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Cutting the Gordian Knot of GE Theory

Onion Eater

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Cristobal Young writes:

“General equilibrium theory – the mathematical analysis of a market economy as a whole – has its roots in the late 19th century works of Leon Walras and Vilfredo Pareto… However, the project failed to attract much following and soon faded into dormancy.

“It was the end of the Great Depression, ironically, that saw a tremendous revival of the General Equilibrium (GE)/Welfare economics project. In the US, a loose grouping of devout socialists were busy detailing the elegance of the market equilibrium. The leaders of the GE revival – Oskar Lange, Abba Lerner and Abram Bergson – were cutting-edge mathematical economists and true believers in Soviet-style central planning…

“The GE framework, given sufficient mathematical complexity, is actually a grand narrative on the fragility and implausibility of perfect market equilibrium. Successive mathematical torturing has outlined an extensive list of unlikely conditions required to demonstrate general market efficiency. Mark Blaug has nicely summarized a partial inventory: ‘perfectly rational, omniscient, identical consumers; zero transaction costs; complete markets for all time-stated claims for all conceivable contingent events, no trading at disequilibrium prices; no radical, incalculable uncertainty…; only linearly homogenous production functions; no technical progress requiring capital investment, etc’ (Blaug, 1997, p. 5)…

“For an economic system that failed to satisfy such assumptions, there seemed a need for government intervention. General equilibrium theory provided a sort of checklist for market critics.”

Milton Friedman invoked his famous “assumptions don’t matter” dictum to avoid having to admit that he could not untie the Gordian knot of GE Theory. I harshly criticize this cowardly approach at Axiomatic Economics by Victor Aguilar: Socrates and Hume at Billiards

Instead of attempting to untie it, I cut the Gordian knot of GE Theory by throwing all of Walras’ and Pareto’s assumptions overboard and starting from scratch with my own set of axioms.

And, unlike the Austrians who talk about the axiomatic method without ever clearly stating their axioms, my axioms are concisely stated at the top of the home page of my website: Axiomatic Theory of Economics by Victor Aguilar: Home

“Ludwig Mises knew nothing about mathematicians and denounced them all, making no distinction between axiomatists like Kolmogorov and positivists like his brother. Thus having missed a splendid opportunity to team up with his brother’s rival, Ludwig Mises’ embryonic vision would lie dormant for half a century before the axiomatic method would find its champion in economics,” I write at Axiomatic Economics by Victor Aguilar: Critique of Austrian Economics

Mises failed to defeat socialists like Lange because he was a lousy mathematician. I am not a lousy mathematician. Modern socialists like Scucca may throw GE Theory at my feet (http://www.debatepolitics.com/economics/34429-hints-structural-economic-adjustment-air.html), but I will not stumble over it – like Alexander at Gordium, I cut through that crap with one decisive stroke.

REFERENCES

Blaug, Mark. (1997) “Ugly Currents in Modern Economics” in Policy Options, 18, 3-8.

SSRN-The Politics, Mathematics and Morality of Economics: A Review Essay on Robert Nelson`s Economics as Religion by Cristobal Young
 
Ummm, ok

Could you list the advantages (under your theory) that capitalism has over socialism?

And then the advantages socialism has over capitalism?


And what are your thoughts on a compromise, like a social democracy?
 
Could you list the advantages (under your theory) that capitalism has over socialism?

Henry Hazlitt already has. There are 25 advantages listed here: Economics in One Lesson

And then the advantages socialism has over capitalism?

I don't know of any.

And what are your thoughts on a compromise, like a social democracy?

Compromise???? What's that word mean? It's not in my vocabulary - I'm sure that I've never used it.
 
Well, what do you know about socialism?

Stéphane Courtois, asserts that "...Communist regimes...turned mass crime into a full-blown system of government". Using unofficial estimates he cites a death toll which totals 94 million, not counting the "excess deaths" (decrease of the population due to lower than the expected birth rate). The breakdown of the number of deaths given by Courtois is as follows:

20 million in the Soviet Union
65 million in the People's Republic of China
1 million in Vietnam
2 million in North Korea
2 million in Cambodia
1 million in the Communist states of Eastern Europe
150,000 in Latin America
1.7 million in Africa
1.5 million in Afghanistan
10,000 deaths "resulting from actions of the international communist movement and communist parties not in power."

Source: The Black Book of Communism - Wikipedia, the free encyclopedia

However, this thread is about the foundations of theoretical economics, so let's focus on foundational issues.
 
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You sourced Wikipedia...

That information and statistics Onion Eater quoted are consistent with The Black Book of Communism (Harvard University Press, 1999). Here are some excerpts that go to the heart of the nature of Communism. Stéphane Courtois, director of research at the Centre National de la Recherche Scientifique, wrote:

…it was flesh-and-blood Communism that imposed wholesale repression, culminating in a state-sponsored reign of terror… Communist regimes, in order to consolidate their grip on power, turned mass crime into a full-blown system of government…

Communism has committed a multitude of crimes not only against individual human beings but also against world civilization and national cultures…

The Bolsheviks had decided to eliminate, by legal and physical means, any challenge or resistance, even if passive, to their absolute power. This strategy applied not only to groups with opposing political views, but also to such social groups as the nobility, the middle class, the intelligentsia, and the clergy, as well as professional groups such as military officers and the police…

The fundamental question remains: Why? Why did modern Communism, when it first appeared in 1917, almost immediately turn into a system of bloody dictatorship and into a criminal regime?

…Why should maintaining power have been so important that it justified all means and led to the abandonment of the most elementary moral principles? The answer must be that it was the only way for Lenin to put his ideas into practice and “build socialism.” The real motivation for the terror thus becomes apparent: it stemmed from Leninist ideology and the utopian will to apply to society a doctrine totally out of step with reality…

In a desperate attempt to hold onto power, the Bolsheviks made terror an everyday part of their policies, seeking to remodel society in the image of their theory, and to silence those who, either through their actions or by their very social, economic, or intellectual existence, pointed to the gaping holes in the theory. Once in power, the Bolsheviks made Utopia an extremely bloody business…

This transformation of ideology and politics into absolute, “scientific” truth is the basis of the totalitarian dimension of Communism. The Party answered only to science. Science also justified the terror by requiring that all aspects of social and individual life be transformed…


Finally, Alexander Solzhenitsyn observed of his experience with Soviet Communism:

I have climbed not three or four makeshift steps, but hundreds and even thousands of them; unyielding, precipitous, frozen steps, leading out of the darkness and cold where it was my fate to survive, while others -- perhaps with a greater gift and stronger than I -- have perished. Of them, I myself met but a few on the Archipelago of Gulag, shattered into its fractionary multitude of islands; and beneath the millstone of shadowing and mistrust I did not talk to them all, of some I only heard, of others still I only guessed. Those who fell into the abyss already bearing a literary name are at least known, but how many were never recognized, never once mentioned in public? And virtually no one managed to return…

Frequently, in painful camp seethings, in a column of prisoners, when chains of lanterns pierced the gloom of the evening frosts, there would well up inside us the words that we should like to cry out to the whole world, if the whole world could hear one of us.
 
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I challenge you to a Reverse Debate, with the topic "should America turn socialist".

I will argue for capitalism, and you will argue for socialism.

I'll even let you pick who goes first.

Do you accept?

That's a very interesting proposition. I'll think about it and get back to you. I had never heard of a reverse debate before - it sounds like fun, but I'll need to think a little about how to argue for America turning socialist.

However, in the meantime, let's get this thread back on topic: Cutting the Gordian Knot of GE Theory.

Adherance to GE Theory practically defines what it means to be a "mainstream" economist today. I'd like to hear from some of those mainstream economists on whether or not I have actually cut the Gordian knot of GE Theory and whether or not they think it was (is) a good idea to do so.
 
Onion Eater,

I'll take a look at your website to get an understanding of your approach.
 
I am not a communist, and i agree the Soviet Union was an evil dictatorship that killed hundreds of thousands of people.

But, i still think we should be a socialist nation, we are a republic, and that's why we can do it right.

And my point was that Wikipedia is an invalid source, do you disagree with that statement?
 
I am not a communist, and i agree the Soviet Union was an evil dictatorship that killed hundreds of thousands of people.

But, i still think we should be a socialist nation, we are a republic, and that's why we can do it right.

And what are your thoughts on a compromise, like a social democracy?

“If some demagogue were to offer us, as a guiding creed, the following tenets: that statistics should be substituted for truth, vote-counting for principles, numbers for rights, and public polls for morality – that pragmatic, range-of-the-moment expediency should be the criterion of a country’s interests, and that the number of its adherents should be the criterion of an idea’s truth or falsehood – that any desire of any nature whatsoever should be accepted as a valid claim, provided that it is held by a sufficient number of people – that a majority may do anything it pleases to a minority – in short, gang rule and mob rule – if a demagogue were to offer it, he would not get very far. Yet all of it is contained in – and camouflaged by – the notion of ‘Government by Consensus’…

“The advocates of that notion would declare at this point that any idea which permits no compromise constitutes ‘extremism’ – that any form of ‘extremism,’ any uncompromising stand, is evil – that the consensus ‘sprawls’ only over those ideas which are amenable to ‘moderation’ – and that ‘moderation’ is the supreme virtue, superseding reason and morality.

This is the clue to the core, essence, motive, and real meaning of the doctrine of ‘Government by Consensus’: the cult of compromise. Compromise is the pre-condition, the necessity, the imperative of a mixed economy. The ’consensus’ doctrine is an attempt to translate the brute facts of a mixed economy into an ideological – or anti-ideological – system and to provide them with a semblance of justification…

“The only danger, to a mixed economy, is any not-to-be-compromised value, virtue, or idea. The only threat is any uncompromising person, group, or movement. The only enemy is integrity.”

Source: Any Rand, Capitalism: The Unknown Ideal, 1967, pp. 228-232.
 
And my point was that Wikipedia is an invalid source, do you disagree with that statement?

I do. Let's be frank - Who, in their wildest dream, would take time out of their day to inject false lies and invalid information on the Wikipedia article for 'Black Book of Communism'. If it was on McCain, Obama, or any other modern (within the last three months) controversy, then I'd be more likely to understand that false data may be on there. But, we are talking about the black book of communism. Let's be real.

Even if you are not convinced 100% that it's legitimate, take it with a grain of salt. As long as nothing extremist is posted, or is totally out of context - It's fine.

And then the advantages socialism has over capitalism?

I may be a Libertarian, however, I can (partially) understand where the other side is coming from.

Socialism has some great aspects, honestly. It allows a basis for everyone. It allows everyone to receive social benefits (whether it be health care, jobs, housing, etc) - along with the possibility for success. If you want to go ahead, start your own business and prosper, ultimately, it's there. Although, the underlying fact still remains - As time goes on, economics systems sway left. It's been evident in nearly every civilization. Looking at America, in the early 1900s, capitalism was at it's finest - No unions, no minimum wage, there was child labor. As the years progressed, social reform came. We became to have minimum wage, child labor laws, unions fighting for rights. What started from a bright red system was starting to fad, and turn purple. Which, unfortunately and pathetically, has cripped prosperity.

Socialism is a nice idea, however, it can only work for a small community. You would need something with a small population in order to have a fully functionable system. Which is where Capitalism has it's strong-hold, and dominance - It works best when there are more people.

And what are your thoughts on a compromise, like a social democracy?

That's.. a far reach. Like I stated before, socialism does not work on a large scale. There are simply too many people. If everyone knew each other, they'd be more likely to say 'yes' to paying taxes to help. However, when you have 300,000,000 people in a nation - A CEO in Manhattan is not going to know, let alone care, about a farmer in Kansas. It's harsh, but, it's how it is.

Another example - If your neighbor needed money, and he asked you - Are you going to be inclined to say yes? Of course. Where as, if someone in California asked you, you'd be more inclined to say no; you don't know them.
 
As the years progressed, social reform came. We became to have minimum wage, child labor laws, unions fighting for rights. What started from a bright red system was starting to fad, and turn purple. Which, unfortunately and pathetically, has cripped prosperity.

That depends on your definition of "prosperity"

I mean if this

indiana.jpg


is "prosperity"...

If "prosperity" is dozens of people dieing in factory's every year dew to unsafe equipment...

Then yah, you could say it "crippled prosperity".


I'm not sure how to go about arguing with someone who is pro child labor...
 
That depends on your definition of "prosperity"

I mean if this

indiana.jpg


is "prosperity"...

If "prosperity" is dozens of people dieing in factory's every year dew to unsafe equipment...

Then yah, you could say it "crippled prosperity".


I'm not sure how to go about arguing with someone who is pro child labor...

It's not that I am pro-child labor. If you want to work, by all means, go for it. The government shouldn't stop you and say you can only work x amount of hours a week.
 
It's not that I am pro-child labor. If you want to work, by all means, go for it.

in the early 1900s, capitalism was at it's finest - No unions, no minimum wage, there was child labor. As the years progressed, social reform came. We became to have minimum wage, child labor laws, unions fighting for rights. What started from a bright red system was starting to fad, and turn purple. Which, unfortunately and pathetically, has cripped prosperity.


Now, unless you are prepared to argue that a 12 year old child would work for 13 hours a day for below minimum wage because he wants to, then I don't really see how you have an augment.
 
Now, unless you are prepared to argue that a 12 year old child would work for 13 hours a day for below minimum wage because he wants to, then I don't really see how you have an augment.

Even if the US removed of all child labor laws, would that necessarily result in the picture you posted above?

Now days, we have an advanced means of communication. Any firm employing children in an unfit fashion would most likely be exposed on national television/ Youtube which would result in a public relations nightmare. Very counteractive when trying to win over "buyers"...
 
Now, unless you are prepared to argue that a 12 year old child would work for 13 hours a day for below minimum wage because he wants to, then I don't really see how you have an augment.

If they want to, why should they be stopped?
 
Even if the US removed of all child labor laws, would that necessarily result in the picture you posted above?

Now days, we have an advanced means of communication. Any firm employing children in an unfit fashion would most likely be exposed on national television/ Youtube which would result in a public relations nightmare. Very counteractive when trying to win over "buyers"...
Unless, of coarse, there goods were exported to another country, or they were selling a basic necessity of life. You can't exactly boycott the power company when they own the only plant within 150 miles...

If they want to, why should they be stopped?
Because employers shouldn't be allowed to take advantage of children.

Nobody, and i do mean nobody, wants to work in unsafe conditions for 14 hours a day, they would only do so if they had to. This goes double for children, the only reason an twelve year old would work in a factory is if his mother and father couldn't support the family on there own.

Furthermore kids should be at school, where is he going to get the time to do this?
 
Even if the US removed of all child labor laws, would that necessarily result in the picture you posted above?

Now days, we have an advanced means of communication. Any firm employing children in an unfit fashion would most likely be exposed on national television/ Youtube which would result in a public relations nightmare. Very counteractive when trying to win over "buyers"...

Goldenboy! Metropolis! You guys call yourselves libertarians and you're letting an 18-year-old socialist run circles around you!

Mentork is assuming his conclusion. His conclusion is that the only thing that stopped child labor in the past and prevents it today is legal prohibition.

By arguing that there were other possible ways to stop child labor, like shaming the factory owners (Goldenboy) or that it was not so bad as long as the 12-year-olds wanted to work (Metropolis), you have tacitly accepted Mentork's claim that what actually happened was that child labor was prohibited by law - and that it would re-emerge today if those laws were revoked.

Goldenboy, your argument that they lacked "advanced means of communication" in the past is all wet. There was nothing wrong with newspapers of the time and the "sob sisters" (female journalists who specialized in heartbreaking stories) did a fine job exposing problems like child labor.

Metropolis, your argument that 12-year-olds should be allowed to work in factories "if they want to" is also all wet because they did not want to. Their parents made them work; they beat their children if they came home without a paycheck. Anyway, 12-year-olds aren't of the age of consent - if Mentork was a better debater, he would have slammed you with the "what if a 12-year-old girl 'wants' to work as a prostitute?" argument.

The correct response is to challenge Mentork's assumption that the only thing that stopped child labor in the past and prevents it today is legal prohibition.

Does Mentork have proof that these laws did not just codify what the free market had already accomplished, the withdrawal of children from the work force?

Perhaps the free market raised the living standards of everybody enough that families no longer had to depend on their children's earnings to make ends meet.

Perhaps, due to the wonders of capitalism, the parents alone could support their families and voluntarily sent their children to schools rather than to factories.

Perhaps the government had nothing to do with the demise of child labor and just took credit for it after the fact.

Imagine that!

Goldenboy, you're a boxer; go on the offensive! Don't let Mentork define the terms of the debate. Make him prove that the demise of child labor did not happen as I describe. Make him prove that there are any Americans today who are so poor that, in the absense of legal prohibitions, they would make their 12-year-olds work in factories. (And how could they be so poor in the midst of capitalist plenty?) Put him on the defensive.

You let Mentork's scary photo put you on the defensive. (And imagine the backpedaling that Metropolis would be doing right now if Mentork had blindsided him with the 12-year-old-prostitute argument!) You'll never be a professional boxer if all you do is block the other guy's jabs and never try to line him up for a clout on the snooz. And you'll never be a professional debater if you let the other guy assume his conclusions.
 
Great now it's three on one -__-.

Mentork was a better debater, he would have slammed you with the "what if a 12-year-old girl 'wants' to work as a prostitute?" argument.

I'll just put that one in my back pocket in case i ever need it, thanks.

Perhaps the free market raised the living standards of everybody enough that families no longer had to depend on their children's earnings to make ends meet.

Perhaps, due to the wonders of capitalism, the parents alone could support their families and voluntarily sent their children to schools rather than to factories.

As of 2007 37.3 million people are in poverty, with the definition of poverty being "lacking the resources to meet the basic needs for healthy living; having insufficient income to provide the food, shelter and clothing needed to preserve health."

The death rate before 60 for those in poverty in the U.S. Is almost twelve percent. People lacking functional literacy skills is exactly 20%. That is just the united states.

Sorce

Sorce


Things are not good the way they are, there are people who can't read, there are people with no home, there are people with no food.

What do you propose we do?
 
How is small government going to help people under the poverty line learn to read?
 
Because employers shouldn't be allowed to take advantage of children.

Nobody, and i do mean nobody, wants to work in unsafe conditions for 14 hours a day, they would only do so if they had to. This goes double for children, the only reason an twelve year old would work in a factory is if his mother and father couldn't support the family on there own.

Furthermore kids should be at school, where is he going to get the time to do this?

You are right. Nobody would want to work. So, that means the company will need to fix up the place and make it so kids WANT to work.

Metropolis, your argument that 12-year-olds should be allowed to work in factories "if they want to" is also all wet because they did not want to. Their parents made them work; they beat their children if they came home without a paycheck. Anyway, 12-year-olds aren't of the age of consent - if Mentork was a better debater, he would have slammed you with the "what if a 12-year-old girl 'wants' to work as a prostitute?" argument.

Such a shame. But, no one gets beat now-a-days - So, then, I think it'd be fair to remove the child labor laws.

And, a prostitute? What's wrong with that? It's her body. Her choice.

We are libertarians. We don't care what other people do. As long as it is not hindering our body/life, then we are fine. If little Martha wants to whore herself out, go for it. If little Timmy wants to work in the factory for endless hours, go for it. You're not hurting me. You're not hurting anyone but yourself.

Responsibility should be in the hands of the person - not the government. No one should ever tell me that I should not do something because of 'potential problems'.
 
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However, in the meantime, let's get this thread back on topic: Cutting the Gordian Knot of GE Theory.

Adherance to GE Theory practically defines what it means to be a "mainstream" economist today. I'd like to hear from some of those mainstream economists on whether or not I have actually cut the Gordian knot of GE Theory and whether or not they think it was (is) a good idea to do so.

Could you elaborate since I am not completely understanding? Are you attacking the assumptions, as put forth by Blaugh:‘perfectly rational, omniscient, identical consumers; zero transaction costs; complete markets for all time-stated claims for all conceivable contingent events, no trading at disequilibrium prices; no radical, incalculable uncertainty…; only linearly homogenous production functions; no technical progress requiring capital investment, etc’ (Blaug, 1997, p. 5)…

or are you cutting to a deeper level?

One can easily attack the assumptions of GE theory and any decent economist will tell you that you can relax the assumptions.
 
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