It's Mercantilism All the Way Down

He who knows only his own side of the case, knows little of that. -- John Stuart Mill

This post isn't really about mercantilism, per se. It's about polemic, dialogue and theory and the differences between them. The Sandwicman has been trying to fight polemic with polemic for nearly twenty years to no avail. I want to try to sketch out here a dialogic alternative.

In a 1948 article, "Dialectical Materialism and General Semantics," Anatol Rapoport outlined the technique used by Lenin in his polemic against "Machism" in Materialism and Empirio-Criticism. Lenin sought to discredit his philosophical adversaries by establishing that there are only two consistent world views and validating his own perspective, materialism, as having been "derived from self-evident facts with inexorable logic."

Although the adversary's view, idealism, may also be logically derived, it proceeds from dubious assumptions that are incompatible with the allegedly self-evident facts. From this polemical perspective, science "consists in carrying out a relentless struggle" against the proponents of the erroneous world view.

Having established that there is an "unscientific" and a "scientific" point of view -- a myth and a reality -- the task for the conscientious polemicist is then to demonstrate that the opponent does indeed make the erroneous assumptions from which the unscientific, mythical view is logically derived. Lenin took elaborate pains to show that his adversaries believed what he said they believed in spite of any protestations to the contrary.

Rapoport contrasted Lenin's meticulousness with "modern efficient smear methods, such as defining subversive activity to be attendance at a concert by Paul Robeson." The problem with polemics, in Rapoport's view, is that there are no winners "in the sense that no evidence exists of significant conversions to this or that point of view ever having taken place as a result of polemic." This raises the possibility that the function of polemic may often be to forestall, rather than to "win" a debate.

Classical political economy -- or at least some key tenets of it -- may be usefully viewed as a polemic against mercantilism. The polemical strategy is to establish the correctness of the polemicist's view on the grounds of the error of the opponent's (supposedly) contrary view. The opposite of false is true. If that guy is wrong, I must be right! Whether the two positions are, in fact, "opposites" is a question that is best either evaded or obscured.

I would like to use as a demonstration text, Josiah Tucker's implicit praise of Sir Josiah Child's statement of the "infallible maxim" and condemnation of a "vulgar error." Child could be described as a mercantilist with some anticipations of post- or anti-mercantilism. He was also been described as a self-serving projector who donned the mantle of scientific objectivity to advance his cause. As the principal shareholder in the East India Company, he was one of the wealthiest men in England.

Tucker's approval of Child's argument is implicit as it comes in the form of a question -- three questions, to be exact:

Whether Sir Josiah Child did not call it a VULGAR ERROR to say, We have more Hands than we can employ? Whether he was a Judge of Trade? And Whether it is not an infallible Maxim, That one Man's Labour creates Employment for another?

The modal verb, can, does a lot of work in that first question. As a positive verb, it could refer to an ability, a possibility, an opportunity or a permission. In this passage, though, it performs as a substitute for the negative, "we can't employ all of those (additional) hands." It is vague on how many can't be employed. One? A large number?

The juxtaposition of infallible maxim to vulgar error suggests that "one man's labour creates employment for another" is a direct rebuttal to "we have more hands than we can employ." But the former passage is also ambiguous. Are the two employments equivalent to each other? Are they both 40-hour jobs at $15 an hour? Why can't one man's labor create employment for two others or for half? Wouldn't it be more accurate to say that one man's labor creates some fraction of employment for many others?

Given the imprecision of both statements, wouldn't it be possible for either of them to be true in some circumstances and sometimes even for both of them to be true at the same time? Of course it would. But the descriptors of "infallible maxim" and "vulgar error" assert otherwise. Would it be possible for the maxim to be true and the error to be false? Yes. Could the former even be a better predictor of changes in employment? Perhaps.

Polemic doesn't do "maybe."

In Fights, Games and Debates (1960), Rapoport proposed a set of procedures for carrying out an ethical debate. The first rule for such a debate is that each party must present the opponent's case to the opponent's satisfaction before presenting their own case.

The second step is to identify specific situations in which the opponent's position is correct. This is possible even in extreme situations. Rapoport gives the example of the claim that "black is white." One can agree that in a photographic negative, black is indeed white.

Finally, in presenting one's own case, one may proceed to point out the circumstances in which the opponent's claim is not applicable. The purpose of these procedures is to encourage each participant in the debate to identify with the opponent by empathizing with the thought process that produced their contentious position.

Of course there is no guarantee that the opponent will follow the rules of an ethical debate. Rapoport later recalled an incident with an associate director of the Institute of Advanced Studies in Vienna. He began by presenting what he viewed as the associate's perspective,  "you think that I did something just in order to embarrass you." The associate agreed that this was indeed what he thought. When asked to state Rapoport's perspective, though, he replied, "Well, you have just stated it. You said yourself that you did it to embarrass me, didn't you?"

Rapoport might have retorted, "You think that I admitted that I did something just to embarrass you." To which the associate could have responded, "Yes and you just confirmed that you did admit it!" And so on, in Pythonesque fashion.

The "you say that I say that..." double structure of the latter exchange offers a template for handling the standard fallacy claim. We may start with one of the beliefs that Sir Josiah Child labelled a vulgar error, "We have people enough, and more than we can employ."

Restating Child's position involves acknowledging both the status of the belief that there are more people than can be employed and  his evaluation of the belief as a vulgar error. For a while I had been under the impression that Child's rebuke of the  vulgar error was directed at John Graunt's suggestion that there may be "but a certain proportion of work to be done." But I have come across an earlier text that corresponds almost word for word with the supposition that Child criticized. It is from a 1630 pamphlet, The Planter's Plea, by the Puritan divine, John White, promoting colonization in Massachusetts:

It is a fearfull condition, whereby men are in a sort enforced to perish, or to become meanes and instruments of evill. So that the conclusion must stand firme, we have more men then wee can imploy to any profitable or usefull labour.

The same year White published his pamphlet, his pilgrims founded a colony in Massachusetts and named in Dorchester, after the Dorset, England town where White preached. It is now the largest neighbourhood in Boston. Ironically, Child's pamphlet also contained propaganda for English emigration – to the slave sugar plantations in the Caribbean.

So Child was correct that there were indeed people claiming that there were more people in England that could be employed. As for his evaluation of the claim as a vulgar error, Child defined the term in the preface to his New Discourse of Trade, pointing out that men often fail to "distinguish between the Profit of the Merchant and the Gain of the Kingdom" or mistake the former for the latter.

Although in White's case it is not the merchant's profit that he is mistaking for the kingdom's gain, he is promoting a colonial scheme. But he may indeed be offering it as a solution to a situation that he could be overstating or that might have some less drastic remedy than emigration to America.

So it is clear that Child's criticism is valid in certain circumstances. 

Putting White's argument into context, he acknowledges the possible objection that the unemployment he observes is due to ill government rather than to an excess of numbers. His answer to that objection is partial agreement, that better government could reform many of the evils he decries but argues that there remain limits to tillable land and pasture for livestock. Since he was writing at a time when most livelihood was based on subsistence agriculture, he would not have the benefit of relying on knowledge of future technological developments.

I Confess, Graunt Didn't Invent Economics...

Aristotle did. As Philip Kreager reminded me:

Historians of economics have for some time treated his [Aristotle's] writings as formative, even though relevant passages in the Politics and Ethics amount to only a few pages.

Wait. There's more:

In the Politics, however, population is a recurring topic, extensively discussed and integral to the overall argument. "The first part of a state's equipment," Aristotle says, "is a body of men, and we must consider both how many they ought to be and with what natural qualities,"

The almost obsessive focus on proportionality I noted in Graunt and Locke is no proof of Graunt's influence on Locke. The proportional view was central to Aristotle's Politics and everybody in early modern humanism "up to and including Adam Smith" was doing Aristotle. You didn't have to read Aristotle. The commentaries on Aristotle were ubiquitous. For Aristotle,

The logic of proportional versus numerical relationships also describes the economy of the household in relation to its size, and this in turn shapes the wider demography of constituent groups. Oikos, the household, is the root of oikonomia, the art of household management, from which we derive the modern term "economics."

What Graunt did contribute was a brilliant synthesis of humanist Aristotelianism with the techniques of merchant bookkeeping.

Graunt's work brilliantly synthesized humanist methods of natural history and rhetorical communication that were basic to Aristotelianism with techniques of merchant bookkeeping in which population totals are treated as open or relative accounting balances, rather than closed aggregates; his method arose as a direct response to the need to calculate balances in the body politic.

So no, Graunt didn't invent economics. He did invent the science of population statistics, though, and thus laid the foundation for modern social sciences. As for Graunt's contribution relative to Petty's, Walter Wilcox aptly summed up my own impression, "To the trained reader Graunt writes statistical music; Petty is like a child playing with a new musical toy which occasionally yields a bit of harmony."

"A certain proportion of work to be done": How John Graunt invented economics

John Graunt’s Natural and Political Observations on the Bills of Mortality (1662) is acknowledged as the inaugural text of "political arithmetick." Graunt is ranked along with William Petty, Charles Davenant and Gregory King as a major pioneer of "the art of reasoning by figures, upon things relating to government." 

In their Outline of the History of Economic Thought, Screpanti and Zamagni, however, describe Graunt as a "follower" of Petty. In books and articles on history of economic thought, Petty is mentioned ten times as often as Graunt (JSTOR, Google Scholar). Graunt is more frequently thought of as a pioneer of population studies and vital statistics. Regarding that latter capacity, Philip Kreager has written extensively and wonderfully on Graunt's truly innovative methodology.

It is convenient at this point to recall that to produce, to consume and to trade are actions first, as are supply, demand, value and price – before they can be treated as things and aggregated. People perform those actions and they do them in proportion to their numbers, abilities and appetites. 

Proportion, by the way, is central to Graunt's methodology. Did I mention the word appears no fewer than 68 times in Graunt's Observations? Kreager's article, "New Light on Graunt" contains 48 occurrences of the word. The methodological significance of this word for Graunt cannot be overstated. I am therefore quoting in full Kreager's explanation of the analytical role of proportional checks in bookkeeping and Graunt's Observations:

A population, like a commercial enterprise, must achieve at least an equilibrium of income and expenditure over time, if it is to survive. Graunt noticed that the bills, like a merchant's day-book, provided a continuous record of additions and subtractions in a constantly changing numerical whole. The diversity of transactions in people and trade, however, make such a simple running account difficult to interpret. The 'method of double-entry' bookkeeping, widely promoted in Graunt's time, claimed to provide a solution to this problem by revealing the inherent order and regularity of trade. The procedure may be summarized as follows. On the basis of his daily journal of transactions, a merchant was supposed to classify and tabulate every entry according to a few major types of account. Successive transactions pertaining to an account were then entered twice in a ledger, in parallel columns, one entry showing the changing balance of debt, and the other of credit. The comparison or proportion of the two columns relative to starting and subsequent balances provided the merchant with an immediate evaluation of the current and past status of the account, relative to others. This made it possible to spot accounting errors, to isolate losses, and to distinguish real profits from diverse fluctuations in income.

Therefore, when Graunt wrote, "…if there be but a certain proportion of work to be done; and that the same be already done by the not-Beggars; then to employ the Beggars about it, will but transfer the want from one hand to another…" it is virtually certain that he was not referring to a "fixed amount" of work. Instead he was referring to a regularity. Change happens but disproportionate change may be cause for concern.

It is difficult to think of a economically-significant fact that doesn't involve "a certain proportion" of something to something else. GDP per capita gauges a certain proportion between economic output and population. Productivity measures a certain proportion between economic output and hours of work. Economic growth reflects a certain proportion between one year's output and the next's. The unemployment rate considers a certain proportion between the labor force and the number of people who are looking for work. It is certain proportions all the way down.

Compare, though, Dorning Rasbotham's lament, 118 years after Graunt, about people who say there is a "certain quantity" of labor to be performed:

There is, say they, a certain quantity of labour to be performed. This used to be performed by hands, without machines, or with very little help from them. But if now machines perform a larger share than before, suppose one fourth part, so many hands as are necessary to work that fourth part, will be thrown out of work, or suffer in their wages. The principle itself is false. There is not a precise limited quantity of labour, beyond which there is no demand.

Does the absence of a "precise, limited demand for labor" mean the introduction of machines that produce 25 percent more output can have no disproportionate effect whatsoever on the demand for labor? Rasbotham's rant didn't address that question but his disdainful tone insinuates that to even inquire about such things is tantamount to economic illiteracy. The legacy of that anticipatory polemic against the yet-to-be-born Luddites has been an echo chamber of disdain.

For a while I had been thinking that Sir Josiah Child's rebuke, as a vulgar error -- so commonly held as to have become "almost proverbial" -- of the supposition that "we have people enough, and more than we can employ"  was directed at Graunt's suggestion that there may be but a certain proportion of work to be done. But I have found an earlier text that corresponds almost word for word with the supposition that Child scorned. It is from a 1630 pamphlet, The Planter's Plea, by the Puritan divine, John White, promoting colonization in Massachusetts:

It is a fearfull condition, whereby men are in a sort enforced to perish, or to become meanes and instruments of evill. So that the conclusion must stand firme, we have more men then wee can imploy to any profitable or usefull labour.

The same year White published his pamphlet, his pilgrims founded a colony in Massachusetts and named it Dorchester, after the Dorset, England town where White preached. It is now the largest neighbourhood in Boston. Ironically, Josiah Child's pamphlet also contained propaganda for English emigration – to the slave sugar plantations in the Caribbean.

Graunt's Observations had a large and immediate impact. The Royal Society made him a charter member. Mathematicians and natural scientists such as Huygens, Leibniz and Halley were impressed by Graunt's practical application of quantitative reasoning. John Locke owned a copy and paid homage to Graunt's method by keeping a record of mortality statistics in his notebooks during the time he was exiled on the continent.

Perhaps the influence of Graunt's Observations was much greater than has previously been acknowledged. Much, much, much greater.  In "The scientific method of Sir William Petty" Ullmer pointed out that "the only data available to Petty" in his pioneering accounting of national income came from Graunt's National and Political Observations -- the rest was conjecture.  In John Locke and Agrarian Capitalism, Wood credited Graunt with having "had the advantage of being able to use parish records in his examination of the city of London mortality rates" while Petty and Locke had to rely on "commonsensical estimates."

Referring to Locke's pivotal 1668 memorandum on interest, Some of the consequences that are like to follow upon lessening of interest to 4 percent, Wood observed that "Locke's memorandum abounds with such speculative calculations, which serve as points of departure for chains of numerical deductions."

Recent Locke scholars have argued that Locke's famous chapter five, "Of Property," of his Second Treatise of Government can only properly be understood in the context of explicit arguments from the 1668 memorandum and in his Essays on the Law of Nature, which appear to have been written in 1664. Recall that Graunt's Observations was published in 1662 and was an immediate sensation.

Proportion is the central analytical concept of Locke's 1668 memorandum. The word occurs in the text sixty times. Even "certain proportion" occurs twice:

For there being a certain proportion of money necessary for driving such a proportion of trade, so much of this money as lies still lessens so much of the trade.

That in a country open to the commerce of the world and that uses money made of the same materials with their neighbours, any quantity of that money will not serve to drive any quantity of trade, but that there must be a certain proportion between money and trade.

Proportionality is also a key concept in Locke's final essay/question on the law of nature. Locke composed the essays in Latin but two recent translations agree in their translations:

The human race has only one patrimony and this is always the same and it is not increased in proportion to the number of births.

In point of fact, the inheritance of the whole of mankind is always one and the same, and it does not grow in proportion to the number of people born.

The question Locke was addressing in this essay was whether the law of nature could be based on self interest. His answer was "no" and the reason was that the bounty of nature did not increase in proportion to the number of people, therefore "no gain falls to you which does not involve somebody else's loss." Or, to put it another way:

…when any man snatches for himself as much as he can, he takes away from another man’s heap the amount he adds to his own, and it is impossible for anyone to grow rich except at the expense of someone else.

In Locke's view, then, the law of nature is a zero-sum game – but only if every person acts in their own self interest. The qualification is crucial. Locke suggested instead that obedience to the law of nature generates utility in the form of "peace, harmonious relations, friendship, freedom from punishment, security, possession of property, and – to sum it all up in one word – happiness." Paradoxically, then, food, clothing and other goods are limited but possession of property -- being a socially-generated utility -- is not. The dilemma is abated by generosity, "a great number of virtues, and the best of them, consist only in this: that we do good to others at our own loss."

It is not my intention to defend or criticize Locke's argument but simply to point out the light that it shines on his canonical justification of private property in the Second Treatise on Civil Government. Locke concluded his essay on the law of nature with the observation that "the rightness of an action does not depend on its utility; on the contrary, its utility is a result of its rightness."

In his "Treatise of Taxes & Contributions" (1662) William Petty made the same point about the proportion between money and trade that Locke emphasized six years later in his memorandum on interest:

…there is a certain measure, and proportion of money requisite to drive the trade of a Nation, more or less than which would prejudice the same.

Compare Locke's text:

For there being a certain proportion of money necessary for driving such a proportion of trade, so much of this money as lies still lessens so much of the trade.

Yet another parallel between the texts of Graunt, Petty and Locke appears in their discussions of "intrinsic value." Graunt's distinction between intrinsic and accidental, or extrinsic, value comes in his conclusion, in which he stressed that the purpose of "all this laborious buzzling and groping" was to inform the "art of governing and the true politics… how to preserve the subject in peace and plenty," the foundation of which "is to understand the land, and the hands of the territory to be governed, according to all their intrinsic and accidental differences…":

It were good to know, how much hay an acre of every sort of meadow will bear? how many cattle the same weight of each sort of hay will feed and fatten?… It is no less necessary to know how many people there be of each sex, state, age, religion, trade, rank, or degree, etc. by the knowledge whereof trade and Government may be made more certain and regular; for, if men knew the people as aforesaid, they might know the consumption they would make, so as trade might not be hoped for where it is impossible.

For his part, Petty contrasted intrinsic and extrinsic value in the course of his discussion of usury, where he proposed "a survey of the figures, quantities and situations of all the lands," which would compare the suitability of lands for various crops and of those crops for feeding livestock:

As for example; ¡f there be ten acres of Land, I would have it judged whether they be better for Hay or Corn; if for Hay, whether the said ten Acres will bear more or less of Hay then ten other Acres; and whether an hundredweight of the said Hay will feed or fatten more or less, then the same weight of other Hay… This I call a Survey or Inquisition into the intrinsick Values of Land, the extrinsick or accidentall follows.

In what followed, Petty outlined the rudiments of a labor theory of value: "If a man can bring to London an ounce of Silver out of the Earth in Peru, in the same time that he can produce a bushel of Corn, then one is the natural price of the other…"

Locke took a radically different approach to intrinsic value, arguing that the intrinsic natural worth of any commodity was due to its serviceability to the necessities of life but "that there is no intrinsic natural settled value in anything as to make any assigned quantity of it constantly worth any assigned quantity of another commodity." According to Locke, intrinsic value is conferred by consent on gold and silver money by virtue of its scarcity and durability. This intrinsic value is not natural, "yet being universal has generally but not always... the same effect as if it were natural."

The necessity therefore of a proportion of money to trade depends on money not as counters but on money as a pledge… First, because a law cannot give to bills that intrinsic value which universal consent has annexed to silver and gold.

Locke didn't complete the thought with a second reason why trade depends on money as a pledge but instead elaborated on the first, pointing out that bills "are liable to unavoidable doubt, dispute, and counterfeiting and require other proofs to assure us that they are good and true security."

To what purpose, then (mimicking the wording of Graunt's conclusion) tends all my laborious buzzling and groping? My contention is that Graunt's "if there be but a certain proportion of work to be done" was far from a "vulgar error," "false principle" or "populist fallacy" to be ridiculed by subsequent legendary generations of anonymous but disdainful textbook economists. It was instead a provocative statement of a thesis -- qualified by the conditional phrase, "if there be" -- that good government depends on conscientious attention to the due proportionality between trade, population, land, labor, consumption and social trust "so as trade might not be hoped for where it is impossible." The thesis was supported by data, at a time when data was scarce.

John Graunt invented economics.

You Grow the Pie?

The New York Times recycles boilerplate nonsense:

YOUR MONEY: Disproving Beliefs About the Economy and Aging 

The notion that the job market is a zero sum game — more jobs for one group translates into fewer jobs for another group — is deeply ingrained. Economists call the belief that there are only so many jobs in an economy the "lump of labor fallacy." 

But the truth is that growth in the number of jobs for older people tends to run in parallel with gains for younger workers. "There isn’t a fixed number of jobs," Ms. Carstensen said. "You grow the pie."

When I see a pie growing, I toss it in the compost.

Where to begin? "The notion... is deeply ingrained." Deeply ingrained in WHAT? WHO thinks this notion, aside from Ms. Carstensen, Christopher Farrell and other disciples of unidentified "economists" who call this believerless belief the "lump of labor fallacy"?

The old zero sum game gambit AGAIN? Oh come on. Haven't the boilerplate recyclers heard of prisoner's dilemma yet?

Make America Fake Again!

Immaterial labor, unconventional oil, multi-level marketing, fictitious capital, negative interest rates, counterfeit politics...

You've really got to read the Italian Autonomist Marxists -- people like Paolo Virno and Maurizio Lazzarato -- if you want to get a handle on what's up with the Donald Trump shtick. More precisely, cultural theorists have used the Automists' concept of immaterial labor to analyze the appeal of Trump's reality game show, The Apprentice. The show is a metaphor for the man, the campaign and the distinctive "virtuoso" labor of neoliberal capitalism.

What it all boils down to is the blurring of the boundaries between work and entertainment; employment, unemployment and precarious under-employment; advertising, entertainment, news and education (of a sort). In this twilight "workplayce," it is the image of competitive personality -- rather than any substantive competence -- that succeeds. Doing the job -- or any job at all -- is secondary to projecting that image. The pinnacle of success is celebrity.

I have to confess that I have never watched a single episode of The Apprentice. For that matter, I have never watched a single episode of any TV "reality" show. I don't feel like I have missed much. However, there are people who build their dreams and aspirations around "brandom" -- brand fandom. This is nothing new, just more pervasive.

What I'm getting at here is that Trump's nomination is no anomaly. It's the new normal personified.

Did I mention the blurred boundaries between work and entertainment? Writing blog posts is my entertainment. I am writing this "at work" (although not on work time). In isolation, the critique of immaterial labor is unsatisfying because it seems to lead into a hall of mirrors made of signifiers and subjectivities. Where is the substantive anchor? Isn't there some universal unit in which value can be evaluated?

It helps to recall the sense in which the seemingly new has been there all along. In his notes on James Mill, Marx observed the way that debt transforms the human personality into a commodity:

Credit is the economic judgment on the morality of a man. In credit, the man himself, instead of metal or paper, has become the mediator of exchange, not however as a man, but as the mode of existence of capital and interest. The medium of exchange, therefore, has certainly returned out of its material form and been put back in man, but only because the man himself has been put outside himself and has himself assumed a material form. Within the credit relationship, it is not the case that money is transcended in man, but that man himself is turned into money, or money is incorporated in him. Human individuality, human morality itself, has become both an object of commerce and the material in which money exists.

It is difficult to avoid a moral judgment of the morality implied in the human personality becoming an object of commerce. However, that is just the kind of restraint needed to arrive at an objective evaluation of what is happening. Regardless of whether it is a good thing or a bad thing, it is an historical process and any transcendence of it will also entail an historical process, not a moral judgment.

Criticisms of Donald Trump's policy positions or of his supporters' alleged racism or xenophobia are incidental, if not irrelevant. In crucial respects, Trump is indistinguishable from Hillary Clinton or even Bernie Sanders. He is a celebrity projecting "larger than life" personality traits that have become an object of commerce. Clinton's or Sanders's personalities and what they stand for may be more appealing to particular market segments, but... it all comes down to what was once provocatively referred to as "The Selling of the President."

But it is not just a matter of sovereign citizens acting in their capacity as sovereign consumers expressing their presidential brand preferences. Those brands are counterfeit, as are the debtor/citizen/consumers electing them!

Since, owing to this completely nominal existence of money, counterfeiting cannot be undertaken by man in any other material than his own person, he has to make himself into counterfeit coin, obtain credit by stealth, by lying, etc., and this credit relationship – both on the part of the man who trusts and of the man who needs trust – becomes an object of commerce, an object of mutual deception and misuse. Here it is also glaringly evident that distrust is the basis of economic trust; distrustful calculation whether credit ought to be given or not; spying into the secrets of the private life, etc., of the one seeking credit; the disclosure of temporary straits in order to overthrow a rival by a sudden shattering of his credit, etc. The whole system of bankruptcy, spurious enterprises, etc.... As regards government loans, the state occupies exactly the same place as the man does in the earlier example.... In the game with government securities it is seen how the state has become the plaything of businessmen, etc.

In other words, phoniness is a large part of Trump's appeal to his supporters -- as it is to the supporters of Hillary Clinton and Bernie Sanders. None of it will restore "the American Dream" or "the middle class." Presidential politics is part of the problem, not the solution.

Game theory and rationality -- the road less traveled

In "Game Theory and Cold War Rationality: A Review Essay," Roy Weintraub reviews two recent books, The World the Game Theorists Made (2015) by Paul Erickson and How Reason Almost Lost Its Mind by Paul Erickson, Judy Klein, Lorraine Daston, Rebecca Lemov, Thomas Sturm, and Michael Gordin (2013),both of which are published by University of Chicago Press.

Two of the "minor characters" in both of those books, Kenneth Boulding and Anatol Rapoport, merit particular attention for their role in mapping a "road less traveled" -- a road with ethical rather than strategic directions. Boulding is credited as a founder of ecological economics, along with Nicholas Georgescu-Roegen and Karl William Kapp. Boulding and Rapoport were plotting behavioral economics at Stanford two decades before Kahneman and Tversky arrived there. Boulding and Rapoport, again, cultivated the early work of Thomas Schelling that led to his Strategy of Conflict. Rapoport's Strategy and Conscience was an explicit reply to Schelling's book. Rapoport's experimental work with prisoner's dilemma anticipated Elinor Ostrom's.

The road taken by the mainstream was more constrained by Cold War ideology than was the approach pursued by Boulding and Rapoport. It was also elevated to orthodoxy by its ideological perspective. This is not to say that it was wholly unscientific. It was scientific to the extent that it could produce results useful to the prevailing purposes. This provisional scientificity is the essence of the qualifier "almost" in  the phase "almost lost its mind." But what may have been almost madness in 1960 or 1970 is today stark raving lunacy.

Growth analogies, microfoundations and Mathematical Biology of Social Behavior

You want MICROfoundations? In Mathematical Biology of Social Behavior, Nicolas Rashevsky attempted "the next step" of examining the social interactions of individuals in terms of the mathematical biophysics of the central nervous system. He paid special attention to economic questions of wealth, distribution, motivation, learning, rationality, habit, imitation, individualism and collectivism.

Rashevsky's mathematics must be seen as exploratory and often is qualified by the admission that assumptions are unrealistic but that more realistic assumptions make the math intractable. The results thus offer insights, not "conclusions." The contrast with alleged microfoundations as practiced by contemporary mainstream economists couldn't be starker. The latter embrace unrealistic assumptions as a feature, not a bug, because it enables them to crank out conclusions based on biases they are seeking to confirm.

Simon Kuznets on growth:

Growth is a concept whose proper domicile is the study of organic units, and the use of the concept in economics is an example of that prevalent employment of analogy the dangers of which have been so eloquently stressed recently by Sidney Hook. 

Sidney Hook on analogy:

As an argument it is formally worthless and never logically compelling. An argument from analogy can be countered usually with another argument from analogy which leads to a diametrically opposed conclusion. ...

At best an analogy can only suggest a plausible conclusion whose validity must then be established on other grounds. The uncritical use of analogies is the bane of much historical writing, particularly when the resemblances lack clear definition or when they are blurred and presented as identities. ...  The belief that society is an organism is an old but fanciful notion. It can only be seriously entertained by closing the eye to all the respects in which a group of separate individuals differs from a system of connected cells, and by violently redefining terms like "birth," "reproduction," and "death." 

Gregory Bateson on schizophrenia:

...the ‘word salad' of schizophrenia can be described in terms of the patient’s failure to recognize the metaphoric nature of his fantasies. In what should be triadic constellations of messages, the frame-setting message (e.g., the phrase 'as if') is omitted, and the metaphor or fantasy is narrated and acted upon in a manner which would be appropriate if the fantasy were a message of the more direct kind.

Prayer - Science = 0

Yes, it’s okay to talk about climate change right now. The devastating natural disaster in Fort McMurray is "consistent" with climate change.

The Fort Mac wildfire is horrific. Miraculously, no people have been killed. Saying that the unseasonably hot conditions in Alberta are "consistent with" climate change is not to say that they are "caused by" anthropogenic global warming. But there is no jurisprudential rationale here for requiring that guilt be established beyond a reasonable doubt. On the contrary, the precautionary principle is the appropriate standard for evaluating the possible connection. 

A lot of people go on social media to offer their prayers for the people affected by the disaster. There's nothing wrong with that. But what gets the Sandwichman's goat are the sanctimonious edicts against "politicizing" the disaster by mentioning the connection to climate change. "Now is not the time." And if not now, when?

Perhaps one can most quickly unravel the enigma of Pareto's personality by saying that his was the psychology of the disappointed lover. 

Is the Road to Hell Paved with Pareto Improvements?

In a large multiplayer prisoner’s dilemma, any change in any one individual’s strategy doesn’t affect anyone else, so a player can know that defection will be a Pareto improvement. We might say that the problem of social evil is that the road to hell is paved with Pareto improvements. -- Ted Poston, “Social Evil,” Oxford Studies in Philosophy of Religion, Volume 5

Poston's "social evil" is what previous authors have called a social trap or, more famously, the tragedy of the commons.

A Pareto improvement is a change that makes at least one person better off without making anyone worse off. According to the standard fable, voluntary exchange results in a Pareto improvement because each party in the exchange gets something they wanted more than what they gave up for it.

A prisoner's dilemma involves a situation where the individual payoff to each player for defection is better, regardless of whether the other player defects or co-operates but the collective payoff is maximized when both players co-operate.

In a large multiplayer prisoner's dilemma game, defection by some players may have no effect on the other players' outcomes, while defection by a large number of players may have catastrophic effects after some vaguely defined tipping point has been reached. Within limits, defections thus appear to result in a Pareto improvement, where some players are made better off and no one is made worse off.

In Fights, Games and Debates, Anatol Rapoport presented a production and exchange model that deserves to be much better known. It is a very elementary model and thus, as Rapoport warns repeatedly, the results should not be taken as a faithful depiction of what is likely to happen in reality. However, it offers some critical insights into "common sense" assumptions and specifically into the idea of Pareto improvement, which is also based on extreme simplification.

Rapoport's production and exchange "society" consists of two people who each produce goods and exchange with each other a uniform, fixed ratio of their products. The individuals derive utility from the goods they produce and, presumably, can increase their utility by exchanging some of the goods they produce for the different goods their counterpart produces.

Effort to produce those goods, however, is a disutility. The utility from goods increases logarithmically as the quantity of goods increases but the disutility of effort increases in proportion to the amount of effort expended.

Agents in this model can only change their utility by increasing or decreasing their own effort and output. Thus, plotted on a graph, X can only move along the x-axis and Y can only move along the y-axis. Under the stipulated conditions, a stable equilibrium can only be achieved when the utility of the proportion retained by each producer is larger than the disutility of effort.That is to say, the proportion retained cannot be too small and the disutility of effort cannot be too large.

In the absence of a stable balance, any relaxation of effort by one of the agents will lead to parasitism by that agent as the other will immediately compensate by increasing effort, the first agent will slack off more to compensate for the increased effort of the other -- and so on.

But even in the presence of a stable equilibrium, the total utility of the two agents, at the balance point, will be less than the total would be without exchange, as long as their production/effort decisions are guided solely by their own utility rather than by some agreement about how to link their production effort to achieve a "social optimum." This outcome is contrary to the "common sense" interpretations of Pareto improvement and Pareto optimality. As Rapoport cites his mentor, Nicolas Rashevsky, it turns out that:

The only 'ethics' which leads to the attainment of maximum joint utility in the model of society we have considered is the 'egalitarian ethic,' in which the concern for self and for other are of equal weight.

It would be easy to dismiss Rapoport's conclusion as pertaining only to very restrictive premises. This is a point that Rapoport reiterates throughout his exposition. But the objection applies equally to Pareto's model.

Vilfredo Pareto is not readily perceived as a proponent of the egalitarian ethic. In his model, though, Rapoport unpacked a tacit premise of Pareto that rational agents would act "as if" guided by some unacknowledged intuition of linkage -- one might even call this invisible intuition "moral sentiments."

Furthermore, the restrictiveness of Rapoport's assumptions may not be as unrealistic as it seems at first. The fixed ratios of exchange can be relaxed to merely widespread similarities in the ratios of exchange. The specification for a stable equilibrium that the proportion of an individual's product exchanged does not exceed the proportion retained can be rationalized by the fact that there is a roughly equal number of hours of unpaid household work performed in the world as there are waged hours of labor. All this is before we move on to the issue of "multiplayer games" -- of a society in which individual actions that ostensively do no harm may accumulate into "social evil."

In Beyond the Invisible Hand, Kaushik Basu examined the issue of outlawing yellow dog contracts, as the Norris-LaGuardia Act did in 1932:

It could he claimed that if one worker prefers to give up the right to join trade unions in order to get a certain job that demands this of workers, then this may be a Pareto improvement. But if such yellow dog contracts are made legal, then lots of firms will offer these contracts, and the terms for jobs without a yellow dog clause may deteriorate so much that those who are strongly averse to giving up the right to join unions will he worse off in this world. 

Basu proceeds to consider labor standards in cases in which there are multiple equilibria. He asks, "Should the law be used to set a limit on the number of hours that a worker is allowed to work?" His answer -- backed by reference to supporting empirical studies -- would earn the scorn of economists who fancy a lump of labor behind every proposal for shorter hours:

A statutory limit on work hours can, by limiting the supply of labor, push up the hourly wage rate, and it is possible that at this higher wage rate people would not want to work that many hours. In other words, the labor market may have two or more equilibria, in which case banning the long work-hours equilibrium is fully compatible with a commitment to the Pareto principle.

Unpacking Pareto optimality and Pareto improvement, as Rapoport's model of production and exchange does, undermines the premise of the road to hell being paved with Pareto improvements. If there is indeed a tacit moral sentiment, a secret egalitarian ethics at the heart of the Paretian idea, then any violation of trust will impose a loss of utility on everyone else -- perhaps even on the violator. Those individuals gains through defecting were only "improvements" assuming an ethical vacuum. What is the point of building a road to a hell when one is already there? In an ethical world, violations of trust are losses of utility.

UPDATE: I have made a pdf copy of the section on the production and exchange model in Rapoport's Fights, Games and Debates. Below is the equation for the utilities of the two members of the society:

In "An Empirical Refutation of Pareto-optimality?" Rupert Read argued that the empirical evidence in Wilkinson and Pickett's The Spirit Level suggests "the remarkable normative conclusion of making the Pareto principle, far from the “conservative” device it is often taken to be, a potential agent of radically-egalitarian/socialist distributive justice." I am arguing here that Rapoport's production and exchange model suggest a mathematical demonstration of the same unexpected conclusion. 

Equus II

Keynes:

Keynesianism: 

Equus Librium

A Vulgar Error:

An Infallible Maxim: 

Worstall's Malignant Lump

In an op-ed at the New York Times yesterday, Nick Hanauer and Robert Reich made the following observation:

In a cruel twist, the longer and harder we work for the same wage, the fewer jobs there are for others, the higher unemployment goes and the more we weaken our own bargaining power. That helps explain why over the last 30 years, corporate profits have doubled from about 6 percent of gross domestic product to about 12 percent, while wages have fallen by almost exactly the same amount.

According to Tim Worstall, Hanauer and Reich committed a lump-of-labor fallacy. Worstall objected specifically to their claim that raising the income cap for the overtime premium would force employers to either pay higher wages or hire more workers. Worstall's objection is that the employer's demand for labor will not remain the same if the cost of that labor goes up.

To be precise, Worstall's assertion is one version of the fallacy claim complex. It happens to be the version refuted by Maurice Dobb in 1929. As Dobb pointed out, workers are concerned with how much compensation they receive in return for the amount of effort required of them and not simply in the aggregate amount of employment in the economy. Working longer hours for less pay is not a bonanza for the workers even if it does lead to more aggregate hours worked in the economy as a whole.

 But again, Worstall's fallacy claim is but one version of a complex of claims, some of which contradict each other. I addressed this perplexing proliferation of claims in my contribution to Working Time: International trends, theory and policy perspectives. Refute one of the bogus fallacy claims and a substitute will immediately pop-up to take its place!

It is not easy to unpack what is going on inside the fallacy claim because its persuasive strategy is based on a "house of mirrors" effect. Whether disingenuously or unwittingly, fallacy claimants commit yet another version of the fallacy they attribute to others. Their error, though, is embedded in the perfect competition, perfect information, full employment, ceteris paribus abstractions of the standard equilibrium model of supply and demand. The name given to this set of abstractions by those who mistake them for a description of reality is "economics." When "economists" commit this vulgar error it is regarded by Worstall & Co. as an infallible maxim.

Now, it is conceivable that some of those accused of committing the lump-of-labor fallacy may indeed assume the proverbial "fixed amount of work to be done" or whatever. There can be bad arguments for a good cause. But, as A.C. Pigou pointed out in his refutation of the ubiquitous fallacy claim, "If it were a good ground for rejecting an opinion that many persons entertain it for bad reasons, there would, alas, be few current beliefs left standing!"

Siphoning Off the Increment to Pay for More Excrement

Paul Krugman rightly excoriates the "carbonized Keynesianism" of the Republican rationale for the Keystone XL pipeline. As I replied to Barkley a few days ago, however, calling it "Keynesianism" is a misnomer. Kalecki had another name for it. I would prefer "Keyserlingering."

Sandwichman has been connecting the dots between Keystone pipe dreams, dynamic scoring of tax cuts and the genesis of pseudo-Keynesian multiplier aberrations in the top secret Cold War doctrine of NSC-68.

1950 was a watershed year for the alchemy of "transmuting excrement into increment." Academic economists, Paul Samuelson and John Maurice Clark said it couldn't (or shouldn't) be done. But the chairman of President Truman's Council of Economic Advisers, Leon Keyserling, had other ideas:

...if a dynamic expansion of the economy were achieved, the necessary build-up could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product.

In his article on "Evaluation of Real National Income" Samuelson had explained that including "such wasteful output as war goods" in the calculation of national income served only to indicate the potential for producing "useful things... in better times." NSC-68 contrived counting wasteful output as a direct contribution to maintaining the standard of living. This is the logic the Republicans employ when they extol the job-creating magic of Keystone. But, more subtly, it is also the logic William Nordhaus employs when discounting the net present value of the future costs and benefits of climate regulation.

Exorcising the weaponized, carbonized, dynamically-scored Republican pipe dreams will take more than pointing out the meagerness and hypocrisy of their job-creation claims. It requires a ruthless critique of the lingering Cold War growthmanship that is deeply embedded in the economic conventional wisdom across the political spectrum.

Any N-person Game Whether Zero-sum or Not

In Chapter XII, "Coalitions,"  of Fights, Games and Debates, Anatol Rapoport wrote:

Any N-person game whether zero-sum or not can always be pictured as a zero-sum game by adding a fictitious (N + 1)-th player, whose winnings (or losses) equal the summed losses (or winnings) of all the others. Since the (N + 1)-th player makes no moves, his inclusion makes no difference in the original game’s strategic structure; but it is advantageous to include him, because his presence lets us treat every game as a zero-sum game. Zero-sum games are easier to treat from a unified point of view than non-zero-sum games. 

Here it may occur to ask why the difficulties of the non zero-sum game were at all emphasized if they can be circumvented by adding another player. Note, however, that adding a player to a two-person game turns it into a three-person game, which is complicated by the possibility of forming coalitions. ...

To be fair, when Paul Samuelson, Thomas Friedman, Alicia Munnell, George Shultz or other mouthpieces cut-and-paste "zero-sum game" words into their lump-of-labor boilerplate, they don't intend to refer to actual game theory but only use game-theoryish sounding terms to impress and intimidate the rubes. 

Krugman of Mass Destruction

UPDATE: See also Krugman, Ike, Keyserling, Keynes and Kalecki: "Siphoning Off a Part of the Annual Increment of GNP" in response to today's column by Krugman, "Bombs, Bridges and Jobs."

Paul Krugman, check your thoughts and your sources! In a blog post titled More Thoughts on Weaponized Keynesianism, Krugman wrote:

Economics, as I say often, is not a morality play. As far as creating aggregate demand is concerned, spending is spending – public spending is as good as but also no better than private spending, spending on bombs is as good as spending on public parks.

Economics is not a morality play but spending on bombs is NOT "as good as" spending on parks. In a comment, reader valuethinker from London pointed out that the lowest multiplier estimate for stimulus spending was for defense manufacture. This is not a trivial side issue but the core of the problem. Spending on the wrong things ultimately defeats the purpose of Keynesian stimulus. Keynes knew this. It's a shame Krugman doesn't know his Keynes.

In his post, Krugman also cited "the Kalecki point that admitting that the government can create jobs undermines demands that policies be framed to cater to all-important business confidence." Krugman linked to Rortybomb who linked to MRZine for the Kalecki paper. In that paper, Kalecki had more to say that is germane to Krugman's argument that "spending on bombs is as good as spending on public parks":

One of the important functions of fascism, as typified by the Nazi system, was to remove capitalist objections to full employment.

The dislike of government spending policy as such is overcome under fascism by the fact that the state machinery is under the direct control of a partnership of big business with fascism. The necessity for the myth of 'sound finance', which served to prevent the government from offsetting a confidence crisis by spending, is removed. In a democracy, one does not know what the next government will be like. Under fascism there is no next government.

The dislike of government spending, whether on public investment or consumption, is overcome by concentrating government expenditure on armaments. Finally, 'discipline in the factories' and 'political stability' under full employment are maintained by the 'new order', which ranges from suppression of the trade unions to the concentration camp. Political pressure replaces the economic pressure of unemployment.

So, yes, "spending on bombs is as good as spending on public parks" -- even better if you're a fascist! By the way, Professor Krugman. You still haven't replied to my earlier letter.

Game-theoretical Aspects of Parasitism and Symbiosis: The Social Optimum

A 1956 paper by Anatol Rapoport published in the Bulletin of Mathematical Biophysics.

Zero-Sum Foolery 4 of 4: Wage Prisoner's Dilemma

Soon after the wages-fund doctrine fell out of favor with economists, it was immediately attributed to trade unionists under the label of the "fixed work-fund fallacy" and then the "Theory of the lump of labour." In denunciations of the lump-of-labor fallacy, it has become fashionable recently to appeal to the notion of the "zero-sum game" in addition to the customary allegation of a "fixed amount of work to be done."

What follows is a brief sketch of the wage prisoner's dilemma that I modified from one posted last June. The outline can be elaborated by thinking of the dilemma in terms of Garrett Hardin's "Tragedy of the Commons" and Elinor Ostrom's analysis of common-pool resources. I have previously presented the perspective of labor power as a common-pool resource and a full treatment of wage prisoner's dilemma would incorporate those arguments. I've added a pay-off matrix at the end.

The principle of labor as private property is enshrined in the chapter, "Of Property," in John Locke's Second Treatise of Civil Government:

...every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his.

Except for the most part we are not talking about just "the labour of his body, and the work of his hands." We are referring to a complex division of labor, co-operation and means of production that dwarfs the manual labor of a person. Regarding this augmented labor power as a common-pool resource recognizes the greatly-enhanced social productivity of labor. The wages system is calculated to siphon off the lion's share of that social productivity and award it to the owners of capital.

How does that happen?

Consider the wage prisoner's dilemma: given a choice between working long hours for more money and working short hours for less money, many will chose to work longer hours. But if a preponderance of workers choose (or are compelled) to work long hours, they will oversupply the labor market, depressing wages. They may end up working longer hours for less money.

This is not rocket science. It is elementary supply and demand: an observed regularity. And, no, it does not imply or assume "a fixed amount of work to be done." If I flood the market with bananas, it is likely the price of bananas will fall even if the demand for bananas increases in response to the lower price. It is conceivable that the temporarily lower price could instigate a banana craze that subsequently overwhelms the initial price decline. But as a rule...

Imagine the following scenario:

One hundred workers are fully employed for 40 hours a week. The current wage is $10 an hour. Due to some inscrutable technical feature of the production process, it is determined that optimal scheduling requires workweeks of either 36 hours or 44 hours. However, weekly output per worker is the same for a 36-hour worker and a 44-hour worker. Hourly output is correspondingly higher for the 36-hour worker. Pay is determined by averaging total output and aggregate hours of the workforce as a whole.

After adjustment to the new schedules, the uniform wage rate will be somewhere between $9.09 and $11.11 an hour, depending on the proportion of workers who choose each schedule. Weekly pay will thus range between $328 and $400 for those working a 36-hour week and between $400 and $488 for those working a 44-hour week.

If half the workers choose a 36-hour week and half choose a 44-hour week, hourly wage will remain at $10 and thus the weekly pay will be $360 and $440 respectively.

One payoff matrix – out of 99 – for each worker would look something like the following, with the worker's choice occupying the rows:

Assuming an individual was indifferent about the loss of leisure time, that individual would be "better off" choosing a 44-hour workweek whether all the other workers chose 36 hours or 44 hours. Aside from that assumption, the best option would depend on the relative strengths of the worker's preference for leisure, risk aversion and assumptions about other workers' preferences.

This is, of course, an extremely simple-minded example. It is meant only to suggest that "zero-sum thinking" is not the sole possible explanation for people's anxieties about unemployment – it is unlikely to be the most plausible.

Despite all the arrogant rhetoric about zero-sum fallacies committed by advocates of shorter working time, early retirement, trade protectionism or limiting immigration, there doesn't appear to have been any research to substantiate the claims empirically. There has, however, been empirical research on prisoner's dilemmas or social traps, as the tragedy of the commons model is also known. Elinor Ostrom was one of the authors of "Cooperation in PD games: Fear, greed and history of play" that references Rapoport's earlier studies. "Take-Some Games: The Commons Dilemma and a Land of Cockaigne," by Peter Mitter is included in Paradoxical Effects of Social Behavior: Essays in Honor of Anatol Rapoport.

Another kind of game has evolved with a primarily didactic rather than investigative purpose. Julian Edney's nuts game and Linda Booth Sweeney's harvest game exemplify the commons dilemma or social trap learning game. In principle, there is no obstacle (other than time and money) to incorporating a harvest-type game into a research design similar to the prisoner's dilemma research conducted by Rapoport, Ostrom and their respective colleagues.

Growthmanship: The Rock and the Hard Place

President Obama:

Now, if we can't grow our economy, then it is going to be that much harder for us to reduce the deficit. The single most important thing we could do right now for deficit reduction is to spark strong economic growth, which means that people who've got jobs are paying taxes and businesses that are making profits have taxes -- are paying taxes. That's the most important thing we can do.

Yes, what Obama says is correct, as far as it goes. Let us not forget, though, that the "9-point-something trillion- dollar" debt (not "deficit") got racked up on the premise that this year's deficit would stimulate sufficient economic growth to enable "siphoning off" enough of the growth dividend in tax revenues to repay the deficit. The siphoning off phrase comes from NSC-68. We're living in the perpetual growth Utopia conceived by Leon Keyserling: debt requires growth, growth requires deficits, deficits accumulate debt, debt requires growth... The only thing "siphoned off" in this vicious circle is the option of taking a portion of productivity gains as increased leisure.

As Eugene McCarthy and Bill McGaughey pointed out in their 1989 book, Nonfinancial Economics: The Case for Shorter Hours of Work,

"The main reason that leisure is in disrepute among Treasury Department officials is that they can't tax it. A proposal such as the shorter workweek, which would redistribute the burden of work and its income more evenly, would reduce the tax collector's take from a given volume of economic activity. Therefore it cannot be."

Few people recall that the "voodoo" of supply-side economics was supposed to be that it would induce (or compel?) people to WORK MORE HOURS. This was clearly stated by Paul Craig Roberts, Reagan's Assistant Secretary of the Treasury for economic policy in a Wall Street Journal oped published on March 19, 1981.

"For the supply-side policy to work, taxpayers don't have to respond to lower marginal tax rates by giving up vacations, going on a double shift and saving all their income. When you have a work force of more than 100 million people, small individual responses result in a large aggregate effect. If the average number of hours worked per week rises from 35 to 35.5, GNP rises by $24 billion."

Well, folks, supply-side economics "worked" in the sense that it ratcheted up the working hours. It didn't work in the sense of generating a revenue dividend large enough to pay for the lower marginal rates. Oh, well. C'est la vie, eh?

Given the 'choice' between the guns-and-butter swindle of Keyserling and NSC-68 and the Reagonomics supply-side swindle, I'd opt for none of the above. There IS an alternative. But it requires valuing people more over money and time over tax revenues. So it won't happen. Or it will only happen over the dead bodies of most economists. "In any highly developed discipline," McCarthy and McGaughey wrote,

"there is a tendency to become so specialized and refined that its respected practitioners appear to lose common sense. If medieval philosophers counted the number of angels that could dance on the head of a pin, some contemporary economists deal in equally strange and fictitious concepts. To many of them, it would seem, money is reality, while leisure is an empty spot in time devoid of wealth-producing activities. Although U.S. economists in the postwar period have paid much attention to the techniques of financial manipulation by which governments might keep the economy on a prosperous course, they have paid far too little attention to the way people actually work and live. That approach has produced its own set of problems, more than a few of which appear now to be coming home to roost."

Zero-Sum Foolery 3 of 4: Forecast Factory

Long before the issue of anthropogenic climate change arrived on the doomsday agenda, Lewis F. Richardson anticipated climate modeling with his failed attempt to forecast weather numerically. His calculations predicted surface pressures 150 times higher than observed:

Paradoxically, then, the most time-consuming, precisely calculated forecast in history was also among the least accurate ever prepared by any method.

Some consolation could be had, though, from Richardson's fantasy of the "forecast factory." In A Vast Machine: Computer Models, Climate Data, and the Politics of Global Warming, Paul Edwards praised Richardson's metaphors of the factory for "reach[ing] to the heart of computing as a coordinated human activity that harmonizes machines, equations, people, data, and communications systems":

At the same time, they stand in stark contrast to today’s dominant metaphors of computation, which are mostly individual: the brain, memory, neurons, intelligence. Richardson’s forecast-factory remains a better description of the practical reality of computing. The limits of computer power, even today, stem from these human and material dimensions.

Richardson had more success investigating the mathematics of arms races. The September 1957 issue of Conflict Resolution was devoted to Rapoport's essay on Richardson's mathematical theory of war, an essay that Schelling described as "magnificent."

In his assessment of the failures and successes of Richardson's theory, Rapoport stressed the investigative rather than explanatory function of mathematical models: "Contrary to a prevalent meaning of 'model' in many theoretical formulations, the main function of a mathematical model is not an 'explanatory' one." The distinction is fundamental to Rapoport's profound methodological objection to the pretentious "rational" pursuit of solutions to problems and answers to questions. In Strategy and Conscience, Rapoport reaffirmed that "The important end product of such [experimental] research is not an answer but a question."

The value of game theory, Rapoport was later to insist, lay precisely in its demonstration of the limits of supposedly rational choice. This is an insight that the strategists have either never grasped or refused to acknowledge. Philip Mirowski has been scathing in his criticism of "the strategic community" – including Schelling – for their misrepresentations of "what game theory could ever hope to do." The strategists' "image of game theory was one of the purest instrumentality, of the labcoated expert 'thinking about the unthinkable.'"

Not all "unthinkable" things were eligible to be thought about, though. Some thoughts, namely Rapoport's eloquent critique of strategic thinking, had to be castigated and dismissed as "defeatist," "moralistic" – much as the economists feel compelled to ridicule the fallacies of those who refuse to genuflect to the prescribed articles of faith.

As Rapoport observed in his reply to Albert Wohlstetter's bitterly dismissive commentary on Strategy and Conscience:

...the cognitive assumptions of the strategists are neither revealed truths nor self-evident facts. They are rather derivatives of a power-oriented value system, which sharply delimits the cognitive horizon of its adherents. It is high time we stopped identifying narrowness of vision with 'realism.' It is high time to stop calculating long enough to think awhile, perhaps even to listen to the voice of our conscience.

Rapoport's reply compared the strategists' assumptions to the way that 19th century political economy "conceptualized man's economic activity in a way which made it appear inevitable that the poor must forever remain poor." Central to that conceptualization were reverence for what eventually became known as Say's Law and the wages-fund doctrine, which conceived the wages-fund as a zero-sum game in which trade union action to secure higher wages for one group of workers could only result in lower wages for others.