Adorno on pop culture

19 Feb, 2021 at 09:39 | Posted in Politics & Society | 1 Comment

Image result for adorno pop cultureWhen Adorno issued his own analyses of pop culture, though, he went off the beam. He was too irritated by the new Olympus of celebrities—and, even more, by the enthusiasm they inspired in younger intellectuals—to give a measured view. In the wake of “The Work of Art,” Adorno published two essays, “On Jazz,” and “On the Fetish Character of Music and the Regression of Listening,” that ignored the particulars of pop sounds and instead resorted to crude generalizations. Notoriously, Adorno compares jitterbugging to “St. Vitus’ dance or the reflexes of mutilated animals.” He shows no sympathy for the African-American experience, which was finding a new platform through jazz and popular song. The writing is polemical, and not remotely dialectical.

Alex Ross / The New Yorker

Manufacturing strategic ignorance

19 Feb, 2021 at 00:34 | Posted in Theory of Science & Methodology | Comments Off on Manufacturing strategic ignorance

.

Say ‘consistent’ one more time and I …

18 Feb, 2021 at 17:19 | Posted in Economics | 10 Comments

Image result for say 'consistent' one more time meme Being able to model a credible world, a world that somehow could be considered ‘similar’ to the real world is not the same as investigating the real world. The minimalist demand on models in terms of ‘credibility’ and ‘consistency’ has to give away to stronger epistemic demands. Claims in a ‘consistent’ model do not per se give a warrant for exporting the claims to real-world target systems.

Questions of external validity are important more specifically also when it comes to microfounded macro models. It can never be enough that these models somehow are regarded as internally consistent. One always also has to pose questions of consistency with the data. Internal consistency without external validity is worth nothing.

Yours truly has for many years been urging economists to pay attention to the ontological foundations of their assumptions and models. Sad to say, economists have not paid much attention — and so modern economics has become increasingly irrelevant to the understanding of the real world.

As long as mainstream economists do not come up with any export-licenses for their theories and models to the real world in which we live, they really should not be surprised if people say that this is not science.

To have ‘consistent’ models and ‘valid’ evidence is not enough. What economics needs are real-world relevant models and sound evidence. Aiming only for ‘consistency’ and ‘validity’ is setting the economics aspirations level too low for developing a realist and relevant science.

Say you are a die hard ‘New Keynesian’ macroeconomist that wants to show that the preferred ‘rigidity’ view on economy is the right one. Then, of course, it is a pretty trivial modelling matter to come up with what ever assumptions that makes it possible for him to construct yet another revised and amended DSGE model that is ‘consistent’ with his preferred view on the economy. But what’s the point in doing that when we all know that the assumptions used are ridiculously unrealistic? Using known-to-be false modelling assumptions you can ‘prove’ anything!

Economics is not mathematics or logic. It’s about society. The real world. And if you want to analyse and explain things in that world you have to build on assumptions that are not known-to-be ridiculously false.

Axioms of ‘internal consistency’ of choice, such as the weak and the strong axioms of revealed preference … are often used in decision theory, micro-economics, game theory, social choice theory, and in related disciplines …

Image result for amartya sen Can a set of choices really be seen as consistent or inconsistent on purely internal grounds, without bringing in something external to choice, such as the underlying objectives or values that are pursued or acknowledged by choice? …

The presumption of inconsistency may be easily disputed, depending on the context, if we know a bit more about what the person is trying to do. Suppose the person faces a choice at a dinner table between having the last remaining apple in the fruit basket (y) and having nothing instead (x), forgoing the nice-looking apple. She decides to behave decently and picks nothing (x), rather than the one apple (y). If, instead, the basket had contained two apples, and she had encountered the choice between having nothing (x), having one nice apple (y) and having another nice one (z), she could reasonably enough choose one (y), without violating any rule of good behavior. The presence of another apple (z) makes one of the two apples decently choosable, but this combination of choices would violate the standard consistency conditions, including Property a, even though there is nothing particularly “inconsistent” in this pair of choices (given her values and scruples) … We cannot determine whether the person is failing in any way without knowing what he is trying to do, that is, without knowing something external to the choice itself.

Amartya Sen

Hovern’ engan

18 Feb, 2021 at 14:14 | Posted in Varia | Comments Off on Hovern’ engan

.

Image result for whatever you do you do to me

Folk som har otur när de försöker tänka …

17 Feb, 2021 at 21:51 | Posted in Politics & Society | Comments Off on Folk som har otur när de försöker tänka …

Att olika åsikter möts är bra, och inte farligt. Det viktiga är att vi kan tala om dem på skolan – och det gör vi. Namnändringen är fortfarande en relevant fråga. Men inte för att alla förväntas hålla med om att “vita havet” har rasistiska konnotationer. Kanske är det helt enkelt dags att skapa en annan samhörighet än färgerna svart och vit, som våra två hav nu heter. Inga beslut har fattats. Men världen förändras och vi med den.

Konstfacks rektor Maria Lantz

kränkt

Beyond mathematical modelling

16 Feb, 2021 at 19:53 | Posted in Economics | Comments Off on Beyond mathematical modelling

Image result for mathematical modelling reality Mathematical modelling has now dominated the economics academy for so long that younger people that emerge from economic studies who are dissatisfied with what they are taught, cannot think beyond the modelling. They have been immersed in it so long that it is a kind of common sense to them. The idea that modelling is bound to be almost always irrelevant just does not compute for many. Yet they recognize that modern academic economics mostly does not provide any insights. So, they assume that the fault lies in the sorts of topics covered, or conclusions drawn etc. with the solution to be found by way of doing the modelling differently. It is all quite dire …

The only diversity the mainstream advocate is that which remains consistent with the mathematical modelling emphasis. So, it is more or less all irrelevant, because it all carries an unrealistic ontology. Different accounts or ways of modelling of isolated atoms … The result is that academic economics has been and remains a big failure in terms of providing anything of relevance … The modelling project in economics, as it turns out, has in fact not produced a single insight into the real world – as opposed, of course, to occasionally tagging on insights determined independently of modelling. If that assessment were wrong, it would be so easy to provide a counterexample. Yet so far none has ever been seriously suggested in defence of the methods …

I love mathematics. But everything has a context of relevance. Mathematical modelling methods are just irrelevant to the analysis of most social situations; I suspect you have as much chance of cutting the grass with your armchair as generating insight by way of addressing human behaviour using the methods in question … The problem is not mathematical methods in themselves but their employment in conditions where doing so is simply not appropriate.

Tony Lawson

Using known to be false assumptions, mainstream modellers can derive whatever conclusions they want. Wanting to show that ‘all economists consider austerity to be the right policy,’ just e.g. assume ‘all economists are from Chicago’ and ‘all economists from Chicago consider austerity to be the right policy.’  The conclusions follow by deduction — but is of course factually wrong. Models and theories building on that kind of reasoning is nothing but, as argued by Lawson, a pointless waste of time and resources.

Mainstream economics today is mainly an approach in which you think the goal is to be able to write down a set of empirically untested assumptions and then deductively infer conclusions from them. When applying this deductivist thinking to economics, economists usually set up ‘as if’ models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. The beauty of this procedure is of course that if the axiomatic premises are true, the conclusions necessarily follow. The snag is that if the models are to be relevant, we also have to argue that their precision and rigour still holds when they are applied to real-world situations. They often don’t do for the simple reason that empty theoretical exercises of this kind do not tell us anything about the world. When addressing real economies, the idealizations necessary for the deductivist machinery to work, simply don’t hold.

From a methodological point of view one can, of course, also wonder, how we are supposed to evaluate tests of theories and models building on known to be false assumptions. What is the point of such tests? What can those tests possibly teach us?

From falsehoods anything logically follows. Modern expected utility theory is a good example of this. Leaving the specification of preferences without almost any restrictions whatsoever, every imaginable evidence is safely made compatible with the all-embracing ‘theory’ — and a theory without informational content never risks being empirically tested and found falsified. Used in mainstream economics ‘thought experimental’ activities, it may of course be very ‘handy’, but totally void of any empirical value.

So how should we evaluate the search for ever-greater precision and the concomitant arsenal of mathematical and formalist models? To a large extent, the answer hinges on what we want our models to perform and how we basically understand the world.

The world as we know it has limited scope for certainty and perfect knowledge. Its intrinsic and almost unlimited complexity and the interrelatedness of its parts prevent the possibility of treating it as constituted by atoms with discretely distinct, separable and stable causal relations. Our knowledge accordingly has to be of a rather fallible kind. To search for deductive precision and rigour in such a world is self-defeating. The only way to defend such an endeavour is to restrict oneself to prove things in closed model-worlds. Why we should care about these and not ask questions of relevance is hard to see.

‘New Keynesian’ macroeconomics

16 Feb, 2021 at 08:49 | Posted in Economics | 2 Comments

The standard NK [New Keynesian] model, like most of its predecessors in the RBC literature, represents an economy inhabited by an infinitely-lived representative household. That assumption, while obviously unrealistic, may be justified by the belief that, like so many other aspects of reality, the finiteness of life and the observed heterogeneity of individuals along many dimensions … can be safely ignored for the purposes of explaining aggregate fluctuations and their interaction with monetary policy, with the consequent advantages in terms of tractability …

Image result for new keynesianism memeThere is a sense in which none of the extensions of the NK model described above can capture an important aspect of most financial crises, namely, a gradual build-up of financial imbalances leading to an eventual “crash” characterized by defaults, sudden-stops of credit flows, asset price declines, and a large contraction in aggregate demand, output and employment. By contrast, most of the models considered above share with their predecessors a focus on equilibria that take the form of stationary fluctuations driven by exogenous shocks. This is also the case in variants of those models that allow for financial frictions of different kinds and which have become quite popular as a result of the financial crisis … The introduction of financial frictions in those models often leads to an amplification of the effects of non-financial shocks. It also makes room for additional sources of fluctuations related to the presence of financial frictions … or exogenous changes in the tightness of borrowing constraints​ … Most attempts to use a version of the NK models to explain the “financial crisis,” however, end up relying on a large exogenous shock that impinges on the economy unexpectedly, triggering a large recession, possibly amplified by a financial accelerator mechanism embedded in the model. It is not obvious what the empirical counterpart to such an exogenous shock is.

Jordi Gali

Gali’s presentation sure raises important questions that serious economists ought to ask themselves. Using ‘simplifying’ tractability assumptions such as ‘infinitely-lived representative household,’ rational expectations, common knowledge, additivity, ergodicity, etc — because otherwise they cannot ‘manipulate’ their models or come up with ‘rigorous ‘ and ‘precise’ predictions and explanations, does not exempt — ‘New Keynesian’ or not — economists from having to justify their modelling choices. Being able to ‘manipulate’ things in models cannot per se be enough to warrant a methodological choice. If economists do not come up with any other arguments for their chosen modelling strategy than Gali’s “advantages in terms of tractability,” it is certainly a just question to ask for clarification of the ultimate goal of the whole modelling endeavour.

Gali’s article underlines that the essence of mainstream economic theory is its almost exclusive use of a deductivist methodology. A methodology that is more or less used without a smack of argument to justify its relevance.

The theories and models that mainstream economists construct describe imaginary worlds using a combination of formal sign systems such as mathematics and ordinary language. The descriptions made are extremely thin and to a large degree disconnected to the specific contexts of the targeted system than one (usually) wants to (partially) represent. This is not by chance. These closed formalistic-mathematical theories and models are constructed for the purpose of being able to deliver purportedly rigorous deductions that may somehow by be exportable to the target system. By analyzing a few causal factors in their “laboratories” they hope they can perform “thought experiments” and observe how these factors operate on their own and without impediments or confounders.

Unfortunately, this is not so. The reason for this is that economic causes never act in a socio-economic vacuum. Causes have to be set in a contextual structure to be able to operate. This structure has to take some form or other, but instead of incorporating structures that are true to the target system, the settings made in economic models are rather based on formalistic mathematical tractability. In the models they appear as unrealistic assumptions, usually playing a decisive role in getting the deductive machinery to deliver “precise” and “rigorous” results. This, of course, makes exporting to real-world target systems problematic, since these models – as part of a deductivist covering-law tradition in economics – are thought to deliver general and far-reaching conclusions that are externally valid. But how can we be sure the lessons learned in these theories and models have external validity when based on highly specific unrealistic assumptions? As a rule, the more specific and concrete the structures, the less generalizable the results. Admitting that we in principle can move from (partial) falsehoods in theories and models to truth in real-world target systems do not take us very far unless a thorough explication of the relation between theory, model and the real world target system is made. If models assume representative actors, rational expectations, market clearing and equilibrium, and we know that real people and markets cannot be expected to obey these assumptions, the warrants for supposing that conclusions or hypothesis of causally relevant mechanisms or regularities can be bridged, are obviously non-justifiable. To have a deductive warrant for things happening in a closed model is no guarantee for them being preserved when applied to an open real-world target system.

Henry Louis Mencken once wrote that “there is always an easy solution to every human problem – neat, plausible and wrong.” And mainstream economics has indeed been wrong. Very wrong. Its main result, so far, has been to demonstrate the futility of trying to build a satisfactory bridge between formalistic-axiomatic deductivist models and real-world d target systems. Assuming, for example, perfect knowledge, instant market clearing and approximating aggregate behaviour with unrealistically heroic assumptions of “infinitely-lived” representative actors, just will not do. The assumptions made, surreptitiously eliminate the very phenomena we want to study: uncertainty, disequilibrium, structural instability and problems of aggregation and coordination between different individuals and groups.

The punch line is that most of the problems that mainstream economics is wrestling with, issues from its attempts at formalistic modelling per se of social phenomena. If scientific progress in economics – as Robert Lucas and other latter days mainstream economists seem to think – lies in our ability to tell “better and better stories” without considering the realm of imagination and ideas a retreat from real-world target systems reality, one would, of course, think our economics journal being filled with articles supporting the stories with empirical evidence. However, I would argue that the journals still show a striking and embarrassing paucity of empirical studies that (try to) substantiate these theoretical claims. Equally amazing is how little one has to say about the relationship between the model and real-world target systems. It is as though thinking explicit discussion, argumentation and justification on the subject not required. Mainstream economic theory is obviously navigating in dire straits.

If the ultimate criterion for success of a deductivist system is to what extent it predicts and cohere with (parts of) reality, modern mainstream economics seems to be a hopeless misallocation of scientific resources. To focus scientific endeavours on proving things in models is a gross misapprehension of what an economic theory ought to be about. Deductivist models and methods disconnected from reality are not relevant to predict, explain or understand real-world economic target systems. These systems do not conform to the restricted closed-system structure the mainstream modelling strategy presupposes.

Mainstream economic theory still today consists mainly of investigating economic models. It has since long given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence still only plays a minor role in mainstream economic theory, where models largely function as substitutes for empirical evidence.

What is wrong with mainstream economics is not that it employs models per se, but that it employs poor models. They are poor because they do not bridge to the real world target system in which we live. Hopefully humbled by the manifest failure of its theoretical pretences, the one-sided, almost religious, insistence on mathematical deductivist modelling as the only scientific activity worthy of pursuing in economics will give way to methodological pluralism based on ontological considerations rather than “consequent advantages in terms of tractability.”

Noam Chomsky on postmodern grotesquerie

15 Feb, 2021 at 15:15 | Posted in Theory of Science & Methodology | Comments Off on Noam Chomsky on postmodern grotesquerie

.

Image result for if you can't say it clearly you have not thought it through quotes

The Frankfurt School

15 Feb, 2021 at 14:07 | Posted in Politics & Society | 3 Comments

.

Creating a constitution

15 Feb, 2021 at 12:31 | Posted in Politics & Society | Comments Off on Creating a constitution

.

For more on how the constitution was created yours truly highly recommends reading  Carol Berkin’s A Brilliant Solution.

Why economic theory doesn’t help us to understand globalisation and trade

15 Feb, 2021 at 08:28 | Posted in Economics | 4 Comments

.

MMT basics

13 Feb, 2021 at 16:10 | Posted in Economics | 9 Comments

We have already shown that deficit spending increases our collective savings. But what happens if Uncle Sam borrows when he runs a deficit? Is that wht eats up savings and forces interest rates higher? The answer is no.

Image result for kelton deficit The financial crowding-out story asks us to imagine that there’s a fixed supply of savings from which anyone can attempt to borrow …

MMT rejects the loanable funds story, which is rooted in the idea that borrowing is limited by access to scarce financial resources …

Government deficits always lead to a dollar-for-dollar increase in the supply of net financial assets held in the nongovernment bucket. That’s not a theory. That’s not an opinion. It’s just the cold hard reality of stock-flow consistent accounting.

So fiscal deficits — even with government borrowing — can’t leave behind a smaller supply of dollar savings. And if that can’t happen, then a shrinking pool of dollar savings can’t be responsible for driving borrowing costs higher. Clearly, this presents a problem for the conventional crowding-out theory, which claims that government spending and private investment compete for a finite pool of savings.

The loanable funds theory is in many regards nothing but an approach where the ruling rate of interest in society is — pure and simple — conceived as nothing else than the price of loans or credit, determined by supply and demand in the same way as the price of bread and butter on a village market. In the traditional loanable funds theory — as presented in mainstream macroeconomics textbooks — the amount of loans and credit available for financing investment is constrained by how much saving is available. Saving is the supply of loanable funds, investment is the demand for loanable funds and assumed to be negatively related to the interest rate.

As argued by Kelton in The Deficit Myth there are many problems with the standard presentation and formalization of the loanable funds theory. And more can be added to the list:

1 As already noticed by James Meade decades ago, the causal story told to explicate the accounting identities used gives the picture of “a dog called saving wagged its tail labeled investment.” In Keynes’s view — and later over and over again confirmed by empirical research — it’s not so much the interest rate at which firms can borrow that causally determines the amount of investment undertaken, but rather their internal funds, profit expectations, and capacity utilization.

2 As is typical of most mainstream macroeconomic formalizations and models, there is pretty little mention of real-world​ phenomena, like e. g. real money, credit rationing, and the existence of multiple interest rates, in the loanable funds theory. Loanable funds theory essentially reduces modern monetary economies to something akin to barter systems — something they definitely are not. As emphasized especially by Minsky, to understand and explain how much investment/loaning/ crediting is going on in an economy, it’s much more important to focus on the working of financial markets than staring at accounting identities like S = Y – C – G. The problems we meet on modern markets today have more to do with inadequate financial institutions than with the size of loanable-funds-savings.

3 The loanable funds theory in the “New Keynesian” approach means that the interest rate is endogenized by assuming that Central Banks can (try to) adjust it in response to an eventual output gap. This, of course, is essentially nothing but an assumption of Walras’ law being valid and applicable, and that a fortiori the attainment of equilibrium is secured by the Central Banks’ interest rate adjustments. From a realist Keynes-Minsky point of view, this can’t be considered anything else than a belief resting on nothing but sheer hope. [Not to mention that more and more Central Banks actually choose not to follow Taylor-like policy rules.] The age-old belief that Central Banks control the money supply has more an more come to be questioned and replaced by an “endogenous” money view, and I think the same will happen to the view that Central Banks determine “the” rate of interest.

4 A further problem in the traditional loanable funds theory is that it assumes that saving and investment can be treated as independent entities. To Keynes, this was seriously wrong. As he wrote in General Theory:

The classical theory of the rate of interest [the loanable funds theory] seems to suppose that if the demand curve for capital shifts or if the curve relating the rate of interest to the amounts saved out of a given income shift or if both these curves shift, the new rate of interest will be given by the point of intersection of the new positions of the two curves. But this is a nonsense theory. For the assumption that income is constant is inconsistent with the assumption that these two curves can shift independently of one another. If either of them shifts​, then, in general, income will change; with the result that the whole schematism based on the assumption of a given income breaks down … In truth, the classical theory has not been alive to the relevance of changes in the level of income or to the possibility of the level of income being actually a function of the rate of the investment.

There are always (at least) two parts in an economic transaction. Savers and investors have different liquidity preferences and face different choices — and their interactions usually only take place intermediated by financial institutions. This, importantly, also means that there is no “direct and immediate” automatic interest mechanism at work in modern monetary economies. What this ultimately boils done to is — iter — that what happens at the microeconomic level — both in and out of equilibrium —  is not always compatible with the macroeconomic outcome. The fallacy of composition (the “atomistic fallacy” of Keynes) has many faces — loanable funds is one of them.

5 Contrary to the loanable funds theory, finance in the world of Keynes and Minsky precedes investment and saving. Highlighting the loanable funds fallacy, Keynes wrote in “The Process of Capital Formation” (1939):

Increased investment will always be accompanied by increased saving, but it can never be preceded by it. Dishoarding and credit expansion provides not an alternative to increased saving, but a necessary preparation for it. It is the parent, not the twin, of increased saving.

What is “forgotten” in the loanable funds theory, is the insight that finance — in all its different shapes — has its own dimension, and if taken seriously, its effect on an analysis must modify the whole theoretical system and not just be added as an unsystematic appendage. Finance is fundamental to our understanding of modern economies and acting like the baker’s apprentice who, having forgotten to add yeast to the dough, throws it into the oven afterward, simply isn’t enough.

All real economic activities nowadays depend on a functioning financial machinery. But institutional arrangements, states of confidence, fundamental uncertainties, asymmetric expectations, the banking system, financial intermediation, loan granting processes, default risks, liquidity constraints, aggregate debt, cash flow fluctuations, etc., etc. — things that play decisive roles in channeling​ money/savings/credit — are more or less left in the dark in modern formalizations of the loanable funds theory.

Fallacy 2
Urging or providing incentives for individuals to try to save more is said to stimulate investment and economic growth.

Saving does not create “loanable funds” out of thin air. There is no presumption that the additional bank balance of the saver will increase the ability of his bank to extend credit by more than the credit supplying ability of the vendor’s bank will be reduced … With unemployed resources available, saving is neither a prerequisite nor a stimulus to, but a consequence of capital formation, as the income generated by capital formation provides a source of additional savings.

Fallacy 3
Government borrowing is supposed to “crowd out” private investment.

The current reality is that on the contrary, the expenditure of the borrowed funds (unlike the expenditure of tax revenues) will generate added disposable income, enhance the demand for the products of private industry, and make private investment more profitable. As long as there are plenty of idle resources lying around, and monetary authorities behave sensibly, (instead of trying to counter the supposedly inflationary effect of the deficit) those with a prospect for profitable investment can be enabled to obtain financing. Under these circumstances, each additional dollar of deficit will in the medium long run induce two or more additional dollars of private investment. The capital created is an increment to someone’s wealth and ipso facto someone’s saving. “Supply creates its own demand” fails as soon as some of the income generated by the supply is saved, but investment does create its own saving, and more. Any crowding out that may occur is the result, not of underlying economic reality, but of inappropriate restrictive reactions on the part of a monetary authority in response to the deficit.

William Vickrey Fifteen Fatal Fallacies of Financial Fundamentalism

Dann sind wir Helden

13 Feb, 2021 at 15:28 | Posted in Varia | Comments Off on Dann sind wir Helden


Ich glaub’ das zu träumen / die Mauer / Im Rücken war kalt / Die Schüsse reissen die Luft / Doch wir küssen / Als ob nichts geschieht / Und die Scham fiel auf ihre Seite / Oh, wir können sie schlagen / Für alle Zeiten / Dann sind wir Helden / Nur diesen Tag

Fall of Berlin Wall

Brothers in arms

13 Feb, 2021 at 11:13 | Posted in Varia | 1 Comment

This one is for you — all you sons and daughters struggling to survive in wars or forced to flee your homes and risking your lives.

Then the righteous will answer him, ‘Lord, when did we see you hungry and feed you, or thirsty and give you something to drink? When did we see you a stranger and invite you in, or needing clothes and clothe you? When did we see you sick or in prison and go to visit you?’

The King will reply, ‘Truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me.’

Chick Corea (1941-2021)

12 Feb, 2021 at 08:12 | Posted in Varia | 4 Comments

A jazz legend is dead. Yours truly will always remember his Mad Hatter concert at Olympen in Lund back in 1978. One of the most fantastic concerts I’ve ever visited.

R.I.P.

« Previous PageNext Page »

Blog at WordPress.com.
Entries and Comments feeds.