[From Bill Powers (2006.08.14.0830 KMDT)]
Marc Abrams (2006.08.14.0637)–
But it seems that this is a one
way street here. That is, both Bill and Rick want, and expect economists
to read and understand B:CP but both seem to be unwilling to familiarize
themselves with just some of the most basic tenants of the
discipline.
Here is a basic tenet from the cited wiki page:
Austrian economists reject
observation as a tool applicable to economics, saying that while it is
appropriate in the natural sciences where factors can be isolated in
laboratory conditions, acting human beings are too complex for this
treatment. Instead one should isolate the logical processes of human
action - a discipline named “praxeology” by Alfred Espinas.
Ludwig von Mises is commonly miscredited as coining the term
‘praxeology.’
This is very Greek, of course. Arisotle declared that men have more
teeth than women, and apparently he never actually counted them because
the ancient Greeks considered experimentation and observation to be an
inferior way of arriving at Truth.
I have done some studying of economic texts, of a modest sort (more than
economists have studied PCT texts, for sure). I remain unconvinced that
the secrets of human interactions in the economic mode have been
successfully described or understood by anybody – Marx, Keynes, Mises,
Samuelson, or anyone else who claims the title of economist. There seems
to be a great deal of self-interest in economic theory; that is, theories
are proposed that seem designed specifically to justify whatever status
quo the author already supports, or to demolish what the author already
rejects. The spirit of exploration and discovery is hard to find. I
remember a letter from Galbraith to my father in which he admitted that
while TCP may have made a few good points, Galbraith simply loved the
capitalistic system and was not about to give it up because of what any
theory or data said. His conclusions, in other words, had already been
selected, so even if TCP was right about something, Galbraith was not
about to change his mind. I’m sure others felt the same way but he’s the
only one who said it.
One common thread I have found is what economists consider to be the
community whose interests guide economic processes. In the paragraph
following the one cited above, we find:
**Austrians view
entrepreneurship as the driving force in economic development, see
private property as essential to the efficient use of resources, and
often see government interference in market processes as
counterproductive.**This is exactly the point of view one would expect an
entrepreneur – but not a consumer – to defend. Judging from what
entrepreneurs complain about, the entrepreneur does not want to be
hampered by any precepts of honesty, fairness, compassion, or integrity:
he just wants to be left alone to do what he thinks will work to make
more money. This is called letting “market forces” determine
the outcome. Of course from the standpoint of the entrepreneur that is
only reasonable, but from the standpoint of the consumer who bought a
driveway installation last week only to find that it is crumbling away
this week, this lack of accountability is far from desirable – it
negates the very reason for having an economic system, from the
consumer’s point of view. It is the consumers who bring about the
regulations that entrepreneurs try to escape from, and consumers call for
regulations because all too often entrepreneurs come across as
sociopaths.
From the standpoint of PCT, the only basic driving force in any economy
is the set of all reference conditions that people seek. Mises admits
that some of these reference conditions may pertain to survival, or to
the manner in which one survives. In fact he sounds very PCTish in
places:
**When applied to the means chosen
for the attainment of ends, the terms rational and irrational imply
a judgment about the expediency and adequacy of the procedure employed.
The critic approves or
disapproves of the method from the point of view of whether or not it is
best suited to attain the end
in question. It is a fact that human reason is not infallible and that
man very often errs in selecting and
applying means. An action unsuited to the end sought falls short of
expectation. It is contrary to
purpose, but it is rational, i.e., the outcome of a reasonable–although
faulty–deliberation and an
attempt–although an ineffectual attempt–to attain a definite goal. The
doctors who a hundred years
ago employed certain methods for the treatment of cancer which our
contemporary doctors reject
were–from the point of view of present-day pathology–badly instructed
and therefore inefficient.
But they did not act irrationally; they did their best. It is probable
that in a hundred years more
doctors will have more efficient methods at hand for the treatment of
this disease. They will be more
efficient but not more rational than our physicians.**For Mises, “rationality” is a catchword for all
higher mental processes, what we in PCT would call higher-level
perceptions with their associated control systems. But the emphasis is on
logic, not principles or system concepts. If there are economists who
employ different principles or support different system concepts, to
Mises they are simply irrational, because they fail to use the logical
processes he uses. This self-centered view negates a lot of what is
PCTish in Mises’ writings, by eliminating perceptions higher than those
of logic. It may be that installing a driveway using cheap materials and
then moving on to the next city or state is a rational means of
maximizing return on investment, but that is only under a certain set of
principles (If you get away with it, it must be OK) or system concepts
(nature red in tooth and claw). Mises does not discuss these principles
or system concepts; he simply acts out the ones that happen to determine
the premises he uses in his own view of what is logical.
If Mises had been acquainted with HPCT, he would realize that what is a
purpose at one level is a means at the next level up. A particular set of
premises might determine the course of logical reasoning, but why choose
that set of premises instead of another? The answer lies in the
principles one is controlling for at a higher level. Different principles
lead to the choice of different premises. And why those principles? They
too, are means to an end, the system concepts that make up one’s picture
of the kind of self, social, or inellectual system one admires and tries
to help create.
Here, more or less, is Mises’ system concept of Economic Man:
**In every living being there works
an inexplicable and nonanalyzable Id. This Id is the impulsion of
all
impulses, the force that drives man into life and action, the original
and ineradicable craving for a
fuller and happier existence. It works as long as man lives and stops
only with the extinction of life.
Human reason serves this vital impulse. Reason’s biological function is
to preserve and to promote
life and to postpone its extinction as long as possible. Thinking and
acting are not contrary to nature;
they are, rather, the foremost features of man’s nature. The most
appropriate description of man as
differentiated from nonhuman beings is: a being purposively struggling
against the forces adverse to
his life.This PCTish paragraph, by the way, illustrates a peculiar sort
of expository style which appears often in economics and philosophy. It
consists of making a series of statements of fact without any
support or proof, as if there could be no doubt that they are true. Of
course every assertion above, and some sentences contain two or three of
them, could be false, in which case there would be no reason to read
further. After each assertion, one could be justified in asking “How
do you know that?” and not allowing the exposition to go on until
the question is answered, or at least until some plausible basis for the
assertion is indicated. How do you know there is an Id?
The primary effect of this style, it seems to me, is the early
elimination of dissidents, leaving only those who already believe these
assertions to accompany the author the rest of the way.
Mises considers “thinking and acting” to be “the foremost
features of man’s nature.” But he doesn’t say thinking and acting
about what. If one breaks thinking down into more detailed types
of thinking, as I have attempted to do with my proposed levels of
perception, it becomes clear that traditional logical entrepreneurial
thinking, “bottom-line” thinking, is not the only kind there
is, or even the most important kind. It’s not enough to explain, Donald
Trump-like, some despicable action by saying “That’s just good
business.” One must also explain what’s good about it, and in
explaining that, one can’t help but reveal the principles and system
concepts that motivate the specific strategies.
But I agree strongly with one of Mises’ tenets.
It is customary to find fault with
modern science because it abstains from expressing judgments of
value. Living and acting man, we are told, has no use for Wertfreiheit;
he needs to know what he
should aim at. If science does not answer this question, it is sterile.
However, the objection is
unfounded. Science does not value, but it provides acting man with all
the information he may need
with regard to his valuations. It keeps silence only when the question is
raised whether life itself is
worth living.**If science provides acting man (ideally) with all the
information he may need with regard to which acts will achieve the ends
he freely values, the Austrian rejection of observation ceases to make
sense. How can you determine what economic effects a given action has, or
is likely to have, without making observations? Pure reason is simply not
enough. To try to understand economic systems without using careful,
verified, and replicable observations, organized by a working and
verifiable model, is to construct a systematic delusion. Of course
economists think that all economic theories (but one) are systematic
delusions, which means that all economic theories are considered
by the great majority of economists to be systematic delusions.
The start of an economic model that I presented a few years ago was
nothing more than an attempt to look at the interacting effects of
actions in an economic system. The problem with all attempts to do this
that I had read about before, from Keynes to Samuelson, is that they
tried to derive the behavior of the system by looking at just a few parts
of it in isolation. The idea of supply and demand, for example, is
handled in a way that leaves reference conditions out of the picture;
there is no concept of “enough.” And other simultaneous
influences on buying and selling are ignored while talking about supply
and demand.
Of course there is a relationship between supply and demand, and another
between demand and supply, but it is not the only relationship that
exists between buying and selling. The economic system is full of closed
loops of causation, and there is no way to understand it or predict its
behavior correctly without understanding the laws governing interacting
closed loops. The only people I have seen who manage to do this
correctly, using models, are those who study “agent-based”
economics (Charlotte Bruun is one of them). And even they try to use
short-cuts based on abstractions like supply and demand without
understanding how they emerge from the more basic model.
My model was certainly not complete, but it could have been made a lot
more complete. Unfortunately, the person who could have helped make it
more complete couldn’t bring himself to do it.
It has been extremely
frustrating for me in trying to talk about economics in this forum as it
applies to PCT as it was for Bill Williams.
Bill Williams, who was a close friend of Mary’s and mine for over 20
years, suffered a radical change in his last few years, which may perhaps
be understandable now. He was never hesitant to apply his acid wit to
ideas he disagreed with, including mine, and for most of our acquaintance
he could take reasonable criticisms of his ideas as well as dish them
out. Toward the end, however, all that changed. He became offended at the
idea of people without degrees in economics proposing unorthodox (or any
other) views (though he had little good to say about orthodoxy). His
ideas of modeling changed from his practical approach toward the Giffen
Paradox to something more impressionistic and much less organized. When I
did not accept his new approach, I very quickly turned into his
arch-enemy. I was angry and upset about that at the time, but now, in the
light of subsquent events, I am only sad.
My suggestion is for them to
read a bit from the Austrian School and Ludwig Von Mises. Again, as you
note, it is extremely important that they stay away from that
“macro” mush
The quotations from Mises above were taken from some exerpts I made in
2001. Unfortunately I didn’t write down the title of the book, but it’s
probably one of the main ones you get to through his web page. As to the
Austrian school, I see no reason to accept their pessimistic views about
scientific observation in economics – it sounds more like an excuse than
a view, to me. As to their claim that human behavior is just too complex
to study scientifically, all I can say is that it may be that they
don’t know how to do it, but that does not mean that nobody can do it. I
think I’ve made a pretty good start on it, and others have, too. The
Austrian rejection of science sounds like sour grapes to me. As I’ve said
before, to me, science just means studying things honestly and
systematically and trying not to let your own desires and beliefs distort
the results. To reject science is to embrace ignorance, prejudice, and
superstition. Can they really be proposing that we do that?
As to that “macro mush,” there is no way to avoid it. Even the
law of supply and demand, or any other regularity that is seen in
economic interactions, is macro mush. A truly micro account of economics
would be as meaningless as a half-tone photograph viewed under a
microscope. Any time you’re talking about more than one person, more than
one producer, you’re in the realm of macroeconomics. It looks like mush
only when you don’t know how to deal with complex systems, but there is
no excuse for that any more.
To the believer in molecular interactions, thermodynamics is macro mush.
But thermodynamics is a lot more powerful as a way of predicting the
behavior of large assemblages of molecules than is any analysis of
molecular dynamics. Macroeconomics is far more powerful than
microeconomics in revealing the consequences of system-wide policies or
properties, and it’s the only way to unravel the effects of multiple
closed loops acting at the same time. I think that a lot of objections to
macroeconomics arise from the fact that a macro analysis leads to
conclusions that are contrary to popular beliefs and superstitions, such
as – well, I’m not here to throw gasoline on the fire. Suffice it to say
that there is no way to get a correct picture of economic interactions by
looking at the whole system one entity at a time. But it is very easy to
develop wrong ideas that way.
I think there is a much bigger
problem that both Rick and Bill face and that is the complete
revision of their current mind sets about what economics actually is and
what it describes.s revision will create utter havoc with their current
world views and I’m not sure either one of them is up to
that.
Thus spake Zarathustra. My view is that modern economics is a total mess
and needs a complete revision of world-views, which are mostly so
transparently self-serving as to be laughable, not just wrong.
I’m afraid both will fight tooth
and nail against what I would think could be the only reasonable outcome
given their beliefs about perceptual control.
It’s really time to stop alluding indirectly to things and start saying
what you mean. You refuse to describe what you refer to as your research
because you anticipate criticism and stubborn refusal on the part of
others to admit the truths you have discovered. Anyone who expects
scientific work to be accepted sight unseen as valid just doesn’t
understand how the world works. If I had taken that attitude, my name
would not be associated with PCT (though someone else’s might be). If you
continue that way, your work will be ignored, and why not?
Just what is that “only reasonable outcome?” If it were truly
that, wouldn’t everyone already agree with it? Or is your definition of
being unreasonable the refusal to agree with you? Why not just
throw it out on the table for discussion?
Bill P.