[From Bill Powers (2011.07.26.1030 MDT)]
Martin Lewitt 2011 July 25 2129 MDT --
ML: Good grief Bill! Evidently, you have so much hubris that you assume pre-existing work in economics has nothing to offer. Why haven't you educated yourself some. If a good is not scarce, then it is not a problem for economics. I've looked around and have found a good discussion of scarcity and am pasting it here:
Scarcity is simply the concept that human wants (not human needs) exceed the resources available that are necessary to produce the goods used to satisfy those wants.
Thus, scarcity is fundamentally the most important concept in economics, upon which all of the rest of the discipline rests. For without scarcity, no need for choice, either individual or collective, exists. One need not make a choice between buying a nice lunch at a restaurant and buying a new sweater because one will always have enough resources to purchase both goods. Since economics is the study of how people make choices, without scarcity there would exist no choice and, hence, no economics.
Thus, scarcity is one of the fundamental premises of economics. ...
BP: Splendid. It's my turn to say Good Grief. If that's really the basis of economics, I think we can understand why economics was unable to predict what just happened and is helpless when it comes to doing anything about it. It also explains why, in all my attempts to educate myself about economics, I have found practically no ideas I ended up believing (where you, apparently, believe everything economists publish, and wish me to believe it, too -- if that's what you mean by saying I should get an education).
You seem to be saying that unless there is conflict, economics has nothing to say about the way we provide goods and services for ourselves (that way being how I would define economics, but read on). It looks as if economics has been tailored to justify a society in which the wealthy and powerful take what they want by any means available, make and enforce laws (through purchase of lawmakers) that keep the rest from overthrowing the system that makes this possible, and requiring the non-wealthy and non-powerful to work to support the system and remain as close as feasible to the subsistence level of existence (got to have those scarcities). In other words, the status quo. No wonder we have revolutions -- that's the only remaining way for the underdog majority to get a life.
Unfortunately, when the underdogs arise and win, they are no better at running an economy than those they displaced. They don't have any workable theory of economics, either. Without a workable theory, we seem to be doomed to endless reorganization in random directions. Well, that will work eventually, but not soon enough to do me any good.
My picture of an economic system is a lot of people working individually and together to find or invent or produce or do things that are useful to themselves and each other, and where possible to bring life closer to what each person wants it to be. There's nothing in that definition about property and owners and managers and distributors and customers and dependents and the poor or young or old or disabled. Or about money and stocks and bonds and credit and sub-prime mortgages. All but the young, old and disabled are artifacts of a particular way of managing an economic system, invented on the fly as we make mistakes and try to correct them. There is nothing necessary, fundamental, or essential about any of them. They are the entities and rules of a game of Dungeons and Dragons we are inventing as we play the game, with no idea of what the consequences will be until they happen.
It's interesting that people can bring some kind of order into that sort of game, but of course nobody goes home after playing Dungeons and Dragons believing that that world, with its levels and passageways and doors and rules and magical appearances and disappearances, really exists. It seems real enough while you're playing it to involve hopes and disappointments and other strong emotions, but when it's over, the illusions dissolve and we go back to real life.
Except in economics, where the illusions persist even as we try to live real life.
To construct a usable model of economics, we have to start from ground level and build from there. Nothing gets into the model unless we can support it with observations, or unless we label it as an hypothesis to be tested. Before we use the model, everyone has to sign off on its organization, so we're all talking about the same thing. Before we believe it, every hypothesis has to pass the tests we apply, or be changed until it does. Tough requirements, dependable model. You can't have the second without the first.
If anyone has an opening suggestion for starting the construction of a model of an economic system, I will be very attentive. Here's a small building block.
When a person buys a quantity of goods or services, the producer's inventories of the goods or time available for services get depleted and the person's store of goods or benefits from services increases by the same amount. The person's store of money or credit shrinks by an amount equal to the number units of the good or service obtained times the price per unit. At the same time, the seller's store of money or credit is increased by the same amount.
That is a description of the environment in which the environmental feedback functions of the participating control systems exist. This model can be elaborated if we take things into account like interest and depreciation and use of consumables and so forth, but this is a starting point for considering the main elements of a transaction. This much of the model can be tested by positing specific transactions, so we can see what happens.
I have never seen a conventional economic model that has anything like these elements in it.
Best,
Bill P.