Re: [OPE] The micro dimension of the Financial Crisis

From: Gerald Levy <>
Date: Wed Nov 12 2008 - 08:59:32 EST

> An Arch-Bishop of Canterbury once said in the sixties something like:
> "Why should the devil have all the best tunes?"
> Jerry: why should the great satan of capitalism have all the best models?

Hi Michael W:

Thanks for the answers you offered to my questions.

As for the question you ask above, I do not oppose the development and use of
models in general. To do so would be to oppose theory itself.

The issue is: what are the best theories/models which express the essential
yet complex character of capitalism? This is *not* a mathemetical question.

The issue that I am concerned about in this thread concerns the limitations
of mathematical models for describing markets and predicting economic changes
under capitalism (which, of course, I do not view as "the great satan").
I fully accept the idea that mathematical models can have
a different role in non-capitalist modes of production such as socialism -
although, there also I think that there should be a critical interrogation of the
character of the proposed models and their inherent and specific assumptions.

It is true that within certain markets especially (such as the insurance industry)
there _must_ be an effort to ex ante quantitatively express risk and
uncertainty. These models tend to work under capitalism during 'normal'
periods and fall on their faces at a time of dramatic change which was
unpredicted by the (mostly conservative) economic forecasters. We have
seen this, once again, in the current financial crisis.

You spoke today in another post and on another subject about the need to
be practical and not self-indulgent. I think that most of the models of
mainstream economics are not practical and are self-indulgent. How
many years ago was it when they claimed - in all seriousness - that
the business cycle was obsolete and that a 'steady state' of growth
could be ensured by the mechanism of the market sector assisted by
prudent and intelligent state economic policies? Not long ago at all.
Indeed, some of them still make that claim - even as the economy is
deepening into the crisis.

In solidarity, Jerry

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Received on Wed Nov 12 09:04:32 2008

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