My letter on the Stiglitz review of Robert Skidelsky's "Keynes: The Return of The Master" is printed in the May 27, 2010 issue of the London Review of Books. Paul Davidson
It reads as follows:(Sent to me by Paul Davidson__The economist we need to solve the present world crisis...)
The Non-Existent Hand...
Joseph Stiglitz criticises Robert Skidelsky, Keynes’s biographer, for not understanding Keynes’s theory, but in doing so reveals his own imperfect understanding (LRB, 22 April). The basis of his complaint is Skidelsky’s distinction between risk and uncertainty. Risk, Skidelsky explains, exists when the future can be predicted on the basis of currently existing information (e.g. probability distributions calculated from existing market data); uncertainty exists when no reliable information exists today about the future outcomes of current decisions, because the economic future can be created by decisions taken today. According to Stiglitz, this is a distinction without a difference, and ‘little insight’ into the causes of the Great Recession is gained from Skidelsky’s emphasis on uncertainty as opposed to risk.
But this is not what Keynes believed. The classical economics of Keynes’s time presumed that today’s economic decision-makers have reliable information regarding all future outcomes. I have labelled this the ‘ergodic axiom’. By contrast, Keynes argued that ‘unfortunate collisions’ occurred because the economic future was very uncertain. ‘By very uncertain,’ he wrote, ‘I do not mean the same thing as “very improbable”.’ No reliable information existed today for providing a reliable forecast of future outcomes.
This is the very proposition that Stiglitz denies. All that is needed to provide better insight into the workings of the market, he thinks, is ‘small and obviously reasonable change in assumptions’; for example, that reliable information about the future does exist but that different individuals have access to different information. The only necessary policy is ‘transparency’: to make complete information about the future available to all. The classical ergodic axiom is correct, provided one accepts that not everyone has access to all the information that exists.
For Keynes the inability of firms and households to ‘know’ the economic future is essential to understanding why financial crashes occur in an economy that uses money and money contracts to organise transactions. Firms and households use money contracts to gain some control over their cash inflows and outflows as they venture into the uncertain future. Liquidity in such an economy implies the ability to meet all money contractual obligations when they fall due. The role of financial markets is to assure holders of financial assets that are traded on orderly markets that they can readily convert these liquid assets into cash whenever additional funds are needed to meet a contractual cash outflow commitment. In Keynes’s analysis, the sudden drying up of liquidity in financial markets, occasioned by sudden drops of confidence, explains why ‘unfortunate collisions’ occur – and have occurred more than a hundred times in the last 30 years, according to Stiglitz.
By contrast, Stiglitz implicitly accepts the orthodox view that all contracts are made in real terms, as if the economy were a barter economy. Consequently people’s need for liquidity is irrelevant. Stiglitz indicates that he and Bruce Greenwald have explained that financial markets fail ‘because contracts are not appropriately indexed’, i.e., contracts in our economy are denominated in money terms rather than ‘real’ terms. He suggests that if only such contracts were made in real, rather than monetary, terms we would not suffer the ‘unfortunate collisions’ of economic crisis. If only we lived in a classical world, where contracts would be denominated in real terms! But in a money-using economy, this is impossible.
Paul Davidson
Journal of Post Keynesian Economics, New York
Saturday, May 22, 2010
Sunday, May 9, 2010
The Higher Nation-State of Law…
This post is just going to be a jumble of ideas I’m throwing out, which all relate in my mind to evolving the world through a new systems’ logic, to a new universally law structured state. I’m always shooting for the same basic better ordered state of liberty, achieved by what I’ve elsewhere stated as a subtraction from the universals__I believe I published it elsewhere as Kant’s metaphysics of ethics, where he actually started with the universal continuum, associated it as the grand equilibrium, for this particular purpose, and subtracted the equal universal rights of individuals and nations, to achieve a proper state of liberty__governed by the laws of mathematical fairness… Kant’s ideas just happen to be very reasonable for any age, and that alone is why Kant is so important, in my mind__He, and he alone, seems to have related the laws of liberty so closely aligned with arithmetic… He also related the laws of thought closely aligned with arithmetic, and quantum mechanics, long before anyone even had any idea about the quantum continuum__with his continuum mind space, actually shaping our concepts, objects and ideas… Now, if that isn’t quantum state space acting on the photonic structure of concepts, I don’t know what is…
Where natural law verses the higher self of the state, which can only truly be realized by the realities of the Nuremberg Trials, as this is really the first time and place where nations realized their man-made law structures lacked the ability to judge states against states, that new universally applicable laws were first created… This required applying the intellect of mans law system, to draw upon the natural law system of nature, represented by the universality that only Kant had really written about. Of course secular society being so against theistic approaches of the past, to establish the higher ground of judgment required of a state to judge another, this left the field blank, until someone realized one could draw from the natural universality of reality, or the universal continuum, as Kant had named it, that new codes of ethics and laws for international war crimes trials could take shape, to evolve the world to the higher international standards required, by the times. So, some of these old philosophers really do have some use after all, when all is investigated and known__believe it or not…
My point here being that, the many seeming contradictory truths of man’s laws, and nature’s higher universal laws, are more than just the usual chimera many have so long thought… If we truly try to thoroughly understand this simple conceptual difference between the existing law systems, that so seem to be destroying the better order of the world today, and the much higher possibilities of nature’s universal law systems’ abilities, to greatly improve the global order of present conditions__we have much more to look forward to than many at present may realize… The re-arrangement of the planet’s necessary law changes is not so difficult to see, when one realizes it at such a simple conceptual level as introduced at the Nuremberg Trials, and simply being copied from a treatise on ‘The Metaphysics of Ethics’, some two hundred years before__and being based on such a simple arithmetic as subtracting equal universal rights for you and your state, and equal universal rights for me and my state__while keeping all satisfied with the results based on such a simple mathematical fairness__How could anyone complain…? These are also the simple arithmetic methods employed by many of America’s founding fathers__to achieve her initial fairness… Don’t you really think it’s about time we started re-copying some of these very wise men of history, instead of blindly following our present pin-headed leaders…???
Why are we on this foolish road of destruction anyway…? I can tell you simply, it’s none other than the dictatorship of relativism, that’s had its near 100 year run-up to ruling all our lives to ruin… This cultural relativism, creating cultural particularism and it’s cousin cultural pluralism__is no pretty kitty… Oh it’s true, everyone thinks it’s such a great world, that all truths, viewpoints, perspectives and perceptions are equally valid__Oh it’s such a wonderful world with these new equal universal rights__The trouble is, no-one’s ever pointed it out to you, that this is the very destruction vehicle of all societies in history… It’s nothing new__The Indians experienced it__the Chinese, the Egyptians, the Greeks, the Romans, the Spanish, etc., on and on… It’s always the same story__it feels good, but few realize such a state of relativism is granting the same universal rights to ignorance and stupidity, as to intelligence and wisdom__which in turn can only destroy intelligence and wisdom, since ignorance and stupidity are always any states’ over-whelming majority…
If more could just realize it’s a simpler process to understand than they presently think, we may be able to step into a new pair of shoes… If more could just see it’s more a triadic bio-cognitive perception agency world, than the simple dyadic oppositions far too many think it is__as is clearly witnessed in the opposing gridlocks of global governments everywhere… Believe it or not__there is a middle way in all this global madness, if anyone just takes the time to look, instead of falsely believing it this way or that, left or right, right or wrong, good or bad, etc., on and on__which are all false extremes, never looking at the central truths__that are clearly staring everyone straight in the face__if they’d but open their sleepy eyes, and look… All our minds contain a bio-neuro-mirror system of abstract perception and cognition, between all our natural memory and perception states__which can easily see these three present conditional differences existing__at all times…
You know, I lived all my life practicing an iff conditional induction logic, which my job required… I didn’t realize how important this was until recently, to the work I was trying to achieve with my writing, as I’d not really looked deeply enough at just what I’d done all my life__I took it for granted so much, I actually didn’t see it__But, I now see it’s extreme importance in possibly adding something simple to understand to this modern over-confused and over-conflated world. To make this short and sweet, iff conditional common sense necessitates truth, intelligence and wisdom… It does this so simply, just by always asking or stating the iff conditionals of any desired aim or goal, before actually attempting to achieve any such aims or goals. As an example; “If you want a better world, you gotta do the work required to achieve such aims and goals.” Nothing comes easy, and I found all through my professional career, that if I premised all my actions by iff conditionals, I always had a much easier time of it. Another simpler example still is; “If you want me to do that for you, will you do this for me…?” The iff conditional logic is just a trade-off action, that allows the other person we all have to deal with, to have some input in the action__and such shared actions, aims and goals automatically develop co-operation among all involved, as everyone sees their part in the enterprise. It makes everyone feel important to be involved, if you allow them to be involved__and the iff conditionals allow just this…
The iff conditional is also a very powerful logic, when used inductively, as models can be best averaged over all inductions__in other words, we can answer, in general, future conditions of otherwise unknown states of nature, science and reality__as economists have been doing this for years__even though present political pin-head reality makes it look like economics is a bust… It’s not, it’s just politically corrupted by the powers that be__but if more people realized how iff conditional model logic actually works, we could have an army of very intelligent and influencial political operatives__to pass the properly written universally ethical international laws… Such simple knowledge sytems can do tremendous benefit, if properly understood…
A final thought I’d like to express is the fact that psychology lacks the economy of identity that philosophy uses__with its far more clearly worked out concepts of philosophy, over the millennia__and are imo a far more sound system of organizing thought… It’s not that psychology can not cognitively organize thought just about as well, it’s the fact that most psychologists do not use a sound economy of research, when working up and presenting their ideas__thus they contain far too much confused and conflated presentations imo, although there are some fine cognitive psychologists__they are few and far between… Most psychologists do not have a proper understanding of the universals, and the continuum of connectives involved__thus create a cognitive apartheid, lacking the needed cultural universalism…
As I stated first off, these are a jumbled bunch of ideas, but I think worth putting forth, as it helps me organize my better thoughts, later__yet at the same time, may contain something of interest to some__At least, it gives you some idea of the direction I’m headed… Presently, I’m putting together some ideas of recent books and other materials I’ve read and talked to others about, as to best methods to present major law change ideas…
Where natural law verses the higher self of the state, which can only truly be realized by the realities of the Nuremberg Trials, as this is really the first time and place where nations realized their man-made law structures lacked the ability to judge states against states, that new universally applicable laws were first created… This required applying the intellect of mans law system, to draw upon the natural law system of nature, represented by the universality that only Kant had really written about. Of course secular society being so against theistic approaches of the past, to establish the higher ground of judgment required of a state to judge another, this left the field blank, until someone realized one could draw from the natural universality of reality, or the universal continuum, as Kant had named it, that new codes of ethics and laws for international war crimes trials could take shape, to evolve the world to the higher international standards required, by the times. So, some of these old philosophers really do have some use after all, when all is investigated and known__believe it or not…
My point here being that, the many seeming contradictory truths of man’s laws, and nature’s higher universal laws, are more than just the usual chimera many have so long thought… If we truly try to thoroughly understand this simple conceptual difference between the existing law systems, that so seem to be destroying the better order of the world today, and the much higher possibilities of nature’s universal law systems’ abilities, to greatly improve the global order of present conditions__we have much more to look forward to than many at present may realize… The re-arrangement of the planet’s necessary law changes is not so difficult to see, when one realizes it at such a simple conceptual level as introduced at the Nuremberg Trials, and simply being copied from a treatise on ‘The Metaphysics of Ethics’, some two hundred years before__and being based on such a simple arithmetic as subtracting equal universal rights for you and your state, and equal universal rights for me and my state__while keeping all satisfied with the results based on such a simple mathematical fairness__How could anyone complain…? These are also the simple arithmetic methods employed by many of America’s founding fathers__to achieve her initial fairness… Don’t you really think it’s about time we started re-copying some of these very wise men of history, instead of blindly following our present pin-headed leaders…???
Why are we on this foolish road of destruction anyway…? I can tell you simply, it’s none other than the dictatorship of relativism, that’s had its near 100 year run-up to ruling all our lives to ruin… This cultural relativism, creating cultural particularism and it’s cousin cultural pluralism__is no pretty kitty… Oh it’s true, everyone thinks it’s such a great world, that all truths, viewpoints, perspectives and perceptions are equally valid__Oh it’s such a wonderful world with these new equal universal rights__The trouble is, no-one’s ever pointed it out to you, that this is the very destruction vehicle of all societies in history… It’s nothing new__The Indians experienced it__the Chinese, the Egyptians, the Greeks, the Romans, the Spanish, etc., on and on… It’s always the same story__it feels good, but few realize such a state of relativism is granting the same universal rights to ignorance and stupidity, as to intelligence and wisdom__which in turn can only destroy intelligence and wisdom, since ignorance and stupidity are always any states’ over-whelming majority…
If more could just realize it’s a simpler process to understand than they presently think, we may be able to step into a new pair of shoes… If more could just see it’s more a triadic bio-cognitive perception agency world, than the simple dyadic oppositions far too many think it is__as is clearly witnessed in the opposing gridlocks of global governments everywhere… Believe it or not__there is a middle way in all this global madness, if anyone just takes the time to look, instead of falsely believing it this way or that, left or right, right or wrong, good or bad, etc., on and on__which are all false extremes, never looking at the central truths__that are clearly staring everyone straight in the face__if they’d but open their sleepy eyes, and look… All our minds contain a bio-neuro-mirror system of abstract perception and cognition, between all our natural memory and perception states__which can easily see these three present conditional differences existing__at all times…
You know, I lived all my life practicing an iff conditional induction logic, which my job required… I didn’t realize how important this was until recently, to the work I was trying to achieve with my writing, as I’d not really looked deeply enough at just what I’d done all my life__I took it for granted so much, I actually didn’t see it__But, I now see it’s extreme importance in possibly adding something simple to understand to this modern over-confused and over-conflated world. To make this short and sweet, iff conditional common sense necessitates truth, intelligence and wisdom… It does this so simply, just by always asking or stating the iff conditionals of any desired aim or goal, before actually attempting to achieve any such aims or goals. As an example; “If you want a better world, you gotta do the work required to achieve such aims and goals.” Nothing comes easy, and I found all through my professional career, that if I premised all my actions by iff conditionals, I always had a much easier time of it. Another simpler example still is; “If you want me to do that for you, will you do this for me…?” The iff conditional logic is just a trade-off action, that allows the other person we all have to deal with, to have some input in the action__and such shared actions, aims and goals automatically develop co-operation among all involved, as everyone sees their part in the enterprise. It makes everyone feel important to be involved, if you allow them to be involved__and the iff conditionals allow just this…
The iff conditional is also a very powerful logic, when used inductively, as models can be best averaged over all inductions__in other words, we can answer, in general, future conditions of otherwise unknown states of nature, science and reality__as economists have been doing this for years__even though present political pin-head reality makes it look like economics is a bust… It’s not, it’s just politically corrupted by the powers that be__but if more people realized how iff conditional model logic actually works, we could have an army of very intelligent and influencial political operatives__to pass the properly written universally ethical international laws… Such simple knowledge sytems can do tremendous benefit, if properly understood…
A final thought I’d like to express is the fact that psychology lacks the economy of identity that philosophy uses__with its far more clearly worked out concepts of philosophy, over the millennia__and are imo a far more sound system of organizing thought… It’s not that psychology can not cognitively organize thought just about as well, it’s the fact that most psychologists do not use a sound economy of research, when working up and presenting their ideas__thus they contain far too much confused and conflated presentations imo, although there are some fine cognitive psychologists__they are few and far between… Most psychologists do not have a proper understanding of the universals, and the continuum of connectives involved__thus create a cognitive apartheid, lacking the needed cultural universalism…
As I stated first off, these are a jumbled bunch of ideas, but I think worth putting forth, as it helps me organize my better thoughts, later__yet at the same time, may contain something of interest to some__At least, it gives you some idea of the direction I’m headed… Presently, I’m putting together some ideas of recent books and other materials I’ve read and talked to others about, as to best methods to present major law change ideas…
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