Thursday, February 16, 2012

Philip Pilkington: The Delicate Balance of Terror –How Neoclassical Economics Deploys Psychotic Reasoning to Explain Human Behavior

By Philip Pilkington, a writer and journalist based in Dublin, Ireland

A concentration camp is the complete obliteration of privacy.

– Milan Kundera

Imagine a world where everyone could read everyone else’s thoughts. There would be no privacy, of course, and no trust. We would all know what each other were thinking and would act accordingly. We would not be able to hide certain thoughts we had about others – and we would be aware of every intention others had toward us.

In Milan Kundera’s seminal novel The Unbearable Lightness of Being he explores privacy in great detail. Teresa – one of the novel’s main characters – is a deeply traumatised young woman. When she was growing up her mother allowed her absolutely no privacy and this invasion of her personal space haunted her into her adult life, colouring all her relationships.

Kundera:

Almost from childhood, she knew that a concentration camp was nothing exceptional or startling but something very basic, a given into which we are born and from which we can escape only with the greatest of efforts.

Kundera cleverly uses Teresa’s psychology to raise questions about what it means to lead a private life as a dissident under Soviet rule in Czechoslovakia in the late 1960s. The authorities there secretly record dissident’s personal conversations in order to broadcast on the radio; they trick dissidents into sexual encounters which they videotape and then report in the media. In modern democratic societies, we have institutions in place that do this, but they leave citizens alone and focus on celebrities (who, naturally, none of us sympathise with).

Kundera:

When a private talk over a bottle of wine is broadcast on the radio, what can it mean but that the world is turning into a concentration camp?

But the life of a dissident in the Soviet Union or the celebrity in a Western democracy would be nothing compared to a person living in a telepathic society. Toward the end of 1984 George Orwell makes the convincing case that we are still free when our thoughts are still our own. A person living in a telepathic society would not even have ownership over their own thoughts, which would be broadcast at every moment to everyone around them.

Tragically, there are indeed some who live in such a world. They are not telepathic, of course, but they may come to think that they are. These are people who psychiatrists refer to as suffering from a severe and usually chronic form of psychosis: paranoid schizophrenia.

The most famous case of paranoid schizophrenia in the case literature is that of Daniel Paul Schreber – a high profile judge who lived in Germany at the turn of the 20th century. Schreber is famous in part because his case was picked up on by Sigmund Freud, but his case was only picked up because it was so fascinating. Schreber – a highly gifted and intelligent writer – wrote a long book about what he had experienced while in the throes of paranoid schizophrenia.

Here is a good characterisation of the role of telepathy in the Schreber case by the psychoanalyst Michael Vannoy Adams, taken from his book The Fantasy Principle: Psychoanalysis of the Imagination:

[T]he essence of the ‘paranoid style’ is rampant, pervasive suspicion. Paranoid schizophrenics are suspicious that someone might ‘influence’ them. In just this way, Schreber suspects that his psychiatrist’s ‘nerves’ might influence his ‘nerves’ – that is, murder his soul or destroy his reason. Schreber believes that his psychiatrist has exerted the influence of telepathy. He assumes that his psychiatrist is attempting to read his thoughts for the purpose of, as he says, “appropriating his mental powers.” In order to defend himself, Schreber pretends that he is demented – that he has no thoughts that his psychiatrist might read. This is what Schreber means by “the so-called not-thinking-of-anything-thought.

Schreber’s delusional state, then, puts Teresa’s neuroticism and totalitarian state/celebrity culture invasion of privacy in their proper light. The latter are bad; but they’re not that bad.

In cases of paranoia, as the psychic structure disintegrates various last gasp defences are often summoned up. In cases where telepathy plays a role a typical manifestation of this is that the sufferer begins to think that they can read the thoughts of others. By assuming that one can read the thoughts of others, one insulates oneself from the notion that others might be reading one’s own thoughts. This gives the sufferer a defence with which they can (usually temporarily) control the disorder and maintain some sort of control over the world around them.

And this brings us to the case of John Forbes Nash Jr. Nash – who many will remember from the film (or the book on which it was based) A Beautiful Mind, which depicted his struggles with paranoid schizophrenia – played perhaps the most significant role in the development of post-war neoclassical economics.

On October 12th 1950, Nash delivered a paper on game theory to the Cowles Commission – a group of mathematical economists who were intent on formalising the discipline. What Nash gave this audience was a means to close off the theoretical edifice of neoclassical economics once and for all – something that previous generations of neoclassicals had been unable to do and which leading figures like John von Neumann and John Maynard Keynes had essentially declared impossible.

Nash employed some fancy mathematics to do this, of course, but, like all applications of mathematics, it was in the assumptions buried within the equations where the truly relevant assumptions lay.

First Nash assumed a fearful and paranoid universe where everyone was constantly scrutinising each other and weighing up what each would do next. In Nash – as in any paranoid universe – there was a total elimination of trust. In their book Modern Political Economics: Making Sense of the Post-2008 World the economists Yanis Varoufakis, Joseph Haveli and Nicholas Theocrakis, put it as such:

Nash proves that bargainers [that is, economic agents] will only settle for an equilibrium of fear agreement and then proves that there exists only one such agreement: his solution to the bargaining problem. [Authors’ emphasis]

In his book Machine Dreams: Economics Becomes a Cyborg Science, the historian of economic ideas, Philip Mirowski, ties this directly to the ‘paranoid style’, as portrayed by Vannoy Adams above:

The Nash solution concept was not a drama scripted by Luigi Pirandello or a novel by Robert Musil; it was much closer to a novella by Thomas Pynchon. Just as von Neumann’s minimax solution is best grasped as the psychology of the reluctant duelist, the Nash solution is best glossed as the rationality of the paranoid. Nash appropriated the notion of a strategy as an algorithmic program and pushed it to the nth degree.

From these paranoid premises where all trust is eliminated and all action taken on the basis of perpetual fear, Nash then slips in an assumption that completes the circle and makes his vision of the economic agent truly in line by assuming telepathy on the part of the actor. From Modern Political Economics:

[Nash’s proof] only holds water if we can assume that [the economic agents] can potentially share common knowledge of the probability of no agreement [taking place when one agents threatens another]. But how can they, given that [each agent] has an incentive to overrepresent it [in order to strengthen their bargaining position]? As rationality alone cannot bring about such common knowledge, something closer to telepathy is necessary.[Author’s emphasis]

Or, Mirowski again:

In the grips of paranoia, the only way to elude the control of others is unwavering eternal vigilance and hyperactive simulation of the thought processes of the Other. Not only must one monitor the relative ‘dominance’ of one’s own strategies, but vigilance demands the complete and total reconstruction of the thought processes of the Other – without communication, without interaction, without cooperation – so that one could internally reproduce (or simulate) the very intentionality of the opponent as a precondition for choosing the best response. An equilibrium point is attained when the solitary thinker has convinced himself that the infinite regress of simulation, dissimulation, and countersimulation has reached a fixed point, a situation where his simulation of the response of the Other coincides with the other’s own understanding of his optimal choice. Everything must fit into a single interpretation, come hell or high water.[My emphasis]

Welcome to the concentration camp in which telepathy reigns and all privacy melts into ether!

We should, of course, take this as a powerful critique of the game theoretic foundations of modern neoclassical doctrine – foundations which were then built upon by Nobel prize winners Kenneth Arrow and Gérard Debreu and many others. But we should also see this as something more.

Those who came before Nash recognised that the economy – inhabited as it is by people whose decisions are impossible to pin down – cannot be wholly reduced to some model or others. Keynes’ theories were the most eloquent expression of this, but even von Neumann who did develop game theoretic and general equilibrium models which he deployed for the purpose of economic explanation recognised the limits of this axiomatic way of portraying a capitalist economy. And yet, after the war, the neoclassicals pursued their closed, autistic models with gusto.

What we should see in this example is something about the very nature of trying to apply mathematical models to systems that are created and inhabited by humans. Modelling these systems is equivalent to trying to model those around us. And while many neoclassicals (we hope) would not try to write equations to explain their spouse’s or their child’s behaviours, they seem perfectly content to do so for everybody else – absurdity be damned!

Topics: Free markets and their discontents, Guest Post, Science and the scientific method, Social values, The dismal science

Email This Post Email This Post Posted by Yves Smith at 3:34 am

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121 Comments:

  • brazza says:
    February 16, 2012 at 4:04 am

    As disturbing and penetrating an article as I’ve read in a while. Particularly interesting to me because it contains (if we are honest) a personal dimension – the way similar psychological strategies are at work in inter-personal relationships. We may not go so far as to produce strategic algorithms, as Pilkington augurs at the end, but I suspect the individual brain may tend to produce an unconscious set of rules requiring inputs that rely on assumptions of telepathic “knowledge”, reflecting the same strategy at work in relationships.

    • Philip Pilkington says:
      February 16, 2012 at 9:47 am

      “We may not go so far as to produce strategic algorithms, as Pilkington augurs at the end, but I suspect the individual brain may tend to produce an unconscious set of rules requiring inputs that rely on assumptions of telepathic “knowledge”, reflecting the same strategy at work in relationships.”

      Woah! Almost missed this. Very good. I totally agree.

      Modern psychoanalytic theory calls this ‘the dimension of the Other’. They argue that in ‘normal’ people this dimension is ‘repressed’ (i.e. ‘unconscious’, as you say), but in cases of psychosis it is manifest or explicit (as in Nash and his theories).

      Nice call on that, though. It has massive implications for psychology, I think…

      • knowbuddhau says:
        February 16, 2012 at 3:10 pm

        What a fascinating article, much obliged. I’m endlessly fascinated by the interplay between economics and psychology. What passes for both, sadly, isn’t as scientific as proponents claim.

        A bachelor of psychology myself, I’m struck by the implications for reductivist, APA-style thinking. The lesson of this article: foundational assumptions matter; speaks to the foundational assupmtions of Western academic psychology.

        It reminds me of what I learned years ago from an article in the Journal of Phenomenological Psychology, c 1979: “Ojective Psychology: A case of epistemological sleight-of-hand,” by G. M. Kinget.

        ~~~~~~~~~~~~~~~~~~~~~

        Like most of us even to this day, the early psychologists were probably overwhelmed by the triumphs of technology which they, again like most of us, may have mistaken for science–thereby confusing “what works” with “what is understood” (Needleman, 1975; Barzun, 1964; passim). What impelled Wundt was an understandable impatience with speculative pronouncements about psychological processes and a corresponding urge for factual knowledge. For this he remains eminently deserving of credit. Boldly breaking with tradition, he declared psychological phenomena as being natural, not supernatural or somehow non-natural, hence he attempted to study them naturaliter, i.e., empirically. Wundt, however, vastly overshot his methodological mark. Apparently forgetting that experimental techniques are only part of the empirical approach, he by-passed the initial, reflective, and observational phases of the process to start with its very last, experimental phase–which can rightly be broached only after the possibilities of the former are exhausted. What spoiled Wundt’s and his followers’ endeavor was, it seems, their obsession with the reigning physical model and their sense of urgency. Few apparently ever stopped to ask the crucial epistemological question, to wit: whether the phenomena of consciousness, though doubtlessly natural, are natural in the same sense as the phenomena studied by the natural sciences.

        This epistemological neglect and resulting methodological error were responsible for the early psychologists’ natural-science choice of an approach to their subject matter and for the physicalistic-quantitative techniques which they imposed upon, rather than fitted to, the phenomena. (In fairness to the all-too-long maligned Wundt, it should be mentioned that he himself promptly recognized the application of the experimental method to psychology as being sharply limited, suited only to elementary, hence largely sensory phenomena. Where higher processes such as those of conceptualization and language are concerned, Wundt insisted throughout the seven volumes of his Völker Psychologie that such processes can be studied only via the “techniques of historical and naturalistic observation and also of logical analysis” (Blumenthal, 1975, p. 1082)–which, incidentally, amounts very largely to the use of the phenomenological approach. However, this choice of approach and of techniques amounts to introducing an ideology under the cloak of methodology–the mechanistic, Newtonian ideology which dominated 19th century thinking. The central assumption of this crypto-ideological methodology is the belief that psychological phenomena can be studied in the same way as physico-chemical phenomena, for it implies that, while phenomena differ in their manifestations, they are nevertheless identical in their nature, or sufficiently similar, to justify equating them.

        Kinget, G. M. (1979). Objective psychology: a case of epistemological sleight-of-hand. Journal of Phenomenological Psychology, 11, 83-86.

        ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
        ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

        That is, in the laudable effort to make their field more scientific, and to land positions in the blossoming field, early psychologists effectively reduced the baby out of the bathwater.

        Kinget goes on to describe how, in 1956, none other than Robert Oppenheimer warned the APA convention against reducing psychology to an outdated version of physics. But they did it anyway.

        ~~~~~~~~~~~~~~~~~~~~~~~~~~

        Psychology’s attempt at independence thus amounts to breaking away from one field, philosophy, only to subject itself blindly to the methodological and epistemological dictates of another, physics, with equally sterile effects upon the refugee-discipline. Almost a quarter-century after Robert Oppenheimer’s warning at the 1956 APA convention that the worst thing psychology might do would be “to model itself after a physics which is not there anymore, which has been outdated” (p. 134)*, almost all of psychology continues to fashion itself basically upon variations of this moribund model. [*Oppenheimer, R. Analogy in science. American Psychologist, 1956, 11, 127-135. In Kinget, G.W. (1979).]

        ~~~~~~~~~~~~~~~~~~~~~~~~~~
        ~~~~~~~~~~~~~~~~~~~~~~~~~~

        Not surprisingly, reducing us humans to Newton’s famous “balls-on-a-billiard-table” model has had tragic repercussions. Much of the trouble of present day APA-style psychology, which is by no means the only one available, traces back to the over-zealous reduction of the study of the human psyche to Newtonian physics.

        IOW, the homonculus of APA-style psychology is a Newtonian voodoo doll.

        As a psych student at U. Washington in the mid 80s, I was told that psychology’s motto was “to predict and control human behavior.” What about understanding? I can predict and control the behavior of my computer, but I hardly understand it.

        It wasn’t until my senior year, too late to bail out, that I learned of the so-called “crisis in social psychology.”

        Not coincidentally, APA has helped DOD develop methods of human torture. Alone among organizations for health professionals, APA’s leaders think they have the power to keep torture “sage, legal, ethical and effective.”

        Further reading:
        http://www.ethicalpsychology.org/pens/video1.php

        http://www.psysr.org/blog/2010/08/15/the-cias-torture-research-program/

        http://psychoanalystsopposewar.org/blog/2009/07/21/welch-the-american-psychological-association-and-torture-the-day-the-tide-turned/

      • JamesW says:
        February 16, 2012 at 3:47 pm

        A very intelligent and thoughtful article, my only criticism being the citing of Milan Kundera — one of the most depressing authors I’ve ever read, and once again I’m depressed.

        I like Max Lerner’s summation of Thorstein Veblen’s implied definition of economics:

        “An apology for differential income inside a system of arbitrary and disfunctional ownership.”

        • knowbuddhau says:
          February 16, 2012 at 5:12 pm

          Thanks for mentioning that. That idea, that some so-called sciences actualy function as apologia for inequality, was at the back of my mind.

          People love to hear how right they are to be superior to others, and how natural, too. IOW, Social Darwinism is alive and all too well.

          BTW, did you know? Reductivism is dead. Stephen Jay Gould said so, way back in 2001. Come to think of it, the 12-year anniversary of this article is upon us in just 3 days. I had intended to work this into my comment, but it was already too long. Got a bad habit of doing that, I’m afraid. ;)

          Humbled by the Genome’s Mysteries
          Stephen Jay Gould
          February 19, 2001
          http://www.nytimes.com/2001/02/19/opinion/humbled-by-the-genome-s-mysteries.html?pagewanted=all&src=pm

          Gould is talking about the finding, that there are far, far fewer constituents of the human genome than had been predicted.

          ~~~~~~~~~~~~~~~

          The implications of this finding cascade across several realms. The commercial effects will be obvious, as so much biotechnology, including the rush to patent genes, has assumed the old view that ”fixing” an aberrant gene would cure a specific human ailment. The social meaning may finally liberate us from the simplistic and harmful idea, false for many other reasons as well, that each aspect of our being, either physical or behavioral, may be ascribed to the action of a particular gene ”for” the trait in question.

          But the deepest ramifications will be scientific or philosophical in the largest sense. From its late 17th century inception in modern form, science has strongly privileged the reductionist mode of thought that breaks overt complexity into constituent parts and then tries to explain the totality by the properties of these parts and simple interactions fully predictable from the parts. (”Analysis” literally means to dissolve into basic parts). The reductionist method works triumphantly for simple systems — predicting eclipses or the motion of planets (but not the histories of their complex surfaces), for example. But once again — and when will we ever learn? — we fell victim to hubris, as we imagined that, in discovering how to unlock some systems, we had found the key for the conquest of all natural phenomena. Will Parsifal ever learn that only humility (and a plurality of strategies for explanation) can locate the Holy Grail?

          The collapse of the doctrine of one gene for one protein, and one direction of causal flow from basic codes to elaborate totality, marks the failure of reductionism for the complex system that we call biology — and for two major reasons.

          First, the key to complexity is not more genes, but more combinations and interactions generated by fewer units of code — and many of these interactions (as emergent properties, to use the technical jargon) must be explained at the level of their appearance, for they cannot be predicted from the separate underlying parts alone. So organisms must be explained as organisms, and not as a summation of genes.

          Second, the unique contingencies of history, not the laws of physics, set many properties of complex biological systems. …

    • digi_owl says:
      February 16, 2012 at 11:45 am

      Except that those rules default to trust until wronged.

      With the paranoid it is distrust at all times.

      I will go so far as it claim that economics have basically trained everyone living today to be paranoid at some level or other.

      • John Merryman says:
        February 16, 2012 at 2:27 pm

        Maybe it is because we have commodified trust as currency? A piece of paper denoting a debt is not a commodity, per se, but a contract. It is not a store of value, but a promise of value, which is dependent on the Other.
        If we begin to understand it as a contract, with obligations and not just a digitized notational value, then we would be far more careful what value we exchange for it and this would allow space for the more organic forms of reciprocity and civil responsibility to grow, as well as firmly connecting the currency to a presumption of civil responsibility.

    • Ignacio says:
      February 16, 2012 at 3:23 pm

      The nice thing about our little brain rules is that if we are clever enough, we realise all the time that they are just rules of thumb, and not general laws to be followed to their limits.

    • LeonovaBalletRusse says:
      February 16, 2012 at 5:55 pm

      brazza, doesn’t this presume the frame: lack of mutual trust? This makes the fortunate among us grateful to have experienced marriage in which mutual trust, tolerance, love, consideration, and spontaneity existed or exists. How rare!

      The Pilkington captures the psycopathic world of MonopolyFinance within the frame of “The Lives of Others” — the frame that now encompasses the political and finance worlds that connect infinitely through *revolving doors* to profit-upon-profit. Curiously, it is a *securitized* world for the 1% where *derivatives* on Elected Office pay off until the music stops, and even then some.

      • brazza says:
        February 19, 2012 at 2:38 am

        Leonova:

        The article led me to wonder whether I assume knowledge of others’ thoughts or strategies in my everyday relationships; be they paranoid (assuming the worse) or benevolent (based on trust), and whether both outcomes are in fact schizophrenic assumptions of an ability I don’t possess. I am of the opinion that a definition of integrity is the ability not to base decisions on invisible external variables but solely on my own expression of a set of values applied to reality – a set of circumstances as they appear, not a suspicion of a covert guiding matrix. I may lose “the game” but I will not lose myself in the process. Actually, I feel that trust applied without condition is immensely powerful in creating the conditions that reduce the likelihood of deceit.

        Not forgetting that there is a difference between a belief in telepathy, and empathy – the latter does not seek or claim understanding of the other, but exudes compassionate understanding with no intent to manipulate or “fix” the other.

        I have zero preparation in economics. I don’t claim to know shit about math and models, and don’t care to. I just see self-understanding as the only goal worth pursuing in an existence that remains the most fascinating conundrum. The fundamental question we constantly circle is whether our own individual life is “worth keeping”. The underlying assumption is that it is. And most of existence then becomes a series of strategies to maintain it as long as possible. Consequently, if we are going to be at all costs, paranoia and greed are inevitable. I choose to debunk that and live without fear. I confess … I’m an inveterate romantic artist. I can’t imagine a life without love would be worth the bother at all, the antithesis of the exasperated rationality represented by game theory :)

        brazza, doesn’t this presume the frame: lack of mutual trust? This makes the fortunate among us grateful to have experienced marriage in which mutual trust, tolerance, love, consideration, and spontaneity existed or exists. How rare!

        The Pilkington captures the psycopathic world of MonopolyFinance within the frame of “The Lives of Others” — the frame that now encompasses the political and finance worlds that connect infinitely through *revolving doors* to profit-upon-profit. Curiously, it is a *securitized* world for the 1% where *derivatives* on Elected Office pay off until the music stops, and even then some.

        • brazza says:
          February 19, 2012 at 2:42 am

          if anyone should read the above, please ignore the last two paras – I pasted them into the answer field so I could see Lenora’s comments and .. forgot to delete them :)

  • j says:
    February 16, 2012 at 5:13 am

    Building models is nothing bad in itself. Any knowledge about the world assumes a model, and is itself a model.
    The problem with models is that being simplifications, they always get something wrong. A bad model assumes something that is not there, a good model still just omits some phenomena. Getting a model 100% right is extreme luck.
    If you don’t want to act just pure random, it is impossible not to use models. This is the old battle of chaos and cosmos. But when using any model, you have to remember that it is just that – a model. You have to know your assumptions, you have to know your omissions. You have to know where you want to get with the model, you have to keep your eyes open concerning where the model is taking you. Is the profit worth the collateral damage? And what do you say to those damaged, if you even care?
    And then there is the fact that models are gamed and played against. Modern economic theory seems oblivious to this very important detail, yet this is increasingly where the profits are!
    Concerning the paranoid Nash game theroy, think about a game of chess. You do try to figure out what the other is doing, right? A pretty paranoid situation, right? But chess is a zero-sum game, while healthy economic and social interactions are win-win situations. These modern times we are increasingly moving towards winner-takes-it-all situations, a trend which needs to be reversed, if we want to put the world back on it’s feet again.

    • jake chase says:
      February 16, 2012 at 5:31 am

      Economics fails because it assumes a single goal: production of MORE. It ignores the questions of WHAT and WHO GETS HOW MUCH. These are the only questions which matter in our advanced society, in which WHAT seems to have become a mountain of worthless drek, and WHO GETS resolves into rentier usury on the one hand and trickle down desperation on the other. These consequences are enforced by power relations and reinforced by political chicanery. One can only wonder why anyone pays any attention to economists at all.

      • Fiver says:
        February 16, 2012 at 6:23 am

        Yes. Maybe an effort aimed at really achieving something big communally, actually cleaning up whole regions, demolishing and restoring vast areas of suitable urban badlands rather than wait to see how the constant, random barrage of techo-spores all eager to lock you into some serious money and time-wasting are making out down at the mall.

    • Philip Pilkington says:
      February 16, 2012 at 6:07 am

      “Concerning the paranoid Nash game theroy, think about a game of chess. You do try to figure out what the other is doing, right? A pretty paranoid situation, right? But chess is a zero-sum game.”

      Right, the old example was a poker game. I think its a silly one (and I think you imply this). Why?

      Okay, in poker we try to act like Nash-robots, right? Well, first of all we’re NOT TELEPATHIC. This is important. My critique of Nash above isn’t just ‘moral’ in nature. It’s logical. As Varoufakis points out in the quote above, Nash assumes telepathy (in order to have an equilibrium point reached to ensure that the opponent is not bluffing).

      Secondly, in real life we interact in a social regime based on trust. Let’s say you’re over at your buddies house to play cards and his father just died. Are you really going to act like a Nash robot in your gaming strategies? I doubt it.

      This applies at an economic level too. Lot’s of contracts etc. are based on this dimension of trust. This came to be recognised in a big way after the crash. Of course, the NeoClas carried on with their models. Most of those fools don’t even know what is buried in their theorems (because, to be frank, most of them, while being proficient in mathematics, are actually a bit thick).

      So, there’s two elements to the critique.

      The first is logical: people are not telepaths. There is always a degree of uncertainty where someone may or may not be bluffing and we literally cannot tell for sure. This means that there is no ‘Nash equilibrium’.

      Secondly, there is an empirical critique: economic relations ARE based on trust. So, Nash’s theories are useless to explain the economy.

      As for using maths and models. As I said: never for people. It doesn’t work. I believe macroeconomic models have some usage. But microeconomic models — those that model individual agents — are basically a crock.

      • tom allen says:
        February 16, 2012 at 10:50 am

        But chess, or poker, are one-time games. There’s a winner and a loser, game over.

        In life (or economics) there’s inheritance. I guess that’s a bit more like poker than chess, but still, at the end of the game you can’t walk away from the table. You have to pass on your winnings or debts to your children (or nieces and nephews, or your fellow man.)

        I suppose what I’m asking is whether Nash’s results hold when the games are held multiple times — when one prisoner’s dilemma feeds into the next, and so on, ad infinitum. I suspect there are subtleties he may have missed.

        • Philip Pilkington says:
          February 16, 2012 at 10:55 am

          Nash’s ‘results’ never hold or held because ‘results’ imply that his theory is in keeping with empirical evidence. It’s not. People don’t behave in the way Nash that thinks they behave (that’s why they locked him up, frankly).

          So, no. Nash’s theories never ‘hold’. Not even in a single game of poker. They only hold in the mind of the paranoid — and in the theories of the neoclassical economist.

          • Mark P. says:
            February 16, 2012 at 3:36 pm

            “Nash’s theories never ‘hold’.”

            [1] Oh, come on. A fact is a fact and, in being simplistic about this, you’re wrong.

            Sure, you rightly want to beat up on neoclassical economics so you’re taking a stick to Nash Equalibria (NE). But the reality is that there’s plenty of examples of NEs working in real life, till they don’t. Off the top of my head, there’s Cold War-era MAD: two players in a zero-sum game (if one player wins, the other loses), with both having the same optimal minimax payoff (no first strike/no first strike) in a one-time, non-iterated game (because if either player launches a first strike, both sides are annihilated and it’s game over.

            So there’s a very simple NE that happened to be robust. This was despite plenty of figures on both sides arguing that nuclear weapons were usable and should be used to their sides’ military advantage: MacArthur, LeMay, and official Soviet doctrine which — like Ronald Reagan — never accepted the principle of MAD.

            Nevertheless, the __reality of MAD enforced itself and nobody dared use nukes.

            [2] So NEs can work, though they’re more unstable than the theorists ever admit. And they’re unstable for the reason you point to — human agents’ individual variability of behavior.

            Moreover, the more players there are in a game, the more that instability becomes exponentially magnified according to game theory maths. Nuclear deterrence is a far more worrisome thing in the context of a 9 or 15 player game than it is with two players (it’s pretty worrisome and stupid with just two players).

            Later work in the 1960s and ’70s by the likes of Reinhard Selten looked at this implicit instability in NEs that’s due to individual human players, and noted that players may may make destabilizing moves and yet the NE is maintained because, for instance, it might be in everybody’s interest that the NE continue. Selten’s tag for this state of play is ‘Trembling hand perfect equilibrium’

            http://en.wikipedia.org/wiki/Trembling_hand_perfect_equilibrium

            A trembling hand perfect equilibrium is an equilibrium that takes the possibility of off-the-equilibrium play into account by assuming that the players, through a “slip of the hand” or tremble, may choose unintended strategies, albeit with negligible probability.

            [3] All this said, game theory and NEs have turned out to be most reliable guides to players’ behaviors in the realm of evolutionary game theory — i.e. among animals, precisely where the variabilities of individual human-type intellectual motivation and behavior don’t occur.

          • Philip Pilkington says:
            February 17, 2012 at 7:35 am

            Explaining something post factum is not science. It is just rubbish.

            Common sense tells us how bargaining will result. NE tries to theorise this coherently. Its theories are absurd and insane. We can say plenty about bargaining in plain English without recourse to nonsense.

      • charles sereno says:
        February 16, 2012 at 10:53 am

        Two ‘telepathic’ chess masters, without exception, will always play to a draw. A dismal prospect, because a creative advance will necessarily be nipped in the bud.

      • Rotter says:
        February 16, 2012 at 12:50 pm

        Later In his life, as the treatment of delusional paranoids improved, so did Nash. He has all but repudiated most of his early work. Not that it matters to anyone, except that of course it should.

      • LeonovaBalletRusse says:
        February 16, 2012 at 6:02 pm

        PP, here you get to the heart of Nash’s maniacal need for *certainty* of outcome in addition to *certainty* of knowledge through the magic of telepathy (or the illusion of the same). We now see how the quest for *certainty* is an insane human pursuit, exceedingly destructive of all in its path.

        Truly, it is Frankenstein’s monster run amok beyond Mary Shelley’s imagination.

  • mmckinl says:
    February 16, 2012 at 5:28 am

    Isn’t this paranoid schizophrenia what is described as “perfect information” in markets ?

    • Philip Pilkington says:
      February 16, 2012 at 6:09 am

      Good call.

      Yes, all that Rational Expectations nonsense has its roots in Nash. Its all built on the assumptions of telepathy which were hidden in Nash’s formulae. Rational Expectations is our telepathic, concentration camp society in action!

  • Fiver says:
    February 16, 2012 at 5:30 am

    Mr. Pilkington,

    Totally agree with respect to the enormous downside risk created by the mathematization of economics and the presumed value of game theory.

    But the presentation of your argument appears to assert that a belief in neoclassical economics is itself representative of some “shared” quality in the believer: a distinct paranoid bent featuring prominently.

    Questions:

    1) Do we typically declare “garbage” anything produced by someone who proves to be unstable, or do we value whatever he/she accomplished in accord with our (whoever “our” is) understanding at the time of assessment? You acknowledge yourself that his math was nothing to sneeze at. An awful lot of genius would have to be chucked applying this yardstick. Let’s just remove them all and see if we ended up anywhere near here…

    2) That game theory developed at all is not exactly surprising. After all, understanding of human behaviour was being turned into a “science” right alongside and intertwined with the development of the technical/organizational means to implement what we had “discovered”. Human decision-making (free will or no), was duly abstracted and subject to a thorough going-over – the potential payoffs in the early post-War nuclear nightmare period were evident all around. If you could determine a method to consistently “out-play” your opponent (and the world as constructed by the powerful had plenty of opponents)you had the Holy Grail. This thinking was then and still is pervasive. How “crazy” is it when the principal actors really ARE making decisions based on these sorts of methodological assessments – now buttressed by nth power computing capability? You could punch up a dozen estimates of the probability of a war with Iran in seconds. Never mind that if you consider the “I think, you think, that I think..” you just might wonder what the difference is after the 3rd move.

    3) Did neoclassical economics have anything to do with bombing Hiroshima just to impress the Russians? The latest works insist it was Truman, Dulles and other civilian leaders, not the military, that made that horrific “calculation”. Galbraith was managing the economy at the time. I think the “Bomb them” faction were insane. And you?

    I agree completely that economics is in serious trouble, though what I advocate is an urgent move to an actually sustainable steady state model. Even with infinite growth, the argument between neoclassical vs Keynes (or whomever) is perhaps less important than the thorough criminalization of the domestic and global economies, which was a monumental political and moral failure, not an economic theory failure.

    The argument re neoclassical economics doesn’t need a paranoid “crazy” in the picture at all. Just the rational agent making rational decisions should, one would hope, be enough to junk those sorts of models completely – unless, after 5 decades of relentless “progress”, the logic of our technologies and systems now compel us to make exactly the sorts of “rational” choices that this fellow long ago imagined and we see now playing out in so many ways on a global scale – “rational” choices like cutting down the last tree on the island to throw on the fire.

    • Philip Pilkington says:
      February 16, 2012 at 6:40 am

      “Do we typically declare “garbage” anything produced by someone who proves to be unstable, or do we value whatever he/she accomplished in accord with our (whoever “our” is) understanding at the time of assessment?”

      Certainly not. Nikola Tesla probably suffered from the same condition and he produced some great things. Many geniuses are very unstable. (Although I don’t think Nash was a genius by any stretch).

      However, if someone suffers from chronic psychosis I think we should be VERY careful about what they have to say about interpersonal relationships and human psychology. I think it is obvious why. To be blunt, would you accept a treatise on the psychology of vision from a person who was born blind.

      “How “crazy” is it when the principal actors really ARE making decisions based on these sorts of methodological assessments – now buttressed by nth power computing capability?”

      Pretty crazy, I think. If Kennedy had used these negotiation tactics in the Cuban crisis I’m not sure we would be talking about this today.

      But still, you’ve missed one of the key points: Nash equilibrium ASSUMES TELEPATHY. It is logically inconsistent. Whether you like the idea of a ‘machine psychology’ or not or whether you think its applicable or not are besides the point. It is based on UNTRUE ASSUMPTIONS.

      “Did neoclassical economics have anything to do with bombing Hiroshima just to impress the Russians? The latest works insist it was Truman, Dulles and other civilian leaders, not the military, that made that horrific “calculation”. Galbraith was managing the economy at the time. I think the “Bomb them” faction were insane. And you?”

      Game theory was not seriously adopted by the military until the 1950s as far as I know. Von Neumann, who started it, was actually working on BUILDING the bomb during the war, so people weren’t thinking about strategy much. So, no, game theory almost certainly did not play a factor.

      Robert MacNamara explains the mass bombings in the film ‘The Fog of War’. He was referring to the firebombings (which killed around the same number of people as the nuke attacks). I got the distinct impression from that interview that it had a lot to do with revenge and hatred rather than scaring Russians. Indeed, how would the firebombings scare the Russians?

      I think it was a revenge attack pure and simple. And in that, it was madness.

      “The argument re neoclassical economics doesn’t need a paranoid “crazy” in the picture at all.”

      I disagree. Telepathy is built into the assumptions. This is, as the title of the piece suggests, psychotic reasoning.

      • Skippy says:
        February 16, 2012 at 7:23 am

        Philip,

        In the fog of war, where mac and the vietcong leadership broke bread (decades after the war). You know the bit where he ask, why they did not come to the capitalist party ( commie china bed fellows ), after they were promised their little hearts desires or so the USA polies thought. And the response was Fook the French, sore back side and BTW we have been fighting the Chinese for 2,000 years…. we want some independence first! Now where have I heard that fable before…ummmm? Independence? Anywho, Mac realizes they thought they had telepathy and knew their opponents motivation, communisum, only to find himself fighting his forefathers! ROFLOL….

        Skippy… Great Doco, bring popcorn, bucket may serve another purpose whence emptied ie. regurgitation brought on by disbelief or stick on head to hide (tinfoil covering optional).

        PS. MADNESS…. OH YEAH!!!

        • digi_owl says:
          February 16, 2012 at 11:55 am

          Yep, the Vietcong never wanted a unified Vietnam. They just wanted the current despot out and some semblance of “i leave you alone, you leave me alone”. It is crazy really how much that pattern keeps repeating.

      • LeonovaBalletRusse says:
        February 16, 2012 at 6:12 pm

        PP, but what does today’s will to default to computers, whose programmers may indeed be paranoid (especially if at the NRA, the CIA, etc.).

        • LeonovaBalletRusse says:
          February 16, 2012 at 6:15 pm

          i.e. what does this will to default to computers… say about those making such decisions.

          Isn’t *The World According to Kurzweil* in vogue among programmers avid for The Singularity? Can they not be exploited to out-game the *Iran* in the minds of the paranoid?

      • Fiver says:
        February 17, 2012 at 12:58 am

        I put together a lengthy response, thought I hadd posted it, and now it’s gone. I will make another effort:

        We agree on some key features. I simple refuse to call this an exercise in “telepathy” or to label as paranoid madness a model and work to which a great many people who were neither paranoid nor mad subscribe – certainly no more so than any number of other economic, political, financial, military or psychological thinkers across the spectra of “schools of thought”. I will address your points as presented in slightly modified order.

        Your response: “Do we typically declare “garbage” anything produced by someone who proves to be unstable, or do we value whatever he/she accomplished in accord with our (whoever “our” is) understanding at the time of assessment?……

        …However, if someone suffers from chronic psychosis I think we should be VERY careful about what they have to say about interpersonal relationships and human psychology. I think it is obvious why. To be blunt, would you accept a treatise on the psychology of vision from a person who was born blind.”

        My response: As noted above, irrespective of this man’s own mental health struggle a very large number of people who were neither paranoid, nor mad, were persuaded by the ARGUMENTS and MATHEMATICS of the proposed model. To suggest otherwise is simply disingenuous. And should a blind person somehow produce a theory of vision that was CORRECT, that WORKED, I would be something of a fool not to accept it. After all, humankind developed all manner of technologies and techniques without the remotest clue as to the WHY of their working. What works works, as they say – until it doesn’t.

        Your response: “How “crazy” is it when the principal actors really ARE making decisions based on these sorts of methodological assessments – now buttressed by nth power computing capability?”

        Pretty crazy, I think. If Kennedy had used these negotiation tactics in the Cuban crisis I’m not sure we would be talking about this today.

        My response: What I meant was not that the practice wasn’t “crazy” from an external reference point, but rather that from the perspective of those engaged in the process, if both parties over time come to subscribe to the same line of thinking – which whether you like it or not, has infected a good portion of globe. Consider the estimates provided Obama as to the probability of being able to execute bin Laden in Pakistan without destroying the relationship with the latter. Or of course, the massive, orchestrated effort to force a war with Iran. Wall Street and the Pentagon and their counterparts elsewhere are stuffed full of these sorts of analyses. I would expect that the PSI bondholders in Greece who appear on the brink of extorting tens of billions are candidates for inclusion.

        Kennedy was no better a negotiator than Kruschev US mythology notwithstanding. Both men had to back down, as the horrific reality of MAD cut through all the macho bullshit (note as to the WHY of those bellowing “existential threat” while pushing for an attack on Iran over the presumed attempt to attain a nuke while Israel already has hundreds) . Kruchev got what he wanted, US missiles removed from Turkey, and Kennedy was rewarded with the eviction of Russian missiles from Cuba. But notably, Cuba remains independent to this day despite 50 years of economic strangulation and subversion, but never another military attack – the forgotten “bargaining chip” that demonstrated better than any other attempt what might be possible if socialism was not subject to attack from the moment it was conceived, i.e., just imagine how it might have developed if allowed to do so in peace.

        You: “Did neoclassical economics have anything to do with bombing Hiroshima just to impress the Russians? The latest works insist it was Truman, Dulles and other civilian leaders, not the military, that made that horrific “calculation”. Galbraith was managing the economy at the time. I think the “Bomb them” faction were insane. And you?”

        Game theory was not seriously adopted by the military until the 1950s as far as I know. Von Neumann, who started it, was actually working on BUILDING the bomb during the war, so people weren’t thinking about strategy much. So, no, game theory almost certainly did not play a factor.
        Robert MacNamara explains the mass bombings in the film ‘The Fog of War’. He was referring to the firebombings (which killed around the same number of people as the nuke attacks). I got the distinct impression from that interview that it had a lot to do with revenge and hatred rather than scaring Russians. Indeed, how would the firebombings scare
        the Russians?

        My response: My point was that Truman et al were NOT PLAYING game theory, yet what they did was every bit as mad, based on a pre-”game” calculus of power. As noted, Japan was nuked AFTER the war was won, only to put a scare into Russia:

        http://debatepedia.idebate.org/en/index.php/Argument:_Bombing_Hiroshima_and_Nagasaki_was_cynically_about_deterring_USSR

        Firebombing failed in Europe, was known to be failing at the time, but proceeded nonetheless. It was pure punishing savagery:

        http://www.fireandfury.info/

        The firebombing of Tokyo, coming at the end of a long series of disasters for the Japanese, all but ended the war there. The firebombing had nothing to do with scaring Russia – just the Japanese. NUKING Japan was for the Russians to think about.

        Your response: “But still, you’ve missed one of the key points: Nash equilibrium ASSUMES TELEPATHY. It is logically inconsistent. Whether you like the idea of a ‘machine psychology’ or not or whether you think its applicable or not are besides the point. It is based on UNTRUE ASSUMPTIONS.”

        And: “The argument re neoclassical economics doesn’t need a paranoid “crazy” in the picture at all.”

        I disagree. Telepathy is built into the assumptions. This is, as the title of the piece suggests, psychotic reasoning

        My response: This has nothing whatever to do with telepathy. We haven’t the remotest clue what a society of telepaths would be like, or if one would even be possible if everyone had the ‘gift’.

        Rather, it is one formalized abstraction of something we all do all the time, i.e., try to figure out what the other person is going to do in myriad circumstances from politics to war to chess to sport to humour to romance to prayer to…whatever.

        Nash’s constructs suffer ALL the defects of all “rational agent” models, and as for the efficacy of strict game theory I repeat my encouragement to really consider the “I think that you think that I think…” time waster.

        Charges of paranoia and madness are simply not necessary to the argument, no matter that the principal actors of the elites in 2012 are indeed as vicious as anything that came down the pike (the global economic crisis from 2008 on has cost tens of millions of lives in poor countries). Actually Nash’s calculating “players” were not nearly despicable enough to accurately reflect the entire past century’s power politics.

        • Philip Pilkington says:
          February 17, 2012 at 7:38 am

          Group consensus says nothing about the validity of a proposition. Very smart people have, throughout history, convinced themselves of the stupidest things.

          • Fiver says:
            February 17, 2012 at 3:22 pm

            Since I did not make the claim that “group consensus” was either correct made evil actions legitimate, this is a mysterious response.

            If you wish to label “paranoid crackpot” everyone who buys into a theory you do not, well, you go right ahead. But please also remove the statue of every scientist who, astoundingly, bought into Newtonian physics before Einstein came along – and every physicist now alive who is going to look like a “very smart stupid man” when Einstein is overthrown.

            And as noted more than once, all manner of crimes and war crimes have been committed by governments guided by Keynesian economic policy – old guns and butter LBJ for instance and his insane effort to pound Vietnam into submission – millions slaughtered for no reason at all, with the bonus of triggering a monetary crisis serious enough for Nixon to go off gold, which in turn led to……………and today we have the Drone King Obama, and Money Bomber Bernanke – don’t know about paranoid or crazy, but evil certainly fits that pair.

      • Jan Wiklund says:
        February 18, 2012 at 10:32 am

        Re nuke bombing of Japan – you are probably right. According to Lawrence Wittner: Rebels against the war, Columbia U.P. 1989, there were as many as 25% of the Americans, according to a gallup at the time, who favoured extinguishing of the Japanese people altogether! And a total of 95% who favoured revenge of any kind.

        And it seems as this habit of mind has only continued. The US by now is deply into debt and can not feed itself – but it has to get into one expensive war after another, adding to the debt. Economy, or rational reasoning, has nothing to do with it, just macho psychology and scariness about not being on the top. As one idiot pundit, one Michael Pillsbury, had it about the Chinese: “Their history and culture make it impossible for them to accept American leadership.” So, accordingly, they are enemies to beat.

        What can one DO with people like that???

    • digi_owl says:
      February 16, 2012 at 11:52 am

      On the issue of 1, normally science have a check against that. That is, if the model makes predictions that holds up (for instance stars moving as the sun gets close to them, thanks to gravitational lensing, proved Einstein’s theory) when checked against real life observations.

      Problem is that economists have chucked that out the door and instead try to model the perfect economic system. And then make policy recommendations designed to nudge society in that direction. And Nash’s work fitted neatly into that.

      • LeonovaBalletRusse says:
        February 16, 2012 at 7:44 pm

        digi, right, the demand for *real world testing*/*proof* is dismissed, being called to task in reality is anathema, hence cover-up upon cover-up–what evolves into compound naked derivatives and denial to go with the delay of the *inevitable*. These guys are indeed stark raving mad.

  • Stephanie says:
    February 16, 2012 at 6:10 am

    I find these posts of critiques of neoclassical economics really interesting, and really appreciate the various takes on it. I wonder, however, what might be gained from taking a look at how informal economies work, aka affective economies, and thinking about them in relation to capitalism here in the pages of Naked Capitalism. There are, of course, reasons why capitalism has seemingly steamrolled over them…but, at the same time, people the world round are actively clinging to their socially and culturally embedded ways of ‘doing the economy’ and actively rejecting capitalism (though this is usually portrayed by the West as them being ‘backwards’ and ‘un-modern’), presumably because the precepts of capitalism and neoclassical economics are an anathema to their ways of doing things. It’s good to criticize, but it’s also good to offer a way out of the mess. Right now, I still see that the majority of solutions tend to just want to tweak the system rather than to question the basic premise on which the system relies.

  • Skippy says:
    February 16, 2012 at 6:39 am

    When mom and dad tell lies, the lies their parents told them and so forth. All the way back… a godhead said so folks, kneel and bring me stuff or the after life will suck even more… than the pain and suffering I can deliver.

    Skippy… Bang up job Philip, ripper!

    • LeonovaBalletRusse says:
      February 16, 2012 at 6:19 pm

      Skippy, “KNOTS” by Laing comes to mind: dysfunction/absurdity from generation to generation.

  • craazyman says:
    February 16, 2012 at 7:23 am

    pretty funny stuff. not only that, but people change their minds all the time. so you need to know what they are thinking now and what is likely to change their minds, and people themselves don’t even know that. people are impulsive and can change intention instantly in response to sudden intuitions and feelings.

    so you have to assume not only perfect knowledge of the other’s thoughts at any static point in time, but perfect knowledge of how they will change over time and even in the future — even when you yourself don’t know how yours will change and neither do they.

    Ego-gnomics is a real clown circus.

    • Philip Pilkington says:
      February 16, 2012 at 7:32 am

      Exactly. The rabbit-hole gets rather deep quite quickly. You start out realising that you don’t know what The Other wants. Soon you find that you don’t even know what The Self wants in the medium-to-long run.

      But economics gives its practitioners something to remedy this. And I think this something is akin to a ethical system. In the past religions would tell you not to worry about the whole problem of desire — whether the desire of The Other or desire of The Self — because religion had it all figured out.

      “This is why your neighbour does X, this is why you want Y” etc.

      Neoclassical economics is just a giant intellectual regression back to this point. Actually talk to some of its practitioners, they all think they’re rational utility maximisers and the like. Completely superstitious behaviour — and yet they think they’re the most rational people on earth. You couldn’t make it up!!!

  • giulio says:
    February 16, 2012 at 8:00 am

    Oh Gosh,

    what a presumptuous and uninformed post.

    You mix up the concept of Nash equilibrium with that of Nash bargaining solution: two separate contributions by Nash. The concept of Nash equilibrium is central to game theory and does use the assumption of common knowledge of rationality (I think this is what you mean when you write about paranoia). The Nash bargaining solution while useful is just a device to get rid of the indeterminacy of the outcome in a bilateral monopoly situation.

    Furthermore, neither contribution is central to the Arrow-Debreu competitive equilibrium paradigm which does indeed provide the underpinning of neoclassical economics.

    This is even worse than the MMT stuff.

    • Philip Pilkington says:
      February 16, 2012 at 8:16 am

      Careful, buddy.

      The above applies to both the bargaining problem and the Nash equilibrium. In the bargaining problem there is an assumption of multiple equilibria. But there is still the assumption of equilibria.

      As Varoufakis (specialist in game theory who I ran this by) is quoted as saying above: in order to assume equilibrium we must assume that we can tell the other’s likelihood of over-representing their likelihood of default (bluffing, in plain English). Without the assumption of full knowledge of the other player’s intentions, infinite regress results and hence no strategic equilibrium is possible.

      We won’t get too far into the Arrow-Debreu thing. Let’s just say that both Nash and Arrow-Debreu use fixed-point theorems. The latter were inspired by Nash in this. So, the same assumptions are hidden.

      • Lambert Strether says:
        February 16, 2012 at 8:34 am

        OK, I’ll bite. What’s a fixed point theorem?

        • Philip Pilkington says:
          February 16, 2012 at 8:50 am

          Here ya go:

          http://en.wikipedia.org/wiki/Fixed-point_theorem

          “In mathematics, a fixed-point theorem is a result saying that a function F will have at least one fixed point (a point x for which F(x) = x), under some conditions on F that can be stated in general terms.”

          Although Arrow and Debreu buried Nash’s equilibrium solutions in their more general theories, they are still there. ‘Repressed’ as Mirowski says.

          In English: they still assume that some sort of bargaining equilibrium ‘becomes fixed’ and holds. But this assumes telepathy insofar as it assumes that I know exactly to what degree you are bluffing.

          In this regard, the Mirowski quote from the piece shows well the type of reasoning needed to ‘fix the point’:

          “In the grips of paranoia, the only way to elude the control of others is unwavering eternal vigilance and hyperactive simulation of the thought processes of the Other. Not only must one monitor the relative ‘dominance’ of one’s own strategies, but vigilance demands the complete and total reconstruction of the thought processes of the Other – without communication, without interaction, without cooperation – so that one could internally reproduce (or simulate) the very intentionality of the opponent as a precondition for choosing the best response. An equilibrium point is attained when the solitary thinker has convinced himself that the infinite regress of simulation, dissimulation, and countersimulation has reached a fixed point, a situation where his simulation of the response of the Other coincides with the other’s own understanding of his optimal choice. Everything must fit into a single interpretation, come hell or high water.”

          • LeonovaBalletRusse says:
            February 16, 2012 at 6:26 pm

            “I know exactly to what degree you are bluffing” — “because I am so damn smart, as in infinitely intelligent” — the egocentric FLAMING FANTASY of the math nerd.

            Yes, PP, there is a *moral* component to this story, and its called *hubris* of the magnitude depicted in Greek tragedies.

    • Philip Pilkington says:
      February 16, 2012 at 8:34 am

      Regarding the Arrow-Debreu connection, I’ll quote from the definitive history on this. Philip Mirowski’s ‘Machine Dreams’:

      “The revealing aspect of Arrow’s account is that the way to bring together two separate strains of fixed-point theorems and Walras [read: general economic equilibrium] together was to leave Von Neumann out… Cowles in general and Arrow in particular were not enamored of Von Neumann’s conceptualization of the equilibrium of a game; but Nash provided an alternative that was much more solidly rooted in the Walrasian [read: general economic equilibrium] tradition of constrained optimization of utility. Von Neumann embraced the multiplicity of social conventions, which would downgrade the salience of the question of existence, not to mention anything so pretentious as the “fundamental welfare theorem” [read: Pareto optimum]; but Nash sought out a unique paranoid solution of strategic rationality.” (P. 408)

      The above ‘critique’ of my piece is a classic buffudlement of a person who has trained far too hard in learning theorems without for a moment looking to see what assumptions these theorems are based on. This sort of mindset shows perfectly how, in the process of being turned into human calculators, neoclassical-types are brainwashed beyond repair.

      • LeonovaBalletRusse says:
        February 16, 2012 at 6:28 pm

        PP, but didn’t they make the marvelous assumption that *equilibrium* was a durable state? Wouldn’t quantum physicists consider this assumption preposterous?

        • Philip Pilkington says:
          February 16, 2012 at 6:53 pm

          Of course. Heisenberg was a Keynesian! What do you think the uncertainty principle was all about?

          • skippy says:
            February 17, 2012 at 12:42 am

            Well, well. I can remember not so long ago on this blog, a commenter in their statement, paraphrasing here, said in his opening sentence “leaving Heisenberg out of this for a moment”…

            Skippy… too bloody inconvenient, lets put a corner stone observation off to the side, so I can make a point….

            PS. thanks PP for that little connection.

    • LeonovaBalletRusse says:
      February 16, 2012 at 7:45 pm

      giulio, say more. Educate us. *Inquiring minds want to know*.

      • giulio says:
        February 23, 2012 at 8:49 am

        What more do you want me to say?

        1) PP treats the Nash bargaining solution as strategicially derived when he writes “Without the assumption of full knowledge of the other player’s intentions, infinite regress results and hence no strategic equilibrium is possible.”

        The (1950) Nash bargaining solution is axiomatic, its primitives are axioms about the solution itself NOT about either the agents involved, their knowledge or behaviour. There is NO strategic element. No STRATEGIC equilibrium, just how to split up a pie in a way which satisfies a set of axioms.

        And saying that the application of a mathematical tool which is useful to neatly solve the problem at hand (a fixed-point theorem) is the same as the use of an equilibrium concept which shares the same tool is mind boggling. In fact, you can use a fixed-point theorem to prove the existence and uniqueness of whole classes of differential equations.

        But getting back to the point, there is NO strategic interaction in Arrow-Debreu, agents take prices as given. Do the words tatonnement and auctioneer conjure images of strategic interaction?

        3) “People don’t behave in the way Nash that thinks they behave (that’s why they locked him up, frankly).”

        I fail to understand the viciousness just to score a rethorical point. The history of the world is full of people whose theories were/are wrong. Most people have not been locked up because of that, otherwise scientific research would be a very dangerous business…

        Nash was “locked up” because he had serious psychological problems. It is sad, but making it follow from the incorrectness of his theories is just cruel in a fashion that reminds of the old communist debates. In fact this whole style of argument seems to me firmly in that tradition

        4) Appeal to authority (e.g. quoting from Mirowski) have not counted as valid arguments for some centuries now.

        • Lambert Strether says:
          February 23, 2012 at 10:44 am

          “Do the words tatonnement and auctioneer conjure images of strategic interaction? ”

          “Auctioneer” does, if (when?) the auction is fixed, exactly in the same way that “croupier” and “dealer” do.

  • reason says:
    February 16, 2012 at 9:21 am

    “And while many neoclassicals (we hope) would not try to write equations to explain their spouse’s or their child’s behaviours, they seem perfectly content to do so for everybody else – absurdity be damned!”

    Becker?

    Phillip – I don’t think this is quite fair. Personally I don’t think this is the main problem with neo-classical economics at all. Most of the assumptions are mild and perfectly reasonable. The real problem is with the comparitive static methodoly and the equilibrium assumption (if you like trying to find a static permanent unique solution in the first place).

    • reason says:
      February 16, 2012 at 9:23 am

      In this I agree with Steve Keen.

    • Philip Pilkington says:
      February 16, 2012 at 9:30 am

      You think you can formalise interpersonal bargaining relationships mathematically? Because this is essential for neoclassical economics.

      Related to this is the absurd notion that people maximise utility — whatever that means.

      Keen’s critiques are somewhat correct — at a macro level. Keen doesn’t touch the micro level in any real way. Because I think he knows how much of a mess it is…

      • LeonovaBalletRusse says:
        February 16, 2012 at 6:32 pm

        PP, those who assume that we all *maximize utility* have equally assumed what *utility* is in each and every case. Incredibly presumptuous!

    • Merijn Knibbe says:
      February 16, 2012 at 11:18 am

      Reason,

      the assumption of the existence of utility itself is severely at odds with neurology, psychology, anthropology, economic history and whatever.

      One of the most important things which economists have to learn is to look at their own life and behavior, which is so much at odds with neo-classical economic theory and the atomistic idea of humans. I mean: you’re an ‘american’, with a defined ‘gender’, and correct tastes in movies and literature?

      And how do you define utility? How do you measure ‘utility”? Which metric do you use to measure it (one ‘Bentham?). Is it a coincidence that economists have still not been able to create a metric which enables measurement of ‘utility’?

      • reason says:
        February 16, 2012 at 12:13 pm

        You don’t actually need formal utility theory much. You just need agency and the possibility of mutually beneficial exchange. I agree utility theory is awful. And utility maximisation is a pretty wonky idea. But that all feeds into the idea of a mathematically calcuable optimum. It doesn’t destroy a dynamic view of economics.

  • Tom Crowl says:
    February 16, 2012 at 10:37 am

    Any economic theory that ignores the effects of Dunbar’s Number (a theory regarding a ‘natural human community size’ and cognitive limits) and its relationship to the “altruism problem” won’t hold water in large societies.

    Keynesianism (and MMT) it seems to me… are correct… EXCEPT… they never addressed this issue and how it relates to credit creation and how it should be introduced into a system.

    Economics as currently envisioned ignores this subtle but very real issue.

    Issues in Scaling Civilization: The Altruism Problem
    http://culturalengineer.blogspot.com/2012/02/issues-in-scaling-civilization-altruism.html

  • Tertium Squid says:
    February 16, 2012 at 10:41 am

    “As soon as the generals and the politicos
    can predict the motions of your mind,
    lose it. Leave it as a sign
    to mark the false trail, the way
    you didn’t go. Be like the fox
    who makes more tracks than necessary,
    some in the wrong direction.”

    http://www.context.org/ICLIB/IC30/Berry.htm

    • James says:
      February 16, 2012 at 10:56 am

      More insight than anything I’ve read here today.

    • Blunt says:
      February 16, 2012 at 1:51 pm

      The most insightful comment to this piece yet. Berry’s been making such comments about this modern world for forty years.

    • LeonovaBalletRusse says:
      February 16, 2012 at 6:42 pm

      TS, thanks for the link. Well worth reading: “Manifesto: The Mad Farmer Liberation Front” from THE COUNTRY OF MARRIAGE, copyright 1973 by Wendell Berry, reprinted by permission of Harcourt Brace Jovanovich, Inc.

      Ah, great male poets are wonderfully different from men who live to kill.

  • jsmith says:
    February 16, 2012 at 10:42 am

    I’d find it hard to believe that you haven’t watched Mr. Adam Curtis’ brilliant documentary “The Trap” as it more accurately depicts what you are trying to put forth in the above article. If you haven’t watched it I suggest you do.

    The first part of three is entitled “F*ck You Buddy” after one of Nash’s games.

    http://www.youtube.com/watch?v=gZt2HhFXB3M

    There’s also a great interview with Nash later in life in which he says that he was wrong in his paranoid views of the world.

    The documentary does a great service in extrapolating beyond the world of economics into psychology and politics.

    In addition, people have been talking about the REAL loss of privacy for decades – the ability of governments to read the minds of citizens – not in some allegorical, economic sense but using sophisticated technological methods that are kept from the public eye.

    Here’s a couple of links which I’m sure you’ll mock:

    http://www.rense.com/political/weapons/nsa.html

    http://mindcontrol.twoday.net/stories/1929829/

    Go ahead and laugh but google EMF mind control and just appreciate that many others much less sophisticated than yourself have been “out there” already describing a world you only conjecture about.

    What, you don’t like your new “colleagues”, Mr. Pilkington?

    Don’t want to hobnob with the hoi polloi?

    One of the main reasons for bringing this up is that one of the points of your article was to seemingly shock the sophisticated readers of NC by painting a dystopian picture of the world we live in.

    All I’m trying to say is that many people believe that this world is already here and that you are entering a territory that is not uninhabited but rather the denizens are just ridiculed and ignored.

    Do I believe what these people say?

    One needn’t believe a person to understand what they’re saying – something I’m sure you understand as a professional journalist, right, Mr. Pilkington?

    I really only put these “nutty” ideas out there so maybe you’d like to see what other “philosophers” in your vein are pondering.

    Cheers.

    • Philip Pilkington says:
      February 16, 2012 at 10:51 am

      Hahaha! Yes! Adam Curtis pulled this argument from Mirowski. At least, that’s what Mirowski and I think.

      I asked Mirowski about his relationship to Curtis. Apparently Curtis turned up on the doorstep of his University department (in Notre Dame) one day and asked for an interview which then appeared in the program you link to.

      Mirowski never heard from him before or since. But Mirowski and I think we know where he got his ideas… (Note, Yanis et al openly cite Mirowski as the source…). Mirowski is the fountainhead of all this stuff. Some day he will be recognised for the genius that he is. But, alas, not today…

      As for the blatant dystopian tropes I use in the piece: no, I don’t believe in the New World Order. I’m just making the point that people who LIVE the New World Order everyday — in their suffering from schizophrenia — sometimes have a huge input in how we come to view the world. This is probably not a good thing because it is likely to lead to new attempts by certain elements to exercise control over society. I think what Naomi Klein calls the ‘shock doctrine’ is largely an attempt by these people and their disciples to exercise this power.

      It doesn’t result in a giant gulag or a New World Order. But it does make an awful mess of things…

      • René says:
        February 16, 2012 at 12:10 pm

        “…no, I don’t believe in the New World Order. I’m just making the point that people who LIVE the New World Order everyday — in their suffering from schizophrenia — sometimes have a huge input in how we come to view the world.”

        Good point, Philip. But the NWO is not a believe system, it has more to do with perception. It also has to do with awareness/consciousness, I think. There are people who are living in a mental concentration camp everyday because of their illness and then there are people who are living in a world, which, in their view, starts to resemble something out of “1984” and “Brave New World.”

        There are all kinds of people who have (had) a huge input in how we come to view the world. And guess what, they weren’t mentally ill. They weren’t able to empathise with their fellow space travellers, that’s all, only a minor point.

      • jsmith says:
        February 16, 2012 at 3:00 pm

        You’ve really got to be more careful when throwing around terms, PP.

        To say that all people who believe in a New World Order are schizophrenic is really a sad statement on a number of levels.

        One, it insults people who are trying to make sense of the world around them by creating models which fit the reality they see.

        Bohr couldn’t see the atom but was he schizophrenic for believing that his model best describes certain aspects of observed physical phenomenon.

        Likewise, are people who don’t have access to the hallowed halls of power and money schizophrenic because they try and build models on their understandings of the society around them?

        Isn’t understanding a society sometimes made easier by treating “the elite” as an actual homogenous entity – ie. creating a model to understand the movement of capital, politics, wars etc etc?

        Much like Bohr’s original simplified view of the atom?

        Does this mean that high school students are schizophrenic because they still basically use Bohr’s model to understand atoms?

        Thus, what about the people who utilize the idea of the NWO to understand the world around them?

        Are they mentally ill or just uninformed?

        Where does one draw the line between ignorance and illness?

        Should a line be drawn?

        In addition, although Bohr’s model is now outdated it does do a good enough job in helping illuminate atomic physics for the layman – sure, you could browbeat a high schooler about wave theory, QCD and the such but at the end of the day the solar system model is still good enough.

        Likewise, why not the NWO model?

        Is it so crazy for the layperson to believe that powerful elements of society conspire together to their own advantages especially when history is replete with said actions?

        You yourself castigate the “paranoid” about imagined evils but state that you believe in “new attempts by certain elements to exercise control over society.”

        So, the NWO is off limits but your belief in certain elements BEHIND the idea of the NWO is AOK, is that what you’re saying?

        Again, psychological terms should be treated a little more carefully as in your post it becomes unclear WHO exactly is “crazy” – the common people who believe in the NWO, elite members of the real but not-named NWO type entity that manipulate the idea of the NOW or anyone else who has a model that may not be entirely accurate but nevertheless does accomplish something in broadening people’s understanding of the world around them.

        • jsmith says:
          February 16, 2012 at 3:05 pm

          The last sentence should read “NWO” not “NOW”.

          I was not alluding to the National Organization of Women as I don’t think the masters of the NWO are using the NOW as a front.

          But one never knows!

          MWAHAHAHAHAHAHAHAHA!!!

        • Philip Pilkington says:
          February 16, 2012 at 6:54 pm

          “To say that all people who believe in a New World Order are schizophrenic is really a sad statement on a number of levels.”

          Certainly never said that. Plenty of people BELIEVE in the New World Order. But I would say that they don’t live it. The lucky ones, I suppose.

          • René says:
            February 17, 2012 at 6:50 am

            …and then there are people who are living in a world, which, in their view, starts to resemble something out of “1984” and “Brave New World.

    • LeonovaBalletRusse says:
      February 16, 2012 at 6:44 pm

      jsmith – http://www.youtube.com –

      “The Tavistock Agenda”
      “The Tavistock Institute for Global Manipulation”

  • Schofield says:
    February 16, 2012 at 10:43 am

    Robert Frank expands on this theme in his “The Darwin Economy” with “positional good and services.” He takes the ice hockey team as an example most of whose members would prefer to wear a helmet to minimise the chance of injury but not wearing one offers a “positional advantage” since you can hear slighly better whilst playing. Likewise as a general axiom the more expensive houses tend to be where the schools are better and your kids would gain an educational (positional) advantage over others for ultimately gaining better jobs and wealth. Striving for such houses pushes up their price.

  • James says:
    February 16, 2012 at 11:06 am

    I think the first paragraph sums up the 21st capitalist/economic mindset pretty succinctly:

    Love the quick profit, the annual raise,
    vacation with pay. Want more
    of everything ready-made. Be afraid
    to know your neighbors and to die.
    And you will have a window in your head.
    Not even your future will be a mystery
    any more. Your mind will be punched in a card
    and shut away in a little drawer.
    When they want you to buy something
    they will call you. When they want you
    to die for profit they will let you know.

    Thanks for that link. No need for obscure theories here. That’s life in modern corporate America to a T.

  • Sufferin' Succotash says:
    February 16, 2012 at 11:10 am

    “Those to whom the king had entrusted me, observing how ill I was clad, ordered a tailor to come next morning, and take measure for a suit of clothes. This operator did his office after a different manner from those of his trade in Europe. He first took my altitude by a quadrant, and then, with a rule and compasses, described the dimensions and outlines of my whole body, all which he entered upon paper; and in six days brought my clothes very ill made, and quite out of shape, by happening to mistake a figure in the calculation. But my comfort was, that I observed such accidents very frequent, and little regarded.” — Jonathan Swift

  • Schofield says:
    February 16, 2012 at 11:14 am

    Richerson and Boyd respond on the Dunbar Numbers issue in their book “Not By Genes Alone.”

  • diptherio says:
    February 16, 2012 at 11:14 am

    Great article. I always found it unsurprising that Mutual Assured Destruction was the result of applying the system of a paranoid mathematician. Follow the reasoning of a schizophrenic and what you end up with is literally MAD. And, unsurprisingly, you end up with the inverse of the best possible solution which I guess you would have to call the worst possible solution.

    You’ve nicely dissected how this craziness lies at the heart of neoclassical economic doctrine. Thanks.

    • James says:
      February 16, 2012 at 11:52 am

      MAD seems to be alive and doing very well these days under the slighltly repackaged guise of “bailouts for the rich or else,” doesn’t it? No surprise there after all I guess. Just more recycled madness. First it was a political theory or else, and now it’s the political theory’s hand in glove economic theory or else. The powers that be are obviously getting a little desperate.

  • SR6719 says:
    February 16, 2012 at 11:29 am

    This is an interesting post. I have to admit, the last place I expected to see both Kundera and Daniel Paul Schreber’s names mentioned together is on Naked Capitalism. Have to give credit where credit is due.

    Favorite Kundera quote: “In the sunset of dissolution, everything is illuminated by the aura of nostalgia, even the guillotine.” (After all, how can anyone think of Wall Street these days without longing for the days of the guillotine?)

    Now, with all that effusive praise and stuff out of the way, my comment will go off topic, avoid neoclassical economics, and focus on schizophrenia instead.

    A Schizo Cocktail consisting of: 1 oz. Daniel Paul Schreber, 1 oz. Deleuze/Guattari, 1 oz. triple sec, 1/2 oz Rose’s lime juice, 1/2 oz cranberry juice, half a measure of Artaud.

    Shake vigorously in a shaker with ice. Strain into a martini glass, garnish with a lime wedge on the rim, and serve. Be sure not to let any ice cubes fall.

    As for Schreber, his case is discussed at length in Deleuze/Guattari’s book on schizophrenia. What’s interesting is the way he divided himself up into parts: earlier empires, later empires, etc (“Sunbeams, birds, voices, nerves enter into changeable and genealogically complex relationships with God and forms of God derived from the Godhead by division” – D/G, Anti-Oedipus

    “The schizo has his own system of co-ordinates for situating himself at his disposal, because, first of all, he has at his disposal, his very own recording code, which does not coincide with the social code, or coincides with it only in order to parody it….It might be said that the schizophrenic passes from one code to another, that he deliberately scrambles all codes, by quickly shifting from one to another, according to the questions asked him, never giving the same explanation from one day to the next, never invoking the same genealogy, never recording the same event in the same way. When he is more or less forced into it, he may even accept the banal Oedipal code, so long as he can stuff it full of all the disjunctions that this code was designed to eliminate.” – D/G, Anti-Oedipus, pg 15

    Half a measure of Artaud:

    Artaud belongs to a secret sphere, a secret place, it’s very hard to talk about him. Kind of like exposing one’s secret on Jerry Springer or Oprah Winfrey or some confessional American TV show.

    Deleuze again: “Artaud makes a shambles of psychiatry, precisely because he is schizophrenic and not because he is not……from the depth of his suffering and glory, he has the right to denounce what society makes of the psychotic….”

    Even Artaud’s words can’t be taken literally in terms of their meaning or signification. The way he proceeds has something in common with the symbolic strategies of primitive societies. He never needed to identify with his own culture in order to transgress it or go beyond a nostalgic culture devoid of meaning or depth. He was already on the outside, standing in the filter of the void.

    Artaud in his own words:

    “The race of prophets is extinct. Europe is becoming set in its ways, slowly embalming itself beneath the wrappings of its borders, its factories, its law-courts and its universities. The frozen Mind cracks between the mineral staves which close upon it. The fault lies with your moldy systems, your logic of 2 + 2 = 4. The fault lies with you, Chancellors, caught in the net of syllogisms. You manufacture engineers, magistrates, doctors, who know nothing of the true mysteries of the body or the cosmic laws of existence. False scholars blind outside this world, philosophers who pretend to reconstruct the mind. The least act of spontaneous creation is a more complex and revealing world than any metaphysics.”

    And for anyone put off by the Schizo Cocktail above, try this one instead:

    1 oz vodka
    1/2 oz triple sec
    1/2 oz Rose’s lime juice
    1/2 oz cranberry juice

    Shake vodka, triple sec, lime and cranberry juice vigorously in a shaker with ice. Strain into a martini glass, garnish with a lime wedge on the rim, and serve.

    Note: 1 oz vodka is only a suggestion, some prefer to substitute 2 or even 3 oz

    • SR6719 says:
      February 16, 2012 at 1:43 pm

      Deleuze once remarked that his favorite sentence in Anti-Oedipus (a 384 pg book on schizophrenia) is:
      “No, we’ve never seen a schizophrenic.”

    • Get up to $600 with TD Ameritrade says:
      February 16, 2012 at 4:46 pm

      Man ordered his experience in terms of psychological considerations of the nonexistent mind. But the ordering of experience is always on the here-and-now level. The interpretation of the ordering is always at the there-and-then level. Be aware that the brain’s operation is a continuing activity of ordering in the here-and-now. There was always ordering in the here-and-now while man deluded himself with considerations there-and-then, considerations of a world that didn’t exist. A world that never had existed. The world of the past. A fractional instant, and yet the past. Because of that interval man was able to exist. Man, a relic of the instantaneous past. Man, an instant too old to exist. Things not existent should be of no interest to us. All those things rendered unto man are based on a system that deals with illusion. The interpretation of the ordering of the brain takes place while new ordering is continually happening. It is almost as though there were two parallel planes.

      Almost. We might even assume there was a choice between living in one plane or another. Actually, there is no choice. There is no choice. There is only the ordering and arrangement, the here-and-now. Some of us, most of us, cannot recognize this level and continue by blindness, by inertia, by pretension, the delusion that we are men. It’s a mistake. Man is dead. Man never existed at all. Our awareness as experience is past experience. Dreaming.

      Man is dead. It’s a world of information. Information in this context refers to regulation and control and has nothing to do with meaning, ideas, or data. Any system is said to be able to receive information if when a change occurs the system is capable of reactions in such a way as to maintain its own stability. Information is nothing but an abstraction. As an abstraction it will allow for new observations and associations, for discernment of patterns and organization. Note that the reference is to a reaction to change. The concern here is only with the reaction, the effect. Information is a measure of the effect. This refers to how the control center of the organism, the brain, reacts to change in order to maintain continuity.

      We are dealing with activity integrated on the neural, the brain level, i.e., the present. Thus, when discussing information, we are talking about the brain’s response in terms of present, direct experience. This response is always effected without consent or awareness. There is no choice. There is no information unless there is a change. Information does not exist as information until it is within the higher levels of abstraction of each of the minds and computed as such. Up to the point at which it becomes perceived as information, it is signals. These signals travel through the external reality between the two bodies, and travel as signals within the brain substances themselves. Till the complex patterns of traveling neuronal impulses in the brain are computed as information within the cerebral cortex, they are not yet information. Information is the result of a long series of computations based on data signal inputs, data signal transmissions to the brain substance, and recomputations of these data. Information is an abstraction to be used for measuring the communication of pattern, order, and neural inhibition.

      • LeonovaBalletRusse says:
        February 16, 2012 at 11:15 pm

        Excellent thesis. So *order* depends on what *order* is. “My *order* is better than your *order* now that you’ve blown it” says the Resistance fighter to the Despot.

    • LeonovaBalletRusse says:
      February 16, 2012 at 7:09 pm

      SR6719, Prof. Guido Giacomo Preparata most definitely is not paranoid. But he is infinitely creative with language, a brilliant poet/analyst of caustic rhetoric, who has sourced every claim against the maniacs who have brought us George H.W. Bush’s DECLARED *New World Order* of psychotic despots in finance and politics, of which we are the continual victims.

      “THE IDEOLOGY OF TYRANNY: Bataille, Foucault, and the Postmodern Corruption of Political Dissent” by Guido Giacomo Preparata (New York, Palgrave, Macmillan, 2007).
      CHAPTER 8: “The Tomb Raiders of the Postmodern Right: Junger’s Anarch, the Neocon, and the Bogus Hermeneutics of Leo Strauss”.

      Mr. Pilkington, “You can’t touch that.”
      Though I like some of your enticing presentations at NC, it seems there’s always a sucker punch lurking between your lines or in your comments. Hence, I confess:

      “I do not like you, Dr. Pil.
      Why this is I’ll come to till.
      What you won’t or what you will,
      You are a New World Order shill.”

      *Bard of Clan Robertson* among NC’s *hoi polloi* commentariat
      (of the “Ladies from Hell” — from the land of the Picts, the Celts)

    • LeonovaBalletRusse says:
      February 16, 2012 at 7:30 pm

      SR6719, Schreber would consider all poets schizophrenics, then. The antidote to Schreber is:

      Robert Graves: “The White Goddess: A Historical Grammar of Poetic Myth” (New York, Vintage Books, 1958; Farrar, Strauss & Cudahy, Inc.; 1948).

      Mathematicians might have trouble with the subtlety therein, since they rarely speak symbols in words. They tend to like their symbols *neat*, and above the human fray. It is hard to convey deep, complex meaning in words for human discourse.

  • Min says:
    February 16, 2012 at 11:44 am

    On another economics blog I suggested that preparation for studying economics should include playing n-person strategic games. I did not explain myself, because I had a subversive intent. ;) One of the basic lessons of n-person games is the value of coalitions. Any child who learns that is going to scoff at the paranoid loner assumptions of economic game theory. ;)

  • Wade Riddick says:
    February 16, 2012 at 12:22 pm

    You’ve conflated autism and schizophrenia. In many ways, the two disorders are opposite one another. To read the intentions of another person, you need a functioning mirror neuron system. Schizophrenics may overread such intentions, they may imagine others can overread them (e.g., telepathy) – but autistics have problems underreading these intentions, if they can read them at all. Autistics can be baffled by the emotions behind common, easily interpreted facial impressions – whereas schizophrenics can sense these emotions everywhere, even in the ceiling fixtures. Autistics can’t process language easily, whereas schizophrenics process it a little too readily – sometimes to the point of conversing with furniture. Autistics also prefer rigid rules – which schizophrenics are notorious for breaking. Autistics can’t see a world of people; schizophrenics see a world of nothing but people.

    These systems of empathy are not to be confused with conscience. Narcissists understand the emotions of others; they just don’t care that much; sociopaths, not at all. If anything wealth is famous for reducing empathy among those who have it. Wealthy individuals are literally less sensitive to the intentions and interior states of those around them.

    • Lambert Strether says:
      February 16, 2012 at 12:36 pm

      I wonder if the poster had the “autistic economics” school in mind, as opposed to the condition. (Also, Temple Grandin’s book is wonderful.)

    • Philip Pilkington says:
      February 16, 2012 at 12:52 pm

      Yes, autism a quite different disorder. (Although I believe both stem from the same psychological ‘mechanism’ — and I don’t mean neurological mechanism, but psychological mechanism; but that’s besides the point).

      However, in the above I used the term ‘autism’ as an adjective, not a noun. ‘Autism’ in contemporary English has come to mean something like “closed in upon the self”. Although, to my knowledge the dictionaries have not caught up with the vernacular as of yet. Pity. It’s a good adjective. It seems to have replaced ‘solipsistic’.

    • LeonovaBalletRusse says:
      February 16, 2012 at 7:12 pm

      Wade Riddick, excellent distinctions, a fine precis.

  • Susan the other says:
    February 16, 2012 at 12:50 pm

    I once was told by a Czech that Kundera’s books are very funny in Czech. That the humor is lost in translation. Meta funny.

  • Blunt says:
    February 16, 2012 at 2:17 pm

    Put your faith in the two inches of humus
    that will build under the trees
    every thousand years.
    Listen to carrion – put your ear
    close, and hear the faint chattering
    of the songs that are to come.
    Expect the end of the world. Laugh.
    Laughter is immeasurable. Be joyful
    though you have considered all the facts.
    So long as women do not go cheap
    for power, please women more than men.
    Ask yourself: Will this satisfy
    a woman satisfied to bear a child?
    Will this disturb the sleep
    of a woman near to giving birth?

    “Manifesto:
    The Mad Farmer Liberation Front”

    by Wendell Berry

    I rather prefer that stanza to some of the others quoted. But quoting Berry can be quite an antidote for foolish games that try and encompass all of reality at a single gulp.

    The problem with Nash is that the voices he was conversing with were knowable to him as they were aspects of himself that he read as “the other.” Hence, he could grok exactly what “the other” was thinking.

    The problem with translating to “the real world” the images present in the psychotic mind is 1) understanding the images 2) translating them at all.

    R.D Laing found schizophrenia to be a perfectly reasonable response to a culture that was unlivable. To apply the thoughts of a paranoid to anything “rational” is to mix apples with sand as if one is mixing equivalents.

    Economists fail because they exclude 1) rationality 2) humanity as if by disregarding the human they could turn a social study into a science like mathematics or biology.

    Were it apples and oranges perhaps the result would male a passable fruit salad with a couple of more fruits and some yogurt added. OTOH, when one mixes apples with sand one obtains a salad no reasonable human would wish to eat. Fail/fail.

  • Jim says:
    February 16, 2012 at 3:45 pm

    Philip Pilkington at 7:32 A.M.

    “You start out realizing that you don’t know what The Other wants. Soon you find that you don’t even know what The Self wants in the medium to long-run.”

    Philip I’m glad to see that you are becoming quite a skeptic!

    The next step is to realize that reality may be elusive on an ongoing basis.

    If such is the case then all of your theorizing and all of my theorizing is possibly based on an arbitrary starting point.

    The fact may be that there is always a choice involved in order to situate a problem to begin with, which suggests, in turn, that the language of problem identification is metaphorical–that the problem does not transparently reflect a situation that exists independent of our conceptual formulation of it.

    We all appear to be continuously engaged in conceptual slicing maneuvers that are not necessarily intrinsic to the circumstance of each particular case.

    And since reality is, at least, partially unknown, circularity –building the salient points of one’s conclusions into one’s premises–constitutes a common philosophic strategy for producing a symmetrical argument, for filling in the objective-knowledge gap.

    Cirularity then seems to become a logical fact of life and confirms a certain durability to it when reality seems to provide little.

    What structure of government would be the best institutional representation of such skepticism?

    • Philip Pilkington says:
      February 16, 2012 at 6:57 pm

      “What structure of government would be the best institutional representation of such skepticism?”

      Since government rests on decision I seriously doubt it could accommodate such skepticism — speaking philosophically, of course. I know many people in government who are quite skeptical. They’re usually the ones with a sense of humour!

      • LeonovaBalletRusse says:
        February 16, 2012 at 7:15 pm

        No. An Open Democracy with full participation of the citizenry engaged in critical thinking is the best yet for dealing with the continual elusiveness of *reality* in flow.

  • CR says:
    February 16, 2012 at 4:14 pm

    I offer a real life example of how game theory gets used as a tool and a rationalization–

    When Reagan was elected governor in 1966, he and his ilk had been very busy demonizing the University system for over twenty years as a haven for commies and other undesirables (minorities, inconvenient women). Cleaning up the Universities was a centerpiece of his campaign, red meat for voters upset with the civil rights movement, war protesters, disrespectful youth, etc.,etc., etc.

    The process of defunding the Universities was one of Reagan’s big projects. Universities had to be downsized because of defunding. Since professors were protected by tenure they couldn’t be fired one by one very easily, but it was possible to eliminate whole departments, and that is what happened. Critics eliminated in one fell swoop.

    At the University in the town where I lived at the time, the President was asked to resign by the chancellor and the replacement the hiring committee chose was disregarded and the chancellor’s hand picked choice installed.

    The first order of business for the hatchet man recruited from Rand Corporation in Santa Monica, an intelligence research specialist in game theory, was to cull out non-cooperative administrators from those who would willingly assist him. His method was to tutor all the ambitious, young men, administrators and professors who attended his Sunday Afternoon Salons in game theory. Others were not promoted or harassed out.

    The new president had to destroy the collegial, humanistic culture of the university community and its traditional use of democratic processes and consultation. He taught his cool kids distain for such moldy institutional practices. Game theory allowed the cool kids to win and be winners and never mind the eviseration of the school and it’s culture. It was glamorous, it was cutting edge. The president’s acolytes became completely amoral and didn’t suffer for the damage inflicted on their colleagues, because it wasn’t germane to their brief.

    When the president moved on to bigger and better things, he left behind a seething, sociopathic, viper’s nest. No one could trust anybody. Suspicion, gridlock, and being blindsided from on high became the norm, a real hell on earth.

    Sound familiar? This nonsense is all pervasive in society today. It is systemic.

    Its time people, to say no, to make a new social contract. There is not much more left to lose and I don’t mean just material things.

    • charles sereno says:
      February 16, 2012 at 4:33 pm

      Those (and these) are the days!

    • René says:
      February 16, 2012 at 4:45 pm

      Interesting story. Yes, we need a new social contract.

    • brazza says:
      February 16, 2012 at 6:10 pm

      Sickening. You are describing a deliberate coaching of our best and brightest away from cogitated value-judgement, and into a mental framework of win-at-all-costs (as the article underlines) paranoia.

    • LeonovaBalletRusse says:
      February 16, 2012 at 7:18 pm

      CR, excellent reporting. During the same era of the Southern Strategy and *religious* focus-and-bonding groups, the number of *Christian* colleges and universities and *law schools* increased as if exponentially. With the graduates of these reactionary institutions was Bush’s Department of Justice stacked.

    • LeonovaBalletRusse says:
      February 16, 2012 at 7:20 pm

      CR, RAND was/is connected with Tavistock, like Stanford, MIT, Wharton.

  • LeonovaBalletRusse says:
    February 16, 2012 at 5:43 pm

    Fascinating. Doesn’t this remind you of “Staring at Goats” with the CIA?

  • Paul Tioxon says:
    February 17, 2012 at 12:47 am

    We become what we hate. Here is an interview from over 35 years ago about the future of nuclear power, the USA turned into an airport like security checkpoint with an enormous police bill.

    http://www.youtube.com/watch?v=1-QwGBDbd3M&feature=related

    As to communication, language, before there was written language, there was spoken language. And before spoken language, we were mute. What made us human, was not that we spoke, but that we buried our dead. Human comes from humare, to bury. We had communication as profound as any funeral sermon by our simple behavior with burial rites. It is difficult to divide your mind between the language you must internalize to speak and write, and the world in which you live, with behavior, not only of people, but of nature at large to contend with. Some of us are lost in language and think that is life. Communication, telepathy, from the mute era of humanity is direct knowing without the mental intermediation of language.

  • brazza says:
    February 21, 2012 at 5:17 pm

    Recent biological science seems to contradict Nash’ negative view of humans, and supports Pilkington’s arguments … thank heavens! http://www.aljazeera.com/news/americas/2012/02/201222023301844664.html


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