Regular Features Sandpit April 29, 2019 John Quiggin17 Comments A new sandpit for long side discussions, conspiracy theories, idees fixes and so on. Like this:Like Loading... Related
17 thoughts on “Sandpit”
WE CANNOT DERIVE FUNDAMENTAL LAWS FOR OR FROM NORMATIVE ECONOMICS.
Shimshon Bichler and Jonathan Nitzan in their conclusion to “Capital accumulation: fiction and reality” manage to sum up and refute modern economics in one masterful sentence:
“You cannot build an entire social cosmology on the assumptions of individual rationality, equilibrium and perfect markets – and then blame the failures of this cosmology on irrationality, disequilibrium and imperfections.”
“In science, these excuses and blame-shifting are tantamount to self-refutation. What we need now are not better tools, more accurate modelling and improved data, but a different way of thinking altogether, a totally new cosmology for the post-capitalist age.”
Bichler and Nitzan are saying that we do not need better tools in the current economic paradigm as the paradigm itself is based on false premises. They propose the need for a new paradigm, “a totally new (social) cosmology”. To explore this cosmology analogy, we can note that the physical cosmos is considered to be a single connected system by cosmological science which investigates it via a relational theory framework. In a relational framework, the positions and properties of existents are only meaningful relative to the positions and properties of other existents in the system. A relational system “social cosmology” immediately suggests that individual “rationality” is not discretely atomistic and fixed. Rather, individual rationality is socially conditioned and thus fluid or malleable. Collective (as well as individual) rational and irrational behaviors exist, or rather arise, as emergent properties.
Bichler and Nitzan refer to “the duality of real and nominal”. They expand on this to refer to the splits of “subject and object, idea and thing, nomos and physis”. The ontological problems presented by the duality puzzle of the real and the nominal are what modern economics fundamentally and comprehensively fails to analyze correctly. In particular, modern economics confuses its formal prescriptive rules (and more especially their often algorithmic outcomes) with the real by regarding them as “laws”. These outcomes are not discovered laws of real systems (like the Laws of Thermodynamics for example). They are rather the “algorithmic outcomes” of the formal (axiomatic) rule systems of modern economics. Modern economics (especially as neoclassical and neoliberal economics) seeks to conform the real (real biosphere, real people) to its formal (axiomatic) rule system while at the same time claiming this rule system is positive (descriptive) rather than normative (prescriptive). This constitutes the foundational ontological and scientific fallacy of modern economics. The premises are wrong. All deductions which follow wrong premises are wrong.
When we are dealing with physical phenomena, the fundamental laws of the cosmos are independent of human understanding or modelling of them. No matter what you or I or any human thinks of the Laws of Thermodynamics or even if we are ignorant of them, the fundamental natural phenomena follow predictable courses which can be well modeled by the laws of thermodynamics (when those laws are mathematicized to permit accurate-enough descriptions and empirically verifiable predictions of the natural phenomena in question). However, when it comes to socioeconomic phenomena, what we think and believe can and do enter into the constructions and emergent outcomes of socioeconomic phenomena themselves (along with fundamental physical phenomena also playing a role in the constructions and outcomes). At this formal level, any theory of the formal system enters into the system as a compounding or complicating element. Thence, meta-theory (theory of the impact of theories on the system) will also enter into the system. These theories enter into the system by changing the behaviors of human subjects, not by changing any fundamental laws of physical nature.
It is not possible to mathematicize socioeconomic processes into fundamental economic laws for the simple reason that most socioeconomic rules are arbitrary and may be changed at any time. Here we must distinguish between rules and laws. Rules are social decisions on how to conduct matters. Hence rules in this sense are any and all of customs, legal laws, regulations, accounting rules, finance rules and so on. Rules instituted into formal systems become algorithms or recipes; lists of ingredients, methods and time orders for doing things. Any of these rules may be made in one way or made in any other way with the major proviso that rules which directly and immediately contradict fundamental natural laws are not actionable. Rules which cross-contradict each other are also not actionable unless one rule takes precedence over the other rule.
It is not possible to fully mathematicize the changing arena of socioeconomics precisely because the grounds and bounds of the problem can be changed by changing the rules of the game (meaning the cooperative-competitive game of socioeconomy in praxis). The socioeconomic system which we seek to model continually mutates as we change its parameters and rules. We model the socioeconomy in both senses of the word “model”. “To model” can mean to make a copy of an original or it can mean to actively change, that is re-model, the original. Changing the parameters and rules of the socioeconomy happens by any and all of fiats, diktats, limited consensus or wide consensus and also is affected by issues such as gaming the system, loophole-finding, ideational and ideological “arms-races”, patterns of rule-adherence, rule-breaking, law-abidingness, criminality and so on. Also, theories of the system themselves enter into the system as outlined above. Changing the rules sets up new constellations of “bodies” and interactions (as processes) and annuls other constellations and processes. This statement again refers to the relational system or cosmology analogy. This is not just an n-body problem where n is a huge number. It is also an “n-rule” problem, where n again is a huge number; and the rules are continually made and unmade and mutate and interact in intended and unintended ways.
The totally new “social cosmology” Bichler and Nitzan very rightly call for is not predictable nor even envision-able in many ways. Being a new and emergent complex system it will demonstrate radical novelty. In systems emergence theory, a radical novelty is not predictable because an explanatory or phenomenological gap unavoidably exists between the precursor or substrate system and the next radically different system. We do not have and can never have complete knowledge, nor is the future predictable in a system which shows both chaotic and non-determined aspects to its evolving nature. But stating even this does not fully explain or explain away explanatory gaps. Explanatory gaps from the scientific philosophical points of view are not limited to the matter / consciousness problem but manifest throughout the spectrum of systems in the world and cosmos.
Calls to theoretically elucidate (and worse, calls to mathematically delineate) the new desired economic system are totally inoperable calls. We cannot pre-define it by positive or prescriptive statements. We do not know the right way to go as it is an open-ended problem with an infinite or near-infinite move tree. It is as if the problem were a hyper-complex chess game played on a near infinite board. The analogy of search tree “look ahead” logic is entirely appropriate. In a massively complex open-ended problem, the series of perfect moves leading to a perfect or “won” game is incalculable. What are calculable proximally are very bad and indeed dreadful moves which lead to imminent misery or checkmate (as human civilizational collapse or human extinction for example) in a “few moves”, meaning in a relatively short time frame.
Thus the problem is not to find the “perfect moves” or the theoretically “perfect system” for calculating perfect moves. (Modern economics pretends to be an idealized perfect system.) Instead, the problem, pragmatically defined, is to avoid the really bad moves. Our practice of late stage capitalist economics (neoliberal economics) has revealed and is revealing a wide panoply of really bad moves. In summary, the really bad moves clearly revolve around;
(a) treating the free goods of nature (of the biosphere) as infinite;
(b) running an endless growth economy on a finite planet;
(c) allowing algorithmic (and “autocatalytic sprawl”) processes to run unimpeded according to the current prescriptive theories of capitalism without regard for real system impacts.
(d) allowing algorithmic (and “autocatalytic sprawl”) processes to run unimpeded according to the current prescriptive theories of capitalism without regard for human impacts.
Points (b) to (d) are really elaborations on point (a) rather than truly separate points. However, the elaborations are important. They indicate the areas where we should start changing things to avoid the obviously bad moves. It is in the employment of science, logic, democratic decision-making and humane consequentialist ethics to avoid the obviously bad moves that we will in effect instantiate a trend away from the blind implementation of the ideological / faith logic and algorithms of orthodox economics. It is this method of avoiding the obviously bad moves (obviously bad to a high degree of certainty according to contemporary science and humane consequentialist ethics) which can likely shift the system to a better and “totally new social cosmology” even though we cannot as yet envisage or predict the emergent form of that system.
I have not read the original work by Shimshon Bichler and Jonathan Nitzan. My comments are restricted to your extensive post.
1. “WE CANNOT DERIVE FUNDAMENTAL LAWS FOR OR FROM NORMATIVE ECONOMICS.”
Who claims the contrary? I can’t think of any one.
2. “Modern economics pretends to be an idealized perfect system”.
I don’t agree with this proposition. More importantly, the volumes of Econometrica, Journal of Economic Theory, European Economic Review, Journal of Mathematical Economics etc, are full of evidence to the contrary in the sense that people continue to do fundamental theoretical research, which would make no sense if they believed that the idealized perfect system has been found.
3. I do not understand why people want to comparing economics to natural science. The research questions are so fundamentally different that it would be surprising if anyone could reach a conclusion other than natural laws mean something totally different from empirical observations on ‘an economy’ that has been observed at a particular time interval and at a particular location, implying under natural and institutional circumstances. It is a historical fact that a long time ago some economists talked about ‘the law of supply and demand’, often qualifying this expression by saying there is a ‘tendency’. There may still be people who use this terminology.
4. The idea that new information (including theoretical and empirical knowledge) affects the behaviour of people and therefore ‘the economy’ is not new. For example, it is well documented that the Black and Scholes Options Pricing Model has influenced the behaviour of traders of options such that the price observations of the relevant options after the B&S Model became known (following an information dissemination process) matched the output of the B&S model.
5. The critique of mathematical economics is not convincing, given that the authors used a mathematical object, which in the applied area is known as “search tree” (or decision tree), to illustrate the complexity of decision making under uncertainty. Furthermore, and perhaps more importantly, communication between natural scientists and economists is facilitated by the language of mathematics.
6. “(b) running an endless growth economy on a finite planet;” Is obviously not possible, as can be easily understood when studying an intertemporal general equilibrium model.
But here I have a question. Do the authors examine the influence of religions on the underlying belief of endless accumulation and growth being a good thing?
In order to correct a misapprehension which I may have created inadvertently, I must state that only the ideas in the quotation marks are the ideas of Bichler and Nitzan. The rest of the ideas, and the awkward exposition of same, are essentially mine and may or may not accord with Bichler and Nitzan’s conceptions on such matters. In particular, I am attempting to synthesize some ideas from B&N’s CasP (Capital as Power) project with ideas from my own ontological project. Their project is scientific, sociological, socioeconomic and political-economic in nature. It is difficult (for me at least) to pigeon-hole it. My project is clearly philosophical and specifically ontological in nature and draws from fields like systems philosophy and systems science plus from British Empiricism and American Pragmatism as philosophical movements. My readings involve relatively narrow autodidact sections or slices into these fields at certain points and not broad academic surveys. I do not pretend to extensive knowledge of those broad fields.
1. I do hold that mainstream classical, neoclassical and neoliberal economics make the claims I accuse them of. I know that you have long considered I am making a straw man argument in this regard. However, in terms of the economics encapsulated and broadly promulgated in undergraduate studies almost everywhere in the Anglophone world since WW2, via the texts of Paul Samuelson & William Nordhaus and later of Greg Mankiw, and in terms of the business and government economics promulgated and practiced from the time of Milton Friedman onwards, extant mainstream economics has operated on the publicly proclaimed basis that it describes laws of economics (like the law of supply and demand) and these are natural and real laws (rather than admitting its prescribing of rules of economics from axiomatic presuppositions). The Keynesian tradition, a brief attempt to escape classical economics is largely expunged from the public record as it were or at least ignored in the extant practice of economics (except for those brief resurgences of pump-priming to save bankers and billionaires rather than poor people).
2. – 4. I don’t doubt that the volumes of Econometrica, Journal of Economic Theory, European Economic Review and Journal of Mathematical Economics are full of attempts at fundamental research. Whether many of the attempts qualify as scientific is another question. Some may well qualify as heterodox approaches to economics; the category of “heterodox” itself also being no guarantee of empirical or scientific content or of sound ontological foundations. If economics cannot be scientific (and it cannot be in toto) then, in those unempirical parts, it must be derived from moral philosophy. The question then is which variant of moral philosophy.
5. The decision tree analogy is mine. I don’t recall this specific analogy being used anywhere in the writings of B & N. So, if anyone is to be apportioned with just criticism for this interpolation then that is anyone is me. 🙂 I hold that I proved in essence that static, formulaic and equilibrium theories cannot describe an open, evolving and emerging system. I proved, as it were, that the search for good global “moves” through economic calculations (macroeconomics) is in principle flawed. What we need to do is avoid bad and catastrophic moves and these judgements must be made by scientific, ecological, democratic, humane and consequentialist ethical criteria.
6. We agree on a lot of important things. The finite nature of the stocks and flows of natural free goods and nsatural free services in the biosphere is one of those principles. These sorts of agreements between us are interesting (and hopeful) even though I make other sweeping statements re “mainstream economics” which you strongly disagree with.
Do B&N “examine the influence of religions on the underlying belief of endless accumulation and growth being a good thing”? That’s an interesting question. The extensive CasP project literature, which includes writings by other important researchers (including Ulf Martin and Blair Fix), does touch on religion and the transition from Christian-Feudal to Secular-Economic society and probably other matters. B&N note:
“The basic dualities of subject and object, idea and thing, nomos and physis have preoccupied philosophers since antiquity. They have also provided an ideal leverage for organized religions and other dogmas specializing in salvation from alienation. And more recently, they have come to form the basic foundation of modern economics.” – Bichler & Nitzan.
I agree with Blair Fix that modern global economics, at least as bowdlerized and practiced, is in essence a secular religion. (The central tenet of that secular religion is that free markets plus free trade will produce an endless cornucopia of justly distributed goods and services with infinite substitutions solving scarcities.) Fix has noted the mutually reinforcing complex of Circular Logic – Hypocrisy – Authoritarianism which appears to characterize and firm up dogmas, religious and secular, against criticism and intellectual overthrow.
Footnote to my above response. If I were to attempt to sum up CasP (Capital as Power) theory I would just make a hash of it. It’s far better that people read the book and important related articles on the “Bichler and Nitzan Archives”;
Just to explain myself and my idee fixee outbursts in Sandpits, I have been attempting to come at the problem of “the duality of real and nominal” in economics and other fields. My approach has been to go back to ontology and seek to develop a consistent system linking the two (the real and the nominal); figuring out in what sense each exists and how they are linked by humans as agents who can manipulate both real quantities and formal symbols. I’ve developed a consistent system in outline and completed several draft chapters. It’s merely a non-academic, autodidact work.
However, a consistent philosophical system is merely one where the conclusions are logical deductions from the premises. The premises in turn are a priori assumptions and though they may have some epistemic justification they nevertheless remain unproven assumptions. Thus, all ensuing deductions remain at best theoretically possible but entirely unproven.
I discovered these inherent (and disappointing) limitations of metaphysics as I worked through matters logically and used in particular George Berkeley’s metaphysical works as a model for philosophical method but only as a model of metaphysics in the sense that I somewhat inverted Berkeley’s metaphysics. His monism assumption (one system) is very useful and very modern-science-congruent and thus retained. His idealism assumption is quite unnecessary as is in fact is a materialism assumption also. All that is needed really is an “existen-ism” thesis (not to be confused with existentialism). Nevertheless “physicalism” is retained as the default common term or otherwise physicalists and empiricists might be confused or alienated.
The only point to my attempts in my view (apart from keeping myself amused) is if the philosophical system, the metaphysics in this case, is of a character I term “near empirical” or “meta-physical” in the sense of being just beyond the known “physical” (the known existent really) and thus heavily influenced by the most successful models of the hard sciences (physics, chemistry, biology) and also influenced by systems philosophy and systems science. With this method, the goal set by Peirce might just become realizable:
“The best that can be done is to supply a hypothesis, not devoid of all likelihood, in the general line of growth of scientific ideas, and capable of being verified or refuted by future observers.” – C. S. Peirce.
Although my metaphysical system outline is consistent (in my view), I have not found any significant way to link it back to economics (of any type) to generate even interesting speculations in that arena let alone testable hypotheses. In reading Bichler and Nitzan’s work I came to the conclusion (my view of their work) that they had solved the question of value theory in classical and Marxist economics by the radical procedure of annulling it entirely. That is they demonstrated that the nominal (money) is entirely disconnected from real value and that the nominal (financial) economy is not a reflection and not a measure of the real economy. Rather than try to explain their theory further I refer people to their book and papers.
I noted the clear shared attention to the problem of the real and the nominal in my amateur work and in Bichler and Nitzan’s professional work. However, we came at that problem from opposite directions and very different methods. As I said, I felt there was an investigative connection but I have not been able to develop and elucidate it. Again, this may well relate to the “inherent and disappointing limitations of metaphysics” I referred to above. I may have been barking up the wrong tree the entire time. 🙂
Ikon, “but I have not been able to develop and elucidate it.” You never know so try my melting pot…
“Being a new and emergent complex system it will demonstrate radical novelty.”. I like radical novelty – not enough of it imo!
Erenestine’s confounding question imo, ends up being trumped by “Is endless war, then, our fate? Or might society one day evolve beyond it? … the hidden laws of history itself.” Peter Turchin – Ultrasociety: How 10,000 Years of War Made Humans the Greatest Cooperators on Earth
Tuchin’s Ultesociety is both depressing and reassuring. Kings made by war, kings removed by war. Your endorsement of “a different way of thinking altogether, a totally new cosmology for the post-capitalist age.” is at once true and fatalistic, and depressing in the now and reassuring us in some far off future of a post capitalist age. We can only get to post capitalism via cooperation – or a war or revolution such that as you describe is a nullification of what we have, I only would agree to doing it over time after I could envision it and thought and believed in it – the highest of bars and religious territory without proof. Evolution for me please. I think by stating “The totally new “social cosmology” Bichler and Nitzan very rightly call for is not predictable nor even envision-able in many ways” makes evolving the only option as if I / we / society / economics etc can’t envision the change / future / model, we are left with the physics of biology -evolution and adaptation either by design, mutation, diffusion etc.
Ikon – “These theories enter into the system by changing the behaviors of human subjects, not by changing any fundamental laws of physical nature.”
Of course “we” are never going to change any fundamental laws of psychical nature yet via cooperation driven by competition, society “However, when it comes to socioeconomic phenomena, what we think and believe can and do enter into the constructions and emergent outcomes of socioeconomic phenomena themselves ” so for your proposition to change the social / capitalist comos in total, you answer your own questions by saying we just need to change what we think and believe. Imo via time and evolution.
And so that leads to the missing immutable law – time. As Turchin outlines you have about a 10,000 year time horizon to get where we are today. As we are creating knowledge faster and faster pehaps the trajectory will deliver your outcome in a shorter time frame. We may crack fusion and render energy comparatively free. A boon for societal cosmos yet time needed to diffuse allowing thoughts and beliefs to change.
But as Ernestine introduces religion, let’s say you were to somehow alter the thinking and believing around religion – in a broad definition also like “I believe in Capitalism ” – how long before you may change such a belief?
Judging by studies on social paradigm shifts you just have to get 25% to change their thinking and beliefs – yet the broad definition of “religious belief” in anything, will require a physics like proof, not 25%, and a demonstrated society (I only have to work one day and I get free power at no cost, but I now can’t envision what to do safely with it) to remove the last vestiges of “the foundational ontological and scientific fallacy of modern economics.” – as well as, law, politics and the percieved societal cosmos. Everyones ontology obliterated and replaced by the “new” ontology. A bit scary.
You also need to overcome this; “Steffen Mau does not simply demonstrate the distortions that occur when excessive reliance is placed on statistical indicators, but shows how the current mania for measurement and quantification eats away at social relationships and even our sense of ourselves.’”
Review – amazon – Colin Crouch, Emeritus Professor at the University of Warwick – “The Metric Society: On the Quantification of the Social”
Perhaps if you were to flesh out a time frame on your proposition, incorporate E O Wilsins writings combined with Turchin and manage to overcome what Steffan Mau states, envisioning with the help of Seshat (below) we may envision your vision. And Ernestine would not write those insighful questions in response.
I appreciate your efforts and writing, as without a contrast and a yearning we would not get anywhere.
And as I am not a worthy of a ontologies boot leather, I hope you can make something intelligible of the above response.
Finally you will find the link below a worthy base and both ontological and empirical data and method for your goals (I think and believe 😊) – a worthy resource and systemic tool for your endeavors I’d say… yet driving forward by looking in the rear view mirror pehaps???…
“”Seshat: Global History Databank
… was founded in 2011 to bring together the most current and comprehensive body of knowledge about human history in one place. The huge potential of this knowledge for testing theories about political and economic development has been largely untapped.
“Our goal is to test rival social scientific hypotheses with historical and archaeological data. Therefore, the Databank is systematically compiled with information about polities from around the globe. Our approach is essentially scientific and involves the following steps:”…
Ikon – and I appreciate a comment from you Ernestine on this…
… pehaps you might tackle wealth condensation first Ikon;
“Beyond Meat surges in value as shares hit US market ”
Ikonoclast and KT2,
I wish I could write as fast and use words with confidence as you do. Time permitting, I’ll try to find a few words over the weekend to a selection of items.
From Twitter, an insight to Australia’s innate denialism;
In 2007 former industry lobbyist and Liberal Party staffer Guy Pearse wrote High & Dry, a seminal book on climate politics under the Howard Govt. He identified 11 Australians who had worked to delay climate action. Brian Fisher was on that list. Here’s what he wrote….
My guess is that history will not look too kindly on the greenhouse policy work overseen by Brian Fisher at ABARE from 1996 to 2006. Fisher was undoubtedly responsible for some very good economic analysis relevant to the agricultural, resources and energy sectors.
However, as the exclusive provider of economic advice on climate change, ABARE has consistently pandered to the needs of the Liberal Party and the desires of ABARE’s emissions-intensive clientele. If you look closely at the ABARE’s greenhouse policy work, the truth is usually hiding in the fine print, or in the scenarios that the government chooses to ignore. Its work actually proves how affordable even deep, unilateral emissions cuts are for Australia, showing that by 2050 GDP would almost treble, wages almost double, and we would pay proportionally less on energy. This is true of the most pessimistic scenarios ABARE has been able to generate. ABARE’s research also indicates that the AP6 will not stop emissions doubling in the world’s largest emitting countries and that John Howard’s policies will see our…emissions rise by 70 per cent in the next few decades. Fisher’s great talent was to include the truth. But to assist to obscure it.
Time and again, results that Fisher presented in his reports to government, and the scenarios and assumptions behind them, lent themselves to misrepresentation by the Howard government. They routinely overstated the costs of cutting emissions, and they never factored in the financial benefits of action or the costs of inaction.
One can see how this affects calculations by looking at the 2006 report produced by Fisher’s UK counterpart, Sir Nicholas Stern. He put the cost of inaction at twenty times that of the action required to limit global temperature increases to 2 degrees. It is little wonder that the UK government is committed to cutting emissions while the Australian government is deluded into thinking it would collapse the economy.
The executive director of an agency like ABARE might normally be considered indirectly responsible for these failures. But Fisher’s role in ABARE’s greenhouse work was anything but indirect. He was the lead author on a host of ABARE’s greenhouse policy reports, traveled on Australia’s official negotiating team to UNFCCC meetings, played an integral role in interdepartmental committees, and worked closely on greenhouse policy with relevant minister and directly with the prime minister’s office, and was appointed as an IPCC lead author for the second and third assessment reports. ABARE’s greenhouse work has been the backbone of government policy, and Fisher was the backbone of ABARE.
Fisher’s support of the government’s policy lends weight to the argument that his involvement went well beyond frank and fearless advice and into the realm of advocacy, flavoured by his own views. He regularly made speeches applauding government policy rather than explaining it. He wrote op-ed pieces cheerleading the Howard government view. He had no qualms about giving speeches in support of the deny-and-delay greenhouse agenda at conferences organised by big polluter funded front groups like the APEC Studies Centre, Frontiers of Freedom, and the ICCF.
In 2004, along with four other ABARE authors, he openly collaborated with a host of greenhouse sceptics on a book published by the Institute for Economic Analysis and sponsored by the Exxon-funded ICCF. The first line of that article cited Ian Plimer, one of Australia’s best known sceptics – who disputes any link between the greenhouse effect and human-made emissions. It is hard to imagine that Fisher did not know that his research, public statements and collaboration would all be used by polluters everywhere to promote more denial and delay here, especially in the US, and around the world.
There was no shortage of praise for Fisher during my interviews with polluter interests, who were also ABARE clients. The Lavoisier Group cited Fisher as one of the only two crucial senior officials within the bureaucracy who were not part of the ‘surrender forces’. Some viewed Fisher as being at least partly motivated by strongly held personal views, and his 2006 move to become vice president of CRAI does nothing to allay this impression. One of my interviews with an AIGN insider who has known Fisher well for over thirty years described Fisher’s mindset:
He’s sceptical of the science and even if he isn’t sceptical of the science, he says if the government accepts that something needs to be done radically on greenhouse then basically it opens up public coffers to a whole pile of charlatans from the renewables industry or gas industry or even maybe the
Certainly, my research confirmed what many already believe: that Brian Fisher has had more influence on the Prime Minister’s greenhouse response than any other bureaucrat. Today he continues to defend that response, denying it has been a wasted decade, and (perhaps appropriately) works for interests that benefit from such a response.
I cannot re-explain my ideas in a short space so I must apologise up front for that.
My original post on this subject is not a fully worked out theory or system of thought. It’s a quick meditation on the difficulties we now face. Mainstream neoliberal economics has its economic ontology settled by dogma. I should have said that instead of attacking all economics with the same scatter gun. Against the endless, propagandistic barrage of neoliberal economics, we who think outside that particular gospel tent are left with the difficult problem of determining anew what is economically real, how it is real and how it interacts. These are basic ontological puzzles which lead all the way up to hard science puzzles and social science puzzles. If we wish to avoid simply raising up another dogma, another ideology, then we need first to develop a science-congruent ontology for economics.
The complex systems and open-ended emergence problems of our situation (as a globally inter-connected socio-economic system coming into conflict with real global limits) cannot be minimized. The paragraph quote below gives a feel of the complexities we face from a systems and emergence perspective.
“Understanding emergence along the lines of self-organization has become so ubiquitous the two terms have just about become synonymous. However, the usual connotations of self-organization result in a misleading account of emergence by downplaying the radical novelty characterizing emergent phenomena. It is this radical novelty which generates the necessary explanatory gap between the antecedent, lower level properties of emergent substrates and the consequent, higher level properties of emergent phenomena. Without this explanatory gap, emergent phenomena are not unpredictable, are not non-deducible, are not irreducible, and thus are not truly emergent. For emergent phenomena to be genuinely emergent, processes of emergence must accomplish the seemingly paradoxical feat of producing an explanatory gap while simultaneously maintaining some degree of continuity with the substrate level.” – Professor Jeffrey A. Goldstein.
This elucidation by Professor Goldstein can certainly be taken as word-model explanation for the existences and emergences of the types of issues and problems Lars Syll on the RWER blog has been referencing in his recent posts related to Keynes. I refer to dot-point ideas like;
1. Uncertainty vs. Risk;
2. Economic reality is not a ’nomological machine’;
3. Unknown unknowns;
4.’’Non-ergodicity” – The past is not projectible into the future
– A sample taken from the past doesn’t necessarily say anything about a future ’Population’.
I’ve been rightly criticized for throwing out the baby (mathematics) with the bath water (mathematico-deductivist reasoning based on false premises and false ontologies). Such criticism is entirely valid. In the careless rush of blogging I have indeed done this. I’ve had it pointed out to me that;
“(Your) critique of mathematical economics is not convincing, given that (you) used a mathematical object, which in the applied area is known as “search tree” (or decision tree), to illustrate the complexity of decision making under uncertainty. Furthermore, and perhaps more importantly, communication between natural scientists and economists is facilitated by the language of mathematics.” – Ernestine Gross.
To reiterate, this criticism is entirely valid. The real problem, defined more accurately, occurs when mathematics or rather mathematico-deductivist reasoning is based on false premises and false ontologies. When the premises are wrong the conclusions are wrong no matter how accurately they are derived mathematically. Essentially, I am arguing that we need to get our premises right, which in economics means getting basic ontology right (or as right as humanly possible).
I caricature the central dogma of mainstream neoliberal economics as follows:
“Free markets plus free trade will produce an endless cornucopia of justly distributed goods and services with infinite substitutions solving all resource scarcities.”
This isn’t too far from what most doctrinaire classical, neoclassical and neoliberal economists believe and assert. (Keynesians and others are different). Indeed, doctrinaire neoliberals or “economic fundamentalists” do assert precisely this and they are in policy ascendancy in most major economies around the world and have been now for some 40 years. Some disavow that these are their precise beliefs but it does define how they act in the praxis of applied economics. Praxis is what matters.
There are clear embedded ontological assumptions (and omissions) is this vision of economics. The environment (as a complex system biosphere of physical and living systems) appears nowhere except as vivisectioned “resources”. It is not made clear that the economy is a system inside a greater system, the biosphere, and dependent on it, materially and energetically. Analyses based on a scientifically correct ontology (to a very high degree of certainty) are thence impossible in mainstream economics: ruled out of court, out of analysis and out of calculation right from the outset.
The other key terms also contain embedded ontological assumptions which are demonstrably incorrect. Economic substitution, while a real phenomenon, is not infinite or infinitely elastic. Some requirements are non-unsuitable and will remain so. The human need for potable fresh water is non-unsuitable. It is now becoming clear that the need for biosphere eco-services may well impose limits to growth before raw resource limitations. We have not run of fossil fuels but we have run out of biosphere space for dumping CO2 safely. I could go on to critique the construction of private ownership and free markets; the ideas that humans are only selfish and only produce for others for selfish reasons and so on. But this is a blog post, not an essay or book.
We need to generate a scientifically supportable ontology for economics. This is not a new argument these days of course. The environmentalists, climate scientists and biophysical economists, to name a few, have all preceded me and the above two paragraphs at least are wholly derivative. However, the need to generate a scientifically supportable ontology for economics goes deeper. The next essential problem relates to the “real-nominal” bifurcation which Bichler and Nitzan (and other thinkers) have grappled with. The function of money and financial capital in the system needs to be better understood. The essential problem is that the assumptions that money measures value and that financial capital “mirrors” or “models” the real economy is a very shaky assumption indeed. I would refer people to the CasP (Capital as Power) project for insights in this regard. If money and (financial) capital do not objectively reflect the real economy (and I believe this case holds) then this has raidcal implications. The idea that money and financial capital calculations tell us anything real about the extant real economy has to be jettisoned. This in turn suggest radical solutions to the entire money / financial capital issue. The most radical solution, in the long term as an evolving solution, would be the abolition of money and finance capital as such.
One anonymous thinker online refers to money as “permission slips” to consume. Looking at money as permission slips is a better way to look at money, in my opinion, but we need to expand our understanding to take account of the fact that money in our current system is not just a “permission to consume”. To give a fuller list, It is all of;
(a) permission to consume;
(b) permission to out-consume;
(c) permission to deny consumption (by corollary);
(d) permission to destroy (environments, other people’s lives).
(e) permission to reorder society, production and consumption if you possess enough “slips”.
(see Bichler and Nitzan on the concept of “creorder”.)
Currently, money is idealized as a pure form of a number of things: as a pure form of justice, of entitlement and of rights. Part of the dogma of the current economic system is that money rewards are proportional to input to society, to the creation of “value”. Thus the distribution of rewards mediated by money is ipso facto “just”. Equally, the possession of large amounts of money (at which point it may be termed financial capital) gives one the right reorder to production, consumption and society, very possibly against the wishes of a great many other people. Money votes the order of society not people. More precisely a few people with a lot of money vote the order of society.
All of this indicates (I think) the need to reduce the power of money and financial capital to order society. Concomitantly, while doing that we could and should increase the power of science, democracy and moral philosophy to order society. The final evolution in the money story could be the abolition of money itself, hard as it might be at this stage of history to envision how that might work.
In practical terms, more laws to limit the uses of money and money instruments, to put upper limits on the individual possession of money (and fixed capital) and to set permissible and impermissible earnings ranges and distributions would be a way to work towards the goal of decreasing the power of big owners of money to “creorder” society and increasing the power of all the people to “creorder” their society.
Ikon; “The environment (as a complex system biosphere of physical and living systems) appears nowhere except as vivisectioned “resources”. It is not made clear that the economy is a system inside a greater system, the biosphere, and dependent on it, materially and energetically”…
“”Adding Feedbacks and Non-Linearity to the Neoclassical Growth Model: A New Realm for System Dynamics Applications
“Modelling of economic systems is traditionally associated with a mathematical formalism that has its drawbacks and limitations. This study applies system dynamics as a specific modelling technique that enables us to modify and elaborate existing economic models and improve them both from a theoretical perspective and for practical applications. More specifically, the Solow-Swan growth model is enriched by feedback and non-linearity based on its extension by the energy sector. The influence and role of renewable resources are considered in this enhancement. The developed model is tested in two different scenarios and utilizes sensitivity analysis as the primary tool. Acquired outcomes offer a new perspective on the economy–energy nexus based on real data and demonstrate that system dynamics can be successfully used as a modelling tool even in the theoretical economics as a traditional discipline.”
The role of Energy In Production
Search Steve Keen title abive as youtube video. He also has standard economic models appended with physical constraints and software to do it. You can put in your own scenarios and see outcomes without being a mathmatizer financilaizer or expert and still a valid conceptual base with which to critique from toward your ontology. Maybe!
I can’t handle a lot of words, as you know. So here are my further comments in response to your further posts.
1. I agree with you on neo-liberalism as practised during the past 30 years or more. It is dogma rather than a reflection of the progress in economic theory as well as empirical observations.
2. You have found the reason why I object to your general statement of ‘mainstream economics’ and therefore saved me many words.
3 . Your question on the relationship between ‘real’ and ‘money’ – what you call the duality problem – is an important one, particularly in macroeconomics. To be specific by means of an example, GDP (or GNP, it doesn’t really matter for my argument), is still sometimes taken as ‘output’. That is the terms are used as interchangeable. I don’t agree with this habit. ‘Output’ refers to quantities of physical things or some services that can be related to physical activities. But GDP measures the monetary value of transactions. This means, GDP can be positive even though nothing is produced (eg Output as a function of Inputs is zero) if I would say, as I do, that selling the same house several times during an accounting period results in zero output of housing while generating a positive GDP. Indeed, if the house is constantly on the market, being traded, then it is not even available for anybody to live in it. This is only one of the problems. Another one concerns the notion of ‘money’ and the role of the financial system. But I won’t go into this one here.
3. Environment, resource constraints, closed and open systems. I am not sure if my possibly cryptic comment will make sense, but I’ll try. You say we agree that the environment is finite. I agree. In economics we tend to say there is a finite resource constraint. In some theoretical models (eg general equilibrium models), this is recognised by having a finite number of “commodities”, with the interpretation that the last date is the end of the world as we know it. This representation does not do justice to the complexities of the environment, but it surely provides a point where interaction with natural science is possible on the conceptual level. The rest is technical and empirical – roughly speaking. For example, now the notion of sustainability is being made more meaningful by scientists working out and estimating the natural reproduction rate of natural resources and compare them with the usage rate. (I still can follow.) Now, the theoretical model of an economy with a finite life (finite number of commodities is a closed system. In your post you talk about an open system and you use the notion of a search tree (or decision tree) – which was very helpful. May I suggest that you cannot postulate a closed and an open system as the solution to the same problem. A closed system representation has the consequence that the environment is crucial for economics and in particular it is the ultimate resource constraint (not financial debt! I am not saying debt doesn’t matter but rather that debt becomes irrelevant at the end stage). However, from the perspective of an individual, the system looks like an open system because it is impossible to conceive all possible outcomes – it looks like a search tree with an infinite number of points).
4. Democracy and economics. This is an item which doesn’t directly follow from your further posts, but I find it convenient to introduce it here, given that you have often raised this issue. Have you ever read Adam Smith’, The Wealth of Nations? If not, I recommend you do. IMO, Smith describes how businesses, who try to make a profit, succeed only if they produce what people actually want (and can afford – something Smith wasn’t very clear on from my memory, but it has been made clear at the latest in the 1950s from theoretical models where at least one author, Gerard Debreu, claims and supports it with an extensive bibliography, has its intellectual origins in Adam Smith). This idea is IMO the link to democracy. Not everybody has to like what you want to sell, but a sufficient number of people must want to buy your product to cover your costs of production and make a little profit. Now, compare this idea with what we experience and examine the role of the legal construct of a corporation, including banks, legal companies, in a so-called ‘market economy’.
5. If I may allow myself a further comment. It seems to me your self-set task could be made a little easier if you would sometimes ask, what is the question to which you expect to get an answer from a particular theoretical model or argument. A critique of a theory on the grounds that it does not answer a question which you have but which the theory does not address is not valid. If you can’t find a satisfactory answer anywhere, then you’ll have do it yourself.
The current question now concerning me is this. Is money simpliciter the central problem with modern economics and we can we evolve a system beyond money? Where would this leave current economic theory?
According to some theorists, Marx predicted internal contradictions would bring down capitalism. This has not occurred to date. Instead it appears that external contradictions will bring down capitalism. I refer of course to the climate crisis, sea level rise, the sixth mass extinction currently under way and so on. Scientists with the United Nations have issued a report warning that global temperatures could reach an irreversible tipping point as early as 2030. Without a change in the direction of high-consumption capitalism it now appears a catastrophic crisis is likely to get under way as soon as the decade of 2031 to 2040. We now face a dialectical contradiction whereby raw Keynesian (and MMT) economics, money priming, though perhaps preferable to neoliberal austerity in the short term, would be inoperable in the mid term.
The idea that we can quantitatively grow our way out of trouble at this juncture is a non-starter. Hence, the idea that we could simply pump-prime extant capitalism (a mix of private, corporate and state capitalism) and over-produce and over-consume our way out of trouble is in contradiction with biospheric limits. I am not saying knowledgeable advocates of Keynesian or MMT economics are making this conceptual mistake. However, I think it is possible that a bowdlerized understanding of these ideas can arise among ordinary people, to the effect that it is thought that this one simple expedient, the freeing up of public deficit spending (money essentially) will solve all our ills and the capitalist machine, otherwise unreformed, can then roll on successfully and indefinitely like a perpetual motion machine.
The Marxists over at Monthly Review have putting considerable emphasis for some time now on the fact that Marx and Engels developed a “metabolic rift” theory. Today we might term that an “ecological rift”, though the term “metabolic” was prescient and accurate with its biophysical connotations. From the evidence, the claim that M & E developed a metabolic rift theory is not mere historical revisionism. That theory can be shown to exist in substantial and developed form in their works. It is consistent and logical that dialectical materialists (with some emphasis on the word “materialists”) would develop this concept if rigorous enough in developing conclusions from their researches and analyses. Marx studied the soil fertility crisis of the early to mid 19th C and the scientific work of the organic chemist Justus von Liebig. Of course, the term “dialectical materialism” was coined later but the essence of Marx’s thought is definitely of a dialectical materialist nature. Indeed, dialectics as systems philosophy and systems materialism is in essence a theory of radical emergence.
Why have I taken this detour to discuss “rifts”? The central point I would like to make is that we also need to be concerned about the “real-nominal” rift. It can also be termed the “real-nominal bifurcation” as it is by Bichler and Nitzan in CasP (Capital as Power) theory. A rift has occurred in the real world as the rift between capitalist production and the capacity of the biosphere to provide not just adequate raw materials but also bio-services. This rift is not sustainable and will collapse back on itself. Energy and order are taken from the biospheric or natural world system and built into the socioeconomic system (albeit in much different form). At some point, the energy and order differential (as a difference potential enabling the transfer of energy and order from the biosphere system to the socioeconomic system) will not be great enough to keep the two spheres apart. The socioeconomic system will collapse back into nature albeit back into a much disturbed, much changed and much more unstable natural world.
Rifts are also possible in our thinking and none is worse perhaps than the real-nominal rift. This real-nominal rift can be regarded as Platonic in origin. It begins its movement as an idealization of the real. Hence, the idealized idea is considered ideal-real, even more real than the real or hyperreal. Nothing exemplifies the hyperreal category better than modern money. It’s a purely nominal creation yet we hold that we can measure everything real with it and specifically that we can measure real value with it. Note that “real value” strictly speaking is an oxymoron, a contradiction in terms, when using money values to measure real values.) Our hyperrealist idealisation of money IS our central problem.
“In semiotics and postmodernism, hyperreality is an inability of consciousness to distinguish reality from a simulation of reality, especially in technologically advanced postmodern societies. Hyperreality is seen as a condition in which what is real and what is fiction are seamlessly blended together so that there is no clear distinction between where one ends and the other begins.” – Wikipedia.
I know there is much opposition to postmodernism in the realist and materialist camps. I share that opposition when and if variants of postmodernism assert that nothing at all is objectively real. But where it asserts (or could assert) everything is relative, everything is relational within a relational system theory framework, then this view accords with modern physics (as the hardest of the hard sciences) where all events and processes are modelled (with many striking successes) as occurring in a relational existence framework. We can see how the above Wikipedia definition of hyperreality can be applied to money. The money / finance system is held to be a simulation of reality. Money is held to reflect real values in its market operations. Finance capital is held to reflect real capital, plant and equipment, plus its ability, when mixed with labour, materials and energy, to generate income. The CasP project work of Bichler, Nitzan, Fix, Martin et al. refutes this proposition with extensive empirical evidence ( and I might add with a consistent scientific ontology). Finance capital does not reflect real economy reality, it orders it in both senses of the word order. It commands it and structures it.
“Hyperreality is seen as a condition in which what is real and what is fiction are seamlessly blended together so that there is no clear distinction between where one ends and the other begins.” Is this not a perfect description of the confusion of money and capital with the real in mainstream economics? What is real and what it fictional is blended together in social action so that we reify money and consider it real and interchangeable with the genuinely real. It’s a social instantiation of “realness” of course. Money is instantiated by a bunch of human made rules. These are made one way and could be made in many other ways. When the rules (the rules of capitalism and capitalization) run counter to fundamental natural laws, these rules sooner or later become non-operational.
Hence, while I agree that money is not neutral, that is to say it is not neutral in our current system, this is not to say that it is (a) objectively real in any way nor (b) that it is the only management or command method that can run an economy nor (c) that all real economy problems under the current system are amenable to “money solutions”. Money is only socially real. It is used as a distributed command system to run our socioeconomics (as opposed to centralized command systems). And “money solutions” cannot solve our real problems of “metabolic rift” or ecological collapse especially when they are intrinsically tied in the current system to endless growth and the endless stimulus of more production and more consumption in a finite biosphere system.
It is often implied that a capitalist economy is not a command economy. This is untrue. It is indeed a command economy, albeit a command economy of a particular type. No complex purposive system (one exhibiting purposive behaviour) runs without coordinating commands. It may run with a combination of a central command system plus distributed sub-command systems. This very much describes really existing capitalist democracy (RECD), as Chomsky terms it. Any move away from money commands and finance commands (which currently run large swathes of our socioeconomy) will be termed a move to a command economy by the opponents of same. It would be no such thing. It would simply be, in pure terms, a move from one type of command economy to another type of command economy. Currently, money and finance commands, outside those of government, come most powerfully from the possessors of large amounts of money and capital. They have the power to order and reorder society. Money, in the hands of a tiny number of rich people, “votes” the ordering of our society currently rather than the majority of people by forming it by more conventional political votes.
Given the unrealness of money and its lack of accurate reflection (mirroring or modelling) of the real economy and real environment, the only truly radical solution would be for socioeconomics to evolve emergently beyond the use of money. Money itself would need to be rendered obsolete. This is not easy to envisage currently and could not happen in a big bang manner (like say Sweden changing from driving on the left side of the road to driving on the right in 1967). Rather, we can seek to emerge this development over time by reducing the role of money and finance in societal decisions and reducing the role of market and money operations in distribution or allocation. The good thing, in my view, at this level of thinking is that socialist economic measures progressively applied could move us towards this end. Initially, radicals who aim to abolish money are not going to look different in practice from socialists. Eco-socialists in turn are going to find areas of agreement with Keynesians and MMT advocates provided the stimulus advocated is qualitative change, not quantitative growth, and is heavily directed to eco-sustainability ends.
To save you wading through my long, wordy posts, let’s restrict the discussion (if possible) to science and mathematics.
Wikipedia tells me that: “The basic axiom of quantity calculus is Maxwell’s description of a physical quantity (measure) as the product of a “numerical value” and a “reference quantity.”
Quantity calculus is the standard term, although a better term might be “quantity algebra” (unless calculus is specifically utilized(?)). Quantity calculus is based on the concept that a physical quantity, unless it is dimensionless, has a value equal to the product of a numerical value (a pure number) and one or more units.
A new-ish paper called “Quantity Calculus, Fundamental Constants, and SI Units” by Barry N. Taylor Scientist Emeritus, National Institute of Standards and Technology, Gaithersburg, USA, tells us;
“A paper we published in this journal (Journal of Research of the National Institute of Standards and Technology) in 2011 shows in detail how, with the aid of the quantity calculus, the current International System of Units (SI) can be viewed as being founded on seven reference quantities, now called defining constants. The motivation for that paper was the likely adoption in the not-too-distant future of a revised SI (referred to as the “new SI” at the time) explicitly based on seven defining constants, three of which would be the same as for the current SI but four of which would be different. Sufficient progress has now been made in the required experimental work that such a revised SI is now expected to be established by the 26th General Conference on Weights and Measures (CGPM) when it convenes 13-18 November 2018 and which will come into effect on 20 May 2019, World Metrology Day.”
(Yes, I resisted my spell checker’s efforts to change that to “Meteorology”.) 😉
Money is a numerical value of notional type. Its formal designation might be in dollars (for example). A dollar is not a reference quantity. It is not one of the seven reference quantities in the International System of Units. Neither are “Utils” or “SNALTs” reference quantities. These are claimed, by neoclassical economics and Marxist economics respectively, to be real quantities to which dollars refer. However, utils and SNALTs are not real reference quantities nor can they be derived from real reference quantities according to Bichler, Nitzan, Fix et.al. (See the Capital as Power project.)
On the face of it, this posits strictly that any quantity calculus in economics must nowhere refer to dollars or any other monetary unit.
The issue of dimensionless quantities is perhaps a little more subtle. You know I am not a mathematician, albeit I can do arithmetic and simple algebra. I assume that a dimensionless quantity in economics if derived via an equation where money units (themselves not reference quantities) cancelled (as denominator and numerator), then in this case, the ratio could still not be regarded as a genuine ratio of reference quantities and hence not a true or proper dimensionless quantity in scientific or quantity calculus terms.
However, as I am not a mathematician I an open to valid corrections on these issues.
“According to some theorists, Marx predicted internal contradictions would bring down capitalism. This has not occurred to date. Instead it appears that external contradictions will bring down capitalism. I refer of course to the climate crisis, sea level rise, the sixth mass extinction currently under way and so on.”
It seems to me those theorists (as well as Marx, it seems), like neoliberals (naive market people) and MMT people, treat ‘the economy’ as separate from nature (ecosystem). It may have been the consensus view in the 19th century but it certainly is not it since the 1950s.
Are there people who theorise about what Marx wrote? Why don’t they just read his work?
Marx and Engels do NOT treat the economy as separate from nature in their full works. However, it’s true that doctrinaire Marxists have done so, especially but not only Soviet Marxists. We must remember that Marx himself said “I am not a Marxist” in response to the bowdlerization of his work by followers in his own lifetime. I agree that naive market people and naive MMT people treat ‘the economy’ as separate from nature (ecosystem or biosphere).
You write, “It (the economy existing separate from nature) may have been the consensus view in the 19th century but it certainly is not it since the 1950s.” I assume you mean in higher, objective, academic, theoretical and analytical economics. I accept this statement, to a point, and it is a good thing in itself. However, we have to ask why this view was not properly operationalized in praxis, meaning in “Really Extant Capitalism and Democracy” (RECD) as Noam Chomksy calls our current mixed economy system. The Chicago School, the Friedmanites, Reganites and Thatcherites took over; in a word the neoliberals.
One has to wonder why better theory fails to worse theory in terms of which theory gets to control or manage the real extant socioeconomy. Of course, that’s worth a shelf of books in itself and we will all have our hypotheses. This post will get too long if I start expounding at length on mine. Suffice it to say that I hold that there are foundational ontological errors in standard economics which fundamentally open it to going astray. The real-nominal bifurcation is the problem (and it has to do with money and finance capital). I do wonder if your analytical economic models eschew money and finance. That would be interesting to know because in one purist sense they should do so to be scientifically analytical and to avoid the ontological contradictions induced by the real-nominal bifurcation. This is notwithstanding the fact that in our RECD system, with much management of resources instantiated in the money-finance “over-system”, money and finance are in fact not neutral. In that case, we would need to begin asking: How can pure theory assist impure practice?
“Are there people who theorize about what Marx wrote? Why don’t they just read his work?”
In one sense, that would be a bit like asking in 1905, “Why is this Einstein guy theorising about time and motion? Why doesn’t he just read Newton’s work?” The questioner has made the mistaken assumption that the Newtonian theory of time and motion is a fully settled and complete theory and there is nothing to add it or revise in it.
In another sense it fails to note that Marx’s work was unfinished in many ways and various notebooks and some lesser works were not publicly available for a very long time. Indeed, IIRC, some were suppressed or hidden away in Soviet archives for an even longer spell. This was because these monographs and notes contradicted the doctrinaire Soviet interpretation of Marx.
A third point is that geniuses need interpretation and explanation so that ordinary folk can understand a bit of their work. I certainly can’t understand Einstein in the original. A fourth point is that geniuses developing a new theory usually run through several proto-theories on the way. Some are discarded, some are partially re-worked into the finalised theory and some actually contradict the full theory and exist as awkward codas and side-notes.
An example of an awkward side note is “The fragment on the machines” in the “Grundrisse der Kritik der Politischen Ökonomie”. Taken literally (albeit it is fairly difficult to follow the convoluted reasoning) this passage debunks the standard labor theory of value on which Vol 1 of Das Kapital depends. In the fragment, Marx essentially realizes that eventually automated machines could produce all value and human labor would form no part of it. Marx worked dialectically as we know, and after he started using labor theory of value to justify sociliaist theory, he started to realize objections to the labor theory of value itself. Of course, that was extremely inconvenient to him. I am not sure of the sequence of his realizations but he did die with his intellectual life work unfinished. If he had had another 10 years of life with a good mind he might have re-configured some of his central theories.
The hijacking, co-option and bowdlerizing of Marx’s work by doctrinaire Marxists (and later Communists) certainly marred his legacy. It’s the same problem that the better side of conventional economics faces. It claims and no doubt has to some extent, a better theory than the extant FUBAR (Fouled Up Beyond All Repair) situation. The worse or even obsolete aspects of conventional economics have been raised up to walk again (hence J.Q.’s invocation of “Zombie Economics”). There’s a great black irony in all this, of course, as in the historical progression we got Zombie Marxism and then Zombie Conventional Economics. Perhaps the “good” theorists should stop theorising as their work will always be ruined by popular misunderstandings. But we cannot do this either as it would leave the field entirely open to the bad theorists.
Ikon, I doff my hat to your reply B.
Regarding A, you may recall I referred to a model by Roy Radner (mid 1970s) on several occasions, primarily in discussions related to the GFC. This model does not deal with all problems related to banking and finance. However, it shows clearly that when financial contracts are introduced into an economy in addition to physical things (‘commodities’) and there is repeated trading, then something changes, relative to an economy where only physical things are traded, even when every actor is behaving ‘competitively’. So, this suggests to me, having a policy for the financial system that relies on competition, isn’t going to work well.
I am afraid I am getting time constrained. Can we continue our conversation some time in the future?
I understand that you are time constrained. Reply when you can. This below got lost in the Hazlitt thread but it contains questions which really belong in this thread. As I say, reply if and when you can. You’ve already helped my understanding considerably.
Copied from the Hazlitte thread;
I refer to your words;
“… in that research program, which Debreu called axiomatic, there are only 2 items in the description of ‘an economy’ which are taken as ‘axiomatic’, namely individuals’ preferences (leaving open how people get them) and finite natural resources. Everything else is open for investigation – what happens if another part in the description of ‘an economy’ is replaced with a different assumption.”
That looks empirically and analytically entirely supportable to me. I am particularly impressed to note that money and markets are not included in the “axiomatic minimum” if I might call it that. Note, my being even able to formulate those two sentence-thoughts owes a crucial amount to your good self via our discussions and arguments in this blog over some period of time.
I imagine in turn that what happens when money and markets are added to the “axiomatic minimum” is where matters get really interesting. Of course, money and markets should only be added incrementally and mathematically (again I owe this insight to you if you agree it is a correct characterization) commencing first with the very simplest possible instantiations of “money” and “market” possible. (Whereas our current economy has multiple instantiations or extant forms of money-like instruments and of markets). If I look at the “analytical economics” program from this angle and if I have characterized it correctly it looks like a very complex but potentially fruitful research program, analyzing matters from the minimum grounds up.
Let me know if the above makes sense or needs correction from your point of view. Thanks.