Re: more squiggly lines

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Bill:

Some comments which occurred to me as I read your message:

First.

> W.r.t. the circular flow of economic activity, Georgescu-Roegen identified
> it as a fatal flaw in standard economics (in his magnum opus on entropy
> and
> the economic process).

It is indeed a fatal flaw.

Comment:

As it happens, the Circular Flow view is to economics what Newton's
Gravitational Equations (see below) are to solar system mechanics.  For,
contrary to the conventional construction thereof, Newton emphasized in his
introductory remarks in Part III of Principia (Definition VIII) that his
Equations were NOT to be construed as EXPLANATORY with respect to the
factors involved in solar system orbital mechanics:

"I likewise call attractions and impulses, in the same sense, accelerative
and motive; and use the words attraction, impulse, or propensity of any sort
towards a centre, promiscously, and indifferently, one for another;
considering those forces NOT physically, but mathematically: wherefore the
reader is NOT to imagine that by those words I anywhere take upon me to
define the kind, or the manner of any action, the causes or the physical
reason thereof, or that I attribute forces, in a true and physical sense, to
certain centres (which are only mathematical points); when at any time I
happen to speak of centres as attracting, or as endued with attractive
powers."

The distinction was lost on most of Newton's contemporaries - and,
apparently, on 99.9% of modern theoretical physicists.  As for Say's Law, I
have no doubt that Keynes understood perfectly well that it DESCRIBED an
IDEALIZED economic system and that his peers who viewed it as descriptive of
REAL-WORLD economies were as fundamentally mistaken as were Newton's
contemporaries and successors with respect to the epistemological status of
Newton's Equations.

Second.

> >In the book by H.J. Muller that I have mentioned before, he makes
> this
> >generalization very forcefully in respect of Newton's cosmological
> physics--i.e.
> >that "Newton" was inevitable and that someone was bound to come up
> with
> >the same general principles very soon.

Comment:

I don't know H. J. Muller, but I would be much surprised if by Newton's
"general principles" he meant something other than the supposed "forces"
which Newton "considered NOT physically but mathematically" - that is to
say, if Muller understood Newton's Equations to be purely DESCRIPTIVE of
observed aspects of solar system orbital mechanics.

And, given their dynamic stability, it is as certain as anything can be that
a "Newton" was bound to come along and develop a mathematical MODEL thereof.

We are still without a definitive EXPLANATORY model.

Third.

As to the circular flow model, in financial terms it cannot work (I'll
avoid the entropic aspect for now).

Comment:

There is no question that, just as Say's Law, the Circular Flow Model
"cannot work" when viewed as descriptive of real-world market economies.

Schumpeter made that point abundantly clear with respect to Interest on
Production Credit or Entrepreneurial Profit - the proposition that such
Interest/Profit has NO place in an IDEALIZED Circular-Flow market economy is
a function of the attributes thereof as distinct from those of real-world
market economies.

Gunnar