Re: Fundamentals - Keynesian Economics

["Gunnar Tomasson" <tomasson@xxxxxxxx>]

Re. the following:

....when we set its boundaries, move stuff in and out
of it, create its institutions, its values, rules and
regulations; we do so for a purpose that inherently cannot
originate from within the confines of the system itself (for
the same reason we cannot know the purpose of the universe);
but that as creators of economic system we can, so that the
system becomes a means to an end.  (John V.)

Comment:

Given the fact that "we set [the] boundaries [of the economic system], move
stuff in and out of it, create institutions, its values, rules and
regulations", it is not rocket science to figure out that only an omniscient
system-builder could ever construct an ergodic economic system.

By the same token, it is self-evident that such omniscient system-builder
would have to factor in every last bit of interaction between the system's
individual parts before resting assured that, indeed, the system was
ergodic.

Curiously, none of this is apparent to mainstream economic scholars!

For, in one way or another, mainstream theorists proceed along lines that
Paul A. Samuelson set forth in his 'Foundations of Economic Analysis' as
follows:

First.  "In every problem of economic theory certain variables (quantities,
prices, etc.) are designated as unknowns, in whose determination we are
interested.  Their values emerge as a solution of a specified set of
relationships imposed upon the unknowns by assumption or hypothesis.  These
functional relationships hold as of a given environment and milieu. [I.e.,
within our man-made economic system - insert]  Of course, to designate this
environment completely [as an omniscient being would be obliged to do -
insert]  would require specification of the whole universe [a piece of cake
for an omniscient being - insert]; therefore, we assume implicitly a matrix
of conditions within which our analysis is to take place. [I.e., while we
are not omniscient, we "assume implicitly" that we are! - insert]" (p. 7)

Second.  "It is clear, however, that logically there is nothing fundamental
about the traditional boundaries of economic science.  [???]  In fact, a
system may be as broad or as narrow as we please depending upon the purpose
at hand; and the data of one system may be the variables of a wider system
depending upon expediency. [I.e., forget about the logical prerequisites for
ANY system to be judged ergodic and make-believe that whatever "inconsistent
hotch-potch" (Keynes' term)  may emerge from our equations is economic
science! - insert]." (p. 9)

"It is astonishing what foolish things one can temporarily believe if one
thinks too long alone, particularly in economics," Keynes wrote in Preface
to the General Theory.

"Astonishing"?  Not if one IS a fool!

It is fair surmise that Keynes never suspected that what, in his last
published article ('The Balance of Payments of the United States' in
Economic Journal, June 1946) he derided as "much modernist stuff, gone wrong
and turned sour and silly" was en route to gaining acceptance as foundations
for what mainstream scholars, gone wrong and turned sour and silly, had the
unmitigated gall to offer the world as 'Keynesian' Economics.

Gunnar










----- Original Message -----
From: "John Vertegaal" <vertegaa@xxxxxxxxx>
To: "POST KEYNESIAN THOUGHT" <pkt@xxxxxxxxxxxxxxxx>
Sent: Thursday, March 29, 2001 2:59 PM
Subject: Re: Fundamentals


>
> John M. Legge wrote:
>
> >John V,
>
> >are you saying that an economy is not part of the universe?
> >or that people are not subject to physical laws?
>
> No, what I am saying is that as long as we are part of the
> universe, its ultimate purpose of unfolding the way it is
> will have to remain a mystery to us.  But that through the
> way the economic system has been set up, its elements take
> on an additional purpose that, as far as their evaluation
> as economic factors is concerned, overrides their original
> purpose as "universal" particles.
>   So that when we set its boundaries, move stuff in and out
> of it, create its institutions, its values, rules and
> regulations; we do so for a purpose that inherently cannot
> originate from within the confines of the system itself (for
> the same reason we cannot know the purpose of the universe);
> but that as creators of economic system we can, so that the
> system becomes a means to an end.
>   Its individual elements, now meaningful only in terms of
> that end, thereby surrender their substantial determinacy as
> "universal" items and become indeterminate.  For if they
> still were determinate, the purpose of the economic system
> could be arrived at from the inside.
>
> I am not claiming that isolating the economy as such, is the
> only way towards sensible policy advice, but that it does
> seem to do so without any paradoxes rearing their vexing
> presence, when established theories take a stab at that.
>   A rejection of my two axioms ennobles the creation of
> capital as ends in itself.  It would leave its determinacy
> intact (just as you claim it is) and insulated from charges
> of inconsistency; but only as long as nobody makes a case
> about sacrificing the ends for the means.
>
> One cannot have both determinate capital and a determined
> purpose to the system, unless a coherent theory of capital
> value can somehow be advanced that shows this to be true.
>   Anything short of such coherency, makes one a preacher
> claiming to "know" what capital is.  And based on that
> "knowledge" proceeding to explain the system from the inside
> out; paradoxes be damned, as they cannot be part of ordained
> "truth"; is vulgar.
>
>
> >or that a supernova is a trivial event compared to a decline
> >in share prices on Wall Street?
>
> On the scale of the universe, a single supernova is indeed a
> trivial event compared to the 30% loss in so called "wealth"
> recently incurred by the world's markets.  Is the latter
> portending economic collapse? probably not, but in terms of
> probability an awful lot more likely to do so than the first.
>
> The real tragedy being that deterministic economic theories
> neither would have had a way of forecasting its imminence, up
> until the very moment of it happening, nor could they have
> prevented the setting of the stage allowing it to happen in
> the first place.
>
> John V
>
>
>