A new sandpit for long side discussions, conspiracy theories, idees fixes and so on.
To be clear, the sandpit is for regular commenters to pursue points that distract from regular discussion, including conspiracy-theoretic takes on the issues at hand. It’s not meant as a forum for visiting conspiracy theorists, or trolls posing as such.
John Quiggin 
I repeat here some points I made on the MMT thread. These points relate to my continued “campaign” for conventional economics to critically examine its own (implicit) ontology. I’ve hoped for some time to get this debate going on this blog.
I admit I am still struggling with some quite basic issues in economics but I feel the discipline of economics itself is also struggling. This is particularly so because economic modern economic debates signals acutely the need for an answer to how the real and the nominal interact: and even for an answer to what the “real” and the “nominal” actually are. Economics looks in the mirror and if honest must ask itself, “Am I a prescriptive discipline or a descriptive discipline?” The answer I think is “both” which makes it an especially difficult discipline.
What we particularly need to do in economics, I think, is sort out the prescriptive and descriptive elements and such a sorting is not easy or neat when these elements continually and complexly interact. Specifically, they interact in a complex systems feed-back fashion. This leads us to the real economy / financial economy debate or divide. We could call it the real economy / nominal economy debate. Using the terms real economy / formal economy would make sense ontologically (as in real systems and formal systems) but that unfortunately runs into a definitional problem since the term informal economy means the illegal and/or un-taxed and unregulated part of the economy and formal economy thus means the inverse of that.
If we are wondering about the real and the nominal and how they complexly interact, I think we have arrived at a a very significant ontological juncture. Certain ontological problems in economics have previously been side-stepped because of their intractability and specifically because economic ontology (like religious and ideological ontology) shades off into moral philosophy and metaphysics, even speculative metaphysics. The applied sciences, say engineering and medicine, do not have that problem to anywhere near the same extent (except at one end of the spectrum for medicine). The ontology of engineering is “settled” by physics. The ontology of medicine is “settled” at one end of the spectrum by physics, chemistry, biochemistry and neuroscience but it is still contested or contestable at the other end in psychology and psychiatry. Of course, by “settled” I mean here not absolutely settled but adequately settled to a workable degree (not precluding further knowledge progress) such that the applied sciences have a known arena where discovered scientific laws and developed disciplinary principles and practices operate dependably; this being so because more fundamental existents and their properties, plus the causes which impel and the effects which flow from properties and from properties interacting, are known to a dependable and manipulable degree.
Side-stepping intractable problems is a pragmatic response which can and does permit progress. At a given state of knowledge we side-step intractable problems if there is a longer, harder way which yet leads to our goal or at least to a goal-approach which satisfices. It is my contention that “conventional” economics has side-stepped what were intractable ontological problems at a lower stage of scientific and technical knowledge historically and it pragmatically improvised to satisfice; although who gets satisficed and who gets “screwed” (unsatisficed or de-satisficed) is a power question with ideological and moral philosophy dimensions and even security and military dimensions for that matter.
Scientific progress has been accelerating rapidly since the Darwinian and Einsteinian revolutions and has accelerated much more again post WW2 and especially with the computer and instruments revolutions since about the 1960s to1980s. Economists who are of my age of 65 and then plus or minus 10 years probably (remembering I am not an economist) were educated into economics, and other disciplines they may have taken, before some of the fruits of these last revolutions arrived. I am thinking particularly of complex systems science and information theory, the latter meaning both computer information theory and general information theory. These disciplines have moved the boundary between “empirical ontology” and metaphysical and speculative ontology very considerably. I don’t feel confident that all economists in the age group I mention are quite up with this boundary shift although this might be an assumption of some temerity. I think this boundary shift has radical implications for an (ontological) reappraisal of economics.
It is quite clear that empirical ontologies as well as metaphysical ontologies can be developed and thus do exist and have pragmatic value. Some ontologies refer to the real like the Relational System Model of modern physics. Some ontologies are formal like those of computer systems science. In each case the ontology “settles” and defines a set of base existents and their properties plus interactive properties to a given degree of resolution (empirical ontology) or definition (formal ontology) with the goal being ultimately pragmatic; discovery of the real (including the socially real) and manipulation of the real (including the socially real) to human ends.
I don’t think economics as a discipline is immune to the need for a (at least partly) “settled” ontology which;
(a) deals with the real (empirical ontology);
(b) deals with the nominal (formal ontology); and
(c) deals with the ontology of interactions and feed-backs between real systems and formal systems.
There is a way, I contend, to fuse empirical ontology and formal ontology. To sketch it ever so briefly, the method lies through Physics Relational System Monism to Complex System Monism incorporating evolution and emergence (in the form of a priority monism ) and utilizing the insights of information theory and information science. A key deduction in the philosophical “logic chain” implied by the priority monist premise is that since all sub-systems in a real monistic system (the cosmos) must also be real then a formal sub-system in the real monistic system is also real. This leads to the seemingly paradoxical assertion that a formal system is a real system. It is indeed a real system but one with special characteristics. Its operations while real-system instantiated are informationally stored and transmitted (in patterns of matter or energy). Data and the capacity for data operations are stored and enacted in physical media, including computer components and human brains as media. A salient point is that the information content (which exists in patterns in media and which is capable of influencing / producing other real patterns and structures) in these systems is more important than the matter or energy content. This might almost hold as a definition of information efficiency. An efficient information system is one where the information content and/or transmission rate is high relative to the matter/energy requirements.
Where this theory leads, in part, is to a workable ontological delineation between “fundamental laws” as in the discovered laws of the hard sciences and humanly generated “rules” as in legal laws, regulations, customs and mores. The human agent (the human being) is the key component in all this of course. As a human agent he/she possesses some autonomy (which as a concept would be need careful and extensive definition), a physical body actuated by servos and servo systems (muscles, nerves etc.) and finally and importantly a brain, which among its other capabilities, encodes and decodes information and the rules that the information as instructions (algorithmic and heuristic) can encode. The human agent may then obey rules or disobey rules with the key proviso than a human cannot obey a rule if that would entail breaking or ignoring a fundamental law of nature discovered, or yet undiscovered, by the hard sciences (physics, chemistry and biology).
Key questions for economics are these. What in “conventional” economics are truly laws? What in economics are “mere” rules? What parts of the moral philosophy presumption for the efficacy of private property as a personal and social good (to use that example) can be related to fundamental laws of nature and what parts can be related to mere human prescriptions as human rules? Then, what empirical effects, from effects on the well-being or welfare levels of all social participants (effects especially as differential or unequal effects) to effects on environments and the biosphere can we note from different rules and rule sets and different variants of rules and rule sets for private property and other economic rules and institutions? What factors exogenous to the limited rule inputs we are examining could be affecting the outcomes?
To sum up, or else this post will become much too long, I think conventional economics’ bias is to think rather too often that it has found laws (as in fundamental laws) when rather it has “merely” found some empirical and some axiomatic outcomes of its current prescriptive rule set (as per my definition of rules above). It is certainly the case that humans obeying humanly created rule sets can generate both axiomatic and empirical (fundamental law) outcomes. But I should leave it here or this becomes too long for a blog. Any input and discussion would be welcome.
Disclaimer: I am merely pursuing autodidact investigations. This is not preparation for any course, examination or formal thesis. Nor is it part of any professional work with even the remotest chance of being published. My investigations are purely lay and amateur. In the highly unlikely event anyone uses any of my ideas (in the further highly unlikely event that any are original and useful rather than derivative and/or useless) or quotes my words in any more formal context than a blog, I would like an acknowledgement. Beyond that I assert no copyright and would not pursue the issue in any way.
I will attempt to take this discussion a little further to see if I can get a bite.
Mention of “the political” must be made when it comes to economics. It is clear that conventional economics in theory and in praxis, is a political lever, whatever else it is too. When one person writes that the problem of conventional economics is in its ontology and another that it is in its politics, there can be a tendency to view these as mutually exclusive statements or competing theories. However, there is no reason that both cannot be true. False ontologies are part of every myth system and every ideological system. False ontologies serve a purpose both rhetorical and propagandistic. None of this is to say that ontologies with some genuine accuracy are easy to develop. The hundreds of years of progress of physics, which project is still ongoing, is testament to that.
There is a common saying that “A lie can travel halfway around the world before the truth has put its boots on.” The provenance of this saying might be from Jonathan Swift who wrote:
“Besides, as the vilest writer has his readers, so the greatest liar has his believers; and it often happens, that if a lie be believed only for an hour, it has done its work, and there is no farther occasion for it. Falsehood flies, and the truth comes limping after it; so that when men come to be undeceived, it is too late; the jest is over, and the tale has had its effect.”
Lies are easy to invent. False ontologies, which are superficially plausible, are relatively easy to develop. The reason “truth” (as homomorphic correspondence of model to reality) is “putting its boots on” is that it has to investigate real matters, often painstakingly. Lies can simply be made up. A plausible lie or lie-system, often commences with a kernel of truth which it then embellishes and elaborates upon; building a great inverted pyramid of systematic and connected lies resting and precariously balanced on one tiny point of truth in contact with the ground of reality.
The need for private property is a case in point. Let us consider some wisdom from Paracelsus.
“Alle Dinge sind Gift, und nichts ist ohne Gift, allein die Dosis macht dass ein Ding kein Gift ist.” – Paracelsus.
Translation: “All things are poison, and nothing is without poison, the dosage alone makes it so a thing is not a poison.”
This is often shortened to “The dose makes the poison”. As this is true in toxicology could it not be true in the matter of private property? From the point of view of complex system monism (priority monism of the cosmos and this world) it might be expected that certain principles hold true at multiple levels of reality in something (the cosmos) which is complexly connected and thus “shot through” and interconnected by the same fundamental laws. This would imply a fractal-like repetition of the validity of the principle that “the dose makes the poison”. It might apply, one can hypothesize, physiologically, then psychologically, then socially and then socioeconomically.
As Charles Sanders Peirce states: “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.”
We can note the need of an individual for individual autonomy or freedom. This is natural and necessary for a feeling, thinking being with a body and mind to “dispose”, meaning here “to place or set in a particular order or arrangement or to set into particular types of motion”. The individual “disposes” his or her body and mind in this sense to meet needs physiological, psychological and social. We can note also that a man or woman in society is a tool-making, artifact-making (and using) being and that the entire society they live in also demonstrates this characteristic. To survive and move forward, in time and in personal development, a man or woman in a complex society needs tools and artifacts, which means possession and/or access to tools and artifacts. And it is clear that access to tools and artifacts multiplies our power potential, personal, social and environmental, along both benign and malign vectors.
The need for personal property or at least easily accessible social and public property arises from these anthropological facts. A house which a family shares is in everyday practice social property within and for that family. They share key spaces and utilities but may also have personal spaces (bedrooms) where they have more personal or special-bond privacy, comfort and space. Yet, at the formal economic level in our current system, the paired parents (not the children) might legally-economically “own” the house jointly or a single parent might own the house or it might be a rented house. Yet, other personal property is of a more private and exclusive nature, or most people wish it to be. As one person wrote in a blog topic about socialist ideas, “I do not wish to share my toothbrush”. People need a certain amount of exclusive space and certain amounts of exclusive or near-exclusive tools and artifacts to survive-ably, live-ably and comfortably dispose and develop themselves and those of concern to them.
The need for personal property thus arises ineluctably in a society, in a civilization. This real anthropological fact is the point upon which the inverted pyramid of bourgeois or capitalist private property is constructed, both ideologically and in praxis. The moderate dose of personal property which is clearly efficacious and necessary for each and all is taken to be a principle capable of endless enlargement to any scale without toxic effects on other persons or the natural environment. Relative amounts of personal or private property as well as absolute amounts clearly play into this equation.
All this indicates, given the extant empirical data on our modern trajectory, that the principle of the carte blanche, open-ended right to private property is flawed. Built on a point of truth it is expanded into a gross and bloated falsehood. The dose makes the poison. Too much of the needful is toxic. This further indicates that while this principle appears incontestable scientifically and ontologically, the discovery of the right doses of private property and the right doses of social and public property need to be determined empirically and they will vary according to exogenous and even quite likely endogenous factors and conditions.
This problem is encountered in medicine, in acid-base physiology for example, where the biochemical mathematical models might not be sophisticated or complete enough yet and/or all the patient data available is not comprehensive or timely enough (in a crisis) and/or the ontology (the existences and interactions of the fundamental existents applicable to the probelm) is not adequately elucidated yet (and research continues). In this case the answer to the question “What is the right dose?” is “Enough.” This answer is perfectly empirical in spirit and application. It is known what will move the acid-base balance. It is not known, except perhaps approximately and heuristically, what amount will move the balance into the desired zone in some cases.
The issue of private property must be approached in the same manner. it is clear to all but the invested, self-interested possessors of stupendous amounts of private property (and the power that wealth converts into), clear to all but the ideologues and their payed theorists as “hired guns” that the amount of wealth concentrated today into a few hands is toxic to the masses, to equity, to efficiency (the inequitable society is inefficient in its use of resources) and toxic to the environment. The empirical data on these issues are now becoming undeniable.
Ikonoclast: I’d like to help you get your discussion kicked off – if we can find something we can discuss. As a blatant attempt at that: All that I can find believable in all of economics is nominal GDP (& even there, I’d have more trust is they’d use more of the actual available data & less sampling).
Ed Zimmer says AT 7:00 AM
“I’d have more trust is they’d use more of the actual available data & less sampling).”
Ikon & Ed, hope this isn’t a derail at the start, yet as Ikon says, a bit more agreement by economists and a tighter link to “complex systems science and information theory” will certainly produce more trust, and a better outcome for humanity.
Yet economics is not a science as shown via…these two infographics – the spread of opinions shown, allows a politician, covid commissioner or think tank to choose whatever theory, prescription and expert needed for requied analysis and outcome. I find the spread of opinions, and the fact that I even stoop to calling them opinions, disheartening.
As can be seen, the opinions range from neoclassical to ubi.
See for example Rana Roy’s comment in ^1. “Insofar as the larger macroeconomic aim here and now is to support and raise aggregate demand, the best and fairest way to do so – best in terms of allocative efficiency, fairest in terms of distributional equity – is for the Australian Government to provide a flat-rate “Universal Pro-Recovery Bonus” to all residents of Australia, and which could perhaps serve as a proto-type for a “Universal Basic Income” in the future.”
As I said, a wiide range of views.
How might we get economists to narrow their prescriptions? And as Ikon says, involve complex systems science and information theory paradigm to better align economic prescriptions.
^1. theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292
^2. fivethirtyeight.com/features/the-economists-in-our-survey-are-slightly-more-hopeful-than-they-were-two-weeks-ago/
I had a debate with Wylie Bradford on the MMT thread. We got cross with each other and then cooled down; while agreeing to continue to disagree on certain topics.
One topic at issue was the notion of “value” in economics. When I attacked the theory of value in conventional economics W.B. told me I was attacking a straw man, at least in the way I was doing it. Economics had long dispensed with the simplistic theory of value view I was attacking, said W.B. Economics had moved on to the ordinal rank-dependent expected utility approach (or perhaps the state-contingent approach or variant). I don’t recall W.B.’s words precisely without checking. Either way, we did not complete the debate. This is understandable. When ontologies differ (a prior assumptions, derivations or discoveries about existents fundamental to a discipline) people cannot agree on the real grounds of the debate. Unless they can agree to take the debate back into ontology, the debate tends to get broken off at that point by at least one party.
This is one area where I think conventional economics pulls a motte-and-bailey debate maneuver. Indeed, I thank J.Q. for introducing this concept to me in the context of economic apologetics. I am tempted to say like Shylock in The Merchant of Venice , “A Daniel come to judgment! yea, a Daniel!” in thanks for J.Q. highlighting the tactic. Conventional economics uses the tactic as well as MMT.
How often are we told by politicians, popularizers of economics and business economists that the economics of money and markets helps us find (implicitly valid) relative values and via these relative values we achieve at least three things;
(a) market clearing returns on goods and services;
(b) just rewards for effort, innovation and indeed ownership; and
(c) efficient use of resources.
This argument is experienced as a bait and switch or motte-and-bailey by the layperson who is promised the above in politicized, popularized and bowdlerized economics but then goes searching for more answers at a more sophisticated level, as expounded by conventional academic economists, They tend to say, “Oh we don’t believe or propound that simple picture any more.” But hang on, if you (the orthodox academic economists) are still “in the tent” and “playing ball” (to mix metaphors) with the dominant players and game and accepting some overlap of concepts and parameters, how can this be claim be justified?
Do prices effectively clear markets? Well sometimes but incompletely and not always. If prices do not reflect relative value accurately, or at all, how can they be held to be just? If we destroy the biosphere in unsustainable ways according to market dictates how is this efficient? There are may kinds of efficiency after all. On a car road trip there is time efficiency, fuel efficiency, mechanical endurance efficiency etc. etc. Which kind of efficiency does market economics promote (if any) and is it the most important efficiency or the best collocation or compound result of a set of efficiencies which are important? These are important questions. Conventional economics seems torn between whether it wants to retain the theory of value in a classical form or rehabilitate it in some arcane academic way.
I feel what is at stake is orthodox economics’ attempt to maintain a facade of being a descriptive discipline rather than admitting it is a prescriptive discipline. If the descriptive discipline “emperor’s clothes” are lost then all claims to objectivity, science and validity of mathematical rigor, not to mention moral and ideological justification, go out the window with them. It’s a great loss of status and income in a sense, though academic economists are intelligent, educated and skilled enough to still make good money in a dozen ways. That’s one reason I don’t feel too bad in attempting (Quixotically) to give them what I imagine is a hard time. It’s not that at all. It’s a (still Quixotic) attempt to say, “Come on, leave the dark side already. Leave it properly and completely. Have no truck (from the French troquer, meaning ‘barter’) with any of its theories.”
We now closely approach the asymptote of capitalism; an historical juncture where capitalism will collapse of its own contradictions. It has turned out that its contradictions were not internal but external, that is with the environment. This event (a rolling collapse unless avoided by other than capitalist measures) will be the complete refutation of capitalism and all of its theory. Be a theorist on the right side of empiricism and history. That’s what I’m sayin’.
Ed Zimmer,
Thanks, you got the discussion kicked off. I have strong doubts about nominal and even so-called “real” GDP. Such numbers mean almost nothing. They simply do not equate to anything real except except to social wealth-power to consume and manipulate in the socioeconomic realm. They don’t equate to value or utility or the hedonic (despite heroic efforts) or efficiency or ecological sustainability. Outside the social, nothing real is reliably referenced.
See;
“The Aggregation Problem:Implications for Ecological and Biophysical Economics” – Blair Fix.
Click to access 20190100_fix_the_aggregation_problem_bpearq_preprint.pdf
“Abstract
This paper discusses the dimension problem in economic aggregation, as it relates to ecological and biophysical economics. The dimension problem consists of a simple dilemma: when we aggregate, the observer must choose the dimension of analysis. The dilemma is that this choice affects the resulting measurement. This means that aggregate measurements are dependent on one’s goals, and on underlying theory. I explore the consequences of this predicament for ecological and biophysical economics. I discuss the many problems of using ‘real’ monetary value as the dimension of analysis. And I highlight how the dimension problem undermines the practice of seeking ‘optimal’ policy. Although there are no solutions, I discuss ways that ecological and biophysical economist scan deal with the dimension problem.
Keywords: aggregation; dimensions; real GDP; sustainability indexes; optimal policy”
I’ve never seen a conventional economist even admit that he or she understands this issue. I know they are intelligent enough to understand this issue. I know most of them even know what ontology is as a subject area (meaning all of formal, empirical and metaphysical ontologies; what they are and how they differ each from each. Yet, conventional economists studiously avoid debate on this issue. It’s because deep down they know (I believe) how genuinely shaky are the ontological underpinnings of their discipline.
Ikonoclast: And I maintain that NGDP is the sole reality in economics. I’ve had businesses in hi-tech manufacturing, consumer retailing & real-estate construction & I know that the financial data that i was required to submit from each business, if compiled along NIPA lines, yields an accurate picture of our production & consumption economy – which I’ll further argue is the only essential economy. In the article you referenced, Blair was (rightfully) criticizing RGDP.. (I know his work & his thinking as I’m one of his supporters.)
I argue that we need much less “complex systems science and information theory” – it’s doing nothing but adding to the already opaque blinders. I added a response to Alonso Kihano’s 6/10 rwer post (where he suggested we need to go back & start from the beginning) this morning that I’ve copied below:
“To start from the beginning, go back to my one-paragraph description of a nation’s economy – http://tenonline.org/magic-money-tree.html . That’s 6 logically-consistent statements that show the role of government – show that government could support its people even if no businesses stepped up to the plate (but why they would, voluntarily, if government simply allowed them to) – that the whole FIRE economy (except the construction industry that’s already included in GDP) is superfluous to a healthy national economy – that the flow of currency (& the world’s perception of the stability of that flow) is all that’s important to such an economy – that wealth and its accumulation is pretty meaningless – and that GDP is all that’s needed to properly manage the economy (just as one would manage any other business).
That’s as KISS as you can get. Start from there and all the problems of our economy (including those that Ikonoclast outlined) come into focus and we can start asking what are our options for correcting them and possibly coming to some consensus that could be viewed by the public in clear, concise, understandable terms that might then build consensus there. That’s likely out only tenable path forward.”
Ed Zimmer,
I think I can safely assume that “NGDP is the sole reality in economics” is rhetorically hyperbolic. 😉
Of course we both know that there are real resources, real people, a real economy, legal laws, regulations, institutions and a financial economy. I will answer on the basis of this understanding.
I believe you are talking of NGDP targeting. Professor John Quiggin has himself proposed this. The quote below is from one of his posts on this site.
“The first step should be a re-ordering of the Reserve Bank’s objectives to focus primarily on full employment rather than price stability. One way to implement this would be to target the level and growth rate of nominal income. My suggested target would be a 7 per cent rate of nominal growth, ideally made up of 3 per cent real growth* and 4 per cent inflation. The idea of the nominal target is that, if real growth falls below the target, the Reserve Bank loosens monetary policy and accepts higher inflation.” – Prof. J.Q.
It’s a way of managing the extant economy (Really Existing Capitalism or the Really Existing Mixed Economy) without changing anything else more fundamental. From what I know about about it (not a lot but I would take J.Q.’s advice on it) it sounds like a good idea. It is realistic too in the sense you mention.
“Start from there and all the problems of our economy (including those that Ikonoclast outlined) come into focus and we can start asking what are our options for correcting them and possibly coming to some consensus that could be viewed by the public in clear, concise, understandable terms that might then build consensus there. That’s likely out only tenable path forward.”
I can see that such a plan is realistic. And indeed in that passage you move on to an implicit acknowledgement that there is a set of further realities in economics and political economy. You mention the need to get a social and political consensus to permit further progress. On that point I would raise more than a quibble. We will never get a consensus if a consensus means that all agree. The elites don’t agree and the elites will not agree. They have demonstrated this over and over again. This is crucial as the elites (the wealthiest 1% or the wealthiest 0.1%) control the agenda. Research has shown that the majority of voters (in the USA) want the sort of practical, social and economic policies that you, I and John Quiggin would all agree on in very large part. But the elites with vast quantities of political donation monies essentially buying or controlling the votes of representatives, WILL NOT ALLOW IT. Apologies but the caps for emphasis are necessary.
There are other things which need to change apart from implementing NGDP but I would agree it was a start. I would rather see the poor’s glass a tenth full instead of completely empty. I can say this from a mere enlightened self-interest perspective. We’ve already seen that an underfunded public health system (or no public health system) plus inadequate pandemic preparedness from cost-cutting, threatens everybody except the super rich who can move to secluded gated country mansions or private islands. If black people hadn’t felt impelled and indeed forced really to protest during a pandemic we all would have been safer. A stitch in time saves nine. An equal right in time saves nine people.
I think it’s important to consider what is proximally feasible (NGDP) AND what is theoretically possible AND what is ontologically supportable from a real complex systems point of view. These are all matters to pursue even if the ontological debate is not one for the general public. Preparing theoretical ground is necessary. All disciplines worth their salt have their theoretical (or pure) and applied domains. Capitalism has a false ontology. That is my fundamental contention and I argue (in various ways) that this contention is scientifically supportable. If reform to NGDP targeting is our sole vision and goal we leave the false ontology, the deplorable moral philosophy and the manifest injustices of capitalism all in place and they will keep re-generating and re-constituting the ills we see. We cannot prevent legislative and regulatory capture, for example, while huge property and wealth disparities continue to exist.
NGDP will merely prune the shoots and runners of excess wealth concentration. While they continue to grow the rich shoots respond, thickening and growing thorns until they are effectively unable to be pruned. The gardeners are reduced in number, denied protective gloves, and their shears are blunted and reduced in designed capabilities, size and number. Branch reform will never work. What is required is root and branch reform, by revolution if necessary.
Correction, I should have written above;
“An equal right in time saves nine million people.” That would be more correct in terms of orders of magnitude.
Ikonclast: “Rhetorically hyperbolic” – guilty as charged. I do it for emphasis (like your use of cap letters) – although there’s a degree of truth there under the definition of “reality” I intend.
No, I am not talking about NGDP targeting. Although a definite improvement over control of interest rates, I find the whole notion of formulaic control of an economy (at least an economy beneficial to society) to be non-useful in comparison with financial “management”: of the economy. I don’t believe an economy can be controlled from the top – managed, yes, controlled, no.
I see government as essential to business in enabling and constraining it, but not in controlling it. I find the idea that government can control the growth rate of an economy mindless. That it can “encourage” growth or control “apparent” growth via inflation (with its control of currency and of perceptions related to that currency) there’s no question, but whether that’s beneficial to society is very much in question.
On to building consensus, “consensus” does not mean “all” agree, only that sufficient agree. I wholly agree that the elite control (in the sense of dictate to) government (and hence the economy and hence society) and that they’ll resist changes that threaten that power. However, they’re realists too. They don’t want to see anarchy or revolution anymore than the rest of us. And acceptance of a reduction in power or wealth is not out of the question. I believe the existence of a gap between them and the next lower hierarchical tier is more important to them than the size of the gap.
So I see change as possible despite the existing power structures. But I believe the major changes needed can happen only if the public believes in them. I don’t believe economists advising politicians is sufficient (even if all economists could be brought into agreement).
That’s the purpose of my KISS description of the economy. I believe that’s a sufficiently simple description of our current view of the economy that the public can understand and buy into it. I’m still looking for an economist to show me where it’s incorrect. Anyway, I see that as the necessary first step to counteract the lies the public has been told over the past 50 years.
Ed Zimmer,
1, “Consensus”
“Consensus” is one of those words that means different things to different people. The Merriam-Webster online gives;
“Definition of consensus
1a : general agreement : unanimity the consensus of their opinion, based on reports … from the border— John Hersey
b : the judgment arrived at by most of those concerned.”
It can mean anything apparently from unanimous to “most”. I always took consensus to mean unanimity at least or an overwhelming majority when used as “general consensus” which is almost a tautology. The vagueness or nuances of the word wrong-footed us. That is why some prefer to precisely mathematize as much as they can in economics. However, moral philosophy in the form of the ethics in and of economcis does not lend itself easily to mathematization. I mention moral philosophy further below.
2. “I see change as possible despite the existing power structures. But I believe the major changes needed can happen only if the public believes in them.”
I agree. However, if the public is kept “dumbed down”, I don’t think this assists the public in the long run. Dumbing down, of course, is the deliberate oversimplification of intellectual content in education, public discourse and culture. Governments, elite self-interest groups and even some elitist academics deliberately participate in or implicitly acquiesce to, this dumbing down of the public.
NGDP is one of those simplistic measures (and I would argue wholly inadequate) that lends itself to dumbed down explanations and dumbed down debates. I don’t think (adjusted) NGDP or GDP are fit for purpose (managing socioeconomic decisions) for the reasons Blair Fix canvasses and for other reasons. Rather than miseducating people to believe in “GDP” or “NGDP” as a kind of Holy Ghost (or Holy Grail) encapsulating the true spirit, true measure or true goal of our economy (properly they are none of those things) we would be better off concentrating on distributive justice and appeals to the public’s sense of fairness and equality. Then we engage their self-interest for sure, but as an appeal to shared or common self-interest. We also engage their ethical reasoning (moral philosophy) and move the debate into the language arena. The language arena is a complex “fuzzy-logic” arena. It’s a long argument which I can’t make on a mere blog post but complex fuzzy logic employing ethical heuristics (moral philosophy) is better than false quantification for democratic-social decision making.
KISS economic analysis:
Does everyone have access to clean drinking water? Are my fellow citizens gettting enough to eat? Does the food taste good? How many nutritionists are unaccounted for? (No I did not mispell that I meant nutritionists not neutriants)
Does everyone have at least one pair of shoes? Does anyone have more than 4 pair of shoes? Does everyone have at least a 10 day supply of clothing? Does anyone have more than a 30 day supply of clothing? A supply of clothing is the amount of clothing that one has before they need to wash the clothing. In a hot humid environment more sets of clothing will be needed. In a cold environment other types of clothing will be needed.
Does everyone have a shelter that will protect them from natural dangers and be safe in an earthquake or sustained highwinds up to a point, say 120 mph, or 150mph, or 110mph?
Is at least on room in the house kept above 65° F during the day time and are the bedrooms kept above 60°F at nighttime in the wintertime and kept at a safe tempreture and humidity combination in the summer time?
Do all of my fellow citizens have access to adequate appropriate medical care? Is access to this care fairly distributed to all citizens?
Do my fellow citizens have access to appropriate educational opportunities? Are these opportunities fairly
Do my fellow citizens have access to adequate appropriate entertainment opportunities? Are these opporunities fairly distributed?
What level of stress, alienation, and physical hardship, and risk must my fellow citizens endure to meet the demands listed above? Are the levels of these 4 negative costs imposed on people sustainable?
Are these costs desireable?
Are renewable natural resources being used to achieve these goals or non renewable resources?
What externalities are being placed upon the environment? Are these externalities sustainable?
Is the government prepared to weather a period of severe natural disasters? Can it continue accomplish its missions under less than optimal conditions? Are families prepared to be self sufficient for a predetermined amount of time, say 2, 3 or 4 weeks?
Are institutions that provide insurance properly regulated and mission ready?
What happens to people in our society who can not or do not want to work? Is that outcome fair?
An economy can not exist without Dollars, or Yen or Yang, or Dracmas, But I really can not see how having Dollars or what ever can answer any of the questions that I listed above. A price for something only tells you perhaps 1% of what it is that you, as an economist, need to know. So how the hell can it be that if you add up all the prices of all the products of an economy you have learned anything useful? (Is it neccessary for me to tip my hat to Ikon for that observation?)
Did anyone notice that I used the word “fairly” a fair amount of times? That word fair provides a loophole to drive a truck through. There are many different ways that one could calculate what is fair.
I like the Parecon outlook. But is this a robust enough system? It seems to me that process of negotiations between consumer unions and producer guilds may take longer than a business cycle.
Curt Kastens,
No need for hat tips. Most of my ideas are entirely derivative, except for my growing and never-to-be-published monograph on “Complex System Monism” (CSM); which philosophical system is still at least partly derivative. CSM particularly seems to annoy some people, especially some economists, who don’t want to question their own ontological a prioris. This encourages me that I am on the right track whether I get social validation or not. 😉
All your questions are valid. People who believe in infinite expansion of personal wealth and endless growth of the entire economy never want to want to hear these questions. Indeed, they attempt to completely suppress such questions and the very supportable moral philosophy and empirical deductions, inductions and abductive logic which lead to such questions.
I don’t agree that “An economy can not exist without Dollars, or Yen or Yang, or Dracmas.” You mean in essence “An economy can not exist without a numéraire”. I don’t agree as I say. Primitive gift economies and even perhaps barter economies existed without a numéraire. Household internal economies (what happens in a familial group household today) tend to exist in internal transactions without a numéraire. They are gift, cooperative and negotiation economies, at least internally.
Certainly, our current mixed public-private capitalist political economy (national and global) cannot exist without a numéraire. The numéraire and numéraire based operation are an integral evolved aspect and a heavily and extensively prescribed part of this economy.
I do not exclude the possibility that we could evolve to a post-capitalist, post-numéraire economy. Indeed, I would recommend we attempt to socioeconomically evolve in that direction, in small but numerous steps. By a process of nationalizations, provisions of expanded free public services, encouragements of worker cooperatives and Parecon structures we could move incrementally in that direction. There is much about technological evolution that is now encouraging this movement, including shareware, shared knowledge, shared infrastructures, shared facilities and prosumer (producer-consumer) solutions. I am sure if we brain-stormed we could think of more.
Instead of opposing these cooperative developments, our laws and regulations could be altered to encourage them. For example, why do our laws, taxes and subsidies as systems encourage corporate formations and corporate monopolies with low taxes, tax holidays, tax havens, subsidies and cheap money (Quantitative Easing)? Why could not worker cooperatives, small to medium businesses,and Parecon initiatives attract more assistance and rich people and rich corporations attract less assistance? It would be eminently do-able except for the legislative and regulatory capture effected by the super-rich over our governance systems. Among other things, it is this capture we need to address.
Ikonoclast JUNE 14, 2020 AT 8:31 AM
NGDP is not “one of those simplistic measures”- nor “inadequate”. NGDP is a compilation of real operating data submitted to government, by law, from every household, business and government agency. You can argue about their methodology in compiling the data (which you have not done), but not about the data. You’re simply showing that you do not understand NGDP. Please read my http://tenonline.org/magic-money-tree.html article . You will see that the economy flows from consumption and that flow is automatic and self-sustaining if government allows it to be. (Note that I purposefully used “allow” and not “make”.)
Yes, the public has been dumbed down by the monied interests, government, economists – all who know (or should know) better – because of fear that once politicians realized they could just create money, their spending would instantly spin out of control. The MMTers removed those blinders but provided enough understanding of the real constraints to hopefully counteract that fear. And as a result of Trump’s crazy spending and the COVID pandemic, the fact and the understanding are getting through to the popular press and to the public.
Curt Kastens JUNE 14, 2020 AT 8:46 AM
I share your concerns – but my concern is not with the quality or adequacy of those concerns (most of them I see as individual choices) – my concern is that they have adequate currency to fulfill their needs. And there I claim that government is fully capable of adequately fulfilling those needs, except for political will or understanding. There are some concerns – depletion of natural resources, climate change – that require government initiative, but are still a political, not economic, problem.
Ikonoclast JUNE 14, 2020 AT 10:16 AM
A numéraire is simply a unit-of-account (eg., dollar, yen, etc.). I have no question that gift, cooperative or negotiation economies can be quite viable at low population levels, but I’d argue they’re not viable at current population levels (as it appears you agree). But I see no advantage to anything beyond that. Now if you’re saying that government needs to be pulled back closer to the people, that I totally agree with. I’d like to see much more of local governments deciding what needs to be done (and how) and the Federal government just paying for it. The Federal-revenue sharing that Nixon started was on the right track but quickly abandoned. Researching that program and its abandonment is on my to-do list when I have some time.
FYI, Richard Murphy just published a new diagram that says it all as simply
as possible, See https://www.taxresearch.org.uk/Blog/2020/06/13/the-old-and-new-economic-orders/ .
Ed Zimmer,
Ref. your link, I really like it. I tried to move the blue and green picture here. But, I was unable to figure out how to do that. That picture in the link is KISS economic analysis down to the atomic level. My list is by compairison is at the molecular level. In reference to a comment made by John Turning in that link which you provided, John asks the question of who answers the questions posed by economic analysis. I dare to say that is a political question not strictly speaking an economic one. But the truthful answer to John Turning’s question is, only those people who laugh at my jokes.
The number of qualified applicants needs to be small enough to make the field of applicants managable. And the salary should be
Ed Zimmer,
Blair Fix lays out the problems:
“This paper highlights some basic problems with aggregation in economics. As I see it, aggregation involves two types of decisions:
1. Choosing a system boundary;
2. Choosing a measurement dimension.
When we choose a system boundary, we decide what to include in our measurement, and what to exclude. When we chose a measurement dimension, we decide how to make the incommensurable commensurable. The problem is that both boundary and dimensional choices are subjective — they depend on our goals. Yet these decisions affect the resulting aggregation.” – Blair Fix.
He then notes:
“Critics of economic aggregation usually focus on boundary decisions. This is understandable. The national accounts are based on dubious boundary choices. For instance, they exclude unpaid domestic work. They also exclude environmental degradation, social ‘bads’, resource depletion,and ecosystem services.” – Blair Fix.
He then argues that the measurement problem is an even more fundamental problem and he locates it directly in the numéraire’s being a measure in an “unreliable” dimension thus being an unreliable measuring stick (because essentially it cannot be calibrated reliably as a measuring stick). The truth of this statement is not dependent on whether quantities of the numéraire, at any point in time are inflation adjusted or not. The inflation example uses change over time to demonstrate the differential unreliability of the numéraire as yardstick. Once demonstrated this proposition holds for any point in time and holds for “nominal” and “real” quantities of the numéraire.
“Economists have based their accounting system on the dimension of monetary value. Yet this dimension is unstable. Prices change over time in divergent ways. This changing meter stick wreaks havoc with objective measurement. Should we reform a system based on such an unreliable dimension? I argue we should not. Instead, we need to ask some more basic questions.” – Blair Fix.
Just as the changing measuring stick over time demonstrates the unstable nature of the dimension and the unreliability of the numéraire (to measure anything real), it demonstrates these problems as existent at any point in time, as an infinitesimal snapshot. A measure dimension-invalid over time is invalid at any point in time. I am pretty sure a whiz at the calculus of infinitesimals could demonstrate that principle. It seems logically sound to me. I’d be pleased if any mathematician or physicist happening to read this post would comment on that and other points here.
In summary, Blair Fix’s points apply to NGDP and RGDP. His proof is demonstrated by the change-over-time case (that is the method of proof) but the result applies by logical deduction to all points in time. The numéraire measures nothing physically or objectively real. It measures in a social-fictive dimension. It measures subjectively,elphic even if it is a “wideband delphi” heuristic assessment of value or expected utility by a collection of “agents” (actually people) through market mechanisms.
Your (apparent) contention that money measures something real is true only in the social-fictive “castle in the air” sense of the financial economy and the double-entry credit-debit transactions which are used to coordinate all businesses in one financial system. This the arena where axioms and equivalences are true by definition, by prescription and not by virtue of measuring in objective dimension. Your (apparent) contention is not true in the real economy, nor in the real environment. It is the latter Blair Fix is looking as “Implications for Ecological and Biophysical Economics”.
I would like to run my interpretation of Fix by him but it seems one cannot now properly access the Capital as Power public board. Fix and Jonathan Nitzan have replied to me and debated me on that forum in the past so I am sure if I could put up a post, Blair could resolve for us what he meant. Or I could get a little cheeky and email him directly.
Ikonoclast JUNE 15, 2020 AT 8:52 AM
You’re misinterpreting what Blair is saying & Blair is misunderstanding the NIPA accounting. What Blair is arguing against is aggregation as economists use & have used it, ie., you can’t add apples & oranges & look at their prices & try to draw historical quantity or price conclusions. You need both boundaries & unit-of-account, which is of course, correct.
But he misunderstands the NIPA accounts in assuming they’re using dubious boundaries, but that’s just because they’re not important to his research (whereas disproving economists common use of aggregation is). That their are some dubious boundaries (like imputing rent to owned homes), the possible errors are so minor to the final result they’re inconsequential.
If each month, every restaurant in the country reports its sales & costs for that month, you know what the industry’s sales & costs were for that month – & you know what households spent in restaurants that months – & that is one sub-account in GDP’s Personal consumption expenditure account. That’s real data – nothing fuzzy about it.
Due to the quantity and geographical disbursement of restaurants throughout the country, composite restaurant sales & costs stay pretty steady. But if there’s a significant change in those sales, it’s important to those trying to manage the economy to explore what caused the change & whether and how to correct it.
Even looking at that data over time can tell you something, not in trying to aggregate prices over time in an inflation-index, but in relative pending patterns, eg, a trend in restaurant consumption increasing & grocery consumption decreasing.
Criticism of GDP not measuring unpaid domestic work (or environmental degradation or…) is irrelevant as that’s not GDP’s purpose. GDP’s purpose is simply to measure the flow of currency through the economy, which IMO opinion, it does remarkably well.
I could email Blair for an opinion, but the opinion would be worthless unless he thoroughly researched the NIPA accounting, which I don’t want him to do because it would be a distraction from his main interest of exploring hierarchical effects on societal behavior. I’d see that as an imposition on his time.
Instead of looking for an “expert” opinion, there’s nothing here you can’t research for yourself. First explore NAICS (North American Industry Classification System) coding to get a handle on the economic segmentation NIPA uses so that you can clearly see the boundaries being used. If you go at it looking for problems for argument, you can find many. But if you’ll recognize this has been carefully constructed over 100 years by all disciplines involved in industry to best meet their needs & look at whether what you would dispute would make any significant difference, I believe you’ll come away saying that’s a pretty good representation.
Then look at how BEA collects and compiles data on these segments (it’s all summarized in their 500-page Handbook, supplement by numerous papers where the designers argue with each other) & you’ll come away thinking it could be so much better. The collection is too dispersed among agencies, there’s too much sampling of the data rather than just using it, there’s readily available data they’re not using, in some places they’re using trade association data. But if you step back & look at how they collect the expense and income data independently & reconcile them through double-entry accounting methodology – & that their results have maintained remarkable consistency over time, you come away thinking, yes, they could do better, but overall they’re doing a pretty damn good job.
So I hold to my belief that GDP (& its sub-accounts) represent the best (& only “real” data) we have of our economy. And I’ll choose it any day over others suppositions and wishes for how the economy works. It squares with everything I’ve observed over my almost-90 years of widely varied living and business experience. (That’s not saying you should believe – just that you should not assume, should not rely on “experts”, & should research yourself or detail an alternative proposal to achieve the same end.)
Curt Kastens JUNE 15, 2020 AT 8:09 AM
Here’s that diagram: https://www.taxresearch.org.uk/Blog/wp-content/uploads/2020/06/Screenshot-2020-06-12-at-14.59.08-550×567.png
To save an image, just right-click in it & select the desired option. Here I selected “open image in new tab” (Chrome), went to that tab & copied/pasted the link to this response.
Curt Kastens JUNE 15, 2020 AT 8:09 AM
And here;s a little more expanded version of that diagram posted today: https://www.taxresearch.org.uk/Blog/2020/06/15/spend-and-tax-not-tax-and-spend/
Ed Zimmer,
I think that you chose a really good example, resturants, to consider. Yes I can see how learning that people are spending a higher percentage of their income over time buying food in resturants and a lower percentage in grocery stores over time could be useful information. Or maybe the date shows that people are spending more in grocery stores but in relation to resturants it is less. That is still useful information.
But does the GDP data often get used to make claims that the GDP data do not accurately reflect?
Also I took the question of borders more literally. When the USA shows an increase in GDP because McDonalds and Burger KIng have increased their profits by importing beef grown on land that was previously rain forest in Brazil an economic signal is sent that McDonalds and Burger King are doing something right. They are making life better for Americans and obviously at no cost to the Brazllians because if the deal was not a good one for the Brazilians they would not have made the deal. Yet even before we consider that environmental impact of the deal the market signal that is sent, and the conclusions that people draw are incorrect.
The data probably shows that GDP in Brazil goes up because of the sale and that fast food employment and fast food profits in the USA go up because of the sale there by contributing to the impression that overall employment and profits have gone up because of the sale. I might add that in a sense if the USA is running a trade deficit with Brazil then overall profits and and employment have really gone up.
But I think to fully appreciate the situation the Brazilians have to ask what if rather than turning our rainforest in to pasture land we turned in to a nut plantation, or a timber plantation, what would our profits be then?
And Americans would have to ask rathter than turning our money created by a computer entry in to beef grown on Brazilian pasture land converted from rainforests should we buy steel from Brazil and sand from Saudi Arabia to improve our energy infrastructure?
Are the alternative ways of spending money infinate? I do not want to start counting because it will take to long. But in chess the number of possible moves is huge. Yet the masters of chess know that all but a few of them are irrelevent in any given set of circumstances. Of course in our circumstances environmental damage is relevent.
With the help of a fast computer can anyone do a better job of making these complex compairisons than a warrior-philosopher-logistician central committee member chosen by
people smart enough to know who deserves to be a central committee member?
Ed Zimmer,
PART 1.
Sorry, we are probably going to have to agree to differ. I don’t see our views meeting at any significant point unless one of us changes his ontology. Our inability to agree with each other comes down to ontology, implicit or explicit. Our ontologies, as sets of ontological assumptions, are different and indeed somewhat antithetical, each to each. One definition of an ontology is that it is a set of assumptions about what is real and what is not real. There are nuances and gradations to such a binary judgement of real / not real but more of that later if I can fit it into this blog post.
Specifically, a developed ontology deals with what it asserts are realities fundamental to a discipline, These fundamental building blocks, processes and observed regularities, as fundamental laws, are taken to be the grounds which allow us to build a knowledge system or asserted knowledge system about the subject area with explanatory power, predictive power and pragmatic power to manipulate things via cause and effect.
As an example, the periodic table is a (now “settled”) part of the ontology of physics and chemistry. The humors theory of disease was a pre-modern theory of disease and it did not permit genuine progress in fighting many diseases because it was wrong about the basic existents relevant to medicine as a research and applied discipline. The germ theory of disease was developed from advances in instruments and empirical research of the microscopic world. The germ theory (ontology) of disease permitted advances in reaching and treating diseases of pathogenic origin.
A rule of thumb is that if one does not get the ontology of a discipline correct, then no real progress will ever be made. The discipline will remain a mess. Economics is a particularly difficult discipline with an unresolved ontology and consequently it is done badly. Economics is a particularly difficult discipline because it involves complex interactions including multiple feed-back interactions of the real and the notional in a way that the hard sciences do not.
The hard sciences use word mathematics and mathematical models but the rules or axioms of maths and maths models do not enter into the reactions and interactions of the fundamentals and their fundamental law relation, in the theory and practice of the hard sciences. The models remain entirely descriptive (seeking to explain and systematize empirical observations and to discover fundamental laws. Economics uses word explanations and also mathematics and mathematical models but in a different manner. The words and maths are both prescriptive and descriptive. Economics both prescribes and describes.
The difference is seen in that economics prescribes some rules for the subject matter of its “operational field” or its objective disciplinary arena. The hard sciences do not and cannot prescribe rules for the subject matter of the “operational field” or objective disciplinary arena. Both disciplines do prescribe “rules of method” (methodology) for their discipline but prescribing rules of method is not the same as prescribing rules for the subject matter of the objective disciplinary arena itself. Modern hard science prescribes a large set of scientific method, experiment design, observation and peer review rules. Modern science does not tell the fundamental realities of its objective disciplinary arena to behave in a certain way. It does not and cannot tell sub-atomic particles to stop behaving in non-classical manner, for example.
Economics however makes both methodological rules and fundamental rules for its objective disciplinary arena or field of investigation. Economics prescribes the field before it describes the field. An extant economy is an outcome of both fundamental laws, meaning the fundamental laws of the physical (or monistic) real world, as affecting the real economy, and of human rule sets as legal laws, regulations, customs, institutions, ethics and mores. Certainly, modern economics did not make all these. Much of that list has evolved historically and socioeconomically. But modern societies become ever more self-reflective about their legal laws, regulations, customs, institutions, ethics and mores (their rules in other words) especially through the comparative disciplines like comparative religion, comparative ideology, comparative economics and so on. In terms of what is “socially imaginable” the arena widens for modern economics (long with the other “soft science” disciplines) to innovate new rules of human social and economic conduct.
The evolution of money and our rules about money is a case in point. As we change our rules about money (prescribe new rules) this changes the economy itself. The formal and nominal (ownership rules, financial rules and the numéraire interact with the real world to generate new forms of the real economy. The new rules enter into the subject field and mutate it. Money is not neutral, financial rules are not neutral and so on. The interaction of the formal and/or nominal with the rule is mediated by agents of course, meaning by real human beings who are rule-obeyers and rule-disobeyers (called making up your own rules). At a more fundamental level humans, as agents, can be regarded as rule-makers, rule-takes and rule-breakers.
This larger conception of what human agents do (yet still complex system science and information science based) stands in contradistinction to the cruder conception of humans as agents who only act as rank dependent expected utility maximizers through market operations. The rank dependent expected utility model must still prove useful (I believe but I don’t any expertise in that area) but it must be applied not only to market theory but also to rule-innovation theory which crudely we could call “legislative capture” or “regulatory capture” (as rule-innovating. rule-evolving, rule-mutating and so on). This reintroduces the political and gives us back political-economics as the true subject arena without throwing out rank-dependent and expected utility models. This is not to say that economics can ever be a made a wholly descriptive discipline. It simply cannot.
This serves as an introduction to my ontological thinking. In part two I will get back the numéraire and NGDP as part of the money-financial economy and its rather tenuous relation to “the real” meaning the physically real, the biophysically real and the real economy.
(There are workers in my road and if experience is any guide I may lose my internet at any minute.)
Ed Zimmer,
PART 2.
This deals directly with your claims that money flows and NGDP are (in some senses) the sole realities in economics. Of course, the term “real” can be used with different definitions. In the hard definition I tend to insist on, the physical world is real, a human being is real and the real economy is real. The money-financial economy is nominal, notional or formal in this set of definitions. Money is not real in the sense that the goods or services it purchases are real. Money as we know is a formal representation of wealth or value as use-value or exchange-value or social power.
However at another level money is real. As a socially-mediated instantiation of value (or power) measurement in a nominal token, it is real as are the customs and calculation processes which apply it. It’s reality is social-fictive, not physical. It measures nothing real in the real world though it pretends to and is used by people as if it does. This statement required elaboration. It measures no real physical dimension in the real world as per the SI “dimensions” used by the hard sciences. It measures expected utility to humans or perhaps more accurately the social power to move towards or achieve apprehended and expected utility. It measures even this only heuristically, not accurately, and is in every sense, the unreliable measuring stick as pointed out by Blair Fix.
The money-financial sphere becomes a system unto itself with less and less attachment (as financialization proceeds) to the real sphere, even as a measure of expected utility to humans of real resources, objects, processes and services. Apparent precision in numbers can be essentially meaningless in several ways. One way is when the numbers measure nothing “really real”, that is to say nothing that SI dimensions measure in the real physical world. This nominal-real or financial economy-real economy bifurcation becomes a serious source of error and problems in dealing with the real physical and biophysical world. Obeying financial dictates can often mean ignoring real physical and biophysical “dictates” meaning the long-term predictions we can generate from understanding the fundamental laws of the natural world. It is this bifurcation which is causing us many of our problems now.
So while money, accounting and finance can tell a firm if it is healthy in the money-finance world and according to such rules, they can tell the firm and us nothing about whether the firm is healthy for the ecology or us or our long term future. Money, accounting and finance are of social-ficitve reality only and tell us something real only in their own self-referential system set up axiomatically and not empirically. All the money and all the money calculations in the world cannot tell us one thing about the real physical and biophysical world in which we live. Nor can they tell us how to value or properly or sustainably utilise anything in that world. The empirical proof of this is that using money-finance economics to manage our economy, our people and our world is destroying all three. Empirical real-world evidence trumps all predictions of a social-fictive theory and praxis system from double-entry bookkeeping to capitalist economics).
Ikonoclast JUNE 16, 2020 AT 10:43 AM
Yes, it’s best that agree to disagree, but as I realized in a conversation with davetaylor1 on the rwer blog a few days ago, I think it comes down to our inability to communicate. I’ll venture that you’re a strong inductive thinker – & I’m a dogged deductive thinker. I understand what you say but it has little relevance or interest for me & that’s probably true to you for me. But despite our difficulty in communicating, we very much need each other. Without inductive thinkers like you, we deductive thinkers would never get out of our ruts of what we believe to be “true”. But without we deductive thinkers, nothing would ever get done.
So I’ll continue to read your posts watching for things that might relate to my worldview – & I’ll briefly comment if I see something I feel you’re overlooking – but now that I understand the situation, I’ll no longer attempt engaging in extended conversation. Sorry to put you through so much text generation, but I suspect like most of us, writing helps your thinking.
Irony 2.
faustusnotes says:
JUNE 17, 2020 AT 12:45 PM
“KT2, don’t tell other commenters where to put their comments or how to comment. I have responded to your points in the Masks thread, where the debate belongs. If you are interested in understanding why your proposed strategy is wrong, then please read and respond in that thread.”
Ironic 2a – telling the teller “Don’t ”
Ironic 2b – I am wrong even after I tried pisting 100 or so links and researchers names and “I am wrong”.
faustusnotes note, I am not wrong or right. The question is, are they?