Re: A Future Economics

[Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>]

cc: pkt

Gunnar,
Thanks for the detailed reply.

Suppose:

Desired Output = Current Income

In the other words, collective income arises from the collective *desire*
for output. Catch-22 avoided.

Harry


>> Harry:
>
>> If an economy has a beginning then income=output cannot be true, since
>> income=output implies a catch 22: no output without income; no income
>> without output.

Gunnar:
>
> When economic theorists circumvent this "catch-22" by distinguishing between
> Comparative Statics and Dynamics, the "catch-22" aspect is transformed into
> the equally intractable problem of moving in logically coherent fashion from
> Static to Dynamic aspects of theoretical economics.
>
> This is how Paul A. Samuelson (a) defined, and (b) 'resolved' the problem in
> 'Foundations of Economic Analysis':
>
> "In this study I attempt to show that there do exist meaningful theorems in
> diverse fields of economic affairs.  They are not deduced from thin air or
> from _a priori_ propositions of universal truth and vacuous applicability.
> They proceed almost wholly from two types of very general hypotheses [a.k.a.
> _a priori_ propositioins of universal truth and vacuous applicability -
> insert].  The first is that the conditions of equilibrium are equivalent to
> the maximization (minimization) of some magnitude. [A condition which cannot
> in principle apply to Supply of Money at the touch of a computer key -
> insert]...
>
> "However, when we leave single economic units, the determination of unknowns
> is found to be unrelated to an extremum position.  In even the simplest
> business cycle theories there is lacking symmetry in the conditions of
> equilibrium [assuming the concept of "equilibrium" to be a meaningful one in
> dynamics - insert] so that there is no possibility of directly reducing the
> problem to that of a maximum or minimum.  Instead the dynamical properties
> of the system are specified, and the hypothesis [_a priori_ proposition of
> universal truth and vacuous applicability - insert] is made that the system
> is in "stable" equilibrium or motion [i.e., one assumes that what one cannot
> SHOW to be so, is in fact the case - insert].  By means of what I have
> called the _Correspondence Principle_ between comparative statics and
> dynamics, definite _operationally meaningful_ theorems can be derived by so
> simple a hypothesis." (p. 5)
>
> Samuelson's assumption become "so simple a hypothesis" is predicated on the
> implicit assumption that Ergodicity is an attribute of real-world market
> systems - that was the point of Samuelson's acknowledgement three or four
> decades later that Ergodicity was a _sine qua non_ for Economics as Science.
>
> In this respect, Samuelson is one step ahead of most PKT economists, who
> hold real-world market systems to be Non-Ergodic but fail to recognize (or
> admit) the implications thereof for their own quest for Economics as
> Science.
>
> In this respect, such PKTers follow in the footsteps of Keynes, who skirted
> the LOGICAL issues involved in moving from Comparative Statics to Dynamics
> in Preface to _The General Theory_ - his would-be Dynamic follow-up to 'A
> Treatise on Money':
>
> "When I began to write my _Treatise on Money_ I was still moving along the
> traditional lines of regarding the influence of money as something so to
> speak separate from the general theory of supply and demand.  When I
> finished it, I had made some progress towards pushing monetary theory back
> to becoming a theory of output as a whole.  But my lack of emancipation from
> preconceived ideas showed itself in what now seems to me to be the
> outstanding fault of the theoretical parts of that work (namely, Books III
> and IV), that I failed to deal thoroughly with the effects of _changes_ in
> the level of output.  My so-called "fundamental equations" were an
> instantaneous picture taken on the assumption of a given output.  They
> attempted to show how, assuming the given output, forces could develop which
> involved a profit-disequilibrium, and thus required a change in the level of
> output.  But the dynamic development, as distinct from the instantaneous
> picture, was left incomplete and extremely confused.  This book, on the
> other hand, has evolved into what is primarily a study of the forces which
> determine changes in the scale of output and employment as a whole; and,
> whilst it is found that money enters into the economic scheme in an
> essential and peculiar manner, technical monetary detail falls into the
> background.  A monetary economy, we shall find, is essentially one in which
> changing views about the future is one which depends on the interaction of
> supply and demand, and is in this way linked up with our fundamental theory
> of value.  We are thus led to a more general theory, which includes the
> classical theory with which we are familiar, as a special case."
>
> [Translation:  This is my second attempt to integrate Comparative Statics
> and Dynamics in a Unitary Conceptual Framework.  In the first (unsuccessful)
> attempt in 'A Treatise on Money', the Comparative Statics aspects served as
> my point of departure - here, I approach the SAME problem from the Dynamics
> side of things.  There are some loose ends - with "technical monetary detail
> [pushed] into the background" - but success this second time around would
> ensure that the Dynamics of Supply-and-Demand interactions dovetail in
> seamless fashion with the Comparative Statics approach of "our fundamental
> theory of value".]
>
> Alas, the Comparative Statics foundations of "our fundamental theory of
> value" cannot in principle accommodate Profit as part of Income within a
> Conceptual Framework which is at once Unitary and Logically Coherent - a
> point to which I can imagine Keynes responding:
>
> "I know that - but current world economic and political circumstances do not
> afford me the luxury of being a stickler with respect to technical details,
> the import of which is lost on most of my academic peers in the first
> place."