PKT message, 'Stability' Of Equilibrium w/Zero-Cost Money

A correspondent on an Internet Forum asked with respect to the subject matter of my yesterday's posting to the PKT-list entitled 'Re. an enquiry':

What are the questions being raised [thereby] (in philosophical terms)?

My answer follows:

As background, let me quote the following passage from a 1976 book by the late New York Times economic columnist Leonard Silk:

Once regarded as a brash, arrogant opponent by the pillars of the economics establishment, [Paul Samuelson] has lived to embody that establishment in his own person. The attack on - or defense of - contemporary economics must begin with Paul Samuelson, whom time and his own talent and industry have endowed with fame, wealth, and respectability. He has become the leading practitioner of what may be called bourgeois economics. i(The Economists, Basic Books Inc., Publishers, New York, 1976, pp. 3-4)

(Parenthetically, I should add that Leonard Silk's memory is very dear to me - he took great interest in my 'heretical' work in economics, which he judged to be "very important", suggesting that I submit a manuscript thereon to a university publisher whom he served as editorial adviser.)

The current point at issue goes to the heart of Samuelson's bourgeois economics - is it rigorous 'science' or mathematical 'pseudo-science'?

In his original Harvard Ph. D. thesis, later published as Foundations of Economic Analysis, Samuelson predicated his 'foundations' on the twin propositions:

(a) that real-world market economies are "system[s] in 'stable' [general] equilibrium or motion," (p. 5) and

(b) that "any sector of economic theory which cannot be cast into the mold of such a system must be regarded with suspicion as suffering from haziness [hence my label 'pseudo-science' - insert]." (p. 9)

The two principal components of proposition (a) are

(i) that the economic calculus whereby economic agents are held to interact in the real world is constantly operative so that the time paths of observed economic exchange transactions is akin to that of the time paths of gravitating particles of matter in the Laplacian construction of Newtonian Mechanics; and

(ii) that the 'stability' - read: predictability - of the time paths of observed exchange transactions is ensured by the activation of automatic corrective forces generated by the economic calculus whenever the conditions of equilibrium motion are "displaced".

In economist jargon, the economic calculus concerns decision-making with respect to scarce 'resources' - hence, it does not apply to the supply of 'fiat money', the cost of which in terms of 'resources' is zero.

Again, in technical jargon, this means that the supply of 'fiat money' is indeterminate - that Samuelson's 'stability' condition may or may not obtain with respect to real-world market economies.

In other words, mainstream 'bourgeois economics' is pseudo-science!