from Lars Syll
Alex Rosenberg — chair of the philosophy department at Duke University and renowned economic methodologist — has an interesting article on What’s Wrong with Paul Krugman’s Philosophy of Economics in 3:AM Magazine. Writes Rosenberg:
Krugman writes: “So how do you do useful economics? In general, what we really do is combine maximization-and-equilibrium as a first cut with a variety of ad hoc modifications reflecting what seem to be empirical regularities about how both individual behavior and markets depart from this idealized case.”
But if you ask the New Classical economists, they’ll say, this is exactly what we do—combine maximizing-and-equilibrium with empirical regularities
This is a great article. I recall the comment on your article on Romers Nobel and so forth
I linked to that article on my Linken in profile as I will with this article.
The issue with static models is that they are static and we need to recognise complex flows and the vector of the system not snapshots of a System which is never stationary or in equilibrium.
Claes Johnson has done work on Turbulent Air flow using finite element analysis The point he makes regarding Well posed and ill posed
and a small perturbation in x(t+Δt) or x(t) gets divided by the quantity Δt tending to zero and thus gets amplified by the large factor 1/Δt. The standard approach to the Fundamental Theorem puts the emphasis on the ill-posed or unstable process of differentiation.
We sum up as follows:
The standard approach to the Fundamental Theorem is ill-posed, unstable and of questionable meaning. As an illposed problem, it rests on symbolic mathematics of infinite precision, which appears as magics.
The approach in BodyandSoul is well-posed, stable and clearly meaningful. As well-posed problem it can be solved by numerical mathematics in finite precision, which is reasonable and not magics.
These aspects would be possible to discuss constructively with the man on the street, but may be very difficult to present to a teacher of standard Calculus for which Adams’ book is the bible.
Roger January 22, 2016 at 8:55 am #
See Keen’s analysis below of MMT and Monetary Circuit Theory.
I have been an avid student of Keens since around 2010 so in 6 years I have enjoyed the first use of Minsky when it became available and I have it on my computer tool bar. I am also a qualified Chartered Surveyor the branch I belong to is the Valuation branch My business I was in business seriously, was all about income flows John G.
If you were interested enough to follow keens lecture, it is 20 minutes long you will see he gets into the mathematics of the Mathematical Identity you posted earlier, representing your sectoral balances approach.
The Post Ante Nature of your summed flows is a weakness which I have explained due to the ill-posed nature of a derivative that can experience large Changes as a result of small increases in inputs. This is a particular problem for Ex Post models like the Balance sheet identity represented by MMT theory in Sectoral balances.
Back to Martin Shubik,
Its the Vector and not the destination or coordinates at any particular point in time which we should concern ourselves with.
”The monetary and financial system of an economy are part of the socio-politico-economic control mechanism used by every state to connect the economy with the polity and society. This neural network provides the administrative means to collect taxes, direct investment, provide public goods, trade. The money measures provide a crude but serviceable basis for the accounting system which in turn, along with the codification of commercial law and financial regulation are the basis for economic evaluation and the measurement of trust and fiduciary responsibility among the economic agents. A central feature of a control mechanism is that it is designed to influence process. Dynamics is its natural domain. Equilibrium is not the prime concern, the ability to control the direction of motion is what counts.
Money and financial institutions provide the command and control system of a modern society. The study of the mechanism, how they are formed, how they are controlled and manipulated and how their influence is measured in terms of social, political, and economic purpose pose questions, not in pure economics, not even in a narrow political economy, but in the broad compass of a political economy set in the context of society. ”
All of that and no 2nd law of thermodynamics.