me: > > an analysis of the psychology of the Bank of France seems to say > > nothing about the psychology of people operating on a day to day basis > > in the economy.
Ted Winslow: > Yes, but the invoking in the Tract of the "deep instincts by which the love > of money protects itself" to explain the "violent prejudice" against the > capital levy does. So too do any number of other texts, e.g. "Economic > Possibilities for Our Grandchildren." Wasn't the EPOG written/published much later than the "Tract," i.e., 1930? isn't evoking that book simply a way of distracting us from the idea that the Tract might be monetarist in its orientation? Why can't you simply admit that Keynes might have been wrong (i.e., monetarist) at one point of his life? After all, he wasn't a god. me: > > what did [Keynes] say about (Asian, I presume) Indian peasants? that they > > hoarded as a form of buying insurance and/or that they did so because > > they expected deflation? nothing new in either of those phenomena. > > Maybe if he had talked about "loss aversion" ... but he wrote several > > decades before experimental economics rose to the fore. Ted: > "India, as we all know, already wastes far too high a proportion of her > resources in the needless accumulation of the precious metals. ... Keynes's assertion that "we all know" seems to be nothing but hand-waving. The rest of it seems to be totally descriptive rather than an analysis of _why_ Asian Indian peasants hoarded gold. (BTW and FWIW, one theory among economic historians used to be that the gold that flowed to India continued eastward to the Chinese empire (which existed back then). The problem was that the fixed exchange rate in the Chinese trimetallic system between gold, silver, and copper created the incentive for the Chinese to buy gold. I do not know the status of this theory at this point, i.e., whether or not anyone believes it.) > "On the other hand, if a time comes when Indians learn to leave off > their unfertile habits and to divert their hoards into the channels of > productive industry and to the enrichment of their fields, they will have > the money markets of the world at their mercy. A surfeit of gold can do at > least as much damage as a shortage. During the past sixty years India is > supposed to have absorbed in addition to her previous accumulations more > than £300,000,000 of gold (apart from enormous quantities of silver). We > may presume that, if India ceases to demand fresh gold and begins to > disgorge some part of her huge stock, she will do so gradually. Yet if the > change comes at a time of big new production, she may involve the world, > nevertheless, in a very great inflation of prices. maybe the Indian peasants were hoarding gold in order to put that kind of scenario into operation. That is, they were _planning_ to "turn the tables on the West" (as in the next quote). > "If, however, India is thus to turn the tables on the West, she > must not delay long. The time may not be far distant when Europe, having > perfected her mechanism of exchange on the basis of the gold standard, will > find it possible to regulate her standard of value on a more rational and > stable basis. It is not likely that we shall leave permanently the most > intimate adjustment of our economic organism at the mercy of a lucky > prospector, a new chemical process, or a change of ideas in Asia." ((Indian > Currency and Finance, pp. 69-71; see also pp. 116- 117) so it's just a matter of "ideas in Asia" (which could change at any minute)!? that seems blatant idealism. It's not a matter of social ontology. The latter would say (as I understand it) that the nature of the social structure would be a prime determinant of those "ideas in Asia." Since the social structure likely wouldn't change overnight, Keynes's nightmare wouldn't happen overnight. If social ontology was so important, he would have mentioned it. <ellipsis> Ted stops quoting the Great Man for awhile: > This idea of changing "habits" (let alone the idea of an irrational "love > of money" rooted in "deep instincts") isn't consistent with the social > ontological and psychological ideas underpinning neoclassical theory. As > do many other texts, it shows what's meant by an "internal relations" view > of such changes. Neoclassical theory has absolutely no explanation for changing tastes or habits. They are exogenous. If I read what you've quoted from Keynes correctly, the change of habits is similarly exogenous in his analysis. That is, he has absolutely no explanation for such changes. On the other hand, the hypotheses that I put forward (buying insurance and/or expectations of deflation) would allow for "habits" to be changed due to _endogenous_ forces. Changing economic and social conditions could easily cause "habits" to change. By the way, "an irrational 'love of money' rooted in 'deep instincts'" does not have to be based in any kind of "social ontology." "Deep instincts" sounds like the crude kind of "instinct psychology" that used to be popular, specifically back when Keynes wrote: if you don't understand a behavior, posit an instinct. This idea seems to have been dropped, since the number of instincts multiplied and multiplied and their were little or no explanation for them all. "Internal relations" (as I understand it) refers to the idea that society (or some other totality) represents a unified whole, with all sorts of relationships between the parts. The alternative might be the neoclassical/liberal view, in which the "world" is interpreted as merely a bunch of individuals added up, with any relationships between them being merely epiphenomenal and not feeding back to affect individual attitudes, ideologies, etc. For what it's worth, I don't see _any_ internal relations in the quotes from Keynes. These quotes could just as well be interpreted in an atomistic way. Or we could follow Hick's THEORY OF ECONOMIC HISTORY and simply assert that people have "customs" which lead to hoarding of gold. This suggests an important reason (besides a commitment to "questioning authority") that I don't like the approach of constantly quoting texts. Texts are always subject to interpretation. One can read "internal relations" into Keynes, but I can't seen them in the quotes. I like an alternative approach to "Great Thinkers," where the effort is to try to figure out what their key understandings of the world are. For Keynes, I'd say it was issues of uncertainty and effective demand, along with his stress on the importance of finance. (The list doesn't stop there. BTW, if I wanted to put "internal relations" on any economist's list, it would be that of Marx, not Keynes.) > Such a view is also inconsistent with the identification > of "science" with "experimental" methods. Like axiomatic deductive > reasoning, they are limited in their applicability by the fact of such > relations, i.e. by the fact that changing relations can change the > "identities" of the behaving entities in ways that invalidate such methods. That's crap. In our discussion, I NEVER "identified" experimental methods with "science" (and it's quite the opposite of axiomatic/deductive reasoning). But I will now, in a limited way. (Why are there scare quotes around "experimental"?? are you opposed to experiments?) A key element of science is skepticism, the need to verify and/or falsify all propositions by reference to new evidence, new logic, or methodological critique. (NB: this is NOT Popper.) The followers of Friedman have worked very hard to insulate their views from any kind of criticism or skepticism, following his BS about "positive economics." They've tried to build a Green Zone around such notions as "homo economicus." That makes them profoundly unscientific, just as unscientific as those who quote Holy Books to justify their opinions all the time. The behavioral/experimental economics movement is an effort to break down that wall, to show that the neoclassical vision of humanity just doesn't fit the facts. There are clear limits to their conclusions: as you seem to say, the results would vary with social conditions. But that doesn't deny the scientific role they play, in knocking down Friedmaniac dogmatism. You should know that some experiments have been done in several different societies (on all continents). It turns out that _homo economicus_ fails the experimental test. BTW, I think that the main problem with behavioral/experimental economics is that it's typically infused with liberal individualism. But it doesn't have to be that way. > The conventional kind of "trust" in such methods and reasoning won't be > affected by such arguments, however, As the current situation in financial > markets shows, "trust" is often a matter of "blind faith." I don't understand what you are saying here. It seems to me that behavioral finance helps us understand some of what's happening in financial markets these days. The point is not to create a false opposition between Keynes and recent students of finance, but instead to learn from both. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
