My question is: for how much longer are the community of students and teachers to be fooled by confusing theories about macroeconomics?
The universities are full of politically biased narrow-minded teachers of the old and messed-up theories in economics that were spoiled over a century ago when John Bates Clark and his friends responded to the industrialists and unions by claiming wrongly that both land and buildings are capital. The confusion that resulted has enabled student to pass their exams without they or their teachers really needing to properly understand their subject!
My recent book "Consequential Macroeconomics--Rationalizing About How Our Social System Works" has at last converted the old pseudo-science into a real one and I would be most glad to share it for free with any serious/sincere student or teacher. Write to me at [email protected] for an e-copy. Or if that is too much, at least answer the question posed above.
It will remain so until another theory subsumes current economics mainstream.
Scientists are notoriously conservative in that they will stick even to theories known to be false. Sometimes even if a new theory is proposed that is clearly superior, some scientist will continue to reject such revolutionary ideas to the very end.
What is needed in economics is, perhaps, best understood via the methodological lens. At the heart of the formalisms of economic theory lie the tools employed by Paul Samuelson some 70 years ago. This includes mostly linear algebra (e.g., heavy use of matrices and vector spaces) and analysis (e.g., reliance on calculus, measure theory, and topology), with a good mix of statistics. Unfortunately, David, your book is no different in this respect.
I think that economics will undergo a paradigm shift towards more structural methods, and away from pure problem-solving techniques. This would include abstract algebraic objects (like groups, monoids, etc.), the study of invariance under isomorphisms, rather than strict equations, and so on. In doing so economics will hopefully shift from equilibrium analysis of mostly linear models towards disequilibrium analysis of complex systems that admit discontinuities, singularities, broken symmetries, heavy tails, etc.
So far it seems that the economics profession is not at all interested in developing such ideas. But my guess is that it will happen, eventually, probably after the current generation of young professors at prestigious universities peters out or converts.
Good question, David. Thanks for asking! I am also concerned about professors influencing students with their biased views. I try very hard to keep my own opinion out of the classroom. I try to teach both sides of any issue like immigration, minimum wage, health care reform, etc. I think we have to realize that college students are young adults who probably haven't formed strong opinions about these controversial topics. If professors teach both sides of an issue, then the students can come to their own conclusions and form their own opinions. Your new book sounds very interesting! I will definitely be sending you my e-mail for a copy. Thanks again!
Dawid, in the short time between my asking this question and your answer it is impossible that you have properly read my book, or even understood sufficient of it to answer as you did. I am attaching a short paper which unlike Sameulson, builds a complete yet simple model about of what our system consists. This model is used in my book, the analysis which is presented there will tell you much more about our social system than before. Tell me properly if I am wrong!
David, it was not my intention to discredit your ideas or to even imply that your model is flawed in any way. In fact, I found the diagram that depicts flows within the economy very interesting even before posting my original answer.
What I was referring to was the formal apparatus, i.e. the mathematical methods that are being used. Mathematically (model-theoretically), a model is always a structure that aims to satisfy formulas of a given theory (e.g. set theory, Peano arithmetic, real closed fields, etc.). In fact your model does not present the background theory that is being modeled. This is not peculiar to your model: it is the feature of all economic models.
Additionally, the domain of discourse is not explicit. For example, you refer to certain "entities", like capitalist, government, etc. What exactly (mathematically) are those entities? Are they numbers? Natural, real, or complex? Or perhaps they are points in a topological space? Is it connected, compact, totally disconnected, or none of those? I saw that you used the word "topology" but it is certainly not topology as understood in mathematics.
What exactly are the "flows" that you refer to, like "organized money transfer" or dividends? Maybe they are elements of a vector space? If so, what kind of space is that? Does it have a norm? Is it a topological space or not? What is the underlying field? Is the space finite or infinite-dimensional?
I also note that you use differentiation (p.90 of your book), and this is entirely within the received wisdom. But the functions differentiated are aggregate and macroeconomic, and this puts a very strong constraint on the whole system. For starters, if you demand that functions be differentiable, they must be continuous everywhere in their domain. This means that the model excludes discontinuities as "anomalies". But just take a look at any stock price and you will see that the pricing function is almost never continuous, since there are "jumps" between market closing on one day and opening on the following. The existence of derivatives actually puts many more constraints, but I hope you get the idea.
In conclusion, my point is that, in order to intelligently answer your question, we must look at the actual methods employed by economists. These methods result in very uniform and "well-behaved" mathematical structures. But the real economy is not "well-behaved" nor uniform. In my opinion there lies the key to a good answer to your question.
David, I agree that Economic textbooks for students are biased considering only idealized world. You are right that land has escaped macroeconomic models being replaced by capital about a century ago. An interesting book by Brian Czech reveals why and how has this happened: https://supplyshock.org/
Pooling land with capital means not distinguishing with virtually unbounded growth of global financial capital and land in finite supply. I am trying to include spatial dependence of variables and explicit accounting of land in my models where it is possible.
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