Dynamic Value As Capital - What's Missing From MacroEconomics, And GDP Too

   (Commentary posted by Roger Erickson.)



If any economist wants to hear a description of what's missing from macroeconomics, here's a great example.

Achieving Greatness by Giving Control and Creating Leaders

... the concept of leadership [and group agility, AND policy agility, as real capital] is certainly more complicated than taking and receiving orders. As retired U.S. Navy Captain David Marquet explains in the following video, it’s about creating an environment that empowers the members of an organization to think creatively and take psychological ownership of the mission at hand, whatever it may be. [And, providing them with adequate venues to practice exactly that.]
It’s about “giving control and creating leaders, not taking control and attracting followers,”

Put that in your ISLM and, instead of smoking it, just blow it up? And toss ISLM in the garbage?

What's missing from GDP? It tracks only static assets. Not dynamic assets. As Steve Hansen points out, GDP became increasingly less useful as we transitioned further from a product to more of a service economy.

Leadership?  

Leadership, leadership everywhere, but nary a drop applied to enlarging our policy space. Or to increasing our policy agility.

  Rhyme of the Ancient Marriner Eccles

Precisely Managing Nonsense, With Double-Entry Accounting

Commentary by Roger Erickson

John Maynard Keynes once wrote of Hayek’s book Prices and Production:

“The book, as it stands, seems to me to be one of the most frightful muddles I have ever read, with scarcely a sound proposition in it beginning with page 45 … It is an extraordinary example of how, starting with a mistake, a remorseless logician can end up in Bedlam.” (Keynes 1931: 394).

The Horror of Rothbardian Natural Rights

One has to be aware of the purpose of evolving aggregates before assuming definitions for natural flows, and managing them with double-entry accounting. Otherwise, you end up rigorously managing nonsense.

Sense vs non-sense comes ONLY by the selection pressure of combining feedback from all channels, existing and emerging. There is no adaptive path in the natural world that isn't bounded by dynamic equilibria between locally conflicting forces, and local perspectives.

In the end, you can't square double-entry accounting with quantum mechanics. That should remind us to never lose track of the fact that it's accounting that has to yield to reality, not the other way around.

This reminds me of three, simple, ancient truths.
* Data is meaningless without context.
* The difference between [operations] & theory is greater in practice than in theory.
* Theory soon becomes meaningless if not constantly serving actual aggregate [not sub-group] operations.

The definition of logic itself is looking for consistency in explaining unpredictable reality. Logic simply maps theory to discovered operations, and in the process selects sense from nonsense.

Interestingly, that seemed to be recognized by members of the Brain Trust who advise the FDR administrations through the astounding number of pragmatic experiments which they utilized, even though it was clear that they, themselves couldn't adequately model a completely new paradigm from the methods which context forced them to adopt, by trial and error. That had to wait for the operational summary called MMT.

STUART CHASE: SEMANTICIST EXTRAORDINARY

Chase, Stuart - Tyranny Of Words [pdf; $9 fee in USA]
  (Ironically, available here too, from Germany, free.)

One lesson is that we always need a survivable ratio of leaders and experimenters in policy offices responsible for our survival, and that we soon die if we instead fill those leadership offices with risk managers. We're always executing experiments on ourselves, no matter what we do. So we may as well have as leaders people able to rapidly learn from many mistakes, rather than those opposed to any change whatsoever, and terrified of making a mistake. The ultimate mistake is to not generate survivable ones as a survivable rate!