AN APPROACH TO A "THIRD WAY": An Alternate Economic Paradigm for the 21st Century.

Preface

Many books have been written denouncing orthodox economics as having lost touch with reality. A few of those have attempted to provide subset alternatives. But except for perhaps Marxism, no new paradigm built from the ground up has ever had a modicum of success in challenging orthodoxy. Despite the obvious enormity of its task, this book seeks to change that. It must be understood however, that a subject as vast as economics cannot of course be totally covered by any single book; hence the key word "approach" in the title.
I very much doubt that this book could have been written by any academic economist, even a so-called heterodox one. For with Keynes I have come to believe that: "The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds"(1). Having spent a few years hanging out at the now defunct "Post Keynesian Thought" moderated internet forum, it has become quite salient to me how difficult that really is.

So how does an outsider with an idea, go about convincing economist that there is a valid alternative methodology that can actually be used to cure economic ills? It may very well be an impossible task. But given the scant success in having assuaged the poor living standards of the vast majority in this world, that economists can boast about having been instrumental in, perhaps yet a worthy endeavour. In preparation for this book I translated the most pertinent portions of a magnum opus by one of the almost totally ignored followers of Adam Smith. By rather heavily annotating that work, this was to show that a continuation of economic thought right through to the present, is possible without needing any other intermediate economist at all; thus hopefully getting rid of the persistent old ideas ramifying economists' minds. The author's full name is Jean Charles Leonard Simonde de Sismondi, Sismondi for short; and his magnum opus is called: "Nouveaux Principes d'Économie Politique". A lot of history these last couple of centuries, almost all of it bad or worse, would never have occurred if Sismondi and not Ricardo had been successful in setting up a school of followers. In order to achieve the widest possible coverage, and make the interested lay public knowledgeable enough about the real-world economy to challenge economists and their theories, I have made this annotated translation available, free of charge, at my website; http://www.vcn.bc.ca/~vertegaa

The new paradigm, or thesis if you like, centres around the idea that the economy is structured very differently than economists, both orthodox and heterodox alike, make it out to be. Not only as a dynamic formation is it impossible to be represented statically without losing its very essence(2); but instead of being on a (non-linear) path from here to there, establishing determinate values at every step of the way and thus depictable in (dynamic) equations, the economy is at all times in an indeterminate position. In other words, the present is never quite complete, cannot as a whole be captured mathematically, not even to serve as a point of departure let alone as a conclusive end (at least not by any method I'm aware of); and makes common discourse the only way to describe it realistically(3). This is not some low level axiom, that one has to take on faith, in order to follow further discussion. The above derives from three high level axioms that I don't believe anyone can quibble with. But if prejudices were to prevent their immediate acceptance, it would be up to the objector to point out either contradictions with the "real" or empirical world as we know it, or important economic situations that are non-sequiturs from those axioms. To put it bluntly, my depiction of the economy has to be taken at least as valid as orthodoxy, as long as either the converse or its critical incompleteness cannot be shown. Then it will become a contest of public opinion, which of the two approaches is more descriptive of "real world" conditions, and offers more in the way of ameliorating non-economies.

The axioms are concise assertions of: 1. What the economy is; 2. Why it exists; and 3. Whom it is for. And the intent of this book is to show and convince that if certain man-made institutional practices clash with a true delineation of those axioms -- thereby not only making the system unstable in its terms and thus at least prone to collapse; but what would be a lot more important, since doomsday may be generations away: insidiously wasteful and deficient at the same time, in its ongoing allocation of manpower, remuneration, and rights towards any overall attained standard of living -- those practices need to be modified, regardless of their commonality or power base.

As mere mortals, nothing we reason about can be determined as absolutely true. For us there are no absolutes. The best we can do is start off with as few presuppositions or axioms as possible, and use a form of deduction to arrive at what we want to prove. Then if no contradictions show up, our supposition is true, but only in terms of our chosen axioms; which themselves transcend the argument altogether. This is called deductive reasoning and the fewer axioms necessary to complete our deduction, the higher the level of generality is. Second best, if we don't have a clue about what axioms underlie our supposition, we can reason from somewhere in the middle down and state that if something has been true (no contradiction has ever been detected) in the past, and if nothing has changed that condition since, it still is true. This is called inductive reasoning. No philosophy major is required to understand that an argument based on the latter method is almost bound to fail upsetting an argument based on the first.

Although there seems to be no controversy that orthodox economics has used a form of deductive reasoning to build its superstructure, its notions of capital and money assets are most certainly arrived at inductively; and thus very much open to pointed criticism from a deductive methodology, one that effects a higher level of generality (based on fewer axioms) to do so. Nor is it a secret that many if not most of the economists who consider themselves encamped in the heterodox field are very suspicious of the efficacy of deductive reasoning where economics is concerned. The reason for that, as far as I can gather, is the question of whether the economy is open or closed. Now while it is true that deductive reasoning requires the existence of a boundary around whatever it is, it's trying to investigate; this doesn't mean that the boundary needs to be closed. All that is necessary is to clearly specify what in this case is considered to be economic and what is not. If the boundary is set to encompass too narrow or too wide a field to be at all enlightening, this will show up in the analysis soon enough; which will than have to be abandoned and/or restarted. Furthermore, the heterodox objection to deductive reasoning, I believe, is fully allayable by pointing out that the proposed theory is a thesis only. In order to bring it in conformity to real-world conditions, antithetical attributes that come into play due to the influence of human beings not bound by axiomatic constructs, should be identified; so that a synthesis becomes a feasibility. But limiting oneself off the bat to second choice analysis, on the other hand, is too self-defeating to be useful. Hence, in my humble opinion, current heterodox thought is not up to the task it has set for itself; but a superior i.e. higher level of generality achieving deductive methodology is required to overthrow present orthodoxy.

Whether the superstructure of orthodoxy is indeed as tight as most economists believe it to be, or whether it is full of holes that just need to be exposed to have it all come crumbling down is not the subject of this inquiry however. A number of good books on that have already been written by people in a much better position to expose those holes than I; and no sign of any significant cracks yet. The only thing that matters in the end is whether its axiomatic foundation fosters pertinent answers to our economic questions. Unfortunately, as the economy and its theoretical description are two very different identities, with the potential to exist entirely separate from each other, for long periods of time; it is almost certain to take a crisis of unheard of proportion to effect such a general discontent with the current edification that an alternative one will be sought. But by then the existence of an alternate explanation build on a very different foundation and with real answers to the arisen perplexities is bound to take over. I have no doubt that one way or the other, the time will come that there will be an end to economic orthodoxy as we now know it.