Creditary vs. Monetary Policy & Ideology

["John Gelles" <johng@xxxxxxxxxx>]

        Gunnar quotes Milton Friedman on the matter of
        the logical use of language in arriving at economic
        prescriptions.

        Friedman put a great deal of emphasis on money.

        Gunnar, in my view, insists that money can lead
        only to its exchange for real wealth, like land,
        oil, ore, timber, work in progess, finished goods,
        buildings, furniture, collectibles, etc. -- which real
        wealth can then be collateral for credit -- for
        credit which is as good as money or better.
        Gunnar's case is made when money goes out of
        style, as happened with Confederate dollars and
        Reischmarks.

        Obviously, in times of inflation, Gunnar has the
        better of the two ideas -- the ideas being, "which
        to emphasize, money or real wealth?"

        Just as obvious, as deflation takes over, money
        talks -- and it becomes real wealth -- as real
        things are dumped before their price gets lower.

        Gunnar insists that there are "premises" that are
        the "logical foundation" for hypotheses.

        Friedman knows that hypotheses are proved by
        induction not deduction.

        When we try to escape deductive chains (that
        nowhere coincide with replicable inductive
        proof), are we ideologically favoring reform
        over tradition?  Yes.

        But, are there limits to what can be done with
        inductive proof when it comes to making rules
        for people to obey in the absence of compelling
        reasons not to?  Yes.

        Now I fail to see what Gunnar's objectives are.
        If he wants us all to admit that managing money
        can be a waste of time when money goes out
        of fashion -- OK. We admit it.

        If he wants us to convert our policy
        recommendations that speak of money to more
        GENERAL ones that speak of MONEY when
        IT is our real wealth  and of  THINGS  when
        they replace money as real wealth -- OK. We
        will have no other choice.

        If he wants us to emphasize deductive logic when
        we have no way of establishing cause and effect--
        OK. We will have no other choice.

        In return for our agreement with him on these
        issues, let him agree with us:  If money is
        desireable enough to motivate work and the
        rules we adopt are "proved safe and effective"
        then let him agree to stay on board as we go
        from one success to another.

        John Gelles

----- Original Message -----
From: Gunnar Tómasson
To: pkt@xxxxxxxxxxxxxxxx  ...
Sent: Monday, November 19, 2001 7:36 AM
Subject: Economics, logic, and ideology


The following off-list message ...<snip>

Gunnar

********

My own summary statement of this view of things is that the premises of
one's argument must be internally complete, coherent, and consistent -- or
else one's argument itself is incomplete, incoherent, and inconsistent.

The "ideology" comes in when mainstream, monetarist, and ELR theorists
refuse to admit this nearly self-evident point lest its acceptance upset
their respective apple-carts.

In this respect, Milton Friedman stands out among other leading theorists in
that he does not shy away from acknowledging the fact that logical coherence
and consistency is not of primary importance for his brand of would-be
theoretical economics:

"Logical completeness and consistency are relevant but play a subsidiary
role; their function is to assure that the hypothesis says what it is
intended to say and does so alike for all users -- they play the same role
here as checks for arithmentical accuracy do in statistical computations."
('The Methodology of Positive Economics', in 'Essays in Positive
Economics'.)

What Friedman does NOT acknowledge is that, absent internal completeness,
coherence, and consistency between his premises, it is logically impossible
to formulate "hypotheses" whose meaning is (a) unequivocal, and (b)
understandable.