Home > Uncategorized > Why everything we know about modern economics is wrong

Why everything we know about modern economics is wrong

from Lars Syll

The proposition is about as outlandish as it sounds: Everything we know about modern economics is wrong. And the man who says he can prove it doesn’t have a degree in economics. But Ole Peters is no ordinary crank. A physicist by training, his theory draws on research done in close collaboration with the late Nobel laureate Murray Gell-Mann, father of the quark …

His beef is that all too often, economic models assume something called “ergodicity.” That is, the average of all possible outcomes of a given situation informs how any one person might experience it. But that’s often not the case, which Peters says renders much of the field’s predictions irrelevant in real life. In those instances, his solution is to borrow math commonly used in thermodynamics to model outcomes using the correct average …

If Peters is right — and it’s a pretty ginormous if — the consequences are hard to overstate. Simply put, his “fix” would upend three centuries of economic thought, and reshape our understanding of the field as well as everything it touches …

Peters asserts his methods will free economics from thinking in terms of expected values over non-existent parallel universes and focus on how people make decisions in this one. His theory will also eliminate the need for the increasingly elaborate “fudges” economists use to explain away the inconsistencies between their models and reality.

.                                                                                                                          Brandon Kochkodin / BlombergQuint

sfiOle Peters’ fundamental critique of (mainstream) economics involves arguments about ergodicity and the all-important difference between time averages and ensemble averages. These are difficult concepts that many students of economics have problems with understanding. So let me just try to explain the meaning of these concepts by means of a couple of simple examples.

Let’s say you’re offered a gamble where on a roll of a fair die you will get €10  billion if you roll a six, and pay me €1 billion if you roll any other number.

Would you accept the gamble?

If you’re an economics student you probably would because that’s what you’re taught to be the only thing consistent with being rational. You would arrest the arrow of time by imagining six different ‘parallel universes’ where the independent outcomes are the numbers from one to six, and then weight them using their stochastic probability distribution. Calculating the expected value of the gamble — the ensemble average — by averaging on all these weighted outcomes you would actually be a moron if you didn’t take the gamble (the expected value of the gamble being 5/6*€0 + 1/6*€10 billion = €1.67 billion)

If you’re not an economist you would probably trust your common sense and decline the offer, knowing that a large risk of bankrupting one’s economy is not a very rosy perspective for the future. Since you can’t really arrest or reverse the arrow of time, you know that once you have lost the €1 billion, it’s all over. The large likelihood that you go bust weights heavier than the 17% chance of you becoming enormously rich. By computing the time average — imagining one real universe where the six different but dependent outcomes occur consecutively — we would soon be aware of our assets disappearing, and a fortiori that it would be irrational to accept the gamble.

From a mathematical point of view, you can  (somewhat non-rigorously) describe the difference between ensemble averages and time averages as a difference between arithmetic averages and geometric averages. Tossing a fair coin and gaining 20% on the stake (S) if winning (heads) and having to pay 20% on the stake (S) if losing (tails), the arithmetic average of the return on the stake, assuming the outcomes of the coin-toss being independent, would be [(0.5*1.2S + 0.5*0.8S) – S)/S]  = 0%. If considering the two outcomes of the toss not being independent, the relevant time average would be a geometric average return of squareroot [(1.2S *0.8S)]/S – 1 = -2%.

Why is the difference between ensemble and time averages of such importance in economics? Well, basically, because when assuming the processes to be ergodic, ensemble and time averages are identical.

Assume we have a market with an asset priced at €100. Then imagine the price first goes up by 50% and then later falls by 50%. The ensemble average for this asset would be €100 – because we here envision two parallel universes (markets) where the asset-price falls in one universe (market) with 50% to €50, and in another universe (market) it goes up with 50% to €150, giving an average of 100 € ((150+50)/2). The time average for this asset would be 75 € – because we here envision one universe (market) where the asset price first rises by 50% to €150 and then falls by 50% to €75 (0.5*150).

From the ensemble perspective nothing really, on average, happens. From the time perspective lots of things really, on average, happen. Assuming ergodicity there would have been no difference at all.

On a more economic-theoretical level, the difference between ensemble and time averages also highlights the problems concerning the neoclassical theory of expected utility that I have raised before (e. g.  here).

When applied to the mainstream theory of expected utility, one thinks in terms of ‘parallel universe’ and asks what is the expected return of an investment, calculated as an average over the ‘parallel universe’? In our coin tossing example, it is as if one supposes that various ‘I’ are tossing a coin and that the loss of many of them will be offset by the huge profits one of these ‘I’ does. But this ensemble average does not work for an individual, for whom a time average better reflects the experience made in the ‘non-parallel universe’ in which we live.

Time averages give a more realistic answer, where one thinks in terms of the only universe we actually live in and ask what is the expected return of an investment, calculated as an average over time.

Since we cannot go back in time – entropy and the arrow of time make this impossible – and the bankruptcy option is always at hand (extreme events and ‘black swans’ are always possible) we have nothing to gain from thinking in terms of ensembles.

Actual events follow a fixed pattern of time, where events are often linked to a multiplicative process (as e. g. investment returns with ‘compound interest’) which is basically non-ergodic.

flaw-of-averages-1

Instead of arbitrarily assuming that people have a certain type of utility function – as in the neoclassical theory – time average considerations show that we can obtain a less arbitrary and more accurate picture of real people’s decisions and actions by basically assuming that time is irreversible. When our assets are gone, they are gone. The fact that in a parallel universe they could conceivably have been refilled, is of little comfort to those who live in the one and only possible world that we call the real world.

  1. December 24, 2020 at 2:44 pm

    Ah, entropy, yes.

  2. Andri W. Stahel
    December 24, 2020 at 3:31 pm

    Dear Lars Syll,
    I guess the problem with economics is much deeper than you imply. Although far-reaching your argument is. It is the whole method borrowed from Newtonian physics used to understand economics which has to be questioned. I just did so in my recently published article in PAER http://www.paecon.net/PAEReview/issue94/Stahel94.pdf I invite you to have a look at it and would love to hear your critique/comments on it.
    Sincerely yours,

    andri

    • Geoff Davies
      December 25, 2020 at 12:57 am

      Andri, mainstream economics did not properly borrow Newtonian method, because it only took the deductive part. Thus it neglected the non-rational inference of possible hypotheses from observations and the comparison of deductions with more observations. Neoclassical economics is not science, it is mathematical pseudo-science.

      However it is true that a *reductionist* approach works brilliantly for the non-living world and hopelessly for the living world. A mouse reduced to its component parts is not a mouse, it is dead. One must study the whole mouse. One must study a whole society and its embedded economy.

    • Yoshinori Shiozawa
      December 25, 2020 at 2:09 am

      Often told physics envy is a distorted picture of modern economics. If economics really tried to imitate modern physics, it would have not adopted equilibrium framework. Statics is a part of modern physics but its major contents were already discovered in the Alexandrian period, by Archimedes for example. Even if some economists tried to introduce modern physics, we should always note that it was a failed attempt as Geoff Davies points it out.

  3. Herb Wiseman
    December 24, 2020 at 3:55 pm

    Typo in third sentence of third paragraph. Think that you mean weighs not weights.

  4. Gerald Holtham
    December 24, 2020 at 5:46 pm

    Every fund manager is e aware that losing 50 per cent and then gaining 50 per cent leaves you 25 per cent worse off. The way this is handled in practice is to pay careful attention to bet size in relation to the size of your total portfolio or endowment. To take Lars’ example, if you are really confident that the market is offering 10 to 1 on a 6 to 1 shot you would always take it – but for small money, such that you could afford to make the bet often enough to finish ahead. You would never bet a billion dollars on anything, however likely it seemed, unless in Greenspan’s words you were “desirous of losing money”. Bet sizing is known to all traders to be the most important element in any trading strategy. That is “rational” behaviour and would not be condemned by any economist, even a neoclassical one.

  5. Philip
    December 24, 2020 at 9:15 pm

    The examples seem consistent with traditional economics if one introduces risk aversion into the utility function, so utility is maximized, not expected value. Is that all there is to this?

  6. Ikonoclast
    December 25, 2020 at 12:35 am

    My son is a stock market investor and uses the Kelly betting method as part of his investment strategy moves. This equates, as I understand it, to what Gerald Holtham is saying. With all due respect to Ole Peters he may be attacking a straw man. A student of Economics 101 may make the mistake exemplified but not a fund manager as Gerald Holtham points out. However, doesn’t this argument simply indicate that Ole Peters’ critique is related to financial economics and not to the entirety of economics? A better way to refute the entirety of conventional economics is the path opened up by Bichler, Nitzan, Fix et.al, over at the “Capital as Power” site.

    Blair Fix’s “Aggregation” paper, linked to below, points out the dimensions (literally) of the aggregation problem in conventional economics with respect to the ecological sustainability and biophysical issues of the real economy.

    Click to access 20190100_fix_the_aggregation_problem_bpearq_preprint.pdf

    Those issues are special cases of the general case of opportunity cost. Conventional economics’ claim to deal with scarcity (to make efficient use of scarce resources) also fails upon a full consideration of the aggregation problem. These considerations actually amount to a comprehensive scientific refutation of the entire foundations of conventional (classical and neoclassical) economics.

    I like to suggest that people read Fix’s paper and then ponder why I make the claims above. How is the aggregation issue linked to (and refuting of) applied opportunity cost reasoning and applied scarcity reasoning, in the money metric, in conventional macro economics? If you figure that out, you will fully understand, I believe, why conventional economics and the system it advocates and supports, capitalism, cannot succeed in dealing with global problems like limits to growth, ecological unsustainability, scarcity and inequality. Fail to explore these questions and we remain mired in the ideological and “numéraire-metric” ontological falsehoods of conventional economics.

    Of course, the credit for these insights belongs to Bichler, Nitzan, Fix et.al. I am just the self-appointed messenger.

  7. Geoff Davies
    December 25, 2020 at 12:50 am

    Or, without engaging in obscure theory, you can just notice there are instabilities all around (financial booms and crashes, runaway concentration of wealth, runaway growth of dominant firms, …) and conclude that an equilibrium theory is completely inappropriate.

    • Yoshinori Shiozawa
      December 25, 2020 at 2:42 am

      Geoff is right. We should “concluded that an equilibrium theory is completely inappropriate” in economics. But pointing it is a taboo because many heterodox economists employ equilibrium frameworks as their main method of analysis. I am saying the same thing by expressing that “Equilibrium is an epistemological obstruct.” See my posts in the following threads:

      My comment on November 26, 2020 at 2:40 am
      https://rwer.wordpress.com/2020/11/26/a-valid-ontology-for-economics/

      My comment on October 14, 2020 at 3:09 pm in
      https://rwer.wordpress.com/2020/10/09/modern-macroeconomics-theory-based-on-misleading-illusions/

    • Yoshinori Shiozawa
      December 25, 2020 at 3:33 am

      There was a long series of arguments on Asad Zaman’s article Complexity Economics posted on December 4, 2020 and it still continues.

      I have talked about equilibrium but also about complexity and its meanings for economics. Please see for example following three “Replies”:

      https://rwer.wordpress.com/2020/12/04/complexity-economics/#comment-175793

      https://rwer.wordpress.com/2020/12/04/complexity-economics/#comment-176016

      https://rwer.wordpress.com/2020/12/04/complexity-economics/#comment-176160

    • Meta Capitalism
      December 25, 2020 at 4:28 am

      3.2 Complexity conceptualized

      It seems that characterizing a frame of reference for dealing with intractable complex phenomena can hardly be carried out without a clear definition of the concept of complexity it uses. Yet, this appears to be a challenging task. Complexity is a term that “means different things in different disciplines, and is not rigorously defined outside of a specific context” according to the glossary of the Santa Fe Institute Complexity Explorer (retrieved on February 16, 2017). This view finds a confirmation with the responses given in a book by 24 contributors with an expertise in complexity, including a majority of scientists, who were asked to define complexity (Gershenson, ed, 2008). The editor was led to conclude that the “most common problematic aspect of complexity was the misuse of the concept” (ibid.: 135). (Davis & Hands 2020, Kindle Locations 656-665.)

      .
      Davis & Hands make an important distinction between complexity thinking that trivializes intractability and complexity thinking that takes intractable problems seriously.

      • Meta Capitalism
        December 25, 2020 at 7:26 am

        I thought of you when I read this quote from “Economy, Society, Nature: An introduction to the new systems-based, life-friendly economics (World Economics Association Books)” by Geoff Davies –

        “The third revolution is the revolution of systems science that has given us the radically new (for science) appreciation of self-organisation, complexity and chaos. Its lesson is that some systems cannot be reduced to their component parts but must be studied as a whole. Some systems’ behaviour is emergent, and only manifests when the system is fully functioning. Such systems must be studied holistically. Furthermore many such systems are not predictable in the detail of their behaviour. It is apparent that living systems especially must be studied holistically, and with the humility to acknowledge that not every detail of their behaviour will be predictable.”

        Start reading this book for free: https://a.co/aFo1h5k

      • Meta Capitalism
        December 25, 2020 at 7:27 am

        I thought of you when I read this quote from “Economy, Society, Nature: An introduction to the new systems-based, life-friendly economics (World Economics Association Books)” by Geoff Davies –

        “How to study economies scientifically The process of understanding economies can proceed by the following steps. 1. Observe the economy and look for patterns in its behaviour. 2. Attempt to describe a perceived pattern. The description might be in words or it might have a mathematical expression. Call the description a hypothesis. 3. Deduce implications from the hypothesis. 4. Compare those implications with more observations. If the deduced implications are usefully similar to the additional observations, then retain the hypothesis and perhaps call it a model or theory. If the implications clearly do not match the observations then discard the hypothesis (though sometimes you need to check the observation first). 5. Repeat.”

        Start reading this book for free: https://a.co/htdR4BV

    • Meta Capitalism
      December 25, 2020 at 4:42 am

      (1) Explaining what complexity involves.  Among the subjects of investigation that complexity involves are:

      • intricate interdependency
      • complex adaptive systems
      • random and unexpected change
      • feedback patterns
      part-whole system relationships [aka emergent properties]
      • simulation
      • nonlinear and chaotic dynamics
      • phase transitions
      • sensitive dependence on initial conditions
      • self-organization [aka organism/relational]
      • computational complexity
      • big data
      • cross-level and within-level interactions [top-down causation]
      • network effects

      And no doubt there are other subjects this list omits!

      (Davis, John. Economic Philosophy: Complexities in Economics (Kindle Locations 169-186). WEA. Kindle Edition.)

      (2) Explaining How Complexity Enters into Economics. Here we can distinguish:

      • How the nature and content of economics itself is complex

      Economics is complex in regard to: heterogeneous agents, upward and downward causation, the nature of complex adaptive systems and agent-based models, bounded rationality, dispersed interaction, bubble phenomena, herding behavior, trading networks, non-market interaction in relation to market interaction, post-Walrasian economics, multiple equilibria and out-of-equilibrium dynamics, radical uncertainty, reflexivity and feedback patterns, novelty and emergence, increasing returns, identity formation, open vs. closed systems, hysteresis, econophysics, artificial markets, etc.

      • How economics’ complex nature and content relates to its methodology of investigation

      Problems of complexity arise in connection with: different relationships between economists, social scientists, and the public in regard to the content and roles of economics, relations between different traditions and school of thought in economics, different methods used to introduce complexity into economics, different epistemological and ontological conceptions of complexity in economics, interdisciplinarity and economics’ relations to other disciplines, the relationship between positive and normative reasoning in economics, computational limits, the relationships between induction, deduction, and abduction, problems of self-reference, historical vs. logical analysis, simulation and artificial systems, constructive mathematics, etc. (Davis, John. Economic Philosophy: Complexities in Economics (Kindle Locations 186-204). WEA. Kindle Edition.)

      An Economic Philosophy investigation of Complexities in Economics, then, operates on two interconnected levels: how (i) a complex economics draws on (1) complexity theory, and then on the relationships between (i) the complex content of economics and (ii) the complexity of approaches to that content. (Davis, John. Economic Philosophy: Complexities in Economics (Kindle Locations 204-207). WEA. Kindle Edition.) (Davis, John B. & Hands Wade, eds. Economic Philosophy [Complexities in Economics]. UK: Bristol; 2020;(World Economics Association Book Series.)

      • Meta Capitalism
        December 25, 2020 at 4:43 am

        In computer science it is called the “one off” problem, aka one tag/bracket off!

  8. deshoebox
    December 25, 2020 at 9:47 pm

    In my opinion, the starting point for why “Everything is wrong with modern economics” is that economists do not start by talking about the purpose of an economy. How can you meaningfully analyze a complex system without knowing what it is supposed to be doing? I know everyone reading these posts pretty much agrees with most of the criticisms that appear here, so I would be very interested to know what you all think the purpose of an economy is. Starting there, it’s not exactly rocket science to work out whether it is accomplishing that purpose, how efficiently it is working, what kinds of things might be done to make it less wasteful, and what public policies might help prevent the most destructive side effects. If you have a couple of minutes, would you mind writing a little about what you think the purpose off an ecoomy is?

    • Craig
      December 25, 2020 at 11:33 pm

      The purpose of production is consumption in the most technologically efficient, ecologically sane and ethically humane ways possible. The current monopolistic monetary and financial paradigm of Debt Only as the sole form and vehicle for the creation and distribution of money lays directly across all of these purposes and is the deepest reason that most of our economic, ecological, social and political problems are kept in suspension. Finding the right new monetary and financial paradigm concept and then implementing it is the first order of business.

    • December 26, 2020 at 1:33 am

      deshoebox that’s a good question. A preceding question is ‘What is an economy’. My answers are
      “An economy is the set of activities through which a society provides for its material needs. An economy emerges from the exchanges of goods and services in which the society’s members engage. A society, in turn, emerges from the social interactions of a sufficiently large group of people.
      The purpose of an economy is to provide sufficient goods and services for the society and its members to survive and thrive indefinitely into the future. Thus not only should individuals be able to survive and thrive, but the society should also be able to continue in a form that is acceptable to its members.”

      “Survive and thrive” is not at all the same thing as efficiency (by what criterion?), and society should determine the form of the economy, not vice versa.

      • Meta Capitalism
        December 26, 2020 at 9:08 am

        WHY WE NEED A HOLISTIC ECONOMIC MODEL

        There are many examples in the modern world showing how this doctrine of the free market—the pursuit of self-interest—has worked out to the disadvantage of society.
        — CAMBRIDGE PROFESSOR JOAN ROBINSON, 1977

        The approach used here concentrates on a factual basis that differentiates it from more traditional practical ethics and economic policy analysis, such as the “economic” concentration on the primacy of income and wealth (rather than on the characteristics of human lives and substantive freedoms).
        — NOBEL LAUREATE AMARTYA SEN,
        DEVELOPMENT AS FREEDOM

        What makes life worth living? Ask economists, and their answers will depend on their view of how the economy works, and on their criteria for evaluating economic performance. In free market economic models, a person’s well-being is measured by “utility” (satisfaction), which is in turn measured by income, and a country’s well-being is measured by its market output or total income. The free market judges a country’s performance by how fast its income is growing, but it ignores the distribution of income within that country.

        In Buddhist economics, people are interdependent with one another and with Nature, so each person’s well-being is measured by how well everyone and the environment are functioning with the goal of minimizing suffering for people and the planet. Everyone is assumed to have the right to a comfortable life with access to basic nutrition, health care, education, and the assurance of safety and human rights. A country’s well-being is measured by the aggregation of the well-being of all residents and the health of the ecosystem.

        In simplest terms, the free market model measures prosperity by focusing on growth in average income per person and in national output, while the Buddhist model measures prosperity by focusing on the quality of life of all people and Nature. (Brown 2017, 2-3) [ https://a.co/f6d3fE6 ]

      • December 26, 2020 at 10:57 am

        This has changed deshoebox’s question, from ‘what is the purpose of economics?’ to ‘how do different systems work? Not that makes what Meta is saying irrelevant. On the contrary, my sticking to the blog’s question of ‘what went wrong?’ follows Robinson in mentioning ‘methodological individualism” and Sen’s ‘Buddhist’ corrective in focussing on humans growing up in families with their environmental needs supplied: our becoming capable of acting independently by learning to control our own bodily functions, hence freedom to NOT act.

    • December 26, 2020 at 4:26 am

      Yes,deshoebox, a good question, and Geoff, a good answer. I put the same thing somewhat differently: it is the human form of dads and mums busy feeding their kids while their elders offer advice. Evolution has moved on another phase, with the advice institutionalised in a control system comprising banks, share markets, insurance and portfolio management, with abuse of the latter changing its purpose from controlling the economy to controlling the money flow. But as Craig implies, banks claiming credit is debt reverses its direction, drawing money out of the economy and directing it to the banks (which with a philosophy of ‘methodological individualism’ means ‘to the bankers’).

  9. Yoshinori Shiozawa
    December 26, 2020 at 7:15 am

    Lars Syll is making a simple confusion between additive and multiplicative processes. Arithmetic average is for additive process, whereas geometric average is for multiplicative process.

    In a additive process, plus 20 % ( + 0.2) and minus 20 % (- 0.2) are symmetric opposite. If you take arithmetic average (average in the additive process), it gives you ( S + 0.2 S) – 0.2 S) / 2 = 0. The average return of this process is 0.

    In a multiplicative process, the symmetric opposite of plus 20 % (= 1.2 ) is 1/ 1.2 = 0.833… .
    If you take (1.2 S)×(1/1.2), it gives you the initial value S. Geometric average is square root of 1.2 times (1/1.2) is 1. Average return of this process is 1 which is equivalent to 0 in additive process (log 1 = 0). Two processes {R ,+} and {R+, ・} are structurally isomorphic. Isomorphisms are exp and ln (natural log).

  10. Craig
    December 26, 2020 at 5:18 pm

    If you want a new economic model and new purposes for it you have to look for its major outness (money, debt and banking), discern the paradigm concept of that outness and then replace it with a new concept that fits seamlessly within the legitimate structures of the pattern under consideration and yet changes its character while resolving its major outness. The means of that new conceptual implementation requires a new insight or insights.

    This is the scientific, philosophical and paradigmatic process. All else may be legitimate research, but at best is only palliative reform and at worst habitual abstraction and regurgitative erudition.

  11. Meta Capitalism
    December 27, 2020 at 12:15 am

    In The Faith of a Heretic (1961) Chapter X on Morality, German philosopher Walter Kaufman proposes four cardinal virtues as a foundation for answering the following questions: How are we to live? By what standards should we judge ourselves? For what virtues should we strive? (Karacaoglu 2020, 431)

    His four cardinal virtues are: “humbition” (a made-up word referring to a fusion of humility and ambition), love, courage, and honesty.

    It is the second one of these (love) that is the centre of our interest, as it relates to public policy. Kaufman gives the word a very specific meaning. As Wes Cecil, the producer and narrator of the series Forgotten Thinkers, interprets it, “I love you” for Kaufman means: I want you to live the life that you want to live. I will be as happy as you, if you do; and as unhappy as you, if you don’t.

    How would we design, govern, implement, and evaluate public policy, if it were based on our love for future generations, true to the meaning that Kaufman gives to: “I love you”? (Karacaoglu 2020, 431-432)

    We have no idea what future generations will value and how they will want to live. Nor do we wish to prescribe how they would choose to live — so long as, that is, they do not prevent others from living the lives they value. We want to prepare and look after the “wellbeing garden” (the broader ecosystems) that will provide them with the opportunities and capabilities to survive and thrive — i.e., flourish in safety. As Walter Benjamin expressed it, “We want to liberate the future from its deformation in the present” (Wellmon 2020). (Karacaoglu 2020, 432)

    Wellbeing and justice

    Wellbeing is about the ability of individuals and communities to live the lives they value — now and in the future (i.e., it is about their human rights). It would be extremely unjust to prevent the enjoyment of valued lives. Preventing such injustice across generations would be the primary focus of a public policy that has intergenerational wellbeing as its objective. (Karacaoglu 2020, 432)

    There is a rich variety of possible lives, conditioned by personal circumstances, including capabilities, opportunities, and preferences, as well as cultures, religions, political arrangements, geographical surroundings, and so on. Nevertheless, there is considerable evidence to suggest a set of common contributors to wellbeing across humanity. (Karacaoglu 2020, 432)

    These common contributors to current wellbeing, … can be classified under the categories, material conditions (income and wealth, work and job quality, housing) and quality of life (health, knowledge and skills, environment quality, subjective well-being, safety, work-life balance, social connections, civic engagement). (Karacaoglu, Girol, eds. I Love You — Investing for Intergenerational wellbeing. In The Inequality Crisis. Eds. Fullbrook, Edward and Morgan, Jamie. Middletown, DE: WEA; 2020; pp. 431-433. (World Economic Association.

    .
    On page 437 Karacaoglu writes, “Our public policy platform is the concept of ‘love’ …. The objective of public policy is to make it possible for individuals and communities to live the kinds of lives they value.” Further it is noted:
    .

    We agree with Layard and O’Donnell (2015). After quoting Thomas Jefferson (“The care of human life and happiness […] is the only legitimate object of good government”), they go on to write, “What should be the goal of public policy? We agree with Thomas Jefferson. What matters is the quality of life, as people themselves experience it. And the best judge of each person’s life is that same person. Is she happy with her life; is she satisfied? In a democracy that should be the criterion for good policy” (ibid., p. 77).

    • December 28, 2020 at 2:30 pm

      Re Kaufman’s cardinal virtue of love. C S Lewis in “The Four Loves” distinguishes four types as we grow up, which he characterises as others being around (familar), side by side (friends), facing each other (in love) or following a leader (this last being dodgy if the leader is not Christ but a Hitler).

  12. JD
    December 28, 2020 at 2:35 am

    Thank you, those who commented on my question about the purpose of an economy. Very interesting and helpful in my thinking. Responding to one of Craig’s points, though, I would say the major outness of our contemporary economies is the fact that it is entirely permissible to withhold what is essential for life for the sake of money. If I can find a way to make millions by starving people in remote lands (speculating on commodities futures, for example, or privatizing a water system) our present economic paradigm and our existing laws have no criticisms to offer. This is surely wrong and I don’t feel that a new paradigm is needed to know this.

    • Craig
      December 28, 2020 at 5:48 pm

      “I would say the major outness of our contemporary economies is the fact that it is entirely permissible to withhold what is essential for life for the sake of money.”

      Correct. That is the result of the increasing financialization of the economy, and ending the monopoly creation of money by creating a publicly administered non-profit money and financial system aligned with the gracious and wise policies of Wisdomics-Gracenomics would end Finance’s monopoly paradigm of Debt Only, create economic democracy, greater general prosperity and enable ecological sanity.

      “This is surely wrong and I don’t feel that a new paradigm is needed to know this.”

      Correct again. But to ACTUALLY FIND a new paradigm concept you need to be aware of the signatures of historically accomplished paradigm changes like a new tool and/or insight, conceptual opposition, willingness and ability to embrace apparent illogic and/or orthodoxy and complete inversion of present pattern reality.

  13. deshoebox
    December 28, 2020 at 9:02 pm

    Thank you, Craig. Very good points. I don’t know if this amounts to a paradigm or even a starting place for a paradigm, but my own thinking about “a new economics” begins with only two points. The first is the claim that everyone born on Earth has an equal and inalienable right to a share of everything necessary for a safe, healthy, and productive life. This would include clean air, clean water, shelter, food, education, and opportunity, plus other elements, probably. The second is the claim that there is enough to go around. This can be (and has been empirically verified. If you disagree with the first claim, then you are likely to disagree with everything that follows from it. If you do not accept that everyone has an equal and inalienable right to healthy food and clean air and water, for example, on what basis would you reject the right of a wealthy investor to speculate on commodity futures in such a way that food prices are increased beyond the ability of poor people to eat? Or the right of a corporation to manufacture proucts for profit while avoiding disposal costs by dumping toxic wastes into a river, even if that means poisoning entire villages or stunting the development of children. If you don’t accept the idea that there is enough to go around, you may be stuck with the conventional idea that economics is about the allocation of scarce resources. You may even have to accept the idea that profiting from artificially created scarcity is OK. But if you accept both claims it’s easy to see that many of the economic activities we consider normal should no longer be permitted. Private enterprise is not obviously a violation of the two points or principles, but global finance capitalism might be impermissible to the extent that it runs up against the inalienable rights of many currently living and also future people. I would also like to develop the argument (which I believe to be true) that activities that generate wealth without creating anything of value should be either prohibited or be socially managed so the benefit accrues to everyone concerened.

  14. pfeffertag
    December 28, 2020 at 9:13 pm

    The following nags at me. Meta Capitalism, Dec 25, 7.27am quotes Geoff Davies. To do economics “scientifically” Geoff advises

    “1. Observe the economy and look for patterns in its behaviour.”
    This has been the approach of psychology and sociology for over a century and it has led nowhere.

    “2. Attempt to describe a perceived pattern. The description might be in words or it might have a mathematical expression. Call the description a hypothesis.”
    This, too, the social sciences (except economics) have always done. There must be millions of hypotheses. All useless. There is no evidence that science theory comes from observations (rather the contrary).

    A hypothesis is nice but it is not a pattern of things you think you see. In science a hypothesis (or a theory) is a relationship between two or more concepts (as in economics theory) and usually the concepts are not visible.

    From Andri W. Stahel, Dec 24 at 3.31pm
    “It is the whole method borrowed from Newtonian physics used to understand economics which has to be questioned.”
    Does it? This is probably the most important single factor in economics’ success. That economics is not as successful as Newtonian physics is not grounds for advocating the failed approaches of the other social sciences.

    • December 31, 2020 at 3:07 am

      I’ve been away having a life with family and friends for a couple of days (and it’s good to be able to do so, even with limitations.)

      1. A statement based on extreme ignorance I suspect. I’m no expert in either, but I know psychology has some much more productive insights these days than when Freud first had a go. Experimental psychology has identified important features of our behaviours that govern a lot of what we do, including be social and loving much of the time. See Joshua Greene, Moral Tribes for example.

      2. The hypothesis I’m talking about IS describing a pattern in things you think you can see. It comes from my experience in Earth science (a proper science) and from looking at economies. I have submitted a post that will illustrate this if it appears in due course.

      Newtonian reductionism has failed miserably when applied to living systems. Neoclassical economics is the outstanding example – it has failed miserably at giving us insight (will there be a financial crash? Nah, not possible. Oops, no-one could have seen that coming).

      The study of self-organising systems has extended science into a new realm, where one can study the behaviour of a whole system without dismembering it (and killing it).

      So I take pfeffertag’s comments as a superficial and ill-informed defence of mainstream, mainly neoclasical economics.

      • pfeffertag
        January 2, 2021 at 5:03 am

        If, Geoff, you “know” of psychology’s productive insights, you should tell us what they are. Without evidence, or at least an illustrative example, it is an empty claim.

        Accusation of ignorance is no reply but it, too, is incorrect. The only thing approaching a useable insight in psychology is so-called learning theory and it only works on children and animals. Sociology, social psychology, and anthropology have no theory worth mentioning. Game theory is applied in international relations but at a philosophical, rather than practical level. (Game theory is anyway related to economic theory.)

        “The study of self-organising systems has extended science into a new realm.” Another claim without evidence.

        The Newtonian approach (“reductionism” is vituperation) has failed in economics? On the contrary, it has been a roaring success. Economics rules the world. It failed to predict the GFC but so did psychology, sociology, etc. Failure is not grounds to reject theory—science regularly fails to predict fire, flood, drought and volcanic eruptions. The theory is useful for post mortems and rescue—for which the other social “sciences” are perfectly useless.

        Over a century of intense academic social research has yielded nothing that can predict anything. The big exception is economics, the only social field that has managed to build a body of theory.

      • January 3, 2021 at 4:52 am

        pfeffertag –

        I gave you a reference about psychology.

        Self-organising systems: Complexity, a readable account by Mitchell Waldrop; a book on this site, see right-hand column and https://www.amazon.com/Economic-Philosophy-Complexities-John-Davis-ebook/dp/B084SYKDXG

        Predicting the GFC: see the Revere Award on this site: https://rwer.wordpress.com/2010/05/13/keen-roubini-and-baker-win-revere-award-for-economics-2/ , and many other commentaries here and elsewhere.

        “Reductionism” is a recognised descriptive term, contrasted with “holism”, with a clear meaning.

        You just keep saying economics has built a theory, by which you presumably mean mathematical equilibrium theory. It is utterly misleading, therefore destructive. See Steve Keen Debunking Economics https://www.amazon.com/Debunking-Economics-Naked-Emperor-Dethroned-ebook/dp/B00A76WZZK/ref=sr_1_1?dchild=1&keywords=keen+debunking+economics&qid=1609649088&s=digital-text&sr=1-1; and many others including Paul Ormerod’s The Death of Economics, John Quiggin’s Zombie Economics, Dean Baker’s Rigged (free) and my Sack the Economists http://betternaturebooks.net.au/my-books/sack-the-economists/ .

        If you won’t look and inform yourself before you criticise then there is nothing more to be said.

  15. December 30, 2020 at 12:10 pm

    Since nobody else seems to be rising to your challenge, pfeffertag, let me. Your questions had already challenged me, along with that of why other people don’t accept deshoebox’s starting from principles which I personally entirely agree with.

    My response to deshoebox (trying to make sense also of Craig’s language) relates to inability to see the past until one has had one (i.e. grown up ‘unspoiled’ enough to develop wisdom). Most people therefore do not see that accepting or rejecting the religious attitudes of gratitude for Creation and graceful sharing began as a second-hand choice between a selfishness one could understand and love one could only appreciate.

    Pfeffertag’s challenges, then:

    1. The problem with Geoff’s recipe is “the elephant in the room”. One has to look in the right place, and in psychology Jung did just that: recognising that some of what had been taken as abnormal behaviour was normal for some types of people (cf. men vs women). Myers-Briggs research mapped our differences; developmental and neural physiology have explained them. The elephant being ignored in sociology seems to be the limitations of language, but if what makes Newtonian physics works is independence, what Humean sociology has failed to map is the independence of and the linguistic interaction within and between architectural systems.

    2. Science as description of perceived patterns, or as pfeffertag’s “relationship between concepts”? Geoff is surely describing Kuhn’s every-changing normal science, describing what we have now, whereas pfeffertag is describing Kuhn’s revolutionary science, based on a history changing so slowly that labels for accepted insights and technology have had time to become parts of our language.

    [3]. Andri Stahil’s questioning of the Newtonian method. I agree with because I can see Shannon’s Information Science ready as the replacement. Since not only economics but the other social sciences have ignored this, I agree with pfeffertag, the failure of economics “is not grounds for advocating the failed approaches of the other social sciences”.

    [4]. Lars Syll’s challenge: “Why-everything-we-know-about-modern-economics-is-wrong”.
    Because it has become bewitched by bamboozling itself and everyone else with complexity? Not that physicist Ole Peters is wrong “to focus on how people make decisions in” our real world, but he’s still using specialist words and ignoring what can be learned from Shannon and Chomsky. In Shannon’s real world things go wrong, and the issue is using spare capacity to put them right. In Chomsky’s real world similar children can learn different languages because the “fundamental” theory of how to learn anything is built into their brain architecture; “normally” they just learn to see and talk about what is current in their own society.

    • Craig
      December 30, 2020 at 4:30 pm

      One self actualizing experience of grace as in Direct and Reciprocal Monetary Gifting is worth a trillion words about it.

      Why does one think all of the political machinations about $600 vs $2000 direct monetary payments is all about? Answer: It’s such an excellent learning experience and there’s nothing like an actual learning experience to effect change.

      • Craig
        December 30, 2020 at 8:13 pm

        That is the general populace might get the idea that direct monetary distribution works. The twin 50% Discount/rebate policies are a learning experience regarding both the wonderfulness of an aspect of the natural philosophical concept of grace, and regarding the fastest, most direct and deepest problem resolving way to make fiat monetary systems work to serve us instead of dominating and manipulating us.

      • December 31, 2020 at 4:02 am

        As Andri Stihil notes in his RWER 94 paper, economists from Adam Smith to Milton Fieldman have justified their theories with nonfactual stories, so why should the stories of the Bible (whether factual or not) be dismissed as “just stories”? Think of the story of the ten lepers, having to self-isolate, that Jesus graciously cured and sent off to get clearance from the medics. Only one thought to come back and say thank you. Adam Smith would have seen that statistically as the norm; I see the appreciation of gratitude and sadness at the lack of it.

        Let me tell that story in factual terms. A guy I know let a homeless man use his holiday home for the winter for a rent the tenant could afford. This guy began to refuse to pay the rent, laughed when asked for it and refused to move out to make way for the summer let at the end of his tenancy. When taken to court he smashed the place up before he could be evicted. Adam Smith would not see the ingratitude, for he explicitly despised the grace as weakness, promoting instead the enforcement of legal contracts.

        Against J S Mill’s utilitarian pursuit of happiness I focussed on gratitude as the cause of it, forging a chain reaction of gratitude reciprocally expressed by graceful giving (i.e. to others, not specifically back to the original giver). Craig, this is about raising the tone of the economy, not providing examples we may not be able to copy. I don’t think we disagree about much except the logic of this. To become a continuing process it has to be circular, needing not one but three terms to describe it.

  16. December 30, 2020 at 9:48 pm

    I’m sad Craig feels it necessary to belittle gratitude, which is a pretty ungracious way of selling grace. Having just received my Christmas present, Adam Smith’s “The Theory of Moral Sentiments”, I can now see quite clearly that Smith’s understanding of morality owes more to Machiavelli and the Borgias than it does to Christ, whose story begins with the ingratitude of Adam and Eve, then Cain and Abel, then the those who fled slavery in Egypt, and ends up not with condemnation by the wrathful God of the scottish Calvinists of Smith’s day but Christ re-enacting his Father’s giving up his own life “that we might live”. None of which Craig and Smith seem to have heard of, never mind thought about. Religion is a codeword for gratitude for God’s forgiving our lack of it, and in today’s Covid pandemic our gratitude has been earned by the hospital and care staff who are helping us in our need.

    Today is an occasion for gratitude as a second Covid vaccine is made available. This moved me to look again at the moving lament by Jalāl ad-Dīn Muhammad Rūmī that Lars Syll shared with us on April 19, 2020 as the pandemic started to bite. Here’s my own response to that:

    “So we are discussing first the end of mankind, and then the beginning? How moving and appropriately sad the music and video. Until recently the beginning has been more in my own thoughts than the end: pandemic rather than our exposing mankind to the burning sun had been the last thing I would have thought of. The questions posed in Ikonoclast’s (Ike’s) verse 1 are for me reflected in the Arabic writing on the video, which as a virtually single-language Englishman I find utterly if tantalisingly mysterious. There is however, an answer to the questions in Ike’s verse 6. The Creator knows, and if our ideas of god are later than creation, it may be that we got them from the Creator: posed successively as mankind’s understanding developed in terms of God making a work of art and finding it was good; the Creator as Father wanting even his ungrateful children to share this goodness with him; and in today’s world, perhaps an explanation of how it all happened: by God blowing himself up in a Big Bang: “dying that we might live”, albeit on the understanding that, with the Conservation of Energy, death is not so much the end as a transition from material (sold/liquid) form to spiritual: the wind carrying the seeds of our ideas. (Paul Robeson remembering Joe Hill? Another lament I’d just been listening to). Who knows? More to the point, what is TRUE knowledge, so that the seeds we plant may help make the future world a better place for our heirs? At Ike’s 7., fathers don’t know how their children will turn out: they live in hope, despite disappointments. But the past is past, and we can only be grateful for it, and thus happy – or not.”

    While searching I came across another Lars Syll gem: “Hicks’ chef d’oeuvre”, June 28, 2020.

    “When we cannot accept that the observations, along the time-series available to us, are independent, or cannot by some device be divided into groups that can be treated as independent, we get into much deeper water. For we have then, in strict logic, no more than one observation, all of the separate items having to be taken together. For the analysis of that the probability calculus is useless; it does not apply. We are left to use our judgement, making sense of what has happened as best we can, in the manner of the historian. Applied economics does then come back to history, after all. … “.

    Given this, “John Hicks’ “Causality in economics” is an absolute masterpiece. It ought to be on the reading list of every course in economic methodology”.

    But we can go back to the Big Bang and start from energy as the explanation of change, with the four distinct quarters in the circular form of complex number as the key to its analysis. So use our judgement on what? Counting, in fours, an expanding evolution like that of an arabic number, we need to check each successive digit against the archeological facts. We started with photons communicating light but went wrong when Humean theorists, not stopping at economics, theorised a chrematism hoarding imaginary (not to say dishonest) money.

    • Craig
      December 31, 2020 at 3:39 pm

      Dave,

      The last two dualisms to be integrated by the concept-experience of grace are those created by religious scientism and religious colloquialism.

      The saints (whether they were aware of it or not) practiced natural philosophy rather than/despite their beliefs.

  17. December 30, 2020 at 10:27 pm

    Taking Geoff Davies’ comment above (December 25, 2020 at 12:57 am) as a critique of Hick’s position here, I agree with Geoff in that scientific method is not just deductive but is itself an interactive system of different logics: as I see it, induction (quality control statistics), reduction (hypothetical description or redescription), causal deduction (experimental prediction) and induction again to see if the results are good enough to be accepted, or need more work.

    I agree with Hicks that deduction only holds for separate items which can be taken together, i.e. sets of wholes or in Fourier’s temporal logic the analytically distinguishable quarters. So my fundamental theory is like map, which can tell you where the towns are, leaving normal social theorists looking at what is going on within them (not unjustifiably generalising that across the globe or into the future).

  18. Meta Capitalism
    December 31, 2020 at 5:58 am

    Christ, whose story begins with the ingratitude of Adam and Eve, then Cain and Abel, then the those who fled slavery in Egypt, and ends up not with condemnation by the wrathful God of the scottish Calvinists of Smith’s day but Christ re-enacting his Father’s giving up his own life “that we might live”. ~ Dave Taylor
    .
    … so why should the stories of the Bible (whether factual or not) be dismissed as “just stories”? ~ Dave Taylor

    .
    Because some stories, no matter how reinterpreted send the wrong message. The story of Adam and Eve is mythology; a redacted version of Jewish history invented by scribes.
    .

    The Torah is the Jewish name for the first five books of the Bible, Genesis through Deuteronomy. In the Torah are stories representing a combination of myths, folk tales and political propaganda, with only the slightest bit, if any, of actual historical memory. The opening biblical stories, from Adam and Eve through the flood, have absolutely no connection with history, despite the fact that some of the world’s more foolish people still go on expeditions trying to locate Noah’s ark on Mount Ararat. (Spong, John Shelby. Re-Claiming the Bible for a Non-Religious World (p. 29). HarperOne. Kindle Edition. https://a.co/4eHg76O )

    .
    I know you mean well Dave, but what I find limiting in your attempt to bring religion into the discussion is your inability to see that religious dogma rather than elevating supreme values is a constriction rather than a pilot light. You repeatedly parrot traditional Catholic (Christian) dogma that is outdated and no longer capable of serving as a pilot light, for example the atonement doctrine you so frequently parrot on this blog ( https://a.co/iwsmXvL ). Yet, if one engages the best of religious literature in the context of comparative studies one does see superlative values that can function as pilot lights. You would do well to focus on the Golden Rule rather than old medieval Catholic (Christian) dogma about sacrifice and atonement.
    .
    Human beings are evolutionary creatures; hence the story of Adam and Eve is at best allegorical myth reinterpreted in modernity. Modern men and women will not respond to antiquated myths that attempt to drag them back into the medieval dark ages. That may have served in the age of Barth but those days are long gone. These stories (myths) may have served 2000 years ago but they are dry river beds today. Yet, if one looks beyond old Catholic dogma (which many Catholic scholars have done as leading pioneers in comparative religious studies and interfaith dialogue) there one finds living waters where the channel has changed its course leaving old river beds dry while seeking out new channels of understanding.
    .
    Religionists have nothing special to offer our current world crisis if they insist on bring the dogma of institutional religion to the table. Institutional religion — the dogma of tradition — cannot cannot afford inspiration and provide leadership in this impending world-wide social reconstruction and economic reorganization because it has unfortunately become more or less of an organic part of the social order and the economic system which is destined to undergo reconstruction.
    .
    Only the real religion of personal spiritual experience can function helpfully and creatively in the present crisis of civilization. Institutional religion is now caught in the stalemate of a vicious circle. It cannot reconstruct society without first reconstructing itself; and being so much an integral part of the established order, it cannot reconstruct itself until society has been radically reconstructed.
    .
    Religionists must function in society, in industry, and in politics as individuals, not as groups, parties, or institutions. A religious group which presumes to function as such, apart from religious activities, immediately becomes a political party, an economic organization, or a social institution. Religious collectivism must confine its efforts to the furtherance of religious causes.
    .
    Religionists are of no more value in the tasks of social reconstruction than nonreligionists except in so far as their religion has conferred upon them enhanced cosmic foresight and endowed them with that superior social wisdom which is born of the sincere desire to love God supremely and to love every man as a brother in the heavenly kingdom.
    .
    An ideal social order is that in which every man loves his neighbor as he loves himself. The institutionalized church may have appeared to serve society in the past by glorifying the established political and economic orders, but it must speedily cease such action if it is to survive. Its only proper attitude consists in the teaching of nonviolence, the doctrine of peaceful evolution in the place of violent revolution—peace on earth and good will among all men.
    .
    Modern religion finds it difficult to adjust its attitude toward the rapidly shifting social changes only because it has permitted itself to become so thoroughly traditionalized, dogmatized, and institutionalized. The religion of living experience finds no difficulty in keeping ahead of all these social developments and economic upheavals, amid which it ever functions as a moral stabilizer, social guide, and spiritual pilot. True religion carries over from one age to another the worth-while culture and that wisdom which is born of the experience of knowing God and striving to be like him.

  19. January 2, 2021 at 11:26 am

    Happy New Year! “It must be true it is false: I saw it in the papers”.

    • Meta Capitalism
      January 3, 2021 at 8:19 am

      Happy New Year Dave. I think you would really enjoy Luigino Bruni and Stefano Zamagni book “Civil Economy: Another Idea of the Market” for in the best sense of the term it is “catholic” (universal) and shows another way to view the economy that reveals the best of catholic thinking with regards to the economics, competition vs. cooperation, profit motive vs. service motive, and the civil vs. uncivil economy.

  20. pfeffertag
    January 6, 2021 at 12:58 am

    To Geoff Davies at January 3, 2021 at 4:52 am.

    I realise that questioning firmly held beliefs can be disconcerting. Still, ad hominem is not a valid response. Thanks for the references but I asked you if you could support your claims; it is no reply to point me at some books.

    It appears you can show no example of a “productive insight” from psychology or sociology, or of how the “study of self-organising systems has extended science into a new realm.” I think it would bother me to find myself convinced of something for which I could not offer even minimal evidence.

    I am keen to learn of any useful contributions of the social sciences, though I think that whatever they have, their overall performance is so vacuous there could never be grounds to recommend their approach—certainly not to economics which is a comparative champion. As for any actual social theory, we may forget it.

    The failure of economics to predict the GFC is not in question. But we don’t declare physics and chemistry faulty if they fail once to predict an earthquake or a hurricane (and presumably, human behaviour is even more complicated than such natural events). The GFC was surely also a prediction failure of psychology and sociology which, unlike economics, are of no analytical help after the fact. One reason economics has come to dominate—to “be” society in some people’s eyes—is because there is no coherent alternative.

    “Complexity theory” began to come into vogue about twenty years ago. I have never been able to discern any useful content; all I see is a name for a lot of generalisations (with “emergent” at the mystic peak). Maybe it came in because systems theory petered out—or was it network theory, or chaos theory or TQM? I suppose the complexity fashion will fade when a new vogue turns up.

    You say: ‘ “Reductionism” is a recognised descriptive term, contrasted with “holism”, with a clear meaning.’ There is some truth to this though the term is derogatory, rather than descriptive.

    Holism has no meaning beyond “not reductionism” and reductionism is the label for a purported analysis which “reduces” the whole to its parts, which says the whole is no more than the sum of the parts. It is an epithet hurled at science by non-scientists and an article of faith in the more touchy-feely academic labyrinths where to question it is to reveal yourself as a racist, homophobic, climate-denier with horns poking out of your top-hat. But water is not the sum of hydrogen and oxygen; directed at science, reductionism is a silly put-down; it is sour grapes.

    It is social science, not science, which is guilty of reductionism. Staying with horns, in a famous scene Goethe has Mephistopheles say:

    Who a living thing would know and describe
    Seeks first the spirit from it to drive.
    He then has the parts all in his hand;
    Missing, alas, just the spiritual bond.

    So reductionism was noticed 200 years ago: no binding spirit, i.e., no interrelationships; and it well describes social science today. A vivid instance is personality research. We think even our pets have personality and for a century researchers have been inventing schemes to describe and categorise “personalities.” Personality, which is personal, manifests socially—but they look only at the individual, seeking patterns, and each researcher has their own vocabulary. In the attempt to know and describe they drive the social spirit out. And they don’t really have the parts in hand—just various fuzzy names of alleged parts—for in science, unless the parts are interrelated, they cannot properly exist. Personality is a vast and respected academic field—and it is predictively useless, lacks real-world examples, has no known relationship to society (economics, politics, crime, fame, art…), and there is no explanation why it exists at all. What’s to recommend?

    That typifies the state of the social sciences: at best factoids of individual behaviour. The only social science which escapes Mephisto’s sardonic observation is economics. The others lack theoretical basis which means, for example, they have no equivalent of the relationship of supply and demand, so they can’t have the sort of conversations and arguments that are routine among economists. Economists can count themselves blessed.

    The science theory approach of expressing a relationship between idealised parts has worked marvellously for four hundred years and is responsible for such effectiveness as economic theory displays. Economics needs to do more of it, not less.

    • Meta Capitalism
      January 6, 2021 at 1:35 am

      pfeffertag your opinions are nothing more than dogmatic opinions with no evidence. You are one big hypocritical pot calling the kettle black.

    • Meta Capitalism
      January 6, 2021 at 12:00 pm

      The market-led model of globalization ultimately depended on the idea that, left to their own devices, increasingly internationalized markets could generate outcomes that were both in every body’s self-interest and in societies’ collective interests. Yet, following the financial crisis, it was no longer obvious that this idea was in any way credible. Indeed, Alan Greenspan, former Chairman of the Federal Reserve and for much of his life a cheerleader for market forces, was forced to admit as much while giving evidence to the US House Committee on Oversight and Government Reform in October 2008: ‘Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.’ Markets cannot function in a vacuum. They need to operate within some kind of institutional framework. But which one? (King 2017, Stephen D. Grave New World [The End of Globalization, the Return of History]. London: Yale University Press; 2017; p. 79.)
      .
      The failure of economics to predict the GFC is not in question. But we don’t declare physics and chemistry faulty if they fail once to predict an earthquake or a hurricane (and presumably, human behaviour is even more complicated than such natural events). The GFC was surely also a prediction failure of psychology and sociology which, unlike economics, are of no analytical help after the fact. One reason economics has come to dominate—to “be” society in some people’s eyes—is because there is no coherent alternative.

      .
      The theories that failed in the field of economics are well know. The entire younger generation is being educated using textbooks like “The Economics Anti-Textbook: A Critical Thinkers Guide to Micro-Economics” by Rod Hill and Tony Myatt which cuts through the ideological pseudo-scientific rhetoric that hides blatant ideological agendas. One so-called scientific theory after another within the field of economics has been proven false by empirical reality. Lars (and other authors on the right hand side) have eloquently spoken to some of the reasons for this failure.
      .

      “Complexity theory” began to come into vogue about twenty years ago. I have never been able to discern any useful content; all I see is a name for a lot of generalisations (with “emergent” at the mystic peak). Maybe it came in because systems theory petered out—or was it network theory, or chaos theory or TQM? I suppose the complexity fashion will fade when a new vogue turns up.

      .
      Concepts like “complexity,” “intractability,” “emergence,” reductionism,” come with more than one meaning. So it is important to ask, “Whatever do you mean?” if one is to sift through chaff from the wheat. While Geoff may at times be philosophically naïve (and may he forgive me for my harshness) he has nevertheless hit on a correct insight. The only way to reduce biology to physics is via murder (Lars notes this too).

      Reducing macroeconomics to microeconomics, and microeconomics to refinements of hyper-rational Bayesian deductivist models, is not a viable way forward. It will only sentence to irrelevance the most interesting real world economic problems. Murder is probably the only way of reducing biology to chemistry … (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 1758-1760). WEA. Kindle Edition.)

      .
      Biology is not reducible via “reductionist methodology” (a heuristic method) to physics. Only those who consciously or unconsciously hold “philosophical reductionist presuppositions” make such silly arguments. Which version of “reductionism” pfeffertag is making is indistinguishable from his dogmatic statements. He seem to be blissfully ignorant of the difference as the above comment makes clear.
      .
      The fact is that the concept of “emergent processes” is _descriptive_ of reality and tells us really _nothing about underlying causation_ is proof that science, at least up till now, has limits that as of yet in no way answer fundamental questions regarding causation and emergent realities. There is a difference between what science can claim to know and what scientists speculate about. They often obfuscate this distinction with story telling and narrative akin to mythology or even religion. An Encyclopedia of Ignorance (a book in my library with papers by the world’s leading scientists in various fields) is as important as the Encyclopédie of the Enlightenment.
      .
      But here is fundamental fallacy that pfeffertag is committing; emergent processes are a reality that scientists in disparate fields (especially biology) are forced to reckon with; biology indeed cannot be reduced to physics. Nor can sociology (human individuals and social interaction) be reduced to physics (or social mathematics) either.
      .
      There is a difference between methodological reductionism and philosophical reductionism. And often those who are naïve of the this difference end up on endless dogmatic debates without ever recognizing the their underlying presuppositions.

    • January 11, 2021 at 12:47 am

      Pfeffertag –

      I will make just a couple of points here. However much some people may waffle about complexity and emergence, there are clear technical definitions of them. They are not mystical.

      If one notices the many instabilities in observable economies, one can conclude the economy is nowhere near equilibrium – and I have to presume you’re talking about neoclassical equilibrium theory though I don’t think you have specified that as I requested.

      Here is a straightforward conclusion from that observation: if there is no general equilibrium there is no basis for claiming markets will optimise the economy. (Markets are clearly powerful, but this implies we need to manage markets so they deliver what we want, they will not do it *automatically*. We can do that by managing their financial incentives – as we already commonly do, but incoherently or perversely. Or the billionaire monopolists manipulate them for their own advantage.)

      Here is another conclusion: an economy far from equilibrium is a self-organising system plausibly in the realm of complex behaviour. The behaviour of a complex system is *radically* different from an equilibrium system, as different as wild horses from a rocking horse. It is prone to sudden shifts and collapses. People not blinkered by equilibrium theory saw the GFC coming clearly.

      This false claim of equilibrium has been used to reduce government regulation and thus allowed the wealthy and powerful to distort the system for their own benefit. It does immense harm to societies around the world. So your vaunted “body of theory” is not just useless, it is extremely harmful.

      (btw, geophysicists, of which I am one, do not routinely claim to predict earthquakes, we know it is a very difficult problem. But economists regularly claim to predict next year’s economy and repeatedly fail.)

      You claim pointing you to books is no reply, though of course it is. I have seen your tactic employed by climate deniers: “convince ME, right here right now, with all the necessary detailed evidence, or I’ll keep saying you’re wrong”. It’s a great way to tie people up in endless debate, as you are doing on this thread. I’m not walking any further into that trap than I just did.

      You make a grandiose claim, that the other social sciences have yielded no useful insights, and you provide no evidence for that claim.

      I think you are trolling and I will not engage any further with you.

      • Meta Capitalism
        January 11, 2021 at 1:24 am

        I will make just a couple of points here. However much some people may waffle about complexity and emergence, there are clear technical definitions of them. They are not mystical. ~ Geoff

        .
        I am currently working on collecting a selection of such definitions from a range of fields, from physics, to biology, etc. that I think will be an interesting place to examine their meaning (including through time historically).

      • Meta Capitalism
        January 11, 2021 at 3:55 am

        You claim pointing you to books is no reply, though of course it is. I have seen your tactic employed by climate deniers: “convince ME, right here right now, with all the necessary detailed evidence, or I’ll keep saying you’re wrong”. It’s a great way to tie people up in endless debate, as you are doing on this thread. I’m not walking any further into that trap than I just did.

        You make a grandiose claim, that the other social sciences have yielded no useful insights, and you provide no evidence for that claim.

        I think you are trolling and I will not engage any further with you. ~ Geoff

        .
        Geoff has succinctly pointed out the dogmatic rhetorical tricks of sophistry Pfeffertag is using. Pfeffertag creates a false superficial dichotomy between “holism” and “reductionism” (much as Shiozawa does in his book) that superficially ignores more nuanced, historical differences over time of how these terms were used in the past and present and pretend this is “evidence” when it is merely dogmatic rhetoric.
        .
        Or he makes absurd statements like, “Economists themselves are successful. They are at the centre of government everywhere. Economists rule the world,” as though this alone proves their claims are “science” or “scientific” when there are ample histories available that reveal such success is based upon power, politics (within government and educational institutions, ideologically driven agendas amplified by feed-back loops of lobbyists, think tanks, government, and elite educational institutions and the self-serving professional journals that filter what passes as mainstream economics and what doesn’t and thereby determines entire generations of brain-washed graduate students in the US and abroad. His rhetoric is blind ideology, claiming “They understand the consequences of their decisions, at least to some extent. That is the power of theory.” That is the power of money, prestige, elitism, and ideology. That is all it really is. Their so-called “theories” are falling down before reality one-by-one and the emperor is sitting naked and no amount of dogmatic rhetoric can dress this pig up again.

      • Meta Capitalism
        January 11, 2021 at 4:00 am

        P: Economists themselves are successful.
        P: They are at the centre of government everywhere.
        P: Economists rule the world.

        C: That is the power of theory.

        P: Nazis (were in their day) successful.
        P: They were at the centre of government everywhere they conquered.
        P: Nazis ruled much of the world they conquered.

        C: That is the power of “Theory.”

        The logic used by Pfeffertag can be applied to anything, anywhere, anytime were power and control are all that counts. It has nothing to do the science or the rank scientism that Pfeffertag is parroting.

  21. pfeffertag
    January 8, 2021 at 12:13 am

    It seems I am collecting insults. I must have struck a nerve, which wasn’t my intent. Instead of asking Geoff for evidence, should I perhaps have told him he had none and called him a dogmatic hypocrite? Ad hominem is not valid and it does not enhance understanding to say things you would not say face to face.

    The charge of hypocrite baffles me but “no evidence” is quite untrue for I gave a lot. Still, if you can specify where I failed to supply evidence, I will try to fix it.

    Most of your long, vituperative post is irrelevant. Your “ideological pseudo-scientific rhetoric that hides blatant ideological agendas” is itself ideological and an oxymoron as well. That economic theory is faulty is not disputed. Indeed, no one on this blog disputes it. Going on about it is unnecessary; it is preaching to the choir, wallowing in righteousness; a case of social media in an island of agreement. Complainers might reflect that that geology, meteorology, and geophysics usually fail to predict fire, flood, volcanic eruption, earthquakes, and hurricanes. Their failure to predict is normal and they are not perennially wailing about it.

    No matter how ghastly economic theory is, it is incomparably superior to any other social science. Incomparably. Instead of harping on its failures, why not examine its successes with a view to building on them?

    Does the remedy lie with the methods of the other social sciences? Geoff thinks so; I don’t. I have discussed in some detail their record and why they fail but in a sense they are so empty they hardly provide any criterion for failure.

    It occurs to no one (except me) to accuse psychology and sociology of failing to predict the GFC. Though the GFC surely was a psychological and sociological event (and economic writing often mentions human forgetfulness and willingness to believe a stock market bubble is “different this time”) those two academic fields have nothing to contribute; they are so remote no one expects them to contribute. The GFC was also a big political failure but political science stays low, leaving the economists to try to explain, to excuse and to squabble.

    The social sciences can offer no help in the quest to improve economics. From them we may expect learned papers on “complexity” and “emergence” and so forth into the indefinite future. These will achieve the same result as the millions of writings of the past, namely nothing—no cumulative knowledge, no body of theory.

    I note the claim that it is important to specify the meaning of such words. That is what you wind up doing if you are just going to observe. Science theory is independent of language; definitions are not required.

    Observing simply doesn’t work. Before Newton, things fell to the ground because they had a downwards tendency (smoke and fire had an upwards tendency). That is the sort of knowledge you get when you observe. And it is so obviously right, it can’t be disputed. When the apple fell on Newton’s head it jolted some neurons and he formulated a relationship between mass and distance. His theory of gravity applies to two bodies, perfectly spherical of uniform density which are not influenced by other bodies. These conditions nowhere obtain in the real universe yet his theory is indispensable to understanding, predicting, and further theorising the universe.

    Economics adopts the same approach of hypothesising relationships between idealised concepts. The result is arguably as impactful as Newton’s gravity theory.

    The other social sciences, which have no impact on anything, don’t do this. Instead they count the number of apples that fall and count the number of windy days and find the correlation. Why not? Apples clearly exhibit the downwards tendency; it is surely reasonable to hypothesise that the wind plays a role. And look! the statistical correlation proves it! Such a successful research program deserves to be written up and published with some graphs and tables: the wind accounts for 72% of apple falling; further research is needed.

    The statistics might have administrative value for the manager of an orchard but they are of no use for theory building, no use for cumulative knowledge. Observing the (apparent) pattern will never yield a theory of gravity.

    Social science will not progress unless it does as science does, as economics does: hypothesise relationships between idealised entities. The relationships are of quantity, not of statistical count. There no sign of this happening. Economics itself is only half aware that it does it. Some economists mistakenly vilify it (but are unable to offer a viable alternative).

    The evidence of four hundred years says this approach is the key to theory success. It is often remarked that economic theory ran out of steam about 1970, In my view, the general hypothesis of competition became exhausted (i.e., since 1970 no more useful hypotheses have been found which assume a competitive environment) and I have suggested the formulation of hypothetical relationships which assume cooperation and coercion.

    Cooperation and coercion do have economic impact and, as I have pointed out before, they, with competition, are three mutually independent social environments. As long as economics only theorises one of them it will be defective. It is a commonplace to observe that regulation of markets is needed. That would be the predominant form of what I call coercion. So the task is: form relational hypotheses which include it (and cooperation).

    On this reasoning, if the other social sciences did their job properly they would be formulating such relational hypotheses—there is enough disillusion with economics that the motivation is surely there—but they are stuck in a century-long rut. I think one reason for this is that the fundamental cause of the success of economic theory is not widely appreciated—namely the hypothesising of interrelationships of idealised concepts.

    • January 8, 2021 at 11:28 am

      Reading back to see who is insulting who, Meta’s response to yours to Geoff looks to me like relatively fair comment compared to Meta’s remarks about religious dogma, not understanding that ‘dogma’ means ‘teaching’. The purpose of teaching is at one level to develop capabilities and at another to promote fruitful attitudes (e.g. gratitude) as against damaging ones (Adam Smith’s inhumanity). Nevertheless I agree with you, “Ad hominem is not valid”, and that “Cooperation and coercion do have economic impact and .. with competition, are three mutually independent social environments”, with the need for “regulation of markets [to be] the prominent form …of coercion”.

      I invite you to reflect on the need of a fourth mutually independent social environment, what I call “development”, to account for the transformation of science and mercantile economics. If we can agree on that perhaps we can start being cooperative instead of competitive.

    • deshoebox
      January 8, 2021 at 6:55 pm

      Pfeffertag, I would be interested to know what you think economics’ successes are, the ones you say we should build on. And do you distinguish between the successes of economics and the successes of economies? If you do, what do you consider the most notable successes of an economy?

    • Yoshinori Shiozawa
      January 18, 2021 at 4:56 pm

      pfeffertag

      This thread contains several important points. Unfortunately they are drown out among many other contributions. Let me add a few words on complexity.

      “Complexity theory” began to come into vogue about twenty years ago. I have never been able to discern any useful content; all I see is a name for a lot of generalisations (with “emergent” at the mystic peak). Maybe it came in because systems theory petered out—or was it network theory, or chaos theory or TQM? I suppose the complexity fashion will fade when a new vogue turns up. (pfeffertag on January 6. 2021 at 12:58 am)

      The social sciences can offer no help in the quest to improve economics. From them we may expect learned papers on “complexity” and “emergence” and so forth into the indefinite future. These will achieve the same result as the millions of writings of the past, namely nothing—no cumulative knowledge, no body of theory. (pfeffertag on January 8. 2021 at 12:13 am)

      I am happy that you know quite well about complexity questions in economics. As you hinted it, complexity came as the last of Four Cs (Cybernetics, Catastrophe, Chaos, and Complexity). These fads in social science were imported from mathematical sciences. Many social scientists wanted to mimic these discoveries and tried to apply them to society and economy. As there were no firm foundations, it was inevitable that they ended as fads. It is normal that you are quite skeptical of them. However, if you concluded from these observations that complexity has no significance for economics, you are wrong.

      Please read discussion between me and A.J. Sutter in the thread here:
      Asad Zaman Complexity Economics on December 4, 2020.
      https://rwer.wordpress.com/2020/12/04/complexity-economics/

      If you are hurry, please go directly to
      https://rwer.wordpress.com/2020/12/04/complexity-economics/#comment-176377

      and two following posts. (Note: A post is doubly posted.)

      The thread contains some serious thought but at the same time it reveals how fruitless arguments are made in the name of complexity and evolution. In that sense, pfeffertag’s skepticism has a good reason. However, there is some true economics that can compete with mainstream economics in the very core of economics (i.e. Arrow-Debreu competitive equilibrium theory). Read our book that is cited in the last of my posts: (B2) Usefulness of evolutionary thinking in economics. Few economists can recognize that this is a book of complexity economics, because it is very different from more conventional complexity economics.

      • Yoshinori Shiozawa
        January 20, 2021 at 4:07 am

        pfeffertag

        Have you read my post above? There are so many comments in this thread and it is natural that you do not notice some of the comments. If you have, that is all right. I do not ask you to respond explicitly. Everybody is busy.

  22. pfeffertag
    January 9, 2021 at 11:13 pm

    To davetaylor1 at Jan 8.

    The three terms—competition, cooperation, and coercion—are suggested labels for social environments within which people and organisations operate. My beef is that economics notices and theorises only the first. If all the three environments obtain, to varying degrees, throughout society then all three need to be theorised. (I do not suggest cooperation “instead of” competition.)

    I’m not sure I know what you mean by “development” but whatever it is, surely it could take place in a competitive, or cooperative, or coercive social environment.

  23. pfeffertag
    January 9, 2021 at 11:29 pm

    To deshoebox at Jan 8.

    Yes I distinguish. I am talking about economics.

    The great success of economics is that it has a body of theory which is independent of language, culture, and belief system. The other social sciences don’t have anything like it. The finance ministers from Japan and Mexico and China and Germany and India can meet and have a coherent conversation—just as geologists and chemists and pathologists can.

    Economists themselves are successful. They are at the centre of government everywhere. Economists rule the world. Treasury civil servants couldn’t function without an education in economics. They understand the consequences of their decisions, at least to some extent. That is the power of theory.

    As for economies, broadly their success appears positively correlated with economics (think of the world over the last two centuries, or China since it adopted the free-market) but many things influence an economy and in judging an economy’s success the right winger will point to GDP and the left to Gini index.

    That’s a different discussion but note that left and right economists have common concepts to argue with. They both assume that people prefer more money to less and they even largely agree on the effects of their different preferred policies. The political left-right division pops up wherever people are free to assemble—it is evidently in our nature—yet the notion of left-right within the other social sciences doesn’t make sense. (Except maybe anthropology—oh boy; let’s not go there.)

    Economics relies on the theory that people prefer more money to less. However people do have other preferences and these do affect the economy. Ultimately everyone except a Midas or a Scrooge knows that the other preferences are actually more important, that money is a means to an end, the end depending on “tastes” for which there is no theory. As long as economic theory treats only the money drive, it will be an inadequate description of the economy.

    But everything’s relative and, relatively, economics shines. I doubt it is possible to exaggerate the barrenness of psychology and sociology. Consider (to take a random example) the possibility of a riotous mob invading and vandalising the national legislature. They wouldn’t do this for money so what theory, or what psychology school, explains it? There is none. There are just opinions.

    In general the most significant human motivators would be faith and love but psychology has no theories of them. Think of it: after a century of intense effort, no theories of the most important things driving human beings, singly and collectively. To have a body of theory, as economics does, is not even a dream.

    • January 10, 2021 at 11:47 am

      Pfeffertag, you are failing to distinguish between economics ruining the once-sustainable economy and its succeeding in achieving hegemony: this because most people believe what they are told, with right-wing thinkers (thinking theoretically about emotional utility rather than about what can be seen) usually having a better command of language than left-wing thinkers. With that they can incite right wing hopes and left-wing fears. Think Hitler, or think Trump; compare Lenin and Marx. The fact that you disavow any possibility of today’s psychology predicting this (despite its use defusing matrimonial disharmony and its now being underwritten by the physiology of communications systems and that by electro-chemistry) suggests that your views are right-wing and possibly childish. How else can you acknowledge co-operation and coercion as well as competition, yet persist in competing for hegemony rather than cooperating? Perhaps it is time you read Edward De Bono’s works on “Lateral Thinking”!

      As for ‘development’, this is the ‘diversify and design’ phase in a productive economy, the ‘divide and rule’ strategy in competitive chrematism. Think on that, too!

  24. ghholtham
    January 10, 2021 at 7:05 pm

    The division between economics and other social studies is not as clear as pfeffertag maintains. Take Minsky’s theorising about an unstable economy. It depends on a psychological postulate that “success breeds excess” in situations of uncertainty. For that reason it is not accepted into the corpus of neo-classical theory although demonstrably having predictive power (and intermittent periods in fashion). Is it an economic theory or a theory in social psychology? Or consider Duesenberry’s relative income hypothesis which explained consumer spending on the basis of interdependent preferences (keeping up with the Jones) and habit formation (ratchet effects in consumption). Again it has been squeezed out of mainstream textbooks because “too sociological” although its predictive power is certainly no worse than Friedman’s permanent income hypothesis and much better than contemporary formulations derived from all-knowing consumers optimising over a lifetime. There is also the work of Tversky and Kahneman in psychology that is currently influencing financial economics – though the crappy way it is being done reveals that economists are not sufficiently practised in incorporating psychological insights. All these examples suggest economics would be enriched by accepting more insights from other areas of study. The principal limitation in economics comes not from neglecting coercion but from the amateurish way it tackles uncertainty. if you cannot assume people always get it right (as equilibrium-based economics does) you have to consider and theorise about what they do when they don’t know what’s going on and you have to plot the consequences of the decision rules they actually follow. HA Simon understood that and it inevitably led him in an inter-disciplinary direction incorporating insights from psychology and computer science to analyse procedural rationality as opposed to “assume the conclusion” substantive rationality. Pfeffertag’s hard distinction between theory and observation is overdrawn too. We all love Popper but the conjecture even about idealized entities has to come from somewhere and it has to be tested on something too – observation and data are indispensable.
    One place where I do reluctantly agree is complexity theory. I love the vision. I do think the economy is a complex adaptive system. I keep hoping for a breakthrough, somewhere where systems theory helps us to tackle real problems. In economics, though, it has so far produced the square root of diddly squat.

    • January 17, 2021 at 12:23 am

      gh, perhaps you are looking in the wrong place for insight into real problems from recognising the complexity of economies. It won’t predict next year’s GDP, in fact it says that’s impossible. But it tells us the following.

      1. There is no general equilibrium, therefore there is no basis to expect markets to yield an efficient, or desirable, result. Optimality cannot even be defined. Goodbye neoliberalism.

      2. Markets therefore need to be managed. They can be managed through the financial incentives they operate under, via taxes, subsidies, regulation. Just getting rid of perverse incentives would greatly improve the world.

      3. There is no single way to manage an economy. Therefore economic and cultural diversity may thrive again. The global consumer-corporate monoculture can be banished.

      4. Economies are like living systems, and have to be managed accordingly, the way we manage horse training or bonsai trees.

      I think those are fairly important insights into real problems. You have to ask different questions of a complex economy.

      • Craig
        January 17, 2021 at 8:46 pm

        Geoff,

        Those are all good insights and conclusions. All they lack is a Copernican concept implemented at a strategic point that resolves the major outnesses of the current paradigm and hence transforms the entire system.

        Think the 50% Discount/Rebate price and monetary policies at retail sale and the point of note signing.

  25. pfeffertag
    January 16, 2021 at 7:15 am

    To ghholtham at January 10, 2021

    Your comment has had me pondering an answer for days—so thank you. First to the easy matter of theory and data:

    “…the conjecture even about idealized entities has to come from somewhere and it has to be tested on something too – observation and data are indispensable.”

    Where does a theory come from? A much discussed question. Nobody knows—except that it comes from a human mind. JS Mill was the great promoter of induction—the idea that theory comes from data—and he was wrong. In probably most instances it is impossible for the theory to have come from any observations (e.g., the earth orbits the sun) and it is often plausible to argue that the theory has been formulated despite the data. There are theories without any data, e.g., phlogiston theory, the Higgs field, the origin of the universe.

    My “distinction between theory and observation is overdrawn”? I don’t see the slightest overlap. I say: theory has nothing to do with data or observation. Nothing. Observation and data belong to testing and are subsequent to theory formation. (Popper: are ONLY subsequent to theory.) Theory testing and theory application are bureaucratic activities, requiring judgement in interpreting the theory and in constructing definitions in order to decide when and where and what to include and to disregard.

    So much for the easy thing.

    “…it has been squeezed out of mainstream textbooks because “too sociological” ”
    That is my strong impression also—and so economic theory is too narrow. Minsky’s and Duesenberry’s theses are psychological-sociological. Since they affect the economy it can’t be right to exclude them.

    “All these examples suggest economics would be enriched by accepting more insights from other areas of study.”

    Absolutely. And the stagnation of theory for the last 50 years is evidence that confining theory to the narrowly economic has had its day; it appears that expansion to include the psychological-sociological is the only possibility of enrichment. Merely recognising players other than homo economicus in the economic game would be an advance but actually all players have to be incorporated into relational theories.

    My own example of an excluded theorist is AO Hirschman and his 1970 thesis of “exit, voice and loyalty.” These he saw as the options when a firm is in decline. They mean: leave (for greener pastures), protest (at the wrongs), and “suffer in silence” (his words). He himself equated the first two options to economics and politics respectively. His theory generated a large literature mainly, I think, in political science.

    He was a professor of economics but his theory was apparently too psychological for economics. (An extraordinary person—worth a read on Wikipedia.) Becker said in 1976 that it was “disturbing” that economics was based on people’s preferences yet there was no theory of tastes, and in 1977 Stigler and Becker argued that a theory of tastes was impossible. I think they slipped up for Hirschman’s thesis was well known at the time and his three stances are subjective preferences, i.e., tastes. Economics assumes that everyone has the homo economicus taste for more money and to some extent everyone does, but Hirschman was pointing out that only a subset of the population prioritises that taste (those who choose “exit”).

    It is a categorisation scheme rather than a theory but it gives insight. Hirschman saw in it a lot more than firms having trading problems. On the first page of his 1970 book he says that it provided him with his “own unifying way of looking at issues as diverse as competition and the two-party system, divorce and the American character, black power and the failure of ‘unhappy’ top officials to resign over Vietnam.” He is not alone. Scholars have applied Hirschman’s theory in all sorts of non-economic fields—client relations, employee attitudes, citizen satisfaction, political allegiance, even romantic alliances. So a lot of people find analytical value in it. In this literature, his first two options are seen as straightforward but discussion of his third option, so-called loyalty, is confused, and seen as such. Which brings me to your “uncertainty.”

    “The principal limitation in economics comes not from neglecting coercion but from the amateurish way it tackles uncertainty. if you cannot assume people always get it right (as equilibrium-based economics does) you have to consider and theorise about what they do when they don’t know what’s going on and you have to plot the consequences of the decision rules they actually follow.”

    To be sure, uncertainty has to be theorised; everything does. If by uncertainty you mean economic risk then it is just part of the homo economicus playbook—weigh the risk against the benefit. In that case I do not see that such uncertainty could be more important than coercion. Coercion is a whole mode of social relations, whereas uncertainty is only one aspect. It is aspect not only of homo economicus’s competitive mode but also of the coercive and cooperative modes. In the different relational environments there will be different things to be uncertain about and different attitudes to it. Theoretical uncertainty would vary accordingly.

    In the coercive environment of regulation the priority is order, not money or profit, so disorder would be the main source of uncertainty. Everybody wants order but this homo hierarchicus prioritises it and regards homo economicus with distaste. Think of James Comey and Robert Mueller. It is a measured, bureaucratic or legal perspective which relies not only on coercion but also on cooperation and competition. It values propriety and dignity, respects expertise, likes to dot Is and cross Ts, and to file things (and people) in their proper place. Training, guidance and discipline, along with diligence and deference, would be the decision rules to preserve order. This is an environment that mainstream economics recognises—as the necessary evil of regulation—but does not theorise. Too sociological. Since it so obviously affects the economy, it seems absurd that it is not theorised.

    There is another, very different, coercive environment, one in which uncertainty itself is coercive. If uncertainty means not knowing what is going on at all then fate, luck, and mysterious, powerful people rule—pure coercion. Such a fatalist cannot link cause and effect so risk (including in its homo economicus sense of opportunity) is without meaning. Instead, life delivers blows and occasional windfalls at random without rhyme or reason. This homo fatalis concept stems from anthropology and is my clarification of Hirschman’s “loyalty”—the employee who just puts up with the situation, says nothing, and ultimately sinks with the ship. Everyone experiences the coercion of fate and luck but for this person coercion is the dominant mode of interaction.

    The decision rule for the fatalist is: keep your head down. Education is pointless and competing and cooperating are pointless. Homo fatalis is liable to be duped (which will confirm that luck rules) and to believe conspiracy theories. Social interaction will be random and superficial (as people’s behaviour is capricious so nobody is to be trusted) and take place at the bottom of the social pile where one gambles and snatches at short-term gain. If the peasants feel too oppressed, the fatalist mindset will find nothing to lose by lashing out—as we saw at the US Capitol the other day. Being disorganised (as well as incoherent), the peasant rebellion will be crushed—having caused pain, achieved nothing, and provided yet more proof of a coercive world. Does homo fatalis count economically? My guess is that this worldview characterises the majority of the blue-collar workforce. Unlike the situation with homo hierarchicus, economics is unaware of the existence of homo fatalis.

    Have I convinced you of the importance of coercion? I think these categories—these tastes—give insight. But they do not make a theory. They need to be theorised in relationships and there surely won’t be any real progress until they are.

  26. ghholtham
    January 17, 2021 at 7:51 pm

    Geoff. I accept the insights you list; some of them were clear to many people even before they came across systems theory. As I said, I love the “vision” of the economy as a complex adaptive system. It just seems to me this vision has not led to theory that is usable in a particular situation. There seems no early prospect of any kind of “technology” evolving that can be employed to address concrete problems. If I am wrong I’d be pleased to hear about it.

    • Craig
      January 17, 2021 at 9:11 pm

      “There seems no early prospect of any kind of “technology” evolving that can be employed to address concrete problems. If I am wrong I’d be pleased to hear about it.”

      The technology is the hiding in plain sight 500 year old discipline of double entry bookkeeping and its convention that equal debits and credits sum to zero. Steve Keen whose brilliant de-bunking of DSGE has recently re-discovered the importance of that discipline in following money flows, it’s just that focusing primarily on theoretical and mathematical abstraction he hasn’t looked at the economic/productive process itself and hence hasn’t recognized the point in that process where the convention could be applied for Ptolemaic to Copernican complexity exploding effect.

      Are you pleased….or still caught up in epicycles as explanations?

    • deshoebox
      January 17, 2021 at 11:56 pm

      Here’s an image I think may be illuminating: Think of going from one side of a large lake to a particular point on the other in a sailboat on a windy day. If you know how to sail you can be sure of arriving at the right place, but when you start out with given wind direction and strength and the tiller in a particular position, there would no way even theoretically to predict where you will end up. Winds change direction, waves cause the boat to change course, so you can be sure the many, perhaps hundreds, of course corrections will be necessary. The boat, the water, the sails, the wind, the sailor….they are all part of a highly dynamic and adaptive system. The fact that you know where you and the boat will arrive where you want to depends on your skill as a sailor, not on your being able to apply a formula to predict your entire course. You can’t even predict a single one of the course corrections you will have to make but if you know your destination you can be sure of arriving there. Perhaps economics is more like this. it is dynamic and adaptive, subject to hundreds, thousands, or even millions of influences, many of them becuase of conflicting self-interested actors. If there is any validity to this analogy then perhaps the fundamental error econoimists tend to make is in trying to predict where an economy will end up without specifying a destination and allowing for the many course corrections that will be required. When I talk about the purpose of the economy, this is what I mean. If one goal is to reduce inequality of wealth and income, for example, it is not that difficult to see how to get there, if you accept that many policy adjustments in the area of taxation, investment, public services funding, and other factors will probably be needed.

      • Craig
        January 18, 2021 at 1:26 am

        Correct. Nothing is ever static and not subject to process. Even paradigm changes and new zeitgeists. The cosmos being a process and human beings not being entirely rational and ethical means that regulation and rules are necessary even for such permanently mental and temporal progressive phenomena. The key thing to consider for those necessary rules and regs is to try to keep them logically and philosophically aligned with the concept behind the change.

      • deshoebox
        January 18, 2021 at 5:31 pm

        GH, knowing “in principle” about all the forces operating on a boat would not enable you to predict where it would end up on the other side of the lake. This would be obvious if you had ever sailed a small boat on a lake. Navigation does not enter into it. The point of the anaogy is that it is a situation where many continually changing forces affect your course and potentialy your destination. It is only the intention of the sailor and his or her ability to trim the sails and steer the boat that make the destination predictable. No formula or set of formulas can even conceivably do that.

    • January 18, 2021 at 12:40 am

      I like deshoebox’s analogy, it nicely illustrates that you don’t need “theory that is usable in a particular situation”. The problem is the habitual reliance of mainstream economists on mathematical theory (even though that theory is worse than useless). My mention of horse training and bonsai was meant to convey the same thing. I don’t have a theory for how to spend the rest of my day. Rather, I get on with it and deal with things as they arise.

      • January 18, 2021 at 1:55 pm

        Geoff, deshoebox’s analogy is just what I’ve been trying to persuade you of the relevance of – i.e. cybernetics or steering – except that his picture is of a lake, where the steersman can still see where he is going, whereas modern navigation is of the open seas, where he can’t. The whole point of complex number, Cartesian (map-making) coordinates and navigators needing to know their latitude and longitude is that the theory of navigational is inherently mathematical, but uses complex number (directional) rather than linear (merely quantitative) mathematics.

        The complex number maths still works on the surface of a spherical world and indeed that of an expanding universe or an economy contracting by using up its resources. It still works with spherical measures of time, as in Fourier analysis, positioning the hands of an analog clock, and as PID control feedbacks keeping navigators directed to a point on a map.

        Not that economists have thought of that. (As J M Keynes said clearly enough back in 1936, they are still members of a Flat Earth society). No wonder ” everything we know about modern economics is wrong”!

      • January 21, 2021 at 5:20 am

        Thank you Dave. The simple truth is I have never really understood your point of view, so your comment clarifies. I have not been against what you say here, I just stopped trying to figure it out. Perhaps I am stupid. Anyway I’m glad to agree with you.

  27. ghholtham
    January 18, 2021 at 2:07 pm

    But we know in principle about all the forces operating on your boat. We understand what wind and tide will do in principle and there are both principles of navigation and a set of techniques for dealing with unforseeable variations in the forces. The “skill of the sailor” may be substantially tacit rather than formulaic but it is learned and it is consistent with our knowledge of how the system works in general. If the sailor couldn’t sail because he knew nothing about wind and current, having an objective would not help him. And I don’t think telling the sailor he is dealing with a complex system that is not in equilibrium gets him very far any more than it helps the economist.

    • Craig
      January 19, 2021 at 2:59 am

      “And I don’t think telling the sailor he is dealing with a complex system that is not in equilibrium gets him very far any more than it helps the economist.”

      Exactly, and that’s because while its true and nice to know that indeed the economy is not in equilibrium…..it still doesn’t get us anywhere in resolving the present economic problems we can’t seem to solve. That requires a NEW insight and/or a NEW tool…..like a NEW paradigm, doesn’t it? ;)

      Maybe we should investigate EXACTLY what a NEW paradigm is and try to decipher the signatures of accomplished historical paradigm changes to help us along the way toward perceiving it….so we can at least have a chance of surviving the looming existential crises converging on us.

      • deshoebox
        January 19, 2021 at 7:17 am

        Craig, how about this as a sketch for a new economic paradigm: The economy’s purpose is to provide for the needs of all people on Earth in a way that does not compromise future people’s ability to continue doing so. The purpose of the economics relevant to this paradigm is to observe and anayze events and their effects to determine the most efficient and sustainable way to meet the fundamental purpose of the economy. As starting points these have the potential advantage that (a) they are true, and (b) almost everybody already knows they are true.

      • January 19, 2021 at 1:37 pm

        deshoebox and Craig, I am with you in spirit on this, but the problem is that neither of you understands the differences between complexity and complication, sailing and navigation and a paradigm (example) and a solution.

        ‘Complex’ literally translated from the Latin means “with parts”, whereas ‘complicated’ means ‘with ties’ (paths all tangled or motions all interacting). A system composed of three parts is still simple in that if “closed” it maps out a single circuit. The simplest complex system therefore has four parts, hence the “four winds” of the sailor, the four directions of measurement mapped as + and – on the two coordinates of complex number.
        Where the simplest system is a triangle, what I discovered by thinking that way is that simplest complex system is a crossed diamond (Leavitt’s diamond, the electrical paradigm of which is Wheatstone’s Bridge). What the Santa Fe complexity theory familiar to economists is trying to do is to untangle complication by reducing it to the algebraic form generates it, in which the high-level terms are logarithms rather than number of different dimensions, and increasing them has increased the tangles.

        Sailing on a lake is like commercial sailing was before Columbus: largely coastal, with precarious journeys across the Mediterranean and between known islands, following familar trade winds” or the flight of birds. Not until Captain Cooke’s successful trials of a reliable clock enabled position to be determined accurately was it possible for navigation of the open seas to advance from an observational skill to a mathematical science. The story is well told in Dava Sobel’s book “Longitude”, 1996, UK: Fourth Estate; US: Walker Pubs.

        The word ‘paradigm’ means “example”, and the point when the topic is mathematical is that it doesn’t matter what subject it is taken from: one can as well add bananas as apples. The value of it is that “actions speak louder than words”. In Kuhnian terms, advances are “normally” made not by changing the underlying theory but by developing existing models. Thinking of cars (in US automobiles) more generally as transport, “revolutionary” changes requiring teachers to rethink their theories occurred with the development first of steam engines, then internal combustion engines, jet engines, rockets and electricity, all of which have since been used to power cars. In economics, the models are still those which originated in the age of steam engines. They are still wedded to the theory of Newtonian mechanics, not recognising (or in any case accepting) that information technology enables us to send messages rather than travel ourselves. The analog and digital theories of this date back to 1948, i.e. Weiner’s “Cybernetics” and Shannon’s “Mathematical Theory of Communication”, (which colloquially “added Information Science to Newton’s Physics”). The revolutionary theoretical question for economists is whether Capitalism is better characterised by its use of information or physical force. Does the captain of the ship or aeroplane move its rudder, or send a message to a servomechanism which can actually exert the necessary force? The comparison of the examples of sailing and navigation is instructive.

      • Craig
        January 19, 2021 at 5:16 pm

        deshoebox, That’s an excellent up to date purpose for modern economics, but it’s not a new paradigm. A paradigm is a pattern, a complexity, and a new paradigm is a new single concept that applied changes the character of the pattern it applies to. It is helio-centrism vs terra-centrism, its agriculture, homesteading and urbanization vs nomadic hunting & gathering, it’s competition and cooperation vs monopoly and domination, it’s wisdom/integrative intellectual inquiry vs reductive scientism only and it’s monetary gifting vs debt only.

        You will notice that on the surface these old/new paradigmatic examples are also conceptually opposed dualisms, but in actual fact the new paradigm concept is an integrative thirdness greater oneness of the particles of truth in the apparent contentious dualism enabled by a new insight and/or tool. For helio-centrism it was the invention of the telescope and the discovery of the ellipse, for homesteading/urbanization it was agriculture, for The Reformation it was the recognition that individual self actualization was epistemologically higher than enforced religiosity, for wisdom/integrative intellectual inquiry it is the insight that indeed scientific thinking is a wholly included set within the larger mindset of wisdom thinking and for monetary gifting it is the insight of the pattern changing power of the ending, summing and terminal factor expression point at retail sale of a 50% discount/rebate price and monetary policy.

        Dave, the study of complexities is interesting, informative and necessary, but the key to discovering and understanding paradigms and especially new paradigms is discerning deep simplicities, i.e. wisdom and wisdom’s pinnacle concept, i.e grace as in love in action/systemic policy.

      • deshoebox
        January 19, 2021 at 6:56 pm

        Craig, I appreciate your response. I would argue, however, that the two points I suggested as the basis for a new paradigm really are as different from those of conventional economics as was scientific thinking that replaced the earth with the sun as the center of the solar system. I have chosen not to start by laying out the complexity these basic points lead to but it is not hard to see what some of them are. If you begin by saying there is enough to go around (which is true and provable) and go on to say that every person born on earth has an inalienable right to an equal share of everything necessary for a healthy, secure, and productive life, it is a short step to eliminating nearly all of the destructive features of the current system of global finance capitalism. Making a profit by polluting the environment could not be permitted, for example, because doing so violates the rights of the people affected and limits the ability of future people to enjoy a healthy and secure existence. Betting on the future value of life-sustaining commodities such as food or energy would not be permitted, either, since these have or could have the same ill effect on the lives of present and future people. I call this a different paradigm because it clearly changes the character of economies and of the economics we would use to understand them and develop public policy to guide them.

      • Craig
        January 19, 2021 at 5:32 pm

        Make that last phrase: “wisdom and the efficacy of wisdom’s pinnacle concept, i.e. grace as in love in action/systemic policy.”

      • Craig
        January 20, 2021 at 2:18 am

        deshoebox,

        I completely agree that your points are aspects of and indeed would be effects of the new paradigm concept I advocate which is Direct and Reciprocal Monetary Gifting.

        Gifting/free monetary gifting of sufficient amount would result in relative abundant economic security for all. Ecological sanity is obviously wisdom.

        Abundance is an aspect of grace, and grace as in love in action/systemic policy is the pinnacle wisdom concept of every one of the world’s major wisdom traditions.

        Every historical new paradigm has been an application of and coming further to consciousness of one or more of the aspects of grace.

      • JD
        January 20, 2021 at 2:34 am

        Craig, thanks for your response. Years ago, reading Kenneth Boulding on grants economics (I went to high school with his daughter and knew him slightly) it occurred to me that the basic unit of economic activity is not a transaction but a pair of gifts or grants. I give you something, money perhaps, and you give me something that we agree is of equal value. An honest gift has no hidden elements, no secret downside. A corporation that mistreats workers, despoils the landscape, and exploits resources unsustainably cannot enter into an honest or love-based exchange of gifts because its way of doing business (“making a profit”) entails concealing part of what is being exchanged, the part where other people not explicitly parties to the exchange, suffer costs they are not paid for. This idea is related to one of the principles of what I consider one of the cornerstones for a new economics. All paired gifts (“economic transactions”) must be such that there are no hidden negative gifts, what economists call “externalities”. If I try to make money by selling you something you need a a cheap price while burdening other people with uncompensated costs to their health, their security, their right to opportunity, and so on, I must be stopped, as a matter of principle. This is one element of what I consider a new economic paradigm which I call “Five Elements Economics” because all economic activity depends on the five elements comprising Energy, Time, Natural Resources, Knowledge, and Ingenuity.

    • January 21, 2021 at 5:43 am

      GH and others, I think this comment and all the responses to it miss the most fundamental point of the sailing example. The point is that you can’t calculate a course in advance and expect to get to your destination. You will never have enough information. But if you get out on the lake, head in the general direction and regularly correct your course you can get there readily.

      If you want ‘complexity theory’ to give you the means to pre-calculate your course you will be disappointed. But you’re asking the wrong question. A better question is ‘Does it help to realise that the wind and currents are shifting all the time in ways that are essentially unpredictable?” Well yes, it helps a great deal.

      Do you need to know it is a complex system in the technical sense? Not really, but there other useful insights might follow from that one. The essential thing is to recognise the lake (and life, and the economy) is unpredictable for all practical purposes.

      The trouble with the neoclassical approach is that it is stuck with trying to pre-calculate the course, and it is doomed to fail every time (except by chance).

      I’m sorry if the implication is that you use methods that may seem crude. No fancy optimisation calculations, no grand claims of global optimality, no flaunting of “rigour”, no false claims of being scientific. You just get out there and muddle along, as I’ve said earlier.

      That is a radical shift of mindset.
      (I’ll leave the semantics of that to the philosophers here, I have better things to do.)

      Is there nothing one can say in advance about sailing the lake, or the economy? There are many things, if you look closely, but they will be macro, about general strategy rather than micro-detail, not necessarily universal, involve mathematics only if it’s useful, and need to be regarded with appropriate humility. Some people are better sailors than others.

      With this approach, you will be much more successful in your sailing, and the world will be a much happier place.

      • Yoshinori Shiozawa
        January 21, 2021 at 3:00 pm

        Geoff,
        I have read all your comments in this thread and three article in your blog: Neoclassical Economics I, II, and III.

        I have no big objection in what you have written except the point that you have almost identified mathematics with neoclassical economics. Neoclassical economists use mathematics (perhaps too much). But that does not imply that mathematics cannot be a useful tool for economics. In Neoclassical Economics I, you have cited Steve Keen several times, but he uses mathematics, although his dynamics system is a bit odd to me. You must be too hasty to denounce neoclassical economics.

        Your comment on Holtham gives me a similar impression. He is not a neoclassical economist. Or at least, he thinks there are much to do in economics and neoclassical economics does not necessarily show the direction. As an economist, he is wondering what will be the right way to proceed. This is an important point. Even if we do not agree, we are searching a new direction, a new possible theory, a new methodology, etc. It is shame that your tone about Holtham sound not very different from accusation of neoclassical economics.

        What I am frustrated with Lars Syll’s arguments is that he always denounces mainstream economics (often in a caricatured way). I guess he is feeling in the same way. Why can we talk as comrades who have different opinions on what we should do with economics?

        The topics such as horse training, bonsai tree, and sailing are useful in illustrating problems we face in the economy, but a successful sailing is related to various things. The boat must be solid enough. To make such a boat, structural mechanics my be useful. The current state of economics is far from mechanics, but one of target of economics is to build a theory that is comparable to mechanics.

        You cannot understand horses and trees by mechanics. But one cannot say that you can know horses and trees better without mechanics. It is true that actual economics lacks a solid theory or theories. But I do not think that we should abandon such efforts. Of course, this does not imply that economics should mimic physics. Economy is very different entity than (simple and idealized) physical objects. We should build an essentially different science. We are, I believe, discussing this strategy.

      • January 22, 2021 at 12:58 am

        Yoshinori,

        I’m not sure why you got the impression I’m against the use of mathematics. I do think the level and amount of mathematics needs to be appropriate to the problem – sometimes little or no mathematics, sometimes very sophisticated, sometimes powerful numerical. I criticise the neoclassical stream for imagining if they do fancy mathematics they are doing science, or that fancy mathematics is a measure of the usefulness of their theorising.

        I was not assuming GHHoltham advocated neoclassical economics, I had the impression he is not. However it seems he still thinks in terms of developing a comprehensive theory, perhaps one that will predict the required course of the boat, rather than lowering our sights and using more immediate, practical, perhaps simpler ideas to start doing things that improve our chances of achieving what we want. That’s what I meant by “asking the wrong questions”.

        The three articles on neoclassical economics are for a different audience, they are highly critical and I would not want my “tone” to carry over to this (useful) debate. I don’t really think it did, but I apologise if it seemed that way.

        Regarding horses, trees and sailing, I have made the point (see my book) that we must distinguish living systems from non-living, non-complex systems. Traditional reductionist science has been brilliantly successful for analysing the latter, but hopeless for living systems. Living systems can be understood to some degree, but we must approach them whole, with humility, and looking for their general “character” rather than their detailed behaviour, which is impossible to “predict”.

      • Yoshinori Shiozawa
        January 22, 2021 at 9:26 am

        I do think the level and amount of mathematics needs to be appropriate to the problem – sometimes little or no mathematics, sometimes very sophisticated, sometimes powerful numerical. (Geoff Davies on January 22, 2021 at 12:58 am)

        If it is your position (which is quite natural for a natural scientist), I have no other words to say “It’s good!” I am only concerned with this question because Lars Syll often expresses his categorical rejection of mathematics, which produced in this blog hasty understanding such as the use of mathematics is the proof of a paper or theory being neoclassical.

        Complexity is ambivalent and vague concepts. Even though, I do believe with you that complexity must lie at the center of methodological arguments in economics.

        In this arguments it is necessary to distinguish three aspects: (1) complexity of the object (complex system), (2) complexity for the agent, and (3) complexity for the scientific research. To differentiate three aspects are particularly necessary for economics, because economy comprises human agents and they face complexity as their environment. Behaviors of agents must be understood in this scheme. (3) is also necessary when we prospect a strategy to be taken. Economics itself must be understood as an entity that evolves.

        The last point is particularly important if we consider the history of modern physics. It started from Galileo and Kepler. They observed very simple system and it was the secret of their success. Based on these results, Newton, roughly a half century later build his mechanics, seeming very general. However, Newtonian mechanics could not included electromagnetic forces if we do not point the lack of subatomic weak and strong forces.

        Economics must develop in a similar way. After Keynes’s macroeconomics, too many economists became to believe that we can understand the whole process of the economy with a single stroke. To try to find a predictable model is a simple consequence of this thought without basis.

      • January 23, 2021 at 12:55 am

        Yoshinori, good, we agree about the place of mathematics.

        Regarding complexity, we must distinguish the normal English use of the word “complex”, which is a close synonym for “complicated”. However “complex” has been co-opted as a technical term in systems theory, meaning (roughly) a system whose behaviour has emergent features that are not inherent in the behaviour of the components, but that is not chaotic.

        I’m not sure, but I suspect the three distinctions you make are between (1) technical complexity, (2) complications for a participant, (3) complications for those trying to understand the system.

        “Complexity” is often mis-used to mean complicated, and in that case it is vague and ill-defined. But I think technical complexity is clear and not ambivalent: it is a state short of chaos in which the system’s behaviour undergoes frequent small shifts and occasional major shifts. As a shift occurs it is unpredictable, but it is (in principle) predictable between shifts. A chaotic system is unpredictable all the time. As I understand it, there is no clear “lower” bound of complexity, so there is some ambiguity there, but the upper bound is usually sharp, where it transitions into chaos.

      • Yoshinori Shiozawa
        January 25, 2021 at 6:07 am

        Goeff,
        common understanding would be something like what you have stated. However, I do think that system complexity and other complexities (complicatedness in your expression) have no relations.

        Probably you are thinking of complexity by the image of Mitchell Waldrop’s book Complexity: The emerging science at the edge of order and chaos.

        It is a possible hint and had a strong influence on economics. However, I am thinking of complexity with two dimensions. One is Warren Weaver’s concept of organized complexity. The other is Herbert A. Smon’s bounded rationality.

        As for Weavers idea I have referred to several times in this blog, but it is sufficient to read his original paper. He distinguished three categories of problems: (1) problems of simplicity, (2) problems of disorganized complexity and (3) problems of organized complexity. Complexity that I have in mind is that of problems of organized complexity. distinction between problems of complexity and problems of organized complexity is still a good axis when we want to consider the difference between

        Simon’s bounded rationality is famous in economics and management studies. It was Simon who started to object optimization formulation of economic behavior in economics. I have argued this point in Chapter 1 of our book, mainly from the viewpoint of the ubiquity of intractable problems. Simon mainly talked about human agent’s rational capability but a parallel argument is possible for economics. We should know that there is certain limit to predict the future state of the economy as a whole.

        Weaver did not consider the computing complexity (at least explicitly) but his organized complexity can be interpreted as problems of which the difficulty of the object for us to understand surpasses our intellectual capability. Ronald Heiner (1984) expressed this as D-C gap.

        I am frustrated with the fact that complexity discussion in economics focuses on system complexity (mainly understood as non-linear system) and other questions such as complexity for agents and complexity for economists (or scientists in general) are generally ignored.

      • Yoshinori Shiozawa
        January 25, 2021 at 12:45 pm

        Errata (my post on January 25, 2021 at 6:07 am)

        (1) The second sentence of the first paragraph:

        “I do think that” should be read “I do not think”.

        (2) The last sentence of the fourth paragraph must starts with “Distinction” instead of “distinction”.

      • January 26, 2021 at 1:35 am

        Yoshinori –
        Yes my understanding of complexity is largely from Waldrop, quoting some of the prominent people in the field.

        I read Weaver’s paper. His ‘organised complexity’ seems to be what we now commonly call self-organisation, when it leads to complicated behaviour. Interesting, and notable for its time, but I did not get any great insight from it. I was already familiar with ‘simple’ problems and statistical mechanics. The distinction I have been making is between physical systems amenable to reductionism and self-organised (including living) systems requiring a holistic approach.

        I confess I do not understand what you mean by “complexity for agents and complexity for economists (or scientists in general)”. Perhaps it is because my main motivation is to dislodge economists from the deeply ingrained habits of equilibrium thinking, and because I am interested in the system.

        I am not familiar with Simon’s ‘bounded rationality’, or rather with what he does with that sensible idea. One passage in Weaver, regarding insurance companies, is pertinent to views that often pop up on this site. They do not have to know all the complicated and unpredictable events in an individual’s life to extract useful aggregate information. There may be progress to be had from characterising individual ‘rationality’, but one can make important progress without it (and without the absurd caricature of homo economicus).

      • Yoshinori Shiozawa
        January 26, 2021 at 5:36 am

        Geoff,

        self-organization is a specific viewpoint to investigate problems of organized complexity. Weaver’s paper was written in 1940’s. It is natural that he could not see many aspects of complexity that will be developed later.

        The problem of Mitchell Waldrop , or Santa Fe Institute program, is that it focused on increasing returns in economics. This is an important problem, but the scope is rather limited. Paul Krugman was frustrated of Waldrop’s book because Waldrop did not highlighted him enough. Krugman’s most famous contribution was his model that explained why intra industry trade was proliferate. His answer was increasing returns. But, he solved this problem as an application to equilibrium theory. In 1980’s increasing returns were believed to be subversive to equilibrium framework but it had no such destructive power. However, Santa Fe Institute continued to be center of excellence of complexity sciences. It gave some distortions to economics.

        Physicists played a good and bad role in forming SFI thought in economics. Good role was that it refused equilibrium analysis, to which I have no objection. But, the trouble was they did not considered in depth how human economic behaviors are organized. They pointed that behaviors evolve. Some of them employed evolutionary game theory. Kenneth Arrow and Brian Arthur were aware that bounded rationality matters. But, it remained, it seems to me, a secondary question compared to increasing returns. They considered also mutual interactions between agents. Probably, this was familiar questions for statistical physicists. This point of view was suited to analyze financial economy such as stock prices and asset pricing. This may be inevitable, because SFI was mainly financed by City Bank. But, it meant, at the same time, SFI economists paid little attention to production and consumption, or in other words, real economy (in opposition to financial/finance economy).

        Although finance economy is gravely influential to real economy, real economy is the body of the economy. If we compare two economy and the economics attacked by SFI and related economists, we observe a strong imbalance between economics of finance economy and economics of real economy. Even if fiance economy is a big problem, we cannot dispense with economics of real economy, because many important problems are ones of real economy. Environmental problem is one of them.

        Let us change our viewpoint for a while and look at traditional economics. The main part is occupied by neoclassical economics. If SFI group economics leaves economics of real economy untouched, neoclassical economics remains mainstream. If we admit it, there is something missing in SFI program. What is it?

        In my opinion, they have ignored how human (or even animal) behaviors are organized in the complex environment. Optimization is impossible. A possible hint was given by Heiner (in the paper cited in the post on January 25, 2021 at 6:07 am). Human behaviors are patterned. We may call them routines. These questions can be argued in various ways. I have given an example in Chapter 1 of our book. But the next question is how to reorganize them in a system or network that extends worldwide. This is the reason why I named Chapter 2 A large economic system with minimally rational agents.

        Although I did not mention it, Chapters 1 and 2 are implicit criticisms of Santa Fe or Arthur’s complexity economics. It has good points but unfortunately it lacks impact that can threaten neoclassical economics. Because it lacks economics of real economy that can replace neoclassical economics.

        My diagnosis is that it lacked deep considerations on the complexity for human agents and a prospectus to re-organize human behaviors as a system that is as large as world economy.

      • Meta Capitalism
        January 26, 2021 at 8:27 am

        Shiozawa, the great weakness of your book and arguments is that that you are a victim of your own limited studies, your own limited presuppositions, a kind of stuck-in-time circa 1940s to 1960s view of science (physics, biology, economics, etc.) that seems only able to cite as resources archaic 1940s papers and unable to even accurately represent their views despite their outdated nature. You seem unable to discern the difference between trivial intractability and non-trivial intractability, or the difference between nearly decomposable complexity and non-decomposable complexity. The only reason I can find is to conclude that your reading is limited, your scope restricted, and this limitation is the best of your ability. Weaver (1948) and Williams (1948) are archaic and antiquated and their understandings of science, biology, complexity do not represent the most advanced understanding available today from many diverse domains of science ranging from physics, to biology, to even social science. But you are so focused on pressing your archaic axiomatic deductive method and spoofing biology (evolutionary theory) that you neglect to familiarize yourself with the current state of the field. This is where you will fail in my view. I would recommend a book that treats these issues in light of more recent discoveries but I have little faith your will read it (I have read every single reference you have put forward).

        If you have the will and ability you might read
        Mind in Life: Biology, Phenomenology, and the Sciences of Mind

      • Meta Capitalism
        January 26, 2021 at 9:17 am

        The first step if discussing complexity is contextualize and define it. To discern its history in context through time.
        .

        3.2 Complexity conceptualized

        It seems that characterizing a frame of reference for dealing with intractable complex phenomena can hardly be carried out without a clear definition of the concept of complexity it uses. Yet, this appears to be a challenging task. Complexity is a term that “means different things in different disciplines, and is not rigorously defined outside of a specific context” according to the glossary of the Santa Fe Institute Complexity Explorer (retrieved on February 16, 2017). This view finds a confirmation with the responses given in a book by 24 contributors with an expertise in complexity, including a majority of scientists, who were asked to define complexity (Gershenson, ed, 2008). The editor was led to conclude that the “most common problematic aspect of complexity was the misuse of the concept” (ibid.: 135). (Davis & Hands 2020, Kindle Locations 656-665, https://a.co/2RF5grv)

      • January 26, 2021 at 11:06 am

        Yoshinori (26 Jan at 5.36 am) says: “Physicists played a good and bad role in forming SFI thought in economics. Good role was that it refused equilibrium analysis, to which I have no objection. … Kenneth Arrow and Brian Arthur were aware that bounded rationality matters. But, it remained, it seems to me, a secondary question compared to increasing returns”.

        Meta’s criticism seems cruel, but “this limitation is the best of your ability” seems to get to the nub of the problem: that like most academics, Yoshinori is a left-brained (literal-minded) thinker. (Cf. my comment in the Keynes-Ramsey discussion). In other words, his own rationality is “bounded” by his lack of right-brained (intuitive) insight, such that he cannot see that PID cybernetics is the dynamic form of equilibrium analysis, from which SFI chaos emerges as the special case of too much positive feedback in pursuit of increasing returns.

        My initial reaction to this was to want to cite A N Whitehead on learning how to think. Let me now indulge that. In the chapter on “Transformations” in his “Prelude to Mathematics”, W W Sawyer cites Whitehead saying in a 1914 presidential address:

        “The art of reasoning consists in getting hold of the subject at the right end, of seizing on the few general ideas that illuminate the whole, and of persistently organising all subsidiary facts round them. Nobody can be a good reasoner unless by constant practice he has realised the importance of getting hold of the big ideas and hanging on to them like grim death”.

        Three relatively recent “big ideas” that economists have failed to seize and hang on to have been complex: G K Chesterton’s brain architecture underlying Jungian personality traits; the manifestation of that in C E Shannon’s electric circuit logic and its programming; Shannon’s seizing on information capacity rather than meaning and using spare capacity not to achieve goals but to correct errors.

        This last enabled Weiner’s cybernetics – a reference to the older big ideas of cartesian map coordinates and solar time-keeping – to be transformed into PID remote control. SFI complexity theorists are still seeing PID as three numbers rather than feedbacks correcting the errors of the present, past and of the different future – as yet merely coming into view. Capitalism is such a system pursuing not economic goals but Brian Arthur’s “increasing [monetary] returns”.

        Thanks to Yoshinori, anyway, for another big idea. ” SFI was mainly financed by City Bank”.

      • January 26, 2021 at 11:55 pm

        Yoshinori –
        The main lesson I got from Waldrop’s book was the idea of complexity, explored in many different contexts in the book. I immediately recognised that it is a much more plausible and productive framework to consider an economy than equilibrium theory.

        Brian Arthur’s contribution to economics is only one of many (then and since), though an important one, and my interest extended well beyond his work. I was frustrated that he did not spell out the obvious implication – that equilibrium theory is nonsense and neoliberalism has no basis.

        Krugman might have contrived to include something he calls increasing returns in an equilibrium theory, but I can only imagine that he used what physicists call a quasi-static approximation, which is still a near-equilibrium approximation. Regardless of Krugman’s obscure theory, it is still obvious that increasing returns will commonly generate exponential growth, i.e. instability (Henry Ford, Microsoft, Amazon etc).

        Have you read Eric Beinhocker’s 2006 book The Origin of Wealth? It summarises many agent-based studies (and much else), growing out of Arthur’s and others’ work. For example Farmer’s work on how even arbitrage can generate instability. There must have been a lot of work since. By the way, agent-based studies are hardly at all similar to statistical physics, so there was no automatic transfer of expertise.

        If you have good ideas to include aspects of human behaviour, and production, then pursue them. There is much to be done and others, like SFI, may be pursuing other aspects.

        I cannot agree that finance is a secondary problem. It has been grossly distorting the real economy, and society, extracting unearned wealth and generating instability. It needs to be reined in.

        MetaCapitalism –
        You do not need to be so patronising, nor harsh, and you seem to be conjecturing on what you perceive as Yoshinori’s limitations, rather than knowing. This thread is generally civil, it would be good to keep it that way.

      • Yoshinori Shiozawa
        January 27, 2021 at 4:59 am

        Geoff,

        yes, Beinhocker (2006) is one of my favorites. I referred to it in my first comment to Asad Zaman’s Complexity Economics:https://rwer.wordpress.com/2020/12/04/complexity-economics/#comment-175551

        Beinhocker talks about ABS (agent-based simulation or studies) but I like his idea of social technology better than others. On this point, he surpasses Arthur. Arthur’s contemplation on technology is rather limited on physical technology. This view changes the scope of economic policy very much.

        As for the possibility of ABS, I am hopeful for the future possibility but I am thinking that we must wait for about a half century before it becomes a real scientific tool for analyzing the economy. I myself have worked in this field. We have constructed an artificial market called U-MART, which is a futures market in which humans can participates as well as machine agents. We have published two books in English and many occasional papers. I will send you the PDF of a chapter in which I argued the possibility of ABS (if my mail arrives to you).

        I am not saying that finance economy is of secondary importance. Complexity economics must pay due attention on real economy. This is the question of proportion. Alan Kirman is much more balanced. For example, he is interested of fish market.

        I feel Arthur and others considers that there are no phenomena that attract their interest in the real economy, because it does not seem to be complex enough. This may be the reason why they are not eager to reject the core of mainstream economics, because it is the theory of production and consumption, or the theory of real economy. (HIdalgo is an exception, because he works on international trade.)

        I contend that we should overturn mainstream economics at its basis. On this point, I believe, we agree with each other.

      • Yoshinori Shiozawa
        January 27, 2021 at 6:00 am

        Dave,

        your left-brained academic can imagine that his rationality is bounded. It is why he poses the third problem:

        (3) complexity for the scientific research.

        Please read my post above on January 22, 2021 at 9:26 am.

        The scientific research includes of course my efforts as economist. Neither logic or intuition is sufficient for the study of complexity. What can you say on this concrete problem?

        I have no big idea on it. Probably we need lot of trials and errors. It would be better that we start from a very small and narrow problem that can be understood firmly, ect.

      • January 27, 2021 at 4:20 pm

        Yoshinori

        Unfortunately your comment of January 22nd didn’t appear. My reference to left-brained academics is of course a short-hand figure of speech, for we all have four parts to our brain and our differences lie in how we habitually use them when thinking. Do we focus on one-dimensional words, two-dimensional observation, what we are doing or how we feel? As I see it, left-brain dominant thinkers tend to intuit the meaning of words but then think rationally about the meanings. By contrast, a right-brain dominant thinker sees situations first, but then has to find words to express what he sees, so his ‘ratio’ is between words and observations. Word reasoning is more efficient, but it doesn’t see meanings which are not already familiar, i.e. the more complex the issue, the more likely it is that the unfamiliar has not yet been seen and transformed into meaningful words. This is ever more so as scientific research becomes specialised to reduce its projects to more or less familiar themes.

        I’ve acquired a new book by an economist with your “big idea” about how to tackle this problem: Mariana Mazzucato’s “Mission Economy: a Moonshot guide to Changing Capitalism”, Allan Lane (Penguin). The reliability and software in it are very much the sort of science I was involved in.

        On p.83 Mazzucato notes the significance of the PID electronic servo system development of the Phillips hydraulic model that I keep insisting on. “Before Apollo, all aircraft and spacecraft were operated by pulleys and wires to open and close valves to fly the aircraft. … The solution was a computer system that could control the spacecraft’s subsystem, turn valves on and off, calculate and store data, and so on”. The book is about how NASA had to be reorganised in order to bring this about.

      • Yoshinori Shiozawa
        January 27, 2021 at 5:05 pm

        It is strange. To post your reply, you must push “reply” button at the right of Geoff Davies post on January 21, 2021 at 5:43 am. My comment on January 22, 2021 at 9:26 am appears as fourth post after Geoff’s above post.

        I have read the publicity of Mazzucato’s new book. It seems it will start to be sold after March 23 in Japan. It must be a policy book. Economic theory and policy are not necessarily closely connected. Please remind the history of medicine. Even before medicine became a scientific discipline, there were various good prescriptions to remedy various diseases.

        Complexity for the scientific research comprises the interpretation why this kind of situation occurs. But to expect a good doctor or good prescription without no scientific background is not the main subject-matter of “the complexity for scientific research”. For right-brained persons, it seems to be of no importance.

      • Craig
        January 27, 2021 at 5:08 pm

        Complexity is analogous to a zen koan. Useful, not as a means of resolving its specific illogical question itself, but as a tool for the means of discovering the importance of utilizing integrative thought and experience that points to and better enables a new and deeper discovery.

        How could wandering hunters and gatherers whose survival depended on chasing game and moving with the seasons to harvest fruits and grains conceive of the absurdity of staying in one place to better survive? Breed and corral stock and plant seeds. How could one pbelieve that the earth revolves around the sun when the sun moves and the earth apparently doesn’t? Invent the telescope. How can austerity be resolved and inflation be prevented when the former seems to be the only way to curb/prevent the latter? Implement a 50% reduction in price and monetarily fulfill it with a reciprocally equating formula at the terminal ending and thus terminal factor expression point of the productive process at retail sale.

  28. Yoshinori Shiozawa
    January 19, 2021 at 8:45 am

    This is a part of evidencebasedeconomics’ post on January 11, 2021 at 7:51 pm as one of comments to Shimshon Bichler and Jonathan Nitzan’s article “Corporate power and the future of U.S. capitalism” on January 4, 2021.

    Jonathan, I have now read some of your work with Jonathan Nitzler, especially “Capital as power: Toward a new cosmology of capitalism”. I have no problem with your view that we need to start afresh, rejecting e.g. neoclassical economics, the idea of a production function, etc. In fact, I wish you spent less time on demolishing existing ideas (reactive mode), and more on explaining your own.

    What I want Lars Syll is the same as what evidencebasedeconomics hoped Jonathan Nitzan. I wish Lars spent less time on demolishing existing ideas, and more on explaining or developing our own ideas. As a philosopher and methodologist of economics he seems to believe it is his duty to “demolishing existing ideas”. I wonder whether there is no way for philosophy of economics to contribute to build a new economics that replaces neoclassical economics. What he is actually doing is enhancing anti-economics sentiment among young students and possible supporters of economics. It may lead to abandon any hope for economics. It will help neoclassical economics to reign longer.

    • January 21, 2021 at 3:28 pm

      To Yoshinori Shiozawa (January 19, 2021 at 8:45 am).

      Thank you for your note. I think that, perhaps inadvertently, you misrepresent my co-work with Shimshon Bichler.

      The Bichler & Nitzan Archives (http://bnarchives.net) has more than 650 items, including books, articles, reviews, interviews, conference proceedings, videos and courses.

      The vast majority of these items, created by us and by others, research, articulate and debate a new radical approach to political economy: the theory of capital as power.

      We also critique existing political economy, both mainstream and heterodox. But this critique is mainly a launching pad for our own research.

      • Yoshinori Shiozawa
        January 21, 2021 at 4:55 pm

        J. Nitzan
        it is true that I do not know what you are doing. I peeped into your site, but as there were so many articles, I did not read them.

        My post on January 19, 2021 at 8:45 am has no aim than citing the post by evidencbasedeconomics. I believe his words (the part I have cited) applies for Lars Syll. How do you think about his activities in this blog site? He is very diligent (at this point I respect him), but I have an impression he is taking a wrong direction. He is spending too much time on demolishing existing ideas, and little on explaining or developing our own ideas. I hope he does not enhance anti-economics sentiment among various non-economists.

      • Craig
        January 21, 2021 at 6:43 pm

        Jonathan,

        Is not a monopoly the very dominating expression of economic power?

        Thus is not the virtual monopoly monetary and financial paradigm of Debt Only as the sole form and vehicle for the creation and distribution of money/credit….not the issue we should focus on? The better to end such domination and hence bring greater individual economic freedom and security and systemic stability.

      • January 21, 2021 at 7:41 pm

        To Yoshinori Shiozawa ( January 21, 2021 at 4:55 pm )

        ***

        1. For those interested in Capital as Power (CasP), the following items might offer convenient starting points:

        (a) ‘The Capital as Power Approach. An Invited-then-Rejected Interview with Shimshon Bichler and Jonathan Nitzan’ (2020). This long interview summarizes our approach http://bnarchives.yorku.ca/640/

        (b) ‘The CasP Project: Past, Present, Future’ (2018). This paper surveys CasP research by Bichler and Nitzan as well as many other writers. It also outlines a CasP research agenda for the future. http://bnarchives.yorku.ca/536/

        (c) ‘Capital as Power’ (2009). This book gives the fullest account of the CasP approach. http://bnarchives.yorku.ca/259/

        2. I think Lars Syll excel in outlining and hammering various shortcomings of mainstream economics. However, I also think that every critique reflects an explicit or hidden alternative, and when the alternative is vague or non-existent, the critique is inherently limited. It’s a reaction rather than an initiative.

      • January 21, 2021 at 8:00 pm

        To Craig (January 21, 2021 at 6:43 pm)

        The concept of ‘monopoly’ and the ideological dominance of the ‘financial paradigm’ are aspects of power. But in my view, focusing on these so-called ‘economic’ aspects power is far too narrow and deeply misleading.

        The Capital as Power approach (CasP) rejects the very category of the ‘economy’, the discipline of ‘economics’, and by extension, the notion of ‘economic power’.

        CasP argues that in capitalism, ALL forms of power that affect future profit, hype, risk and the normal rate of return end up being capitalized and in that sense become part and parcel of differential-capitalization-reads-power.

        In conventional parlance, these forms of power are classified as ‘economic’, ‘financial’, ‘political’, ‘military’, ‘cultural’, ‘gender’, ‘racial’, ‘ethnic’, etc. But this fracturing is part of the problem: it prevents us from seeing how capital shapes, encompasses and capitalizes them all.

        See our 2020 invited-then-rejected interview with Revue de la regulation http://bnarchives.yorku.ca/640/

      • Yoshinori Shiozawa
        January 22, 2021 at 1:55 am

        Thank you for an orientation. I will try to read them.

        Nitzan’s comment on Lars Sill is superb:

        I think Lars Syll excel in outlining and hammering various shortcomings of mainstream economics. However, I also think that every critique reflects an explicit or hidden alternative, and when the alternative is vague or non-existent, the critique is inherently limited. It’s a reaction rather than an initiative. (Emphasis added)

        Syll’s criticism is then reactionary? Of course, this is a joke. I do not think him a reactionary. Although I do not doubt his sincerity and good will, this is a point that we must take into account.

      • Craig
        January 22, 2021 at 7:09 am

        Would you not say that Finance and its monopolistic paradigm is the major part, the core of the problem of CasP, and is therefore the most strategic point of analysis and thrust for positive change? It IS Finance Capitalism we are grappling with after all.

        My understanding from a study of the history of the fall of empires is that the major factor in their fall has always been their unawareness of or unwillingness to deal with the problems of ever increasing (mostly private) debt, and that in fact ever increasing debt was what kept many of the other factors that contributed to the downfall in (unnecessary) continuous suspension.

      • January 22, 2021 at 12:16 pm

        Craig, I agree with what you are saying here, but I see Jonathan (January 21, 2021 at 8:00 pm) as rejecting what are now called “economics” and “the economy” when what he is actually rejecting is Capitalist monetary control of the economy and the condition Aristotle called Chrematism (money making). If I am right, I also agree with Jonathan that your practical focus on debt as the problem to be resolved “is far too narrow and deeply misleading”. Again, to make progress on this we need to reach agreement on our terminology.

      • January 22, 2021 at 4:09 pm

        To Craig (January 22, 2021 at 7:09 am):

        You write:

        “Would you not say that Finance and its monopolistic paradigm is the major part, the core of the problem of CasP, and is therefore the most strategic point of analysis and thrust for positive change? It IS Finance Capitalism we are grappling with after all.”

        My answer is no, I don’t think that ‘finance’ and ‘finance capitalism’ are the core problem of CasP, and the reason is simple: according to CasP, all capital appears as finance and only finance.

        With this definition, there is no such thing as ‘non-financial capital’, there is no dichotomy between ‘productive capital’ and ‘financial capital’, and there are no such things as ‘finance capitalism’ and ‘financialization’. All capital is finance and only finance, and capitalism is always financial, by definition.

        Of course, capitalist organizations control production in different ways, but their capital — regardless if they are a Toyota, an ExxonMobil, a Google or an HSBC — is never a ‘productive’ thing, material or immaterial. It’s always a forward-looking capitalization of risk-adjusted expected earnings. In other words, it’s always finance.

        For more on this subject:

        1.’Capital as Power (2009) Part III: Capitalization http://bnarchives.yorku.ca/259/

        2. ‘Imperialism and Financialism: A Story of a Nexus’ (2012) http://bnarchives.yorku.ca/329/

        3. ‘A CasP Model of the Stock Market’ (2016) http://bnarchives.yorku.ca/494/

        4. Financial Crisis, Inequality, and Capitalist Diversity: A Critique of the Capital as Power Model of the Stock Market (2020) http://bnarchives.yorku.ca/599/

        5. ‘ Reconsidering Systemic Fear and the Stock Market: A Reply to Baines and Hager’ (2020) http://bnarchives.yorku.ca/643/

      • Craig
        January 22, 2021 at 6:13 pm

        Dave, I would say that the sea = the current monetary and financial paradigm, which the navigator “knows” cannot be changed because it is full of serpents known and unknown, and is also a chaotic and unalterable is-ness.

        Consequently the navigator gives no heed to it, even though like all current paradigms it is subject to change with a little imagination and actual analysis that might recognize the new tool and/or discovery that changes it from roiling-ly chaotic and unstable to always in watery process yet as graciously navigable as a lake on a sunny day.

      • January 22, 2021 at 7:49 pm

        Craig, living in an island in an ocean I may be more conscious than you of what navigation involves, which is certainly not taking no notice of non-chaotic tides and trade-winds. These tend to be taken into account when plotting the course and arrival times, but steering corrects for almost random variations through time and locality, which are only become known through their effects. Changing the example to try and clarify this point, the laws of navigation are as fixed and therefore knowable in advance as those for writing a number in the arabic form, as against writing it in Roman numerals in which the symbols are constantly varying if ultimately randomly chosen. I suggest the laws of navigation are fundamental theory, the skipper’s charts applied theory, and the skipper’s knowledge of local conditions what you seem to be talking about: the observable paradigm of steering being the applied theory being applied.

      • January 27, 2021 at 2:46 pm

        Jonathan says (Jan 22 at 7.09 pm): “I don’t think that ‘finance’ and ‘finance capitalism’ are the core problem of CasP, and the reason is simple: according to CasP, all capital appears as finance and only finance.

        “With this definition, there is no such thing as ‘non-financial capital’, there is no dichotomy between ‘productive capital’ and ‘financial capital’, and there are no such things as ‘finance capitalism’ and ‘financialization’. All capital is finance and only finance, and capitalism is always financial, by definition”.

        ‘Capitalism’ is always financial, by definition, but that does not imply that ‘capital’ is. In common usage, ‘capital’ includes the environmental resources, tools and know-how which make the economy effective, whereas finance merely constrains and directs their use. If Capital is Power, how does it make sense to say that possession of those non-financial resources doesn’t provide it? (Whether or not someone has priced them).

  29. Yoshinori Shiozawa
    January 19, 2021 at 8:58 am

    “The principal limitation in economics comes not from neglecting coercion but from the amateurish way it tackles uncertainty. if you cannot assume people always get it right (as equilibrium-based economics does) you have to consider and theorise about what they do when they don’t know what’s going on and you have to plot the consequences of the decision rules they actually follow.”(ghholtham on on January 10, 2021 at 7:05 pm)

    I support the main contention of GHoltham, independently from what we think about coercion. Uncertainty is not equivalent with non-ergodicity. Ole’s ergodicity and non-ergodicitiy are both within the range of probability theory. Lars Syll is contending that true uncertainty cannot be treated by probability thinking or at least by conventional mathematical probability theory. I agree with him on this point. But we should take note that Ole and Syll are talking of different things using the same words.

    • January 19, 2021 at 7:48 pm

      I’m sad to see both Craig and Yoshinori responding to deshoebox as if I hadn’t advanced the argument in my own response to him. Craig persists in claiming (against the evidence of esstablished usage) that a paradigm is a pattern or concept rather than an example which illustrates one of these, and Yoshinori (though probably making fair comment about Lars enhancing anti-economic sentiment rather than helping us develop alternatives), goes back to agreeing with gbholtham about theorising uncertainty, ignoring the alternative I offered earlier of giving OTHER PEOPLE space to work through their own uncertainties, for which my paradigm example was [voluntarily] giving way at roundabouts.

      Are they both perhaps “just trying to drown me out”?

      Jonathan Nitzan, incidentally, didn’t (see Yoshonori above at 8.45 a.m.), for like me he realises that to treat an illness effectively a doctor has to make the right diagnosis. (I don’t think either Lars nor Yoshinori has done that). It seems his current research interests cover the Past, Present and Future (cf. my PID feedbacks). His diagnosis and forward-looking themes look to be very close to my own, particularly on fundamental retheorising of “finance as the symbolic [information based] creordering of capitalism”, and the practical need for “post-capitalist accounting”.

      • deshoebox
        January 19, 2021 at 8:01 pm

        Dave, I agree with you and have mostly had the same experience here, with people drowning me out by simply ignoring my comments. I think by now everybody reading these posts on the RWER knows in their hearts that everything we “know” about modern economics is wrong. Is there anyone here who can convincingly argue that anything about modern economics is right? Speak right up…anybody? No, OK. Moving on to developing alternatives, then. Uncertainty is obviously not equivalent to non-ergodicity so enough about that. Let’s talk about what an economy is for, how to tell if it’s doing it well, and what kinds of analysis are needed to be sure about the publlic policies needed to make it work better. I would very much like to hear from you, Dave, and especially from Craig, Shiozawa san, and Mr. Holtham about this, if you have thoughts to offer. I have no hesitation in putting forward ideas that economists would consider ridiculous or irrelevant, and I urge others to be bold, unless you are risking tenure by doing so.

      • Craig
        January 20, 2021 at 1:50 am

        Dave, if you google the word paradigm you get this definition:

        a typical example or pattern of something; a model.

        So we’re both correct. I have been describing a NEW paradigm which as history has shown is defined by and reducible to a singular new concept of a particular pattern. I don’t dispute that a paradigm can also be an example, but describing it as only an example can make of it a mere mental construct that can detract from or miss its temporal universe relevance.

      • January 20, 2021 at 11:12 am

        deshoebox, thank you for your support. You propose: “Let’s talk about what an economy is for, how to tell if it’s doing it well, and what kinds of analysis are needed to be sure about the public policies needed to make it work better”. Those are exactly the things I have been talking about, although it may not always have seemed so when I’ve been discussing the details. Fundamentally, I’ve proposed going back to the original definition of economics as “household management”, but with the development of international travel and trade, the household is no longer a self-supporting family home but the whole Earth. I have said we must study the poverty, extinction of specied and even the weather – not bank balances – when we are worried about how well it is doing. Analyses don’t unfortunately make the system work better, but by comparing them one can see how systems analysis – like medical understanding – has evolved, and make an informed diagnosis about what is going wrong and how best to prevent it. Theory comes into this because we have to be able to communicate what we have learned, but paradigms come into it because most people learn more easily by copying examples than by translating theoretical language into practical terms. (That’s the engineer’s job). So in theoretical terms I’m seeing the system as a PID servomechanism, what can go wrong in terms of chaos caused by too much use of positive feedback to increase profits, and the solution in Shannon’s information science (which showed how to detect chaos and use spare capacity to correct it with negative feedback). My paradigm example of that is navigation, where it can easily be seen that if you keep changing course to avoid on-coming traffic you will very soon lose your way unless you keep correcting your course. Mathematically that’s the same problem as that of speculative portfolios in share markets.

        Craig, I will only say that you are proposing a new solution, not a paradigm that already exists and can be imitated.

        JD (by now some way above), I share your enthusiasm for Kenneth Boulding, whose Spaceship Earth was as thought-provoking as Kate Raworth’s Doughnut; also his 1953 book “The Image” was on the verge of becoming Information Science. However, your mutual giving argument fails when money has no value. Real exchanges have to involve both receiving gifts and paying back in real terms (e.g. by working), though actual givers may be satisfied with gratitude and seeing recipients giving in their turn. (Imitation is the sincerest form of flattery)?

      • Craig
        January 21, 2021 at 12:37 am

        “Craig, I will only say that you are proposing a new solution, not a paradigm that already exists and can be imitated.”

        If helio-centrism was a paradigm, then Direct and Reciprocal Monetary Gifting is a paradigm. They are both single concepts that strategically and insightfully observed and/or applied would change the pattern of the body of knowledge/area of human endeavor they relate to. Terra-centrism and Debt Only are the old paradigms in each case.

        What is your hang up about paradigms being only examples?

      • January 21, 2021 at 10:02 am

        Craig, old sport, we need to sort this out or we will for ever be at cross purposes. Again, if you had thought about what I had just explained to deshoebox and JD, I’ve already answered your objection. Helio-centrism was not itself a paradigm: how to calculate its trajectory was the paradigm example of how to use Newton’s theory. Direct and Reciprocal Monetary Gifting fails if money is simply an accounting device, i.e. with it one is giving and receiving nothing. Which is what – having looked into what money now is – I do assert.

        I don’t have a hang-up about paradigms being “only examples”. Applying the idea of a paradigm to itself, a paradigm is a paradigm of a way of thinking, which in Chestertonian physiological terms uses the right side of the brain and in Jungian/Myers-Briggs psychological terms is intuitive (“relational”) rather than sensory (“literal-minded”). I first learned this from Algol68 adding “modes of interpretation” or “types” to definitions in a computer programming language – which split its design team between those who could see the reason for it and those who couldn’t. I myself had previously worked with things like serial numbers, which should not be interpreted as numbers because you can’t add them. In any case, my commitment is a conclusion after twenty years’ experimentation and comparison, not a hang-up.

  30. pfeffertag
    January 21, 2021 at 10:15 am

    To Yoshinori Shiozawa at January 20, 2021 at 4:07 am

    Yes, Yoshinori, I did read that post. I also read a couple of the posts you link to though I don’t much care for being referred to other writing. Why outsource an answer? Why not just tell me what it is? In this case, the linked post refers to a yet further authors so the outsourcing becomes second order.

    At any rate I don’t agree. I’m not against categorisation (because naming things is a first step toward theory) but I don’t see any use in the distinction between simple and complex. Why is Boyles law “complex”? It’s a relationship between three variables. Newtonian mechanics is supposedly “simple” but is it?

    Maybe there is a reason but it is just asserted. The author (Weaver) gives no evidence. When I look for it, his assertions don’t stack up. For example, Newton’s gravity theory with four variables is itself simple enough but it only applies to two bodies. In reality there are never just two bodies and if you add just one more body there is no general solution at all. This is the famous “three body problem”—and of course there are never only three bodies.

    That sounds pretty complex to me, more complex than Boyles law. It is not quite clear to me why discussion wandered off into Boyle and Newton territory but if abstract assertions are made, let them be demonstrated.

    You go on to discuss evolutionary economics and the various interpretations and lots of mentions of who has said what. There is no theory there; rather it is a history lesson about a research program. What, after 40 years, has been found out? It is not my intention to rain on anyone’s parade but it looks to me like an example of the go-nowhere discussion that has characterised economics for the last 50 years.

    • Yoshinori Shiozawa
      January 21, 2021 at 12:55 pm

      Your reading of Weaver is too rough, but perhaps you are too busy read him carefully. No one can blame you. If you do not like to argue this question, it is all right. It is your freedom. I will not try to persuade you.

      Where do you want to go from now? How do you estimate the state-of-the-art of economics? Why did you participate in the discussion of this RWER blog? Of course, these questions are my monologue. I was just interested of what kind of people you were.

      • pfeffertag
        January 22, 2021 at 7:10 am

        “If you do not like to argue this question, it is all right.”

        What? Argue against Weaver is precisely what I did! He made an assertion and I argued against it!

        You quote him with approval—so defend him! Give me an argument which might show my argument is erroneous. If you can’t then you should judge him to be in error.

        “How do you estimate the state-of-the-art of economics?”

        Again: what? The state of economics is practically all I discuss! To summarise:

        Unlike all the other social sciences, economics has a body of theory. Complaints that the theory does not accurately reflect the practice are invalid for that is the nature of theory. Science theory posits relationships between idealised concepts and this has made science successful. Compared with the other social sciences (which have no body of theory) economics, too, has been uniquely successful. However, economics theory has stagnated for the last 50 years.

        I suggest the reason for the stagnation is because the possibilities of theorising on the assumption of competition and homo economicus became exhausted. In order to improve the correspondence of theory to reality additional theory is needed which includes human behaviour outside of the narrowly economic. I have suggested assumptions of cooperation and coercion. That is, additional theory—interrelationships of idealised concepts—is needed to take into account motivations other than winning and making money.

        That is my estimate of the state of economics—as expressed several times and argued for at length on a couple of threads.

        In addition to this, I have pointed out that the practice of observing reality to look for patterns, does not work. It has failed for over a century in the other social sciences—which have nothing to offer economics. The way forward is to interrelate idealised forms of, say, cooperation and coercion.

      • January 22, 2021 at 11:08 am

        Pfeffertag, you say above “I don’t see any use in the distinction between simple and complex.” The use is in accounting for motion. As I’ve explained before, a continuous three-phase process can be defined by a triangular circuit, which is still a simple object. When a fourth phase is added it defines a network combining four simple circuits, which is complex. It has been shown in many ways (e.g. in the four colour theorem) that the complex number form is the general case of which the simple one (useful for counting objects contained within closed surfaces like skins) is merely a special case. The notion of complexity popularised by the Santa Fe group is more accurately the complication of actual as against your ideal relationships. In effect this reinvented Shannon’s measure of information capacity while obscuring the fact that the use of that is to contain information by digitisation, revealing spare capacity – and how to use it for putting right what (given the practical assumption of simplicity) will inevitably go wrong.

        Here you say “Science theory posits relationships between idealised concepts and this has made science successful”. IMHO it is not this that has made science (but not economics) successful. Science only becomes successful when experimental use shows that the theory represents the facts sufficiently well for practical purposes (which include defining and observationally grounding the axioms needed by more practically-oriented theories). Particular theories succeed insofor as there are practical purposes for which the are needed, and become dominant insofar as far as they are convenient for everyday use. Sadly, in a world using numbers primarily to facilitate everyday commerce. that has not included the theorisation of complex number.

      • January 23, 2021 at 1:34 am

        pfeffertag,

        I re-engage just to note this. You say “Complaints that the [economic] theory does not accurately reflect the practice are invalid for that is the nature of theory.”

        That misunderstanding is the central problem with neoclassical economics. This simplistic claim fails to allow that a theory may be a good (near, useful) approximation or a wildly misleading approximation. (This confusion was propagated by Friedman, but he was hopelessly confused, as I have written in my books.)

        I have argued (briefly elsewhere in this thread and more fully in my books) that neoclassical theory is wildly misleading regarding observable economies (which exhibit many instabilities), because the behaviour of a far-from equilibrium system is radically different from the behaviour of a near equilibrium (neoclassical) system.

        You go on, above, to propose that economic theory should include a wider range of behaviour of its agents, and I can only agree. But that will be useful only if you let go of equilibrium (as mainstream ‘behavioural economics’ mostly has not).

        My perception of the past century or so of the neoclassical stream is that it has been a desperate search for ways to exclude instability and preserve the general equilibrium, which has such seductive appeal. That is not science, that is putting your subjective wishes/prejudices above the observational evidence.

  31. pfeffertag
    January 21, 2021 at 10:20 am

    To deshoebox at January 17, 2021 at 11:56 pm

    “Perhaps economics is more like this. it is dynamic and adaptive, subject to hundreds, thousands, or even millions of influences, many of them because of conflicting self-interested actors.”

    Yes, but we know there are also altruistic actors, and there are those clueless actors I called fatalists; and there are the dedicated, order-loving actors I called homo hierarchicus. These affect the economy as the wind and current affect the boat but, unlike wind and current, they are not theorised. Only the self-interested homo economicus is theorised.

    Nothing’s perfect but the scientific understanding of wind and current made sailing much more predictable than it was before.

    • January 22, 2021 at 11:50 am

      “The dedicated, order-loving actors I called homo hierarchicus”. I like that: could be me! I’m always on about the hierarchical ordering of algorithms (arabic numbers). Reducing the demands on our memories to a handful of symbols and a reusuable shift process brings order, not only to our representations, but to our understanding. The value of this becomes really obvious when you contrast it with Roman numbering, in which one is constantly having to invent and remember an unlimited sequence of new symbols.

      If you are saying this is – like “the wind and the boat” – not theorised, you have perhaps not read what I wrote above. The likeness is with navigation on the open seas, not sailing on a lake.

  32. ghholtham
    January 22, 2021 at 4:55 pm

    I do not know how to answer Deshoebox’ question posed to me and others about what an economy is “for”. An economy is an abstraction, as J.Nitzan points out. It refers to the actions of a host of different people and institutions each with their own objectives. In most countries there is generally a loose consensus about when an economy is successful or otherwise but there is generally not a tight consensus about the priorities of economic policy. People’s views tend to vary predictably with where they position themselves on the political spectrum.
    Answers to positive questions about how the system actually works, right or wrong, depend on what you are prepared to take for granted. Microeconomics tends to take institutions for granted and considers the actions of individuals or relatively small association like families or larger ones like companies. It is reasonable in those cases to assume their actions are purposeful but have limited ability to affect the structures within which they operate. Macroeconomiics is concerned with the interaction of those smaller entities and the effects of the interaction on a given geography – generally a nation state or a number of nation states. It is generally an error to regard the movements of the macroeconomy as purposeful. The great error of the post classical or rational expectations school is to personalise large sections of the macroeconomy as “representative” firms or consumers and model the behaviour of the aggregate as purposeful rather than emergent and not necessarily purposed by anyone. They do it, I fear, for ideological reasons. Of course all macroeconomics takes the political constitution and other institutions for granted in its turn. If you want to analyse those, why they are as they are and the effects on economic life you are into political economy. Evidently Nitzan is operating in that area, as did Marx. Each of these departments is a valid study and none entirely encompasses the others.
    By the way, Geoff, I disavow any intention to be seeking an all-encompassing theory, which I do not think is possible. Focused, partial, conditional theories that help understand particular recurring situations are what I appreciate.

    • January 22, 2021 at 8:12 pm

      But Gerald, being we are discussing “why everything we know about modern economics is wrong”, why should we believe what you are saying? I’ve argued that your “position on the political spectrum” is itself in need of explanation: as a combination of genetically given personality and what one was taught (whether with Left or Right personality bias) long enough ago for uncritical acceptance to have become habitual. And I have to say I have yet to come across a microeconomic text which takes any account of family relationships.

    • January 23, 2021 at 1:11 am

      GH, I take your point and apologise, I was a bit hasty in writing my comment, only vaguely remembering you want “theory that is usable in a particular situation”.

      As I’ve said earlier, it seems to me we can have (and do have) useful theories for some situations, and we could have more if more of us focussed on that goal instead of being distracted (as many here seem to be) by the neoclassical claims of comprehensive theory. I give a simple example in my book of adapting ‘overshoot and crash’ population modelling to boom and bust modelling of debt. I tried to get it posted here as part of a (provocative) commentary, but alas it may not be approved. I think Steve Keen’s modelling is a less simplistic example of such useful modelling that yields (or confirms) important insights. I expect there are others.

      That said, the best way of getting across the lake is still to get out and do it, hopefully making use of experiential knowledge of the interactions of wind, sails and currents.

    • January 23, 2021 at 11:15 am

      GH, I too take your point, but apologise only for doing so and not for giving you back as good as you gave, when you simply dismissed my arguments for an “all-embracing theory” and the difference between theory in general (fundamental) and that of particular theories (applied). For me, ‘macro’ and ‘micro’ represent fundamental concepts, not how the words happen to be interpreted in today’s misguided Capitalist society. Again, Jonathan Nitzan hadn’t claimed the economy was an abstraction, he wrote Capitalism was. Disappointingly, Geoff followed your example when he ignored the problems of global navigation (that he had said he understood), and reverted to deshoemaker’s lake.

      If you prefer to bandy opinions in competitive debate, so be it. Despite a long-standing judgement that I “present by far the best argument in by far the worst manner”, the positive side of that justifies my trying to advance the argument by discussing fundamental issues. Other readers need to be aware of this choice between style and content.

    • January 23, 2021 at 12:40 pm

      It is worth going back to how Lars started this discussion: with Ole Peters on

      “the all-important difference between time averages and ensemble averages. These are difficult concepts that many students of economics have problems with understanding”.

      The problem is that in the ergodicity concept the time and ensemble averages are the same, yet the first is common sense: if you are wrong you lose your money. With the other it seems rational to choose the most rewarding possibility.

      “If Peters is right — and it’s a pretty ginormous if — the consequences are hard to overstate. Simply put, his “fix” would upend three centuries of economic thought, and reshape our understanding of the field as well as everything it touches …”.

      It is anyway pretty fundamental. Much more so than Gerald’s ensemble-based generalisation: “The great error of the post classical or rational expectations school is to personalise large sections of the macroeconomy as “representative” firms or consumers and model the behaviour of the aggregate as purposeful rather than emergent and not necessarily purposed by anyone”.

      My time-based computer hardware logic sees purpose already programmed into the system: implied by what the program can do only if it is working properly. The point being it isn’t.

  33. gerald holtham
    January 28, 2021 at 6:26 pm

    Geoff, I agree. The best theory is developed by trying to understand and tackle practical problems rather than playing tunes on pre-existing theory in abstract.
    Dave, I’m not saying political choices are not worthy objects of study but they are not normally studied in macroeconomics. You can’t study everything at once. Some compartmentalisation is inevitable and we have to specify the question to give sensible answers. It is sensible to ask how we should try to change the economy to achieve social goals. It is not, on the whole, sensible to ask what the economy is “for” – except as rhetoric. What are human beings “for”? A moralist might say they are born to help each other. True on one level but teleology won’t help you understand society, unless you are a conspiracy theorist.
    There is a literature on family choice and intra-family choice though I am not very familiar with it. You don’t find it in text books which normally assume a consumer “unit” which is generally a household.

    • deshoebox
      January 28, 2021 at 8:09 pm

      This is a wonderfully stimulating conversation. I would like to respectfully disagree with a couple of points made by Mr. Holtham, however. First, the fact that political choices are not “normally” studied in macroeconomics does not imply that they should not be, since all political choices have both economic causes and economic effects, even if these are not made expllicit or analyzed after the fact. As I recall, macroeconomics consisted mainly of tracing changes around four little graphs, which did not lead to my understanding anything at all. I’m sure there is more to it than that but if you ignore the economic motivations underlying political decisions they are not generally going to make very much sense. The second thing is that if you don’t ask what an economy is for, you don’t have any basis for talking about whether is is working well or not. An economy is a developing set of activities, ideas, traditions, practices, and policies roughly organized around providing what people need to stay alive, keep healthy, educate the young, and provide for the needs of future people. Of course it has a purpose, or many purposes! This is not just “rhetoric”, whatever that is intended to mean. The existence of enormous disparities in wealth and income suggests that an economy may not be working well. If there is hunger and malnutrition, inadequate education, widespread pollution of air and water, a lack of basic security, or unsustainable use of natural resources, it is meaningful (and important) to point out the the economy is failing in its fundamental purpose. You may not find this in textbooks but since this entire conversation started with “Everything. we know about modern economics is wrong”, that can’t be our criterion for what is worth talking about. I know economists don’t want to discuss what the economy is for but that’s one of the basic things wrong with modern economics. I’ve used the analogy before of economists being like a group of smart engineers standing outside the fence of a wrecking yard, earnestly discussing which of the rusted hulks inside the fence would theoretically be the best car, assuming any of them ran at all. If what you need is basic transportation to the neighborhood shops, it doesn’t really matter how good their theories are, does it?

  34. Gerald Holtham
    January 29, 2021 at 12:06 am

    Deshoebox You want to discuss public policy and political economy. That’s fine. I don’t think we would disagree about the failings of our current social system. Nor do I disparage the study of political economy which is important and essential to any political programme which aims at change. You have to understand the political forces at work. But unless you want to sweep away all current institutions and start with a blank sheet (a procedure that does not have a good track record) it is helpful to know how the current system works. That is what sensible macroeconomics studies (there are non-sensible kinds too).
    When it comes to political preferences, economists are just citizens like everyone else – entitled to a view but having no special claim to precedence. When a political process determines objectives, sometimes the particular experience of economists can be useful in choosing among the particular measures to adopt. Of course political preferences can bias analysis so it is best to take advice from someone who is not hostile to your objectives. (Avoid millionaire theorists from Chicago).
    The study of how the current system actually works is not illuminated by asking what it is for. The questions you are really asking are: what do we think of this system and what should we do about it? An economist has no special skill in telling you what to think of the system but when you have decided where you want to go, she may be able to point out some routes that are more promising than others.
    If you ask the dentist to cure your malaria you’ll be disappointed. But she’s a better bet than a philosopher when you need a filling. But get one that has practised, not one that has just written a book about the theory of dentistry in an ideal world where no-one has caries.
    Economics is not about everything and one branch of economics is not even about all of economics. Moreover economists are not all the same in interests, politics or methods.

    • January 29, 2021 at 2:01 am

      As I said somewhere a long way back in this thread, the purpose of an economy is (or ought to be) to provide for the material needs of people and their society.

      As distinct, for example, from extracting, using once and dumping ever more stuff, for the further enrichment of the already rich. That seems to be the implicit purpose of the present economy.

      So I agree with Deshoey, it is important to discuss the purpose of an economy.

    • Yoshinori Shiozawa
      January 29, 2021 at 5:14 am

      Geoff,

      would you like to see your e-mail box at ANU? I have sent you an e-mail.

    • January 29, 2021 at 9:39 am

      Gerald says: “When it comes to political preferences, economists are just citizens like everyone else – entitled to a view but having no special claim to precedence”.

      Politicians don’t seem to think so, and anyway, what we see of economists is what their deans and editors are allowing them to publish. That was already evident by the 1860’s when, after being censored in mid-stream, the already celebrated critic Ruskin had to start publishing his own economics books. Needless to say he gained a popular rather than a political hearing.

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