The last great book on economics was by Keynes. There have been critiques aplenty since, some powerful others not so much, but no one has taken the time to sit down and re-write the core from a deep understanding of the changed world.I am not so sure of that, although the great books on economics were all by what Robert Heilbroner called "the worldly philosophers." Philosophy studies the whole, and the great economists were also philosophers in their own right.
Rather than select books, I would prefer to focus on names: Adam Smith, Karl Marx, Thorstein Veblen, John Maynard Keynes, Karl Polanyi and John Kenneth Galbraith, for example, wrote prose rather than formal arguments and they did so for a reason. The whole is not only complicated (complication is expansion of a simple system) but also complex (complexity is a non-simple system).
Conventional economists reject their work as contributive since it is not expressed formally.
Formalization has its place but it is not suitable for describing whole in which quality is as important as quantity and not all information can be expressed either numerically or algebraically because relevant categories don't have distinct edges and smoothing them for tractability results in lossiness than eliminates significant information.
The world badly needs a contemporary worldly philosopher to carry on the great tradition in order to take into account the advent of the digital age and network effects, for example, as well as globalization. The next worldly philosopher must address the world economy as a closed system, with social and political inputs that are relevant to economic outcomes, as well as history.
Conventional economic thinking has reached a dead end.
The Radford Free Press
Partying Like It’s 1848
Peter Radford
" wrote prose rather than formal arguments and they did so for a reason. "
ReplyDeleteBecause they were incompetent to do otherwise....
"whole is not only complicated (complication is expansion of a simple system) but also complex"
ReplyDeleteTom this is all not that complicated...
"oh lets just ditch capitalism and adopt socialism and then everything will be great!"
ReplyDeleteThis is as bad as Andrew Anderson here with his OT based institutional arrangements...
Who are you quoting (paraphrasing?) here, Matt? I didn't draw anything close to this from the essay. In fact, he seems to believe the opposite:
Delete"People on the left have been twittering on about a crisis in capitalism since Marx made it fashionable to do so. Leftists have become akin to those religious sects who repeatedly predict the apocalypse and who never change their minds when their predictions repeatedly fail."
Because they were incompetent to do otherwise....
ReplyDeleteThe human brain is similar to a computer in that one of its functions is as a logic machine. But that is not the only function of the brain, albeit it is an important one — although some assume that when enough is known about the brain and how it functions, it will be found to be a only a logic machine capable of mirroring a rational universe. At this point, this is a big assumption with little evidence for it.
As a logical machine, the human brain can run various kind of logical from propositional logic to modal logic to fuzzy logic and fuzzy sets. AI is not there yet to anywhere near the same degree.
Moreover, the human brain is able to handle quality and quantity, possibility and actuality, and functions in the same expression that are, for example, descriptive, normative, prescriptive and performative. Moreover, brains can operate under conditions of both epistemological and ontological uncertainty.
Formal models are good for some purposes and inadequate for others. The human brain at this point has more power than the most powerful computer, although it cannot process the volume of simple date as fast. But at this point computers are minimally reflexive or creative. But even the most advanced computer cannot do what humans can do individually and in coordination. It may happen "some day" but that day is not foreseeable given the present state of technology.
Humans use both ordinary language, which is highly rich, and formal languages, which are sparse. Rigorous thinking often involves reducing richness and increasing spareness. The problem is that the sparser the less extensive and more limited.
At this point no one thinks that ordinary language will be reduced to formal language in the foreseeable future, if ever. Computers are instruments, Owing to creativity, humans have managed to stay ahead of the instruments they develop and there is no good reason to think otherwise. The likelihood is that computers will allow humans to become more creative.
In the idea of formalizing language was thought possible and proposed as an Ideal by Rudolf CarnapRudolf Carnap and the Vienna Circle as Logical PositivismLogical Positivism. While it was influential, the strong form of it was shown to be problematic. The most promising replacement is AI, but AI is in its infancy.
Human brains use the logic of ordinary language which is not formalized or even well understood. They also draw on a databank of tacit knowledge.
At this point, formalizable knowledge is pretty restrictive. However, informal language can capture a lot of relevance that formal models are as yet not capable of handling, owing to intractability or lack of suitability of subjects matter to formalization.
Tom this is all not that complicated...
ReplyDeleteThen write up and publish it.
Here:
ReplyDelete"We're not 'out of money!'"
The End.
How hard do you have to make this?
ReplyDeleteHow hard do you have to make this?
ReplyDeleteIt has to be explanatory and predictive — logically compelling and evidence-based.
Or else highly persuasive.
Where is the book it is so simple?
ReplyDeletePickett made a good stab at it but botched the job in bringing in all the neoclassical stuff that just confused the issues.
Should be Piketty.
ReplyDeleteMatt: "Because they were incompetent to do otherwise...."
ReplyDeleteThat's doubtful. Keynes was a brilliant mathematician, but he was clear about the limits of mathematics when applied to a social system like the economy. Others have tended to think that there are "rules of thumb" that can be extended further than Keynes thought and may be good forecasts of the economy: private debt, financial leverage, asset prices, genuine full employment (preferably unionised), a large public sector. Kalecki and Godley are within that tradition. This kind of thinking may be systematised to some extent, but it'll never be complete. The closest there's been are the SFC modellers and MMTers, and as superb as this analysis is, a good part of it is prose. There are too many factors involved, but saying "too much private debt is not economically or socially useful" is as good as you're going to get.
There'll never be an equation that'll explain all possible futures: the variables are such that what might be sustainable in any one year may be disastrous in another, hence the difficulty of predicting the exact timing of the crisis that was building and finally hit in 2008. And even then, as Mike and Warren have pointed out, the severe problems of 2008 were turned into perpetual disaster by policy. There'll never be an equation or a systems analysis model for the stupidity and self-indoctrination unleashed on an unknowing public by its political representatives.
For a while there, our ancestors huddled in trees and pulled branches over their heads, trying to keep dry. Then we descended from the trees, stood upright, and served as lunch for the animals. Now, after 200,000 years on the road, the greatest problem we face is human nature, ourselves; the duality of human nature to be concise – which wolf to feed. I’d look for a “contemporary worldly philosopher” that can bring peace to human nature .... :-) ... the politics and economics being attributes, not causes
ReplyDeleteThe only certainty we have is from the analysis of the Human Genome which shows that historically some mechanism exists which makes competition subordinate to cooperation although such analysis may be tenuous. So death dealing viruses which are themselves in competition for survival are stripped of their deadliness and what beneficial genetic innovation they've created incorporated into the extended hologenome:-
ReplyDeletehttp://www.ncbi.nlm.nih.gov/pmc/articles/PMC4594229/
This "certainty" I mention is achieved through the act of "choosing" which is an information activity yet we fail to see life as being based on the manipulation of it especially that money at root is only information signalling. If we want to teach our own children the importance of the "work ethic" we can hold up a bank note and ask them what household chore they'll try to help with for a certain time period. Recognizing that the bank note is acceptable to a store owner for something they desire our children will cut a deal. That bank note, however, is merely sending a signal that it can be continuously used in relay fashion to get us what we need be it the essentials for survival or the "icing on the cake," In the national economy and by extension the global economy all that matters is that an optimum amount of this "information" is made available relative to resources and equitably distributed all the rest is economics!
"The world badly needs a contemporary worldly philosopher to carry on the great tradition in order to take into account the advent of the digital age and network effects, for example, as well as globalization. The next worldly philosopher must address the world economy as a closed system, with social and political inputs that are relevant to economic outcomes, as well as history."
ReplyDeleteyes and his name is Tom Hickey :)
"Who are you quoting (paraphrasing?) here, Matt? I didn't draw anything close to this from the essay. In fact, he [Peter Radford] seems to believe the opposite"
ReplyDeleteSix, Matt has a peculiar way of reasoning: he doesn't need to read what he criticises, he just knows it is wrong.
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See? Comment threads are great!
Philosophy doesn't have any thing to do with closed systems or general systems theory...
ReplyDeleteThis issue of whether or not we are "out of money!" IS a philosophical problem which you don't use mathematics to solve...
All of those dead idiot people whose names you keep dragging out as if they had some great insight thought we were "out of money!" too...
"Formalization has its place but it is not suitable for describing whole in which quality is as important as quantity and not all information can be expressed either numerically or algebraically"
ReplyDeleteHate to break the news to you Tom:
https://en.wikipedia.org/wiki/Quality_management_system
Tom the left simply does not understand material systems management/administration this is not their area... left is more focused on people/human experience not our material support systems... look at Venezuela, Obama, etc...
ReplyDeleteHere is a philosophical problem for you:
ReplyDeleteBill says here:
"governments bailed out the banks during the early days of the GFC and protected the perquisites of the senior managers that created the problem in the first place."
Then he says here:
"when in reality a systemic shortage of jobs explains their plight."
It cant be both....
Of course it can be both Matt.
ReplyDeleteThere is a systemic shortage of jobs AND the GFC was created by managers both at the individual bank level and higher levels. How was the GFC created? It was created because people making policies think that private credit levels dont matter. They think it is just one person borrowing from another and that the "correct" interest rate will always make it work.
In addition many cant see how having so many people without a steady flow of income will negatively affect credit issuance. So the perpetual army of the unemployed, while making labor cheaper and easier to bully, also dont borrow much. They also default more as they lose jobs when our leader think we are out of money. I know you know this but the amount "below trend line" our job creation has been the last 8 years can almost entirely be explained by public sector job loss. Private sector jobs have boomed under Obama, especially as compared to Bush, but public sector jobs cratered and haven't come back. Of course many, including Obama, cite this as "responsible govt management" and want applause for this
So the systemic shortage of jobs does eventually drive a financial crisis when leaders abandon sound fiscal policies
According to Bill Black and a number of others in law of finance, the GFC was largely created by CEO control fraud that was abetted down the line by rating agencies, mortgage brokers, appraisers, etc. Without it, the Ponzi involving massive fraud in the housing market and also the securitization process, and then the foreclosure process, could not have happened.
ReplyDeleteHow do you model that formally, let alone in terms of not being out of money.
"The economy" is embedded in society as its material life support system. Therefore economics is social and political as well as economic, and economics is joined at the hip with finance in a monetary production economy.
The challenge is to create and maintain an integrated social, political and economic system that is fit for purpose — effective, robust, reliable, resilient, and efficient. In the modern Western world this system is assume to be based on liberalism, which requires an integration of social, political and economic liberalism.
There is no model close to handling this, and there is no commanding contemporary vision about how to do it either. There is not even an agreed upon approach that has been set forth in a way that promises it might work better than the clusterfuck in place that run by an oligarchy for its own interests by privileging capital (ownership) over labor (people, workers) and land (the environment, the planet) and by creating double standard of justice that allows criminality at the top.
Yes, this can be kept going by feeding it paper but it that a viable solution in the long run, given that there is also a social and political dimension. I don't think that giving morons and thugs more money is a viable solution, and the way they are spending a lot of those funds on armaments to extend their reach, it threatens the system as a whole. Moreover, so does negative externally in a capitalist system in which money rules. At a certain point, the solution to pollution can no longer be dilution. But the ownership class that is in firm control refuses to switch course without a "definitive model."
continued
continutation
ReplyDeleteA fundamental problem with relying on economics in policy setting is that economists see all issues as exclusively or chiefly economic ones. They are not. That are social issues that have social, political and economic aspects that cannot be modeled formally with the tools available. There are devastating critiques of the present approaches but no convincing replacement has been offered and no framework, let alone models (which require a framework as a foundation).
Even if MMT were recognized as more correct than the current approach and used for policy formulation, it would alleviate some of the issues around employment, but it doesn't address other arguably more critical issues, including the most suitable form of economic system (MMT operates in the existing one with tweaks), nor does it address the paradoxes of liberalism.
MMT principles can also be applied to create more social and political problems while relieving some of them like unemployment. Like funding military expansion and wars of conquest, which is what neoconservatism and liberal interventionism are really about. It can also be used to fund expansion of security and surveillance in the direction of totalitarian control by the ruling elite, cement a system that is rotten to the core in place indefinitely. Anyone who can't see what's already happening is blind.
Moreover, I don't believe for a minute that many knowledgeable people in positions of power and influence are not aware of monetary economics and using it to fund their interests while feigning horror at the lack of funds, which they cite as reason to prune social spending, reading bring the New Deal to an end by "drowning it the bathtub" under the rubric of "big government" and "reducing your taxes." It's straight up dupe the rubes.
The actual issue, as MMT economists say, is not monetary or financial which are about means, but how to allocate real resources that are available to optimal use socially in creating and maintaining a social system that is fit for purpose — public purpose.
This is an issue that extends beyond economics and indeed beyond science, since it is involves non-descriptive aspects that are normative, prescriptive and performative. That is to say, it involves foundational knowledge, which is another way of saying "philosophy."
Philosophy doesn't have any thing to do with closed systems or general systems theory...
ReplyDeletePhilosophy is meta. Meta can occur in different ways. Foundational issues are meta. Issues that bridge quality and quantity, positive and descriptive, etc. are meta. Transdisciplinary issues are meta.
The most significant issues are foundational in that there is no agreed upon conceptual model of reality. There are different world views and they are usually implicitly and tacitly presumed rather consciously and reflectively assumed.
Logical issues can also be meta, especially when criteria are involved. Most issues involve assumption of some criteria.
Integrative issues are also meta, such as reflective world views that subsume data under a particular ordering of categories.
For the most part, conventional economics ignores this and simply presumed that the world view of the ownership class is congruent with reality.
.
the left simply does not understand material systems management/administration this is not their area... left is more focused on people/human experience not our material support systems... look at Venezuela, Obama, etc...
ReplyDeleteWhat is happening in Venezuela is about social, political and economic systems clashing. Even if the Venezuelan economy were humming on socialist principles the neoliberals would be trying to undermine it because in their view global hegemony requires neoliberalism as the only allowable system.
Agreed that the left does often exhibit ignorance economically about how to successfully run a socialist system when a leftist government is in power. But it is still every difficult even under the best of circumstances domestically when that system is opposed by a transnational ruling elite that are doing everything in their power to undermine any competition from the left to the point of conducting economic warfare, fomenting regime change, and even going to war.
Bill says here:
ReplyDelete"governments bailed out the banks during the early days of the GFC and protected the perquisites of the senior managers that created the problem in the first place."
Then he says here:
"when in reality a systemic shortage of jobs explains their plight."
It cant be both....
How is that "a philosophical problem." It's a problem of logic and evidence the way it is formulated here.
A sound argument is one in which the logical form is valid and the premises are true. The conclusion of a sound argument is necessarily (formally) true based on logic and evidence.
This is the first semester of Logic 101, which is prerequisite to critical thinking and further studies in philosophy, which are chiefly about reasoning. Science is about reasoning and evidence, so it is a requisite to science also.
One could say that logic is "philosophical" in that it is foundational and presumed by all forms of knowledge based on critical thinking. Symbolic logic and math are foundational to formal thinking, and they are the basis of computer science.
Those sentences of Bill's are foundational in an argument. Both of those claims would need to be established and the logical connection between them elaborated. Bill either did that successfully or not. Whether he did in a particular case is a matter for debate.
Matt,
ReplyDelete"governments bailed out the banks during the early days of the GFC and protected the perquisites of the senior managers that created the problem in the first place."
Then he says here:
"when in reality a systemic shortage of jobs explains their plight."
It cant be both....
Sure, it can.
The first statement refers to what led up to the GFC, and how the problem wasn’t routed out in the early days of the disaster, just plastered over with dough to ostensibly protect the macro-economy.
The second statement refers to what occurred after 2008 and those the GFC affected most, and how politicians failed to drop a sufficient stimulus (which would have created sufficient jobs, for one) to alleviate their pain.
You’re confusing timelines and confusing actors within the system, which is a closed system when it comes to the USD because the USG is the monopoly creator of the buck globally.
Further, the first was the action of the central bank. The second was the failure of Congress.
ReplyDeleteGood stuff, Tom and all.
ReplyDeleteOne quibble -- I don't see the evidence for the following (quoting Tom):
"I don't believe for a minute that many knowledgeable people in positions of power and influence are not aware of monetary economics and using it to fund their interests while feigning horror at the lack of funds, which they cite as reason to prune social spending, reading bring the New Deal to an end by "drowning it the bathtub" under the rubric of "big government" and "reducing your taxes." It's straight up dupe the rubes."
From my observation, people have a way of rationalizing their preferred policies so that they don't see themselves as lying. In other words, they're not as smart as you give them credit for. Or perhaps they're smart enough to realize that society needs to function for them to prosper, and they actually believe that "drowning the government in the bathtub" will make all purer and better off. Either way, the bottom line to me is that they are more stupid than evil.
DD said,
ReplyDelete"...they are more stupid than evil."
I see it as an evil stupidity. It can't be coincidence that beliefs always err in a way that preserves status. Always, always.
A quote I stole: "The worst thing about inequality is that it makes rich people believe they are geniuses."
At first I thought the quote a good laugh, but I have come to believe it is no joke. It is 100% true.
MMT correctly shows that money doesn't grow on rich people. BUT, we let them use their wealth to put a thumb on the scales of every decision society makes. Even were an understanding of MMT to guide government policy, this issue would need to be addressed somehow. I'm not sure what it would take. History shows that preserving status is more important than keeping a head on one's shoulders. Literally.
I am not saying they are "evil," DD. As you say, they have an agenda, which is liberalization (limited government), privatization (of public assets) and deregulation (part of limiting government). They are aware of exogenous money, since Milton Friedman wrote the book on it, so to speak, and they want to subordinate government to the private finance. They may not understand the fine points of government vs private finance but they understand enough about it to work to limit the power of government by controlling government finance and subordinating it to their interests. No one at the top was under any illusions about the Fed providing unlimited liquidity and Congress bailing out banks with no change of management or ownership or any debt cram downs. There was never a question during the Bush years of special appropriations to fund the military off budget.
ReplyDeleteI don't say this is evil, although I don't say it is not either, at least some of it, e.g., what which is bound up in criminality. But it is interested and uses government to promote special interests while also holding that government should not do so for public purpose for various reasons that boil down to ideology rather than evidence.
There is an old story:
ReplyDeleteOnce, there was a young boy, living in a small village. The boy was bright, inquisitive, and perceptive. He noticed, that in his village, there were basically two types of people: - those who were happy, generous and kind, respectful to others; and those who were brooding, selfish, unfriendly, having little feeling for others. He wondered why this was, but could not decide.
He went to the Chieftain of the village and said: ‘Chief – I have a question for you’, and asked.
The Chief gave his reply: - ‘Son, in human nature there are two wolves, one good, one bad. It all depends on which one you feed’.
As in the village, so in the world. The politics and economics are attributes, not causes.
Our current reality is human nature, as it is, now. If you want a better world ......
For example, Tom’s nature is to start with the universal; Matt’s nature is to pull apart the detail. They probably both enjoy tennis ..... :-)
There are a number of complementary pairs in critical thinking.
ReplyDeletecomparison-contrast
analysis-synthesis
comprehension-application
description-evaluation
logic-rhetoric
matter-manner
simplification-nuance
They have to be integrated.
The National Council for Excellence in Critical Thinking defines critical thinking as the: - intellectually disciplined process of actively and skilfully conceptualizing, applying, analysing, synthesizing, and/or evaluating information gathered from, or generated by, observation, experience, reflection, reasoning, or communication, as a guide to belief and action.
ReplyDeleteThree Souls, One Man
Three souls which make up one soul: first, to wit,
A soul of each and all the bodily parts,
Seated therein, which works, and is what Does,
And has the use of earth, and ends the man
Downward: but, tending upward for advice,
Grows into, and again is grown into
By the next soul, which, seated in the brain,
Useth the first with its collected use,
And feeleth, thinketh, willeth, - is what Knows:
Which, duly tending upward in its turn,
Grows into, and again is grown into
By the last soul, that uses both the first,
Subsisting whether they assist or no,
And, constituting man's self, is what Is -
And leans upon the former, makes it play,
As that played off the first: and, tending up,
Holds, is upheld by, God, and ends the man
Upward in that dread point of intercourse,
Nor needs a place, for it returns to Him.
What Does, what Knows, what Is; three souls, one man.
- Death in the Desert by Robert Browning
Huh???
Critical thinking on one side of a progressive coin turns out to be on the other, for Browning at least, equally a constraint. For some critical thinkers (excluding Tom here), there is no other side of the coin (true for them, because they have never been there). Both expressions are based on individual experience, arising from the one aspirational human nature.
Peace is a reality of the human heart with unlimited potential to change minds through experience!
The politics and economics are attributes, not causes. We should never forget that. No one has ever solved the human dilemma through critical thinking (it is good for building airports though). When a human being experiences peace, they are kind. When a human being is kind, they will think good logical thoughts, and critiques, based in their nature. Politics and economics float on a sea of human nature. It needs to be calmed, made generous, made human. That is why Love has always been the most important energy for mankind – it is the heart that demands the most from us. Mind, we can take or leave it, though it bothers us. I have noticed (without being critical), very few hard-headed people include Love in their critical thinking! And yet it is the most powerful energy in human nature.