Winterspeak— Intentionality and Accounting

Some weeks ago I had a good back-and-forth with the indomitable JKH in the forums about how useful Mosler's "paradigm shift" approach was vs JKHs "strictly the accounting" strategy. Mosler plays fast and loose with the language a little at time to better get his point across, and my position was (and remains) that if your goal is to knock people out of one way of thinking and into another, then sometimes you need to hit them over the head. But I don't think anyone has quite cracked that nut (no pun intended).

And yes, the term "paradigm shift" is grotesquely over and mis-used, but I think in term of MMT/PK vs standard academic economics, it is the correct term as we really are talking about taking an entire worldview, not just an isolated theory, and all of the implications that come with it; and jettisoning it for something else. This is a multiple-organ transplant procedure here, not a buttock lift, so roll up your sleeves.

Conceptualization counts when one is bucking the mainstream model.

Winterspeak
Intentionality and Accounting

David Sloan Wilson — A good social Darwinism [and much more]

Evolution has changed all we know about how humans behave, compete and co-operate. When will economics catch up?

Shreds neoclassical assumptions.

Aeon
A good social Darwinism
David Sloan Wilson | Distinguished Professor of Biological Sciences and Anthropology, Binghamton University
(h/t Gavin Kennedy at Adam Smith's Lost Legacy)

Links at the bottom of the article leads links to limited time (six months) download of papers from the Journal Of Economic Behavior & Organization and This View of Life. Here is the lead in from This View of Life:

Q: How many economists does it take to screw in a light bulb?

A: Zero. The invisible hand will do it.

Making jokes about economics is fun and easy. The field’s nickname is the ‘dismal science’. Type ‘economic jokes’ into Google and you will see 19.5 million hits, far more than other fields, and almost as many as for political jokes. Economics is the field that people love to hate.

Improving economics is much harder than making jokes. In a special issue of the Journal of Economic Behavior and Organization, more than two dozen scholars from around the world have written 13 articles with the important and difficult goal of making economics better.
The title of the special issue is “Evolution as a General Theoretical Framework for Economics and Public Policy.” This is a relatively novel approach and deserves some discussion.

The standard economic paradigm is the neoclassical model. People know what makes them happy and are good at making decisions to accomplish their goals. Furthermore, neoclassical theory has been used to support free market policies by arguing that self-interested, rational actors lead to ‘optimal’ social outcomes, when optimal is defined in a particular way 

“People are rational and greed is good” would be a lay summary of neoclassical economics.

Just reading that sentence probably makes many people’s blood boil. The list of critics of neoclassical economic is long and distinguished. Within the citadels of economic power, however, only one critique has made significant inroads. This successful critique is the behavioral economic field founded by Daniel Kahneman, Amos Tversky, and most forcefully advanced by Professor Richard Thaler of the University of Chicago.

Professor Thaler sums up behavioral economics by saying that people are ‘nicer and dumber’ than economists assume.

The authors of the special issue of JEBO believe that evolutionary theory is required to improve economics. In 1973, the famous biologist Theodosius Dobzhansky, wrote, “Seen in the light of evolution, biology is, perhaps, intellectually the most satisfying and inspiring science. Without that light it becomes a pile of sundry facts-some of them interesting or curious but making no meaningful picture as a whole.”

Paraphrasing Dobzhanksy, we, the authors of these articles on economics and evolution, argue that economics without evolution is a pile of sundry facts-some of them interesting or curious but making no meaningful picture as a whole.

Furthermore, these articles go beyond criticism to specific areas. In many cases, the authors have devoted decades to these topics, and are recognized global leaders. The techniques range from theoretical to experimental to simulation. The species covered include humans, non-human primates, and many other animals.

In order to make the issue accessible, This View of Life is pleased to provide short summaries of each article that link to the full-length articles, which the Evolution Institute has paid to make free online for a period of six months.

JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION SPECIAL ISSUE

“Evolution as a General Theoretical Framework for Economics and Public Policy,” Special issue editors: David Sloan Wilson, John M. Gowdy, J. Barkley Rosser



This supplementary issue of the Journal of Economic Behavior and Organization is based on a collaborative project between the Evolution Institute and the National Evolutionary Synthesis Center that started in 2009 with a NESCent catalysis meeting titled “The Nature of Regulation: How Evolution Can Inform the Regulation of Large-scale Human Social Interactions”. The meeting led to a 2-year project on integrating economic and evolutionary theory. This project used NESCent’s working group rubric to organize three workshops, whose participants were drawn from a larger advisory group. Other outputs of the project include a white paper submitted to the National Science Foundation and a final workshop titled“The Science-to-Narrative Chain”, which examines how to create a new public narrative based on the evolutionary paradigm.

Supplemental material can also be found at our online magazine: This View of Life

1)Wilson, D. S., Gowdy, J, Rosser, B. Jr. (2013). Rethinking Economics from an Evolutionary Perspective. An Editorial

2) Wilson, D. S., & Gowdy, J. (2013). Evolution as a General Theoretical Framework for Economics and Public Policy.

Role in issue: First lead article. Describes how evolution functions as a general theoretical framework in the biological sciences and considers four reasons why evolution might not add value to the study of human-related subjects.

3) Gowdy, J., Dollimore, D., Witt, U., & Wilson, D. S. (2013). Economic Cosmology and the Evolutionary Challenge.

Role in issue: Second lead article. Describes how modern disciplines such as economics and evolution reflect ancient cosmologies and how advances in evolutionary science can help economics overcome some of its outdated assumptions.

4) Wilson, D. S., Ostrom, E., & Cox, M. (2013). Generalizing the Core Design Principles for the Efficacy of Groups.

Role in issue: Shows how the design principles for the efficacy of common-pool resource groups, for which Ostrom received the Nobel Prize in economics in 2009, can be generalized from an evolutionary perspective and used as a practical framework for improving the efficacy of real-world groups. Also serves as a tutorial for multilevel selection theory, which plays an important role in some of the other articles.

5) Witt, U., & Schwesinger, G. (2013). Phylogenetic footprints in organizational behavior.

Role in issue: Explains modern social organizations, including firms, as a product of biocultural co-evolution. The authors have backgrounds in economics, nicely complementing the article by Stoelhorst and Richerson.

6) Stoelhorst, J. W., & Richerson, P. J. (2013). A Naturalistic Theory of Economic Organizations.

Role in issue: Explains modern social organizations, including firms, as a product of biocultural co-evolution. The first author has a business school background and the second author is one of the major figures in cultural evolutionary theory, nicely complementing the article by Witt and Schwesinger

7) Manapat, M., Nowak, M., & Rand, D. (2003). Information, Irrationality and the Evolution of Trust.

Role in issue: Focuses on the important topic of trust and illustrates the role of analytical models in evolutionary science relevant to economics and public policy.

8) Wilson, J., Yan, L., & Hill, J. (2013). Costly information and the Evolution of Self-organization in a Small, Complex, Economy.

Role in issue: Describes a real-world application of the evolutionary perspective to an economic system and illustrates the role of computer simulation modeling from an evolutionary and complex systems perspective.

9) Gowdy, J., Rosser, B. Jr. & Roy, L. (2013). The Evolution of Hyperbolic Discounting: Implications for Truly Social Valuation of the Future.

Role in issue: Addresses a fundamental topic in economics and public policy from an integrated ultimate and proximate evolutionary perspective.

10) DeAngelo, G., & Brosnan, S. (2013). The Importance of Risk Tolerance and Knowledge when Considering the Evolution of Inequity Responses Across the Primates.

Role in issue: Focuses on the important subject of inequity responses and illustrates the importance of cross-species comparison, which is novel for much of the economic and policy literatures.

11) Burnham, T. (2013). Caveman Economics: Toward a neo-Darwinian Synthesis of Neoclassical and Behavioral Economics.

Role in issue: Focuses on the concept of mismatch, whereby genetic and cultural adaptations to previous environments become dysfunctional in current environments.

12) Johnson, D., Price, M., & Van Vugt, M. (2013). Darwin’s Invisible Hand: The Evolution of the Market Competition, Evolution, and the Firm.

Role in issue: Applies multilevel selection theory to the selection of behavioral and organizational practices within and among firms, reaching a different set of conclusions than standard economic views of the firm.

13) Mullins, D.A., Whitehouse, H. & Atkinson, Q. D., (2013). The Role of Writing and Record Keeping in the Cultural Evolution of Human Cooperation.

Role in issue: Takes a long-term cultural evolutionary view on the structure of human social organizations as corporate units, with implications for current and future organizations.

14) Biglan, A., & Cody, C. (2013). Integrating the Human Sciences to Evolve Effective Policies.

Role in issue: Reviews the fields of public health, prevention science and applied behavioral analysis, which have a proven ability change behavioral and cultural practices in individuals, small groups, and large populations. Also emphasizes the importance of prosociality for promoting human welfare at all scales, which stands in contrast to the individual focus of orthodox economic theory. This article is important to underscore the fact that evolution functions as a general theoretical framework for all forms of policy, not just economics.

And a reminder that David Sloan Wilson wrote a thirteen part series on evolution and economics, "Economics and Evolution as Different Paradigms" Series.

Evolutionary theory and evolutionary economics promise to be a large chunk of the emerging new paradigm of economics, along with monetary economics, energy economics, environmental economics, and ecological economics, along with the life and social sciences. Mechanism will be replaced by organicism, and atomism by general system theory, of which economist Kenneth Boulding was a founding developer and laid the groundwork.

Bill Mitchell — Modern Monetary Theory and environmental sustainability – Part 1

There is regular commentary here that seeks to argue that Modern Monetary Theory (MMT) is flawed, bereft or worse because apparently it avoids any discussion of the natural environment. This apparently arises from the inherent conclusion in MMT that growth in aggregate demand (and real GDP) is required to maintain high levels of employment, which are considered both economically and socially desirable. This is the first part of a two-part blog on this topic. We will see that MMT is highly sympathetic to the challenges posed by anthropogenic global warming (a catch-all term) and central policy indications that follow from an understanding of MMT (for example, the superiority of employment buffer stocks) lead to an understanding of how MMT is a green paradigm as opposed to mainstream (neo-liberal) economics and much of Post Keynesian thinking, the latter which relies on generalised expansion as the solution to entrenched unemployment. We conclude that those who seek to dismiss MMT because it doesn’t satisfy their particular pet solution to climate change issues have probably not read some of the earlier MMT literature nor understood fully what is required to develop and disseminate a new way of thinking about the economy. Further, MMT is not a theory about everything! What we will see is that when MMT advocates economic growth it does so with a very different view of what that economic growth might be comprised of and driven.

Bill Mitchell — billy blog
Modern Monetary Theory and environmental sustainability – Part 1
Bill Mitchell

Bucky Fuller on transformation

Reuters — Pope Calls For New Economic Model, More Ethical Markets

Pope Benedict on Friday called for a new economic model and ethical regulations for markets, saying the global financial crisis was proof that capitalism does not protect the weakest members of society....

In it the pope said economic models that seek maximum profit and consumption and encourage competition at all costs had failed to look after the basic needs of many and could sow social unrest.

"It is alarming to see hotbeds of tension and conflict caused by growing instances of inequality between rich and poor, by the prevalence of a selfish and individualistic mindset which also finds expression in an unregulated financial capitalism," he said.

The pope said people, groups and institutions were needed to foster human creativity, to draw lessons from the crisis and to create a new economic model.

The Huffington Post
Pope Calls For New Economic Model, More Ethical Markets
Philip Pullella | Reuters

Mark Gongloff — Ken Fisher, Billionaire Forbes Writer, Attempts To Argue That The U.S. Needs Fewer Jobs

Despite all the cat calls he is getting, Ken Fisher is correct on this. The goal should be to eliminate working for a wage through technological innovation that increases productivity, eliminating repetitive work, rather than to create more of it because of some moral norm that says everyone needs to work to earn their keep, Genesis 3:19 notwithstanding. This is going to take a revision in the basic structure of the cultural paradigm. The faster we get to it, the better of we will be.

Of course, this means revising how we think about distributed prosperity. Clearly, wage income cannot remain paramount in such a system. This implies a rethinking of economics as it stands and the introduction of new economic paradigm along with the new cultural paradigm, and the development of new institutional arrangements to support it. Humanity is now in a position to begin contemplating this transition.

The Huffington Post
Ken Fisher, Billionaire Forbes Writer, Attempts To Argue That The U.S. Needs Fewer Jobs
Mark Gongloff

Deepak Chopra, Menas Kafatos and Rudolph E. Tanzi — A Consciousness-Based Science

This is nothing new, but it is a pretty clear popular presentation of a trend in science that has been growing for the past hundred years at least, actually more, if one counts William James, for instance.

What it says is that the current way of doing science makes huge ontological assumptions that cannot be true based on what is now known scientifically and has been known for some time.

This is hardly new knowledge historically, since it is found in the oldest extant human records, the Vedas, and anthropological studies suggest that this POV is much more primitive than the dawn of recorded history. This is also suggested by the early records, where the view is already well developed in terms of its articulation.

This view in no way contradicts solid scientific knowledge, only certain philosophical assumptions that underlie the POV. Adopting a consciousness-based framework leaves all existing knowledge largely as it is but opens the door to a new way of looking that enables a broader and deeper perspective and allows for the integration of the spectrum of human knowledge and creativity — science, art, humanities, idealistic philosophy, and spirituality-based religion.

What would the effect on economics be? One effect would be less emphasis on "objectivity," that is, quantity, and more on subjectivity, that is quality, value, and creativity. Practically speaking, it would mean less emphasis on on the mainstream "orthodoxy," and greater openness to fresh ideas (which may not be new but merely excluded) and new thinking.

The Huffington Post
A Consciousness-Based Science
Deepak Chopra, M.D., FACP, Menas Kafatos, Ph.D., Fletcher Jones Endowed Professor in Computational Physics, Chapman University, and Rudolph E. Tanzi, Ph.D., Joseph P. and Rose F. Kennedy Professor of Neurology at Harvard University, and Director of the Genetics and Aging Research Unit at Massachusetts General Hospital

From the comments — Money as information

Shaun Hingston wrote in the comments:

Another MMT mind bug.

Why do most MMTers dismiss the notion of 'means of exchange'? The MMT line is that money is a creature of the state. I think that this is inadequate.

What about gold? What about time-sharing systems existing within a normal economy? I think that "means of economic information exchange" should be the correct term. All 'money things' fall into the superset defined by 'economic information exchange'.

Means of Economic Information Exchange

What is it? Any token-system that facilitates the flow of economic information, and can be used to make economic decisions(i. e transactions).

What is a token-system? From an MMT perspective it is defined by everything that is involved in the flow of tokens between economic participants. So that would mean Consolidated Govt. Sector, markets and the 'money supply'. If we are talking about gold, then it really only means the physical gold, markets, and the 'natural sources' of gold.

What makes one token-system better than another?
This is defined by its ability to transfer economic information between participants. This is in both quality & quantity.

Why is state money better than gold?
Generally speaking, it is easier to transfer economic information, it can be manipulated in such a way that maintains reasonably stable prices, prices in a state money system are more indicative of participants wants and desires than those participating in a gold system.

Right, so your saying that it all comes down to a token-system's ability to transfer economic information. Why don't people start up their own currencies?
Token systems transmit the wants and desires of individuals to each other. The overall strength of a token-system is determined by its ability to statisfy wants and desires against the external world. There are individuals within each token system that can manipulate prices greater than others. They may have this power legitimately or not. If adversaries are able to influence the system enough, then they can distort prices enough to obtain more of what they desire. If another token-system is created, then it will most likely threaten this position of privilege. Therefore adversaries will respond in such a way to manipulate prices so that the new currency is threatened. This is generally the reason why new currencies have a difficult time establishing themselves.

Why do you think this is more consistent with empirical observations?
According to the MMT definition of State Money, then a lot of items currently being used to facilitate economic information exchange would be excluded, for no reason. For example, there are time-banks being used in parts of the world, but they are not subject to taxation, or spent into existence like MMT defined currency, so what are they? But what they do facilitate is the exchange of needs & desires between individuals.

What do you define as the optimum?
The ultimate economic output that can be possibly achieved will occur when a token-system most accurately reflects the wants and desires of economic participants.... This would be the hypothetical situation of when everyone can simultaneously communicate with each other, everywhere. It is meant to indicate what is the 'optimum state', not what is actually meant to happen, but what possible token-systems should be measured against.

Time for a new kind of money

Since I have ‘joined’ the MMT community, I have watched as MMT has discussed headlines and challenged the contempory economic thought. But one thing has frustrated me, the lack of creativity. As the world plunges into chaos I am surprised by the lack of creative solutions offered by the MMT community. This to me is an opportune time for MMT to show the world an alternative to the current arrangement.

As stated earlier I have argued that token-system is best able to transfer the needs and desires of participants will prevail. This in itself is something that can be offered to the OWS protestors.

I suggest that MMTers work towards a new token-system that can be offered to OWS protestors as a way for them to exchange their needs and desires. Ultimately I think that this system will either force the current system to reform itself to survive or will become inferior.

What is needed?

– A system to transmit tokens. – A system that manages the creation of tokens. – A system that facilitates the exchange of prices. – A system that measures the needs & wants of individuals.

Why will it work?

Because it will transmit needs & wants better than the current system. There are many different strategies to gain acceptance. A pool of donations could be used to support an exchange rate for the token-system. This will give the token system some underlying support while it gains acceptance. A job guarantee like system could be used initially to disburse initial funds into the economy. This could be used to coordinate the efforts of OWS. Sooner or later businesses will start to see the participants of the OWS as a labour force. They will then start to purchase tokens, which will create a pseudo-permanent state of support for the currency.

At this point, it is likely that the supply of tokens will need to be inflated. This situation is good for everyone. People participating within the OWS will start to gain jobs, the current lack of expansion in money supply of U. S.D would be somewhat offset by the expansion of the OWS token-system.

The token-system will then most likely start to become threatened by those with a vested interest of the U. S.D. The will need to increase spending in order to support their attack on the token-system or to encourage businesses to use U. S.D. Either way even if the token-system is defeated, unemployment will be fixed. There will be a population of individuals educated in MMT, and this group will act as an inoculation against any attempts by powerful morons to drive up unemployment.

Consequently it will be imperative that legislation be changed to allow, groups within the U.S.A to create their own free-floating currencies.

Immediate Suggestions

-Warren, Mike, Bill, and anyone else, should immediately issue 10,000 tokens and disburse them into the OWS movement. At the same time, they should offer at some cost to be paid in those credits, the opportunity for OWS to post on their blogs.

-Then, the Job Guarantee could be formed by paying those OWS participants that promote verifiable material that promotes the MMT agenda.

-After a series of donations have been collected, this could be used to fund a lottery/payment of which tickets can only be purchased using the OWS credits.

Perry Mehrling - What's Next?

"Otmar Issing, for example, offers a Nobel for anyone who provides a proper theoretical treatment that combines credit and money, financial quantities and financial prices. That is what practicing central banker economists like himself have always been looking for, and not found yet, certainly not in the pre-crisis academic consensus.

"A decade ago, Olivier Blanchard wrote an influential paper, “What do we know about macroeconomics that Fisher and Wicksell did not?”, in which he put forth a kind of Whig history of the progress of macroeconomic thinking up to 2000. Compared to today, suggested Blanchard, macroeconomics pre-1940 looks like “a period where confusion reigned, for lack of an integrated framework”.

"According to his account, the inter-temporal general equilibrium model (DSGE) provided that missing framework. Now, ten years later, we can see that framework in a different light, as the origin also of the “beauty” that economists mistook for truth, and apparently still do, if only by force of intellectual habit. The important takeaway is that the crisis has opened the ground for alternative frameworks as well as tweaks of the existing one.

"To be provocative, let me put it this way. We are living today in a period not unlike the inter-war period, a period where confusion reigns for lack of an integrated framework. We are living in a period of exploration and experimentation, not only in the policy world but also in the world of ideas. Let the new economic thinking begin."

IMF Calls for New Economic Thinking —

Or Does It?

Is this realization making room for MMT?