Re: Piorot on Madrick

[Ted Winslow <egwinslow@xxxxxxxxxx>]

John M. Legge wrote:

> James Galbraith's K/C/S classification of industries makes more sense
> than
> the Akerlof argument that you summarise, with the particular advantage
> of
> being solidly grounded in empirical research.
>
> Factors such as value added per worker, and value at risk per worker,
> have a
> stronger force than vague notions of "fairness", although these play a
> secondary role. One shouldn't forget that the word "sabotage" was
> derived
> from the practice of disgruntled workers throwing an old wooden shoe
> (sabot)
> into the textile machinery.
>
> Manove put this concept into economese fairly elegantly:
>
> Manove, M. (1997), "Job responsibility, pay and promotion", Economic
> Journal
> 107(440, January), pp. 85 - 103.
>
> A factor that Manove and apparently Akerlof missed is the need for
> inter-worker cooperation and the resulting joint product: while it is
> easy
> to establish value added and value at risk per worker statistically, it
> is
> often impossible to assign it individually; not only is a uniform wage
> "fair", it may be the best approximation to the economically optimal
> level.

How do you reach the conclusion that the hypothesis that all economic
behaviour is the outcome of "rational maximization" is "solidly grounded
in empirical evidence"?

There is first of all the problem that the "complexity theory" which you
take as the realistic elaboration of this hypothesis constructs reality
as "a fully deterministic system" having no logical space for the notion
of future outcomes being affected by present choices i.e. no logical
space for the idea of "rational maximization."  Self-contradictory ideas
can't be "solidly grounded in empirical evidence," can they?

I gather that what you mean by empirical grounding is that some
empirical phenomenon, e.g.  a uniform wage, liquidity preference, the
domination of current profits in the formation of expectations about
future profits, etc. can be shown to be consistent with the hypothesis
that the phenomenon in question, e.g. this method of expectation
formation, is the outcome of "rational maximization" elaborated as
complexity theory, e.g. since using current profits to predict future
profits (though not, I gather, future profits in other than the short
run) can be shown to be "rational" for agents who believe reasonably
that complexity theory provides the true account of the reality they are
attempting to understand and predict and since agents are using current
profits to predict future profits, it therefore follows that the
particular economic reality in question is accurately described by
complexity theory and that agents know this and base their expectations
on this knowledge.

Have you empirically investigated how and why individuals do in fact use
current profits to predict future profits?  Can you point to evidence
showing they are using complexity theory to do this and that they are
not, as Keynes claims, using current profits to predict what is knowably
going to be different (even in the very short run e.g. Keynes's example,
taken from Marshall, of the irrational influence of knowably temporary
changes in railway revenues) from current profits and , in addition,
within a psychological context of "mob psychology" irrationally treating
as relevant many other kinds of irrelevant "news"?

With respect to "uncertainty" you say both that complexity theory
explains why the future is unknown and unknowable by a finite agent and
that any other way of understanding the phenomenon is "religious" in the
sense of not "scientific" because it's inconsistent with the ontological
premises of orthodox natural science, namely those underpinning its
conception of "determinism."  This is a religious way of defining
science.  It dogmatically insists on the adoption of ideas that, among
other problems (e.g. the "determinism" associated with the ontological
idea of "internal relations" can equally well explain uncertainty), are
self-contradictory i.e. against reason.  It implicitly makes its own the
credo of anti-rationalist religion - credo quia absurdum.

By the way, as I've pointed out to you before, treating what, for
ontological reasons, is necessarily and essentially "vague" "as if it
were precise and trying to fit it into an exact logical category" is
another form of scholasticism.  If you believe that Whitehead's argument
about the requirements material must meet for forms of reasoning that
make use of the logical concept of the "variable" to be applicable to it
is mistaken, you should (given that you understand yourself to be a
rationalist rather than a dogmatic adherent of religion) be able to
demonstrate by means of argument how it is mistaken, no?

Ted