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Ed. note: This excerpt from the Web of Meaning is published with the permission of the author.

As our civilization careens toward a precipice of climate breakdown, ecological destruction, and gaping inequality, people are losing their existential moorings. Our dominant worldview has passed its expiration date: it’s based on a series of flawed assumptions that have been superseded by modern scientific findings.

The Web of Meaning: Integrating Science and Traditional Wisdom to Find Our Place in the Universe (published this week in the UK, next month in the US), offers a coherent and intellectually solid foundation for an alternative worldview based on deep interconnectedness, showing how modern scientific knowledge echoes the ancient wisdom of earlier cultures.

Here is the Introduction.

Tea with Uncle Bob

We could call it The Speech. You’ve probably heard it many times. Maybe you’ve even given it. Every day around the world, innumerable versions of it are delivered by Someone Who Seems to Know what they’re talking about.

It doesn’t seem like much. Just another part of life’s daily conversations. But every Speech, linked together, helps to lock our entire society up in a mental cage. It might occur anywhere in the world, from a construction site in Kansas to a market stall in Delhi. It can be given by anyone old enough to have learned a thing or two about how it all works. But it’s usually delivered by someone who feels they’ve been around the block a few times and they want to give you the benefit of their wisdom.

Because I grew up in London, I’ll zoom in there to a particular version of The Speech that reverberates with me. It’s an occasional family gathering—one of those events where toddlers take center stage and aunties serve second helpings of cake…

…click on the above link to read the rest of the article…

The Problem With Keynesian Economics

July 19, 2019

The Problem With Keynesian Economics

In The General Theory of Employment, Interest and Money, John Maynard Keynes wrote:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”

I think Lord Keynes himself would appreciate the irony that he has become the defunct economist under whose influence the academic and bureaucratic classes now toil, slaves to what has become as much a religious belief system as an economic theory.

Men and women who display appropriate skepticism on other topics indiscriminately funnel facts and data through a Keynesian filter without ever questioning the basic assumptions. Some go on to prescribe government policies that have profound effects upon the citizens of their nations.

And when those policies create the conditions that engender the income inequality they so righteously oppose, they often prescribe more of the same bad medicine. Like 18^th-century physicians applying leeches to their patients, they take comfort that all right-minded people will concur with their recommended treatments.

This is an ongoing series of a discussion between Ray Dalio and myself (read Part 1, Part 2, Part 3, and Part 4) . Today’s article addresses the philosophical problem he is trying to address: income and wealth inequality.

Last week I dealt with the equally significant problem of growing debt in the United States and the rest of the world. The Keynesian tools much of the economic establishment wants to use are exacerbating the problems. Ray would like to solve it with a blend of monetary and fiscal policy, what he calls Monetary Policy 3.

The Problem with Keynesianism

…click on the above link to read the rest of the article…

Does it Matter Whether Assumptions in Economics are Arbitrary?

May 21, 2018

DOES IT MATTER WHETHER ASSUMPTIONS IN ECONOMICS ARE ARBITRARY?

Various assumptions employed by mainstream economists appear to be of an arbitrary nature. The assumptions seem to be detached from the real world.

For example, in order to explain the economic crisis in Japan, the famous mainstream economist Paul Krugman employed a model that assumes that people are identical and live forever and that output is given. Whilst admitting that these assumptions are not realistic, Krugman nonetheless argued that somehow his model can be useful in offering solutions to the economic crisis in Japan.^[1]

The employment of assumptions that are detached from the facts of reality originates from the writings of Milton Friedman. According to Friedman, since it is not possible to establish “how things really work,” then it does not really matter what the underlying assumptions of a model are. In fact anything goes, as long as the model can yield good predictions. According to Friedman,

The ultimate goal of a positive science is the development of a theory or hypothesis that yields valid and meaningful (i.e., not truistic) predictions about phenomena not yet observed…. The relevant question to ask about the assumptions of a theory is not whether they are descriptively realistic, for they never are, but whether they are sufficiently good approximation for the purpose in hand. And this question can be answered only by seeing whether the theory works, which means whether it yields sufficiently accurate predictions.^[2]

Observe that on this way of thinking, the formation of the view regarding the real world is arbitrary – in fact, anything goes as long as the model could generate accurate forecasts.

In his Philosophical Origins of Austrian Economics (Mises Institute Daily Articles June 17 2006), David Gordon wrote that Bohm Bawerk maintained that concepts employed in economics must originate from the facts of reality – they need to be traced to their ultimate source. If one cannot trace it the concept should be rejected as meaningless.

…click on the above link to read the rest of the article…

The Theory of Non-Linear Intervention

October 3, 2017

The Theory of Non-Linear Intervention

Economics is well known for rather unrealistic theories based upon fundamentally unsound principles, such as the assumption that all things remain equal. Reality parts with academics whenever such assumptions are drawn to a foregone conclusion. However, greater false assumptions, which go unnoticed, lie at the foundation of so many theories in economics – primarily the assumption of linearity.

In our thinking process, we all are trapped by the Aristotelian sequence of logic – if X takes place then Y must follow. Unfortunately, we think in a linear fashion and, as such, most theories seek to embellish this very basic assumption. The financial world honestly wants to believe in simplistic notions. Raise interest rates and demand will subside along with inflation is but one false linear assumption. Man prefers to believe in linear relationships and systems, because anything beyond two variables becomes far too complex for rational thought processes.

Man’s natural tendency toward linear thinking has indeed created many heated battles. The arguments between supply and demand-side economics is one such example. Given the assumption of a linear economy, demand-side economists argue that the economy can be controlled through the manipulation of government spending and interest rates. In effect, demand-side economics seeks to use the consumer (demand) as a club to beat capital over the head. Yet these same demand-side economists claim that supply-side economics benefits the rich at the expense of the poor. Strangely enough, throwing the consumer out of work and causing higher unemployment to affect lower demand is the core of demand-side economics. It is hard to see how demand-side benefits the poor at the expense of the rich. The supply-side economist argues that there should be less government intervention in demand. Instead, government should stimulate the economy through encouraging greater output through supply stimulation.

…click on the above link to read the rest of the article…

Some long term climate scenarios

December 15, 2015

Some long term climate scenarios

Scenarios are not predictions, just ways of describing possible futures; useful in order to be prepared for unexpected events. The only rule in scenario building is that the assumptions should not be too improbable; such as involving time machines. And, yet, it seems that in some cases involving climate projections, time machines are a built-in assumption.

The COP21 conference in Paris has brought again climate to the attention of the public and, from now on, there starts the real challenge: what can we really expect for the future of the earth’s climate? As always, predictions are difficult, especially when there are many variables involved. Nevertheless, climate change is the result of physical factors that we can understand and we know that the build-up of greenhouse gases in the atmosphere – if it continues – is going to lead us to a very unpleasant future.

If we look at the long-term future, the whole question rotates on whether we manage to stay below an increase in temperature that is believed to be “safe” (it might be 2 degrees C, but we don’t know for sure), or we pass the limit and we find ourselves above the “climate tipping point” after which the system starts moving by itself toward more and more warming with all the associated disasters.

So, I thought I might engage in a little exercise of qualitative “scenario building” with a special focus on climate. Here are some scenarios; listed in no particular order. Some you could see as horrible, some as unlikely, others as overoptimistic. But they are just that: scenarios. The COP21 was a step in the right direction. Avoiding the worst outcomes will not be easy, but it is up to us.

…click on the above link to read the rest of the article…

PBS Joins the MSM’s Syria-Russia Bias

December 7, 2015

PBS Joins the MSM’s Syria-Russia Bias

Mainstream U.S. media systematically excludes points of view on world affairs that deviate from Official Washington’s “group think.” With no lessons learned from the Iraq-WMD debacle, the MSM only lets on establishment or right-wing pundits with conformist points of view on crises with Syria and Russia, notes Rick Sterling.

PBS Newshour is considered high-quality journalism by many North Americans. But is it? A test case is their report on Nov. 24 when a Russian jet was shot down and one pilot killed as he descended by parachute. This was a significant international event and the situation is still dangerous. The conflict in Syria could get even worse. PBS Newshour presented a discussion/analysis of the event with two guests: Nicholas Burns and Angela Stent. The PBS Newshour host was Judy Woodruff.

This critique applies to that one PBS Newshour broadcast but the essential points are true for much of what you see on the program (and across the mainstream U.S. news media). Assumptions and bias regarding the Syrian conflict are pervasive and persistent. So, how can U.S. foreign policy change (or even show some nuance) if the public is continually fed biased and false information from one point of view? Here are specific points:

—PBS Newshour selected two analysts with essentially the same viewpoint, representing the U.S. government and military/security establishment:

Nicholas Burns is a former U.S. Ambassador to NATO. In early 2003 he urged the “unity” of NATO as some NATO allies expressed doubts about the U.S. the invasion of Iraq. In 2006, he urged punishing sanctions on Iran. In 2011, Burn wrote, “President Obama was surely right to commit the United States, however reluctantly, to the NATO campaign [to overthrow Libyan President Gaddafi].” Burns has a track record supporting Western aggression against other countries. He evidently has learned nothing from the resulting chaos, devastation and death.

…click on the above link to read the rest of the article…

Lost in Extrapolation

October 29, 2015

Lost in Extrapolation

Phillips Curve Fail

In the late 1970s the impossible happened. Inflation and unemployment simultaneously went vertical. The leading economists of the day were flummoxed.

summers Larry Summers favors us with his “eternal stagnation” shrug. The man is a sheer inexhaustible fount of truly atrocious ideas. As we have previously pointed out, when he’s around, the economy can only be deemed safe under certain circumstances.
Photo credit: Reuters

The Phillips curve said there’s an inverse relationship between inflation and unemployment. When unemployment goes down, inflation goes up. Conversely, when unemployment goes up, inflation goes down.

These are the data economist William Phillips originally studied – wage rates vs. unemployment in the UK in the years 1913 to 1948. Phillips’ study will forever stand as a monument as to why economic theory cannot possibly be derived from empirical data. In the wake of the 1970s experience, at least seven Nobel prizes in economics were awarded for work that debunked the Phillips curve-based assumptions of the Keynesians in some shape or form. Recently its long dead cousin NAIRU has risen from the grave again, like a zombie – click to enlarge.

How could it be that both were going up at once? Weren’t they mutually exclusive? Indeed, it took years of heavy handed government intervention to pull off such a feat.

When unemployment began creeping up in the 1970’s the U.S. Treasury, with backing from the Federal Reserve, did what Keynes had told them to do. They spent money to stimulate the economy and spur jobs creation.

According to the Phillips curve, with rising unemployment the planners could have their cake and eat it too. They could run large deficits without inflation.

Unfortunately, something unexpected happened. Instead of jobs they got inflation. Then, when they tried it again, they still didn’t get jobs. Astonishingly, they got more inflation.

…click on the above link to read the rest of the article…

Terms of debate: Destroying vs altering nature, the fragile vs the resilient Earth

May 11, 2015

Terms of debate: Destroying vs altering nature, the fragile vs the resilient Earth

Last week’s piece drew responses that throw into relief how much the language we use depends on our most basic assumptions about how the world works. If left unexamined, that language leads to further conclusions that go unchallenged because the underlying assumptions are never scrutinized.

I challenged the Breakthrough Institute’s notion that humans are in one category and nature in another. If one views humans as merely a part of nature or the universe or the web of existence–however one chooses to name that which includes everything–then our role becomes distinctly different.

Under my assumption humans are embedded in the natural world. They are not the sole actors or agents in it, only one of countless actors, most of which we probably know nothing about. We cannot get one up on nature. We can only cooperate with its workings.

When we put nature in one category and humans in another, we make humans an outside and preeminent force over nature. We (falsely) imbue ourselves with god-like power to “control” nature. In this case, “control” means we get what we want without self-annihilating effects. For who could say that they are in “control” of a plummeting airliner headed for a crash just because they still have the ability to move the throttle.

Now, if humans are one with nature, then the only thing they can do to it is alter it. They cannot “destroy” nature. Only if we conceive of ourselves as living on a different plane from nature can we “destroy” it. And, only if we conceive of nature as immutable can we “destroy” it. But nature is always in flux including any flux that results from human action. There is no immutable nature to “destroy” or to “restore.” We cannot run entropy in reverse and reassemble the universe into exactly a state that existed in the past, not anywhere.

…click on the above link to read the rest of the article…

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