Home > Uncategorized > A valid ontology for economics?

A valid ontology for economics?

from Ikonoclast (originally a comment)

The challenge is to develop a valid ontology for economics. In medicine, early theories of disease failed to yield efficacious treatments because their ontology (a theory of basic real existents and how they interact) was wrong. A few of the more common ideas founded on false ontologies were that diseases were caused by evil spirits, miasma and imbalances of the four humors. It was not until the advent of the germ theory of disease that real progress was made. More basic and real biological existents were found, microscopic “germs” or pathogens, and the pathogenic theory of disease was founded. With continued research, further causes of disease were found, namely deficiency disease, hereditary disease and physiological disease. Again, this progress was made possible by basic empirical research into real existents via the disciplines of physics, chemistry, biochemistry, genetics, physiology (a complex system discipline) and neurology (another complex system discipline).

Since conventional economics has made a total mess of things, and it is founded on a demonstrably false ontology, the discipline must be torn down and rebuilt from scratch. The conventional economists are the modern world’s equivalent of the medieval school-men. Their arguments are those of the syllogism and mathematico-deductive logic while being based on a false ontology of economic objects. When the premises are false, all ensuing deductions are false. Conventional economists still talk about “spirits” only they call them sentiment, optimism, pessimism and so on. Instead of the homunculus to explain human reproduction they have homo economicus to explain economic reproduction.

The problem with conventional economics is that it commences with prescriptions and then using the prescriptions as axioms, develops its theorems. However, to study the real we cannot begin with prescriptions. We must begin with empirical investigation and accurate descriptions of the real and the interactions of real existents. This is why, at the first level, economics must begin with thermoeconomics, also referred to as biophysical economics. At this level we must seek to equate production and production possibilities only with the empirically measurable and empirically sustainable.

At the same time, we cannot ignore our current cultural norms, in particular the prescriptive norms of private property and (supposedly) free markets. This is where contemporary economics is prescriptive and normative, prescribing these norms as absolutely necessary and non-negotiable. With these norms taken as axiomatic givens, the “laws” of economics are sought. But the results of axioms (when derived) are theorems or pre-determined outcomes, not laws. The normative rules of conventional economics create behaviors but these behaviors are in no way law governed (in the sense of fundamental scientific laws). Rather, they are axiomatically guaranteed outcomes within the limits of what is empirically possible. This is a fundamental point. Human rules (as opposed to fundamental laws of nature) create specific results within the bounds of the possible.

If conventional economics will not own up to its prescriptive foundations, as it in fact does not, then it is revealed as dishonest and merely an ideology dressed up in the trappings of false mathematico-deductivist justifications. Can a non-mathematician critique complex mathematical models in economics or other disciplines? No, not in their own terms. However, the empirical evidence for or against a mathematical model set (in a discipline arena) can be assessed by a basically science-literate person. I am neither an aeronautical engineer nor am I an atmospheric physicist. I cannot critique their mathematical models. Yet, I can see that planes fly and that modern climate models also “fly” while still being granular and imperfect. In the second case, “fly” means that word summaries, diagrams and basic formulae of climate models make scientific explanatory sense (cause and effect sense) to a science-literate person and the models also make predictions which are being borne out empirically by real-world developments.

It’s difficult, for me at least, to see any way that mathematico-deductivist economic models fly outside of the theoretical spaces in which they are constructed. That is, it is difficult to see that they fly in real spaces in the real world). That’s fine up to a point. Theory, be it sociological or scientific, is the next step after inductive and adbductive reasoning from empirical hints and instances. But eventually the theory must be taken back to the empirical realm for testing. Much of “conventional” economics seems to me to be unclear about whether it is descriptive or a prescriptive discipline. I’m not alone in thinking this. These debates are now generations old and objective conclusions are not just rare but seemingly non-existent. The state of micro and macro in “conventional” economics seems as deplorable as ever.

“Of several major theoretical problems, the most basic is that economic theory reasons deductively, from axioms. An axiom, said the English economist Peter Wiles, is “only a premise one is not allowed to question, dressed up as something grand.” … By reasoning deductively from axioms, economics confuses the normative with the descriptive.” – Robert Kuttner.

My central question is this. Does economics need to go back to basic ontology (in philosophical and scientific terms) in an attempt to correct and properly found its ontology of economic objects and processes? I contend it does need to do this. If you can’t get the base ontology right (what really exists at the most basic observable levels) then you cannot get anything else right. Medicine, fas I said, could make no real progress until it abandoned the humors theory for the germ theory et. al.

  1. JD
    November 26, 2020 at 2:24 am

    OK, I’ll give it a shot. What exists? Energy, Time, Natural resources, Knowledge, and Ingenuity. What is the economy? An accumulation of information, tools, methods, traditions, customs, laws, and relationships. What is the purpose of the economy? Coordination of effort to satisfy people’s needs and wants. Does an economy depend on and function according to a finite set of public policies at a given time? Yes, it does. What is the starting point for economic reasoning? The fact that there is enough to go around.

  2. Yoshinori Shiozawa
    November 26, 2020 at 2:40 am

    Ikonoclast, I agree with you. It is necessary to reconstruct economics on the basis that is more firmly rooted in the economic reality. However, I believe (an I believe you will agree with me) that we should be careful not to fall in pure philosophical arguments departing from the reality of economics. Basic ontology of the economy can be found though economic researches and not by a pure metaphysical ontological meditation. Ontology and economics must go in tandem.

    With this point in mind, what I propose more concretely is to abandon equilibrium framework and try to build economic theory based on causal processes. This is not a totally foreign attempt that was never tried. As Meir Kohn point it out, process analyses were more often pursued in 1920’s before The General Theory. Now, most of heterodox economists work within equilibrium framework (and do not like to abandon or reject it). This is, in my opinion, the very (epistemological) obstruct [Louis Althusser] that impede the breakthrough of economics.

  3. Craig
    November 26, 2020 at 4:28 am

    “What is the purpose of the economy?”

    The purpose of production is consumption.

    The point of consumption (retail sale) is the end of the entire economic process.

    Once consumption occurs no valid economic agent has the right to charge the consumer additional costs.

    Money has many aspects, but its most basic and important one is that it is accounting and thus must abide by the conventions of that discipline.

    Monopolies are glaring contradictions in profit making systems.

    For-profit finance has (idiotically) been granted a monopoly charter to do this and it exposes the fact of its economically parasitical nature, its illegitimacy as an economic agent and its de-stabilizing monopoly paradigm of Debt and Loan Only.

    Monetary Gifting is the ultimate economic tool, ultimate facilitator of commerce, most ecologically aligned economic factor and most intelligent oppositional force to the tyranny of thermo-dynamics.

  4. Meta Capitalism
    November 26, 2020 at 5:15 am

    The heartbeat of science is at its most philosophical rhythm when major conceptual revisions or revolutions are afoot. Then scientists feel the need to extend their reflections beyond the search for mathematical equations. They desire to reach a level of understanding, in which some physical meaning is assigned to the mathematical expression of the natural world. But scientific revolutions may also lead scientists to a re-interpretation of the nature of the scientific enterprise. What is interesting in this process, from a philosophical point of view, is that empirical facts filter through to the level of conceptualisation and bring about changes in the way the world is conceptualised. ‘Old notions are dissolved by new experiences.’25 The common territory between science and philosophy lies in this interaction between facts and concepts. In re-interpreting the world in the light of new experiences the scientist becomes an active participant in the shaping of human views about the surrounding world. (Weinert 2004: 95, The Scientist as Philosopher)

  5. ghholtham
    November 28, 2020 at 7:12 pm

    The ontology depends on the question you are asking. Even within economics there is a wide range of problems to address. Analysing how people interact within organisations starts with individuals defined largely by their role within the organisation. Analysing how much carbon an economy emits and the easiest ways to reduce it can proceed at different levels of granularity but probably starts with economic processes at some level of aggregation and incorporates firms “as if” they were purposeful organisations. I don’t know what the ontological primitives would be for a grand economic theory of everything but I don’t worry about it because I don’t expect to see such a theory.

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