Gunnar,
Actually I would say that this
is just the other
way around. The Swedish Bank Prize committee
almost certainly has a view of economics as a
"science," that the idea or issue of "schools of
thought" (like Post Keynesianism) is irrelevant,
and that all they are doing is judging who has
made significant contributions to "good
economics."
I leave it to others to judge how well they have
done on that (sometimes they do better than at
other times, however).
Barkley Rosser
----- Original Message -----From: Gunnar TómassonCc: Gang8Sent: Thursday, October 09, 2003 9:04 AMSubject: Economic Science [Was: Re: The Widow's CruseBarkley:Schumpeter's silence on the subject matter in History of Economic Analysis accords with Samuelson's comments:"Curiously enough, [Schumpeter] rarely mentioned his own theories. The nature of entrepreneurship and profits was discussed; but only once did I hear him discuss the reasons why the interest rate would be zero in a stationary state, and then only in an advanced seminar and under heavy pressure from [students]."Why this 'curious' silence?"I have never tried to bring about a Schumpeter school," he advised his Bonn students in 1930. "There is none and it ought not to exist.... ECONOMICS IS NOT PHILOSOPHY BUT A SCIENCE. Hence there should be no 'schools' in our field. [As in "mainstream", "monetarist", PKT, etc. - insert GT].... Many people feel irritated by this attitude. For in Germany alone there are half a dozen economists who regard themselves as heads of such 'schools,' as fighters for absolute light against absolute darkness. BUT THERE IS NO USE COMBATING THAT SORT OF THING. ONE SHOULD NOT FIGHT WHAT LIFE IS GOING TO ELIMINATE ANYWAY." [As in my earlier statement that Schumpeter "chose not to waste his time" in attempts to convert true believers to his point of view - insert GT].In the context, the concept of Economics as SCIENCE is not that used by Sweden's Central Bank in rewarding 'mainstream', 'monetarist', and - one day? - PKTers for contributions thereto.Instead, the concept of Economics as Science mirrors the classical (Humean) concept of "knowledge" - in a working paper from the 1980s, I summarized it as follows:1. All knowledge is axiomatic.2. Hence, knowledge relates to a state of mind.3. A state of mind is either clear or confused, coherent or incoherent, logical or illogical.4. A claim to knowledge is a claim to a clear, coherent, and logical state of mind.5. Hence, a claim to knowledge is distinct from a claim to opinion, whose validity is beyond any conceivable refutation on grounds of clarity, coherence, and logic.6. A claim to knowledge derives from the perception that one's mind is clear, coherent, and logical in holding such claim to be beyond dispute by any other mind equally clear, coherent, and logical.7. Hence, a claim to knowledge can only be refuted by minds satisfying the requirements of clarity, coherence, and logic.8. A claim to axiomatic knowledge is a claim to a state of mind marked by clarity, coherence, and logic in its grasp of propositions beyond relative time and space.9. The art of economics addresses policy issues within relative time and space in light of the axiomatic propositions of economic science itself.The above concept of knowledge accords perfectly with the definition offered in 1922 by Keynes [my working paper continued]:"The Theory of Economics does not furnish a body of settled conclusions immediately applicable to a policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions."Gunnar----- Original Message -----From: Barkley RosserSent: Wednesday, October 08, 2003 6:17 PMSubject: Re: The Widow's CruseGunnar,I just took a look at Schumpeter's final book, his masterly 1260page History of Economic Analysis. Looking in the index I found"Logic" as an entry on page 27 and pp. 448-454. The entry on p.27, part of the introduction to the book reads:"The former [logic] claims our attention because economistshave made a not inconsiderable contribution to it but especiallybecause of their propensity to dogmatize and to quarrel about'method': economists who enjoy this sport are apt to beinfluenced by the writings of the logicians of their time whichtherefore, though more apparently than really, gain some influence,legitimate or otherwise, upon our work."That is it for there, nothing about economics being a branchof logic.The later pages discuss the work of particular economistswho specifically worried about logic, with the main figures beingWilliam Whewell, John Stuart Mill, and Karl Marx. He spends mostof his time talking about Mill, especially his controversy with Comteover how economics should be done. Schumpeter concludes thatMill does an excellent job of describing and defending howeconomists use the "Concrete Deductive Method" and the"Inverse Deductive or Historical Method," and especially (in italics)"the necessity of studying actual human behavior in all its local andtemporal varieties."However, I find nothing in this set of pages either that suggestsanything along the lines of Schumpeter desiring for economics to"become a branch of logic."Barkley Rosser----- Original Message -----From: Gunnar TómassonCc: Gang8Sent: Wednesday, October 08, 2003 3:19 PMSubject: Re: The Widow's CruseBill:A brief comment and a question.Schumpeter, who chose not to waste his time attempting to drive the point home to his colleagues, was confident that economics would eventually be recognized as a BRANCH OF LOGIC.In a memorial article on Schumpeter, Paul A. Samuelson expressed his surprise at this notion - so you are not alone in not getting it.What does Goedel have to do with Y = C + I?Gunnar----- Original Message -----From: William B. RyanCc: Gang8Sent: Wednesday, October 08, 2003 10:46 AMSubject: [gang8] Re: The Widow's Cruse***|Paul has yet to respond. At issue is the
distinction between analytical and empirical
economics as practiced Keynes and PKT economists,
respectively. In one case, the precursor of the Y =
C + I proposition entails a logical absurdity, which
is disregarded in the other case. Isn't that so,
Paul? Gunnar|***Gunnar, you are confusing economic models with formal
logic or mathematics. No model is "true" by the
standards of formal logic or mathematics. They are
generalizations or simplifications that help us to
understand or heuristic aids in teaching concepts.Moreover, as Goedel tells us, at some level of
extrapolation every formal logical or mathematical
structure beyond the trivial becomes self-
contradictory or incomplete. That was perhaps the
most important discovery of the twentieth century.I think your approach is therefore an intellectual
dead-end and a waste of time. It has no more value
to us except recreationally, if we have nothing
better to do, like dominoes.In other words, you are playing a game with us.
--------- Original Message ---------
DATE: Tue, 7 Oct 2003 19:55:57 From: Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx> To: <pkt@xxxxxxxxxxxxxxxx> Cc: "Gang8" <gang8@xxxxxxxxxxxxxxx>
On October 2, I posted the below message to PKT.Paul Davidson responded off-list as follows:Gunnar did you ever note that Keynes specifically changed his definition in
the GT from that used in the TM?To which I replied:Yes.
There, the Widow's Cruse is embedded in Y = C + I.****Paul has yet to respond.At issue is the distinction between analytical and empirical economics as practiced Keynes and PKT economists, respectively.In one case, the precursor of the Y = C + I proposition entails a logical absurdity, which is disregarded in the other case.Isn't that so, Paul?Gunnar********Paul:Further to my message of yesterday's date -
I will check out Ch. 2 of your book at the IMF library tomorrow.
- I have now read the chapter.Briefly, its contents are reflected in the chapter heading, 'Keynes's principle of effective demand' -there is NOTHING there on "the Keynes theory of value".I also used the occasion to leaf through Vol. I of 'A Treatise on Money' and, in doing so, took special note of the following two passages:1. "(1) Income. - We propose to mean identically the same thing by the three expressions: (1) the community's money-income; (2) the earnings of the factors of production; and (3) the cost of production; and we reserve the term profits for the difference between the cost of production of the current output and its actual sale-proceeds, so that profits are not part of the community's income as thus defined." (MacMillan and Co., London, 1950, p. 123)In turn, Keynes identified NET Investment as the source of Profits.2. "Human effort and human consumption are the ultimate matters from which alone economic transactions are capable of deriving any significance; and all other forms of expenditure only acquire importance from their having some relationship, sooner or later, to the effort of producers or to the expenditure of consumers." (p. 134)Whence it follows that Investment is a pen-ultimate aspect of a production process whose ultimate object is Consumption - that is to say, Investment in any given period translates into Consumption in some future period.And, by including Profits/NET Investment as part of the community's disposable purchasing power in any given period, Keynes ended up with an analytical mess of the first order - the fabled Widow's Cruse:"There is one peculiarity of profits (or losses) which we may note in passing, because it is one of the reasons why it is necessary to segregate them from income proper, as a category apart. If entrepreneurs choose to spend a portion of their profits on consumption (and there is, of course, nothing to prevent them from doing this), the effect is to increase the profit on the sale of liquid consumption-goods by an amount exactly equal to the amount of profits which have been thus expended. This follows from our definitions, because such expenditure constitutes a diminution of saving, and therefore an increse in the difference between I' and S. Thus, however much of their profits entrepreneurs spend on consumption, the increment of wealth belonging to entrepreneurs remains the same as before. Thus profits, as a source of capital increment for entrepreneur's, are a widow's cruse which remains undepleted however much of them may be devoted to riotous living. When, on the other hand, entrepreneurs are making losses, and seek to recoup these losses by curtailing their normal expenditure on consumption, i.e. by saving more, the cruse becomes a Danaid jar which can never be filled up; for the effect of this reduced expenditure is to inflict on the producers of consumption-goods a loss of an equal amount. Thus the diminution of their wealth, as a class, is as great, in spite of their savings, as it was before." (p. 139)Keynes' confusion in this respect carried over into the General Theory.For replacement of Entrepreneurial Profits in the amount of NET Investment by the concept of Expected Profits in the amount of "SOMETHING" (Samuelson's phrase in Foundations of Economic Analysis, p. 87) cannot drive the Widow's Cruse out of business - for the Widow's Cruse was born of the misguided attempt by Keynes to integrate Entrepreneurial Profits and Income in a unitary scheme of monetary analysis.You insisted the other day that Keynes had been "consistent" in his reasoning throughout the General Theory.Insofar as the Widow's Cruse is concerned, the "consistency" consisted in perpetuating gross analytical error.Gunnar
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