![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peristaltorThroughout our history, we humans have gazed upward and considered the night sky. We have noted the passage of celestial bodies and marked their changes, especially those changes that appear to be predictable and regular. We have paid special attention to the phases of the moon and to the moving stars we now call planets, for those lights, when understood, can be used to signal plantings and migrations, storm seasons and calm.
Sometimes we go too far, though. Calamity is sometimes called "disaster," literally an "ill-starred event." The acceptance or rejection of burned offerings such as those found referenced in the Old Testament tales, was simple: if the smoke from your offering rose into the sky, God had accepted it; if the smoke hung low, your toasty goat or lamb was rejected, and you are probably toast in His eyes. (Lesson: Don't make offerings to the gods during an atmospheric inversion.)
As we became more technologically advanced as a people, we developed the ability to predict the motions of the heavenly spheres and to translate those movements mechanically. All it took was centuries of direct celestial observations, occasionally corrected to allow for more precise measurements, and the mathematics sufficiently complex to model those observations . . . right?
Well, no. Not at all. We also needed to fit those observations into a paradigm that matched what we were actually seeing. For example, the first devise I pictured to the left is an armillary, a devise that plots the path of the planets and sun. The second devise to the right is an orrery, a devise that plots the path of planets and sun. The difference is more than merely the sum of the more than two hundred years of observations separating the construction of these two devices.
You see, the armillary shows the universe surrounding us as it would move from a geocentric origin, with the sun and everything else spinning around the Earth. The orrery shows the planets and moons — including Earth — spinning as they do, around the sun.
The difference is one of myth. It turns out that myth guides our observations. I'll let John Michael Greer explain:
What has all this astrological mythology to do with a rambling exposition of money creation as it is, as opposed to how everyone thinks it is? Everything, really. Unless one knows that the earth is not the center of the universe, one is going to be hard-pressed to describe the movement of wandering stars, unless one develops theoretical explanations for the observed phenomena. Armillaries, for example, have to take epicycles into account. Due to the angle of observation, the plotted paths of planets can occasionally reverse direction (become "retrograde"), before resuming their previous but slightly off-course direction.
I can't fault the ancient astronomers for their faulty model of the heavens. After all, without an alternative model, they had only their eyes for evidence. No, I think it more fruitful to work out why ancient or outmoded models were retained long past their useful shelf life. And here we find an explanation for just about every scientific theory, including — especially — economics.
Theories start with a set of assumptions, and work out from these given assumptions a range of possible outcomes based on the theoretical logic in question. Since we're talking economics here, let's let Milton Friedman outline what he means specifically by "assumptions:"
So, to Friedman, as long as the outcome works, it doesn't really matter that the assumptions don't fit reality. To a point, this type of analysis can work . . . but only to a point. The key, according to Keen, is sorting out what type of assumptions form the basis for the theory.
The other two types of assumptions prove more problematic.
I'll set aside why heuristic assumptions can prove sticky for the sake of brevity, and cut straight to the core of the issue: "A domain assumption specifies the conditions under which a particular theory will apply. If those conditions do not apply, then neither does the theory." (Ibid, p. 161.)
"If those conditions do not apply, then neither does the theory." If this is as obvious to you as it is to me, we need to consider why scientists of every stripe historically resist changes to their bedrock, domain assumptions. First of all, Keen identifies an obvious reason: We're humans.
When new evidence challenges the veracity of the science enough to threaten the hard core, some scientists cling to the old teachings and some break from the pack to form competing schools of thought based on the new paradigm. In his book, Keen identifies several core beliefs deeply held by the neoclassical school of economic thought that are simply fallacious, even citing scholars held in high esteem within the school who discovered and voiced the flaws in theory. Why then is the neoclassical school the dominant in the world today?
I hope to answer this question in two parts. First, let's consider what happened in the past when core beliefs were challenged. Nicolaus Copernicus got lucky, in that he published his theory of celestial movements just prior to his death in 1543. He got to avoid the ugliness the Copernican Revolution had on its proponents. Galileo developed the telescope powerful enough to confirm Copernicus' observations by offering a microcosm of the solar system in the movement of Jupiter's moons (unseen until then). He did ask permission of the Pope to publish his results, but went too far, insulting the Pope and the church's official position on the planetary motions. This earned him a lengthy trial, a forced "apology", and the right to live the rest of his life at home under arrest.
There are a couple of lessons one can gather from Galileo's example. One, people don't like having their myths confronted, especially if those myths form a dogmatic canon. The Bible tells us in the Creation stories of Genesis (there are two of them: look it up) that the world was the center of creation. The Catholic Church is the protector of the word of God, and the Pope His infallible instrument. I'm sure in his post-arrest years he more than once regretted naming the character representing the Church's position in his cosmic dialog Simplicio, meaning he not only confronted biblical myths but mocked holder of these myths as simpletons.
And while many of you out there might fail to see a connection between the sacred nature of divine texts and the study of money, let's remember: economics must not only explain the economic world around us, it must, to avoid offending the players within it, defend the particular flavor of economic activity: "the defense [of capitalism] was mounted by what we today call neoclassical economics, since classical economics had been turned into a weapon against capitalism by the last great classical economist, Karl Marx."
That's lesson one: don't offend your enemies, especially if they are powerful. Invoking Karl Marx even if he is right is almost guaranteed to get an economist ignored or targeted for a smear.
There's another, perhaps more tenuous connection between the church and the economic state: how they are funded.
Whether you teach or preach, you still have to make a living, and the level of comfort that living can provide you rests in no small part on the message you deliver at the podium or at the pulpit. Those that promote revolution and the redistribution of assets after the battle don't get nearly the financial support as those that show undergraduates that unions and welfare are bad for the economy, while low taxes will raise everyone out of poverty.
And thanks to right-wing think tanks, there's a lot of money to be made promoting these ideas: "For instance, Arthur Laffer, a proponent of supply side economics, said, 'I knew there was no way in God's earth I could make it in the profession. So I went other routes — the press, the political press, consulting.'" (Yves Smith, Econned: How Unenlightened Self Interest Undermined Democracy and Corrupted Captialism, St. Martin's Press, 2010, p. 122.)
Just as collection plate revenues have transformed an offshoot of American Christianity away from the actual teachings of Jesus — with its emphasis on humility, tolerance, acts of charity and acceptance — into a faith dedicated to wealthy living as a sign of God's love, economists which fail to promote the domain assumptions of the neoclassical school soon realize ". . . it is almost impossible to have an article accepted into one of the mainstream academic economic journals unless it has the full panoply of economic assumptions. . . ." (Keen, ibid, p. 163.)
After all, there is nothing inherently wrong with believing that the Earth is the center of the universe. As with many lies, people can lead productive lives living it.
Consider the Greeks and their Antikythera Mechanism. Turn the handle, and the planets move not as they actually travel in a solar orbit, but as you see them move from Earth. For someone just needing to know the position of the planets as a reference to the time of year or astrology, this is far more useful than knowing that one of those moving lights, Jove, has its own moons. One can, yes, use the latter knowledge to determine not just the day but also the time of day to within two minutes — Galileo's celatone and Jovilabe worked pretty well — but without needing to know the time of day with greater accuracy, this information just clutters up the head and becomes, by definition, needless . . . until you need that information. A geocentric model of the universe is fine for those who don't plan on ever leaving the earth. It won't work if you hope to navigate your way to, say, Mars without disaster.
And that's where we are today. The neoclassical model has become so dominant that economic disturbances, predictable using other models, are allowed to progress until financial disaster strikes. We should listen to the people making those alternative, non-neoclassical models, especially to Steve Keen, recent winner of the Revere Award for Economics, "named in honour of Paul Revere and his famous ride through the night to warn Americans of the approaching British army."
X-Posted to![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-community.gif)
talk_politics.
Sometimes we go too far, though. Calamity is sometimes called "disaster," literally an "ill-starred event." The acceptance or rejection of burned offerings such as those found referenced in the Old Testament tales, was simple: if the smoke from your offering rose into the sky, God had accepted it; if the smoke hung low, your toasty goat or lamb was rejected, and you are probably toast in His eyes. (Lesson: Don't make offerings to the gods during an atmospheric inversion.)
As we became more technologically advanced as a people, we developed the ability to predict the motions of the heavenly spheres and to translate those movements mechanically. All it took was centuries of direct celestial observations, occasionally corrected to allow for more precise measurements, and the mathematics sufficiently complex to model those observations . . . right?Well, no. Not at all. We also needed to fit those observations into a paradigm that matched what we were actually seeing. For example, the first devise I pictured to the left is an armillary, a devise that plots the path of the planets and sun. The second devise to the right is an orrery, a devise that plots the path of planets and sun. The difference is more than merely the sum of the more than two hundred years of observations separating the construction of these two devices.
You see, the armillary shows the universe surrounding us as it would move from a geocentric origin, with the sun and everything else spinning around the Earth. The orrery shows the planets and moons — including Earth — spinning as they do, around the sun.
The difference is one of myth. It turns out that myth guides our observations. I'll let John Michael Greer explain:
Many people nowadays think only primitive people believe in myths, but myths dominate the thinking of every society, including our own. Myths are the stories we tell ourselves to make sense of our world. Human beings think with stories as inevitably as they see with eyes and walk with feet, and the most important of those stories — the ones that define the nature of the world for those who tell them — are myths.
(John Michael Greer, The Long Descent, 2008, New Society Publishers, p. 36.)
What has all this astrological mythology to do with a rambling exposition of money creation as it is, as opposed to how everyone thinks it is? Everything, really. Unless one knows that the earth is not the center of the universe, one is going to be hard-pressed to describe the movement of wandering stars, unless one develops theoretical explanations for the observed phenomena. Armillaries, for example, have to take epicycles into account. Due to the angle of observation, the plotted paths of planets can occasionally reverse direction (become "retrograde"), before resuming their previous but slightly off-course direction.
I can't fault the ancient astronomers for their faulty model of the heavens. After all, without an alternative model, they had only their eyes for evidence. No, I think it more fruitful to work out why ancient or outmoded models were retained long past their useful shelf life. And here we find an explanation for just about every scientific theory, including — especially — economics.
Theories start with a set of assumptions, and work out from these given assumptions a range of possible outcomes based on the theoretical logic in question. Since we're talking economics here, let's let Milton Friedman outline what he means specifically by "assumptions:"
Truly important and significant hypotheses will be found to have 'assumptions' that are widely inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions (in this sense). The reason is simple. A hypothesis is important if it 'explains' much by little, that is, if it abstracts the common and crucial elements from the mass of complex and detailed circumstances surrounding the phenomena to be explained and permits valid predictions on the basis of them alone. To be important, therefore, a hypothesis must be descriptively false in its assumptions; it takes account of, and accounts for, none of the many other attendant circumstances, since its very success shows them to be irrelevant for the phenomena to be explained.
To put this point less paradoxically, the relevant question to ask about the 'assumptions' of a theory is not whether they are descriptively 'realistic,' for they never are, but whether they are sufficiently good approximations for the purpose in hand. And this question can be answered only by seeing whether they theory works, which means whether it yields accurate predictions.
(Friedman, 1953, quoted in Steve Keen, Debunking Economics: The Naked Emperor Dethroned?, Palgrave Macmillan, 2011, pp. 159-160, emphasis mine.)
So, to Friedman, as long as the outcome works, it doesn't really matter that the assumptions don't fit reality. To a point, this type of analysis can work . . . but only to a point. The key, according to Keen, is sorting out what type of assumptions form the basis for the theory.
The proposition that a theory is not regarded as a description of reality, but merely as a way of predicting the future, is known as 'instrumentalism.' . . .
However, despite its superficial appeal, instrumentalism suffers from several flaws, which were clearly set out by the philosopher Alan Musgrave in 1981. Musgrave argued that there were three classes of assumptions, and that Friedman's dictum was only partially true in the least important of them.
. . . Negligibility assumptions . . . state that some aspect of reality as little or no effect on the phenomenon under investigation. Friedman's paper made heavy use of the example of a ball being dropped near the earth, which fell very nearly 'as if' it had been dropped in a vacuum. In this instance it was valid to assume that the ball was falling in a vacuum, since air resistance has negligible impact on the ball's fall. However, the same was obviously not true of a feather dropped under the same circumstances. (Ibid., p. 160.)
The other two types of assumptions prove more problematic.
A heuristic assumption is one which is known to be false, but which is made as a first step towards a more general theory. Musgrave gives the example of Newton's assumption that the solar system consisted only of the sun and the earth. This gave rise to the theory that planets would follow elliptical orbits (which is a reasonable medium-term guide to actual planetary orbits in our solar system). . . . (Ibid, p. 162.)
I'll set aside why heuristic assumptions can prove sticky for the sake of brevity, and cut straight to the core of the issue: "A domain assumption specifies the conditions under which a particular theory will apply. If those conditions do not apply, then neither does the theory." (Ibid, p. 161.)
"If those conditions do not apply, then neither does the theory." If this is as obvious to you as it is to me, we need to consider why scientists of every stripe historically resist changes to their bedrock, domain assumptions. First of all, Keen identifies an obvious reason: We're humans.
A collection of scholars in a science will share a perspective on what defines their discipline, and what constitutes scientific behavior. This shared mindset includes core [domain] beliefs, which cannot be challenged without threatening your membership of the group (and hence your status as a scientist), ancillary beliefs which are somewhat malleable, a set of analytic techniques, and as yet unsolved problems to which these techniques should be applied. The core beliefs are known as the 'hard core' — since they cannot be altered without rejecting, in some crucial sense, the very foundations of the science. The ancillary beliefs are known as the 'protective belt,' since their function is to protect the core beliefs from attack. (Ibid., p. 165.)
When new evidence challenges the veracity of the science enough to threaten the hard core, some scientists cling to the old teachings and some break from the pack to form competing schools of thought based on the new paradigm. In his book, Keen identifies several core beliefs deeply held by the neoclassical school of economic thought that are simply fallacious, even citing scholars held in high esteem within the school who discovered and voiced the flaws in theory. Why then is the neoclassical school the dominant in the world today?
I hope to answer this question in two parts. First, let's consider what happened in the past when core beliefs were challenged. Nicolaus Copernicus got lucky, in that he published his theory of celestial movements just prior to his death in 1543. He got to avoid the ugliness the Copernican Revolution had on its proponents. Galileo developed the telescope powerful enough to confirm Copernicus' observations by offering a microcosm of the solar system in the movement of Jupiter's moons (unseen until then). He did ask permission of the Pope to publish his results, but went too far, insulting the Pope and the church's official position on the planetary motions. This earned him a lengthy trial, a forced "apology", and the right to live the rest of his life at home under arrest.
There are a couple of lessons one can gather from Galileo's example. One, people don't like having their myths confronted, especially if those myths form a dogmatic canon. The Bible tells us in the Creation stories of Genesis (there are two of them: look it up) that the world was the center of creation. The Catholic Church is the protector of the word of God, and the Pope His infallible instrument. I'm sure in his post-arrest years he more than once regretted naming the character representing the Church's position in his cosmic dialog Simplicio, meaning he not only confronted biblical myths but mocked holder of these myths as simpletons.
And while many of you out there might fail to see a connection between the sacred nature of divine texts and the study of money, let's remember: economics must not only explain the economic world around us, it must, to avoid offending the players within it, defend the particular flavor of economic activity: "the defense [of capitalism] was mounted by what we today call neoclassical economics, since classical economics had been turned into a weapon against capitalism by the last great classical economist, Karl Marx."
That's lesson one: don't offend your enemies, especially if they are powerful. Invoking Karl Marx even if he is right is almost guaranteed to get an economist ignored or targeted for a smear.
There's another, perhaps more tenuous connection between the church and the economic state: how they are funded.
What's the difference between the Catholic Church in the U.S. and the Church in Germany? Follow the money. In the U.S., we don't pay taxes to support the Church, so it begs for big money from the wealthy and well-to-do. . . . Soon it's a mortal sin to vote for Kerry. But in Germany, the Church is at least not in financial hock to Republican right-to-lifers, because it gets money directly from the state, i.e., a left-wing welfare state. So the Church in Germany can be relatively more left-wing and even has an Archbishop Marx — Reinhard Marx, archbishop of Munich and Freising, which is the pope's old post — and this Marx, like the other Marx, has even written his own Das Kapital denouncing CEO pay raises, outsourcing, and the milder but still growing gap between rich and poor. Isn't it a help that Archbishop Marx doesn't have to beg alums of Notre Dame for money? But I don't want to give a Marxist explanation of Archbishop Marx.
I'll just point out that he's free to call them as he sees them, just as the early Christians used to do.
(Thomas Geoghegan, Were You Born on the Wrong Continent? How the European Model Can Help You Get a Life, The New Press, 2010, p. 288.)
Whether you teach or preach, you still have to make a living, and the level of comfort that living can provide you rests in no small part on the message you deliver at the podium or at the pulpit. Those that promote revolution and the redistribution of assets after the battle don't get nearly the financial support as those that show undergraduates that unions and welfare are bad for the economy, while low taxes will raise everyone out of poverty.
And thanks to right-wing think tanks, there's a lot of money to be made promoting these ideas: "For instance, Arthur Laffer, a proponent of supply side economics, said, 'I knew there was no way in God's earth I could make it in the profession. So I went other routes — the press, the political press, consulting.'" (Yves Smith, Econned: How Unenlightened Self Interest Undermined Democracy and Corrupted Captialism, St. Martin's Press, 2010, p. 122.)
Just as collection plate revenues have transformed an offshoot of American Christianity away from the actual teachings of Jesus — with its emphasis on humility, tolerance, acts of charity and acceptance — into a faith dedicated to wealthy living as a sign of God's love, economists which fail to promote the domain assumptions of the neoclassical school soon realize ". . . it is almost impossible to have an article accepted into one of the mainstream academic economic journals unless it has the full panoply of economic assumptions. . . ." (Keen, ibid, p. 163.)
After all, there is nothing inherently wrong with believing that the Earth is the center of the universe. As with many lies, people can lead productive lives living it.
Consider the Greeks and their Antikythera Mechanism. Turn the handle, and the planets move not as they actually travel in a solar orbit, but as you see them move from Earth. For someone just needing to know the position of the planets as a reference to the time of year or astrology, this is far more useful than knowing that one of those moving lights, Jove, has its own moons. One can, yes, use the latter knowledge to determine not just the day but also the time of day to within two minutes — Galileo's celatone and Jovilabe worked pretty well — but without needing to know the time of day with greater accuracy, this information just clutters up the head and becomes, by definition, needless . . . until you need that information. A geocentric model of the universe is fine for those who don't plan on ever leaving the earth. It won't work if you hope to navigate your way to, say, Mars without disaster.
And that's where we are today. The neoclassical model has become so dominant that economic disturbances, predictable using other models, are allowed to progress until financial disaster strikes. We should listen to the people making those alternative, non-neoclassical models, especially to Steve Keen, recent winner of the Revere Award for Economics, "named in honour of Paul Revere and his famous ride through the night to warn Americans of the approaching British army."
Keen, Roubini and Baker have been voted to be, more than all others, the three economists who if the powers of the world had listened to, the Global Financial Collapse could have been avoided.
X-Posted to
talk_politics.