[Martin Lewitt 2011 July 27 0814 MDT]
[From Bill Powers (2011.07.27.0655 MDT)]
Martin Lewitt 2011 July 27 0448 MDT --
BP earlier: 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).
ML: Exactly, if you can have anything you want without any
effort or
cost, there is no economics. Even if you are a one person
economy
there is conflict, everything you do has an opportunity cost,
which is
the other things you could be doing with your time and
resources.
It takes investment of effort, time and other resources to get
resources.
BP: So getting everything with the least possible effort is sort
of
sinful, is that it? So we should make it as hard as possible?
What makes you think that? Having abundance for free would be
wonderful, but there would be little need for economics in that
situation.
BP earlier: 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.
ML: Economics is value neutral.
BP: An interesting comment; I expected to be castigated as a
wild-eyed
revolutionary, but evidently that wasn’t the main message you
got.
It is value neutral in the sense that it has not be taylored to
justify anything, much less you fanciful speculation. It is value
neutral in that it would also apply in the situation you describe.
Yes, economics as it is today is value neutral. That's because the
Economic Man of current economic theory doesn’t have any human
values.
The choices are made by calculating the bottom line and picking
the path
of highest return on investment, which is not what most people are
concerned about. In fact, the way Economic Man is defined is
almost like
a confession by the people who subscribe to those ideas that this
is how
they work and what they approve of as a way of
conducting
one’s life. We can, of course, put agents with such properties
into the
model to see how they get along with the rest of the agents who
are
organized differently. But first we have to have a working
model.
Economics is value neutral, the decisions are not made based upon
any values intrinsic to the system, but based upon each agents
individual subjective values. Now if we are talking about a free
market, rather than just the field of economics, that is enabled by
a relatively non-coercive environment with property rights, the
honoring of contracts and punishment of fraud. There is some
commonality of values that become important, such as a reputation
for honesty, quality products, honoring contracts, etc.
BP earlier:
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.
ML: I guess you've produced everything you consume or use
yourself.
BP: Of course not. We do manage to get together to produce things
for our
own consumption and that of others, and we use money for its great
convenience, and we get along because we are intentional,
purposive
control systems, in spite of the contradictions, waste, and
ignorance
that disturb the system. If we actually worked the way economists
think
we work, the system would have collapsed long ago, but we can
correct the
errors and put things back together pretty well after each
inevitable
disaster. It’s the people who keep the economy going, not the
other way
around.
BP earlier: 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.
ML: You are right, it is value neutral. If you, with your
values,
value the poor, or young, or old or disabled, the helping them
may be
worth something to you. That would be your
surplus.
BP: It seems that you consider it very important to have a surplus
from
every transaction, a gain that you don’t need but will find a use
for.
Yes, it is very important to have a surplus, i.e., a reason to
transact. You can consume some surpluses right away, leisure time
for instance .
While that's a pleasant thing when it happens, is that
the most important
thing in your life? Aren’t there more interesting things you like
to do
between opportunities to get a surplus?
Sure, and with surpluses you can do more things between
opportunities, and you might eventually be able to retire.
Surpluses are important for organizations and nations as well, in
achieving their goals.
Once you have all the surpluses
you want, what do you do next?
Seeing as how I want to cure cancer, heart disease and aging, I
suspect I’ll be due for a rest, once I know I have sufficient
surpluses.
Or does planning for and getting surpluses
take so much time and effort that there is no time for anything
else? Is
there no amount of surplus you would consider enough? If you’ve
ever met
anyone who does work that way, I should think you would want to
avoid
that sort of obsession.
I want to explore the universe too. Since I think even that goal is
finite, there probably would be an amount of surplus that i would
consider enough.
BP earlier: 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.
ML: You've only just discovered nihilism?
============================================================================
BP: From Dictionary.com:
Nihilism: –noun
1. total rejection of established laws and institutions.
2. anarchy, terrorism, or other revolutionary activity.
3. total and absolute destructiveness, especially toward
the
world at
large
and including oneself: the power-mad nihilism that marked Hitler’s
last
years.
=============================================================================
I had in mind philosophical nihilism, from wikipedia, nihilism "is
the philosophical doctrine suggesting the negation of one or more
putatively meaningful aspects of life. Most commonly, nihilism is
presented in the form of existential nihilism which argues that life
is without objective meaning, purpose, or intrinsic value.[1] Moral
nihilists assert that morality does not inherently exist, and that
any established moral values are abstractly contrived."
BP: No, I knew it was there. My approach is different, but I can
see how
discovering the flaws and failings of established laws and
institutions
could make someone just want to destroy everything and start over.
I
prefer a more constructive approach, in which all the flaws and
failings
are recognized clearly, but the remedy is to build something
workable to
replace the broken parts.
BP earlier: ... 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.
ML: Wait a second, I thought you had just realized that
economics dealt
with a world with no illusions. What are the illusions?
Economics is value neutral.
BP: The illusion is that the entities that make up present
economic
theory have real independent existence, rather than being
constructs
proposed and accepted by people for practical purposes.
I don't have the illusion of dualism.
They are
model-dependent, the model in this case being Economic Man, whose
properties are laid out in various economic works such as price
theory.
Current economics is value-neutral, but real economics is
conducted by
value-driven people.
yes, economics at its best requires value driven people, but in mass
society it is best if government intervention does not destroy
incentive or result in perverse incentives.
ML: It will be
interesting to
see what you mean. Since you seem to have a problem with value
neutrality, are going to produce a model that will predict what
you want
to happen, or what will happen? The world is nonlinear, even
with
the best model, we may never have enough information about the
initial
state to make succesful predictions.
What will happen depends on what has happened and on the
properties of
the system and the values of the people who run it. The economic
model I
propose focuses on the properties, and doesn’t try to predict
events
except as functions of prior events, like any good theory should
do. If
there is a disturbance, a control system will push back with about
equal
effect. This is a property of control systems, but it doesn’t
predict any
pushing behavior by itself. It states a relationship between
disturbances
and actions that always holds true and doesn’t depend on whether
this or
that disturbance happens or doesn’t happen. And disturbances are,
of
course, defined only in terms of the preferred value (that is,
magnitude)
of the thing disturbed.
BP earlier: 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.
ML: That sounds more like accounting than economics.
Can you have an economic theory without accounting? Yes, this is
accounting, and the books have to balance all of the time. It is
the
balancing of books that reveals what is wrong with the idea that
investment causes growth: you can’t have the same money being not
spent
and spent at the same time. That problem is recognized in all the
texts I
have seen, but is brushed aside as mere detail, or patched over
with an imaginary “pause” during which each role of the money
is somehow carried out in a time warp. The real problem is that we
have a
feedback loop here and if you don’t know how to analyze a feedback
system
you simply can’t understand the circular flow, or you get it all
wrong.
Economists, as far as I can see, don’t know how to analyze
feedback
loops. They see them just as sequences. In a working model, you’ll
see
how they really work, which for most people encountering this
phenomenon
for the first time comes as a counter-intuitive surprise. See LCS
III.
BP earlier: 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.
ML: If properly implemented, the books will balance.
BP: Yes, and the mystery is how that can happen when one person is
spending the money earned for producing part of what is purchased
with
the money. In the model the books will ruthlessly balance without
any
imaginary pauses and we will see what actually happens according
to the
model. That will give us something to compare with what is really
observed.
BP earlier: I have
never seen a
conventional economic model that has anything like these
elements in
it.
ML: You're kidding?
BP: Do you mean there is a conventional model that actually does
the
bookkeeping while it runs to make sure the books remain balanced?
Please
cite something so we can look it up. I missed that one.
I've seen accounting systems that continuously monitor inventory and
reorder products and supplies when they drop below a threshold.
-- Martin L
···
On 7/27/2011 8:00 AM, Bill Powers wrote:
Best,
Bill P.