Economics

How Economics Can Free Itself from Religious Dogmatism

Pure theory made economics more remote from day-to-day reality.

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By John Rapley

The Irish have been known to describe their notionally Catholic land as one where a thin Christian veneer was painted over an ancient paganism. The same might be said of our own adherence to today’s neoliberal orthodoxy, which stresses individual liberty, limited government and the free market. Despite outward observance of a well-entrenched doctrine, we haven’t fully transformed into the economic animals we are meant to be. Like the Christian who attends church but doesn’t always keep the commandments, we behave as economic theory predicts only when it suits us. Contrary to the tenets of orthodox economists, contemporary research suggests that, rather than seeking always to maximise our personal gain, humans still remain reasonably altruistic and selfless. Nor is it clear that the endless accumulation of wealth always makes us happier. And when we do make decisions, especially those to do with matters of principle, we seem not to engage in the sort of rational “utility-maximizing” calculus that orthodox economic models take as a given. The truth is, in much of our daily life we don’t fit the model all that well.

For decades, neoliberal evangelists replied to such objections by saying it was incumbent on us all to adapt to the model, which was held to be immutable – one recalls Bill Clinton’s depiction of neoliberal globalisation, for instance, as a “force of nature”. And yet, in the wake of the 2008 financial crisis and the consequent recession, there has been a turn against globalisation across much of the west. More broadly, there has been a wide repudiation of the “experts”, most notably in the 2016 US election and Brexit referendum.

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It would be tempting for anyone who belongs to the “expert” class, and to the priesthood of economics, to dismiss such behaviour as a clash between faith and facts, in which the facts are bound to win in the end. In truth, the clash was between two rival faiths – in effect, two distinct moral tales. So enamoured had the so-called experts become with their scientific authority that they blinded themselves to the fact that their own narrative of scientific progress was embedded in a moral tale. It happened to be a narrative that had a happy ending for those who told it, for it perpetuated the story of their own relatively comfortable position as the reward of life in a meritocratic society that blessed people for their skills and flexibility. That narrative made no room for the losers of this order, whose resentments were derided as being a reflection of their boorish and retrograde character – which is to say, their fundamental vice. The best this moral tale could offer everyone else was incremental adaptation to an order whose caste system had become calcified. For an audience yearning for a happy ending, this was bound to be a tale of woe.

The failure of this grand narrative is not, however, a reason for students of economics to dispense with narratives altogether. Narratives will remain an inescapable part of the human sciences for the simple reason that they are inescapable for humans. It’s funny that so few economists get this, because businesses do. As the Nobel laureates George Akerlof and Robert Shiller write in their recent book, Phishing for Phools, marketers use them all the time, weaving stories in the hopes that we will place ourselves in them and be persuaded to buy what they are selling. Akerlof and Shiller contend that the idea that free markets work perfectly, and the idea that big government is the cause of so many of our problems, are part of a story that is actually misleading people into adjusting their behaviour in order to fit the plot. They thus believe storytelling is a “new variable” for economics, since “the mental frames that underlie people’s decisions” are shaped by the stories they tell themselves.

Economists arguably do their best work when they take the stories we have given them, and advise us on how we can help them to come true. Such agnosticism demands a humility that was lacking in economic orthodoxy in recent years. Nevertheless, economists don’t have to abandon their traditions if they are to overcome the failings of a narrative that has been rejected. Rather they can look within their own history to find a method that avoids the evangelical certainty of orthodoxy.

In his 1971 presidential address to the American Economic Association, Wassily Leontief counselled against the dangers of self-satisfaction. He noted that although economics was starting to ride “the crest of intellectual respectability … an uneasy feeling about the present state of our discipline has been growing in some of us who have watched its unprecedented development over the last three decades”.

Noting that pure theory was making economics more remote from day-to-day reality, he said the problem lay in “the palpable inadequacy of the scientific means” of using mathematical approaches to address mundane concerns. So much time went into model-construction that the assumptions on which the models were based became an afterthought. “But,” he warned – a warning that the sub-prime boom’s fascination with mathematical models, and the bust’s subsequent revelation of their flaws, now reveals to have been prophetic – “it is precisely the empirical validity of these assumptions on which the usefulness of the entire exercise depends.”

Leontief thought that economics departments were increasingly hiring and promoting young economists who wanted to build pure models with little empirical relevance. Even when they did empirical analysis, Leontief said economists seldom took any interest in the meaning or value of their data. He thus called for economists to explore their assumptions and data by conducting social, demographic and anthropological work, and said economics needed to work more closely with other disciplines.

Leontief’s call for humility some 40 years ago stands as a reminder that the same religions that can speak up for human freedom and dignity when in opposition, can become obsessed with their rightness and the need to purge others of their wickedness once they attain power. When the church retains its distance from power, and a modest expectation about what it can achieve, it can stir our minds to envision new possibilities and even new worlds. Once economists apply this kind of sceptical scientific method to a human realm in which ultimate reality may never be fully discernible, they will probably find themselves retreating from dogmatism in their claims.

Paradoxically, therefore, as economics becomes more truly scientific, it will become less of a science. Acknowledging these limitations will free it to serve us once more.

Adapted from Twilight of the Money Gods: Economics as a Religion and How it all Went Wrong by John Rapley, published by Simon & Schuster.

2017 July 13


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  • Economics has become more truly scientific in China already. Nobody else is even close.

    • Nihilist

      Please expand.

      • For 70 years, Chinese economists have, like Babe Ruth, called their shots: they’ve predicted, sometimes decades in advance, their direction and trajectory of their gigantic, shambling economy. They have always been right. They are the only economists on earth to make economics predictive and, thus, the only ones to practice it as a science.

        Our economists have also predicted the direction and trajectory of China’s economy. They have always been wrong:

        1990. The Economist. China’s economy has come to a halt.

        1996. The Economist. China’s economy will face a hard landing

        1998. The Economist: China’s economy entering a dangerous period of sluggish growth.

        1999. Bank of Canada: Likelihood of a hard landing for the Chinese economy.

        2000. Chicago Tribune: China currency move nails hard landing risk coffin.

        2001. Wilbanks, Smith & Thomas: A hard landing in China.

        2002. Westchester University: China Anxiously Seeks a Soft Economic Landing

        2003. New York Times: Banking crisis imperils China

        2004. The Economist: The great fall of China?

        2005. Nouriel Roubini: The Risk of a Hard Landing in China

        2006. International Economy: Can China Achieve a Soft Landing?

        2007. TIME: Is China’s Economy Overheating? Can China avoid a hard landing?

        2008. Forbes: Hard Landing In China?

        2009. Fortune: China’s hard landing. China must find a way to recover.

        2010: Nouriel Roubini: Hard landing coming in China.

        2011: Business Insider: A Chinese Hard Landing May Be Closer Than You Think

        2012: American Interest: Dismal Economic News from China: A Hard Landing

        2013: Zero Hedge: A Hard Landing In China

        2014. CNBC: A hard landing in China.

        2015. Forbes: Congratulations, You Got Yourself A Chinese Hard Landing.

        2016. The Economist: Hard landing looms for China

        2017. National Interest: Is China’s Economy Going To Crash?

        https://uploads.disquscdn.com/images/f9f36982f8d7357099bf85b9277b261b0b25732f073553b8bac2e2d21c87e245.jpg https://uploads.disquscdn.com/images/b8634ed9e8bf4f939dea42f72a9d9d3e4df07eae92e661898fb3425c566cae35.jpg

        • Oh this is a beautiful comment. Nicely demonstrated. But still I’d love to know more on the positive side. What have been the tenets of Chinese economists, as played out in China’s quite intentionally implemented “industrial policy”? I’m thinking basically: mercantilism? It sure worked for England, and the U.S….

          • Eclectic is probably the best word for it. Deng wasn’t kidding when he talked about black and white cats. He gave them 40 years to catch America or ‘lose citizenship from the earth’ and told them it was a race for survival. He didn’t stop being Communist, but his nationalist (survivalist) side came to the fore. https://uploads.disquscdn.com/images/777b49254015d0dc64eb07ab0c564118747635b76e03f264f677188e6687904b.jpg

            All his planners had 160 IQs and they invited the world’s best economists to spend time with them (floating down a river on a cruise boat so as not to be interrupted).

            They took the best advice from both sides, non-ideologically, as Deng had instructed them, and modeled scenarios in which to test various strategies and tools.

            They’ve retained that flexibility all along (as you can tell from those headlines, many prominent Western economists didn’t see how they could escape the consequences of previous policy decisions) and guided a huge team of horses using very loose reins for 40 years without a serious screwup.

            That’s economics raised to the level of art. So artful that they’ve managed to hide 15-20% of their GDP. It’s actually much bigger than they let on, as the chart shows.

            And predictable? I can tell you, with solid documentation, where China will be by the end of 2020 and the end of 2049, and even where it’s heading after 2049.

            They know where they’re headed alright, but they don’t yet know how they’ll get there.

            So they’ve broken the anticipated challenges into discrete elements and asked 33 provincial governors to figure out solutions for those problems by trial and error.

            Here’s the fun part: the governors who come up with the best solutions (which will eventually be rolled out nationwide) automatically become candidates for the presidency and prime ministership.

            Isn’t that cute? I call it government by carrot.

          • Nice, thanks. Sort of Keynes’ notion, that econ should be sort of like dentistry… 😉

          • As he said, “I SHOULD SAY that what we want is not no planning, or even less planning, indeed I say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers, wholly share your own moral position. Moderate planning will be safe if those carrying it out are rightly orientated in their minds and hearts to the moral issue”. –J.M. Keynes.

  • Rob Lewis

    Best example: the neoliberals’ unexamined assumption that in all things, “more choice” equates to “better”. For the fictional Homo economicus, maybe. For actual humans, not so much. Required reading: Barry Schwartz’s “The Paradox of Choice”.

  • Daniel Krynicki

    Dear Mr. Rapley,

    I’m only a retired pipe fitter. So you probably should expect to disregard my fifty years of Bible reading right away. But in case you choose to draw something worthwhile out of my ten years retirement experience in reading economics and financial histories, you may find yourself whistling a different tune about Biblical economics.

    There are many commentaries, tomes and blogs saved in my document folders, many of which are even financial histories written by highly acclaimed professors. Yes, I have put many hours of study into them all, that is, all that I have been exposed to. For various reasons I ignore much of the economic theory proceeding from quite a few economic “experts”.

    Your recent paper “How Economics Can Free Itself from Religious Dogmatism” demonstrates that you have ignored Biblical economic dogma. Actually, you have probably not even read it. It’s very simple.

    We can begin with ancient Israel in the Torah. These are comparatively short books that only devote about five chapters to Biblical finance. In Exodus 12 and 22, in Leviticus 25 and in Deuteronomy 15 and 23 we can gather the whole of ancient Israel’s national laws that pertain to lending and borrowing – moneylending in general.

    After careful examination I found that all interest in moneylending domestically was prohibited. The only allowance for charging interest on loans was when the borrowers were either outlandish or hostile foreigners. Resident aliens were afforded the same protections under their national law as the native born Israelites.

    But the allowance for lending at interest to non-resident aliens was countermanded in Luke 6:35 for those who now claim they follow Jesus. Thus Christians now are held to a much higher standard now which requires them to show love even to their enemies.We, consequently, do not live within the borders of a Christian nation because our national laws do not regard the teachings of Jesus as having any significance.

    Obviously, the outlawing of interest in moneylending cannot come to fruition today as long as all our money is created by private interests. Perhaps Abraham Lincoln and Salmon P. Chase were on to something when they issued Greenbacks as legal tender currency to prosecute the Civil War.

    Throughout the history of the United States panics, recessions and depressions have always resulted whenever there was a shortage of money. Economics Professor Stuart Crane in 1972 quipped that the only reason for a recession is a decline in the availability of credit. This he stated in his famous fifty-two minute monologue “Wheat Receipts”. So obviously, he felt that credit is indeed a part of the money supply. Obsevation, however, will show that ledger credit is highly deflationary. But his monologue was aimed at a general audience; it was not a lecture that should be given textbook status. Yet all should listen to this revealing monologue anyway. At the same time, we should also make an effort to become familiar with banking terminology. Most of it has been in usage for several hundred years now. It’s really simple; understanding common definitions about banking practices will reveal the workings of our world’s macro-economy plainly.

    This macro-economy’s wheels turn as the result of free enterprise coupled to billions of private, peer to peer transactions daily with currency and credit that are created by privately owned banks and corporations. Yet effects of the administrative processes in this system including interest, fees and charges are felt by all in prices for good and services as well as the direct taxation that must result to pay for public infrastructure and all other public dues in such a system with private money creation. If the examples of greed at the highest echelons among corporate management are an indicator of why price levels for goods and services are out of reach for most of the population, our deduction that a bank oligarchy that is also paid disproportionately for their services is not intractable.

    Just look at the Mylan CEO Heather Bresch’s meteoric compensation rise in recent memory. She ran Mylan when the Epipen’s price skyrocketed. It was reported on May 2, 2017 that CEO Heather Bresch took a pay cut in 2015, from $18.9M in 2015 down to $13.8M in 2016. Amazing, $13.8M for one person, my my. I’ll venture to say she perhaps can afford the Epipen as well as all the mortgage interest and possibly the student loans she might have left hanging on her balance sheets.

    Those who paid attention to two previous paragraphs above would have noticed we discussed two forms of money that are commonly used as a medium of exchange for purchasing goods and services: these are currency and ledger credit. The currency may well have gone back further, but we can trace one of paper currency’s beginnings all the way back to 1690 with Massachusetts Bay Colony issuing legal tender currency as “bills of credit” in order to pay soldiers who served in King William’s War against the French. Davis Rich Dewey referred to this war as the French War in his “Financial History of the United States”, pages 21, 22. The details indicating the exact name of this war are found in Langer’s “An Encyclopedia of World History”, Fourth Edition page 554. Dewey’s account about precisely how this Colony paid its soldiers with a paper currency is found in his “Financial History of the United States” on the pages already cited.

    From this point onward in Colonial America a paper currency serving as a medium of exchange made appearances numerous times. Benjamin Franklin’s 1729 essay “A Modest Enquiry into the Nature and Necessity of a Paper-Currency” indeed set the stage for Colonial Americans to issue their own currency at various times in order to make up for the shortfall of multiple world currencies that were commonly circulating. Eventually England put a stop to her Colonies issuing their own paper currency in 1764 (Dewey, page 29). Some histories refer to such paper currencies as Colonial Scrip. But histories such as Dewey’s refer to such paper currency as “bills of credit”, as did the Colonials. Some fringe monetary historians note that they were forced loans upon the people which were extinquished from existence as taxation removed them out of the money supply.

    During the Civil War, Abraham Lincoln’s Treasury Department issued Greenbacks, some of which were legal tender for all debts public and private, in order to pay for the costs of the Civil War.

    Some express concerns, and most histories provide scant information about JFK’s Silver Certificates issue during his short presidency, including Wikipedia on Executive Order 11110. Unwritten in these histories though is that this legal tender currency was issued without paying interest to the Fed because they were based upon the outstanding silver circulating among the population instead of Treasury Bonds. Immediately following his assassination, at first there was a reduction of silver content in coins, and then the complete removal of all silver in them took place by 1965. The Fed was thus successful at putting a stop to Treasury’s issue of currency notes based on circulating silver. They can hide the backroom discussions of all their influence in the Beltway, but they cannot escape scrutiny from people who pay attention to the results of their shenanigans.

    Regardless of what went on under JFK, Lincoln’s Greenbacks gave us the proof we needed that the infrastructure and services provided for us through government issue of fiat currency constitute a value received by the people from said issue. At the same time, said issue preempted the need for any direct taxation in order to pay for such public infrastructure and public services. Notice however that both Lincoln and JFK were assassinated. Both also defied the money power.

    Now here is a brief look at Social Credit:

    Contrary to the obvious conclusion many will arrive at after looking at this heading, “social credit” is not socialism; and it is not credit either. It should more correctly be given a completely different title like dividend because its designated issue as proposed by Douglas necessitates that it be comprised of legal tender currency so that it will become a permanent part of the money supply until it is cancelled out through direct taxation or through the retirement of a ledger credit loan. And since Scottish engineer Major Clifford Hugh Douglas invented it, we might want to call it the “Douglas Dividend”. Though the title subject “social credit” appears just above this paragraph, there are actually only two forms of money in use today that the people use as a medium of exchange: legal tender currency and ledger credit.

    For this subject we can ignore all of the security instruments of trade that are used in mutual risk contracts. But for this study we shall not ignore mutuum loans.

    The mutuum loan ordinarily would not refer to ledger credit because no legal tender changes hands when a loan of this ledger credit is issued to a borrower. But since ledger credit comprises the lion’s share of loans today, and since this ledger credit performs well in the money supply as money, we can and should lump ledger credit loans together with currency loans as mutuum loans.

    When a loan is made as ledger credit, currency is removed from the money supply as the borrower makes payments to retire the loan. This process is shown in a payment schedule. The payment schedule (or amortization schedule – depicted normally in a chart) displays a detailed itemization of the principal, interest and possibly fees that a borrower must pay back to the lender of the ledger credit. A ledger credit loan is accomplished simply by entering two numbers of the same amount on two columns of the ledger sheet. It is not legal tender currency.

    Marc Gauvin insists that money is comprised of just numbers and cannot have any value in and of themselves. While this notion of his is certainly true; a commercial transaction does not take place unless it has a legal basis that is commonly accepted in our system of national laws. So whether money is either currency or ledger credit, it has a basis in law; it is in reality a formal legal contract.

    No new currency is issued when a ledger credit loan is issued. Thus the payments due for this type of loan must be comprised of currency that the borrower earns and may already have existed in the circulation before the loan was issued; in other words this currency was already in the money supply or may even enter the money supply during the term of the loan.

    Dick Eastman always reminds us about the deflationary effects of money that is created as debt. Ledger credit is money because it works well in commerce to effect transactions; but it is not legal tender currency. However, it is a real part of the money supply. Not even Marc Gauvin with his BIBO currency can deny this. Yet he has written a paper entitled “Why Money Cannot Be Credit”. It’s getting very difficult to comprehend such economists whose only desire is to rewrite commonly and universally accepted definitions.

    It is because the ledger credit removes currency from the circulation through payments from the borrower that it is deflationary. It does so even in an interest free and fee free loan because no currency is issued when a ledger credit loan is issued.

    Presently, the Federal Reserve creates our currency based on the amount of debt bonds that America’s Treasury Department issues. Therefore, even these legal tender Federal Reserve Notes are issued by the Fed as the result of an elaborate loan at interest transaction.

    Here now is something for us to ponder and be ready for if the Lord ever places the reigns of monetary control in our hands. After we fire all the executive and managerial staff when we take over the Fed, we will issue both currency and ledger credit interest free and fee free, 1) as currency to pay for public dues, and 2) as ledger credit to regulate the money supply if and when it’s needed. Whenever our Treasury issues loans to the people, businesses or corporations we can choose which money to lend: we can lend either currency or ledger credit. When the currency loans are retired, no pre-existing currency is removed from the money supply. This type of loan therefore is not deflationary, while ledger credit loans are deflationary whether they are interest bearing or not.

    I hope the above is not mind bending, especially for the Douglas Dividend advocates. And I’m willing to place a Douglas Dividend on the table, as long as the social crediters acknowledge that outlawing all interest and fees in loan transactions must really be our primary objective. We must open our eyes that without the outlawing of interest in moneylending and money creation remaining in private control, the same economic woes plaguing civilization will never fade away. It’s an all out war that will never be won through appeasement of the enemies of mankind and God.

    I hope it puts the macro-economy into perspective for others as well. I’m finding even some of the best minds like Marc Gauvin have not yet grasped this. I’m sure Liam Allone and Dick Eastman understand the whole process. But I’m beginning to think Marc Gauvin might simply be an asset of the money power put here simply to keep money creation under private control.

    Margrit Kennedy’s fault was in thinking the very same thing: that money creation can somehow remain under private control. So she tried reasoning with the usurers, the bankers.

    Zarlenga (now deceased) and DiMare are closer to reality. Zarlenga wrote that public money creation has always outperformed private money creation after exhaustively studying past examples. DiMare, the Boston attorney, follows the Greenbacker Henry George. You and I, Dick, are Greenbackers as well; but I demand the outlawing of interest charging in moneylending as the real priority. A Douglas Dividend can surely follow, expecially since the people do not even understand the rich heritage of loan forgivenes and jubilee return of properties that is being kept hidden from them. In addition to the jubilee, no real estate property taxes were allowed in ancient time under the Mosaic Law. Can the people imagine a fully funded judicial branch complete with police, prosecutorial and a penal system without paying for them with one direct tax?

    The past couple of days I have been rethinking Social Credit – and formerly that it is not an advisable venture, that it may very well not be consistent with New Testament doctrine. But this rethinking does not alter the previous objections I had offered. It has only been the realization that all of the former objections should be dealt with in the system of administrative laws that can stop the dividends being given to violators of our criminal laws. The unwillingness of social crediters to notice that the outlawing of interest is the most important objective, and even more important than a dividend, is more of a stumblingblock against their genuineness to do good than their demand for the dividend evinces. Worst of all it leaves the money power in charge of money creation with lending at interest. Usury Abolishionist Ken O’Keefe called them psychopaths in his three minute video.

    A Douglas Dividend may very well produce absolutely no beneficial effects for the people with price inflation and interest rates going sky high. We could go for the dividend, but it would most likely do no good without making the outlawing of interest in moneylending our first priority. You see, perhaps Ezra Pound visualized the whole solution better than I at first did.

    Conclusion to Mr. Rapley: I can see your mind is closed, as Zarlenga’s was, about Biblical economics. I have combed the pages of the Bible; and the only ignorance I have found in the world comes out of those like you choose to ignore it.

    Daniel Krynicki

  • Helen LIpson

    There’s nothing wrong with thinking that people tend to act is ways that maximize their personal gains – as long as you understand that short-term gains compete with long-term gains, and as understand that what people consider “personal gains” include much more than possessions or wealth or sensual pleasure, and as long as you rephrase the dictum to state that people tend to act in ways that that THEY FEEL will maximize their personal gains.

    To the extent that human beings are naturally social beings who naturally take pleasure in being accepted, being appreciated, being respected, and just making other people happy (something that anthropologists and primatologists have pretty well proven), those are “gains” to one’s well-being that often promote kind, generous, socially responsible behavior – and promote the development of a conscience that makes us feel good or bad about ourselves. One might even drive a hybrid car, say, not because of an altruistic concern about the environment but because other people will THINK you care, which might make them respect you more. And that brings us to how much people ALSO like being viewed (or FEELING that they are or will be viewed) as awesome or sexy or rich or whatever – and how easily advertisers can make them feel that a particular product will bring them that “gain.”

    These are, of course, aspects of economic behavior that behavioral economists have already been addressing, but we need to recognize that it isn’t either-or, that we just need to accept a broader conception of real or expected “gain.”

    • stephenverchinski

      Except not all. See Political Ponerology. The world of the psychopathic sociopath.

  • M A J Jeyaseelan

    Most economists are certainly wrong footed in their understanding and interpretation of the very word ‘science’. It is a pity that most economists believe till date that economics qualifies to be called a science simply because of the scientific methodologies it uses. This is a highly preposterous argument. In my opinion, these economists neither have any idea of what constitutes a science nor do they understand what a scientific methodology is.

    Any science qualifies to be called a science because of the unique phenomenon, which it seeks to explain and the distinct laws and principles emanating from the study of such a phenomenon. There is only one methodology in science and that is to provide the proof.

    There are three categories sciences.

    First, the fundamental sciences, which seek to study and explain any real phenomenon. Examples of this group are physics, chemistry, and the whole array of life sciences. One of the distinct features of fundamental sciences is that these do not depend on any other science for their existence.

    The second category of sciences are abstract sciences, which provide the frameworks and tools for the better understanding of the phenomenological context of the fundamental sciences. This group includes philosophy, mathematics, logic, etc.

    The third category of sciences is of applied sciences, which combine the knowledge gained from the fundamental sciences with the tools provided by the abstract sciences for applying scientific knowledge in real life. This group encompasses the entire range of engineering sciences including that of economic engineering, which is what econometrics attempts to do.

    The most important fact that is ignored by all the econometricians is that there can no econometrics without the foundation provided by the fundamental science of economics.

    Every fundamental science deals with a unique phenomenon that exists in reality, which can be observed, researched and studied. The fundamental science of economics also deals with a real phenomenon, which in no way follows the laws and principles any other science be it fundamental or abstract. There is no way to apply mathematical principles to fundamental economics. If this becomes possible, economics will cease to be a fundamental science.

    There is only one methodology in science and that is proof. There is no other scientific methodology. The use of mathematical models can at best make econometrics an applied science but cannot make economics a science. Economics is a fundamental science with its own set of unbreakable rules. To get a clear idea of the fundamental science economics read my article hyper linked below.

    https://www.linkedin.com/pulse/10-must-do-things-reviving-economies-economics-jeyaseelan-m-a-j

  • A lot in what Rapley writes, and a lot more in what Daniel Krynicki writes below, and as what one might loosely class as a skeptic and a humanist, I have some critiques.

    Rapley states:
    “Contrary to the tenets of orthodox economists, contemporary research suggests that, rather than seeking always to maximise our personal gain, humans still remain reasonably altruistic and selfless.”

    That’s is just so wrong when you actually start to understand the depths of evolutionary selection.
    Humans do tend to act in their own self interest, and they do so largely through sets of embodied genetic and cultural heuristic strategies that have stood the test of time and context that did work – on average, over generations spent in the communities of our ancestors.
    Looked at another way – our conscious level rationality is a very thin icing on a very deep multi layered computational and behavioural cake that is deeply heuristic. Our subconscious heuristic systems create the model of reality that is our conscious experiential reality. Our only access to reality is via that model. Understand that, and you begin to understand something of the human condition.

    To understand strategy, one must understand the risk of a player consciously knowing what they will do next in any high stakes game, because if we knew, then we could give that information away at some level, and be vulnerable to exploitation.
    So we are a deeply complex mix between social signaling and high stakes gaming strategies.
    And the stakes right now have never been higher.

    Jordan Peterson does a great job of unpacking some of the very dense information stored in both biology and culture, particularly in the our mythology.

    What he doesn’t do, and what is ignored in this article, is make clear how deeply exponential technologies are altering the possibilities available in the strategic landscape we occupy, and how those changes are turning some things that were deeply beneficial in our past into sources of existential risk in our future.

    Fully automated manufacturing and delivery of goods and services should be a boon to everyone, but in a market based system that must value universal abundance of anything at zero, it is antithetical.

    There are many other levels of issues present in our society.

    It is odd that modern science seems clearly to have come out of the Christian search for God’s truth expressed in reality.

    That a search started in the premise of “Truth” should deliver an understanding that all understandings of reality are uncertain in many distinctly different and context sensitive ways, is almost paradoxical, and it is in a sense in accord with some of the deeper spiritual traditions found around the globe of the ineffable nature of reality.
    We now find ourselves in the presence of measurement errors, Heisenberg uncertainty, Goedel incompleteness, Bayesian uncertainty, chaos, maximal computational complexity, and many classes of undecidability.

    Far from truth and certainty, we find ourselves to most likely be heuristic based survival machines in a deeply uncertain world.

    And once has reached that depth, one can take a certain level of comfort from what seems most likely to be the fact of the existence of cellular life on the planet for some 4 billion years.

    So yes there is risk, and yes there is uncertainty, and it also seems to be true that there are paths available that offer a very high probability of existence and reasonable freedom into the far future (some close approximation to the rest of eternity).

    What is very clear now, from a study of the relationship of competitive and cooperative systems to the emergence of new levels of complexity, is that cooperation is fundamental to the survival of new levels of complexity.
    Raw competition can happen, and it is almost guaranteed to be destructive of complexity.
    Complexity can only thrive in a cooperative context, and raw cooperation is always vulnerable to exploitation, and requires attendant strategies for stability (recurs to infinity).

    We are in an age where fully automated systems give us the ability to empower a new level of cooperation.
    We have come from an age where competitive market based systems served many valuable roles in production, trade, information, creativity, distributed decision making, risk mitigation, etc; all of which can now be replaced by alternative systems.

    As complex evolved social entities we carry deeply embedded systems to punish injustice. In systems that move towards the purely competitive, that provides an internal and inescapable source of existential risk.

    And every level of complexity requires a minimum set of boundaries for survival – that is the nature of complex systems. So it is again almost paradoxical that the greatest possible freedom is delivered when one accepts the necessary sets of boundaries required by the levels of cooperation actually present.

    We must always have many sets of risk in tension – like the tyrranies of the majority or the minority vs individual freedom; conservatism verses creative liberty, etc.

    The simplistic idea that “one true path” is even possible seems one of the greatest risks.

    Complex systems theory seems to be telling us that infinite paths from anywhere to anywhere are possible (but a much larger infinity of paths go elsewhere, many to destruction), and the art of negotiation seems to be understanding each other sufficiently that we can all accept such restrictions as are necessary to deliver that greatest degrees of freedom that are compatible with long term survival.

    In an age of exponentially expanding computational abilities, markets deliver exponentially less utility at finding such paths (ie exponentially increasing risk).

    And we ignore the deep messages encoded in our mythology at our peril.

    A degree of humility is required every bit as much as respect for individual life and individual liberty, both of which must be within the necessary minimum sets of restraints for social and ecological responsibility.
    And all of those things must be ever evolving conversations and understandings.

    Economics seems to have a long way to go to embrace these realities.

  • Patrick Cardiff

    One problem with economists citing different tenets of orthodoxy is semantic.

    For example, when calling a “market” into question, we should apply tests and have a clear grasp of the “theory of the market” before attributing some positive force to it. Ask first: are there *many* buyers & sellers, and can no one buyer or one seller influence the outcome?

    This is how economists get away with blithely trusting “the market,” I think, even when referring to long-duration failures that have never come close to the assumptions of perfect competition.

    We know broken markets aren’t the real markets that we rely on, the ones that serve the science of Adam Smith, Labels can be a cop-out; they can also make theory seem more powerful than it is.

    Consider, is the market for doctors’ services in the USA producing a competitive equilibria of benefits for costs?

    • Helen LIpson

      About doctors: The problem with suggesting – as so many Americans do – that a free market for health care and/or health insurance would solve the problem of costs and access is that a TRULY free market – with as much “ease of access” for would-be practitioners and facilities as there is in, say, the pizza industry or the shoe repair industry – is something that I would guess very few people really want. Lacking that ease of market access creates monopolistic guilds that keep prices much higher than a truly free market would offer. And even if there WERE a free market for health care and health insurance, the “discipline of the market” never ensures that EVERYONE can afford every kind of good or service (think automobiles or fresh lobsters, say) let alone the degree of quality and safety that all our regulations on market entry for would-be practitioners, etc. promotes. Quite apart from the inhumanity of non-universal coverage, I think we have a hell of nerve denying adequate health insurance coverage to people who could most likely could afford SOME kind of health care from some practitioners or other if the market for medical SERVICES were not as regulated as it is.