Debating GDP Dogma With An Economist

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Re: Debating GDP Dogma With An Economist

Postby bfix » Sun Mar 31, 2019 1:31 pm

Conclusions
**************

I found this discussion to be exhausting. But it has been a learning experience about how dogmas work. My main take home from this is that dogmas are constructed so that they are immune to criticism.

The economist first presented their claims in a scientific sense, and argued very much in scientific terms of "right" and "wrong". But when pressed, the economist admitted the normative nature of the claims. The problem was the normative framework was then out of bounds. The only debate the economist would accept was within the logic of their chosen normative framework.

This is a clever trick. It means that all economists have to do to maintain the dogma is achieve logical consistency with their own assumptions. The assumptions themselves are out of bounds for criticism.

And this is why economics is a religion, not a science. The economic clergy only accept debate within the confines of their dogma. To question the dogma is to be a "crank".
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Re: Debating GDP Dogma With An Economist

Postby Ikonoclast » Sun Mar 31, 2019 4:32 pm

I thoroughly agree with your conclusions. The debate was exhausting. I read every word. As you summed up, "this is why economics is a religion, not a science... To question their dogma is to be a crank."

Ernest Gellner, the Czech-British philosopher and social anthropologist, wrote a book called "The Psychoanalytic Movement: The Cunning of Unreason." The phrase "cunning of unreason" is an excellent one and sums up the problems one faces when arguing with a highly intelligent dogmatist. The phrase is now well used. It gets many hits on internet and I am not sure if Gellner originated it or if it comes from another source.

Following Karl Popper (and Gellner to some extent), one can identify several proto-sciences which arose after the Newtonian revolution. Two of great importance for the 19th and 20th centuries were Psychoanalysis and Economics. Popper, at least in relation to psychoanalysis, was prepared in retrospect to grant it an initial status, at its inception at least, as a proto-science. IIRC, he did not categorically state that it could have been identified, for certain, as a pseudo-science from its very inception. That judgement had to await developments both in psychoanalysis itself and in the hard sciences such as neuroscience. The problem identified with psychoanalysis by Popper was that it contained no central propositions which were falsifiable by evidence (falsifiability being Popper's scientific rubric) at the time at which Popper wrote.

Gellner, IIRC, noted that psychoanalysis from the therapist's position was very much a self-confirming theory. Whatever the analyst discovered or thought he had discovered was always adduced as evidence which proved the analyst was right. If the patient agreed with a therapeutic construction, the therapist was right. If the patient disagreed, the patient was resistant and in denial. The therapist was again right.

Until psychoanalysis and/or the hard sciences could progress to the point where psychoanalytic claims could be tested scientifically then it would have to remain termed a proto-science, in Popper's view at least. Eventually, a considerable number of developments in neurology and clinical psychology were able to provide enough evidence to falsify a number of the central theses and claims of psychoanalysis. In addition, historical researchers found that Freud had fabricated important key evidence from a number of his celebrated clinical cases. Freud, strictly speaking, was a scientific fraud in the field of Medicine notwithstanding some brilliant books like his "Civilization and its Discontents". ("Why Freud Was Wrong: Sin, Science and Psychoanalysis" - Richard Webster). Psychoanalysis was most assuredly proven to be a pseudoscience.

The case is somewhat similar with classical economics. I think we can say it began as a proto-science. We can now see it is a pseudoscience. The original idea was to find the "laws of motion" (admittedly Marx's phrase) of economic phenomena. Newtonian precepts, as mathematico-deductivism, were applied to the field of economics. Orthodox economics lacks a firm ontological basis due to its implicit reliance on Cartesian Dualism. Cartesian dualism initially served well as the philosophical base for reductionist and mechanistic science. The first scientific revolution commenced in full with Copernicus. “On the Revolutions of the Heavenly Spheres” was published in 1543. This first revolution achieved its highest developments in the period from the work of Isaac Newton (1643-1727) up until about the time and work of the chemist Justus von Liebig (1803–1873).

This type of reductionist and mechanistic science, effective as it was, was still based on Christian-Cartesian justification and ontology, and it was not seriously challenged, outside of philosophy and perhaps mathematics, until the evolutionary theories of Charles Darwin (1809–1882) and then subsequently the theories of Relativity of Einstein (1879–1955). Through the work of Einstein, Max Planck and others, the eventual ascendancy of relativity, probabilistic science, probabilistic mathematical methods, complex systems philosophy and complex systems science began to be assured for the modern age, constituting a second scientific revolution and a new philosophical revolution to all of those paying intellectual attention: though one should not assume it will be the final scientific revolution.

Crude materialist and reductionist science require a supplementary thesis of at least a second substance (after matter) to explain phenomena which are not well explained or not explained at all by inanimate materialism and reductionism. Materialism, as a substance philosophy, along with mechanistic science, having reductionism as their only explanatory vector, essentially required supplementation by a second thesis of an animating, vivifying, ensouling or spiritual substance which could then provide an explanatory vector in the direction of animation, life, (and thus supervenience, emergence, novelty and evolution) and of course provide justification for the human species’ self-evaluation of being very important.

Cartesian Dualism (or even Trialism) was an impressive philosophical solution for its time and place. Christian dogma was still very strong, being an almost unquestioned part of the furniture in nearly every educated European mind, at least until “freethinkers” like Diderot and Voltaire. Cartesian Dualism is the synthesis which permits early reductionist science and Christian dogma to coexist in relative harmony intellectually and philosophically in any one mind; that is to say without overt cognitive dissonance. We ought to note that neither then nor now have the majority of the human race had their minds troubled by or about Christian or monotheist dogma. Its seeming importance is a cultural artefact of the Middle East and West.

Among those not paying attention, it seems, to the progress of Philosophy from Berkeley and Hume onwards and to the progress of Science from Darwin onwards, were the classical economists who continued developing mechanistic and mathematico-deductivist systems from the comprehensive system created by the patriarch of classical economics, Alfred Marshall (1842–1924), inventor of the term “economics”. Politicians and Capitalists (our modern ruling classes) became much enamoured of classical economics and remain so. It lent itself to bowdlerisation, over-simplification and ideological justification. Social Darwinism was about all that this crude economics borrowed from Darwin.

It is not at all paradoxical that one of the strengths of belief systems, as opposed to knowledge systems, is their over-simplification as dogma for the masses. Classical economics is not only arguably wrong in ontological analytical terms, but demonstrably wrong on key issues from the point of view of modern science. Elite acclaim and its own material successes have simply made it “wronger” in some senses. This view cannot be attacked as mere polemical assertion for empirical proof is now accumulating that severe ecological, climate system and bio-services crises are arising out of production science and technology marshalled and managed at the behest of and in the manner prescribed by classical economics and its direct descendent, neoclassical economics. Severe ethical or moral crises are also arising (once again as they do periodically) due to the rise in economic and social inequality under neoclassical economics.

As the modern state became instrumentally stronger (total war, national accounting, fuller monetary control) the theories of Keynes became conceivable and then executable. These in turn were superseded by monetarism (based around the reification of money) and neoliberalism (based on market fundamentalism). In the 20th century, Capital and State developed like binary stars circling each other closely (or sometimes even combining to form totalitarian systems) in various guises such as laissez-faire capitalism, state capitalism (misnamed communism), corporate capitalism (including Fascism), welfare capitalism (after Keynes), warfare-welfare capitalism (warfare for “others”, welfare for “us”) and most recently the neoliberal or market capitalism (market fundamentalism) under which we in the Anglosphere live in the early 21st century.

Philosophy and pure science have charted a rather different and more creditable path, in ontological and epistemological terms, than have classical and neoclassical economics. The time is close, in historical terms, when classical/neoclassical economics will be refuted by the feed-backs of real systems. The economic ideologues simply do not see that their time is nearly over.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it." - Variously attributed.

"Science progresses one funeral at a time." -- Max Planck
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Re: Debating GDP Dogma With An Economist

Postby jmc » Sun Mar 31, 2019 4:46 pm

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Re: Debating GDP Dogma With An Economist

Postby Jonathan Nitzan » Sun Mar 31, 2019 6:25 pm

Blair,

This exchange – I’m not sure it qualifies as a debate – exemplifies the power of neoclassical dogma. I think it would be useful to have it posted as a Working Paper on Capital as Power.

On
On

You might also consider submitting it to Real-World Economics Review; they should be interested in this example of ‘anti-pluralism’, particularly if you frame it in this way.
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Re: Debating GDP Dogma With An Economist

Postby bfix » Mon Apr 01, 2019 7:37 am

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Re: Debating GDP Dogma With An Economist

Postby Ikonoclast » Mon Apr 01, 2019 5:32 pm

One of the concepts Ernst Gellner develops is the idea of a "swichen". He uses this (neologism) concept in "The Psychoanalytic Movement" book but one can see it has a wide potential application. The basic idea is that some sets of data can support two or more conclusions, drawn by inference. With swichens, each alternative idea is credible and supportable. Indeed, one can sometimes switch between the ideas, finding one and then another, plausible. Gellner uses the example of optical illusions to illustrate swichens. Some optical illusion drawings are of the sort where you can see a candle or two faces, an old woman or a young woman. The perception switch can be as simple as which data are foregrounded and which data are backgrounded. However, there is clearly more to it than that, even in optical illusions.

Below is my interpretation of Gellner's swichen idea, so it's not in his words, and may present a somewhat different take on the idea.

At the religious, philosophical and ideological levels, people can look at "the world", to fully generalize it, presumably see approximately the same data, at the highly aggregated level anyway, and then develop vastly different conceptions of what that data actually means, in terms of developing or consolidating personal beliefs. Of course, how they see it is highly conditioned by early enculturation and education. But sudden conversions to new beliefs or new convictions, especially of the nature of a "Damascene conversion", a "going down the rabbit hole" experience or a "red pill - blue pill" moment, can illustrate that relatively little new data, a re-framing or a subtle coaching by a mentor or manipulator, can create a swichen moment or conversion of views in someone's mind. The new datum or data perhaps have to constitute an idea of the nature of an autocatalytic idea which switches other ideas to its orientation.

I experienced a near "swichening" moment in your debate with the economist. The economist's ten numbered points (I think they were), as chained deductions, started to become superficially convincing to me, at a certain level of reasoning, and I had to remind myself how the chain started (as a normative premise I strongly disagreed with on empirical grounds) to then remind myself that if the first term of the syllogism is false then all the following deductions are false.
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Re: Debating GDP Dogma With An Economist

Postby blairfix » Wed Apr 03, 2019 1:00 pm

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Re: Debating GDP Dogma With An Economist

Postby Ikonoclast » Wed Apr 03, 2019 6:04 pm

Brilliant! So many interesting things to unpack there.

On a first reading, early in the morning after only my first coffee of the day, my mind went gaga at about point 18. That doesn’t really matter because after point 2 the economist’s case was already lost. After my second coffee for the day, I will be able to complete reading it.

The Einstein discussion was very interesting, particularly as I have just finished watching the DVD dramatization series “Genius” about Einstein’s life and work. The series actually does pretty well in illustrating how Einstein came up with his relativity ideas (special and general). It shows him using real, life-scale analogies as concretisations to assist him to visualize the equivalence principle. I don’t recall if the term “equivalence principle” is itself voiced in the series.

Money is an interesting topic. Some are only interested in making it and even using high-powered theories to make it on the stock markets. That’s fair enough, at a pragmatic level, in the extant system people have been handed. They have to live and want to secure their future. I however, having an annual income as a “self-funded” retiree (“self-funded” really being a self-righteous term for an indolent retiree living on modest capital) am only interested in dispelling the phantom of money and finding out what is truly real.

Speaking of analogies and equivalences, I have been turning over in my mind the differences between relatively small amounts of money, say the amounts needed to survive week by week, as a weekly income from work say, and the much larger amounts which more justifiably earn the designation “capital”. The amount of money determines its possible uses, its behaviours as it were.

We can see all sorts of ways, in the physical world, in which scale affects behaviours of materials by determining which physical law dominates in net effect. Place a small drop of water on a flat, level, water-repellent surface and it will draw up into a slightly oblate spheroid droplet due to surface tension. Place a large “dollop” of water on the surface and gravity effects will overcome surface tension and it will flow out.

Money seems to demonstrate these kinds of effects, except that small amounts flow out and disperse and a large dollop (of capital) tends to remain whole and even attract other droplets to meld with it as it “rolls around”. Of course, one shouldn’t make too much of analogies if they don’t lead anywhere; meaning specifically, assisting in making hypotheses and doing empirical studies. But it seems to me that money is a very different thing existentially to a poor person or a worker than it is to an owner of a large amount of capital. The experience of it is different and it “behaves” differently; its potential behavior or application repertoire is different. You might say it presents a different possibility space.

Of course, this general idea is not original. Some theorists talk about the minimum welfare condition for participating in a (consumer) market. This minimum welfare condition does not necessarily imply state welfare. For example, it could also occur at true full employment with a true livable minimum wage. Following on from this, we could also talk about an average minimum wealth expansion condition, perhaps. Is there an average amount of wealth (capital) below which people on average tend to maintain stasis or get poorer and above which (in this capitalist system) they on average tend to get ever wealthier? I don’t know whether this is a useful or interesting speculation.

I mention this because CasP, according to Jonathan Nitzan, is “interested not in the actions of individual ‘agents’, but in the creordering of social structures writ large.” That latter issue is very important and at that level CasP is doing really interesting work. I agree with J.N. that “The liberal ontology of individual ‘agents’ is part and parcel of the rulers’ imposition of power.” This doesn’t mean of course that we need to neglect other ontologies of social individuals and collectives and indeed J.N. mentions some of the most important ones, “the possibility of collective resistance and the desirability of democratic alternatives”. I am simply wondering how and if parts of the CasP project are analysing more than the “creordering of social structures writ large”, vitally important though that is. Are there ways of extending CasP analysis down into other levels (without repeating the kind of horrendous mistakes made by mainstream micro-economics)?

As I implied above perhaps, there is also CasS, “Capital (or money) as Survival” where money, as it were, presents a different (much smaller) possibility space. I do wonder how CasP sees markets. Maybe I haven’t read enough yet. Of course, to start suggesting that there should be no markets or statist commands rather than markets (in whole or in part) or market socialism etc., is to start prescribing again rather than describing. Yet one purpose of accurate (scientific) description of a system fraught with problems must in the end be the goal of some change to that system. How do we get from theory to praxis? That is always a tough question.
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Re: Debating GDP Dogma With An Economist

Postby Jonathan Nitzan » Wed Apr 03, 2019 11:19 pm

The utilitarian pillars of ‘real GDP’

1. This exchange focuses on the ‘unit of aggregation’, mostly in the abstract. But in economics in general and in ‘real GDP’ measurements in particular, the ‘unit of aggregation’ is not abstract at all.

2. What GDP tries to approximate is well-being: note that GDP aggregates ‘goods’ and ‘services’ – both of which connote ‘wellness’.

3. Well-being is an inherently subjective measure. It depends not on the goods and services as such, but on their interaction with consumers. According to mainstream economics, the result of this interaction is ‘utility’ (as Blair notes in his post ).
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4. Since consumers of goods and services supposedly are heterogeneous (the liberal ideal of individual autonomy), so is the utility they derive from goods and services. This heterogeneity means that the well-being generated by goods and services – i.e., the ingredients of ‘real GDP’ – cannot be aggregated, period.

5. Economists, though, aggregate them into ‘real GDP’ anyways. For this aggregation to have a meaning, the following assumptions must be correct.

(a) All consumers are identical, so their utilities are commensurable.

(b) Consumer preferences must be independent of the quantities consumed, so that a redistribution of income between different consumers will not alter the utility generated by a given array of goods and services.

(c) Preferences must remain temporally fixed to ascertain that, over time, a given array of goods and services will yield the same measure of ‘real GDP’.

(d) All markets must be in a perfectly-competitive equilibrium to ascertain that prices reflect the underlying utilities; alternatively, economists must know the ‘correct’ prices that would have prevailed had markets been in a perfectly competitive equilibrium.

6. Since assumptions (a), (b), (c) and (d) are never satisfied, the resulting measures of 'real GDP' are meaningless.

For more, see:

Nitzan, Jonathan. 1989. Price and Quantity Measurements: Theoretical Biases in Empirical Procedures. Working Paper 14/1989, Department of Economics, McGill University, Montreal, pp. 1-24.

Nitzan, Jonathan, and Shimshon Bichler. 2009. Capital as Power. A Study of Order and Creorder. RIPE Series in Global Political Economy. New York and London: Routledge, Chs. 5 and 8.
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Re: Debating GDP Dogma With An Economist

Postby blairfix » Thu Apr 04, 2019 7:14 am

The Unit of GDP is Utility

This is an important point that many economists fail to acknowledge. Yet again another sign that we are dealing with a secular religion. Can you think of any branch of science in which measurement is done without a valid unit? And that practising scientists remain ignorant to this problem, even to the point of thinking that their measurement is based on entirely different units?

This absurdity hit home for me early in my graduate studies. After having taken Jonathan Nitzan's course on , I understood the utilitarian underpinnings of real GDP. These underpinnings are only obvious if you look at the methods used to measure quality change. Most economists remain oblivious to them.

Fast forward a few months and I'm in a committee meeting. I have on my committee a senior ecological economist. We are discussing my research, and the topic of economic growth comes up. I say that I am not going to use real GDP because it is based on the non-existent unit of utility. The senior economist furrows his brow and scolds me.

"Nonsense", he says. "Real GDP has units of $ years. We fix the value of money at a point in time and then measure growth objectively."

As a lowly graduate student, I didn't feel in a position to critique his position. But it cemented in my mind the absurdity of economics. Unless they specialize in price indexes, practising economists have no idea what goes into the calculation of real GDP.
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