Return-Path: Delivered-To: andy@mira.net From: JulioHuato Date: Sat, 6 Dec 1997 21:49:40 EST To: andy@mira.net Subject: Re: Complexity Organization: AOL (http://www.aol.com) Andy, I'm so glad you liked the book and are enjoying its reading. You wrote, "dialectical logic differs fron formal logic in that dialectics is meant to deal with the world, from the very start, essentially, in its full complexity and interconnectedness, "messy", as Waldrop says, rather than beginning with isolated, idealised, static self-identical atoms, as does formal logic." This is also a very good way to describe the logical flaw of modern conventional economics with regards to its point of departure. Modern economics doesn't begin with the "messy" reality ascending gradually to subtler and subtler abstractions and then orderly reconstructing the concrete. It begins with a set of axioms (whose prior induction is foggy) -- the Axioms of Choice ("isolated, idealised, static self-identical atoms" are a good description of such axioms). Arrow (mentioned in the book) and Debreu formalized the axioms mathematically. Samuelson provided an even weaker axiom as a replacement for Arrow-Debreu's "strong" transitive axiom. Arrow and Hurwicz proved the (mathematical) stability of general equilibrium. Sargent (also mentioned in the book), Lucas, and Wallace developed dynamic extensions of general equilibrium that have given rise to a stream of works in economic dynamics. Arrow and Debreu showed (as far as I can see, flawlessly) that those axioms lead to "convex preferences," which in turn imply the markets' general equilibrium as in Walras. The axioms are introduced as truisms that describe in a pure form the structure of human decisions (in general). The underlying theory is that humans (historically undetermined) make self-consistent decisions. It is remarkable that, based on these thin premises (implicitely assuming an individualistic human nature), modern economics has been able to produce a very sophisticated description of a capitalist economy. I believe that the sad state of Marxian political economy in today's academia (say, in the US) is not only an effect of the ideological fraud (that you have pointed out) conflating "socialism" and "Stalinism," etc. (the influence of money is a constant). Most probably, the formal rigor of the general equilibrium theory is a heavy factor in this state of affairs. In my opinion, the book (Complexity) downplays the efficacy of the dynamic models developed within the general equilibrium tradition in order to enhance Brian Arthur's ideas. I believe that the new classical economists have developed dynamic models of a capitalist economy that are far more "rigorous" than those of Santa Fe's. What attracts my attention to Santa Fe's view is not so much their work in economics or their embracing of some sort of raw or unconscious dialectics, but rather models developed by artificial intelligence and computer scientists that, I believe, will turn out to be very helpful in the future of economic science. These computer-simulation models, described in the book with some detail, emulate learning and evolutionary processes. I don't think that general equilibrium theory can be so lightly dismissed based on the "irreality" of its premises, as the book does. I should probably qualify more carefully my statements, but it is evident to me that a "Leontief economy" is a special case of the "Arrow-Debreu" economy. Now, a "Marxian economy" (the value equations and their extensions in the schemes of reproduction) is mathematically (not theoretically) a "Leontief economy." I'm not saying that a "Marxian economy" could or should be deduced from the Choice Axioms. (This has been attempted, I believe, by John E. Romer and it seems to me unnecessary and wrong.) My point is that general equilibrium is a description (somewhat distorted but mathematically rigorous) of the SAME conditions of feasibility and stability of capitalist reproduction that Marx puts forth with his schemes. We know that Marx didn't present his schemes as the "Notion" of capital, but as an aspect of its "Essence." Other aspects -- closer to the "Notion" -- were to be developed further in his exposition (the theory of crises, the world market, etc.), but this was left unfinished and modern Marxian economics lags behind the task of putting these aspects together in a coherent whole. Moreover, (let me venture some broad statements here) the general equilibrium theory can be fairly described as an attempt to deduce the MATERIAL conditions of production from a set of abstract (idealized, universal) premises. So, the critique should deduce the material conditions of production in the proper manner and from the proper premises, study the interplay between such material conditons and the SOCIAL conditions of production (whether or not these social conditions result from individual actions that are "self-consistent") since it is the latter conditions which constitute the specific subject matter of economic science. Now, to the extent that modern conventional economics succeeds in describing the material conditions of production, what modern economics has done will prove to be extremely helpful (once it is turned downside up). I'll stop here. Regards, J.