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Michael Woodford on models

from Lars Syll

woodfordBut I do not believe that the route to sounder economic reasoning will involve an abandonment of economists’ penchant for reasoning with the use of models. Models allow the internal consistency of a proposed argument to be checked with greater precision; they allow more finely-grained differentiation among alternative hypotheses, and they allow longer and more subtle chains of reasoning to be deployed without both author and reader becoming hopelessly tangled in them. Nor do I believe it is true that economists who are more given to the use of formal mathematical analysis are generally more dogmatic in their conclusions than those who customarily rely upon more informal styles of argument. Often, reasoning from formal models makes it easier to see how strong are the assumptions required for an argument to be valid, and how different one’s conclusions may be depending on modest changes in specific assumptions. And whether or not any given practitioner of economic modeling is inclined to honestly assess the fragility of his conclusions, the use of a model to justify those conclusions makes it easy for others to see what assumptions have been relied upon, and hence to challenge them. As a result, the resort to argumentation based on models facilitates the general project of critical inquiry that represents, in my view, our best hope for some eventual approach toward truth.

Michael Woodford

This is — sad to say — a rather typical view among mainstream economists today. Defending the use of unrealistic and unsubstantiated models with the argument that models make it “easy for others to see what assumptions have been relied upon, and hence to challenge them” is rather far-fetched. It’s like arguing: “We can’t understand what is going on in our complex and uncertain world, so let us set up ‘small-world’ models in which we assume away the complexities and reduce genuine uncertainty to calculable risk, and then let us, with precision and rigour, look at those assumptions and challenge them.” Yours truly fails to see the point.

Mainstream economic theory today is in the story-telling business whereby economic theorists create make-believe analogue models of the target system – usually conceived as the real economic system. This modeling activity is considered useful and essential. And it’s used both in micro- and macroeconomics. Since everything the economist wants to know is put in to the model, it’s a piece of cake to prove whatever in a ‘rigorous’ and valid way. Deductive certainty is achieved — in the model. Unfortunately, the price one has to pay for getting at ‘rigorous’ and precise results in this way, is making outright ridiculous assumptions that actually impair the possibility of having anything of interest to say about the real world.

Since fully-fledged experiments on a societal scale as a rule are prohibitively expensive, ethically indefensible or unmanageable, economic theorists have to go for something else. To understand and explain relations between different entities in the real economy the predominant strategy is to build models — the preferred stand-in for real experiments — and make things happen in these ‘analogue-economy models’ rather than engineering things happening in real economies.

Mainstream economics has since long given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence only plays a minor role in economic theory, where models largely function as a substitute for empirical evidence. The one-sided, almost religious, insistence on axiomatic-deductivist modeling as the only scientific activity worthy of pursuing in economics, is a scientific cul-de-sac.

Avoiding logical inconsistencies is crucial in all science. But it is not enough. Just as important is avoiding factual inconsistencies. And without showing — or at least warrantedly arguing — that the assumptions and premises of their models are in fact true, mainstream economists aren’t really reasoning, but only playing games. Formalistic deductive ‘Glasperlenspiel’ can be very impressive and seductive. But in the realm of science it ought to be considered of little or no value to simply make claims about the model and lose sight of reality.

Mainstream theoretical economics is still under the spell of the Bourbaki tradition in mathematics. Theoretical rigour is everything. Studying real-world economies and empirical corrobation/falsification of theories and models nothing. Separating questions of logic and empirical validity may — of course — help economists to focus on producing rigorous and elegant mathematical theorems that Woodford et consortes consider as “progress in economic thinking.” To most other people, not being concerned with empirical evidence and model validation is a sign of social science becoming totally useless and irrelevant. Economic theories building on known to be ridiculously artificial assumptions without an explicit relationship with the real world is a dead end. That’s probably also the reason why Neo-Walrasian general equilibrium analysis today (at least outside Chicago) is considered a total waste of time. In the trade-off between relevance and rigour, priority should always be on the former when it comes to social science. The only thing followers of the Bourbaki tradition within economics — like von Neumann, Debreu, Lucas, and Sargent — has given us are irrelevant model abstractions with no bridges to real-world economies. It’s difficult to find a more poignant example of a total waste of time in science.

If the real world is fuzzy, vague and indeterminate, then why should our models build upon a desire to describe it as precise and predictable? The logic of idealization is a marvellous tool in mathematics and axiomatic-deductivist systems, but a poor guide for action in real-world systems, where concepts and entities often are without clear boundaries and continually interact and overlap.

Being told that the model is rigorous and amenable to ‘successive approximations’ to reality is of little avail, especially when the law-like (nomological) core assumptions are highly questionable. Being able to construct ‘thought-experiments’ depicting logical possibilities does not take us very far. An obvious problem with mainstream economic models is that they are formulated in such a way that they realiter is extremely difficult to empirically test and decisively ‘corroborate’ or ‘falsify.’

Contrary to Woodford, I would argue such models have — from an explanatory point of view — no value at all. The ‘thinness’ is bought at too high a price unless you decide to leave the intended area of application unspecified or immunize your model by interpreting it as nothing more than a set of assumptions making up a content-less theoretical system with no connection whatsoever to reality.

  1. Ikonoclast
    September 10, 2020 at 11:07 pm

    Lars Sylls writes:

    “Since fully-fledged experiments on a societal scale as a rule are prohibitively expensive, ethically indefensible or unmanageable, economic theorists have to go for something else. To understand and explain relations between different entities in the real economy the predominant strategy is to build models — the preferred stand-in for real experiments — and make things happen in these ‘analogue-economy models’ rather than engineering things happening in real economies.”

    Actually, I tend to the view that everything we do in socioeconomics or political economy is an experiment. Everything we do is an ongoing, trial-and-error, uncontrolled experiment. That we are in a dangerously uncontrolled experiment is shown by the fact, very recently reported, that wildlife populations have declined by 2/3rds since 1970. That is to say, making it personal to me and anyone else about my age, wildlife populations have declined by 2/3rds since I left high school. That is a stupendous and terrifying thought. This is an out-of-control planetary experiment so dire that an new experiment, a new trial-and-error program in the other direction is absolutely mandated. It is ethically indefensible NOT to do it.

    Some time ago, it was common for some religious and political conservatives to refer to left-wing views and programs (such as gender equality programs) as “social engineering”. I don’t hear that term being used that way these days. The implication from those religious and political conservatives was that the status quo was natural (and even supernaturally ordained) and attempting anything else was “social engineering”. My standard reply to such thinkers was “It’s all social engineering. The conservative status quo was and is also engineered. It’s dishonest to call only what you disagree with “social engineering.”” Of course, I convinced no conservative by my arguments.

    The progress to the neoliberal ascendancy was engineered by the capitalists of the 1970s and 1980s. Almost at the very moment that the “Limits to Growth” publication appeared, a huge campaign was undertaken to discredit it and intensify capitalist endless growth theory. Calls for even a precautionary pause and more study of the earth systems, ecologies, atmosphere and biosphere were swept aside. We now see the results of that campaign. A wildlife population decline of 2/3rds in 50 years: a sixth mass extinction many orders of magnitude more rapid than any previous mass extinction. South-Eastern Australia last year and California, Oregon and Washington state this year essentially burn to the ground : large tracts of land burn to the ground in catastrophic wildfires with fire regimes and pyro weather events never seen before in modern history and perhaps not in all of civilized human history.

    The capitalist experiment has failed. The neoliberal experiment has failed. An apocalyptic collapse is in the near offing. The COVID-19 pandemic (a zoonotic disease unleashed by our depredations on wilderness and wild-life) is actually showing us the direction we need to take. We need to shut down excess consumption to save the planet and ourselves.

    This raises the enormous problem that an old-fashioned demand led recovery is impossible. If we attempt that we collapse faster. This is why I say that the COVID-19 pandemic is showing us the way, showing us what we have to do. All non-essential economic activities need to cease and cease permanently. The only parts of the economy necessary are those which provide the necessities for modern civilized life. What we have shut down for the COVID-19 pandemic for months now is basically all the non-essential stuff. If it was truly essential on a daily or even monthly basis we would all be dead already without it. Ergo, what is shut for months and hasn’t killed us is unnecessary. If we reopen it, that reopening will kill us. Climate change, species extinctions and the other attendant catastrophes will continue and send the human race extinct.

    The new policies necessary to provide income, while work is restructured away from non-essentials to survival essentials and renewable energy build-out, must be continued and augmented. Nobody must be left without the means to purchase food, accommodation and other necessities. Many services in health and education must be made free and public. In short, we must abandon capitalism and implement democratic socialism immediately. It is possible some of us might survive if we make that experiment. Continuing the experiment of neoliberal capitalism will kill us all in short order. That trend is clear from the last 50 years.

    • September 12, 2020 at 4:16 pm

      As usual I agree with you on most of this. See the Chomsky version below.

  2. Frank Salter
    September 11, 2020 at 10:43 am

    Again there is a failure to recognise that models may be meaningful or total meaningless if the mathematics they represent is merely guesswork or valid theory. ONLY first principles analysis produces valid theory and as far as I know there is only analysis from first principles, therefore conventional analysis is theoretically meaningless.

  3. Yoshinori Shiozawa
    September 11, 2020 at 1:14 pm

    Let us remind what we have argued in comments to Lars Syll’s article “Arrow-Debreu and the Bourbaki illusion of rigour” more than one year ago.

    • Yoshinori Shiozawa
      September 11, 2020 at 1:40 pm

      This is what I have written in one of comments to Lars Syll’s article “Arrow-Debreu and the Bourbaki illusion of rigour”:

      Lars Syll’s talks, it seems to me, as if a new scientific economics emerges once a good philosophy and methodology are established. This is a pure fiction and betrays the history of all sciences and disciplines (natural or social). A science grows very slowly and sinuously. It requires enormous efforts and trials and errors. If Lars Syll wants to be a useful philosopher of economics, he should better pay more efforts on the state of heterodox economics. If he finds some deficiency and flaws, and if he tell those economists who work in those fields, the economists would reflect on their problems and try to find a better way. In a very wide sense, criticizing neoclassical and mainstream economics may be a part of above efforts, but actually it works in a very negative way in this blog site, where almost all readers already recognize there are fatal flaws in neoclassical economics. The next target should be to show a new direction for the construction of a new economics. If not, his efforts enhance disbelief on economics in general including heterodox economics. No science emerges from nothing. A science grows. (Shiozawa, August 2, 2019 at 7:52 am Reply)

  4. Craig
    September 11, 2020 at 11:11 pm

    “A science grows.” Correct, but science is reductive and for the most part lacking in the mentally integrative mindset that characterizes wisdom, and hence will not allow the scientist to leap to the proper deep simplicity necessary to analyze, perceive and honestly evaluate on the level of the pattern/paradigm. Steve Keen whose calculus has so effectively shown that austerity is flawed still cannot bring himself to any more than palliative reforms, good palliative reforms mind you, but reforms that wealth and power can obstruct and/or dismiss as if they were nothing because the power of a paradigm concept IS EVERYTHING. And yet he, we refuse to even surmise what the new paradigm concept might be.

    It’s incredibly blind and stupid that we are not discussing here both what the current and possible new paradigm might be. No one here but me apparently cares about or has done any research about paradigms themselves in order to decipher the historical signatures of such changes, the conclusions of which would undoubtedly be very enlightening for us now.

    Michael Hudson has done much very good historical research on debt as had David Graeber, but not on a paradighmatic level. Science and ideological bias brought them no higher than Georghism, socialism and anarchism. Science ultimately proscribes/inhibits. It alone is not an adequate tool.

    Paradigms are single concepts, i.e. deep simplicites that effect transformational changes in the complexities of entire patterns. Think on them. Analyze about and with them. Or stumble for a few more decades or millenia.

  5. Yoshinori Shiozawa
    September 12, 2020 at 5:05 am

    As science is not everything, paradigm is not everything. However, the concept of paradigm is extremely ambiguous. Different people think of different things. I do not use the word paradigm to indicate Georgism, socialism or anarchism, but it seems you are calling them paradigms. I would call them social thought or social ideas.

    It is true that social idea and social science go tandem, To believe that social idea is everything is dangerous. A social idea indicates aspiration of a society but it may be based on imaginary construction and does not take in consideration all difficult problems that may emerge in the course of implementation. You have cited three social ideas: Georgism, socialism and anarchism. But why have you omitted mentioning communism or idea of central planning? Among the four social ideas, the communism was the unique idea that was actually tried to be implemented. You should learn from the history and from the sciences (in this case, economics and political science). Three others have no such experience. Hayek’s economics was inspired from the doubt on whether central planning of a big society works in reality. There were many economists who thought it is possible, but after a long experiment of Soviet system (about 70 years) proved that central planning did not work as it was imagined.

    There are full of ideological propaganda such as that communists were evil people who aimed to construct an evil empire. This is a sheer lie. Majority of people who dreamed communism were people with good will, burning with high hopes. Despite of their goodwill, their aspiration went to something totally different from that they have dreamed. Why? Simply, because they lacked a good economic theory. Marx’s Capital was an analysis of capitalist economy. No sincere analysis of communist economy or society existed. This is an example that a dream of high idea may turn out be a bad dream. One of social sciences is to give hints to re-adjust social ideas which are simply dreamed ideas.

    I do not insist that actual economics (and mainstream economic in particular) has such hints. It is because social sciences were not so developed until now. But this fact does not imply that social reformers can ignore knowledge of economics and others. There are various strands of economics and you may find someone that may be useful.

    You have mentioned Michael Hudson. He may not have produced a theory of debt as revolutionary as David Graeber. But Hudson’s young work was the history of trade policies in the 19th century United States. The question of free trade or protection is still argued now. Despite the fact that the US had a strong protectionist idea in the 19th century, it turned to be a promoter of free trade in the 20th century. Hudson wrote a history that USA was not a country that embraced free trade thought from the beginning. He has succeeded to put free trade idea in parentheses. But, in the world where mainstream economics is predominant, this relativization is not sufficient. To criticize free trade ideology, we need a positive theory.
    International trade theory may not interest you very much but without having a good theory of trade, we cannot really design a good world economy.

    • Craig
      September 12, 2020 at 7:50 am

      Georgism, socialism and anarchism are not paradigms they are all three theories THAT RESIDE WHOLLY WITHIN THE CURRENT MONETARY AND FINANCIAL PARADIGM OF DEBT ONLY.

      Paradigms, especially extremely relevant and urgently needed new paradigms are everything. It IS FINANCE capitalism we are suffering through. The leading reforms ARE Minsky’s FINANCIAL Instability Hypothesis, Modern MONETARY Theory, Hudson’s FINANCIAL Parasitism and Public BANKING/FINANCE. So the perplexingly ignored hint is that the REAL AND MOST RELEVANT problem IS about MONEY and FINANCE, specifically the MONETARY and FINANCIAL paradigm, its monopolistic dominance of the economy, how it prevents rational thinking and acting to begin resolving the species and planetary existential problem of global warming not to mention the individual and systemic austerity that every heterodox theorist recognizes as a fact.

      Look at the monetary and financial paradigm and its present deleterious effects. Look at the policies and immediate and continuous beneficial effects of the the new paradigm concept of Direct and Reciprocal Monetary Gifting. Look at the incredible individual, commercial and systemic effects of those policies and look at where those policies are implemented for their most efficacious resolution of the problems of the economic effects of the present monetary and financial paradigm. Ask yourself what is a “modern debt jubilee”? It’s monetary GIFTING. What is a UBI/Universal Dividend? It’s monetary GIFTING. Ask yourself why do national “debts” necessarily have to be debts? They don’t have to be, they can simply be debits and credits. Increasing the money supply is always accompanied by the bugaboo of inflation so why not make beneficial price deflation the reality with 50% discount/rebate policies that express the new monetary and financial paradigm of Direct and Reciprocal Monetary GIFTING at retail sale and at the point of note signing for big ticket items most especially big ticket green consumer items.

      Let’s stop all the chat and get on with the new concept and its policies. Please.

  6. Yoshinori Shiozawa
    September 12, 2020 at 9:03 am

    There would be very few people who call Georgism, socialism and anarchism theories. You are free to call your solve-everything idea a paradigm, but it is in a peculiar sense. Very few people use the word in that sense. You are violating the history of terms. I agree with you to stop chattering. Our arguments have a low possibility to produce any positive discoveries.

    • Craig
      September 12, 2020 at 7:02 pm

      “There would be very few people who call Georgism, socialism and anarchism theories.”

      They ARE economic theories. And you forgot to finish my emphasized sentence… THAT RESIDE WHOLLY WITHIN THE CURRENT MONETARY AND FINANCIAL PARADIGM OF DEBT ONLY.

      Paradigms are nothing more and certainly nothing less than ideas. There are little ideas like eggs are good for breakfast, theoretical ideas like science is reductive truth determined by logic and empirical fact and relevant and pattern changing ideas like Direct and Reciprocal Monetary Gifting. There is also the paradigm changing idea that science is a subset of Wisdom.

      The smallish definition of paradigm is merely psychology while genuine pattern changing paradigms indeed so integratively saturate an entire body of knowledge/area of human endeavor with the new concept that it is transformed. It is helio-centrism instead of terra-centrism, homesteading instead of nomadism, agriculture instead of foraging, and freeing yet perplexing self awareness instead of degrees of enforced entrapment in the struggle for survival.

      When someone else’s paradigm concept does more to resolve individual income scarcity, systemic austerity, uncompetitive costliness, uncompetitive, fragility prone and wasteful globalization, erosion of purchasing power and the inhibiting idiocy of the present monetary and financial paradigm preventing us from doing what is obvious in order to survive global warming….I’ll get on their bandwagon. And until then expect me to be the one eyed person in the world of the blind.

  7. September 12, 2020 at 4:04 pm

    Ignoring Craig’s unscientific use of the words ‘paradigm’ and ‘theory’, I found his examples (George, socialism, anarchism) instructive. I largely agree with what he is trying to say, especially his concluding appeal: “Let’s stop all the chat and get on with the new concept and its policies. Please”.

    In the thread: https://www.worldeconomicsassociation.org/newsletterarticles/end-of-globalisation/, this from Chomsky:

    “The coronavirus is likely to change the highly fragile international economy that has been constructed in recent years, profit-driven and dismissive of externalized costs such as the huge destruction of the environment caused by transactions within complex supply chains, not to speak of the destruction of lives and communities. It’s likely that all of this will be reshaped, but again we should ask, and answer, the question of whose will be the guiding hands”.

    Nevil Shute explores Chomsky’s question in his 1960’s novel “In the Wet”, in which a dream is of the British Commonwealth falling apart unless the Queen, the figurehead holding it together, can enforce a more intelligent form of democracy on Britain by subjecting it, like Australia and Canada, to a Governor-General. (This for discussion, not a proposal). It uses the example (paradigm) of Australia and Canada already having Governor-Generals to suggest building it into Britain’s own Constitution as a solution to the real problems there.

    Going back quickly over my own thoughts on Craig’s, I found Henry George’s demonstration of the ills of capitalism persuasive, but yes: his single tax solution still leaves a capitalist government charging rents. ‘Socialism’ is just a word, meaning people-oriented policies to some people but power to dictate their own policies in anti-capitalist Communist or Fabian as well as in capitalist governments. (See Belloc’s seminal “The Servile State” as well as Shute). The word ‘Anarchism’ is taken by capitalists to mean anti-government when literally it means no government, or what I seem to have been proposing: Self-government, in the forms of not just personal responsibility and local community service but agreement on and commitment to the constitutions of states, where written constitutions define conventional choices as real and as necessary as which side of the road to drive on, like what the terms ‘money’, ‘property’, person and ‘ownership’ are to be taken to mean.

    So what is to be Craig’s new concept? I think Shute is right: it has to include Government, but as I’ve just suggested, the theoretical figurehead can be the Constitution even if the human figurehead is a Queen or President. I think with Shute (youthful observer of the Irish uprising) that either capitalism or ‘socialism’ can work in practice insofar as it is combined and balanced by the other. That concept is not just two-sided – ‘either/or’, two sides of one coin – but already complex, taking account also of ‘both’ (a mixed economy) and ‘neither’ (dictatorship, which rejects the Queen’s “Governor-General” role implied in “the divine right of kings” – to defend the nation’s traditions from internal and external attack – but keeps her figurehead role above the parapet to divert flack from the would-be kings below it). Making the Governor-General role explicit could be an interesting solution to that, enabling him to review past constitutional changes and allow the people to commit to their own futures by means of referenda.

    So ‘money’ has changed from being physical goods to being abstract numbers; ‘property’ has changed from the means of earning a living to a means of acquiring money; ‘person’ has changed from being an individual (and/or his family) to being a fictitious figurehead holding fictitious entitlements bought with empty money, and ‘ownership’ has changed from being the traditional right of a family to the produce of the land it has worked to a right to the unlimited (because empty) money and financial assets aggregated by fictitious figureheads.

    Craig remains mistaken to think of a paradigm as a thing like money or a state like debt. A paradigm is an example of a way of doing things, where in ‘monetary’ trade we now have a choice between physical cash, token cheques, banker’s debit cards and our own credit cards: both the last being effectively just numbers in accounts. Thinking in terms of Copernican paradigm change, bankers value goods by their price and make more as we spend, but our credit cards value us by our credit limit, and that goes down as spend. “Smoke and mirrors”! What we see in a mirror is just like the real thing, but wrong way round.

  8. Yoshinori Shiozawa
    September 12, 2020 at 5:03 pm

    davetaylor1’s comment on September 5, 2020 at 7:01 am on Asad Zaman’s article:

    I’ve repeatedly pointed out that “the state of the art”s theoretical core based on the Newtonian Maxwell/Grassman theory of unrestrained radio power transmission has bemused itself by not taking account of the directional constraints of telephony and Shannon’s definitions of information and noise. It seems Hayek’s speculations on information (1946) preceded Shannon (1948), but Keynes wrote after Newton and his theoretical core – however intuitively expressed – was consistent with both the PID mathematical distinctions – proportional, integral differential – in Newtonian mathematics, and the error-correcting rather than knowledge-seeking purpose of information science, as in the cybernetic model of eliminating error.

    Economics professors like Yoshinori, wishing to advance the “state of the art”, need to spend some time studying how DC telephony, AM, FM and Digital radio work; how negative feedback is able to reduce noise (familiar from Dolby hi-fi) and how positive feedback (reaction) first strips the information from any signal it is applied to, and more strongly applied, generates first oscillation then noise (a pre-war practical demonstration of complexity theory).

    I have responded to the second paragraph above in my post on September 7, 2020 at 1:53 pm in the same page, which starts with “Stability-instability problems in economics are much more complicated than the standard cybernetics problems, because the question is the stability-instability of high-dimensioned vectors.”

    Dave’s comment is often very difficult to understand what he really wants to say. The following is a part of Michael Joffe’s comment (March 5, 2020 at 5:01 pm) on Joachim H. Spangenberg and Lia Polotzek’s note “Challenges of complexity economics”:

    Most of the regularities we see in the economy are eminently explicable using feedback concepts – not as deterministic models, but rather as indicating the sorts of causal processes that lie behind the various phenomena we see. These include the relative stability of some types of market, e.g. well established goods and nonfinancial services, like washing machines. Secondly, periodic fluctuations, as in real estate markets, and at a macro level with the business cycle. These are both balancing (negative) feedback, the second one with delay added. Thirdly, multiple equilibria (as Brian Arthur’s work shows) that leads to suboptimal technologies and lock-in. Fourthly, crises, booms/busts etc. Fifthly, economic growth that results from arms-race competition between “capitalist” firms. These last three are distinct types of reinforcing (positive) feedback. All these types of system can readily be illustrated using causal diagrams with feedback loops, that are rather easy to understand. Admittedly they assume an average or aggregate behaviour, so underestimate heterogeneity – but they do take account of causal interactions, which are the main driving force.

    I can understand very well what Joffe says. I wonder why Dave does not explain in this plain way. Both talks about feedback (Economics professor knows the basics of cybernetics). What is the difference? Probably, Joffe enumerates (theoretically) concrete examples in economy or economics to illustrate his idea, whereas Dave does not. He explains his idea by examples he knows well but many people do not.

    • September 13, 2020 at 9:41 am

      Yoshinora doesn’t understand Dave because he’s looking for micro foundations for economic macro theory where Dave is offering the macro foundation of micro logic. What little is true of all is true of any, but the same information (even when presented as Joffre’s diagram) looks different depending how you look at it: as going round a telephone power circuit or a multi-circuit feedback system feeding back data on some or all of present, past and future timescales (Newton’s static position, motion, acceleration and evolving methods, i.e. directed forces). This is not about telling it as it is, it is leaving clues trying to get people thinking for themselves (as Keynes did) about how to get beyond the static “cause and effect” deductive logic assumed in empirical economics. So yes, Yoshinori, my examples – even my “feeding the kids” family model – are not directly of economics but of newly discovered forms of logic still not being applied in economics.

      Several people (including myself) have regretted some apparently ad hominem attacks here. I apologise if my irritation with Yoshinori has occasionally shown, but it takes two to tango. Okay, so he has two left feet, but since my emailing him on 25/01/2018 my thoughts about how to dance, he has never once commented on or asked me to explain the steps I have shown him, merely defending his own position. Okay again: we understand it is hard to teach old dogs new tricks, so no hard feelings. Just occasional irritation.

      • Yoshinori Shiozawa
        September 13, 2020 at 2:53 pm

        Aha! Dave, you are talking about “newly discovered forms of logic” that is “still not being applied in economics”. That must be the reason why I, an economist, do not understand what you say. I have been mistaken that you are talking about economy and economics. If you are not talking about economy or economics, I have no place in this argument. I will quit it.

      • September 14, 2020 at 8:29 am

        What I find utterly bewildering is that any economist should think that logic (and therefore the new forms of logic) is not applicable to economics. It helps tremendously, however, to understand that this is the problem. When one of the new forms of logic is the switching circuit logic used in computers and another the information feedback circuit logic of cybernetics, it perhaps explains why economists can’t see when the word ‘model’ is being used in an engineering rather than an accounting sense.

    • Yoshinori Shiozawa
      September 14, 2020 at 9:36 am

      Using computers as an aid to understand economic processes is not Dave’s monopoly. As I have posted on September 5, 2020 at 2:28 pm, I have written a chapter on
      ACE (Agent-based Computational Economics) and even had lead a group of researchers for this purpose (U-MART, 1998 -2007). The book in which my chapter appears (Realistic Simulation of Financial Markets: Analyzing Market Behaviors by the Third Mode of Science, 2016) is one of that team’s works. Switching circuit logic used in computers does not seem to be very useful in analyzing the economy. If you claim it is, you should present at least an example that shows it is usefully applied in understanding some aspect of the economy.

      As for using cybernetic logic, I have already tried it in our study on stability / instability analysis of input-output relations between firms (See my post on September 7, 2020 at 1:53 pm that follows the above mentioned Reply). This work started from c.1980 (first published paper in 1983). I have tried almost all possible tools of analyses in order to develop a new framework of analyses in order to escape from equilibrium analyses. As you have emphasized that you have discovered a new logic, I tried to find something new than cybernetics and computer-aided agent simulation, in vain. If what you say is correct in the above posts, I must say that I have been using them since many years ago. You should not claim that you have discovered new logic. It is the cause of confusion. They are well known method or tool of analysis even in economics. Many economists are trying how to implement those tools for a concrete analyses of the economy (or of an aspect of the economy). It would be better that you learn economics (what are studied in what way) than to claim that you know something new that no economists know or understand. If you want, I and other participants here may give you some hints.

      • September 14, 2020 at 8:29 pm

        As for new, we are talking 1938 and 1948 as against 300 bc for logic and c.1769 since Harrison’s clock and Captain Cooke’s use of it made compass navigation practicable (i.e. the method Wiener’s cybernetics took as the paradigmatic example of its logic). I have never claimed to have discovered them, I just happen to be one of the earliest users of them, with enough interest in philosophy of science to be concerned with the philosophical and mathematical significance of what I was doing, so that in 1960 (electronic control) and 1969 (Algol68), others put me forward for the relevant jobs.

        Yoshinori, you are still looking at micro-economics and not seeing the macro economics is about understanding the system as a whole by viewing it logically instead of empirically. The empirical method fails both because of the aggregation problem and the impossibility of having all the relevant data, not least the probability of things which have not yet happened. I’ve supported Keynes not only because my generation thrived where all my grandparents had died before his change of mind enabled him to cure the worst of the slump: since first reading him in 1969 I had always seen his macroeconomics as using the integrated (employment position) as well as the course correction (price) forms of negative feedback, before there was a ‘cybernetic’ concept to refer to. I have since realised his discussion of long-term expectations is about differentiation by positive feedback. Like all you mainstream economists from Hicks on, you mistake Keynes’s examples for the logic they are trying to illustrate.

        What I do feel I have probably contributed myself is my interpretation of the cross-connected circuit form you have ignored, which many others have used as a teaching aid. Even that is anticipated in the logical “Square of Opposition” (God knows how old) and in Wheatstone’s Bridge (c.1820), a scientific instrument for achieving equilibrium between two electrical circuits named for the creator of railway telegraphy. That involves power; it still works if the power carries telegraphy or telephone signals, or a broadband signal carrying millions of different signals, whether kept separate by being (like radio stations) broadcast at different frequencies, or by being addressed and sent jumbled up and even whichever way – cable, terrestial broadcasting or satellite – as in modern digital telephony.

        You micro-economists are still seeking the meaning of the broadcasts; you are missing the macro point that equilibrium is a positional aim one can navigate towards given a three dimensional reality and two orthogonal coordinates. That, hung on the cross-connected circuit diagram (itself long ago named as Leavitt’s Diagram) is something simple enough to be explained in city schools and related to familiar household roles. Those who live by and wish to sail to particular places still need to understand what they are doing, but that leaves them plenty of “micro” data to explore and master, like the tides, currents, winds and charts relevant to their own particular seas, or Ashby’s aimless “requisite variety” needed for stability . I’m not even denying a role for an applied science of economics, just insisting on the need for a science of its fundamentals, i.e. of automated rather than automatic equilibrium.

        Occam (so Hume) got it wrong, and Einstein right: “Keep things simple, but not too simple”. One has to take account of the language one is using as well as differences of meaning. Not just Shannon’s binary digits but what they refer to: in English grammar nouns, adjectives, verbs, adverbs or logical directives; in Algol68 variables, constants, procedures and their logical types (Algol68 known as modes of interpretation). Like Lars, I’m taking Locke’s modest under-labouring as my model, but just see how his focus on “the thinness” of models” compares with the “not too simple” simplicity of mine.

      • Yoshinori Shiozawa
        September 15, 2020 at 2:05 am

        Dave, you have your idea. Please go as you like. I have my idea and I go as I like. This is the goodness of pluralism. There is no need to unify what we do in research. Sciences and knowledge in general develop by parallel experimentation.

        Have you read David Ellerman’s paper Parallel experimentation? It is an impressive paper. In fact, there are two versions: (1) Parallel experimentation and the problem of variation, 2004. (2) Parallel experimentation: a basic scheme for dynamic efficiency, 2014. If you like, I can send you PDFs.

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