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Thread: Cutting the Gordian Knot of GE Theory

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    Cutting the Gordian Knot of GE Theory

    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/econom...tment-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
    Is the following quote reckless in the extreme? Then read my 2008 paper about monetary theory:
    http://www.axiomaticeconomics.com/in...e_collapse.php
    Quote Originally Posted by JP Hochbaum View Post
    No tax raises needed, just have the federal government spend the money into existence.

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    Re: Cutting the Gordian Knot of GE Theory

    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?

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    Re: Cutting the Gordian Knot of GE Theory

    Quote Originally Posted by Mentork View Post
    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

    Quote Originally Posted by Mentork View Post
    And then the advantages socialism has over capitalism?
    I don't know of any.

    Quote Originally Posted by Mentork View Post
    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.
    Is the following quote reckless in the extreme? Then read my 2008 paper about monetary theory:
    http://www.axiomaticeconomics.com/in...e_collapse.php
    Quote Originally Posted by JP Hochbaum View Post
    No tax raises needed, just have the federal government spend the money into existence.

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    Re: Cutting the Gordian Knot of GE Theory

    Quote Originally Posted by Onion Eater View Post
    I don't know of any.
    Well, what do you know about socialism?


    Quote Originally Posted by Onion Eater View Post
    Compromise???? What's that word mean? It's not in my vocabulary - I'm sure that I've never used it.
    Quote Originally Posted by merriam-webster

    Compromise

    something intermediate between or blending qualities of two different things

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    Re: Cutting the Gordian Knot of GE Theory

    Quote Originally Posted by Mentork View Post
    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.
    Is the following quote reckless in the extreme? Then read my 2008 paper about monetary theory:
    http://www.axiomaticeconomics.com/in...e_collapse.php
    Quote Originally Posted by JP Hochbaum View Post
    No tax raises needed, just have the federal government spend the money into existence.

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    Re: Cutting the Gordian Knot of GE Theory

    Quote Originally Posted by Onion Eater View Post
    You sourced Wikipedia -__-


    Onion Eater, you wish to debate socialist theory, yet it is clear you know nothing about it.

    Therefore, 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?
    Last edited by Mentork; 09-14-08 at 08:03 PM.

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    Re: Cutting the Gordian Knot of GE Theory

    Quote Originally Posted by Mentork View Post
    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.
    Last edited by donsutherland1; 09-14-08 at 08:23 PM.

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    Re: Cutting the Gordian Knot of GE Theory

    Quote Originally Posted by Mentork View Post
    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.
    Is the following quote reckless in the extreme? Then read my 2008 paper about monetary theory:
    http://www.axiomaticeconomics.com/in...e_collapse.php
    Quote Originally Posted by JP Hochbaum View Post
    No tax raises needed, just have the federal government spend the money into existence.

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    Re: Cutting the Gordian Knot of GE Theory

    Onion Eater,

    I'll take a look at your website to get an understanding of your approach.

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    Re: Cutting the Gordian Knot of GE Theory

    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?

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