Re: P-Q space, Money and Standardized Barter

["Harry Veeder" <veed0001@xxxxxxxxxxxxxxxx>]

----------
>From: "Jack O'Donnell" <jackodonnell@xxxxxxxx>
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Re: P-Q space, Money and Standardized Barter
>Date: Sun, Apr 11, 1999, 6:47 pm
<snip>
>
>Aside from the short lived Phillips curve there is no correlation
>between macro P and macro Q. [i.e. -- He demonstrated a coincidental
>relationship for a short period of time. However, like many such
>relationships discovered by statistical correlation the coincidence
>disappears almost as fast as it is discovered. The point being that
>statistical correlations do NOT demonstrate cause-effect relationships,
>they only indicate good places to look for those relationships.]
<snip>

I don't know anything about the Phillips curve so I can't comment. However,
if a cause-effect relationship is conjectured to follow a probabilistic
process then statistical correlations serve to support the relationship. In
fact, many scientific theories only link events probabilistic ( ie. as
having a probability between 0 and 1)  rather than deterministically ( ie.
as having a probability equal to 0 or 1.  eg. When p=0, X will not happen or
when p=1, X will happen).

This does not necessarily mean the theory is incomplete or inadequate.
For instance, during the early years of quantum mechanics Einstein felt the
theory was "incomplete", because it only could offer a probablistic
explanation of the natural the world. Along with others, he felt that there
must be "hidden variables" at work, and the discovery of such varibales
would render quantum mechanics "complete" ie. remove the indeterminacy.
Since then, a deeper logical analysis has found that the "hidden variable"
theory leads to a slightly different set of predictions under certain
circumstances. Experiments have been performed to test the
diverging predictions and the results still favour the indeterministc
interpretation.

<snip>
>Without a logical connection among correlated data there is no reason to
>believe the relationship(s) is(are) anything but coincidental.
<snip>

Technically speaking, observations or data are not connected by logic. They
are connected by a hypothesis or a theory. A particular theory will have
logical consequences which can then be tested against reality.

<snip>
> Such
>relationships MAY provide an indication for future occurrences that CAN
>be useful for making money in the market, but they do NOT provide any
>insight into cause.
<snip>

I doubt if they can be used by anybody to make money since I think they
represent changes in the economy that are meaningful for the economist but
not for the investor. I agree that such correlations do not provide any
insight into "cause". Somebody must *propose* a causal theory and then have
it criticized and tested.

> However, when the assumed relationship is based on a
>tautological impossibility any causal inference is just hogwash, even
>though it may still provide a risky indication of future occurrences.
>With a rational relationship even the absence of correlations may only
>mean the relevant data to correlate has not yet been found. That is,
>there may be undiscovered variables affecting the logically discovered
>relationship that is of sufficient effect to hide the discovered
>relationship. This does not make the logic wrong, it only means that the
>logic is incomplete.

>> (**I don't think
>> logic can tell us what does or does not exist. For example, Newtonian
>> physics says space and time are "flat". Therefore Newtonian physics
>> logically implies that space and time can never be "curved", but there is
>> evidence which suggests otherwise.)
>
>A good example of a false conclusion based on an incomplete analysis. It
>is not the logical arguments of Newton that are in error, it is only the
>extension of those arguments to conditions that had not been examined
>that is erroneous.

Yes I agree, but I did not say Newton's logical arguments were in error.
( I would never call Sir Issac Newton a bad logician). When I said
"Therefore newtonian physics logically implies that space and
time can never be 'curved...'", I meant that general relativity cannot be
logically deduced from Newtonian physics whereas Newtonian physics can be
logically deduced from general relativity.

>
>> <snip>
>> > I have said
>> >and continue to say that macro P and macro Q are independent of each
>> >other.
>> <snip>
>>
>> I feel there is a relationship between the two and that it is more than just
>> a correlation. There are many many factors which bring macro supply and
>> demand together but it is wrong to argue that macro P plays *no* role.
>
>Feelings don't replace logic. P plays a very significant role at the
>micro level. However, at the macro level P is defined by the weighted
>average micro p so it tautologically cannot be causally related to macro
>Q.

Maybe you are right, but I don't follow what you are saying.
I thought macro P was simply the addition of all the micro p's.
Where do "weighted averages" enter the picture?

At the macro level there simply is no way other than fraud to
>describe a dollar's worth of stuff as anything other than a dollar's
>worth of stuff, whatever derivative dimensions or ratios may be used in
>an attempt to hide that fraud.
<snip>

Okay, but instead of calling it "stuff" call it "information". "Information"
suggests goods AND services whereas "stuff" only suggests goods.

I will respond to the rest your post at a later date.

Harry Veeder