From: Anders Ekeland <anders.ekeland@online.no>

Date: Mon Feb 07 2011 - 14:32:15 EST

Date: Mon Feb 07 2011 - 14:32:15 EST

Thanks to Ian for an informative answer.

I do not feel that we really disagree fundamentally here. I am

looking forward to what models and insights Ian can come up with. We

have to look at actual models and their use in order to advance the

discussion.

Regards

Anders

At 21:16 04.02.2011, Ian Wright wrote:

*>Yes agreed. Allow me to widen the discussion a little. We have been
*

*>discussing "equilibrium" and "equilibrium point" but of course these
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*>are natural language echoes of a highly developed mathematical theory
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*>of deterministic dynamical systems (systems of ordinary differential
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*>equations) in which "equilibrium points" play a small part. Some of
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*>this theory reappears in economics. In other fields -- such as physics
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*>-- there is a much longer and more intimate connection between the
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*>domain of application and the mathematics.
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*>
*

*>It's commonplace in physical models and control theory to "stitch
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*>together" a model that keeps some input constant with another model
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*>that then drives that constant and makes it variable. In fact, many
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*>stability theorems exploit our ability to analytically separate the
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*>dynamics of the complete system in this manner. For example,
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*>dissipativity theory, a generalization of Lyapunov theory to systems
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*>which are "open" to inputs, works this way. We can prove stability
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*>properties for the base system assuming the inputs are zero. Then we
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*>can take another system that is also "open" to inputs and prove the
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*>same. Then we can join those systems together via their input/output
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*>ports. We then use the stability proofs for the separate systems to
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*>construct a stability proof for the joined systems.
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*>
*

*>My point is this -- the "counterfactual" approach of assuming some
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*>things constant (when factually they are not) is an *essential* tool
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*>for understanding the causality of complex dynamic systems. The
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*>mathematicians exploit this analytical procedure. It is really after
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*>all simply "divide and conquer". I feel that critics of this
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*>methodological approach must either be ignorant or naive.
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In general I have no problems with such an approach.

*> > Ian:
*

*> >>This is semantic. I take "natural prices" to refer to those prices
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*> >>that obtain when there is no profit incentive to reallocate capital in
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*> >>circumstances of constant technique and final demand.
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*> >
*

*> > The problem that Jurriaan points to here is that the same forces that
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*> > drives you towards eq. - the forces of competition also continuously
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*> > changes the technique and the preferences.
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*>
*

*>Yes of course they do. I want to understand these kinds of dynamics.
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*>My approach is to take one step at a time. You can't enjoy the full
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*>scientific meal at one sitting, that is all.
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*>
*

*> > The problem here is that the value of the thermostat is continuously
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*> > changing. The thermostat might change in an orderly way so that you
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*> > can have a theory of the moving attractor. Given that we can estimate
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*> > the *reaction speed* we could get - if not an equilibrium theory, so
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*> > at least a theory of "non-crisis" path of development - like the
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*> > golden decades after the 2nd WW.
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*>
*

*>I agree with your general point. But my example was constructed to
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*>show that -- even if the reference temperature of the thermostat is
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*>constant -- it is not the case that the whole system will reach its
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*>equilibrium point; nonetheless the attractor is real and causally
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*>efficacious. In other words, it is wrong-headed to deny the importance
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*>of theorizing equilibrium points and their stability properties simply
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*>because empirical reality seems not to exhibit such properties.
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*>
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*> > You are right - capitalism still exist - it reproduces itself - but
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*> > on a ever expanding diseq. path with periodic crisis (not regular,
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*> > not repetitive) - so the meaning of non-constant technology
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*> > equilibrium and corresponding prices is not still clear to me.
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*>
*

*>It is an analytical abstraction to hold some things constant, just as
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*>a physical experiment is designed to isolate a particular mechanism
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*>from the interference of other causes.
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*>
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*>I cannot expand on this now, but I am deeply influenced by early Roy
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*>Bhaskar (i.e., critical realism). So I view the empirical stream of
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*>events as jointly determined by multiple "hidden" causal mechanisms in
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*>"open systems". Part of the work of science is to discover the laws
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*>that describe how those mechanisms operate in isolation or "closed
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*>systems". How those mechanisms work in isolation may be very different
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*>from how they manifest in open systems. Once you've done that, put the
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*>mechanisms back together again and you'll have a good explanation of
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*>the empirical. The abstraction of natural price is a "moment" in this
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*>scientific project.
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*>
*

*>I also think this is essentially Marx's method, for what it's worth.
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*>
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*> >>Having said that, I do think there are important sources of
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*> >>instability in capitalist economies.
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*> >
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*> > Problem is not that there are "sources" of instability - but that
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*> > they are the same as the equilibrating forces, i.e. the un-cordinated
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*> > - not mutually consistent from the outset - actions of individual firms.
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*>
*

*>I am not sure they are the same. For instance, I think that price and
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*>quantity adjustment by firms is connected to but quite different from
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*>sources of technical change.
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*>
*

*> > I agree that to hold things still might be useful, but we have been
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*> > waiting for the full story for more than hundred years - so one might
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*> > ask if not economic modelling should start with modelling real
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*> > competition, real change of technology - because it has shown itself
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*> > extremely difficult to modify these models to make them dynamic afterwards.
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*>
*

*>I can't speak to the poor progress of economic science, although of
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*>course the obsession with static, Walrasian equilibrium models is
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*>largely to blame.
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*>
*

*>But I can say that "modeling everything at once" is easy to do --
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*>especially with computational agent-based models -- but this approach
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*>has the danger of creating a proxy object that is almost as complex as
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*>the real world. You don't get insight.
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*>
*

*> > The problem between Cap. vol 1 and 3 - the transformation problem has
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*> > shown itself very resistant - although Farjoun and Machower,
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*> > your work, the TSSI - points to another and hopefully more fruitful
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*> > research agenda - but I think Jurriaan is correct in stressing that
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*> > using static models to model "moving attractor systems" with slow
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*> > reaction speeds for the eqilibr. processes compared to technological
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*> > development is a real problem.
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*>
*

*>My model is not a static model. There's lots of interesting dynamics
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*>in there. I do (unapologetically) assume a constant technique, because
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*>my current (short-term) aim is to formally analyze some outstanding
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*>conceptual problems in value theory (rather than "model the economy").
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*> >From my reading of the classical authors they too assumed a constant
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*>technique; that's part of the meaning of "natural price".
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*>
*

*> >From a mathematical perspective, I also know that it is easy to add
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*>technical change to this kind of cross-dual model. I have already done
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*>this in simulation. But developing a good understanding of the
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*>resultant system requires a lot of time and effort. Again, as a
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*>practical "working scientist", it pays dividends to analyze simpler
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*>models first.
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*>
*

*>Best wishes,
*

*>-Ian.
*

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*

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*

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*

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Received on Mon Feb 7 14:35:26 2011

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