unaware of it before – my ignorance! It makes related points to my chapter, but with a slightly different focus. It is well worth reading. And it has the advantage of being much shorter!

      • September 14, 2020 at 9:00 am

        Well done, Michael. The Peter Dorman article is a real find: even the abstract entirely justifying reference to information science and the modelling of its mechanisms (hence the mechanisms of Shannon’s circuit logic and digitisation).

        Sciences are loosely characterized by an agenda to describe the mechanisms by which observable outcomes are brought about and the privileging of propositions that have been demonstrated to have negligible risk of Type I error. … A scientific economics would take Type I error far more seriously, would study mechanisms rather than a succession of states, would be more experimental and would attach greater value to primary data collection”.

        Yoshinora, c.f. https://rwer.wordpress.com/2020/09/10/michael-woodford-on-models/#comment-172624

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