LS:   Gerry, you write “the more qualifications are attached to a theory the more data you need to test it.” But that sure doesn’t solve the basic problem. As one of the founding fathers of modern econometrics — Trygve Haavelmo — himself wrote:

“What is the use of testing, say, the significance of regression coefficients, when maybe, the whole assumption of the linear regression equation is wrong?”

Real-world social systems are usually not governed by stable causal mechanisms or capacities. The kinds of ‘laws’ and relations that econometrics has established, are laws and relations about entities in models that presuppose causal mechanisms and variables — and the relationship between them — being linear, additive, homogenous, stable, invariant and atomistic. But — when causal mechanisms operate in the real world they only do it in ever-changing and unstable combinations where the whole is more than a mechanical sum of parts. Since statisticians and econometricians — as far as I can see — haven’t been able to convincingly warrant their assumptions as being ontologically isomorphic to real-world economic systems, I remain deeply sceptic of the whole enterprise. You write “shouldn’t we try?” My answer to that question is the same as Keynes’ (re Tinbergen): “Newton, Boyle and Locke all played with alchemy. So let him continue.”

Me:  “Real-world social systems are usually not governed by stable causal mechanisms or capacities. The kinds of ‘laws’ and relations that econometrics has established, are laws and relations about entities in models that presuppose causal mechanisms and variables — and the relationship between them — being linear, additive, homogenous, stable, invariant and atomistic. But — when causal mechanisms operate in the real world they only do it in ever-changing and unstable combinations where the whole is more than a mechanical sum of parts. Since statisticians and econometricians — as far as I can see — haven’t been able to convincingly warrant their assumptions as being ontologically isomorphic to real-world economic systems, “I remain deeply sceptic of the whole enterprise. You write “shouldn’t we try?” My answer to that question is the same as Keynes’ (re Tinbergen): “Newton, Boyle and Locke all played with alchemy. So let him continue.”

The point of retail sale is where production becomes consumption, and hence is a terminal ending, summing and economic factor expression point. It is also hence a potentially paradigm changing price and monetary policy point for both the economy and the monetary system. The point of exchange is such an integratively woof and warp part of the economic process that, like breathing, most are unconscious of its power and significance.

It’s true that econometrics, like virtually all studies that precede paradigm changes, is largely an alchemical pursuit, but then the single concept of the new pattern sweeps all of the suspended complexities, perplexities and erudition aside.

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Me:   Y:  “If some fields of mathematics are found to be insufficient to treat a group of problems, what we should do is to construct a new theory that can be applied for them.”

“In the same vein, if econometrics is incomplete, it is necessary to device a new theory (not a theory on econometrics) which opens a new mode of understanding or explaining economy.”

Excellent insights. Perhaps what we require is the econometrics of Paradigmology which looks for the deeply acculturated irrational and de-stabilizing conceptual essence parading itself as necessary. Like for instance that only private money creation and only in the form of debt is legitimate, when in fact private for profit money creation isn’t a legitimate economic business model at all and is actually a disguised form of domination and felonies waiting to happen.

How ironic that we can recognize that rational expectations is an invalid economic assumption and yet fail to see the above irrational expectation regarding private finance and its monopolistic paradigm. But then increasing ironies is an imminent signature of the need for paradigm change and its reflective dualistic phenomenon i.e. reality inversions, an aspect of historically accomplished ones.

DT:  Looking back through all this discussion, perhaps only Craig’s first paragraph when opening it has stuck to Romer’s theme, responding constructively with Monetary Gifting (as against Capitalism’s demanding) and Maths Changes enlightening (as against the maths of Capitalist Economics obscuring or confusing). I agree also with his conclusion there: economists and financiers “need to go back to school and learn coding or something” (the ‘something’ being how time sharing and error correction work in steering, digital communication and computers).

Me:  Thanks Dave. You and I are the only ones who dare to offer up actual and specifically monetary policies to remedy our economic ills. Virtually everyone else here is still in the iconoclastic, name dropping or authority citing stage of analysis and are thus thwarted by problems they can’t see remedies for. I’ve several times suggested everyone here state their specific policies and the problems they resolve. No takers.

A question for you. Your credit card idea….is the balance debt or monetary gifting? And wouldn’t an account for everyone at the central bank serve the same purpose?

Finally, the “something” we all need to learn is the self reflective and integrative understanding AKA wisdom. If we cognite on the power and goodness of the concept of grace applied to economics a Wisdomics-Gracenomics will emerge from the present rigged and smothered financial chaos.

GH:   I agree with Sylls and Skidelskiy that attributing fluctuations in aggregate demand to price stickiness is wrong-headed. Trying to manage counter-cyclical policy exclusively via manipulating interest rates has also not been a success. It failed to defuse the speculative excess leading to 2008 and has been ineffective in stimulating demand for anything except financial assets subsequently. Do we need to repeat criticisms of representative agent theorising which is theoretically nonsensical and empirically vacuous?
But there are unsolved problems that will not be cured by sacrificing to the great god Keynes. How do you prevent Minsky-style speculative excess as in 2004-7? Minsky’s solution was nationalisation of investment. How can it be managed in a mixed economy? And if we ever get back to a world without demand deficiency, how will we resolve the Kalecki problem of needing periodic recessions to prevent inflation speeding up?
Advances in macroeconomics will come from addressing real problems imaginatively not by rehearsing old theoretical disputes or worshipping at the shrine of the mighty dead.

Me:   “How do you prevent Minsky-style speculative excess as in 2004-7? Minsky’s solution was nationalisation of investment. How can it be managed in a mixed economy?”

The obvious solution is to end the monopoly charter to create our money by private for profit banks, rationally and strategically integrate monetary gifting into commerce and make banking and finance a public utility like we used to do with other natural monopolies like water and electric systems. No more derivative nonsense, no more casino capitalism and no more anti-social currency speculation.

“And if we ever get back to a world without demand deficiency, how will we resolve the Kalecki problem of needing periodic recessions to prevent inflation speeding up?”

A 50% discount/rebate price and monetary policy at the point of retail sale will forever end inflation, and SEVERELY taxing arbitrary and anti-social price rises while scorning and boycotting such perpetrators to the general populace whose purchasing power and hence monetary security has been insured by that policy will expose their lack of good will.

Not seeing/refusing to look at the gracious power of the new monetary and financial paradigm and its aligned policies is erudite duncie-ness.

The keys to paradigmatic insight are conceptual simplicity and seamless depth of temporal effect in the area of human endeavor the new paradigm applies to. We should be heeding those instead of ENDLESSLY regurgitating critiques as you and others yourselves have recently remarked here.

JL:  My focus seems to be different. I am interested in the effects of monetary system design on wealth distribution and how it impacts the lives and prospects of the vast majority of Americans today.

Me:   Well, you’re certainly a lot closer to the real problem than all of the people here who are still obsessively caught in the weeds of economic complexity. It IS about money and finance, specifically the monetary and financial paradigm.

Free market Libertarian economists ignore the glaring contradiction of giving private banking a monopolistic charter to create our money ONLY as Debt and wave the bloody flag of their motto that “There ain’t no free lunch!” which rather than being an insight is actually an excellent statement of the problem.

Heterodox economists of all stripes actually say we need a new paradigm it’s just that they don’t know which paradigm, how to think paradigmatic-ally (integratively) or even have a good idea of the definition of a paradigm (a single concept that is simultaneously an integrative mental/conceptual and temporal phenomenon). Thus they blather on in the dark in many wrong/less relevant directions.

For over 5000 years the economy has always been in a state of monetary and financial smothered chaos that parades itself as freedom. Time to awaken from the vast monetary and financial neurosis we live in.

The zeitgeist/ethic of the age is power/knowledge. By pushing economics fully out of its religious connections it gave it the mixed blessing of modernity (religion of course has always had its own problems with power because the current zeitgeist not unlike the current monetary and financial paradigm has been with us since at least the last mega paradigm change from hunting and gathering to agriculture).

The only way mankind will truly progress is if the religionists and the scientists BOTH recognize the natural philosophical concept of grace and begin to conscientiously apply its unitary and ethical aspects to themselves and to their systems.

Too simple for the intellectual vanities of the erudite, too powerful to be denied if one self actualizes it.

Because it goes to and takes effect at the very woof and warp of the economy, that is the point of exchange, and in a monetary economy that increasingly has a scarcity of individual purchasing power and so business revenue, it doubles both of those totals in the most democratic way, that is, directly, universally and continuously.

It’s completely upside for virtually every legitimate and non-toxic economic agent individually and commercially.

Generally, Math as in calculus has needed collateral verification in a complex system like economics, but when it is applied at a pivotal and terminating point like retail sale its effects are immediate, direct and unmistakably clear. Such are the temporal universe effects of a genuine paradigm change. With paradigm changes the impossible has always been possible.

Monetary Gifting is the hand washing of economics, and math coupled with the new insight/new tool that has always accompanied genuine historical paradigm changes affirms and enlightens that change rather than obscures or confuses it.

To wit: agriculture, the telescope, the ellipse, movable print, the experience of god is personal and the obvious increased abundance, freedom and survivability that such new insights/new tools affected in the area of human endeavor that the new paradigm applied to.

Furthermore, when the new paradigm occurs in a body of knowledge/area of human endeavor that directly, immediately and continuously effects the individual like the change from nomadic hunting and gathering to homesteading, agriculture and urbanization or in economics it becomes a mega paradigm change that has “knock on” unitary and synergistic effects in other areas of human endeavor.

In other words “Try it, you’ll like it.”

Economists and the financial authorities are the horse shite picker uppers before the invention of the internal combustion engine. They’ll need to go back to school and learn coding or something. Another signature of accomplished paradigm changes is egg on one’s face poetic justice.

The 50% discount/rebate policy at retail sale and also at the point of note signing….too simple for the intellectual vanities of the erudite, too obviously beneficial and problem resolving to be denied by anyone who actually looks at its effects.

My self awareness is real, amazingly real.

Space is a palpable three dimensional reality.

Present time is a joyous and inutterably diverse experience.

Abstraction is fun, but direct experience is bliss.

Colors, man, colors!

Electro-magnetic waves in the space around me are real!

Of course wealth has always been about power. Power is and forever has been the zeitgeist/ethic of the age of humans. And the only way to effectively deal with and rationally guide power is to integrate the highest ethical, unitary and natural philosophical concept of grace into our systems with policies that reflect and effect it.