“Pure Economics”
from Ikonoclast (originally a comment)
The whole idea that economics and the economy exist as a self contained discipline and a self-contained system respectively is absurd. First, there is a natural system, the biosphere, which contains economics activity and upon which economic activity is dependent. Second, there is politics and force (power) which condition economic activity.
In relation to the second, Chomsky writes of: “…American Liberalism, reiterated… in the Clinton doctrine, which held that the US has the right to resort to “unilateral use of power” to ensure “uninhibited access to key markets, supplies and strategic resources.” Not a right accorded to others, needless to say.”
Under these conditions, the pretense that there can be “pure economics” and a “science” of economics is absurd. It’s equally important to point out that these conditions (use of force to secure and retain strategic access to markets, supplies and strategic resources) show no sign of abating any time soon in human affairs.
The entire and so far successful attempt of capitalist economics has to been to ideologically and systemically “naturalize” itself, meaning make it seem natural and common sense to all its beneficiaries, and many of its bought-and-suborned wage-slaves and politicians, rather than a system of artifice, imposition, exploitation and appropriation.
Capitalist economics is an ideology through and through. Many of its behaviors, for which its useful fools (the bourgeois economists) seek fundamental laws, are axiomatically-determined outcomes based on its rules, parameters and algorithmic directives. Denying this is like saying that it’s a fundamental scientific law of American Football that all points are scored by crossing the plane of the in-game field to the end zone or by other actions in or from the end zone, like the safety. These are obviously not fundamental scientific laws. They are axiomatic outcomes of the rules and parameters of the competitive-cooperative game.
Behaviors in capitalist economics show a strong tendency to be axiomatic outcomes of the rules, parameters and algorithmic calculation prescriptions of cultural and institutional generation and instantiation. There are two limits sets to this proposition. The first limit set is the general set of natural limits (environmental limits and human biological limits). The second limit set is that of overt elite force. In the first case, the environment cannot be pushed beyond its natural limits. It will fail to supply resources and waste sinks adequately and it will “snap back” when pushed too far. Also, in the first case, humans cannot be pushed too far or they will starve, become exhausted or otherwise incommoded or discontented and they will “snap back”, in insurrection and rebellion which may be revolutionary or reactionary in nature). In the second case, the human elites apply force using security and military proxies, in the form of violence, killing, eviction, expulsion etc.
How can such a system be said to only have economic laws? It is quite absurd. It has economic prescriptions, framed by political prescriptions and applications including violence, framed by natural laws which condition the asymptote possibilities of the human rule system chosen. We need to choose rule systems compatible with natural system limits and compatible with moral philosophy prescriptions which take precedence over mere economic precription. We already do this. Slave markets are not legal. Certain forms of pollution are not legal. We simply need to extend this thinking and reduce the ambit of the “algorithms of capitalism” and its false equation of equating many incommensurables in the numéraire.
This equates ideationally to the most ambitious project since the scientific enlightenment. It will mean getting people to cease believing that money measures value. This is the deepest and most fallacious belief of the modern mind. It is inculcated from the day each child begins to observe adults and learn language. It will be tremendously difficult to remove this false belief, this profound false consciousness of the modern mind.
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I am wondering about your comment that money does not measure value. Money is described in Economics texts as a unit of account, means of payment for transactions and store of value. I think it is the first two but not the last one and that is consistent as I read it with MMT.
John Kenneth Galbraith, one of the most prolific economic writers of the 20th century and also one of the most ignored now, said that money is whatever we think it is and what we use to buy and sell goods and services.
Since money is a standard of deferred (i.e. future) payments, it is a store of exchange value.
I do not think that makes any sense whatsoever. I think you are conflating “store of value” with measurement of value. And you seem to be playing with the concept of money being a measure of the exchanges people or businesses might make. It reminds me of Scrooge McDuck and his vault of money.
It also means that loanable funds and money supply notions have validity. And we know that cannot be the case when banks create “money” out of thin air and that money is then destroyed upon repayment of loans. If you are correct, hoarding “money” is a good idea. Must check under my mattress.
Nope. Even Aristotle understood that for anything to act as a medium for future payments, it had to be a store of exchange/trade value. Go to Book V of his Nichomachean Ethics at http://www.perseus.tufts.edu/hopper/text?doc=Perseus%3Atext%3A1999.01.0054%3Abook%3D5
He was the West’s first commentator on money and exchange values. In many ways, we haven’t gone very far past his initial views.
And perhaps the reason that we have not gotten very far past Aristotle is that people still cite his ideas. Some of them need jettisoning. Like this one. Appeals to so-called experts do not work for me. Here, I present another view of it — not original BTW on my part — and you go back over 2000 years to disagree! You seem to be stuck still on the barter ideas — trade value comment above — which other “experts” who have researched it have been questioned as a basis for money. It is hard to think of money as a tool for measuring value without conflating it as having value. Aristotle had that problem obviously.
I am not ‘appealing to an expert’ by any means. I am saying that the primitive gropings of an early abstract thinker wrestling with the new noumena of his day were, in comparison with today, almost as advanced. He saw money as a unit of account, medium of exchange, standard of exchange value, and standard of deferred payments. He was immersed in the commercial era money had brought about. and he well-understood that values-in-exchange were not values-in-use better than modern economists do or have. That fundamental appreciation he had for this difference has not properly entered the domain of modern economics, sadly jettisoned when, properly speaking, it is fundamental to any proper construction of economics. {Jettisoning what you don’t understand is never a good idea. I will be re-introducing this jettisoned component shortly as it allows for all of the current economic theoretic to be replaced. I’d intended to do so weeks back, but illness has prevented this. I hope to place the preliminary reconstruction –not a critique of the current framework but its replacement–here within three weeks.
My comment that money (the numéraire) does not measure value is derivative from the work of the Capital as Power project. See “Capital as Power” (the book and the web site) by Shimshon Bichler and Jonathan Nitzan and related papers by other writers like Blair Fix and Ulf Martin.
I’m an idiosyncratic interpreter of their work (and I also make much broader claims about a lot of other stuff) so what I write should not be taken as “canonical” of their perspective. You would need to read their works to get their precise ideas.
Money is a numeraire for Trade Value, a.k.a. a Value-in Exchange. As such it is not a numeraire for anything else except trade values. Money is ‘capital’ in a market system because it is the means for the purchase of the real capital we have for production: our work, our technology and techniques of production, and all inputs into production.
I agree that there is a systemic interrelation of economics to other sciences as well as of the eonomy to the biosphere. But each of the systems has its own axioms, equations and measures. Hence I disagree with the following of your statements: (1) When you talk about capitalist economics, without referring to other economics like communist economics etc., you are misleading like you are misleading when you interpret Chomisky’s statement in a way that the U.S. (or the EU, or China, etc.) want to exert “unilateral power”. (2) When you say that you people people should cease to believe that only money determines value, you negate that “people” are well aware of mutiple forms of value beyond monetary, like instrumental value or intrinsinc value etc. And “people” also know that for determining an exchange value, you need monetary terms. Or do you want that values are measured, e.g., in the number of cows? What about peopel who do not have cows? Calling your idea the most ambitious project since the scientific enlightenment is like closing the eyes to all human progress that has ocurred snce the age of enlightenment. Think of the Agenda 2030 endavors, which will move mankind forward substantially. The agenda will not work without money, investment, and economic objectives.
Dr. Roland Bardy: Prior to coinage divesting itself of its numeraire values set in terms of domestic cattle/sheep equivalencies, there were only non-circulating numeraires which served as reference taxation or trade equivalencies for goods. Can we re-establish some numeraire equivalency value for money? I speculate that we can, albeit not without difficulty.
Ikonoclast: Ultimately, this comes down to value-in-exchange (Trade Values) versus value-in-use (Objective Benefits tied to how goods are used). Obviously, the former is not the latter. The ham sandwich I bought has a trade value of $3.50 in exchange for other goods. But its Nutritive value to me is not its Trade Value. There has been far too much nonsense written over the past century and a half about how goods only have values-in-exchange!
Dr. Roland Bardy,
1. I did not mean to make out that “the most ambitious project since the scientific enlightenment” was all my idea or even my idea at all. I wasn’t clear enough. I intended to point out, at least by implication, that a suite and sweep of dissenting thinking from Marx and Engels, to Veblen, to the Capital as Power theorists and many other unorthodox thinkers does amount to a project that, to be successful, would have to change the thinking of people as thoroughly as did the scientific enlightenment, as its effects and paradigms percolated through the minds of much of the population over time.
2. It is difficult for Westerners to grapple with what kinds of systems the Soviet and Chinese Communisms were. Professor R.D. Wolff is probably best on this topic and it is worth looking at his books, papers and videos. Suffice it to say here that State Capitalism better describes the kinds of systems they were. All modern economies have turned out to be mixed economies with private and state sectors. The difference tends to subsist in what and how much of various economic activities is allocated to each sector.
3. I think it is perfectly reasonable to assert that the USA wanted to and wants to exert “unilateral power” in order to achieve its objectives and has often done so against weaker opponents. The wiser part and “offensive realist” part of US statecraft does recognize the need for alliances against major opponents but even these alliances tend to be very much on US terms. The US’s deputies generally have to do what the US as self-appointed “World Sheriff” tells them to do. China is now beginning to show the same characteristics. It’s a standard superpower trait. When all else fails they use as much naked force as they dare to apply. The satrapies, vassal states and client states must do what they are told, at least in all key matters.
4.“People” remain “aware of multiple forms of value beyond monetary” though some less well than others. Nevertheless, there has been a creeping subsumption of more and more values under the value of the “money nexus”. It’s a creeping ideational and moral disorder and over generations it distorts and changes perceptions and beliefs. People become more and more attuned to valuing more and more things in money.
5. I want incommensurate items to NOT be valued and aggregated in the common dimension of economic value. Read Blair Fix’s paper, “The Aggregation Problem : Implications for Ecological and Biophysical Economics” for details.
Everything is interrelated in the web of life. Fortunately some compartmentalisation is possible or we wouldn’t know anything. There is no science of everything. You have to decide what problem you are tackling and what questions you need to ask; then you can usually draw a boundary and sometimes get an answer. As Dr Bardy implies: different question, different boundary.
I support Gerald. There is no science of everything. Physicists are trying to achieve the dream of theory of everything but not yet arrived at that. We should keep in mind that (both natural or social) scientists face a wall of complexity that exceed their ability. This must be an important part of complexity thinking, although it is often forgotten. See my post below.
Ikonoclast: Ultimately, this comes down to value-in-exchange (Trade Values) versus value-in-use (Objective Benefits tied to how goods are used). Obviously, the former is not the latter. The ham sandwich I bought has a trade value of $3.50 in exchange for other goods. But its Nutritive value to me is not its Trade Value. There has been far too much nonsense written over the past century and a half about how goods only have values-in-exchange!
In terms of poor style and lack of effectiveness at communication, what I wrote (and was re-posted above by the editor) is a bad piece of writing. I apologize for that. I must have been frustrated and over-emotional when I wrote it.
Nevertheless, I stand by the core ideas. Conventional economics is entirely misconceived as a discipline. I say this just as one would say that astrology, alchemy and the humors theory of disease are misconceived disciplines / theories, at least if one has any allegiance to science and empiricism. Essentially;
(a) Certain existents held up as being fundamental to the discipline of economics don’t actually exist. They are not empirically detectable except as social fictive constructs or axiomatized over-simplifications (models) of a far more complex reality. This is the case for “utils” and the “rational agents” of rank dependent generalized expected utility theory.
(b) The model of dynamic relations, including those of cause and effect, in economics is also fallacious. It explains nothing (no explanatory power) and it predicts nothing (no predictive power) other than in the manner that a set of axioms leads to a set of “axiomatic outcomes”, more commonly called theorems.
Economics is a prescriptive discipline pretending to be a descriptive discipline. It prescribes the axioms (founding rules) of private property, albeit the precise rules vary jurisdiction by jurisdiction. It prescribes the operations of markets. It prescribes the algorithms and formulae of calculation and allocation for money, capital and capitalization. I mean bourgeois economics does these things as an applied political economy discipline in any really existing version of a capitalist or mixed economy. Then, when this axiomatic-algorithmic system produces an axiomatic-algorithmic outcome they want to own, the academic bourgeois economists call these outcomes “laws of economics”. When the system produces outcomes they do not want to own they call the outcomes anomalies induced by exogenous factors, meaning exogenous to their neat axiomatic system. This is the best case scenario where they pay any attention at all to real outcomes. Normally, their theory remains wholly in the realm of theory and unsullied by any attention to the empirically detectable outcomes for ordinary people, ecology and the planet.
Yes. It is everything you say it is. What has disturbed me over many years is how people, including economists, launch this or that critique without, however, changing the theoretic itself. It is the theoretic itself which leads to all of the faulty conclusions, so critique without replacement is not what is required.
What if I told you that what economists have constructed as ‘demand curves’ are not and that there is no such thing as a ‘demand curve’? What if I said I was replacing the theoretic in its entirety? Every bell and whistle?
Sounds like a flake, right?
You’ll be able to judge that for yourself before three weeks have passed.
Blair Fix has written an excellent, half amusing, half serious article called “How Do You Spot a Crank?” Of course “crank” means “flake” in this context.
One issue he doesn’t canvas (if I recall correctly) is the one of believing that appeals to science and logic will persuade people. In other words, if you believe that appeals to science and logic will work and change mass opinion and the world, then sadly this makes you a crank or a flake. Judged by that standard, I admit to having been a crank. Now, I don’t really believe that anymore so maybe I am becoming less of a crank.
But I still think that theory has to be prepared against the eventualities of the future, meaning the day(s) that prediction(s) is/are validated. Being right before the event and believing that most people will accept you views via mere appeals to science and logic is a forlorn hope. However, the theory comes into its own when the predictions are borne out by empirical events that heavily impact negatively on people.
“Don’t touch that, you’ll get burned.”
“Ouch! Now I believe you.”
“Don’t burn all those fossil fuels, your life will be wrecked by climate change.”
“My city (Miami) is now too hot and too affected by sea level rise to live in. This has destroyed my house and my entire financial savings. Ouch! Now I believe you.”
This is the graphic I wished to send to you: https://www.desmos.com/calculator/0uqeuqjnq2
I am just too tired to look for the original discussion I sent the other diagram to.
Money is 97% debt, and it is created by equal accounting entries, that is equal debits and credits. As Steve Keen has said economists can get their PhDs without so much as taking an elementary course in accounting so they are largely ignorant of the above. They are also consequently ignorant of the incredibly powerful efficacy of utilizing accounting’s convention of equal debits and credits summing to zero to create price and monetary policies that would have earth shakingly problem solving, beneficial temporal reality inverting and hence paradigm changing power.
To economically and monetarily paraphrase Aquinas: All that you have written about economics and money is but straw compared to what has now been revealed to you.
I agree with Gerald Holtham (his comment on February 12, 2021 at 5:48 pm.)
The following is what I wrote on January 13, 2020 (about a year ago). I must have written it with an idea to post it as a comment on an article in RWER blog, but I could not find where I did. It is possible that I wrote this but I had no occasion to post it.
As a post to this thread, I believe it is sufficient to replace the first sentence of a paragraph that starts with “To build an economics theory” by a more daring sentence “To build a social science that covers all aspects of the society is an ideal but difficult attempt to implement.”
The book referred above as “our book” is a book written by me with Morioka and Taniguchi and published in 2019. Readers can read a book reviewby Marc Lavoie.
I have found that I posted the above quoted part (with some modifications) as a comment on January 18, 2020 at 1:17 am to Lars Syll’s article “Does it — really — take a model to beat a model?” on January 16, 2020. When I searched it, I only searched comments on topics on complexity. It is a strange coincidence that Lars Syll posted an article with the same title on February 12, 2021, just before Ikonoclast’s article is posted.
In addition to my post above quoted, I found that I had posted a supplementary comment to it. I believe this supplement is also suggestive to our present argument.
January 19, 2020 at 2:02 am Reply
Point (3) that economy is complex for economists is very important. It raises grave hurdles for the construction or re-building of economics. It is impossible to construct a new economics from scratch. Human being is not as clever as may people assume. We must proceed on the shoulders of past giants.
It is opportune to cite a famous parable of Neurath’s boat. Oxford Reference explains it as follows:
From various facts (some parts of them are told by Lars Syll), it is evident that present mainstream economics necessitates a fundamental repairing, but we are sailors on a boat of economics. We have no other materials other than accumulated knowledge of economics (including economic history and many facts accumulated in these two and half centuries).
I have an impression that many contributors to this blog are thinking that reconstructing economics is an easy task once we get a clever idea. They are wrong. We should know our difficulty and we should proceed slowly. Core theory cannot be a theory of everything. Please remind that modern physics started from Galileo Galilei and Johannes Kepler, not from Newton. What Kepler discovered after several decades of endless calculation is only three laws of planetary motion, a phenomenon of only an extremely small part of the universe called solar system.
You spoof Uxkull Shiozawa. You distort, abuse, and misuse biology in a shallaw appeal to authority and self-serving story telling. You are utterly ignorant of the real meaning of Uxkull and use his ideas in a distorted cherry picked manner. You fail to understand his historical limitations or anything of real value he had to say. In that your are only digging a whole for your theory to be buried in.
Hole not whole.
That’s a bit rough Meta C.
Yoshinori Shiozawa makes a bunch of interesting comments. He’s warning fundamental economic reconstructionists like me to think again (or at least proceed with caution) by using his ship metaphor. I can see the point of his metaphor. However, when a mad captain and the officer class (the capitalists) are sailing the ship onto rocks for no good reason other than their own greed, the crew must mutiny if they wish to save themselves and the ship.
His comment that “Human behaviors are not very different from animal behavior,” is on the face of it quite reasonable, although over-generalized.Biologically, humans are animals. Thus, we would be surprised to find that many human behaviors were very different from animal behaviors. On that score, the very idea of complexity gives us the main empirical hint as to why human might be somewhat different from other animals: in terms of more complex and less predictable behaviors.
Until it is well understood that all agent of economic activity must be able to maintain themselves either as human beings or as firms, we will not be able to break out of the nonsense of the Theory of the Consumer wherein we find no life forms, much less human beings. Life forms, just like firms, must be able to provide for themselves. Being unable to has ‘welfare’ consequences … for, unlike the ‘consumer’ in economics who vanishes when unable to exercise ‘effective demand’ for goods, people do not.
Yoshinori is not operating within a producers-who-consume framework, except for firms as ‘producers’.
That is the source of the problem here. He is not a ‘capitalist’ not an apologist for the neoliberal bent economics found itself in ever since D(p) = f (q) was brought into the disciplince by the subjectivist ‘utilitarians’. I excuse Alfred Marshall for he well understood his formulation was simply a ‘toy’, one to be abandoned once better information on the real benefits which flow out of our use of goods was available.
Your argument is not with Yoshinori, Ikonoclast, but with the construction that exists, one that removes from economic consideration all of the factors underlying how people form their budgets for different goods able to deliver benefits from the uses to which they are put as well as how the distribution of income/wealth itself in market-oriented economies determines effective individual and aggregate demand in markets. Data on sales in markets is currently confused with equilibria of both people and the markets themselves –which is wrong on both counts.
Here’s something you might be interested in: https://www.desmos.com/calculator/0uqeuqjnq2
Ikon, don’t take this personal. I am not going to beat around the bush here. If you have not read Shiozawa’s book you are full of it on this one. If you have not studied the history of evolutionary theory (including Uexkull’s ideas) then you are speaking on things you have no context.
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First, Umwelt is not a scientific term. It is a metaphor for the idea that organisms have their own unique perception of the world put forward at a time when we had little understanding of cognitive animal psychology, neurobiology, and evolutionary theory that we have today. We have come a long way in our understanding since then.
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Shiozawa has distorted and used Uexkull for his own rhetorical purposes and if you did know the history of Uexkull and his ideas in historical context you would know that Uexkull would never have tried to argue that a humans “umwelt” is the same as a ticks, yet that is essentially what Shiozawa does in his book. That is not the same argument that humans are evolutionary creatures and share similarities with their closest evolutionary relatives. The Central Nervous System and neurobiology of the brain and cognitive complexity and behavioral responses and abilities of of a tick and human being are night and day. Rather than use the “umwelt” (think cognitive psychology and neurobiology) our our closest primate relatives Shiozawa goes retreats to a tick because that is the only metaphor (but scientifically illiterates) stylized just-so story he can use to justify his thesis that humans and complex economic behavior is reductively reducible to “if-then” rules of routine habitual behavior (what he calls C-D transformations). It is absurd to equate a humans cognitive ability to a tick when we know full well through modern science that is not a very adequate animal model given we have our closest primate relatives (even a crow or dog is closer in this respect than a tick) for comparing some vague “umwelt” (we have actual science to explore this domain, not self-serving misleading metaphors) to complex human economic behavior.
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Humans can look before they leap. They are not imprisoned in mechanical qua habitual qua routine behaviors. They can aspire to be more than mere ticks. To romanticize and anthropomorphize ticks is not science, but scientism. To turn humans into ticks simply for mathematical tractability is not science but scientism.
And all your philosophizing on the comment sections of this blog are proof of my point.
The link to the book review does not seem to take us to a book review by Marc Lavoie.
Thank you, antireifier, for telling me that I made a mistake. The link should be this. You can see another book review here by Yoshio Inoue. You can find other book reviews in my web page.
The ‘separation’ of economics from politics originated in the early attempts by the European burgs to secure differential ‘libertates’. The burgs wanted exceptions from taxation and other forms of feudal sabotage. In due course, their libertates consolidated into the notion of universal ‘liberty’ and eventually culminated in the myth of the ‘free market’.
But nowadays, many seem to forget that the burg is no longer an enclave in the feudal landscape. The logic of accumulation doesn’t need to be defended from the exploits of kings, princes, dukes and knights. It runs the world. The economy is no longer separated from the world. In many respects it is the world. The myths of economic rationality versus political arbitrariness, of competition versus power, of finance versus reality have become fetters on our humanity.
The narrow science of ‘pure economics’ is dead, although most economists, including many heterodox ones, don’t yet know it. We need a new, broader science along with a different history, a science and history that will examine how capital powers, controls and creorders the world against social opposition and natural limits.
Without this new science and history, it will be hard to prepare and stand against the Iron Heel and barbarism.