Re: Piorot on Madrick - Winslow's blast

[Ted Winslow <egwinslow@xxxxxxxxxx>]

Paul wrote:

> All of this implies both Ted and John are talking about ergodic stochastic
> processes where even the probability of changes in the universe barrel are
> already predetermined .
>
> both appear to be talking about epistimological uncertainty-- the kind of
> uncertainty that the Austrians talk about-- and thus believe that the market
> place can predict the outcome, where the limitations of each human's "data
> collection ability and ...computing resources" [to use John's phrase] are
> limited. [Thr kind of uncertainty that  Knight , Simon or Sargent talks
> about.]
>
> When one speaks of  fundamental uncertainty (or nonergodic uncertainty) one is
> talking about ontological uncertainty where the future is not predetermined
> (or preprogrammed) by that great computer programmer in the sky named God.

Not me Paul.  I've been trying unsuccessfully to persuade John that his
account of determinism is self-contradictory because it assumes both that
things are fully "predetermined" - both the future winning lottery number
and the future holder of the ticket with that number are, on his
assumptions, predetermined - and that they are not fully predetermined so
that a contemporary agent, e.g. "God", can _choose_ to buy the winning
ticket and make herself the future winner.  When I point this out, however,
his only response is to repeat the self-contradictory claim:

> God, or an economically rational man, knowing how the balls were stacked in
> the barrel and the exact operation of the selector lever, could predict the
> numbers before the draw and be able to buy the winning numbers, guaranteeing a
> win.

The ontology I'm elaborating (Whitehead's - I think there are good reasons
for believing it's also the one Keynes adopted after abandoning the one
underpinning the argument in A Treatise on Probability) produces meanings
for "cause" and "determine" very different from those produced by the
ontology underpinning complexity theory.

Moreover, as conceived by Whitehead, this idea leaves room for both
self-determination ("free will") and an irreducible element of indeterminism
(this provides the ultimate ontological foundation for Whitehead's
"frequency theory" of probability - a theory in which the probabilities
constantly change because of "internal relations").  Both these aspects mean
that the future is not fully predetermined.  This is helpful since at the
very least it makes the idea consistent with the obvious fact that human
actions are to some degree self-determined and do affect what occurs (even
to deny this is to affirm it i.e. denial necessarily implies an agent - the
one doing the denying - who is to some degree self-determined).

(By the way, even if, as Ian suggests, you conceive complexity theory so as
to allow for an irreducible aspect of indeterminism you don't get rid of the
logical difficulty to which I'm pointing.  Self-determined behaviour - e.g.
choosing to buy a particular lottery ticket - isn't undetermined behaviour.)

So on these premises even a Laplacean demon couldn't know for certain what
was going to happen in the future.

It's true that, on these premises, the origin of uncertainty in the sense of
"we simply do not know" is the limitations this ontology creates for a
finite mind.  Internal relations mean that to fully know any particular
thing you would have to know everything because through internal relations
the "whole" is embodied in the "part" i.e. the part is, in this sense, the
whole. Such knowledge is beyond the capacity of finite minds whether taken
individually or collectively (as in "the market place" - in fact "the market
place" makes finite collective understanding more limited than it need be
for, omong other reasons, those pointed to be Keynes in "The End of
Laissez-Faire" e.g. "it may even be to the advantage of individuals to
aggravate the disease ['uncertainty and ignorance']").

This is not, however, inconsistent with knowing something.  One reason for
this is that internal relations have differing degrees of stability so that
for some purposes some of them can be "abstracted" from.  However, the
farther into the future are the events we wish to know something about the
fewer will be the relations we can reasonably treat as "given" in this sense
and the more it will be necessary for us to know everything before we can
know something. Some of these unknowable things follow from the current
limitations of our finite knowledge.  We can't, for instance, know how our
understanding of things we'll change in the future because if we knew this
we would have already incorporated the changes into our present
understanding.

The stability of internal relations varies with the particular subject
matter that is the object of study.  The phenomena of social life, for
instance, issue from a much less stable set of internal relations than the
phenomena which constitute the subject matter of astronomy.  This is why, if
this ontology is realistic, methods - e.g. the mathematics of complexity
theory - that depend on a high degree of stability in these relations (so as
to preserve the degree of identity in the "variables" that the valid
application of the method requires) will have a much more limited range of
valid application in economics than they do in astronomy.

Uncertainty in this sense has implications for rational action.  These are
set out by Keynes in a number of texts e.g. A Treatise on Probability p. 32,
the correspondence with Townsend (XXIX, p. 224 ), Essays in Persuasion, p.
xviii, and the passage I recently quoted from the end of "The Balance of
Payments of the US."  Rational action in the face of such uncertainty is,
within the limits set by the rational "optimistic hypothesis," "to allow
caprice to determine us. (VIII, p. 32)"

    "No one can be certain of anything in this age of flux and change.
Decaying standards of life at a time when our command over the production of
material satisfactions is the greatest ever, and a diminishing scope for
individual decision and choice at a time when more than before we should be
able to afford these satisfactions, are sufficient to indicate an underlying
contradiction in every department of our economy.  No plans will work for
certain in such an epoch.  But if they palpably fail, then, of course, we
and everyone else will try something different.
    "Meanwhile for us the best policy is to act on the optimistic hypothesis
until it has been proved wrong.  We shall do well not to fear the future too
much.  Preserving all due caution in our own activities, the job for us is
to get through the next five years in conditions which are favourable and
not unfavourable to the restoration of our full productive efficiency and
strength of purpose, of our prestige with others and of our confidence in
ourselves.  We shall run more risk of jeopardising the future if we are
influenced by indefinite fears based on trying to look ahead further than
any one can." (XXVII, pp. 445-6)

Notice the explicit association here of "uncertainty" with "flux and
change."  This is consistent with the explanation of uncertainty in terms of
the ontological hypothesis of "organic unity" - "internal relations."

So the problem comes not from the "uncertainty" itself but from the
irrational psychological reaction to it.  Irrationally influenced by
unconscious phantasy, individuals "try to look ahead further than any one
can" and fall victim, under the same influence, to irrational "indefinite
fears."  If they can't succeed in "hiding from themselves how little they
foresee," they become irrationally pessimistic and "fear the future too
much." "Animal spirits" dim, "enterprise" falters and, for a reason - an
irrational "instinctive or conventional" "feeling about money" - itself
rooted in unconscious phantasy, the "propensity to hoard" intensifies.

>> Keynes cheerfully described people whose actions were not in accordance
>> with his view of the world as acting irrationally, but that is what comes of
>> having an Eton education.
>
>
> No it comes of having a clear logical mind -- and trying to draw a
> taxonomic distinction against the orthodox notion of rationality in his
> time-- where rationality meant knowing the frequency distribution of
> possible future events.

You're continuing, I see, to attribute "scholasticism" in both Keynes's
senses to Keynes.

What John says ignores, among other things, the definition of irrationality
I attributed to Keynes, the definition I've just used to elaborate Keynes's
treatment of the irrational psychological reaction to uncertainty.  For
Keynes, the irrational isn't even necessarily the mistaken, let alone
whatever is "not in accordance with his [Keynes's] view of the world". It's
beliefs and actions rooted in unconscious phantasy which are, for this
reason, immune to rational critique.

In your response to John, however, you still seem to be insisting that
Keynes, in his conception of agents, only abandoned a particular mistaken
notion of "rationality," namely, one that ignores the fact of "fundamental
uncertainty" so that "rationality meant knowing the frequency distribution
of possible future events," and that he continued to assume that agents were
"rational" but in the sense that includes the assumption that agents can't
know the frequency distribution of possible future events and know they
can't know this (my understanding is that you substitute the word "sensible"
for the word "rational" to make clear this difference between Keynes's
axioms and the axioms underpinning "the orthodox notion of rationality").

You seem, in other words, to be continuing to deny that Keynes assumes the
"vast majority" of agents are to some significant degree irrational, in
particular that they are irrational in the sense of "irrational" that I'm
attributing to him. In the Guardian article you recently posted, however,
you do use the word "irrational" to characterize the problem causing kind of
liquidity preference.

"Keynes saw that any [an?] irrational demand for liquidity as [was?] the
cause of unemployment and depression in our otherwise wealth-producing
enterprise economy."

Do you now agree that Keynes treats the "vast majority" of agents as
"irrational" either in the sense I've specified or in some other sense?

If this strikes you as a "beating your wife" question, could you at least,
as seems required by your views on Keynes, "axioms" and "taxonomy," spell
out precisely what are the axioms about agents that you are attributing to
Keynes?  Are they consistent with describing a "demand for liquidity"  as
"irrational"?

Ted