Economist’s inexact models exactly defective 01
(Friedman, Lucas, Aumann)
‘inexact’ science without appropriate engineering is misleading the world
Billions are spent protecting against natural tsunamis
Trillions are spent maliciously CREATING economy tsunamis
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General Equilibrium Theory & others outside bounds of tangible reality
(Scan nobelprize.org, economics, prize lectures).
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Flight United 93 experienced irrational control. The passengers focused on regaining rational control, they did not waste time debating theoretical models, they addressed the problem rationally by attempting to disempower the terrorists. Tragically they failed, and U93 crashed.
However, the passengers on ‘Flight SA 21st’, and ‘Flight Ireland 21st’, both of which are representative of other struggling-nation ‘flights’, are NOT acting rationally. They are irrationally focussed on developing theoretical models rather than attempting to rationally disempower the ‘Globalisation Mastermind Terrorists’ that have taken control.
That fine-tuning theoretical models are the irrational foci is evident, by observing the critical state that each of these flights is in, and also by observing the defectiveness of theoretical model developments (see nobelprize.org; prize winners, economics, all laureates, prize lecture).
ooooOOOOOoooo
The Nobel Prize in Economic Sciences is not an official Nobel Prize, it is the Bank of Sweden prize in Economic Sciences in Memory of Alfred Nobel; nonetheless, initiated in 1969, the intent & stature of the prize is in no way diminished.
BUT, despite all the highly commendable work that is behind the Nobel Prize winners, and many other economists, the fact remains that the world’s economies are in turmoil, and have been for all time ever since Adam & Eve caused all the trouble.
The question is; why are economists not able to develop systems & controls to maintain economy stability? which is mutually inclusive with peace if stability is to be achieved.
A scan of the prize winning lectures gives clear insight why, once the intricate theoretical detail is separated from real world issues.
Of all the laureates listed (see Addendum) the most noticeable, and possibly most notable, is that of Milton Friedman who recently died. Friedman was an influencing force behind Margaret Thatcher’s economy in the 80s & 90s - mainly because he attempted to step outside of the theory and into the real world by proposing systems & controls models for the real world. But Friedman, as an Economic Scientist, was not an engineer – a reading of his 1976 prize lecture clearly shows this.
In his introduction Friedman explained his views (to the effect) that Economic Science was on a par with the ‘exact sciences’; in contradiction to ‘exact scientists’ who view Economics as more a philosophical subject rather than a science, similar to social, business, finance, subjects.
What would perhaps be more correct is to label these subjects as ‘inexact sciences’. The spurious nature of human behaviour does not lessen the theoretical models that are needed to control/influence these environments. The models become more complex once unitary models become a multiplicity because of the randomness of the many more variables that must be considered in attempts to rationalise these environments.
However, the difference between ‘exact sciences’ and ‘inexact sciences’ (social/economy/business/finance or SEBF) is that engineers provide real feedback to ‘exact’ scientists, whereas there are no engineers providing feedback to ‘inexact’ scientists.
This critical difference is why ‘inexact science’ is EXTREMELY inexact, to the extent that models are entirely warped/defective, which reinforces inexactness.
One cannot rationalise these ‘inexact science’ environments if the inexact scientists refuse to adopt sound scientific practices, and accept that they are simply members (small) of a team (large).
An engineer = (scientist + practionist); and implicit within the term ‘engineer’ is the term ‘integrity’ (or rather, it should be).
Exact scientists (collectively) do not operate in isolation as do inexact scientists; exact scientists rely upon feedback from engineers who put science theories into practice in the real world & test the theories.
It is fair to say that prior to CDADD pioneering engineering into the SEBF (inexact science) environments that engineers were not operational, as engineers, in these environments (many engineers had crossed over, but for financial considerations NOT for integrity of profession reasons).
BUT, what has been more destructive is that ‘inexact scientists’ have projected a stigma onto engineering (& re-engineering). Terms such as social engineering, business engineering have been freely bandied around by these people who are not remotely qualified as engineers. (It would also be inappropriate for a civil engineer to delve into plant control).
Understandably there is strong resistance to the use of engineering in the social environment.
This is not to suggest that engineers are squeaky-clean, far from it, simply observe the engineering profession & the engineering council in SA that has been hi-jacked & prostituted. BUT, there is a difference between the numerous space shuttles (& plants) that fly, and the one(s) that crash/explode, because of financial scams – DESPITE the rigorous engineering processes, checks, safety precautions, etc..
The point is that in the SEBF environments that no active engineering components & skills are engaged; which is why ALL economies are continually crashing!
Although Margaret Thatcher was part-convinced of Friedman’s models it is likely, herself being a qualified & experienced ‘exact scientist’, that she had strong reservations about ‘inexact scientists’.
It would be incorrect to say that prevailing economic models do not have merit – it simply means (analogously) that fitting a hi-tech fuel injection system into a mangled wreck of a car is completely irrational; one must first rebuild the car.
So too, hi-tech economics models are inappropriate for nations that continually crash. Coarse, manual, control is needed before fine-tuned, automated, control is possible.
It is important to remember that research results that achieve negative results are just as important as those that achieve positive results because the positives are only accepted with confidence once possibility of negatives are eliminated. i.e. ‘knowing’ is not only what something is, but also what it is not.
It is argued herein:
- that the prevailing economic models are defective but not necessarily obsolete.
- also that economists are engaged in hi-tech models and not in constructive engineering of rational economy systems & controls.
The basic process outline for developing any theory, or solving any problem, is:
IDENTIFY:– the critical issues, the problems, must be correctly identified. Symptoms are not problems, so it is important not to be misled by observed symptoms.
UNDERSTAND:– correct understanding must be developed if correct solutions are to be developed
SOLVE:– develop solutions. This becomes a reiterative process, and can take one back to the start of the process, simply because in the development of solutions greater & better understanding comes about which helps to refine the problem/issues identified.
IMPLEMENT:– this is the practical application & testing which provides feedback into the process (again reiterative in nature)
(Engineers should be involved in & driving the full process)
oOo
- Review some key Nobel Prize (Economics) lectures (at nobelprize.org)
MILTON FRIEDMAN (1976)
Much of Friedman’s work dealt with linking Inflation and Unemployment, and with Money being neutral (as argued by Friedman).
But, if we view this from an engineering perspective (see later) it becomes clear that Friedman’s proposition is incorrect;
In his lecture Friedman acknowledges assistance from Edmund S Phelps, the 2006 prize winner whose work also develops further links between inflation & unemployment.
ROBERT LUCAS (1995)
Lucas’ work focused on Monetary Neutrality, General Equilibrium Macroeconomics & effects of anticipated & unanticipated money shocks..
In his lecture paper he reprints:
- in figure 1; a (World Bank?) graph of Money Growth vs. Inflation and argues that the clear correlation shows that an increase in money leads to an increase in inflation;
- in figure 2; a graph of Money Growth (M2) vs. Real Output Growth;
- in figure 3; Unemployment Rate vs. Inflation Rate.
BUT, what is most important to note is his comment on Page 259, 2nd last para, last 2 sentences.
Lucas poses the question: “Why is it that people cannot obtain that last bit of information that would enable them to diagnose price movements accurately?
And responds with: “In reality, up-to-date information on the money supply does not seem all that difficult to come by.”
Therein lies the rub!!!!!!!
The point about Lucas’ work (and of Friedman & Phelps & economists in general) is that it is founded upon incorrect premises – more later
ROBERT AUMANN (2005)
Aumann argues that war can be rational, not necessarily irrational; but he overlooks a simple mathematical law – that the product (multiplication) of a plus & a minus results in a minus.
Applying this to rational/irrational. – the product of a rational (argued) decision within an irrational (observed) framework yields also an irrational result. This means that wars can only be irrational.
(The fact that war is considered at all means that, at least, the framework has become irrational, therefore a rational war within an irrational framework yields irrational outcome -
This analogy obviously breaks down (rationally so) with the comparison to the product of a minus & minus yielding a plus, because the product of irrational & irrational still yields irrational, NOT rational.)
It is also interesting to note that within 6 months of Aumann giving his 2005 Nobel Prize lecture that his nation, Israel, launched it’s massive, irrational, attack against “terrorists”. Aumann has overlooked that the entire framework of the middle-east has been irrational for millennia; and for the simple reason that both Jew & Christian loving-faiths have considered themselves to be PRIVILEGED not PURPOSED.
2006 EDMUND S PHELPS
Phelps’ prize lecture is to be held early December, however a public announcement is available.
The announcement confirms that Phelps’ work progresses the inflation/unemployment links, and also does not counter Lucas’ incorrect assumption regarding money supply information – again incorrect premises.
oOo
Let’s rethink what happens in economies from a real world perspective and rethink the models presented. NOTE: Terminology may be common with that of economists but interpretation is as expressed herein. CONSIDER:
Money is both TANGIBLE & INTANGIBLE, both REAL & IMAGINARY.
- Tangible is that real cash;
- Intangible is money made up of bits & bytes held in computers or storage devices.
- Real is, collectively, tangible & intangible.
- Imaginary is that which is ficticously created; e.g. through defective accounting, scams, debt racked up without appropriate resources to cover, round-tripping.
(There are other money forms of money such as oil, or other goods for bartering, but in 1st economies they are essentially bartered via money valuation. These international commodities have marked effects on economies, and these need appropriate measures & controls if economies are to be stable.).
Money is not used simply as an exchange medium, it is also traded in its own right and speculatively traded, i.e. it is a commodity in itself and speculative trading far exceeds derived demand trading requirements. It is the speculative tradings that determine the relative exchange values, not derived demand requirements.
We can freely observe, or with little digging, that Money is clearly in oversupply, i.e. that 1st economies are saturated. Simply observe the volume of market tradings relative to total quantity available.
Observe the irrational pumping of share prices; collectively, for any particular market, they can be observed through overall market indeces; e.g. JSE-Overall, approx. 300% increase in 3 years; and, in general, major markets have more than doubled in under 3 years to end 2006.
Observe the destructive speculative trading in futures markets.
QED!!!
If we simplify global finances and assume that corporate finance structures apply globally i.e. that 60% of Gross Profit is paid in salaries/wages as total-cost-to-company, and that 15% is made up of retirement funding; then 9% (15% x 60%) of GP is paid into Financial Institutions.
Add, say, another 6% for private investments; effectively then:- 15% (9% + 6%) of total corporate GP is narrowly held by financial institutions. This happens each & every year, and annually this is cumulated into a large reservoir of money, and ever increasing annually, all of which is used by financial institutions, which are controlled by a minority few, to manipulate markets; irrationally.
Proof of this? Look in newspaper business sections at share prices, unit trusts etc..
This accumulated, narrowly controlled, reservoir of money is massive, and is narrowly held within 1st nations because existing 1st controls & regulations allow/encourage rapid speculative turnover of share/bond stocks. Consequently market prices experience high volatility. These market share prices feed back into: general pricing (cpi) through (for e.g.) cost of capital, and create pressures on prices, hence on cpi; business confidence, which are emotive responses; etc.
This speculative money is used to purposefully & destructively raid economies = masterminded globalisation terrorism.
The point is that 1st economies are saturated with narrowly held & controlled money; and forces flowing from irrational manipulations, by those minorities (terrorists) controlling the money, are massively destructive to economies.
The very fact that an economy experiences destructive forces from saturation means exactly that rational controls are non-existent or are entirely ineffective and that specific controls & regulation are necessary to attain & maintain economies within a stable control range.
Intuitively then; it is clear that links between inflation and unemployment (as argued by economists), with money being neutral, is an entirely incorrect proposition.
Narrow control of money, which is in saturation, means that manipulations purposefully disrupt economies for gain by those who are in control, and to the loss of the masses. Jobs can be, and are, created & destroyed at whim;
Prices (-> cpi changes) are similarly manipulated.
Consequently the ‘scientifically’ deduced links between inflation & unemployment are pie-in-the-sky arguments.
One only need look at the theft, by institutions globally, of pension monies (over 27% of pension income) to understand that financial institutions, their directors & shareholders, have no real philanthropic intents. No matter how much global-gurus argue that they’ve contributed X Millions to society, it is the hidden Billions (Trillions) that they are maliciously manipulating that is still destroying stability.
These institutions, as proven, siphon & churn these investments and have fraudulently taken ownership of at least 50% of value.
Conclusively then; Money is both in saturation, and under irrational influence.
That Economic Scientists have not revealed this previously says that they do not understand economies, or that they have been silenced, or both. Whichever way one views it it is understandable that Margaret Thatcher was, and other leaders still are, sceptical of advice from economists/economic scientists.
This scepticism has further been proven to be well founded in light of the revelations at SA’s CHAMSA Economics for Prosperity Conference in Johannesburg in 2005. Economic Scientists have been shown not to stand up to those economists that prostitute their collective credibility by intentionally presenting false data & analyses.
In light of these proofs Thatcher, and Reagan, and other leaders, were justified in not following Friedman’s models fully. Recent engineering insight into economy systems & controls (developed by CDADD) concretely proves that economic models & theories developed by Economic Scientists are entirely wrong, and as shown again herein.
This does not mean that the models are necessarily worthless, it means that without first establishing rational systems & controls that the models cannot be tested to prove same.
What has been incorrectly derived by economists, and clearly evident in the prize winning lectures (see 1995 Lucas, figure 1), is that of the causal direction.
It has been argued that an increase in Money leads to an increase in Inflation rate; i.e. the causal direction is Money -> Inflation.
BUT, Reserve/Central Banks which issue new notes & coins, and Commercial & Retail Banks that issue new credit, OBSERVE what is happening in the economy. Inflation is determined/calculated by the banks through models derived by themselves; BASED UPON the calculations from these models an (average) Inflation Rate is determined, FROM THAT calculations/assessments are made to determine the forthcoming time-cycle’s needs, in terms of money supply, FROM THAT decisions are made as to the AMOUNT of Money Growth for that forthcoming time-cycle.
In other words the causal direction is NOT (as argued by economists): Money -> Inflation, BUT Inflation -> Money, BUT, only because economists have determined this model (wrongly so).
The fact that the Money -> Inflation relation is pre-calculated means exactly that if the models are applied that a high correlation will ALWAYS exist. It clearly then cannot be a theory of ‘inexact science’, because the ‘theory’ has been pre-calculated, purposefully, to achieve a desired result – vis: high correlation.
Causal direction is critical: +X, and –X, differ by a magnitude of 2X, and in direction by 180 degrees. It means that if you were wanting to get to town X then you would be in entirely the wrong place having travelled to a point 2X distant, and in the opposite direction.
The mere fact that economists had achieved a near-perfect correlation (between money & inflation) was immediate cause for alarm bells to ring. With both components being manually defined & measured, and the one manually influencing the other, it was further cause for alarm bells. Delving into the correlation proves that the alarm bells were fully justified.
It is now clear that the historical models that link Money Growth to Inflation are incorrectly determined.
What is required is that the data used to compile the Money Growth/Inflation graph needs to be re-examined, and from different perspectives.
We need to rethink what an economy should be concerned about. It is contended that stable Economic Momentum is the principle criteria; inherent within ‘stable’ are the terms rational control & rational regulation.
(see paper: Economic Momentum)
Whether you agree or not with the Economic Momentum relationship (vis Economic Momentum = coefficient, c, multiplied by the square of the Money Supply) is irrelevant. What is relevant is that Economic Momentum does exist, this is intuitive; also that it is intuitive that Money & Supply, is the life blood, the fuel, of an economy. Whether the relationship to Money is a squared function or a lesser, or higher, power only real life experience will reveal. But one needs rational controls in place BEFORE tests can be done to determine exact relationship, but intuitively it is the primary relationship.
What has also been proven is that the current unitary model destructively sucks money out of an economy and Economic Momentum diminishes rapidly, and hence that the unitary model is an irrational & destructive control device (see paper: Interest Rates & Loans)
BUT, not one economist has had the courage to go against the historical grains of their ‘inexact science’ discipline.
Money drives Economic Momentum as a primary force. Inflation & unemployment are affected by Money but until rational systems & controls are established it is impossible to prove the exact relationship. Interlinks between inflation & unemployment also exist, this is intuitive, but these are secondary links not primary links. It is further argued that within nature that secondary effects are far less than primary effects, in the order of 10% of primary.
Let’s look at money again:
We can observe, with little digging, that global markets have a glut of speculative money circulating, destructively; i.e. money is in saturation.
If we split out money into two major components, that circulating rationally & constructively for DERIVED DEMAND purposes; and that circulating irrationally & destructively for SPECULATIVE DEMAND purposes, we get:
Total Money Supply (Ms) = Msp + Md.
It is argued that these components not only have different purposes, but they have different magnitudes, and different causal directions, and also phase shifts (manually so). (Similarly with their sub-components)
What this means is that Money is NOT simply made up of SCALAR components but of VECTOR components. That means that one cannot simply ADD the two magnitudes together.
The premise upon arriving at this is that it is observable that economies are crashing, and that there are reasons for same, and that these reasons include purposeful money manipulations.
Regulatory bodies apply control to achieve a desired result, other bodies (manipulators) apply other influences that affect these control measures.
To be able to achieve this it logically follows that the Money components have magnitude, direction, and phase shift.
To clarify:
- Md is that derived demand Money that is used constructively for daily purposes of living & working, it includes constructive derived investment/saving.
- Msp is that speculative money in huge surplus that saturates economies.
Msp is increased by:
- irrational unitary interest rate control destructively sucking money out of Md,
- by the controllers of Msp who maliciously seek to destabilise economies by destroying constructive economic activity for the purpose of achieving ownership of more money.
- by an excess of savings/pensions retained within 1st economies.
- by super profits that cannot be absorbed by Md
It is through Msp manipulations, it is contended, that economic SHOCKS occur; it is not from influences within Md (constructive derived demand) sources. (In this context shocks exclude hot-war impacts)
Money shocks, are one thing, regular surreptitious manipulations are another as they are not easily, or at all, discernable.
This can be seen by observing the ‘instantaneous’ shock of the run-on-rand in South Africa and comparing to (for e.g.) the long term (50 years +) of plundering of pensioners pension savings.
These are REAL EVENTS, REAL SHOCKS, and REAL SURREPTITIOUS MANIPULATIONS; they are NOT fictitious.
The shocks are self-evident, the manipulations are EXTREMELY difficult to detect. Both require careful engineering to rectify.
Let’s now consider Lucas’ question regarding ‘last bit of information on money supply’.
Clearly with economies being swamped/saturated with Msp money it is DIFFICULT to obtain clear information on money supply.
But what makes it entirely IMPOSSIBLE is the IMAGINERY components of money.
Let’s look again at a few sources.
1. Going back to Donald Gordon’s masterminding of pensions fraud (just ONE scam of many) – Gordon KNEW that Liberty would NEVER have to pay out the full entitlement of the pension annuity at retirement conversion of capital to annuity income stream. Therefore the shortfall in income in the pensioner’s hands (between 27% & 42% of additional annuity income) at retirement is converted into a capital shortfall in the pensioner’s account. BUT, Gordon did not need to wait until people reached retirement age before he could siphon off the shortfall, since he knew it would never be paid out he could siphon each & every month that workers were injecting their savings into the Liberty retirement plans during their working/saving lives. The money was siphoned immediately. (What has flowed from this now that CDADD’s research has exposed it, is that Liberty, Sanlam, Old Mutual, & all the other global institutions, do not have the capital to instate the correct annuity streams – this is why SA’s TV judge Denis Davis fobbed-off the recent Cape Town high court matter concerning Sanlam – the money was no longer there, it was LONG, LONG, GONE).
Now think in terms of the effect on Money Supply.
Fraudulent accounting by Gordon (a chartered accountant) and Grant Thornton Kessel Feinstein maintained (falsely) that the capital value was in the pensioners accounts - this was reflected on regular pension statements. BUT, at least 27% had been siphoned off. Therefore an imaginary increase in money supply was experienced.
Liberty could conduct their development projects at an inflated capital level (real, i.e. that remaining after siphoning + imaginary, i.e. that which was perceived by pensioners to be in their accounts); PLUS Gordon could do whatever he did do with the same amount of money (real) that was siphoned off (similarly with all other institutions). (Note: Demutualisation was a fraudulent manoeuvre by institutions to model along the lines of Gordon’s Liberty Life)
2. Consider also the revelations on Enron, Parmalat, etc. These scams had been long, long, running, and many others similar (Enron, Parmalat were just the ones caught out). These scams were masterminded with the collusive assistance of international auditing firms.
Again imaginary money kept these companies afloat and expanding economic activity unrealistically with imaginary money, whilst the real money was doing whatever work elsewhere. i.e. Money Supply was falsely inflated.
3. Consider also the cash stripping of SASOL plants whilst they were exploding and killing people; Barclays Bank UK raiding SA’s ABSA bank and the money disappearing after Barclays bought-off an SA high court judge.
4. Surplus corporate profits that are not taken up within Md flow into & increase Msp – this intuitively is a significant component.
These are just a hint of the REAL issues, but they give an indication of the enormity of the problem of saturation. For example: SA’s accumulated pension fund value is estimated at R1 Trillion, with 27% siphoned off gives R270 Billion CASH, one-sixth of current GDP.
Even at 1/10th of this it is still a significant factor that is swelling Msp and saturating economies even further.
Globally Msp runs to Trillions of dollars.
Clearly then Lucas’ search for ‘that last bit of information’ is an incorrect proposition. There is a MASS of information missing about a MASS of REAL money, and in turn a MASS of information missing about a MASS of IMAGINARY money.
Also, since we know that the current unitary-model interest rate control device does not provide rational control, we can further state that it is proof of the absence of engineering within the ‘inexact sciences’. Hence it is proof that Money is irrationally influenced (i.e. there is no control – as control implies rational).
Therefore it is not currently possible to develop ‘exact science’ models based upon statistical analyses of rationally controlled money – because Money is not rationally controlled.
Flowing from this we also cannot develop ‘exact science’ models of the secondary links between inflation & unemployment; and any models that have been developed are purely speculative in nature.
A further point is that Inflation is not just simply an increase in prices, it is also a reduction in money value.
Since the unitary interest rate model does not maintain value of deposits, against which money is borrowed, it means that deposits are losing value – i.e. savers are seeing a loss in money value. This means that people are buying goods with money that loses value.
Let’s summarise this:
- The absolute level of Money Supply is unknown
- Hence an injection of additional Money (known amount) into an economy cannot be quantified as a percentage of prevailing level of Money (unknown)
- The Money -> Inflation link is pre-calculated, but against incorrect data; regardless of the underlying flaws, the causal direction is wrongly stated.
- Inflation is both an increase in prices and a reduction in money value;
- The reduction in money value is ignored (wrongly) by economists in the Money -> Inflation link, and elsewhere.
On these points alone figure 1, as reproduced in Lucas’ lecture, cannot be correct.
Further,
The Inflation -> Unemployment link is, intuitively, (at most) a secondary effect.
It is important to recognise that the controllers of Msp are not philanthropists, they are Globalisation Mastermind Terrorists.
(Is there really any difference between:- terrorists who use hot-war weapons to kill people, from those who use hot-money weapons to impoverish, and hence starve, people slowly to death?
Yes, there is, the hot-war weapon terrorists kill more quickly, hence more humanely.)
Regulation is needed to disempower the Msp component, which in turn would disempower the controllers/terrorists. The easiest, as a first pass, would be as proposed before, to develop trading cycle delays, to dismantle futures markets & other speculative markets, remove dual-listings, to develop other appropriate protections.
(Properties are not traded as shares are, there are regulatory procedures that slow the cycles and diminish over-heating.)
Reducing the frequency of Msp trading will cause speculative terrorists to look for alternative investment areas, this will increase flows constructively into Md, globally, = upliftment of impoverished regions.
And, most importantly, prosecution is needed against those that are manipulating Msp; those that have been plundering pension/investments & with other scams. Unfortunately SA’s National Director of Prosecutions has covered up on Gordon’s frauds, whether the UK Metropolitan police are including Gordon (& Branson) in the cash4honours investigation is not known, but they certainly need to investigate these massive frauds.
Money is clearly not neutral, it is a fully active transmission medium, the life blood, the fuel, of an economy which is an absolute necessity, but in urgent need of correct structure & control.
BUT, Money alone is not sufficient to solve the crashing-economies difficulties.
We can see that pumping money into developing countries does not produce results – they continue to collapse. Witness also SA’s & Ireland’s increasing instability, and re-enslavement.
The real issues cannot be explained by models (incorrect) that link Money -> Inflation, Inflation -> Unemployment; it’s intuitive that these models do not explain real world issues. Nor does General Equilibrium Macro Economics give explanation.
To develop equilibrium models to assist in understanding the real world is like developing a theoretical giant screen to bring global weather into stable equilibrium. It’s IMPOSSIBLE.
One can, though, develop protections.
Even with derived demand money (Md) people do not respond rationally, they respond emotionally. This is the attribute that Donald Gordon played on to defraud the masses (of their pensions & investments), and he was hugely successful for some 50 years (but now has eternity to ponder his actions).
Look also at the supply driven demand for new model cars – cars are depreciating assets, yet people are swayed by supply driven perceived needs/desires to have the latest model, regardless of affordability.
Pensions & cars are, after homes, the second & third biggest capital-spend; and often these are prioritised before homes.
People DO NOT maximise utils with Md spend.
Clearly then these economist models, that rely on rational thinking by the people in aggregate, are also incorrect.
If thought is given to the General Equilibrium Theory then it is seen that it is outside the bounds of tangible reality, and into the realms of infinity (see paper: Infinity-Eternity, Creation-Evolution).
It is fair to argue that ‘inexact’ economics scientists have lost direction because of their utilising defective analyses by ‘exact’ mathematics scientists that delve into the unreal, intangible, world of ‘infinity’, where it is impossible to test their theories, but where a little engineering foresight can nonetheless bring practical perspective into play and disprove many of the theories.
It is intuitive that saturated Msp manipulations prevent equilibrium from ever being achieved.
Following on:- General Equilibrium Macro Economics is an unrealistic concept, hence the models developed by economists are unrealistic, consequently policymakers cannot achieve meaningful results in economy control, or systems structuring.
The easiest way to begin understanding the ailings of economies is to recall (for those of us who experienced dad’s with old cars) the cold mornings when the car would not start. The first tests were fuel & spark. Invariably fuel was plentiful, but the spark was absent because of damp, or flat battery.
This intuitively is what is causing developing countries to remain in a crashed state – no spark-of-life! (see paper: Poverty, Disparity, Unfair Rules)
It is explains why when money (fuel) is pumped nothing happens; exactly as pumping fuel in an old car that had no spark.
Money, Spark-of-life, Economic Momentum, etc. are THE REAL WORLD, REAL LIFE ECONOMIC, LINKS THAT NEED TO BE DEVELOPED!!!!
They need to be qualified & quantified – and this is where the TRUE aspect of social/economy/business/finance science & engineering needs to be focussed.
All of the aforegoing can be analogised to the Wright Brothers, or de Havilland, if they were to have been continuously theorising about flight as ‘exact scientists’ but ignoring the engineering function, and hence not bothering to build planes, man would not be flying. (Value arguments about this are not considered)
The only reason that man has flown in Concord, or got to the moon, is because they built planes; i.e. they engaged as engineers which provided the feedback to the ‘exact scientists’ for them to refine their theories.
Economics, prior to CDADD’s pioneering, did not have engineering feedback, but still economists are not paying heed to engineering R&D; hence economies are not flying (rationally) – NOTE: free-fall is NOT flying, it’s crashing …….simply with a phase shift.
The economist models & theories behind ALL of the Nobel Prize (Economics) awards all have an inherent speculative aspect to them, because there is no sound engineering in any of the models.
A further cautionary note: Government driven change-programmes that are fed into the public sector for implementation also fail because of lack of flexibility to be able to modify, when required, criteria determined from the original objectives set.
The best example is that explained by Neville Shute in his autobiography, ‘Slide Rule’, in which he explains the dynamics of the R100/101 airships and why the government ship fatally crashed. The locked-in mindset that caused that crash is identical to government & public sector mindsets today.
The reason that this locked-in mindset prevails stems from dishonesty, in that governments do not reward for Intellectual Property value given upfront. It leaves governments blundering in the dark trying to evaluate skills that are to be engaged on a risk basis and through a rigid public sector process; invariably non-optimal skills are engaged, and objectives are seldom achieved.
A reward system removes the risk, frees up potential, and enhances government integrity.
The world needs to move forward, to include Engineering within the ‘inexact sciences’ environments, and to implement rational systems & controls.
Clearly the most important & first that should be addressed is that of Money & Money Supply.
The measures required here include engineering & implementation of:
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Multi-component interest rate control device
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Regulation to curb/control/reduce destructive speculative demand (and by induction increasing & widening constructive derived demand)
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Unbundling of narrowly held & controlled Financial Institutions.
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Intra & Inter economy protections (NOTE: protections are constructive barriers)
BUT, it requires honest leadership by government, churches, corporates, moral leaders to give effect to these measures.
It is a change requirement that is not dissimilar to the change in attitude to smoking in public places.
But change means that a change from ‘committee’ thinking is needed; and clearly the economist’s committee is reluctant in allowing change that shows up their defective models. Hence old committee mindset thinking prevails.
Ireland is currently experiencing the ‘new thinking’ call from government that SA experienced 2 to 3 years ago, but in SA it was simply a ploy for Finance Minister Manuel to ‘justify’ spending via & on his lover.
SA is facing civil war because solutions are not forthcoming because government rogues are spending money on lovers & personal agendas, similar to the Marcos’, hence those that bring proven results are isolated – hence, no meaningful change is coming about, hence the masses look to other ‘popular’ leaders who invariably have no appropriate skills, hence chaos.
Ireland is in danger of following suit because government, similar to SA government, are not honouring commitments; it has had some 80 tenuous years of ‘peace’, if one excludes the Northern Ireland issue. With the majority of young generations re-enslaved through globalisation the probability is extremely high that violence will increase.
It will simply be another component summed to the destruction by the Osamas of the world
And there are plenty of funds within the saturated Msp to buy global leaders, as the cash4honours issue proves.
Unless urgent measures are taken then this world will collapse into chaos as irrational, but understandable, terrorist wars escalate, with ever-increasing destructive power.
Economy Stability & Peace are, by necessity, mutually inclusive - BUT, Economist’s inexact models being exactly defective are blocking this.
Chris Addington Pr.Eng.
ADENDUM:
Nobel Prize (Economics) – Prize Lectures
(www.nobelprize.org)
1969 FROM UTOPIAN THEORY TO PRACTICAL APPLICATIONS: THE CASE OF ECONOMETRICS
Racnar Frisch
University of Oslo
1969 THE USE OF MODELS: EXPERIENCE AND PROSPECTS
Jan Tinbergen
1970 MAXIMUM PRINCIPLES IN ANALYTICAL ECONOMICS
Paul A. Samuelson
1971 MODERN ECONOMIC GROWTH: FINDINGS AND REFLECTIONS
Simon Kuznets
1972 GENERAL ECONOMIC EQUILIBRIUM: PURPOSE, ANALYTIC TECHNIQUES, COLLECTIVE CHOICE
Kenneth J. Arrow ,
Harvard University, Cambridge, Massachusetts
1972 THE MAINSPRING OF ECONOMIC GROWTH
John R. Hicks
1973 STRUCTURE OF THE WORLD ECONOMY OUTLINE OF A SIMPLE INPUT-OUTPUT FORMULATION
Wassily Leontief
Harvard University, Cambridge, Massachusetts, USA.
1974 THE PRETENCE OF KNOWLEDGE
Friedrich August von Hayek
1974 THE EQUALITY ISSUE IN WORLD DEVELOPMENT
Gunnar Myrdal
1975 MATHEMATICS IN ECONOMICS: ACHIEVEMENTS, DIFFICULTIES, PERSPECTIVES
Leonid Vitaliyevich Kantorovich
1975 CONCEPTS OF OPTIMALITY AND THEIR USES
Tjalling C. Koopmans
Yale University, New Haven, Connecticut, USA
1976 INFLATION AND UNEMPLOYMENT
- Milton Friedman
The University of Chicago, Illinois, USA
1977 THE MEANING OF "INTERNAL BALANCE"
- James E. Meade
1977 1933 AND 1977 - SOME EXPANSION POLICY PROBLEMS IN CASES OF UNBALANCED DOMESTIC AND INTERNATIONAL ECONOMIC RELATIONS
- Bertil Ohlin
Stockholm, Sweden
1978 RATIONAL DECISION-MAKING IN BUSINESS ORGANIZATIONS
- Herbert A. Simon
Carnegie-Mellon University, Pittsburgh, Pennsylvania, USA
1979 THE SLOWING DOWN OF THE ENGINE OF GROWTH
Sir Arthur Lewis
1979 THE ECONOMICS OF BEING POOR
Theodore W. Schultz
1980 SOME ECONOMIC SCENARIOS FOR THE 1980’s
- Lawrence R. Klein
University of Pennsylvania, Philadelphia, Pennsylvania 19 104, USA
1981 MONEY AND FINANCE IN THE MACRO-ECONOMIC PROCESS
- James Tobin
Yale University, New Haven, Connecticut 06520, U.S.A.
1982 THE PROCESS AND PROGRESS OF ECONOMICS
George J. Stigler
Graduate School of Business, University of Chicago,
1101 East 58th Street, Chicago, Ill. 60637, USA
1983 ECONOMIC THEORY IN THE MATHEMATICAL MODE
Gerard Debreu
Department of Economics, University of California,
Berkeley, CA 94720
1984 THE ACCOUNTS OF SOCIETY
Richard Stone
1985 LIFE CYCLE, INDIVIDUAL THRIFT AND THE WEALTH OF NATIONS
Franco Modigliani
1986 THE CONSTITUTION OF ECONOMIC POLICY
James M. Buchanan Jr.
1987 Robert M. Solow
GROWTH THEORY AND AFTER
1988 AN OUTLINE OF MY MAIN CONTRIBUTIONS TO ECONOMIC SCIENCE
Maurice Allais
Ecole Nationale Superieure des Mines de Paris et Centre National de la
Recherche Scientifique - France
1989 ECONOMETRICS AND THE WELFARE STATE
Trygve Haavelmo
1990 FOUNDATIONS OF PORTFOLIO THEORY
Harry M. Markowitz
Baruch College, The City University of New York, New York, USA
1990 LEVERAGE
Merton H. Miller
Graduate School of Business, University of Chicago, Chicago, Illinois, USA
1990 CAPITAL ASSET PRICES WITH AND WITHOUT NEGATIVE HOLDINGS
William F. Sharpe
Stanford University Graduate School of Business, Stanford, California,
USA
1991 THE INSTITUTIONAL STRUCTURE OF PRODUCTION
Ronald H. Coase
1992 THE ECONOMIC WAY OF LOOKING AT LIFE*
Gary S. Becker
Department of Economics, University of Chicago, Chicago, IL. 60637, USA
1993 ECONOMIC GROWTH, POPULATION THEORY, AND PHYSIOLOGY: THE BEARING OF LONG-TERM PROCESSES ON THE MAKING OF ECONOMIC POLICY
Robert W. Fogel
University of Chicago, Centre for Population Economics, Chicago, IL
60637, USA
1993 ECONOMIC PERFORMANCE THROUGH TIME
Douglass C. North
1994 GAMES WITH INCOMPLETE INFORMATION
John C . Harsanyi
Haas School of Business, University of California, Berkeley, USA
1994 THE WORK OF JOHN NASH IN GAME THEORY
(An edited version of a seminar devoted to the contributions to game theory of John Nash. The participants, in the order of their appearance, were:
HAROLD W. KUHN
Department of Mathematics, Princeton University, Princeton, NJ 08544, USA
JOHN C. HARSANYI
The Walter A. Haas School of Business, University of California at Berkeley,
Berkeley, CA 94720, USA
REINHARD SELTEN
Department of Economics, University of Bonn, Adenauerallee 24 - 42,
D-53113 Bonn, Germany
JÖRGEN W. WEIBULL,
Department of Economics, Stockholm University, S-10691 Stockholm,
Sweden
ERIC VAN DAMME
Centre for Economic Research, Tilburg University, 5037 AB Tilburg, The
Netherlands
JOHN F. NASH, J R
Department of Mathematics, Princeton University, Princeton, NJ 08544, USA
PETER HAMMERSTEIN, Max-Plank-Institute für Verhaltens Physiologie, 82319
Seewiesen, Germany, is the co-author of the intervention of Professor Selten.
1994 MULTISTAGE GAME MODELS AND DELAY SUPERGAMES
Reinhard Selten
Rheinische Friedrich-Wilhelms-Universität, Bonn, Germany
1995 MONETARY NEUTRALITY
Robert E. Lucas, Jr
University of Chicago, USA
1996 IINFORMATION & INCENTIVES: THE ECONOMICS OF CAROTS & STICKS
James Mirrlees
University of Cambridge, England
1996 WILLIAM VICKREY: A PIONEER IN THE ECONOMICS OF INCENTIVES
Jean-Jacques Laffont
University Social Sciences, Toulouse, France
1997 APPLICATIONS OF OPTION-PRICING THEORY: TWENTY-FIVE YEARS LATER
Robert Merton
GSBA, Harvard, Boston
1997 DERIVATIVES IN A DYNAMIC ENVIRONMENT
Myron Scholes
GSB, Stanford,
1998 THE POSSIBILITY OF SOCIAL CHOICE
Amartya Sen
Trinity College, Cambridge, UK
1999 A RECONSIDERATION OF THE TWENTIETH CENTURY
Robert Mundell
Columbia University, New York
2000 ECONOMIC CHOICES
Daniel McFadden
University of California
2000 MICRODATA, HETEROGENEITY AND THE EVALUATION AND THE EVALUATION OF PUBLIC POLICY
James Heckman
Economics, University of Chicago
2001 BEHAVIORAL MACROECONOMICS AND MACROECONOMIC BEHAVIOR
George A. Akerlof
Department of Economics, University of California, Berkeley,
2001 SIGNALING IN RETROSPECT AND THE INFORMATIONAL STRUCTURE OF MARKETS
A. Michael Spence
Stanford Business School, Stanford University, 518 Memorial Way, Stanford,
CA 94305-5015, USA
2001 INFORMATION AND THE CHANGE IN THE PARADIGM IN ECONOMICS
Joseph E. Stiglitz
Columbia Business School, Columbia University, 1022 International Affairs
Building, 420 West 118th Street, New York, NY 10027, USA
2002 MAPS OF BOUNDED RATIONALITY: A PERSPECTIVE ON INTUITIVE JUDGMENT AND CHOICE
Daniel Kahneman
Princeton University, Department of Psychology, Princeton, NJ 08544, USA.
2002 CONSTRUCTIVIST AND ECOLOGICAL RATIONALITY IN ECONOMICS
Vernon L. Smith,
Interdisciplinary Centre for Economic Science, George Mason University,
Fairfax, VA 22030-4444, USA.
2003 RISK AND VOLATILITY: ECONOMETRIC MODELS AND FINANCIAL PRACTICE
Robert F. Engle III
New York University, Department of Finance (Salomon Centre), 44 West
Fourth Street, New York, NY 10012-1126, USA.
2003 TIME SERIES ANALYSIS, COINTEGRATION, AND APPLICATIONS
Clive W.J. Granger
Department of Economics, University of California, San Diego, La Jolla, CA
92093-0508, USA.
2004 QUANTITATIVE AGGREGATE THEORY
Finn E. Kydland
University of California, Santa Barbara and Carnegie Mellon University,
Pittsburgh, USA.
2004 THE TRANSFORMATION OF MACROECONOMIC POLICY AND RESEARCH
Edward C. Prescott
Arizona State University and
Federal Reserve Bank of Minneapolis
2005 WAR AND PEACE
Robert J. Aumann
Centre for the Study of Rationality, and Department of Mathematics, The
Hebrew University, Jerusalem, Israel.
2005 AN ASTONISHING SIXTY YEARS: THE LEGACY OF HIROSHIMA
Thomas C. Schelling
Department of Economics and School of Public Policy, University of
Maryland, College Park, MD 20742, USA.