Real-World Economics Review Blog

With this relentless assault on the assumptions behind the rationality on which economics is based in this blog, it is frustrating to see so many throw out the baby with the bath water by turning to social science in general for solutions to the “scientific” problem. Neoclassical economics has been considered the physics of the social sciences because it is the most “scientific” of them. There is not much credibility left there. But there aren’t any Nobel Prizes in other social science fields. The first time I looked at the subject for my 1989 book (Management & Higher Education Since 1940, p. 39), I wrote: “…the attempt to make the social sciences part of the new paradigm in management studies has been the most problematic, for effort to improve the scientific methods have not enhanced confidence in reliability very much. Professor Hubert Blalock, Jr. concluded after decades of statistical work that ‘the social sciences, lodged as they are between the natural sciences and the humanities, have almost inevitably become a battleground over the suitability of natural science models and approaches to the study of human behavior and social processes.’” (Basic Dilemmas in the Social Sciences, Beverly Hills, 1984, )

The situation hasn’t changed, so why keep looking to social science for scientific models? I know that many of you have been trained in social science, because I see that you are not very good at dealing with specificities as to time and place. But study problems that are specific to time and place that real people are experiencing. You will end up with contested historical results, about which the researchers will argue, but at least we will stop endless, pointless, self-interrogation among social scientists about methodology and theory that is so eternally fruitless and boring.

People function at a more elemental level. “I want this. I will buy it or barter for it.” That it will eventually present a disposal problem for example is not factored into the decision-making. Many people do not think about where it will go in their office or house. “Want. Buy.” The niche argument is interesting but why remain in a niche when better options are known to exit? For example, if rationality were important in decision-making we would all live in California where it is warm and pleasant. I live in Canada and do not plan to move to California. Why do I and millions of others make that decision?

Economics and PR have looked at what it takes to change those patterns in areas of other decisions and have had limited success. Why did we go with VHS (less rational) rather than BETA (more rational)? Marketing and power. Make it look like the trend and we all jump on board. Social factors and the culture matter more than individual psychology.

Just thinking in print here. Probably nonsense! lol

Ken @ 24, I’m sorry if (having to rush out because of my slowness) I’ve still not made myself clear. I’m NOT saying one form of thought of thought/rationality SHOULD be privileged over another, I’m saying that in practice it IS, i.e. the “male” verbal logic directed by emotions and directing what is sensed, with the grounding of language by reference to the fourth resource (accumulated memories of largely visual first-hand experience of external events) hardly getting a look-in. I am trying to saying is that at all the members of the family group are equally important, but they are at different stages of development and engaged in different phases of “nested” biological, reproductive, distributive and intellectually creative processes, with each needing to be given priority in its own context and the inner (biological) needs taking precedence in the event of conflict. The intellectual level is most able to give way, but least likely to when its attention is so largely on itself.

On the issue of failure to develop, what counts is not what the parents want but whether or not people’s genes and circumstances enable them to accumulate the experience necessary for wise judgement. Stuffing most people in dead-end jobs and the rest in roles where they see only symbols is hardly the recipe for mutual understanding and wisdom.

On the issue of diversity, it seems you are still not seeing that “the one” is not one of the details, but rather a form of representation which can account for all the details and be detailed as far as is necessary for particular purposes. Does one want an infinite variety of rules of logic, or a family tree on which an infinite variety of us can hang own family details? One can have an infinite variety of rectangular jigsaw puzzles, but turn them over and they all look the same: broken down into interlocking pieces with four male and female locators. Perhaps the most important to understand is the concept of an algorithm. Roman numerals became a pain for scientists because they had to create and remember new unit symbols as numbers increased. Algorithmic arabic numbers use a small and easily remembered set of symbols, and procedures which repeatedly reuse them, shifting them to visually indicate increased significance. Scientific variations on this theme allow even almost infinite numbers to be represented very simply. The diamond-shaped algorithmic model I am using accounts algorithmically for everything from the Big Bang to the chemical structure of DNA, the difference between microbes, plants, mobile animals and intellectually mobile humans, and thence to the differences between humans as consumers, producers, distributors and developers in the economic system. Financiers have recently completed their own no longer humanly biological chrematistics with the evolution of derivatives. The value of such models, I suggest, lies as much in communicating understanding as in specifying the context of whatever it is we are looking for.

Ken (@ #29), as I’ve said earlier, you can take a horse to water but you can’t make it drink. I’m probably more a conservative at heart than you are, but I DON’T want to conserve what we have had since Thatcher sufficiently to have spent thirty years trying to work out what would be worth conserving, and that certainly doesn’t involve the present world of “grand schemes [of self-enriching world government] and emotional grand standing about rationality and fixing things as they should and must be”. Nor does it involve being satisfied with the spectacle of history “muddling through”.

Listen to that individualist rationality saying “I find it difficult to accept that humans can control their wills and emotions to accomplish the precision you suggest.” When did I suggest precision at the micro level? What I claimed was all-inclusiveness at the macro level, and I pitched my theory at that level because, even in a society as small as a family, our differing strengths, weaknesses and needs make monistic precision even of aims impossible, and sufficient control of wills, emotions and precision only likely to be achieved by “give and take” and helping each other put right what has gone wrong before it has time to do serious damage. That is precisely what I want to see facilitated, but global control of finance is preventing: kept that way by misconceptions of the nature of money, government, education and intelligence.

A credit card economy which reflected the reality that we start working life with a negative balance and the more we have, the more our lives need to repay society in kind, would at least be honest and an incentive not to hoard more than we need. An “invisible hand” theory of the economy as a system with four aims and PID error control has the implications that if one cyclic process is taken as the aim the other three must be its corrective feedbacks, and that reversing the aim without reversing the feedbacks has the effect of applying positive feedback where negative is needed and vice versa, destabilising rather than stabilising the system. You must be complacent rather than conservative if you are prepared to believe that is not significant, given what has been happening for centuries, not just recently.

#39,40, 41, I have spent my life supporting the unification of Europe after it tore itself and its civilization to pieces in two major wars in the first half of the 20th century. The great benefactor of the conflict was the US, in terms of wealth and power, but America and Britain are not the core of European civilization, which is what I treasure and always have. So when I decided to study modern European History, I concentrated on the Continent. I’m at home there, in its great cities and brillant regions. If Anglo-Saxonia wants out, then, fine with me. Let Europe go its way without them under the leadership of the new democratic Germany because most of Europe’s problems today have been foisted upon them by US-UK Investor Capitalism. Europe only has a chance if it frees itself from its thraldom.

Robert @ #43, I would be entirely in sympathy with your position were it not for two things. First, the extremely important issue of the FORM of reunion: whether it be as a family of nations (each reaching out to its own circle of friends), for which “blood is thicker than water”; or as a UK/US-style financial union (or rather, empire) of lands, run from the centre to exploit the periphery. Secondly, the fact that there around 60 million people in the UK, who would be far better off both economically and morally as part of a European family of nations than as a “junior partner” on the periphery of an American empire (itself imploding since globalisation of its own policy of preaching competition elsewhere). At #44, I don’t think you realise just how run down and debt-ridden Britain itself was in 1945. The Treaty of Rome was 1957.

Ken, I seem to have been luckier than you with my Jesuit teacher of mathematics, who in my last weeks at school taught me the point of calculus in the economics of production. But mathematics and religion are about “neither certainty nor consistency”. The one, “maths technik”, means literally “techniques of learning”: ways of forming things so we CAN learn from them. The other, “re-ligare”, amounts to commitment to the one who (we are told) has untied us, which requires faith to produce trust, and experience sufficiently consistent with that trust to produce the feelings of certainty needed to sustain the well over half of us who reach decisions via their feelings or knowledge as against logic or understanding.

[I’m sorry to go on about this, Ken (and any other readers), but instances like this – rooted in personality differences – of cross-purposes, misunderstandings, personality clashes and teachers/leaders not understanding basics – are little discussed but crucially significant: situations we all have to live with or sort out as we “muddle through” our lives].

On the continuing influence of “Catholic” economics, its medieval tradition was also rooted in Aristotle’s “Golden Mean”, though without maintenance of Roman roads the small, self-sufficient sharing communities of the Acts of the Apostles, exemplified by Benedictine monastic communities, were more or less built into the feudal system. Its new mainstream originated in the UK (whose Constitutional Monarch is still forbidden to marry a Catholic), when a convert Anglican, Cardinal Manning, alerted Pope Leo XIII to social conditions in the new industrial cities and Leo published world-wide his reflections on the rights and wrongs of them (“Rerum Novarum: In this New Age”) in 1891. Here Belloc and the Chesterton brothers founded not so much a Party as a “Think Tank”, the Distributists, focussed on the right to a livelihood (e.g. land) as against employment at the whim of others. Its weakness – which I’ve tried to remedy – has been not understanding how money is created at the whim of financiers, so the traditional view of it as gold fits easily but at cross purposes with the Reserve Banking lie that individuals must earn it.

History shows both continuing influence and continuing cross-purposes. The Distributists demanded generous enough incomes to provide for misfortune and old age; the Government c.1906 introduced insurance and pensions paid for by compulsory saving from earned incomes. In 1926, the year things got so bad after post-war reintroduction of the pre-war gold standard that Britain had a General Strike, G K Chesterton put Keynes’s 1935 thesis in the mouth of a fictitious Trades Union leader: “But if I say”, answered Braintree, “that we also want the extension of effective demand, isn’t that also above party”? The post-war extension of fair rationing while Britain broke the back of its war-time debts was perhaps more due to the influence of Anglican Archbishop Temple, but Thatcher – following Hayek’s misrepresentation of Belloc – was all in favour of a “property-owning democracy” – seen as selling off council housing. Long after I fed my own views to the Conservatives, their present generation sponsored the traditional Distributist think tank of “Red Tory” Philip Blond, the Campbell government is increasing the need for communal sharing by selling off local government, education, welfare and health services (in traditional Catholic cultures, provided voluntarily via the church); and seeing a more adequate basic income only as a one-size-fits-all safety net for the unemployable, thereby penalising the most needy. Previous governments having sold off vital public utilities as profit-seeking monopolies and permitted the theft of contributory insurance and pensions, competitive job-seeking and rising utility prices are leaving increasing numbers with neither time nor surplus to share

I would take Bruce Edward’s thought two steps forward. The basis for cognition is social cognition, and a necessary condition for social cognition is morality, which is an expression of the moral emotions. Moreover, the bio-cultural coevolutionary logic of the moral emotions is rooted in bioenergetics, as follows.
1. The human brain uses about 20% of the body’s energy metabolism directly, and much more indirectly. Most species get away with under 5%.
2. The brain has to pay back that energy debt by supporting increased efficiency in energy acquisition and use. Otherwise, the human brain could not be evolutionarily stable.
3. This task is accomplished by formulating and carrying out complex plans, e.g. in hunting and agriculture and technology. A complex plan can be defined as an instance of a cognitively determined pattern of behavior that either creates a new biological niche (e.g. hunting mammoths) or improves adaptation to an existing niche (e.g. making clothing).
4. Complex plans are always collective rather than individual endeavors. Any individual implementing a private plan draws on a huge collective resource of cultural capital, the cumulative product of social cognition. Social cognition is accomplished via distributed processing based entirely on private cognition, but it is still a social resource.
5. Complex collective plans suffer from free rider problems. These problems can only be solved using institutions (e.g. the hunters are obliged to feed the arrow-maker). Bilateral compacts are not evolutionarily stable as a basis for complex plans.
6. An institution is an interrelated set of roles. A role in turn consists in interrelated rights and obligations. It follows that institutions always rest in part on altruistic ethical behavior, for if people cheat on their obligations when they can get away with it, then no institution would be evolutionarily stable (in terms of either cultural evolution or biological evolution).
7. Therefore the correct model of institutional behavior is institutional realism: individuals generally assume they are acting for all individuals so situated (i.e. Kantian ethics) when they act within an institution. That is, they solve free rider problems by making a collective decision.
8. Hence an institution is a self-replicating pattern of collective behavior. That is, institutions exist because collectively rational decision making subject to institutional constraints recreates their conditions for existence at each moment.
9. Ethical behavior is acculturated but rooted in biologically given moral emotions. Human moral emotions are vastly more complicated than those of any other animal, precisely because our intelligence depends on it. (Note: existing research underestimates the complexity of moral emotions because researchers haven’t taken evolutionary stability into account.)
10. Hence the paradigm of methodological individualism can’t possibly be correct in a complete or ultimate sense. Nevertheless the individualist paradigm is intellectually essential for demonstrating the free rider problem and the counterfactual of failed institutions. (Similar remarks apply to the selfish gene hypothesis.)
11. In particular, the assumptions of methodological individualism necessarily include the notion that people are deeply unethical, in so far as they would not obey institutional norms unless it were in their narrow material self-interest to do so. This assumption is quite obviously counterfactual: individuals do in fact altruistically obey institutional norms with sufficient regularity to keep the institutions going (e.g. the so-called paradox of voting.)
12. Cognitive intelligence can be seen as a collective ethical problem in many other respects. Most importantly, it depends on honest reporting of private facts for public use.
13. Other aspects of intelligence are individually adaptive. Most importantly, intelligence is needed to survive within the complex environment of multiperson institutions. This is not a side effect but rather a necessary adaption for intelligence to exist. However the initial evolutionary driving force for high intelligence is the need for complex institutions to implement complex plans.