We cannot derive "fundamental laws" for economics.

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We cannot derive "fundamental laws" for economics.

Postby Ikonoclast » Wed May 01, 2019 9:29 pm

Shimshon Bichler and Jonathan Nitzan in their conclusion to “Capital accumulation: fiction and reality” manage to sum up and refute modern economics in one masterful sentence:

“You cannot build an entire social cosmology on the assumptions of individual rationality, equilibrium and perfect markets – and then blame the failures of this cosmology on irrationality, disequilibrium and imperfections.”

They continue:

“In science, these excuses and blame-shifting are tantamount to self-refutation. What we need now are not better tools, more accurate modelling and improved data, but a different way of thinking altogether, a totally new cosmology for the post-capitalist age.”

I believe Bichler and Nitzan mean that we do not need better tools in the current paradigm as the paradigm itself is based on false premises. They propose the need for a new paradigm, “a totally new (social) cosmology”. To explore this cosmology analogy, we can note that the physical cosmos is a single connected system and cosmological science investigates it via a relational theory framework. In such a framework, the positions and properties of existents are only meaningful relative to the positions and properties of other existents in the system. In a relational system "social cosmology", this immediately suggests that individual “rationality” is not discretely atomistic and fixed. Rather, individual rationality is socially conditioned and thus fluid or malleable. Collective (as well as individual) rational and irrational behaviors exist, or rather arise, as emergent properties. The essential problems to be resolved here are ontological ones. What really exists in a socioeconomic system and how do these existents relate each to each?

Bichler and Nitzan refer to “the duality of real and nominal”. They expand on this to refer to the splits of “subject and object, idea and thing, nomos and physis”. As I see it, the problems presented by the duality of the real and the nominal are what modern economics fundamentally and comprehensively fails to deal with. This constitutes the foundational ontological and scientific failure of modern economics. When the premises are wrong, all the deductions which follow the premises are wrong.

When we are dealing with physical phenomena, the fundamental laws of the cosmos are independent of human understanding or modelling of them. No matter what you or I or any human thinks of the Laws of Thermodynamics or even if we are ignorant of them, the fundamental natural phenomena follow predictable courses which can be well modeled by the laws of thermodynamics (when those laws are mathematicized to permit accurate-enough descriptions and empirically verifiable predictions of the natural phenomena in question). However, when it comes to socioeconomic phenomena, what we think and believe can and do enter into the constructions and emergent outcomes of socioeconomic phenomena themselves (along with fundamental physical phenomena also entering into the constructions and outcomes). At this level, any theory of the system enters into the system as a compounding or complicating element. Thence, meta-theory (theory of the impact of theories on the system) will also enter into the system. These theories enter into the system by changing the behaviors of human subjects, not by changing any fundamental laws of physical nature.

It is not possible to mathematicize socioeconomic process into fundamental economic laws for the simple reason that most socioeconomic rules are arbitrary and may be changed at any time. Here we must distinguish between rules and laws. Rules are social decisions on how to conduct matters. Hence rules in this sense are any and all of customs, legal laws, regulations, accounting rules, finance rules and so on. Rules instituted into formal systems become algorithms or recipes; lists of ingredients, methods and time orders for doing things. Any of these rules may be made one way or made any other way with the major proviso that rules which contradict fundamental natural laws are not actionable. Rules which self-contradict are also not actionable unless one rule takes precedence over another rule.

It is not possible to fully mathematicize the changing arena of socioeconomics precisely because the grounds and bounds of the problem can be changed by changing the rules of the game (meaning the cooperative-competitive game of socioeconomy in praxis). The socioeconomic system which we seek to model continually mutates as we change its parameters and rules. Changing the parameters and rules happens by any and all of fiats, diktats, limited consensus or wide consensus and also includes issues of gaming the system, loophole-finding, criminality and so on. Also, theories of the system themselves enter into the system as outlined above. Changing the rules sets up new constellations of "bodies" and interactions (as processes) and annuls other constellations and processes. This statement again refers to the relational system cosmology analogy. This is not just an n-body problem where n is a huge number. It is also an “n-rule” problem, where n again is a huge number; and the rules continually mutate in designed and undesigned ways.

The totally new "social cosmology" Bichler and Nitzan very rightly call for is not predictable nor even envision-able in many ways. Being a new and emergent complex system it will demonstrate radical novelty. In systems emergence theory, radical novelty is not predictable because an explanatory gap, an epistemological gap, unavoidably exists between the precursor or substrate system and the next radically different system. We do not and can never have complete knowledge, nor is the future predictable in a system which shows both chaotic and non-determined aspects to its evolving nature.

Calls to theoretically elucidate (and worse, calls to mathematically delineate) the new desired economic system are totally inoperable calls. We cannot pre-define it by positive or prescriptive statements. We do not know the right way to go as it is an open-ended problem with an infinite or near-infinite move tree. It is as if the problem were a hyper-complex chess game played on a near infinite board. The analogy of search tree “look ahead” logic is entirely appropriate. In a massively complex open-ended problem, the series of perfect moves leading to a perfect or “won” game is incalculable. What are calculable are very bad and indeed dreadful moves which lead to imminent checkmate (as human civilizational collapse or species extinction) in a “few moves”, meaning in a relatively short time frame.

Thus the problem is not to find the “perfect moves” or the theoretically “perfect system” for calculating perfect moves. (Modern economics pretends to be an idealized perfect system.) Instead, the problem, pragmatically defined, is to avoid the really bad moves. Our practice of late stage capitalist economics (neoliberal economics) has revealed and is revealing a wide panoply of really bad moves. In summary, the really bad moves clearly revolve around;

(a) treating the free goods of nature (of the biosphere) as infinite;
(b) running an endless growth economy on a finite planet;
(c) allowing algorithmic (and “autocatalytic sprawl”) processes to run unimpeded according to the current prescriptive theories of capitalism without regard for real system impacts.
(d) allowing algorithmic (and “autocatalytic sprawl”) processes to run unimpeded according to the current prescriptive theories of capitalism without regard for human impacts.

Points (b) to (d) are really elaborations on point (a) rather than truly separate points. However, the elaborations are important. They indicate the areas where we should start changing things to avoid the obviously bad moves. It is in the employment of science, logic, democratic decision-making and humane ethics to avoid the obviously bad moves that we will in effect instantiate a move away from the blind implementation of the ideological / faith logic and algorithms of orthodox economics. It is this method of avoiding the obviously bad moves (obviously bad to a high degree of certainty according to contemporary science and humane consequential ethics) which can likely shift the system to a better and “totally new social cosmology” even though we cannot as yet envisage or predict the emergent form of that system.
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