Re: Heterodoxers are crackpots

["John M. Legge" <jlegge@xxxxxxxxxxxxxx>]

Paul,

I am confident that any eclipses next year will be predicted to the
microsecond (but not with infinite precision) and that no asteroid will
strike the earth and wipe out civilisation inside the next decade.  I am
less confident about some of the wilder characters orbiting G. W. Bush:
proposals to launch a nuclear war even against a person as unpleasant as
Saddam Hussein can only come from people whose belief in their own ability
to predict the future substantially exceeds my confidence in that ability.

Contracts provide some assurance about the future, but hardly certainty,
even for next year, since practically all of them involve either limited
liability companies or sovereign states, either of whom can dishonour
contracts by citing force majeure. Had my retirement savings a year ago been
in Argentine bonds and Enron energy futures, insured by HIH Ltd, I would
probably not be sleeping very soundly tonight.

Bruce cited an entrepreneur investing now in a new product with a view to
earning profits in fifteen year's time, and I am not aware of any market in
which contracts for future delivery of such products at such a time lapse
are traded.  OTH if Bruce's entrepreneur was considering buying a country
franchise for Coca Cola he/she could do so with very considerable confidence
(plus or minus one percent at the one sigma level) in next year's product
sales.  There is no forward contract with soda drinkers; just a
well-established habit which won't, short of catastrophe, change much over
the course of twelve months.

Future contracts provide one way of projecting a degree of order into the
future, but they aren't the only way; and whatever way we choose, the longer
the timescale the greater the opportunity for an extraneous event to
interfere with our arrangements.

Bruce's fifteen years is quite long enough for an asteroid strike,
especially one in the southern hemisphere.  Australia's neoliberal
government terminated Australia's asteroid tracking program in order to save
a million or so dollars a year, and so no-one is watching the southern third
of the universe.  I suppose that this proves that neoliberals really do
believe in ergodicity: since there hasn't been an asteroid strike for nearly
a hundred years they confidently predict that there won't be one for the
next hundred, or at least, before the next election.  (If an asteroid the
size of the modest meteor that struck Siberia early last century was to
strike the Pacific ocean it would generate a tsunami a hundred or so feet
high, which would make quite a mess of any coastal city within a thousand or
so miles of the strike.  The Coca Cola franchise for such a city would lose
a considerable fraction of its value.)

JML


> -----Original Message-----
> From: Paul Davidson [mailto:pdavidson@xxxxxxx]
> Sent: Wednesday, 4 September 2002 2:31 AM
>
> At 11:26 PM 9/3/02 +1000, you wrote:
>
> >Human society is more complex, and your example of an
> entrepreneur trying to
> >predict demand for a yet-uninvented product fifteen years
> into the future is
> >probably on a par with an astronomer talking about eclipses
> a million years
> >or from now;
>
>
> How about next year?
>
>
> >More dangerously, in my view, adding an axiom of uncertainty
> denies the
> >assumption of causality on which science relies.  If PKers
> choose to rely on
> >an axiom of uncertainty I do not know how they/we can
> challenge those of the
> >orthodox school who assert fundamental ergodicity.
>
>
> How about  economic institutions that can control economic
> behavior of
> humans?  For example, how about the law of contracts (enforced by the
> state) controls future human behavior during the period of
> the contract --
> at least among law abiding citizens-- and if residents are
> not law abiding
> then a civil economic system breaks down.
>
> And for the law of contracts to be financed one needs an
> institutional
> banking system, etc.
>
> Thus the legal system and related economic institutions
> permits one to
> sleep at night  "knowing" that tomorrow one can expect
> certain types of
> human behavior to occur -- but not to be surprised if one
> wakes up tomorrow
> and finds the bubble has burst.
>
> paul
>