Re: GT and microfoundations

["Alan G. Isaac" <aisaac@xxxxxxxxxxxx>]

Paul,

We have been over the routine vs. crucial decisions
many times on this list, and I was not taking issue
with it. I even approve of the shift in emphasis in
your most recent statement, which follows Shackle in
being purely subjective rather than metaphysical.
(So, for example, there could be crucial decisions
where the decision actually did not have the features
it was believed to have, or a decision might be
treated as trivial because the decision make does
not understand it has characteristics that should make
it crucial.) But the point of my examples is that *even* the
most trivial routine tasks involve predictions
that are *not* probabilistically based, *even though*
they are based on past experience, and that
in no way undercuts the usefulness of the predictions.
By extension, the uselessness of prediction in crucial
decisions does *not* follow simply from our
inability to generate credible probabilistic forecasts.

I still find your resistance to the forward looking
nature of action puzzling, and I can only assume
I am being obscure or you are not reading charitably.
For example, I find your claim that your actions based
on a written contract did not involve presumptions
about the future completely bizarre. The very
purpose of a contract is to add confidence in
one's presumptions of the future. That is *how*
contracts enable *action*, which is *necessarily*
oriented toward the future.

Remember, this part of the conversation started
when you denied my assertion that
``we all must predict all the time, and policy
cannot be made without prediction.''
I assume your denial was based on a peculiarly
restricted notion of prediction (e.g., one
involving measurable standard errors) rather
than the simple ``saying ahead of time'' implied
by ordinary usage and etymology.

As I said: ``look at what you did when you tried to talk
about policy, Paul. You may not like to call
it a prediction, but to `pre-dict' just means
to say ahead of time, which is just what you
did. This is unavoidable.''

You stress that PKs should approach policy
as institution building. I agree that this is the most
important part of policy in the long run, if you will
pardon the reference, but there are also choppy
seas today. In any case, even institution building
involves prediction. Look at your discussions of
you IMCU proposal: they are full of predictions
about the improved state of future affairs under
this institutional arrangement.

The IMCU proposal is also interesting in another
way. I assume you would agree that its adoption
would involve a ``crucial decision''. Note that you
explicitly rely on historical precdent as providing
a motivation for policy makers to make this
decision (PKMT p.267). Thus, as is only reasonable
since it is all we have to draw on, the past does
provide useful guidance even in crucial decisions.

Anyway, this discussion has drifted off into
methodology, whereas we started with a question
of PK theory. I still look forward to a straightforward
answer to my last (7 Feb) query on the neutrality of money.

Alan Isaac



paul davidson wrote:

> Alan Isaac has gone off the deep end.  Unlike Barkley he does not read what
> I wrote about routine vs crucial decisions -- so he hauls out all the
> routine decisions  "Does the car start when  you turn the key?" as if that
> is incompatible with my thesis.



> Then when I wrote about the numerous explicit written provisions in my
> employment contract at the University of Tennessee, he calls those written
> contractual commitments "presumptions about the future".  They are not
> presumptions they are legal obligations -- and the entering into these
> obligations by the University is the only reason I left my other employment
> -- for this contract gave me a larger contractual cash inflow -- and
> therefore mote liquidity.  And as Hicks said "liquidity is freedom"

> Alan forgets what policy is to a Post Keynesian. In my view it should not
> be the simplistic view such as never run a budget surplus -- or the surplus
> over the next decade should be 3 trillion dollars, -- much less "how much
> we should cut taxes or raise spending this year or having a lock box for
> social security.  Instead it should be institution building e.g., my
> clearing union of my IMCU proposal!

> The "desirable" [for full employment] tax cut (increase) or spending
> increase (decrease) for fiscal year 2001 cannot be predicted in February
> 2000 with  any degree of statistical reliability.