Case solved, at last! (Was Re: Monetary production ...)

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

Now Gunnar says,

>In fact, there is nothing mysterious about Say's Law - it
>restates in terms of Supply in the Factor Market and Demand
>in the Market for Final Ouput the logical implications of
>the maximizing attributes of Homo Economicus which underlies
>all of Economic Science.

See: anachronistic introduction of the core neoclassical
concept into classical economic theory and the General
Theory.

A moment reflection ought to suffice ... but it doesn't,
or a lot of misdirected effort would have been avoided ...
to establish that a model in which all the decision are
maximising decisions is an incomplete model of economic
decision making.  Ergo, while it may be appropriate in
some microeconomic questions, it cannot be appropriate
as the sole foundation for a effective macroeconomic
model.  Business operators know that they do not know
enough to make it universally sensible to devote all
resources to the best possible use based on currently
available information, so that some business decisions
will be regular in a way that differs from maximising
decision making.

Boulding argued that where this type of decision making
is obscured is in beginning from the income statement
instead of the position statement ... that is, as I
interpret it, having decided what and how much to devote
to precautionary purposes and whether, what, and how
much to devote to speculative purposes, the amount
devoted to pursuit of opportunities based on known
information might be modelled using maximising models
(though, of course, there are arguments regarding the
strengths and weaknesses of maximising models even
here).  However, the decision of what portion should
be allocated to those three different purposes cannot
conceivably be modelled using a maximising approach,
since two of the three sets of costs and benefits are
by definition unknown when the decision is being made.

Since proper consideration of this allocation problem
is included in the General Theory, and is the foundation
of an important part of the system (albeit in the area
of money and financial assets and not in the theory of
production in general), then the statement:

>the maximizing attributes of Homo Economicus which
>underlies all of Economic Science.

finally pins down a specific premise being added to the
reading of the General Theory (as well as explaining
Bentham as the representative of classical economic
theory!) which is resulting in the gross distortions
that have resulted.  Define economic science as that
which is based on the foundation of your particular
borrowing from an earlier physics, and then anyone
who explores beyond the constraints of that foundation
is not engaged in "Economic Science"!

I'm happy that that is cleared up, through disappointed
that it is such a mundane trained incapacity at work.
If you want to fight the "Washington Consensus" by
working on improved macroeconomic theory, first you
have to untie the hand you've tied behind your back and
drop the requirement of a maximising foundation in order
to qualify as "Economic Science".

Virtually,

Bruce McFarling, Shortland, NSW
ecbm@xxxxxxxxxxxxxxxxxxx