Everything in the way of policies I have suggested accomplishes precisely what heterodox and leading edge critics of current economics and economic theory….say they’d like to see, that is if one actually looks at what those policies do instead of immediately internally invalidating them due to orthodox blinkers or not actually looking at them and their effects at all. The only difference between they and I is I have perceived the single concept that will enable a new pattern known as a paradigm change and placed them within the framework of the moment to moment operations of commerce so as to thoroughly integrate them into the system.

As for analogies the body IS an excellent one for what every economist tries to accomplish with their thinking, that is create a complex and dynamic system that remains stable, robust and healthy despite the inevitable internal and external changes that must take place in the temporal universe so your skepticism regarding using it does not hold.

The real difference between the leading heterodox economists and myself is what I said above, and that I’ve recognized the historical signatures of paradigm changes and shown that the policies I recommend fit virtually all of them. If anyone cares to have a discussion here regarding those signatures I’d be happy to elaborate on them with them. Paradigm changes and perceiving them after all are so staggeringly positive and progressive that one would think they should be the focus here.

I have absolutely no problems with economists utilizing differential equations to describe certain aspects of the economy or even the entire economy…as it presently is. What I am saying however, is that if one takes certain utterly basic aspects of not only the economy, but of the temporal universe itself and then craft policies that take advantage of their mutual realities….that you can penetrate/see through all of the chaos/complexity in the economy, resolve its otherwise currently thought unresolvable problems and virtually linearize its flow, its realities and direct the effects of the system.

The perfect analogy to this is the body which is an incredibly complex mechanism that when healthy flows within a dynamic state of homeostasis.

All heterodox economists I’m aware of are very erudite about economics and highly intelligent generally. However, when it comes to identifying a new monetary and economic paradigm virtually all of them are reduced to dunces. This is mostly because they only utilize science to examine economics instead of using both science and the supreme mental discipline of the human species, namely wisdom, which includes and integrates science into its perspective. Wisdom is simultaneously reductive and holistic thinking and direct looking at the area of human existence/body of knowledge supposedly being examined. But that’s the point, science too often only abstracts while neglecting direct observation and so misses much. Looking and then integratively deciphering the various significances looked at is the very means of paradigm perception, and deserves to be called Wisdomics.

Modern economies do not tend toward general equilibrium, and they aren’t remediable by tweaking the current monetary and economic paradigm. The most accurate characterization of modern economies is:

Dominatingly Smothered Financial Chaos

Dominatingly smothered financial chaos, with an attending power and profit obsessed corporate elite that is largely independent from finance’s paradigm of Debt Only and so in many ways safe from and yet complicit in their domination. The new paradigm will end finance’s dominance and the corporate elites will need to embrace the new paradigm and its ethic of monetary grace as in gifting or eventually, and hopefully quickly, they will also take their place in the dust bin of history the same as private finance. But finance needs be the key factor, the real target and the unrelenting focus, not of mere reform, but of utter structural and paradigmatic change.

The arc of the moral universe is long, but it bends toward justice. To whomever you attribute that quote it remains true, and when a paradigm change effecting so many aspects of human life and that has plagued human civilization for its entire history and consequently is utterly overdue….the necessity and rate of change of that arc is tremendously increased.

When in doubt….integrate the truths in apparently opposing perspectives while simultaneously deleting their separate untruths, unworkabilities, inapplicabilities and lesser ethical considerations. Why? Because that is the very process of wisdom itself. It’s also the fulfillment of the Hegelian Dialectic

[ (Thesis x Antithesis) <–> Synthesis ]

and (should be) the focus in progressing any system or body of knowledge.

For instance:

[ (Capitalism x Socialism) <–> A profit making system of Direct and Reciprocally Distributed Monetary Gifting ]

Theorizing and critiquing is all well and good, but Wisdom and its policy application is what we need in economics….and every area of life.

PB:  All true but it’s slightly more complicated. There are actually two sources of new money in a credit economy. For sure, one is government deficit spending, but another is private bank lending to private borrowers. When banks lend they create an asset called a signed note which they post to their balance sheet. They then create new credit money by funding said loan (a liability of the bank) by crediting the borrowers demand account at the bank. This second source of newly created money can and often does dwarf the money creation by government. This bank credit can lead to instability when bank lending turns down as money supply growth stalls. When this happens government must step in by running deficits to hold the money supply constant. Steve Keen is doing great work in this area.

Me:  All of that is correct, except running a fiscal deficit does next to nothing for the moment to moment and inherent scarcity of individual demand in ratio to total costs and so total prices that is the generally unperceived even by heterodox economists root cause of instability of modern technologically advanced profit making economies.

Dr. Keen has a brilliant and iconoclastic economic mind, but new paradigms, which he regularly gives lip service to, require more than iconoclasm for their perception.

And everything less than paradigm perception is a mere perturbative epicycle of the current one.

L:  “There are actually two sources of new money in a credit economy. For sure, one is government deficit spending, but another is private bank lending to private borrowers” Whoa, there. Bank-created money that is lent into the real economy is paid back with interest. The principal is extinguished, and the interest is the bank’s profit. This is a zero sum process except for (1) bad loans, the upaid principal of which is an unencumbered addition to the money supply, and (2) the paid interest, which is a drain on the real economy money supply, and is probably funneled into the Wall Street casino.
I am not sure what you are getting at with the remarks about Dr. Keen and new paradigms. Have you the same criticism about Stephanie Kelton?

Me:  L,

I’m certainly on board with your understanding that the rentier/purely financialized aspect of the economy is outrageously outsized. The derivative nonsense that preceded the “great financial crisis” resulted from from private banking’s fallacious belief that the economy tends toward general equilibrium…”so we can re-hypothecate the same collateral ad infinitum….right?” ….wrong!

I’m on board with what MMT says about the mechanics of money creation and virtually all of what Steve Keen says. What I’m pointing at is that the advocates of neither MMT nor Keen’s disequilibrium-Minsky’s instability theory are able to craft policies that would implement a new monetary and economic paradigm.

This is mostly because they are caught up in abstractions rather than taking a zen like focus on the moment to moment operations of commerce/the economy, recognizing the economic significance of the stopping-ending and summing point of retail sale throughout the entire legitimate economic process…and then putting all of that knowledge together and crafting policies that would usher in the above new paradigm.

PB:  More fundamentally the cognitive error is failing to distinguish endogenous shocks from exogenous shocks and their corresponding risks and instabilities. It’s as though ship designers only obsessed about capsize risk from tidal waves hitting the ship while utterly ignoring the possibility of hull breach due to corrosion from deferred maintenance or running aground due to poor sailing. This is not an exaggeration, and the stubborn failure by economics to consider any possible mechanism of internally derived systemic failure is breathtaking.

Me:  “It’s as though ship designers only obsessed about capsize risk from tidal waves hitting the ship while utterly ignoring the possibility of hull breach due to corrosion from deferred maintenance or running aground due to poor sailing. This is not an exaggeration, and the stubborn failure by economics to consider any possible mechanism of internally derived systemic failure is breathtaking.”

Precisely. And the best way to do that would be to find the precise points within and throughout the entire economy where one could undo the dominating and monopolistic monetary and financial paradigm of Debt Only and at the same time thoroughly integrate costless monetary policies at those same points that benefited all agents and resolved modern demand constrained economies….all in one fell swoop. Don’t ya think?

L:  Are you on board with the sectoral balances model described at https://en.wikipedia.org/wiki/Sectoral_balances ? Kelton and others have described what could be done by a benevolent sovereign by monitoring the sectoral changes and using public spending for infrastructure to affect the deficit of the private sector. This would also take a realistic view of public spending as a prerogative of the sovereign–i.e., realization that deficit spending by the government is necessary, and that the national debt is not a debt to be repaid. This means realization that the government has infinitely deep pockets and does not ever need to borrow to spend.

Me:  Yes, that’s valid, but monetarily and like the Catholic Church demanding that grace/salvation could only be received via the sacraments….it’s still indirect to the individual via employment.

The new monetary paradigm is DIRECT and Reciprocal Monetary Gifting….implemented by a universal dividend and with the discount/rebate policies at the point of retail sale. Paradigm changes have signatures that are reflective of each other, and directness of effect is one of them…..as is the natural philosophical concept of grace reflected in the Reformation and now in economics as grace as in gifting.

Again, I’m open to more efficient ways of doing things, but number one bitcoin, crypto-currencies and blockchain are the darling of libertarian leaning economic pundits and they definitely do not “dig” the inherent cost inflationary nature of modern economies that social credit exposes. Secondly, I know that these measures are attempts to replace the utterly parasitic nature of the private business model known as finance with peer to peer financing, but finance has already so electronically intertwined itself with commerce that it would be easy for them to claim these measures as THE solution….when what it really would be was the final coalescence and triumph of finance. I know that many social crediters have no problems with private finance, but increasingly I see it as merely an already problematically dominating felony waiting to happen. Having a publicly administered national bank that was governed and guided by the philosophical concept of grace via the policies of a universal dividend and a discount/rebate at the point of retail sale throughout the entire economic/productive process would be so much more efficient and effective than trying to herd the too big to fail fat cat private banks away from their mindset of profit and power ONLY and toward the loftiest ethical concept of grace. So essentially I say terminatedly remedy the problem with the above policies first…then look to making the process more efficient.

…the discount/rebate policy and its direct linkage to the point of retail sale is that it linearizes, stabilizes and inverts/transforms the oppressive natures the pricing, money and individual remunerative systems in an otherwise complex if not chaotic economy. Without seeing its imminent workability and applicability the economy remains obscure if not inscrutable, but seeing it “makes the scales fall from your eyes.”

When one realizes that retail sale is the terminal end of the legitimate economic/productive process and also realizes that the money, pricing and accounting systems are all digital in nature, that is that equal amounts of debit and credit sum to 0, then is when a 50% discount/rebate at that point is elevated from mere policy to paradigm change.

Look at it, understand all of the benefits it brings immediately to all individual and commercial agents and also the further positive “knock on” economic, social, psychological and political effects….and then get on the bandwagon that will make it temporal and constitutional reality…so that humanity may better thrive and survive.

What America, Europe, the world and economics needs is paradigm change via the integrative processes that are Wisdom itself, not the dis-integrative blathering of demagogues who claim the clothing of change and progress while unconsciously blundering along with orthodoxy or worse disguised self interest.