Me: It’s a monetary economy. The most significant and important factor in the monetary economy is free and available individual income to purchase the goods and services of enterprise. Modern technologically advanced capital intensive economies are increasingly cost inflationary due to numerous reasons and so requires continual injections of credit/debt in order to try to prevent the economy from spiraling down into recession or depression (and inevitably fail), because the paradigm of Debt Only for profit making private finance being A CONTINUAL FLOW OF ADDITIONAL costs REQUIRES the new paradigm of Monetary Gifting in order to stabilize the economy.
IOW, it ain’t actually a complexity problem/rocket science. It’s resolved with logic, calculus and observing the economic process with an eye for a place to implement monetary policy that has the most efficient problem resolving effects.
PB: We humans leverage energy to produce an economic surplus. The key objective function we must minimize in this endeavor is waste. In the beginning, human labor, fueled by food energy was an important input. Today, human labor fueled by food energy pales in comparison to our leveraging of fossil fuel energy.
Also missing from your analysis is the importance of information as an organizing principle. Money, for example, is a network externality. The specific network is the payments system which is fundamentally a data network. The power (utility) of any data network scales as the square of the number of nodes (users) in the network. You might try to join this into an entropy model combining human energy leveraging, with the information theory definition of entropy and the second law of thermodynamics. Even this is of course a toy model of great oversimplification, ignoring as it does, the larger ecological system of earth and sun we are embedded in. This is the only way I see to bring hard Physics, Chemistry, and Thermodynamics into macroeconomic theory. The only guy I know who is slightly attempting this is Steve Keen. I recommend him to you.
Me: As I have posted several times before I consider Keen the best economist on the planet, and his research into the energy/entropy problem is of course spot on as well. However, leap frogging the cost inflationary economic problem resolved only by the new monetary paradigm is a fatal error as the current monetary paradigm of Debt Only and its continual flow of additional costs will stymie any action toward sane policies and projects….especially huge ones like off-planeting the most energy/entropy producing means of production.
Intellectuals are necessary, but their tendency to lose interest after merely identifying problems but at best only palliative solutions is not a good one.
YS: The trouble with Lars Syll is that he talks as if no heterodox economics exists. I know very well there are many strands or schools among heterodox economics and they all have many defects and weakness. However, if economics can develop beyond actual mainstream economics, the burgeon of new economics must come out from at least one of them. (Of course, it is possible that some of them will be unified as different parts of a more coherent theory.)
Lars Syll’s talks, it seems to me, as if a new scientific economics emerges once a good philosophy and methodology are established. This is a pure fiction and betrays the history of all sciences and disciplines (natural or social). A science grows very slowly and sinuously. It requires enormous efforts and trials and errors. If Lars Syll wants to be a useful philosopher of economics, he should better pay more efforts on the state of heterodox economics. If he finds some deficiency and flaws, and if he tell those economists who work in those fields, the economists would reflect on their problems and try to find a better way. In a very wide sense, criticizing neoclassical and mainstream economics may be a part of above efforts, but actually it works in a very negative way in this blog site, where almost all readers already recognize there are fatal flaws in neoclassical economics. The next target should be to show a new direction for the construction of a new economics. If not, his efforts enhance disbelief on economics in general including heterodox economics. No science emerges from nothing. A science grows.
Me: Except for its critique of Lars as an individual instead of a general critique of economic thinking, this is actually a very good post and nascent recognition of the real problem in economics. Yes, virtually everyone here knows there are problems with neo-classical economics, but economics itself is not the problem. 99% of the present economic problems we face could be rapidly resolved by changing the monetary paradigm. And it’s obvious why:
1) The monetary paradigm of Debt Only for the sole form and vehicle for the distribution of credit-money hasn’t changed for over 5000 years. This despite repeated historically identified systemic economic collapses due to inability to service debts.
2) Giving a public monopoly on credit creation is problematic…unless it is firmly and completely logically aligned with an unimpeachable ethic like the natural philosophical concept of grace. A private monopoly on credit creation is an utter contradiction of free enterprise theory and such an obvious ignoring of Lord Acton’s dictum that power corrupts and absolute power corrupts absolutely, so if we want free enterprise and individual and systemic freedom we will proceed with post haste in ending the present idiocy.
3) Monetary Gifting as the new monetary paradigm strategically implemented with a 50% Discount/Rebate monetary policy at the point of retail sale immediately and terminally ends the two deepest and seemingly unresolvable problems of modern economies, that is, individual and systemic monetary scarcity and chronic price and asset inflation. The practical and epistemological need to bring directness of monetary policy to the individual and to enterprise is perfectly analogous to bringing directness to one’s relationship with god that resolved the monopoly powers and structural indirectness demanded by the catholic church prior to the Reformation.
As I have posted here numerous times the new insight regarding the terminal ending point of the entire economic process at retail sale, and hence the realizations that it is also the point of the summing of all economic factors and the supreme leveraging, pivoting and so paradigm changing power point for monetary policy perfectly aligns with the fact that a new tool, insight and/or policy has always accompanied paradigm changes.
Why blather on about the complexities of economics when the new monetary paradigm enables us to resolve its worst problems, and prosperously take a huge deep breath while also being able to begin addressing the ecological and energy/entropy problems because finance is now a public utility that serves us instead of being the civilization long dominating parasite it still is today?
“The next target should be to show a new direction for the construction of a new economics. If not, his efforts enhance disbelief on economics in general including heterodox economics.”
“No science emerges from nothing. A science grows.”
Again correct, but sciences grow until they become stymied by their own orthodoxies and internal inconsistencies and so need necessarily to be transformed by a new paradigm in that area of human endeavor.
Isn’t 5000 years of inevitable economic failure due to the monetary paradigm long enough to wait for a new one?
LS: “Economists need to do the same – abandon current methodology borrowed from science and develop a new methodology suited for the study of human beings and societies.”
Me: This is a wisdom insight. And the “new methodology” you are seeking is in fact the integrative mental process of wisdom itself which includes, synthesizes, maintains the ethics of and ultimately transcends science. Wisdom is the best and most ethical integration of philosophy and policy, the ideal and the practical and of the mental modes of science and human consciousness itself. In other words of the truths, workabilities, applicabilities and highest ethical considerations in apparent OPPOSITES.
What economics needs is not a static one moment in time ideology, but rather to cognite on the wisdom state of the dynamic, interactive, integrative free flow of factors aka grace and then find the place in the economic/productive process that the most liquid factor in a monetary economy, namely money, will facilitate both its ending point (retail sale) and its continual re-starting/free flowingness.
IOW we must have a Wisdomics-Gracenomics that effects a new monetary paradigm.