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 
Blair Fix has posted a thought-provoking article on the Real-World Economics Review Blog. It is titled “Why isn’t Modern Monetary Theory common knowledge?”. He means, I think, that since we as a society define and prescribe modern money for certain operations then our prescription for modern money should be our ready-made description of modern money. Why should we need a theory for mere description?
I can imagine that we might need a theory for our description of the emergent outcomes of our invention of modern money but that is not what MMT intends or tends to be. I think perhaps MMT should be called MMD (Modern Money Description) in the plain sense that one can describe what others, who have come before one, have invented. An MMD is certainly needed. The prescriptions for modern money and its operations are indeed extensive and arcane to the average person. But let Blair Fix speak for himself a little as he introduces his essay.
“I’ve always been baffled why ‘modern monetary theory’ is called a theory. I don’t mean this in a disparaging way. As far as theories of money go, I think modern monetary theory (MMT for short) is the correct one. But having a correct theory of money is a bit like having a correct theory of traffic lights. Traffic lights (like money) are a social convention.”
Blair Fix goes on to call money “a social convention that we’ve defined into existence”. This is true and correct as far as it goes. I contend that money, especially and precisely the numéraire, operates in a “social-fictive dimension”. In calling “value”, meaning “use value” or “exchange value”, a social-fictive dimension, I am harking back to ideas suggested to me by Blair’s earlier and excellent paper, “The Aggregation Problem: Implications for Ecological and Biophysical Economics”. In that paper, Blair talks about the aggregation problem and measurement attempts made with a fluctuating measuring stick (the numéraire). This entails, essentially, measuring in a fluctuating dimension (the social-fictive dimension of “use value or “exchange value”) by using a fluctuating base quantity (the numéraire). The dimension is social-fictive in the social-exchange-value-and-market-practice sense and the base quantity is social-fictive in the formal legal prescriptive sense.
In taking the discussion back to “dimension” and “base quantity” I am using the terminology of the hard sciences. By this method we will seek to find out if we can, or can ever, call economics a science. I will not keep the reader in suspense. My conclusion is that we cannot and can never call economics a science. “Dimension” in science means one of seven basic scientific dimensions which are objectively measurable precisely because the base quantity for the dimension can be objectively and reliably defined.
The SI (International System of Units) identifies seven scientific dimensions namely: time, length, mass, electric current, thermodynamic temperature, amount of substance and luminous intensity. The SI also defines their objective and reliable base units of measure. The respective base units listed in the same order are: second, meter, kilogram, ampere, kelvin, mole and candela. These are the base units.
In economics, the base quantity is not empirically derived. It is prescribed not described. It does not bear the same relation to the dimension as does a scientific base quantity to its scientific or real dimension. In economics, the behavior of the dimension (value) is itself emergently conditioned, to some extent, by the quantities and qualities of the base quantity. In science, we can define a base quantity (say the meter) for consistent measurement in the dimension (length) but we do not and cannot affect the dimension by issuing a quantity of the base quantity. This would be an impossible absurdity in science; both the issuing of a quantity of the base quantity and its affecting the dimension.
In economics, where the issuing of a quantity of the base quantity which affects the dimension is possible (meaning issuing money can affect agents’ assessment of various use values, which is to say money is not neutral) then fundamental laws cannot be derived for the system. This follows logically and scientifically.
I am still trying to figure out this theory so bear with me. I do not claim my ideas are finished or even finish-able. But I am intrigued by the strange puzzle that is “economics”.
A commodity (an elementary concept in economics) is described by its physical characteristics, time of availability and location of availability (Debreu, 1959 Theory of Value).
Which aspect of this economic concept is incompatible with the scientific dimensions you have listed, Ikonoclast?
Ernestine Gross,
That is an excellent question and one I find hard to answer. The real economy is indeed constructed from things and processes which can be measured in SI base quantities. An industrial chemist, a structural engineer or a medical science researcher working in the economy certainly do use SI base quantities to measure things and processes in the scientifically described real dimensions. A professional cricketer or a taxi driver also measures thing in real dimensions albeit they do not use mathematics, dimension concepts and formal base quantities. The human brain has innate calculation or estimation capabilities. For these we can find an evolutionary explanation. There are also trained and learned responses which are to do with estimates and anticipations of lengths and future positions of objects in time.
All of the above is true. Yet, as well as a real economy there is a financial economy. It is in the financial economy that we use money or the numéraire. Let us look at some definitions of the numéraire:
“The numéraire is a basic standard by which value is computed. In mathematical economics it is a tradable economic entity in terms of whose price the relative prices of all other tradables are expressed.” – Wikipedia.
“Numéraire is an economic term that represents a unit in which prices are measured. A numéraire is usually applied to a single good, which becomes the base value for the entire index or market. By having a numéraire , or base value, it allows us to compare the value of goods against each other. In essence, the numéraire acts as a set standard of value across an exchange.” – Investopedia.
These are definitions which I have found at short notice. I doubt that either of us will find these definitions completely satisfactory but they might suffice for the moment. Each definition passes over the issue of how the “base value” or “base quantity” itself is set. The SI does not pass over the issue of how the base quantity is set. It defines them precisely and “near-immutably”. Actually, some SI definitions have been refined and re-calibrated recently for greater precision. The numéraire base quantity floats in a most disconcerting and (dare one say?) unobjective manner due to complex market operations.
However, let us backtrack a step rather than considering the issue of how the value of the numéraire is set. We would have to establish first and agree upon (if we can) what “economics proper” is. Is economics just the description and theory of real economy operations or is it the description and theory of the hybrid operations of the real economy and the financial economy? I honestly don’t know where you sit on this issue. This is not an intended slight. I believe your position is profound and nuanced and that I need to understand it. I am asking if you agree that the study of “economics proper” is the “study of the entire hybrid system of real economy and financial economy” or not?
The litmus test for the above question might be relatively simple. If a book or treatise on economics attempts to measure, calculate, describe and prescribe things and actions or derive laws of “economics” in which the numéraire plays any part in calculations, then this book or treatise is unempirical, unobjective and indeed unscientific. Volume 1 of Marx’s Das Kapital, taken in and of itself, is hoist on this very petard. We will leave aside the question of whether Volumes 2 and 3 in any way rescue his case. That becomes a very complicated philosophical (or maybe sophistical) argument in the hands of disciples, to do with “dialectical materialism” which arguments usually contain elements of both Hegelian metaphysical dialectics and material considerations more akin to modern complex system theory and feed-backs; a mixture of incongruous elements in other words. It is an argument also shot through with sectarian ideological positions and unscientific passions.
Importantly, can we apply the litmus test suggested above to Debreu’s “1959 Theory of Value” if that is the correct title of the monograph you referred to or to Debreu’s “Theory of Value: An Axiomatic Analysis of Economic Equilibrium (Cowles Foundation Monographs Series)” published in 1972. I must admit, to my complete intellectual embarrassment, I have read neither of these texts and I am certain almost all the mathematics contained therein will be above my head. Nevertheless, I should be able to understand some essential components which are put in English language description. Does Debreu avoid the mistake of using the numéraire anywhere in the mathematics? That is the litmus test according to my my empirical and ontological investigations and deductions, inductions or abductive reasonings to date. (Attempting to cover all philosophical bases there).
This is probably a good place for me to finish this post. There are many more issues to cover because in real praxis the entire hybridised economy does involve the real and the financial economy and I am in the camp of those who argue that money is not neutral. How do we do Debreu-style analytical economics without the numéraire (if it is indeed done that way) and then bring that back to macroeconomics where we in practice prescribe doses of the numéraire for the (partial?) control of the economy? This seems to go to the heart of whether economics is a positive or a normative (descriptive or prescriptive) discipline. Indeed “economics proper” is probably both, somehow.
Analytical economics (which I believe is your field) could be a positive discipline but I am too ignorant and unlearned to know the answer to that question. That’s not self-flagellation, it’s a fact I am looking squarely at. When economics is bowdlerized for popular consumption it could well be that people like me, who theorise without a proper educational basis in the discipline, attack straw men. But it is clear that in the popular imagination and standard political discourse, money (the numéraire) is improperly reified as an objective measure of value and the value by which we ought to measure, aggregate and compare almost all other things, processes and values. This to me is the source of immense and grotesque errors in running our socioeconomy or political economy in the real biosphere and for the welfare of all.
I will be very interested in your continued thoughts on this.
The corona virus crisis is not taking place in a controled environment. That is one good reason that the national reports on the virus can not be trusted. Another good reason to suspect the national reports is that national governments, or those making the reports, have a motive to lie. A third good reason not to trust the national reports is that the information presented is extraordinarily contridictory. Is that because there is deliberately lying going on or because those responsible for making the reports really do not have the silightest idea what the hell is going on.
The key implication of this lack of reliable macro data is that there is NO relibable information about the pandemic available which would allow anyone to draw any reasonable conclusions.
Did I break my promise? Do you think that it was worth it?
Ikonoclast, if I could write as quickly and as well as you, I most likely would write a long response, but I can’t. Due to the (dimension) time constraint, I only answer your question regarding the Debreu model. All results (theorems) are independent of any notion of a numéraire. Prices are relative prices (as in 1 apple is exchanged for 2 pears), normalised such that the sum of the relative prices is 1.
I appreciate the frustration you experience in trying to figure out what is going on. Much of economics that is discussed in public involves monetary values. I used to be very frustrated finding leaps of faith in textbooks – leaps from the so-called real economy to monetary values. I have mellowed. I now only wish the textbook authors would date the material they present instead of writing as if the arguments and the diagrams are as natural as a stone or a tree. I also learned to appreciate that most graduates with an economics undergraduate degree work in the ‘so called real world’ and this world is as messy as the textbooks. Financial accounting and macroeconomics deal with monetary values. Some legal disputes are settled with monetary amounts, which they call “quantum”.
I do know big brains are working on making progress. But we can’t all stop thinking and guessing and reading and trying to make sense because we wait for the solutions. My best guess is this frustrating activity has to be kept up by as many people as possible for otherwise we might not even be aware of the difficulties which others try to resolve and we might not even understand the new knowledge and insights.
Ernestine Gross,
1. To be honest, I don’t think I write quickly or well but thank you just the same. An occasional sentence comes off passably. A good paragraph is hard to come by. How anyone writes a whole and unified book is beyond me.
2. “All results (theorems) are independent of any notion of a numéraire.” This passes more than the pub test. It passes my basic litmus test for ontological plausibility in the field. Some might place little store in my test but as you know I have been ruminating on these matters for some time. All that passing this litmus test indicates in this context is that there are not any crude ontological errors in the a priori justification(s). And I am talking about what I call “empirical ontology” not speculative metaphysics.
3. The fact that you mention “theorems” and that the title of one of Debreu’s books mentions “axiomatic analysis” is very intriguing. I can’t reasonably expect you to write a lot here so I am reluctant to take this topic too far. When I type “axiomatic systems versus empirical investigations” in Duck Duck Go the first ping I get is “Philosophy of mathematics” – Wikipedia. The second ping I get is “Axiomatic versus Empirical Models in Policy Studies”. Adding “economics” to the search string soon dredges up esoteric stuff like “Empirical and Theoretical Evidence of Economic Chaos” in System Dynamics Review. This gives an idea of the Pandora’s Box of complexities which could be opened up… but I haven’t yet so I won’t here.
I assume Debreu is really making axiomatic models of markets and then deriving theorems. Correct me if I am wrong in that assumption. The interesting things to me (and a lot of others I guess) is that markets sit between the real economy and the financial economy. We humans construct money and we also construct markets. We construct them fundamentally and extensively as formal systems. We don’t construct real things (in the real world) fundamentally. Rather, to put it as Sir Francis Bacon did:
“Towards the effecting of works, all that man can do is to put together or put asunder natural bodies. The rest is done by nature working within.”
With our modern knowledge of physics and chemistry involving atoms, molecules etc. this rings more true than ever. This is is all we do (put together, put asunder) to fabricate goods and generate services in the real economy. The rest is done by what we would call today the fundamental laws of nature working within nature itself. Bacon nailed it.
What this means (to me at this stage of exploration) is that Debreu (and John Quiggin for that matter in his more technical economic works) are posing axioms for the market to make an axiomatized formal system model of an idealized market of some form and then deriving theorems as outcomes of the axioms. The point of this enterprise (I assume) is to stylize or idealise the actual market(s) which mediate the real economy (real system) to the financial economy (formal system). One could say one intention might be to find the best idealized market model to implement in practice in order to best link the real economy as real system to the financial economy as formal system.
What justification do I have to make the whole model tripartite in this sense, I ponder? I am not sure myself. It is clear the real economy is a real system. It is also clear that the financial economy sans the actual market is formal system as a bunch of laws, regulations and accounting rules, where everyone (usually) obeys said laws, regulations and accounting rules. Real people as agents obey the rules tightly unless they are governments with fiat power, corp orates who engage in regulatory capture, criminals or revolutionaries.
The market however is the place where individuals as agents engage in much more discretionary behavior for the most part The market combines the formal and the real according to the market model and the agent’s neural pathways are where this combination truly takes place. We tweak neural pathways for sure. Advertising and addictive junk food certainly do that. However, the market may offer itself up (so to speak) as a place we could axiomatize in its rules to get certain macroeconomic and real outcomes reliably… or possibly.
Not sure. Maybe I am just losing myself in thickets of speculation here and it might not be clear, even to me, what I am driving at.
After my reply above to Ernestine Gross, I continue my quixotic campaign to get economists to take much more seriously the need for an ontological revolution in economics.
In threads touching on economic ontology in various economic blogs, there are those who ignore the issue and those who express skepticism about ontological investigations in and for economics. Implicitly, this amounts to an expression of the view that there can only be speculative ontologies but no empirical ontologies or that economics is a special case as a social science needing no firm ontological foundations. I am still working on a fuller exposition than this below. In the interim, let me run by people the following intentionally specious proposal.
A proposal.
We can fix the economy and climate change as follows. Take 3 parts unicorn manure and mix it with 1 part pixie dust and 1 part Galadrial’s Earth. Reduce to dust in your dragon bone mortar and pestle. Take a pinch of this dust four times over and release a pinch to each of the four winds This will fill all creatures with love, all will grow well, all will be prosperous and the earth shall be healed.
Analyzing the proposal.
People would of course laugh at the proposal, but why? Well, obviously it is fantasy but what are the markers that it is a fantasy? I suspect there would be two key issues:
(1) The objects nominated are not real.
(2) There can be no science, empirical or pragmatic theory to indicate a cause and effect relation of the non-real to the real.
These objections are not only empirically based, they are ontologically based, specifically as ontological empiricism (what objects are real from experience) and ontological realism (at least a part of reality is ontologically independent of human minds and their ideas).
For a prescription or action to have any possibility of working a required effect, the objects and/or processes must be real and and thus at least potentially able to generate a real world cause and effect outcome. I doubt few persons would cavil at the naming of “cause and effect” in particular or in general as an empirically observable and pragmatically employable process. This is even though a philosophical investigation of cause and effect raises questions about our logical induction(s) seeking to establish cause and effect in particular cases and the general case. (See David Hume.)
So why is there this skepticism about the need for ensuring ontological empiricism and ontological realism in economic theory? I would say it is because the topic is relatively new and very difficult. There is a general difficulty because economics involves objects (and processes) which have or appear to have qualitative differences: I mean real objects, formal objects and conjectural objects. For economics involves all three kinds of objects (using this taxonomy and ontology).
This brings us to systems theory. In economics we are dealing with the interactions of real systems, formal systems and conjectural systems. This arena requires a general theory and (eventually) the empirical investigations such a theory would. I strongly suspect information theory will be found to be the required link between the three systems. This is not at all to suggest that there would a scientistic solution which would take economics entirely out of the moral philosophy realm. Human beings are, among many other things, beings who ineluctably exist in socially constructed moral and political “dimensions”.
Ikonoclast, you comment at 8:23 am was (is?) a good comment. But the last paragraph was a bit hard for me to follow. The problem for me lies with the 3rd and 4th sentences of that paragraph. Maybe the problem is mine. But I think that some editing needs to be done in that vicinity.
Thanks Ikon & Ernestine. I have learnt a new word today trying to get my head around this thread
-‘^1 “Tâtonnement
– noun
– trial and error the trying of various methods, alternatives etc until the right one happens to appear or be found – “They didn’t know how to fix the photocopier, but they managed it somehow by trial and error” via dictionary cambridge org. Which it would seem what I am doing now!
And I’ve realised why you use ‘numeraire’ so readily Ikon.
I think the answer to Ernestine’s question (?) is found at Wikipedia “Arrow–Debreu model” page … “the Arrow–Debreu model radically generalized the notion of a commodity, differentiating commodities by time and place of delivery. So, for example, “apples in New York in September” and “apples in Chicago in June” are regarded as distinct commodities.” The apples as as seperate commodities in space and time must have been a bit of a revelation at the time.
So I thought Ikon particularly, & Ernestine, may enjoy this bumper 4 book review…
I like the reversal test for concepts which is simple, yet reversal of causation seems more powerful than just making an alternate /reverse case from a proposition. First para of article; “… It is that we find ourselves running and then, on experiencing this bodily reaction, call it fear. Reversal of an assumed arrow of causation is a hallmark of many conceptual breakthroughs, especially in domains where the truth is counterintuitive, or where it supports a narrative we don’t like…”.
We desperately needs some conceptual breakthroughs.
*** Review…
“Believe what you like
How we fit the facts around our prejudices
By N. J. Enfield
NOT BORN YESTERDAY
The science of who we trust and what we believe
Hugo Mercier
KNOWLEDGE RESISTANCE
How we avoid insight from others
Mikael Klintman
DUPED
Truth-default theory and the social science of lying and deception
Timothy R. Levine
THE UNKNOWERS
How strategic ignorance rules the world
Linsey McGoey
https://www.the-tls.co.uk/articles/fit-facts-around-prejudices-review/
End ****
^1. Tâtonnement
“Proportional Dynamics in Exchange Economies
…”This dynamic models a process of learning how to bid and has been studied in a series of papers on Fisher and production markets, but not in exchange economies.”…
…”This answers an open question about exchange economies with linear utilities, where (^1)tatonnement does not converge to market equilibria, and no natural process leading to equilibria was known. We also note that proportional response is a process where the players exchange goods throughout time (in out-of-equilibrium states), while tatonnement only explains how exchange happens in the limit.”
https://www.researchgate.net/publication/334413928_Proportional_Dynamics_in_Exchange_Economies
( wonkish- “tatonnement does not converge to market equilibria” reminds me of the never ending optimisation of a system if process seen as a Fibonaci series, spiraling around the the arrow of time / causation, trying to converge on ‘now’ and never quite meeting.)
Off topic: I have a friend who would classify as an anarchist and wishes money would disappear. I say to him, we would, still, have a concept and real numeraire of some sort. The day care at the Whitehouse example.
And as I was about to send him this I thought I’d provide a musical accompaniment to this discussion… not sure about rap but nice sentiment and a future story engaging the target audience appropriately. YMMV! And imho Ikon, much more hopeful than your pick “On the eve of destruction” is..
“In conceptualizing the video with our friends Brian and Vanessa Beletic we imagined the world on the day that the age old struggle of class was finally over. a day that humanity, empathy and community were victorious over the forces that would separate us based on arbitrary systems created by man.”
Run The Jewels “Ooh LA LA” feat. Greg Nice & DJ Premier (my rap band would be ‘feat feat!’)
Taleb’s book next.
Thanks as always…
faustusnotes confidently telling John Quiggin he is wrong.
“No John, it was” – Sigh-tation: “https://johnquiggin.com/2020/07/13/monday-message-board-469/#comment-225866 ”
Feel free to review yourself faustus – in real time not spacetime.
“History of Non-Euclidean Geometry
Evolution of the Concept of a Geometric Space
Rosenfeld, “A history of non-euclidean geometry” , Springer (1988) (Translated from Russian)
“The Russian edition of this book appeared in 1976 on the hundred-and-fiftieth anniversary of the historic day of February 23, 1826, when LobaeevskiI delivered his famous lecture on his discovery of non-Euclidean geometry. The importance of the discovery of non-Euclidean geometry goes far beyond the limits of geometry itself. It is safe to say that it was a turning point in the history of all mathematics. The scientific revolution of the seventeenth century marked the transition from “mathematics of constant magnitudes” to “mathematics of variable magnitudes. ” During the seventies of the last century there occurred another scientific revolution. By that time mathematicians had become familiar with the ideas of non-Euclidean geometry and the algebraic ideas of group and field (all of which appeared at about the same time), and the (later) ideas of set theory. This gave rise to many geometries in addition to the Euclidean geometry previously regarded as the only conceivable possibility, to the arithmetics and algebras of many groups and fields in addition to the arith metic and algebra of real and complex numbers, and, finally, to new mathe matical systems, i. e. , sets furnished with various structures having no classical analogues. Thus in the 1870’s there began a new mathematical era usually called, until the middle of the twentieth century, the era of modern mathematics.”
https://www.springer.com/gp/book/9780387964584
The first curved-space universe
Helge Kragh
Author Notes
Astronomy & Geophysics, Volume 53, Issue 5, October 2012, Pages 5.13–5.15,https://doi.org/10.1111/j.1468-4004.2012.53513.x
“While Gauss anticipated non-Euclidean geometry, it was left to the Hungarian mathematician János Bolyai and, independently, his Russian colleague Nikolai Ivanovich Lobachevsky to establish geometrical systems different from the venerable one of Euclid. Of the two pioneers, Lobachevsky was the more empirically oriented. As he said in a paper of 1835, the truth of geometry “can only be verified, like all other laws of Nature, by experiment, such as astronomical observations” (Lobachevsky 1898).
https://academic.oup.com/astrogeo/article/53/5/5.13/208829
“What Einstein Should Have Known
John Farrell
…”But Riemann was not the only one. In Russia, Nikolai Lobachevsky, and in Hungary János Bolyai, were also exploring the geometries of curved space. Indeed, Lobachevsky has the honor of publishing first in the field. “…
https://www.forbes.com/sites/johnfarrell/2015/05/13/what-einstein-shouldve-known/
And an explanation I understand – because it has pictures! And Feynman.
“…provided that it is understood that this rule about the curvature of space applies not only from one man’s point of view but is true for everybody.”…
https://www.feynmanlectures.caltech.edu/II_42.html
KT2, why do you pick these fights? And why do you go to the trouble of putting a hyperlink in quotes but won’t go to the trouble of writing ? Do you have some kind of objection to html? Is it religious?
I should hope it was clear from my comment that I was talking about the specific responsibility for developing the curved space used in special relativity – this space is called Minkowskian space, with a Minkowskian measure, I’m pretty sure I’m on safe ground saying that Einstein drew on Minkowski’s work.
I would also have thought that anyone reading the second paragraph of that comment would be aware that I was placing Minkowski’s work in a longer tradition of non-Euclidean spaces, which is why I said that by Keynes’s time the concept of a Euclidean geometer wouldn’t have made sense.
But thank you for the Feynman link, always a pleasure to see the man being cited.
Hahah I should have closed that a!
faustusnotes, that was a mirror. You think it is a fight.
Getting colder.
To further explain position…
We have an entirely failed theory and praxis in conventional economics. It is not easy to say “hey presto!” and come with up with new, valid, comprehensive, convincing and applicable theory. Marx tried it and it took the whole of his adult life, counting his philosophical and political economy efforts. His legacy is still debatable and debated. Let us leave that aside and talk within more recent intellectual traditions.
For political economy theorists, there will be years, decades or more of wandering in the intellectual wilderness. One can read the notebooks of the philosophers and political economists (where they are still extant) and see what I mean. The seemingly endless theses, anti-theses, premises, objections, counter-arguments and so forth they go through in attempting to forge a new theory or philosophy, usually take decades to work through. This is before the finished product is submitted to the tender mercies of the public, critics and rivals.
I consider that the founding principles of a new political economy are yet to be discovered or developed. I am concerned when people discount the issue of developing an empirical ontology (an ontology of empirically detectable objects, processes and systems) for the foundations of political economy. How else are you going to re-found the subject? If one discounts empiricism, including empirical taxonomies and empirical ontologies, then one is left with axiomatization, the axiomatic approach. I mean the erecting of theories from axioms and then the derivation of specific theorems.
Axioms may approximate the real in some cases when simple idealizing assumptions can be validly made for certain applications. This worked reasonably well with Euclidean geometry in dealing with local “flattish” conditions where the real geometry of space approximated the Euclidean idealizations and its axiomatic, theorem-deriving approach. The case with political economy is far, far removed from this kind of simplism which is acceptable in some other limited and simplified disciplines. What I fear is that rejecting the scientifically-descriptive empirical-ontologies approach is really a declaration FOR the prescriptive axiomatic approach. This is PRECISELY the mistake conventional (classical and neoclassical) economics makes. This is a recipe for FAILING to shake free from the current failed paradigm.
The mania for mathematization and doing that inside an axiomatic, theorem-deriving framework is precisely the problem. Hard mathematization is really for the hard sciences working within the scientific dimensions of the SI (international system of units). And it is for their applied disciplines (like medicine and engineering) but ONLY where the variables are quantities in the scientific dimensions. Outside of that, even the applied disciplines of the hard sciences do not work with fully objective quantification methods. Look at the work of mental health professionals for example.
There are many, many problems we do not and cannot solve by maths, If you have a child with serious behavioral and adjustment problems, how do you solve that by maths alone? That proposition would be absurd. If you have an extensive, complex, socioeconomic or political economy system with serious behavioral problems and an inability to adjust to real world limits and to other requirements including those for justice and equity, how do you solve it with axioms, theorems and mathematization alone? I mean especially any mathematization in the numeraire (money) which measures no real scientific dimensions at all and no moral “dimensions” either except for the dogmatic prescriptive ideological-moral dimensions of capitalist apologism? Again, the proposition is absurd. In political economy maths may be incidentally utilized in dealing with some aspects which can be quantified in real scientific dimensions. That’s really the valid extent of it. Accounting economics uses mere arithmetic. Financial economics uses advanced maths (used by the “quants”) but it is employed in the social-fictive dimension of “value” measured in the floating, fiat-generated numeraire. Nothing is solid there. All turns to the vaporous absurdity of financial speculation.
Personally, I am not close to any finished theory. That is hardly to be wondered at as I am an amateur autodidact working in obscurity outside academia and without the necessary tools and education. Also, a position of priority monist relational system theory (an entire philosophy and complex systems philsophy in itself) needs to be adopted to understand my call, any call, to found the non-moral-philosophy component of an empirical ontology for political economy.
When people offer metaphysical explanations, of which they seem certain, for physics and ethics, I hold they are advancing these explanations from a position of dogma. When they say “Well, what is your explanation for life, the universe and everything?” I say the following. “I don’t know AND you don’t know either! But I can refute some specific this-world claims inherent in your position and do so with empirical evidence.”
We are really in the same boat with political economy. I don’t know and none of you know, including professors, know what is the entire, comprehensive solution for our current theory and praxis political economy and real world dilemma. But we do know some stuff which has been refuted and some paths which are or will be dead ends. It’s a “forward-in-time” tree-search navigation problem. The emergent-evolutionay maze of it is a tree-search exploration problem with unknowns in the system, unknowns in our neurological, physical and social systems and limited “look-ahead” calculative or heuristic capabilities on our part even when using computers and AI to assist us.
There are no discoverable formulas to solve the entire “wicked problem” of political economy. However, we do know enough to know that continuing certain approaches, like attempted endless economic growth and endless growth in elite individual fortunes will end in disaster. We have the empirical trend data for natural systems and for our social systems which unequivocally demonstrate our approach to disastrous asymptotes where systems break down and destabilize: tipping points in standard parlance. Meanwhile, we debate while Rome (the world system) burns. While wrestling with theory we cannot forget political praxis, even revolutionary political praxis. Matters have come to this pass. I do not discount that revolutionary praxis may involve changing our minds, changing politicians minds and changing our votes – all peaceably. Also, we must confront the question of what to do if that does not work.
With reference to “The End Of Capitalism” … if capitalism needs a positive interest rate to work thats overhead. Now maybe thats right. Maybe some level of usury is needed to oil the wheels of commerce. So then we could call some tiny level of usury “A necessary evil.”
On the other hand the minarchist view is that the government is a necessary evil. I don’t think that so much. I think the governments main purpose is to mitigate oligarchy and its horrific effects, amongst other crucial tasks. Mostly its needed, with a participation income, to bring all our brothers and sisters through intact, until we can get policy right and for some decades after that.
But for arguments sakes lets say that usury is a necessary evil and government is a necessary evil. Then bringing usury under government control AS A UTILITY is just a sensible way to minimise overhead. So I support what has been advocated at this space from time to time. Particularly as the banking sector in the West is a manifest failure and are parasites that cannot be reformed.
We have one necessary evil that can easily make a profit. We have another that will always be run at a loss. Its a natural thing to bring the two functions together. Its just good economy. Minimising costs. Which means making finance a simple utility is just good economics.
With reference to the end of capitalism: When we say that interest rates are zero, this is simply a matter of a subsidy extorted from the public and given to the banks. In actual full-blown real economics, where the banks weren’t stealing everything, a zero interest rate would only come about if we mandated it. Or something close to it could come about, if businesses (and here I am thinking of an economy of small and middling businesses) recycled all of their profits back into their busines.
But its unlikely even then that usury would be wiped out since we are talking about a human weakness. Like liquor, opium, gambling or vice. Its the “strong” ie the well moneyed, manipulating the week. Its not all that. But 90-something percent it is. And usury could not be more pernicious. Fractional reserve usury particularly is the root of all evil.
The interest rate to the banks was virtually zero at a time when they were recycling this subsidy to some small businesses (in this case a rural producer of wood-gas generators) at 16%. Now locally and at the moment its not quite so bad. Because I was talking to a tradesman who can get a new van paying only 6 per cent. But maybe his house could be backing that loan and perhaps it is. For the most part its not wealth creation we are talking about, but base ruthless exploitation.
But interest rates must not be thought of as a purely economic phenomenon. Our ancient books don’t see it that way. In the Torah usury is thought of as a form of outright warfare. And rightfully so. We can get zero interest loans to our sole traders. And pick up the interest rate in our GST, our reduction in welfare, in our income taxes. We don’t need to charge an interest rate if we do it right.
Right about now the benighted social credit people must be feeling pretty well vindicated. Because the financial sector are now empirically proven losers and uncontroversial parasites.
I think its all coming together really with the new thread on reducing working hours. We’ve got to be able to tie things together. So you have the participation income. Then to make this income go further many people will retreat to the smaller towns to reduce their living costs.
I initially felt that the Prime Ministers enhanced job search was a little over generous. Now I think its some kind of good luck, or a work of genius. At a time when everyone is saving, the government is dissaving, the extra welfare largesse is pushing (I cannot prove this but I surmise) monetary base out to the periphery. Whereas modern banking dysfunction sends the cash to wherever the real estate guys and the big corporates are spending. So there is a corrective sense to this and the job market is surprisingly …… Well lets just say it hasn’t died like you would have expected.
I hate Keynesianism but lets say we can finance what is suggested here (particularly a participation income aka some sort of UBI …… and shorter working hours) via dissolving David Graebar’s B.S jobs in big business, and in particularly banking, and in the public service….
Are you following me so far?
So we dissolve these high cost welfare jobs to finance low cost welfare jobs (participation income/UBI and new jobs being about less hours)….. What might be the result.
In our analysis we are not interested in wild-eyed red ink fantasies.
So we run surpluses … many people retreat to the lower cost life-style of the small towns. New jobs are created on a (lets say) 5 times ten hours per fortnight basis …. You work 5 days a fortnight for ten hours …… and everyone has a participation income as a matter of course. As a natural thing.
THINK OF HOW COMPETITIVE THE LABOUR MARKET WOULD BE.
And for the first time. The labour market would be more competitive then it ever had been before. I love small and middling employers but they are really going to have to work to get people working for them under the conditions outlined. They are going to have to make employees happy. Because the potential workers now aren’t under a situation of duress.
Plus in this scenario the cities clogged up infrastructure is relieved. Some of our fellow diggers get to see the stars at night and walk in the countryside. Its a pretty good scenario that the Aussie intellectual is sketching out for us I would say.
But its got to be paid for. This ought to be a red ink free zone. And it CAN be paid for. The largesse is simply unbelievable. An embarrassment of riches.
“Now is the time to reduce overlong working hours”
What is the operative word? I think that word is “now” I think thats right. If its the right thing to do then this is the right time to do it. But it should be in the context of reducing bullshit jobs, in the big corporate sector sure … In the finance sector; blood oath. In the government sector as well.
I used to see it as the taxpayer versus the taxeater. But that analysis is just very unhelpful. No lets go with Graebar here. And lets get rid of these BS jobs and make people happy by allowing them to move out to where the air is fresh and clean.
The time to get rid of excessive hours is NOW. Because to pay the bills this is the time we need to actually PUSH UP the unemployment rate. So we can be a slick clean mean energy efficient machine.
But for the first time with happy citizens. Not debt peons or wage slaves.
I THINK its the right thing to do. I KNOW its the right time to do it.
ECONOMICS – THE IMPOSSIBLE SCIENCE
“In a word, Economics is an Impossible Science because by its own definition the determining conditions of the economy are not economic: they are “exogenous.” Supposedly a science of things, it is by definition without substance, being rather a mode of behavior: the application of scarce means to alternative ends so as to achieve the greatest possible satisfaction—neither means, ends, nor satisfaction substantially specified. “Exogenous” however, is the culture, all those meanings, values, institutions, and structures, from gender roles, race relations, food preferences, and ethnicities, to technical inventions, legal regulations, political parties, etc., etc. The effect is a never ending series of new theoretical breakthroughs, each an Economics du jour worthy of a Nobel prize, consisting of the discovery that some relevant little bit of the culture has something to do with it. Only to be soon superseded and forgotten since the continuous development and transformation of the culture, hence of the economy, leaves the Science in its wake. An impossible Science, by its own premises.” – Marshall Sahlins.
You say its an impossible science. But Ikonoclast you make it harder than it has to be. More impossible shall we say. Like the MMT debt mystics you are taking modern central banking and commercial banking laws for granted and somehow making a pigs breakfast of it. Not in the sense that you are saying anything wrong. But in the sense that you aren’t speaking crudely and plainly and so people aren’t going to get a grip on everything you are saying. And I quote:
“In economics, the base quantity is not empirically derived. It is prescribed not described. It does not bear the same relation to the dimension as does a scientific base quantity to its scientific or real dimension. In economics, the behavior of the dimension (value) is itself emergently conditioned, to some extent, by the quantities and qualities of the base quantity. In science, we can define a base quantity (say the meter) for consistent measurement in the dimension (length) but we do not and cannot affect the dimension by issuing a quantity of the base quantity. This would be an impossible absurdity in science; both the issuing of a quantity of the base quantity and its affecting the dimension.”
Base quantity? Are you talking about cash in the hands of the public, plus promises to deliver cash on demand? If so, you are buying into the bankers cruel obscurantist scam. In modern banking, in order to confuse people into not realising that the commercial and central bankers are stealing off the public, the general rule is that the bankers will virtually always substitute a legal promise to deliver cash …. instead of just having the cash right there in the local vault itself. By this shell game they are denying Joe Public the mental capacity to visualise the movement of cash, monetary base, and money supply. Because if the public could visualise these things the theft would be obvious.
You say its impossible to understand but it will become a lot less impossible if you can simplify things in such a way as to be able to visualise what is really going on. Or if thats too hard you can visualise what ought to be going on if the obscurantist polices were outlawed.
One of the reasons that Mosler, the debt mystic, has successfully vandalised monetary reform is that his crowd try and teach money all in one hit. They even say there is no such thing as fractional reserve banking. I understand what they are saying but instead of describing the current system as an extremist version of fractional reserve banking they say fractional reserve banking doesn’t exist.
Thats like trying to teach kids olympic butterfly all in one hit. Rather than teaching them butterfly as a series of dives first. You start at the start and there is at least four phases of the development of banking, culminating with the wealth expropriating and wealth destroying farce we see before us. This is the monetary system Mosler is supporting which is why he derailed reform. You need to learn all stages of development with the attitude of a hanging judge, or you’ll always have a very vague sense of what is going on. Which is what the thieves want.
Okay, let’s it make it simple.
Institute democratic socialism by vote or revolution as required. No need for fancy, scientistic bourgeois economic theory. A good start would be a legal earnings range where the highest salary cannot be more than 10 times the lowest wage. The minimum wage needs to be set at that wage which will keep four people, two adults and two children, in their own domicile. Implement a JG (Job Guarantee) with the Federal Government as employer as last resort. Implement a condition-free, livable benefit for those who cannot work.
Implement wealth limits: no one person permitted to own more than ten times the average net worth of all adults in the country. Confiscate and re-distribute the excess wealth of capitalists. Nationalize all essential, strategic and natural monopoly industries and infrastructures. For example, nationalize health, welfare, education, power, water and communications. Create national scientific research centers for R&D
The efficiency of capitalism is a myth. Capitalism is actually a highly inefficient system. Any system which destroys people and the environment cannot, by definition, be an efficient system. It is not making an efficient allocation of resources. It is astonishing that those against a statist command system are all in favor of an oligarchic, kleptocratic and corporate command system which is less efficient, less enlightened and less democratic.
Implement democratic socialism and nationalize, nationalize, nationalize. Forget all the false, scientistic drivel raised up around capitalism. The proof is in the empirical pudding. Privatized structures are FAILING all around the world during the COVID-19 challenge and under the privatized, neoliberal model. Here in Australia, privatized age care is failing as COVID-19 rages through parts of our for-profit aged care sector. States with the most privatized health systems and hospitals are experiencing by far the most problems in that arena.
Our state institutions are saving us. Private enterprise just wants to restart clubs, pubs, bars, restaurants, tourism and sport. All these are absurd and non-essential industries, in a crisis. These are all the enterprises that operated to restart a second pandemic wave in some states in Australia. The captains of private industry are a pack of selfish idiots who do not know how to run a modern, integrated nation. That is why some western nations, like the USA, are already disintegrating under the COVID-19 challenge. Why do we continue to permit these greedy fools to have undue power and influence in our society?
The economics of capitalism is complete and utter balderdash. Any attempts to rehabilitate it or scientise it are doomed to utter failure.The true subject is social and political economy with the emphasis on the social and the political plus the ethical and the scientific. Capitalism is doomed. Capitalist revisionism and reformism are doomed. Let us not doom ourselves by pursing the tripe of capitalism and its measuring of all values in the fallacious, social-fictive dimension of the numeraire as constructed and manipulated under capitalism.
Read Marx, read Veblen, read Bichler and Nitzan (Capital as Power). None of these has the perfect truth (I don’t think) but their insights are far more valuable and far closer to truth (as correspondence of models to reality) than anything in the entirety of the capitalist apologist, falsely scientising and mathematizing literature. Take all your books on and for capitalism and throw them out of the window, with the possible exception of Keynes and a few like thinkers for counterpoints. Don’t waste your brainpower on the rest of the fallacious, normative rubbish of capitalist prescription.
This crisis and the ones which will follow in rapid succession will constitute the empirical, complete and irreversible refutation of capitalism. That ship is sinking. Don’t be on it. Not just your intellectual and social reputation depends on this choice. Your life and the lives of your family and descendants depend on this choice. Any continued choice for any variant of capitalism is a choice for personal, civilizational and human extinction.
Thats great ikonoclast. There is a lot to work with there. Thats about my favourite comment for a few months.
Coming from our current position its hard not to be sympathetic to your advocacy. Our version of capitalism is like corporate communism. The communists are even trying to tell us how we must think. Trying to dictate to sportsmen and this sort of thing. Eg A certain Rugby player from a minority community. So its communism with another face.
To be successful your democratic socialism must have a powerful small and middling sole trader sector. Even if you are completely sick of the free enterprise propaganda still there is enough truth in it that we cannot delude ourselves that we can do without the kind of incentives that would allow a small businessman to aspire to have a powerful middle sized business.
“Read Marx, read Veblen, read Bichler and Nitzan (Capital as Power).” Marx is cool but he’s a bit of a scammer. He’s trying to put the blame for the crimes of usury and fractional reserve banking onto general business. I hear that many of his deficiencies are corrected in the third volume? Not that I’ve picked it up and opened it to any page so I don’t have an informed opinion.
Veblen is really rather good isn’t he? He had a good take on how bad the pre-New Deal rich guys behaved. Of course they are even worse now. But be fair. The big end of town from 1950 to 1970 weren’t really like that. They did briefly do a great job. Thanks for the tips. I shall take a look at Bichler and Nitzan. I endorse your recommendation of Veblen 100%. Understanding Veblen would actually have helped people be better investors from 1960 lets say to the year 2000. You would have understood better the rise of the big retailers for example.
Just taking this part of your paragraph …. “The efficiency of capitalism is a myth. Capitalism is actually a highly inefficient system ….” I know you can’t take the environment out of it, but on some levels capitalism used to be pretty efficient because the recession would impose efficiency on most industries. Of course recessions aren’t a good thing and we ought not tolerate the fractional reserve banking which creates recessions. Just making a minor point that a different version of capitalism could be quite efficient. Now lets go to the full meaning of what you were saying:
“The efficiency of capitalism is a myth. Capitalism is actually a highly inefficient system. Any system which destroys people and the environment cannot, by definition, be an efficient system. It is not making an efficient allocation of resources. It is astonishing that those against a statist command system are all in favor of an oligarchic, kleptocratic and corporate command system which is less efficient, less enlightened and less democratic.”
Yes we are disgracefully inefficient. Yet a statist situation will also be inefficient if taken too far. But our version of capitalism is land hunger capitalism. Its state supported usury. There is a failure to meet Henry George part-way. Taxes on retained earnings for sole traders ought not be allowed. But royalties are wholly inadequate. They should be pushed much higher. Especially coal royalties shipped for export. If surface land had to pay for itself along Georgist lines then the land hunger wouldn’t be there and the values of natural ecologies may be better preserved and enhanced. The ultimate inefficiency of urban sprawl could never have happened under what I advocate here. So energy use per person would be lower, or at least in terms of per capita GDP.
Do your wealth and income stipulations allow for enough flexibility to have an efficient sole trader capitalism within your socialist democracy? Maybe? Maybe they are a bit tight. Maybe there is enough wiggle room. We could get started by getting rid of all taxes to retained earnings to the sole trader. And swapping the company tax for a total revenues tax gained within Australia, when it comes to the artificial persons.
Phasing to some level of Georgism should be done via communist housing policy. Along the lines of what Singapore did. Its too hard politically to just push up land taxes. Bob Carr managed to do it a little bit and bravo. But it may be that rich people can still avoid this tax through these various trusts. The trusts have to go. I think we can put an extra land tax on artificial persons fairly quickly but we will get nowhere trying to place it on individuals any time soon.
Current Keynesians, through just being fairly good observers of society are often kind of proto-Veblenite. I sure wish they would dump Keynes and put Veblen in his place. Because then they would be working on a rational basis rather than a pseudo-religious faith. I think they would be a lot happier. Things are so much worse now than how Veblen described it.
One of the few times I was disappointed with Rothbard was when I heard him dismiss Veblen. He quoted Mencken and just brushed him off as a “dishwater Marxist” … watered down Marxism. But that was the whole point. Marx was way too absolutist. Veblen was far more fair and balanced.