Peter Radford — A Little Knowledge

Knowledge as a factor of production. Knowledge is broader than information. Knowledge includes tacit knowledge, skill, and critical and creative thinking. In other words, the study of knowledge involves epistemology, logic and language, psychology, and other relevant fields in addition to information. 

Information can be formalized but a great deal of knowledge cannot, at least given present limitations and future prospects through technology.

Labor as the human component of productions that complements capital (land included) had been conceived in terms of time, strength and ability to preform tasks. In this view, labor and capital are substitutable.

In the expanded view that includes knowledge in the broad sense, this is not the case. Accumulated knowledge is the bedrock on which the foundations of a society or civilization are erected. This is what differentiates the human species from other species of sentient beings with whom humans share the planet.

Accumulated knowledge is largely a commons, the shared inheritance, so to speak, of humankind. Innovation is based on adding to that accumulation. Intellectual property—patents, copyright, trade secrets and so forth — may isolate some of this innovation for a time, but eventually it all gets added to the storehouse of knowledge.

Without considering this factor and including it to the degree possible, economics remains an oversimplification that is not capable of dealing with the key factor.

The Radford Free Press
A Little Knowledge
Peter Radford

Chris Dillow — On Burkean Marxism

On social, political, and economic thought. Reconciling Burke as icon of the right and Marx as icon of the left.

Where Hayek and economic liberals go wrong is equating the wisdom of crowds with the invisible hand of the market rather than the evolutionary process that reveals the wisdom of the species. Markets are a manifestation of that species wisdom but not the whole of it.

Free markets do not necessarily lead to free individuals in a free society in which all can unfold their potential.

A big gripe Marxists have with capitalism is that it is a system of domination; in the workplace and in politics, only a few have effective power. By contrast, under communism such domination will cease; communism is a society “in which the free development of each is the condition for the free development of all.” In this sense, communism replaces the rule of foolish individuals with that of the wise species. It therefore facilitates Burkeanism in a way which capitalism cannot.

Stumbling and Mumbling
On Burkean Marxism
Chris Dillow | Investors Chronicle

Lars P. Syll — Paul Romer — favourite candidate for ‘Nobel prize’ 2016

The astonishing thing about this is that most economists had to be told and some still don't get it — like many other matters that are vital to economics, for example, the relationship of money and banking, and finance to economics, as well as how banking works.

Economics needs a Martin Luther to shake it out of its dogmatic slumbers and institutional rigidity. We are still waiting for the Reformation. The priesthood is deeply entrenched.

BTW, the other issue is that while knowledge is non-rival, it is excludable through intellectual property rights.

Lars P. Syll’s Blog
Paul Romer — favourite candidate for ‘Nobel prize’ 2016

Lars P. Syll | Professor, Malmo University

Mike Lofgren — The ‘Anti-Knowledge’ of the Elites

In a previous piece, I described how the Republican Party and its ideological allies in the fundamentalist churches have confected a comprehensive media-entertainment complex to attract low-information Americans and turn them into partisans.…

Not just the GOP, but also the Deep State.

Think of Robert Gates, Ashton Carter, Timothy Geithner or Eric Holder. On the surface, they seem the very antithesis of the Tea Party fanatic, gibbering about ISIS training camps in America. The preferred pose of these establishment personages is that of the politically neutral technocrat offering well-considered advice based on their profound expertise.

That pose is nonsense. They are deeply dyed in the hue of the official ideology of the governing class, an ideology that is neither specifically Democrat nor Republican. Domestically, whatever they might privately believe about essentially diversionary social issues (“rube bait”) like abortion or gay marriage, they almost invariably believe in the “Washington Consensus”: financialization, outsourcing, privatization, deregulation and the commodification of labor.

Internationally, they espouse Twenty-first Century American Exceptionalism: the right and duty of the United States to meddle in every region of the world, coercive diplomacy, boots on the ground, and the right to ignore painfully-won international norms of civilized behavior. To paraphrase what Sir John Harrington said over 400 years ago about treason, now that the ideology of the Deep State has prospered, none dare call it ideology.

Let us consider some of the tenets of their faith

I would add that conventional economics based on the principles of economic liberalism is also an ideology based on assumptions derived from and supporting a POV. Conventional economists are agreed that Marxist are ideological economics are ideological, in addition to it being wrong, but they are also agreed that all "heterodox" economics is also either wrong or unworthy of consideration because "the debate over method is settled" — by them. Even though Marxists, Marxians, and Post Keynesians, for example, warned about the approach of the global financial crisis that conventional economists largely missed and haven't been able to address satisfactorily. Their response is denial.

Consortium NewsThe ‘Anti-Knowledge’ of the Elites

Mike Lofgren

Paul Romer — Human Capital and Knowledge

In the market state of economic liberalism, only that which is quantifiable is significant and everything economic can be capitalized. Workers' capitalization is the wage or salary figure they are able to demand. This is key in a technological society, according to Romer's assumptions.

Here is the true micro-foundation that I used to think about human capital. Human capital is stored as neural connections in a brain. For example, when a person reads from a book how to use a 3-4-5 triangle to construct a right angle using only a measuring rod, this information is stored in a set of neural connections in his/her brain. These neural connections increase the productivity of this person as a carpenter. To get empirical proxies for human capital, we measure the time someone spends reading or this increase in productivity, as reflected in the carpenter’s higher wage. 

Once you have this micro-foundation in hand, it is crystal clear that human capital is a rival good and that even without any legal protection, human capital is almost perfectly excludable. Short of torturing me, there is no way for you to get information out of my neurons that I do not want to give to you. When I give someone information, for example by answering a question, I’m engaging in voluntary exchange in exactly the same way as when I hand this person some object that is in my possession. 

Now, here is an alternative micro-foundation for human capital. There is a little homunculus inside each person’s head who knows everything the person knows and who has his own low-powered ham radio station. When two people come into proximity, neither of them can prevent the homunculus in each head from broadcasting over the ham radio to the other homunculus, all the things it knows. So the mere fact of close proximity causes valuable bits of knowledge, such as how to make a right angle using only a measuring rod, to flow from one person’s head to the other person’s head, which then raises the productivity of the other person as a carpenter. 

This micro-foundation justifies the idea that human capital is not fully excludable. In less precise language, it justifies human capital externalities or spillovers. As you may have noticed, this micro-foundation is also false. 

If you accept micro-foundations that are false, you can reach all kinds of incorrect conclusions. (Sprinkle around the phrase “as if” and they will still be incorrect.) But if you stick to micro-foundations that are true,  human capital is perfectly excludable. There are no human capital externalities. Zero. Nada. Zilch.

Unstated assumption:  methodological individualism based on ontological individualism.

What's false about this? It ignores the role of relationships is a social system. It is not even possible to think, which requires the use of symbols, without a pre-existent public context. There are no private languages.

Romer's excluded middle, which he uses to "prove" his assumption, is silly.

Human ability is socially determined as well as individually developed, and all use of human ability other than the most basic, shared with animals, is also socially embedded.

The notion that human knowledge is essentially rival and excludable is socially pernicious and it is the antithesis of a fundamental assumption of scientific method, that of shared results.

Paul Romer Blog
Human Capital and Knowledge

Paul M. Romer | Professor of Economics at the Stern School of Business at New York University, and formerly STANCO 25 Professor of Economics in the Graduate School of Business at Stanford University and a senior fellow at the Hoover Institution.

Subsistence Living Amidst Hoarded Plenty - vs - The Insanely Great Performance Of Social Species

   (Commentary posted by Roger Erickson)

The “sharing economy,” or a brief recurrence of sharecropping mentality? Or both? Should we be complacent, giddy with relief, or expect even more depressing hardship before sanity breaks out again, on a larger scale? Is everything going to change as much -  better or worse - as plentiful prophets are always claiming?

"You only find this new economy if you look hard for it. In Greece, when a grassroots NGO mapped the country’s food co-ops, alternative producers, parallel currencies and local exchange systems they found more than 70 substantive projects and hundreds of smaller initiatives ranging from squats to carpools to free kindergartens. To mainstream economics such things seem barely to qualify as economic activity – but that’s the point. They exist because they trade, however haltingly and inefficiently, in the currency of postcapitalism: free time, networked activity and free stuff. It seems a meagre and unofficial and even dangerous thing from which to craft an entire alternative to a global system, but so did money and credit in the age of Edward III."

Uh ... so what? I'm not sure this helps anyone. It's just stating what all can see, without making any useful suggestions, or any useful warnings.

Let's start with the warnings. A national government is the ultimate current example of cooperative coordination, and is a remarkable achievement for any population. Tearing an organized government apart, and attempting to replace it with isolated pockets of coordination is NOT necessarily progress. In fact, that's the same, insanely juvenile, logic that various Bolsheviks & Capitalists, from Stalin to Pol Pot to Scott Walker and the Koch brothers, fell back on. Tear some highly evolved thing apart, and plan to replace it with something better? Like 5-yr olds dismantling a watch, that strategy rarely, if ever works, while evolution does.

Meanwhile, if you look at the insane profit margins of firms like Uber, they present ample opportunities for Capitalists (or Pol Pots) to - once again, and a little bit longer - steal the commons. This time, they're stealing your time, which is rather like belling the cats. Except this time it's belling the distributed cats that invent innovations, so that the bell-makers can steal them faster. The form changes, but not the goal.

Yes, new forms of coordination will continue to break out, but don't expect pickpockets with MBA degrees to stop stealing whole railroads.

Sinks in any system stop destroying aggregate output ONLY when sources surround sinks with enough warning lights and stop signs.

The desired outcome of the process we call "coordination" is to reduce any & all frictions, from individual frictions to institutional frictions. Success tracks our ability to fine tune the little things that keep us and all of our institutions from working at cross purposes. (Kudos to Col. Casey Haskins for helping to drive home that concept.)

Who controls what Marx called the “power of knowledge?” To a biologist, that seems like a specious question - revealing that the questioners mind is trapped in the capitalist dogma of agent-based competition to seize & control - for what sustainable purpose, they never explain.

Doesn't it seem more sensible to instead ask, why anyone would limit the power of aggregates to compound knowledge? Isn't that the same logic as "why shrink the flock of geese that lay golden eggs?"

To a biologist, this whole discussion is an aberrant tangent. Capitalism is no more than the mores of a bandit or Cossack camp, a population with members recently & briefly ripped from integration in a social species. Given time, even bandit bands re-invent coordination & teamwork, and return to their social-species instincts. The only question is, how much time? The answer depends on the cleverness the bandits wield, and the contexts they find themselves in. No one said evolution is easy, just unstoppable.

Our "general intellect" won't blow anything sky high, except in the mind of the aberrants. It will just allow us to regain the aggregate-intellectual-agility we once had in fluid tribal societies, before our growth spurt created our existing, supra-tribal population sizes, and thereby briefly turned us into the less-agile bandit super-society we call capitalism.

Paul Mason seems to be missing his own forest, by populating it with one too many of his own, distracting trees. All those little experiments in "sharing" on a larger scale? They started from scratch, mostly BECAUSE few, if any of the participants knew they were supposed to read attempted summaries of unpredictably distributed innovations, by people like Paul Mason. And, as noted, they were just prevented from continuing coordination on a national scale, through use of a functional government serving the needs and desires of the people.

It may come across as harsh, but what useful purpose does Paul Mason play? He travels around telling people what they see in their own mirrors? I don't get it. Does anyone remember the name of the Dinosaur who traveled around telling compatriots that the end of sauropods was occurring? Methinks it was rather obvious to all, and they didn't throw parties for scribes recording the obvious. In fact, they probably ate him.

Now about those requested suggestions. What would help cut through all the useless chatter and clutter of banalities? Maybe cooperative interactions with each other? How many of each other? There's the rub. If citizens could know summaries of what ALL of their co-citizens knew, they wouldn't have to worry about their food supply or "money" supply. They'd have more options, plenty of free time, and literally endless suggestions. For now, I'll only make one suggestion.  Personally, I think that we should be paying one helluva lot of attention to what gets taught in those cooperative kindergartens. Tomorrow's aggregate adaptive rate may well depend largely on the utility of such adaptive methods.

We are what we practice, we practice what we train, we train what we teach, and we teach what we see (not what we say).

In the end, we as a people learn the dynamic sum of what we do, and our descendants live with the outcomes we deserve.

It's literally not enough even to do unto others what you would have done to you. To make your culture even more adaptive, you now have to do unto the 7th generation yet unborn what subtle, small things you would have had your ancestors prepare for you. That's how subtle & complex our adaptive challenges now are.  In other words, our challenge is to think ahead, as never before, and more every year.

If that cascade isn't actively and exquisitely coordinated into a whole greater than the sum of it's parts, then we get the distributed civil war of capitalism, instead of the insanely great performance of finely tuned, highly adaptive, social species.

James Madison on Education and Democracy

The liberal appropriations made by the Legislature of Kentucky for a general system of Education cannot be too much applauded. A popular Government, without popular information, or the means of acquiring it, is but a Prologue to a Farce or a Tragedy; or, perhaps both. Knowledge will forever govern ignorance: And a people who mean to be their own Governors, must arm themselves with the power which knowledge gives....  

If provision were not made at the same time for every part, the objection would be a natural one. But, besides the consideration when the higher Seminaries belong to a plan of general education, that it is better for the poorer classes to have the aid of the richer by a general tax on property, than that every parent should provide at his own expence for the education of his children, it is certain that every Class is interested in establishments which give to the human mind its highest improvements, and to every Country its truest and most durable celebrity.

Learned Institutions ought to be favorite objects with every free people. They throw that light over the public mind which is the best security against crafty & dangerous encroachments on the public liberty....

Without such Institutions, the more costly of which can scarcely be provided by individual means, none but the few whose wealth enables them to support their sons abroad can give them the fullest education; and in proportion as this is done, the influence is monopolized which superior information every where possesses. At cheaper & nearer seats of Learning parents with slender incomes may place their sons in a course of education putting them on a level with the sons of the Richest. Whilst those who are without property, or with but little, must be peculiarly interested in a System which unites with the more Learned Institutions, a provision for diffusing through the entire Society the education needed for the common purposes of life. A system comprizing the Learned Institutions may be still further recommended to the more indigent class of Citizens by such an arrangement as was reported to the General Assembly of Virginia, in the year 1779, by a Committee1 appointed to revise laws in order to adapt them to the genius of Republican Government. It made part of a "Bill for the more general diffusion of knowledge" that wherever a youth was ascertained to possess talents meriting an education which his parents could not afford, he should be carried forward at the public expence, from seminary to seminary, to the completion of his studies at the highest.

James Madison to W. T. Barry
4 Aug. 1822Writings 9:103--9

Lars Syll — Piketty and the neoclassical heart of darkness

Why Matt Rognlie's neoclassical approach fails — neoclassical models cannot deal with the emergence that knowledge involves in a complex adaptive system like a modern society and its economy. Knowledge-induced scale effects vitiate neoclassical assumptions about diminishing returns to scale.

Piketty and the neoclassical heart of darkness
Lars P. Syll | Professor, Malmo University

How May We Permit Ourselves To Scale Up The Product of GROUP_LEARNING X GROUP_CREATING?

   (Commentary posted by Roger Erickson)



We've all learned a lot, since bumping into Warren Mosler, branching out of other fields, and having to learn what we didn't want to have to know about ... namely the difference between sane and insane aggregate economic policy.

Yet it's not at all clear what that knowledge gets us, if we don't know how to leverage what we all now know.

There's a famous, very old quote (dubiously attributed to Caesar), that triggered a still evolving thought process.

"It's better to create than to learn. Creating is the essence of life." JC, ~50BC

Yet where would individuals or electorates be, if they hadn't LEARNED that insight? :( [They'd be roughly where WE are?]

2000 yrs later, we've only slightly restated that train of thought.

“If only HP knew what HP knows, we’d be three times more productive." then-CEO Lew Platt, of HP

Platt's quote is touted as key to the explosively growing field of knowledge management or "KM", proving that all humanity can, will and does miss it's own, prior points.

What IS the obvious point? If we marry together the lessons attributed to Caesar, Darwin & Shewhart//Deming, we get: 

"If we all continuously learned & shared just how little we all need to share, in real time, in order for our nation to CREATE faster/leaner/better culture ... then we'd never have to worry about our Democracy." RGE :)

It seems obvious that we can't separate learning & creating ... except by dying. 

Our REAL, not just nominal, question is how to scale up the product of GROUP_LEARNING x GROUP_CREATING.

Any ideas about new methods that would allow us to create more of that "product?" 

We are NOT constrained by a net lack of knowledge.

Rather, we're lacking methods for letting ourselves sample enough KNOWN options. Worse, we have known option-exploring methods, but lack methods for allowing ourselves to apply distributed use of those subclasses of known methods, whether little or widely known. 

The outcome is that our population is in the same situation as HP's staff was 20 years ago. The US electorate is overflowing with knowledge and practiced methods ... and lacks only a few extra submethods for triggering exploration of national options. Those options can be better explored WITH an ongoing cascade of parsing methods, from best known methods (if they still apply to a non-recognizable pattern, or new context), to desparately_random trial & error.

The more I ponder this, the more our current Democracy reminds me of a patient with Parkinson's disease. Those patients can initially DO most things if prompted by triggering cues, but progressively suffer from declining ability to self-trigger their own voluntary actions. Their symptoms start with difficulty triggering physical movements, and progress to inability to trigger voluntary thoughts, and eventually even autonomic impulses such as breathing.

The evolved operations of vertebrate behavior-motor physiology reveal sub-parts of the basal ganglia as critical brain structures which "gate" all the inter-dependency circuits allowing conditional behavior of individuals.

The factors gating the more distributed functions of a human culture are not specific cultural ganglia. Rather, they are the distributed checks & balances we attempt to maintain, and the sub-methods we employ for creating, KEEPING and extending necessary cultural checks and balances.

We always need NEW METHODS, for tuning and adding to our repertoire of checks and balances, the operations we depend upon in order to explore our emerging options.

The only thing we know for sure about choosing the policy-formation methods we need is that they must help us steer - faster/leaner/better - through the unpredictable obstacle course that we loosely call "succeeding contexts."

Does that help? What core methods can we employ MORE of, in order to create, KEEP and extend the distributed checks and balances which we continuously need MORE of?

Chris Dillow — (Ab)uses of statistics

Chris Dillow links economics and power.

Macroeconomic data do not, and should not, over-ride individuals' local, dispersed knowledge of their personal situation.

You might think this is an Austrian point. But it is also a Keynesian one. Keynes described macro aggregates such as the price level or aggregate output as "vague and non-quantitative concepts" which are "unsatisfactory for the purposes of a causal analysis." To use a good if over-used metaphor, macro stats are only an imperfect map, not the terrain....

In this sense, Alasdair MacIntyre identified the purpose of macro stats - the claim to possess them is a claim to power: "What purport to be objectively-grounded claims function in fact as expressions of arbitrary, but disguised, will and preference" (After Virtue, p107). This sounds like a Foucauldian point, but it has been shared by people who wouldn't know Foucault from off stump....

If we focus upon macro data to the detriment of individuals' actual experience, we risk mistaking the map for the terrain. Which is one reason (of several) why Kenneth Boulding was right to say (pdf) that "almost all organizational structures tend to produce false images in the decision-maker."

(Use the embedded link above to download Boulding's "The Economics of Knowledge and the Knowledge of Economics.")

In a footnote, Dillow makes another good point.

Strictly speaking, "data" is the wrong word. It comes from the latin for "something given", but in fact macro data aren't given at all but rather constructed.

So-called data is the input into the black box of information processing and emerges as information. The data (given) is shaped by the data-gathering process, both limitations upon it — it's not possible to collect every detail — and selection criteria — choosing what to include and what to exclude. Then the input is processed into information using methods that involve further assumptions. As a result the output of information is only an approximation of the given from a POV, and the given itself is only an approximation of the sum of what may be relevant. For example, power is excluded from macroeconomic consideration.

Stumbling and Mumbling
(Ab)uses of statistics
Chris Dillow | Investors Chronicle

Noah Smith — What does it even mean to "believe" something?

Peter Dorman in the comments:
Jeez, Noah, you need a stiff shot of (later) Wittgenstein. Now.

Exactly.

I did my dissertation on Wittgenstein's notes that were published posthumously as On Certainty. While the term "belief" has many meanings in ordinary language given different contexts, the type of belief under discussion is absolute unshakeable conviction in an assumption that is not grounded on publicly available criteria, without which there is no agreement outside that POV that the assertion is actually knowledge. See Plato on belief or opinion (doxa) v. knowledge (episteme).

Wittgenstein elucidates the logic of justification in ordinary language in contrast with formal languages where truth is deductive, being based on axioms or postulates. Wittgenstein's elucidations show how ordinary language description occurs through the lens of one's language, which is reflective of a worldview. I have been calling this a POV. Wittgenstein elucidates this using the Gestalt figure of a duck-rabbit, which can be seen as a rabbit from one POV and as a duck from another. We can conceive of two parties arguing over whether it is really a duck or a rabbit.

Certain propositions function as norms and criteria to delineate the boundary of one's worldview (POV). For example, functioning as normative they test admission and exclusion with respect to the POV.

While appearing to be descriptive propositions based on form and content, their function shows that they are not descriptive propositions in that they are not falsiable. This is, their position in the worldview privileges them from error. Their function is to assess other items in terms of inclusion or exclusion, truth and falsity.

Mises apriori method is a good example of this in economics and no evidence one adduces will falsify the priors for true believers since they are held to be "synthetic a priori" in Kant's sense. Same with religious dogmas and articles of faith. The invisible hand plays a similar normative role in conventional economics based on the neoliberal POV. But if one looks deeply enough into any POV, one will discover the boundary conditions.

We are all ideologues to one degree or another, because ordinary language use involves imposition of a POV in that there are no absolute criteria to ground general agreement. When there is general agreement, it is usually because we are talking to others who share that POV, which Wittgenstein calls "a form of life". But some POVs are more empirically based than other, hence, more "scientific." But that too involves the presumption that empirical criteria are paramount and that is in the final analysis a preference — pragmatically justified perhaps, but not known to be true in any absolute sense.

This is a quick summary and any explanation of Wittgenstein is bound to be wrong because he chose the method he did because the subject matter is ineffable. One has to see how the logic actually works since logic cannot describe itself without becoming involved in nonsense. Alice's Adventures in Wonderland, Through the Looking Glass and, "The Hunting of the Snark" and "Jabberwocky" should be read by adults as nonsense in this sense. Lewis Carroll (Rev. Charles Lutwidge Dodgson) was a logician playing with logic.

Noahpinion
What does it even mean to "believe" something?
Noah Smith | Assistant Professor of Finance, Stony Brook University

Lars Syll — Paul Romer gets the 2012 Nobel Prize in economics

Must-read.

Congrats to Paul Romer.

Lars P. Syll's Blog
Paul Romer gets the 2012 Nobel Prize in economics
Lars Syll | Professor, Malmo University

The most important understanding here is the difference between diminishing returns in deploying  physical resources and increasing returns in deploying knowledge resources with respect to scalability. Ray Kurzweil develops this in his concept of <a href="http://www.kurzweilai.net/the-law-of-accelerating-returns">accelerating returns</a> 

Also, that which is physically limited and particular is rival, whereas what is not limited physically and is universal is non-rival — unless legislated as rival through intellectual property rights, the current push being toward privatizing new knowledge that can be monetized. This is evoking huge push-back globally and is unlikely to be successful without an extension of imperialism.

This similar to what I have alluded to previously, e.g., Bucky Fuller's distinction between physical and metaphysical resource, the physical being limited and particular, and the second virtually unlimited and universal. The physical is scalable only with significant expenditure of physical energy and transaction cost, whereas the metaphysical is easily scale with low energy requirements and transaction cost. 

Even though rationality is bounded, the boundaries are unknown and, given the present state of human knowledge, unknowable. As Aquinas observed, knowledge is in terms of the mode of knowing of the knower. 

Thus, the question becomes whether it is possible to expand the container of knowledge in addition to the contents. There is reason to believe there is.