125 thoughts on “Sandpit”

  1. I’m unsure if this has been discussed here before so I apologize if this is redundant . . .

    I have some thoughts on the labeling of economic systems. I think that is an artificial concept and not scientific. I dislike applying the label capitalist or socialist to an entire national economy. I can identify individual initiatives that may be capitalist or socialist but deny that the label could be applied to the entire economy. Even the Soviet Union had a thriving black market which probably represented a significant proportion of the economy. Even capitalist “free market” nations have social programs. What about non-profit or not-for-profit initiatives and organizations? Neo-mercantalism? Crony capitalism?

    A for-profit venture is capitalistic. A government sponsored, taxpayer funded initiative is socialistic. The presence of either in a national economy does not require the application of a label of a nation being socialist or capitalist. We should move away from that method of terminology. I live in the US, so perhaps this is a non-issue in other places? Please enlighten me. Wikipedia is little help with this type of thing.

    Yes, I realize this question has been politicized, but perhaps a change in the fundamental teaching and textbooks would be a start. Let us depoliticize as much as possible. This should allow technocratic decisions to be made.

    Do economists even care about such labels?

  2. For sure, we have mixed economies. However, for the most part, the interests of capital are predominant, especially since the rise of neoliberalism or economic rationalism or market liberalism (choose your favoured term).

    Marx is continually being proved correct in his diagnosis and prognosis for capitalism. Each new stage of capitalism validates the overall thrust of Marx’s theories.

    After the Great Depression and World War 2, and with the policies of Keynesian economics and welfarism well established, is was thought by many persons of a social democratic persuasion (including me!) that capitalism was tamed and humanised permanently. How wrong we were! The “Golden Age” lasted just a few decades and then capitalism’s remorseless system logic reasserted itself. This is the thing that has to be remembered about capitalism (and which Marx understood), namely that capitalism is a complex adaptive system. Like all complex adaptive systems it exhibits a set of complex system properties.

    Of course, all political economies are complex adaptive systems. But each variant of political economy, as a complex adaptive system, has its own set of internal laws. The political economy system is influenced by the environment (external factors) and indeed it is ultimately dependent on that environment for energy and materials. Within those constraints however, the complex adaptive system will persist and evolve, then reach a final set of crises and decay, in a manner which is in accord with its own intrinsic or endogenous laws. This is the essential meaning of Marx’s philosophy and proto-science of “dialectical materialism”. The term “dialectical materialism” seems quaint and discredited now. Yet dialectical materialism is nothing else but an early development of complex systems theory. Marx, if properly recognised, can be seen as an important early figure in the development of systems science.

    The discrediting of dialectical materialism stemmed in part from the Soviet theorists who misunderstood it and made of it a dogmatic, deterministic pseudo-science. The subtlety of dialectical materialism is that, like complex systems theory of which it is a philosophic precursor, it recognises that complex adaptive systems embody embryonically various possibilites for emergent properties and emergent behaviours (novelties). Some emergent behaviours and novelties are indeed unpredictable. This is uncontroversial now in most quarters. Chaos theory and considerations of micro-indeterminacy (especially, but not only, in the role of generating human behaviour) suggest that;

    (a) highly complex and extremely difficult (to practically impossible) to predict deterministic behaviours can emerge from tiny changes in initial conditions (chaos theory).
    (b) micro-indeterminacy can feed up into macro-indeterminate developments.

    Having said this, macro-determinancy still exists too. Colloquially we could express all this simply by saying, “There are predictable developments and there are unpredictable developments.” Complex adaptive systems possess both these characteristics. That is to say complex adaptive systems can exhibit both predictable and unpredictable developments. Marx’s advance was to uncover some of the internal laws of capitalism which in turn permitted certain predictions to be made about capitalism. Capitalism’s exact path and all its exact productions, historical crises and historical achievements could not be predicted. But its general path, its general tendencies could be predicted. This is much as the Gas Laws (Boyle’s Law, Charles Law etc.) can be derived from the kinetic considerations of (random) Brownian motion. The behaviour of individual atoms cannot be predicted but the behaviour of the gas body or gas system can be predicted overall, albeit by making certain idealised assumptions, setting allowances for tolerable error, and deriving a “macro” or “probabilistically determined” law.

    In the same manner (very broadly), some inner laws of the capitalist system could be deduced. Of course difficulties arise. A political economy system is far more complex than a laboratory gas system experiment! In addition, the “laws” involved are different. Physical system laws are those immutable (in this universe) laws which we discover to be universally regular and dependable (relating to matter-energy and time-space). Political economy “laws” are a complex of formal laws and natural laws. The political economy is a hybrid system. The real economy is a real physical system. It must obey the laws of thermodynamics, for example. It is a dissipative system. A dissipative system is a thermodynamically open system which is operating out of, and often far from, thermodynamic equilibrium in an environment with which it exchanges energy and matter. Marx recognised the fundamental dependency of the economy on nature in his theories of the emerging “metabolic rift” between capitalism and the natural, sustaining environment. Marx anticipated ecology as a science just as he anticipated complex systems theory.

    However, as well as being a real system, the political economy has another aspect, and this aspect is as a formal system. In society, we develop moral laws (as rights-obligations systems), customs, institutions, formal laws (legal laws), transaction systems with contractual rules and finally financial system(s) with axiomatic rules. Firm formal rules (of these types) begin to exert a hard “law-like” (meaning a somewhat hard-physical-law-like influence) on the system. The system develops hard law-like behaviour which is relatively consistent while the firm formal rules continue to pertain. A clear example from a modern economist is the law which Piketty obtained from his detailed researches into capital. This law describes an invariable tendency if a certain condition is met. If r (return on capital) is greater than g (growth) then inequality (say as concentration of wealth in the highest percentile) increases. This tendency is axiomatic under capitalism. The capitalist financial system (an axiomatic system) buttressed by the ideology and reality of minority ownership of productive apparatus can ONLY operate in this manner when r is greater than g.

    What Marx recognised, at least implicitly, is that when a powerful formal system is in conflict with a real system, the formal system will perpetuate and intensify itself while it can but it then must run up, sooner or later, against, real limits in real systems. One real limit, already mentioned above, is the ecological or biospheric limit alluded to by Marx as the metabolic rift. This is a little known aspect of Marx’s work.

    The better known aspect of Marx’s work hinges on the real physical limits of humans and by extension on their psychological limits which are reached before their real physical limits. In mentioning the real physical limits of humans I am referring to the reproductive cost of labour. This is the minimum cost humans need to be able to meet financially to eat, live, domicile, work and produce and educate children to at least replace themselves as workers. If capitalists take so much that the worker does not have enough to live on and to biologically and socially reproduce, then the system is unsustainable. Of course, humans reach psychological limits before such final straits and will, if they can combine effectively, revolt against the system.

    The full system (including the government system) in turn develops stratagems to “save capitalism from itself”. This was what happened in the Keynesian-welfarism era and still happens today with both welfare for the poor and welfare for the rich (bank bailouts, QE etc). In turn however, capitalists are so greedy, so rapacious it finally emerges they do not want or do not understand that they need to be saved from themselves. Hence we have the neoliberal era. The neoliberal era is the predictable result of once-again unfettered capitalism. Capitalism is not sustainable and will collapse. This is predictable. What is not predictable is how many times it can reinvent and transmute itself and resolve its crises. Given past history, WW1, WW2, and now the endless war on anyone the American oligarchy regard as a threat to their wealth and power, it would seem likely that a breakdown into fascism, war and destruction will once again be the capitalists’ chosen method of resolving such a crisis. This crisis is too deep to resolve by any other method except (heaven forbid!) a permanent recasting of the ownership and management of production such that workers and non-working citizens substantially own and manage the greater proportion of production and distribution. This does not entail crude state capitalism of the Soviet Communist type. That is a straw man objection.

    Soviet Communism arose in its particular form (namely as state capitalism) in response to the uncompleted nature of the global capitalist project and in response to (private) capitalist nation aggressions. Capitalism must first transform the entire world (as it is now doing with Russia and China more or less “in the fold”). This apparently (given its actual coming to fruition) is necessary for capitalism to fully exhaust its internal dynamic and run up against its inescapable internal contradictions. Piketty has certainly uncovered conclusive empirical evidence of one inescapable internal contradiction. If capitalism cannot grow faster than the plutocratically imposed rate of profit then the system gravitates to unworkable levels of extreme inequality. Given our approach to the limits to quantitative growth, if not qualitative growth, and the wide emergence of secular stagnation in the developed world, we can rightly deduce hat neoliberal capitalist policies are only partly the cause of secular stagnation. A deeper cause arises from both the internal contradictions of capitalism qua capitalism (not just as neoliberalism) and its contradiction (as a need for endless growth and an imperative to ignore negative externalities) with the environment itself.

    Technocratic solutions are moot when the capitalist political economy prefers and subsidises fossil fuels, heavily propagandises against impact science (the war on climate science) and uses productive science to make automobiles, tanks, warplanes and bombs (the West’s prime consumer items of choice). Technology so misused is a net negative to our survival chances. Capitalism is systemically incapable of applying science and technology wisely.

    We don’t know what genuine socialism and full worker and people democracy can do… because we haven’t tried them.

  3. @Zed Hogan

    No – a “for profit” venture is not necessarily a capitalist venture.

    Anyone can profit from their own labour.

    On the other hand, a “capitalist economy” accumulates Capital by [critical point] fixing workers wages so that a surplus is separated out and scooped up by Capital.

    Read Marx.

  4. @Ivor
    Your #2

    A lovely ‘stream of consciousness’ essay, Ikono. I suppose you just sat down and dictated it into Siri.

    However, as Lenin didn’t actually say: “If you would execute a capitalist, he will try to sell you the rope to hang him with.”

    Or, as Samuel Johnson apparently did say to Bishop Berkeley, “I refute it thus !” as he committed the logical fallacy of argumentum ad lapidem.

    Now you do understand the sorites paradox in all of its manifestations, don’t you.

    And do you yet have Ernestine’s approval for all this psycho-socio-economico theorising ?

  5. @Iconclast there is a way to get rid of predatory capitalism, and that is to show it for what it is. It is a grossly inefficient method of allocating savings that produce a low-value return on savings.

    The existing capitalist system is inefficient because it props up the idea of capital as being something separate from what produces capital namely a surplus on a given exchange of goods and services. Our idea of capital comes from double-entry book-keeping. In double-entry book-keeping, we had to do something with the surplus of costs over income. We invented the idea of calling it capital and making it fungible. We then went further and said we would give people our surplus provided they gave us back more than we gave them. We called that extra capital interest, and we made the way we repaid the capital so that it compounded by requiring the interest to be paid first. Compound interest made it doubly profitable. As if this was not enough we then made it even more profitable by only allowing those who already have capital to get debt money by creating capital out of nothing.

    This is an extraordinarily profitable business to be in if you can get away with it. You can afford to pay a lot of people a lot of money to preserve the fiction. You can get whole professions to line up behind you because they are all on the gravy train.

    Capitalism, as it exists today, is a parasite on the real economy of goods and services host as so well explained by Michael Hudson in his book “Killing the host”.

    Its strength and power is also its point of weakness. We can quickly destroy it by providing an alternative to interest-bearing debt and removing the cost of inflation. Here is one way to do it for Water.

    https://kevinrosscox.me/2016/09/08/water-rewards-submission-to-icrc/

    We can do the same for all cases where we have debt.
    https://kevinrosscox.me/2016/09/01/pricing-by-consensus/

    It turns out that creating systems like Water Rewards is an easy and low cost if we use modern software tools and the existing Internet systems. I have great hopes that we will see a rapid change so that everyone who produces a surplus becomes a capitalist.

  6. @GrueBleen

    Which statements do you disagree with? I want to understand which part(s) of the argument you disagree with.

    1. With the policies of Keynesian economics and welfarism well established, is was thought by many persons of a social democratic persuasion that capitalism was tamed and humanised permanently.

    2. Then capitalism’s remorseless system logic reasserted itself. (Rise of neoliberalism or market liberalism. US wages and incomes for bottom 90% almost stagnant in real terms since 1979 to 2012 (plus 15%). Income of top 1% up by 138% in same period. 1973 to 2013, productivity up by 74.4% while workers’ hourly compensation up by only 9.2%: the productivity / wages disconnect.)

    3. Capitalism, including RECD (really existing capitalist democracy) is a complex adaptive system.

    4. All political economies are complex adaptive systems.

    5. Any political economy consists of (a) a formal system and (b) real system. In today’s context that means (a) the legal, institutional, political and financial systems and (b) the real economy.

    6. The real economy is a physical system.

    6. Real systems (physical systems) exhibit dependable Laws as discovered by scientific method.

    7. Formal systems (customs, rules, laws, political systems, financial systems) can exhibit some law-like behaviours (in the physics hard law sense). Piketty’s discovery of “If r greater than g” then oligarchic / dynastic wealth grows in a manner to increase inequality” is a case in point.

    The combination of finance system axioms plus the action of certain extant laws and institutions (esp. laws of ownership and inheritance as standard conditions) act to ensure that “Piketty’s Law” will obtain while these “standard institutional conditions” obtain. This is the realisation of “law-like” behaviour in a formal system.

  7. @Ikonoclast
    Your #6

    Hmmm, I wonder how my previous reply named Ivor – I just clicked on ‘Reply’ on your comment as I normally do and somehow got ‘Ivor’ rather than ‘Ikonoclast’. Oh, mysterious are the ways …

    Anyway, you do understand I hope, Ikono, that basically I was just trying to inject a little humour into proceedings, hence my (non)reference to Lenin and the insertion of some “homage” to argumentum ad lapidem. The only comment that was vaguely serious was my inclusion of “the sorites paradox”.

    So, to your 7 points above, I’m not sure whether I agree or disagree with all or any of them. “Agreement”, as such is irrelevant really. My considered response to assertions and propositions generally ranges from Pauli’s “not even wrong” (which may apply to some of your propositions) to “probably as right as humans can be”.

    And given that, the “sorites paradox” comes into its own. Not the ‘simple’ sorites – ie how many grains of sand do make a beard – but rather the composite effect of many ‘near truths’ (yes, I normally use the ‘Correspondence Theory of Truth’ in estimating truthiness). Unlike the ‘errors’ in a scientific experiment that may counter each other as well as reinforcing each other (as I’m sure Charles Sanders Pierce would attest), the uncertainties in a sorites argument are always reinforcing, thus even though each conclusion/proposition along the way is possibly more right that wrong, the totality of wrongness over the whole argument invalidates the end conclusion.

    Or so I say. But I haven’t the time, or frankly the passion, to critique each of your 7 ‘arguments’ in detail. So, just an example using No 1. My reaction to this is simply “so what ?”. Who are these “persons of a social democratic persuasion” and does it matter a damn what they do, did, or don’t think – and that’s assuming, for the moment that you have interpreted their “thinking” correctly. But really, Ikono, what is your No. 1 supposed to achieve in the grand scheme of things ? Other than perhaps setting the scene so that you can interpolate the very portentous phrase “Then capitalism’s remorseless system logic reasserted itself.” into the ‘argument’, as though ‘capitalism’ is somehow capable of “reasserting itself”.

    But sufficient unto the day, yes ?

  8. @GrueBleen

    “Hmmm, I wonder how my previous reply named Ivor – I just clicked on ‘Reply’ on your comment as I normally do and somehow got ‘Ivor’ rather than ‘Ikonoclast’. Oh, mysterious are the ways …”

    Are you serious? You clicked on the reply button in Ivor’s comment. Why do you tell lies to yourself and us? 🙂 It’s such a clear indication to a student of human nature that you missed something important about fooling yourself and if you do it so blithely in this instance imagine how many times you fool yourself in more important circumstances. lol

  9. @GrueBleen

    “And do you yet have Ernestine’s approval for all this psycho-socio-economico theorising ?”

    And this? What is your point here? What did you mean? Why did you say this?

    “Zenghi said: The government has deviated from the righteous way of leadership and the people have long been left to their own devices. If you can finally uncover the truth behind the making of a crime, you ought to be sympathetic toward the criminals instead of being delighted in your ability to solve crimes”.

  10. @GrueBleen

    Good points. My point 1 was a rhetorical scene setter so criticising it when it ostensibly purported to be point 1 of a deduction series is justified.

    Point 2 has an assertion followed by some data. It’s debatable whether the data prove the assertion. They might tend to lend some credence to it if one is already inclined to think that way.

    Your ideas of errors compounding from “deductions” of a string of half-truths and the issues of “sorites paradox” are also valid. It would be worth my while thinking about those issues.

    I watched a video lecture by John J. Mearsheimer, political theorist and social theorist where he expounded his theory of “offensive realism”. He then applied it to the USA and to what China might as it eclipses the USA economically. I noted he made the point that his ideas were theoretical; “We have no data from the future.” He did not claim certainty but did claim “I think my theory is right (predictive) about 75% of the time.” Then he said essentially it was a simplifying theory and “what it leaves on the cutting room floor can jump up and bit one in the hynie.” It’s an interesting approach to creating and defending a social-political theory. He was basically saying “all great powers act the same”.

    Then I watched a video by Dr Martin Jacques, “Why China Will Be a Very Different Kind of Great Power”. One sees immediately the different theses. If Jacques is right one of the big factors Mearsheimer leaves on the cutting room floor (he might not even be aware of it, his scholarship might not extend to these factors) will jump up and bite his theory on the ass.

    In my case, I simply am not prepared to non-theorise just because I might be wrong. That leaves the arena to the current dominant theories many of which are demonstrably myths in their own right (not recognised as such simply because a lot of people believe them). What I need is a correction method for reasoning faults that lead me into errors, I hope. Of course, this is Quixotic project but it’s interesting to me.

  11. @Kevin Cox

    I don’t think the scheme(s) you mention will get rid of predatory capitalism. They seem to be linked to regional public utility monopolies. The Rewards scheme you propose is short on details. It seems to suggest a kind of co-operative funding within the public sphere but extending no further than the users of the regional monopoly. To get the discount, one must be in the zone of the service.

    Given the shortage of details I infer the following for the “pure” model.

    (1) The authority will not borrow from banks or money markets.
    (2) The authority will offer 10% discounts for pre-payment.
    (3) The 10% discount appears to apply in perpetuity (Not sure.)
    (4) Pre-payment for the service could function as capital raising.

    In this model, I wonder how reliably pre-payment would function as capital raising. There is the question of uptake. There is no guarantee that uptake might be small, erratic and insufficient to raise the necessary capital, say for an expansion or upgrade. Creating all these little secondary markets in rewards vouchers or shares looks messy to me but as you say, modern computing can handle it. I wonder about security and validation though.

    But the main objection seems to be the uncertainty about the adequacy of capital raising under this model. I grant that if it worked it save interest payments.

    To my mind, a better model for municipal (and maybe state) capital raising for utilities would be a state (national) development bank. Gee, we used to have one of those called the Commonwealth Bank when it was a federal government institution before privatisation. I would advocate that we progressively renationalise the Commonwealth Bank and then use it, among other uses, to provide development and maintenance finance for municipal, state and national infrastructure projects.

  12. @Ikonoclast

    Did you hear about the “human headline” naming those paedophiles in parliament? How obvious was it that this was the reason he got himself elected. Talk about single issue fanatics.

    This sort of obsessive behaviour was once a bit suspect, politically incorrect and the press would not touch it but now …. because news has to be profitable we get sensationalism that for some people is more salient than for others. You can imagine how vulnerable to these messages uninformed young parents are. They don’t just irrationally choose to become helicopter parents.

    The point is I think I want to make is that with respect to the changes in the way we raise our children compared to the way we were raised this is just one of the many ways that some dangers are exaggerated while the really dangerous things out there are the society denying individuals whose only aim in life is to make a profit from other individuals.

  13. @Julie Thomas

    Yes, good points. It is very complicated all this. I could make a number of points at a number of levels. My problem is paring down my blog posts to a length that someone might read. Certainly modern news encourages or induces everyone to catastrophise all the time. I have a derogatory saying about commercial news (partly plagiarised). “If it bleeds it leads. If it burns it earns.” It’s pointless watching commercial news. There is the car accident. Then there is the house fire. Then there is the pedophile story. Rinse and repeat. Swap the order sometimes. Then have the sports stories where boofheads talk about boofheads. Throw in a bit of hagiography about “J.T.”. If you are a Queenslander you will get this last reference. He kicks an ovoid inflated leather object between two raised sticks and throws his sweaty headgear to little hero-worshipping children. OMG! He is a hero! 😉

    One can satirise the SBS too. At one stage it was suggested that SBS stood for Soccer Bloody Soccer. These days it probably stands for Syria Bloody Syria. Syria is a tragedy of course, largely created by our stupid Western governments. But the SBS is terribly selective about its news. One would get the impression from the SBS, most of the time, that only the Middle East exists. Forget about the rest of the world.

    The first Congo war 1996-1997 caused 250,000–800,000 dead and 222,000 refugees missing. The second Congo war 1998 – 2003 (about) caused according to differing estimates, 2.7–5.4 million excess deaths (1998–2008) or 350,000+ (violent deaths 1998–2001). I recall little in the way of SBS or any media reportage on this or analysis of why it was happening. At the same time, headlines like 6.9 billion people lived in peace today but 1 billion are extremely poor, do not appear at all. It’s certainly selective reporting of reality.

    Sorry, that was a bit of a rave.

  14. @Ikonoclast

    This is a sandpit right? People can scroll and ignore pixels on a screen? If not it is possible to see a friendly psychologist and if people can’t afford to pay for some help coping with freedom of speech then they can access some free sessions if their need meets government regulations.

  16. @Julie Thomas
    Your something or other

    Ah Grasshopper, you begin to understand yourself at last.

    Keep up the good work – membership in the great cohort of Homo Sapiens sapiens may yet one day be yours.

  19. @Ikonoclast
    Your #10

    They can be more than “half” truths, just not necessarily “whole” truths – though i have no idea how to formulate a scorecard and ranking in that respect..

    Basically, I have no problem with the broad thrust of your exposition Ikono (though that doesn’t mean I wholeheartedly believe it either), but proving such ideas is just not easy. The only extended arguments that are trustworthy are mathematical – like the ‘beginning to end’ proof of Fermat’s Last Theorem. Andrew Wiles didn’t actually have to produce an ‘end to end’ proof because so much of his reasoning had already been proved.

    Now, if you can get to that state … 🙂 But I guess you may think you have by using what you consider to be theses alraedy proven by Marx. Unfortunately, Marx doesn’t rank as highly as a huge sorites of proven mathematics.

    Anyhow, this business of China “eclipsing” the USA according to the IMF (with slightly different numbers for the World Bank and the CIA’s World Factbook), the current standing in terms of PPP GDP (in Geary-Khamis Int$) is:
    China $20.853 Trillion
    European Union $19.205 Trillion (still including Britain in that number)
    USA $18.558 Trillion
    India $8.6 Trillion
    and so on.

    But, in terms of PPP GDP per capita, we have:
    Quatar $132 k
    .
    .
    USA $55.8 k
    .
    .
    China $14.1 k

    So, to even reach USA parity on PPP GDP per capita, China needs to almost quadruple its current PPP GDP. But there is a wee problem: as GDP increases, PPP drops (because of higher wAges and costs and so forth). This is known as the Middle-income trap that all developing nations face: easy-peasy (sort of) to get up to a middle level of GDP percapita, much harder to go on increasing from there.

    However, places such as Japan, South Korea, Australia etc have managed it, so maybe China will too, eventually – and probably just a little while sooner than India.

    So, just perhaps, the futuere isn’t any more easy to predict than it ever was.

    Anyhow, let me be as clear as I can: I enjoy reading your stuff (well, almost all of it), and I respectfully applaud your project, I just don’t always agree with, or believe, all of it.

  20. @Julie Thomas
    Your #12

    “Talk about single issue fanatics.”

    Do you ? Often ? And do you have a list of your favourite SIFalytics ? Other than Derryn, of course.

    “They don’t just irrationally choose to become helicopter parents.”

    Yes they do, and quite a few of then irrationally decide not to vaccinate their kids, too.

  22. @Ikonoclast
    Your #13.

    Re news, you forgot the “Car crashes into house (or shop or office or whatever).

    And SBS stands for Sex Before Sleep, now and forever. Except for when it stands for Super Beaut Soccer, which appears to be a lot of the time.

    As to the Congo Wars, well they’d certainly been well trained by that great statesman, King Leopold II of Belgium. Maybe as many as 10,000,000 Congolese slaughtered under his personal reign. But then it only went on up to 1910, and we all became civilised after that.

    Except for the USA, of course, and it’s little war in the Philippines. Whereas the rest of us just got on with killing each other.

  24. @Ivor I have read Marx . . . about 25 years ago I admit. My conclusion was that he was a good observer of the world but that his predictions and solutions were just as speculative as anyone else’s, perhaps less accurate in some ways. We find that economies can be controlled to a certain extent, but only within limits, and not in the ways he imagined (i.e. the persistence of black markets).

    I don’t recommend trying to understand the world only in terms of a single thinker. Everything should not be referred back to Marx. You might as well refer back to the bible, etc.

    I take it you do not accept the idea that a worker’s potential output could be considered capital. I personally think of my time and effort as an investment, but then, as I said: American.

    I’ll ponder your point some more though.

  25. @Zed Hogan

    Marx’s predictions (which is not how he presented his case) have been fully validated in the modern world as his counter-vailing tendencies have reached their limits.

    It is not possible to control a capitalist economy as Christine Legarde and Central Bankers are now learning,

  26. As is clear from above, I am pursuing some of my own theories, purely for my own interest. I am looking at complex systems in a particular way using only word based arguments. I am no mathematician. The “particular way” I refer to is to look at the interaction of formal systems with real systems. Formal systems may be descriptive or prescriptive. A theory in physics, for example, is a descriptive formal system which seeks to describe or model a real system or an aspect of it. Boyle’s Law could serve as an example. The Laws of Thermodynamics serve as another example. A prescriptive formal system could be a piece of legislated law, a manual or a rule book. Another example is the set of financial accounting rules we use including those for national accounts.

    Prescriptive formal systems then can be divided into normative and axiomatic. (Yes, I know there is a naming issue here with “prescriptive” and “normative” having close meanings in standard language. This is my system but it may not be original except for the idiosyncratic terminology.) A law which says “You shall not unlawfully take (kill) human life.,” and then goes on to define “unlawfully” etc. is a normative law (system). An individual can transgress the normative law. The normative laws do not make an axiomatic system. There is nothing that axiomatically links “you shall not unlawfully take (kill) human life” with “your car will be towed away if you park on the yellow line”. An accounting system is an axiomatic system. All permitted operations in the system are axiomatically linked by calculations or calculation rules.

    My interest is in looking at how formal systems operate on real systems and vice versa. Clearly human formal systems operate through human agency. It is only by implementing them in practice that we operate on real systems in some manner. My more particular interest is in formal systems which are in conflict with real systems either immediately or in long term tendency. We would tend to say such a formal system is unsustainable and will sooner or later come into conflict with a real system. An example would be if I became a “Breatharian”, someone who believed he could and should live on air and not require food. That would be a normative formal belief system which would come into conflict with a real system (my physiology).

    Of course there is much more to this. I am interested in feedbacks between these formal and real systems and how such feedbacks work (and don’t work). Formal systems are actually encoded in real systems, in brains, books, computers and so on. At this level they are real systems. The next question is how can formal systems operate to create fallacies and errors, in a word to be incongruent with real systems? That’s where the investigation gets interesting when one assume everything is a monistic real system of all real subsystems. How does the transfer of matter, energy and information across interfaces generate errors (incongruences) as well as congruences as a correspondence mapping of “truth”? Lost information must be one issue.

  27. @Ikonoclast You say that formal systems become real, and that is true. The problem is that they become real, but they are not true. Formal systems are models or representations of reality.
    I work in the areas of identity and transfer of value. In both these areas the models are deemed to be true, and we go to great expense and effort to maintain the fiction.
    In the area of identity, the most common formal system represents an identity by a token. Because an identity is much more than a simple attribute or token, it is expensive to maintain the fiction that it is only a token. Finding a better formal description and making that real reduces the effort to maintain the real, but made up, formal system.
    In the area of money, the formal system (economics and accounting) assumes that money tokens are a store of value. That is a fiction and maintaining the fiction is extraordinarily expensive. The lower bound of the cost is the sum of all interest plus the cost of inflation.
    The theory that has helped me make sense of all this Promise Theory from Mark Burgess.
    What we are doing in identity is to change the building block of identity from a single token to the connection between two identities and then we build the formal system to make it real. It turns out this system is lower cost because the model is closer to the real world.
    For money, I am proposing something similar. The building block for the formal system of money is the transfer of value between two parties or peer to peer credit. Doing this will remove the cost of interest and inflation. The formal system becomes real when we build systems like https://kevinrosscox.me/2016/09/08/water-rewards-submission-to-icrc/
    Of course, the new models of identity and money are not true, but they result in a lower effort (cost), so I expect they will do well until something better comes along.

  28. @Kevin Cox

    I am not familiar with promise theory and I cannot understand the Wikipedia entry. It seems very general and vague. I would have to read up on promise theory but I already have a reading list as long as my arm.

    There are hints in what you say which indicate that the thought systems we are considering might have some links. But my focus is philosophical at this point, specifically ontology.

    For example, you write “You say that formal systems become real, and that is true. The problem is that they become real, but they are not true.”

    I agree with that statement but I would add several more wrinkles. Also, the reasons I agree are too complicated to write into a blog entry.

    You also write; “What we are doing in identity is to change the building block of identity from a single token to the connection between two identities and then we build the formal system to make it real. It turns out this system is lower cost because the model is closer to the real world.”

    This also makes sense to me based on my thinking and writing. The Universe is a single, entangled real system. Identity, like any characteristic is relational. Thus viewing and constructing any identity as relational to all identities in a given system would make sense.

    As I said, I can’t comment on the details of promise theory. Also, you haven’t answered my questions in my post number 11 where I sought detail on Water Rewards and raised concerns about it.

  29. @ICONOCLAST Apologies for not answering your questions. I do not see them. I will answer now.

    Promise Theory explains why the approach taken on identity and money reduce costs. It was important to me because I could not understand why the models we were building were so efficient. Complex Adaptive Systems and Computational Modelling is the methodology. What we do is to build models of interacting autonomous agents, change the rules of interactions and see what happens.
    The models of the formal systems we build become operational systems. We can then experiment with the operational systems to see the effects of policy changes.

  30. @Kevin Cox

    Thanks for the answer, sincerely, however it is a back of the postage stamp size answer. Your site gives back of the serviette size answers. These answers probably make sense to you as you have a lot of background knowledge in these matters. To an outsider, they are too brief to give any good picture of what is meant or what is going on. I don’t expect a huge screed on J.Q.’s blog (he probably doesn’t expect it either, LOL) but some links to papers which explain these concepts would help. Any paper less than 2,000 words and maybe even less than 5,000 words is not going to do justice to your subject area or research topic . I just can’t get a handle on this theory from such brief summaries.

    Note: I am the main culprit for posting screeds here, some of which are only tangentially related to economics or topics of social democracy. I am trying to tone myself down. I certainly don’t want to encourage others to post excessive screeds. 🙂

  31. @Ikonoclast
    Your #30

    You say: “I am trying to tone myself down.” No no no, don’t do that, especially if you mean that “I certainly don’t want to encourage others to post excessive screeds.” because the best way to discourage them is to keep posting your own very long screeds. They (we ?) will see what they’re up against, and opt for brevity.

    But to slightly revise Peter Sellers (‘So little time’): “So much to say, so little time.”

  32. @Ikonoclast I am not proposing a theory. I leave that up to others. I try to understand why what we propose works. I do something and then look for the theory to explain why it works.

    I am proposing we change the way we transfer value. At the moment we transfer value using debt or money with interest. What if we transferred value using money without interest attached? How could we do this? What would happen if we did it?

    Well, we can do it by taking savings and giving investors a return through more goods and services. If we do this, it eliminates interest, and we can also adjust the value of goods and services to remove the effect of inflation.

    It turns out that to transfer value without using debt requires a few more things to make it work. We had to work out how to reliably identify the parties exchanging value. We had to make sure we could retrofit the approach to existing systems without those systems having to change. We had to find the tools that enabled autonomous computational entities to communicate. We had to work out how to present it decision-makers in ways they could accept. I had to find programmers who could write the systems.

    It has taken eight years and several million since I first proposed the idea of Rewards. Last June I finally felt I both understood it and knew how to sell the ideas to those who could make it happen. Putting the ideas in places like this is part of the exercise of making people aware that it is possible. I am also hoping people will start to imagine what they think will happen when if it is widely adopted.

    When you make a new tool, you have little idea of the consequences. It would be good to anticipate a negative impact before it happens.

  35. @Iconoclast Here is another attempt. It is not difficult to understand. It is difficult to know the consequences or emergent properties of the widespread use of the approach.

    Here is the idea

    I give you some money for some goods and services. If you give me the goods and services at the same time as I give you the money, the value of the money is equal to the value of the goods and services.

    If you give me the goods and services before you receive the money, I receive fewer goods and services for the same amount of money.

    If you give me the goods and services after you receive the money, I receive more goods and services for the same amount of money.

    In the exchange, the amount of money stays the same. The value of the goods and services exchanged changes.

    Here is what happens now

    With interest-bearing money, if you receive the money later I pay more money. If I pay later, I pay less.

    Exchange of value this way is debt money, the amount of money changing hands varies on whether it is early or late. The value of the goods and services exchanged stays the same.

    If we use the new system it means the money we use for exchange does not need to have a value due to the passing of time (interest). It means if the value of money changes due to inflation we can adjust the value of goods and services exchanged. Interest and inflation are both costs. Varying the value of goods and services is low cost and happens all the time. Removing interest and inflation reduces the cost of exchanging value.

  37. Bob Roberts claims href{https://www.theguardian.com/australia-news/2016/sep/16/malcolm-roberts-to-discuss-climate-science-with-csiro}{CSIRO have never released the data} “proving” Greenhouse Gases cause global warming, and they have decided to give him a briefing. Prediction for Bob Roberts comments after the meeting: “They didn’t have any data. It was corrupted. The manipulated it. They used fake NASA data. Lies, damn lies! One World Government. The conspiracy runs deep.” Seems we don’t even need to waste the time of CSIRO’s staff, we can just cut to the ending straight away.

  39. @Ikonoclast

    @ 26

    It seems to me what you call ‘formal system’ I would call ‘institutional environment’. What you call ‘real system’ I would call ‘natural or physical environment’.

    In my theoretical framework, at any one time there is only 1 natural environment but there may be different institutional environments in the same natural environment, called earth (some may prefer a broader context – the universe). Over time both environments (within which humans and animals and plants) live evolve.

    In one of your many well written posts, you wrote something to the effect that we all try to make sense of the world, using whatever means or knowledge available to us. I agree.

    You say words are your means to think and explore ideas – theorise. Writing words doesn’t come easy to me.

    GrueBleen says words to the effect that words aren’t good enough to theorise.

    My background is in math econ and finance. In a sense I agree with GrueBleen. However, I also know that pure mathematicians, who became interested in economics, didn’t just come up with their theoretical models, plucked from thin air. They read the writings of economists and then applied their knowledge. This involves – roughly speaking – finding appropriate mathematical objects to represent ideas – ie translating into a universal language with a lot of known rules – weeding out overlapping or duplicated terminology, such that one can tell the difference between a new theoretical result and inventing new phrases for an old result (a literature review dressed up in new jargon). Beliefs, held by economists, were exposed to checks for logical consistency (for example, if ‘freedom of choice’ is a desired aspect of an institutional environment then a theoretical condition is required which ensures everybody has enough power – wealth in some institutional environments – to be able to give expression to this freedom of choice. Practical implication: Policy makers who promote ‘freedom of choice’ but give tax cuts to the top end of the income distribution and taking away some income from the bottom are not credible).

    Who knows, one day your written words may be picked up by mathematicians, leading to new results, new insights. Perhaps GrueBleen is already working on it!

  40. @Ernestine Gross

    In the past, I might have criticised you for “over-mathematicising” economics or reality. My own continued theorising, with input from others including yourself, has convinced me of the language relationship between word language and maths. To cut a long story short, the generic charge of over-mathematicising does not hold up. A theorist using words can equally be criticised of “over-languagising” reality. (No doubt there is a point to certain meditation practices, for example Zen, where the student is taught to stop languagising reality.)

    You write:

    “This (the economic maths project) involves – roughly speaking – finding appropriate mathematical objects to represent ideas – ie translating into a universal language with a lot of known rules – weeding out overlapping or duplicated terminology, such that one can tell the difference between a new theoretical result and inventing new phrases for an old result (a literature review dressed up in new jargon).”

    That sentence now makes excellent sense to me. I believe I understand very well what you mean. I wouldn’t have reached this insight without my stumbling and bumbling attempts to explore philosophy as an autodidact. The feedback does help though. Conclusion? Darn, I have to start respecting mathematicians again.

    My focus on formal systems and real systems is perhaps roughly the same as a focus on institutional systems and natural systems at a broad brush level. At the fine detail level, it is something more and I hope it refines matters. I start with an a priori justification (or assumption) that the Universe (the largest natural system in your terminology) is;

    (a) all that exists; and
    (b) that it is a monistic real system.

    Real system is used here in the sense that physicists would use the term. Thus this is a relational theory. “In physics and philosophy, a relational theory is a framework to understand reality or a physical system in such a way that the positions and other properties of objects are only meaningful relative to other objects.” – Wikipedia. In other words, I am saying the universe is a single, entangled system. Implicit in this monistic view is the argument that there is no mind-body problem, no consciousness-physicality problems as found in dual substance philosophy or dualism.

    Following this and remaining consistent, I get an odd result, namely that ontologically formal systems are also real systems. This would seem to undermine my whole approach. After all, I make a contention that we must analyse formal systems and real systems in relation to each other. If the distinction disappears ontologically what remains of the contention? But let me first demonstrate my “odd result” with a simple notation I have developed.

    I regard the universe as a single, entagled system. It is a real system, so every sub-system of it must be a real system. It follows that consciousness as a sub-system of the real monistic system is also a real system. I regard sub-systems as interacting through interfaces represented by the pipe symbol thus “||”. Illustrating a set of real sub-systems of the monistic universe system in this manner I get;

    Universe || Earth || Biosphere || Ecosystem || Humans || Minds || Formal Systems

    Thus a formal system (so-called) like Euclidean geometry is still a real system according to this analysis. We can see that Euclidean geometry is encoded in real objects. I mean in books, in PCs and in human brains for example. Euclidean geometry exists nowhere except in these physical encodings and the interacting operations of these encodings.

    The pipe symbols “||” above indicate that matter, energy, information and perhaps field effects can be transferred between systems. Field effects will include but not be limited to space-time. There is an unresolved question here for me, namely to consider whether field effects are transferred (transmitted) or whether they are the ubiquitous conditioning “field” in which matter, energy and information effects occur. But that can be set aside for now.

    The only differences I can find between formal systems and real systems are;

    (a) formal systems are related to (embodied in and bodied forth from) life (defined biologically) or at least some forms of life;
    (b) life and thence formal systems developed by some life are characterised by both a high ratio of information content to matter-energy content and by the application of encoding and decoding algorithms to operate on the information.

    These are still somewhat tentative “findings” on my part. Intelligent life (and not only intelligent life) makes models. That’s we do. Our brain reconstructs sight data for example. We do not see the world we see a model of the world that is reconstructed in our head. Insofar as this model is “accurate” – meaning accurately correspondent enough or isomorphically congruent or homomorphically congruent – we do not bump into things when we walk around.

    Our formal systems are models too. This includes language and maths constructs as formal systems. The value of a model is that it seeks to replicate the essential relations in some real system and the model does it in a way that is informationally dense. By this I mean there is a high information content relative to matter-energy content. Thus with models we manipulate analogs of reality to test what might be the case in reality and we are able to do this economically, with matter-energy economy. That is the value of models. Thus the difference between formal systems and real systems resides not in an ontological separateness of substance (as implied by philosophical dualism for example) but in as I said above “a high ratio of information content to matter-energy content and by the application of encoding and decoding algorithms to operate on the information” and in the value of these processes for understanding and manipulating reality (real systems).

    The next issue I would deal with of course is inaccurate models. If we have inaccurate models and attempt to apply them to the world then we get stuff-ups basically. The issue with inaccurate economic models (you rightly refer to the need to check for logical consistency in freedom of choice arguments)- in our economic system is that these inaccurate models can persist for a long time buttressed by internal socio-economic “logic”; indeed buttressed by axiomatic ownership systems, law system and finance systems. The ignoring of resource limits is another case in point. We can ignore resource limits while they are not near limits. Our current economic system has an internal logic which ignores resource limits by and large. Our model in some senses is accurate enough (meaning workably congruent with reality or the biosphere system it is embedded in) while it is distant from limits but not as limits are reached and overshot.

    But that’s enough for a blog.

  41. @IconClast The problem with formal models is they often work well “in the small” but fail when systems become large and more complex.

    It is a general issue in all information systems. We make the symbols used in the information systems have a reality that works well “in the small”. Maintaining that reality becomes expensive when the systems get large. Of the two I have worked in – identity and money – this is certainly the case.

    Promise Theory explains why. https://www.amazon.com/Search-Certainty-science-information-infrastructure/dp/1492389161

    Burgess explains it this way.

    Let us assume we want to put Hydrogen and Oxygen atoms together. We find that we can put them together in stable ways H2O, (OH), H2O2. What we can’t do is make a tightly coupled million H with a half a million O. It doesn’t happen without a lot of effort and energy. However, we can put together billions of H2O molecules with loose couplings between the water molecules to form water or ice or steam. We scale the problem of combing H atoms and O atoms by combining a stable combination of a small number of H and Os.

    With identity, we find that if I give you a unique number denoting your identity, and you do the same to me, then this works well when there are only two people. If becomes expensive if everyone uses the same unique number to represent either of us. A lower cost solution is to make an “identity” molecule of the two ids and treat the combination as a molecule. We can now make mass identities cheaply using these identity molecules.

    With money, when two entities transfer value they both can agree on the value and represent it as money. It works well when there are only a few entities involved. It becomes very expensive when we use the same value for money over many entities for many reasons. That is, we make money fungible. A solution to make money work at scale is to make money tokens zero value and keep value localised but still transferrable but not fungible.

  42. @Kevin Cox

    Interesting thoughts. I do take seriously the issues of complex systems philosophy and complex systems science. I mean insofar as I can understand them as a layperson and mere autodidact, amateur thinker. I am careful about taking your particular ideas here (which I take provisionally and at a self-educated guess as basically valid in complex system terms) further into economic prescriptions about revolutionising the money system. That part I am not sure about but I maintain an open mind.

    I think unorthodox thinkers need to attempt to share ideas. This process must cause great amusement for academics and there is always the chance of serious foolishness arising out of it. I can imagine an amusing essay titled “When Cranks Take Each Other Seriously”. Or jokes about “What happens if you put an MMT theorist, a Marxian, A Promise Theorist and Complex System Monist philsopher in the same room and ask them to design an economic system, or more properly speaking, a political economy system?

    Of course, I can only term myself a crank. I am not terming you one. Ernestine is not a crank and yet (with sensible selectivity) takes maybe some things I say seriously. Tim Macknay and GrueBleen take me seriously enough to caution me against my more crankish flights of speculation. What is a “crank”? My definition is “a person who maintains huge enthusiasm for an idea in the absence of confirming or even vaguely supporting evidence for that idea”.

    By this definition, I term all fundamentalist religious people cranks. And my definition of “fundamentalist religious” is very broad. Much of widespread, institutionalised religion meets that definition for me. The fact that a crank belief is shared by a lot of people does not rescue it from being a crank belief. UFO-ology and Anti Climate Science beliefs are a case in point. Another way anyone can become a bit crankish is to take a valid idea and try to apply it in a field where it does not and cannot work. Of course, one does not always or even often know when an idea is inappropriate to a field. The process often has to be tried, the research project undertaken. Failed research programs (dead-ends) are part of the price we pay for attempting to navigate the maze and attempting to find principles for navigating the maze.

    With respect to your specific ideas applied in the field of economics and money “creation”, meaning something more than money creation in standard economic parlance, I would have to read and think a lot more about it.

  43. @IConoclast Thank you for thinking I may be a crank. I certainly believe I am one according to your definition. However, I may be a fake crank or alternatively extra cranky, because I am pursuing the ideas with considerable supporting evidence.

    I think you are right when you talk about models becoming real when they are implemented. That is both an explanation and an opportunity. It is an explanation because the models describe ways that autonomous entities interact and this becomes an explanation for evolution. We won’t discuss how the first things entities (atoms) appeared or even if they were atoms. We do know that there are atoms and we do know that they interact. We can explain evolution by stable entities randomly interacting and exchanging information about themselves. Some of these random interactions create new stable structures and we call this evolution.

    The opportunity is that we can create new models and these – if they are successful – become part of the new reality. We can do this in a directed way. We can speed up evolution and we can direct it. We have a model called economics including money tokens with value or interest and that is real. It exists and it always will exist. Evolution happens when we change the model in some way that changes its nature and makes whatever it does require less effort.

    That is what we have done with identity and have built the systems to prove it. The idea that identity is a property of a single thing does not go away and will always be with us. The idea that there is another type of identity that uses the combination of identities as the building block for a new theory is interesting and proves to be much less effort to maintain and so we can expect it to replace the old theory in the real world. The old theory does not go away but it becomes less useful and less used.

    Similarly with money. We have invented a theory that money is a store of value and because it is a store of value it can earn interest. This happens and is real.

    What I (and many others) are doing is saying that perhaps we can have a lower cost system if we change the theory so that money is not a store of value and does not earn interest. In other words, money is not fungible but is something just used to exchange value. That theory now exists and is real. It will replace the old theory if it is lower cost and it will become the dominant reality. The evidence is strong that this will happen.

    What is exciting about this is that we have a way of understanding how we can direct evolution. We can do it by creating new realities by taking the symbols of the old reality and combining them to become the new building blocks of a new theory.

  45. @Kevin Cox

    I am sorry, I am stuck. I still don’t fully understand your ideas. That just might mean that because I have no background in these ideas, I can’t even get basic concepts.

    I don’t foresee reading any books specifically on this in the near future. Perhaps you can link me to academic articles about the topics. I assume the core topics are Promise Theory and Interest Free Money. I am currently reading your blog, “Stable. Productive Money” – “Submission to Senate Inquiry on Small Business Access to Finance”.

    Okay, finished a quick read of that submission. My first general thoughts are;

    (a) big corporations, big capitalists and governments which support the plutocracy will never go for this idea, therefore submissions to government will likely be of no use;

    (b) as in Switzerland the only way to get such an idea going will be a cooperative enterprise;

    (c) perhaps as in Switzerland it will find a niche.

    (d) regulation of the finance industry and better managements the labour/profits ratio could achieve many of your goals in the current system;

    (e) such regulation is unlikely too for reason (a) above.

    I actually think collapse will occur unless we radically and yet peacefully change this system. How this might be done is a post in itself and requires a lot of theory and even wishful thinking. I am not hopeful.

  46. @Ernestine Gross
    Your #38

    I’ll read Ikono’s very long reply to your comment real soon now and see if there’s anything else to add. I would simply point out that I do accept – and try to use – words for communication, that being the limit of their usefulness. But yes, if you want rigour, it’s mathematics or nothing. What a terrible problem we’ve caused ourselves by inventing words before we invented numbers (other than Mene mene tekel upharsin perhaps 🙂 )

    Otherwise, though science is necessarily reductionist, existence is seamless.

    Incidentally, your ‘institutional’ versus ‘physical’ is very close to N David Mermin’s famous ‘explanation’ versus ‘description’. However, Mermin was referring to physics and cosmology where ‘description’ may be a lot easier, but also harder, to come by than in economics.

    Otherwise, my participation in the grand adventure ? Sadly, too little talent and too little (life)time. But I guess you knew that 🙂

  50. GrueBleen,

    “I regard” not “I have solved”.

    This below seems to lend support. Indeed, it is from such papers that I derive the “I regard”. I go by the words and rely on the maths and science to be peer reviewed, just as all we non-physicists do re the IPCC reports for example.

    http://www.sciencedirect.com/science/article/pii/S037026931200994X

    However, thanks, as the word “entangled” may be the wrong one in the context anyway. I need to revisit that.

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