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On Phil Pilkington’s question concerning whether there could be an economic induced psychosis August 14, 2014

Posted by larry (Hobbes) in Culture, economics, Mind, Philosophy, Psychology, Science.
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Link to Phil’s post: http://fixingtheeconomists.wordpress.com/2014/08/11/is-there-such-thing-as-an-economics-based-psychotic-delusion/#comment-7078

I take Phil’s question to be an important, though unusual, one. But in order to approach an answer, we need to set up our framework. First, we need to define what a psychosis is. And I think it reasonable to define a psychotic state as one where the individual suffers from neurological malfunctioning of the brain that results in them seeing and/or hearing things that are not there, that is, that do not exist.

Second, we need to distinguish between the mind and the brain. We could go into great detail but for our purposes here it should be sufficient to use the term ‘brain’ to refer to the neural connections and activity of this organ’s neurons. (For anyone who has difficulty with this, I recommend a look at Gordon Shepherd’s Foundations of the Neuron Doctrine (1991), and the term ‘mind’ to refer to what we ordinarily consider to be mental activity and conceptions. There is an entire literature on this in both psychology and philosophy.

Third, we need to divide economics into two, possibly overlapping, spheres. One would be economics qua conceptual construct (or idea or belief or the like). The other would be economics qua economic activity. The first is a mental construct, while the second is a behavioral activity. They are naturally related, though any causal link could go in either direction.

We now have two related questions before us. 1) Can having a particular economic idea or conceptual construct drive a person into having a psychotic delusion? 2) Can engaging in a particular kind of economic activity drive a person into having a psychotic delusion? The film, Gaslight, involves both, as the husband places ideas in his wife’s head while simultaneously engaging in certain kinds of behavior, all designed to drive her into having a psychotic delusion, in terms of the film, the delusion that she is insane whereas there is, in fact, nothing wrong with her. In the terms which we have set, she does not exhibit either the types of behavior typical of someone who does have a psychosis or have a malfunctioning brain in the sense defined above.

Now Phil has rightly raised the specter of certain religious notions. Would we want to claim that someone, perhaps an entire group of people, even an entire society, was psychotically deluded because they have a belief in a god of some sort? Are they psychotic because they indulge in a communal ritual of communion, which, in principle, involves the doctrine of transubstantiation?

Let us leave religion and consider the Nazis. We assume, for which there is evidence, that there existed true believers. One of their beliefs was that there was such a thing as a pure Aryan race. Another was that there was a Jewish conspiracy to destroy Germany qua its racial essence. Is anyone who holds such beliefs or even virtually an entire society holding such beliefs and engaging in the activities indicated as being appropriate by the beliefs in the grip of a psychotic delusion?

Most people would probably answer No to the former case and Yes to the latter. But what is the difference between them? Both involve engaging in activities and entertaining conceptions for which there is no empirical evidence that would justify either and, indeed, there is (and was) abundant evidence to the contrary. Both cases involve people believing falsehoods and acting on them, blatant or otherwise. Surely, we would not wish to contend that anyone in the grip of a false belief is ipso facto in the grip of a psychotic delusion.

The answer, it seems to me, lies in our original definition of ‘psychosis’. With respect to either case, is it reasonable to ‘believe’ that an entire society, that is, its members, could be more or less simultaneously experiencing a particular brain malfunction? We need another term, I think, to describe what is going on in cases such as these.

The case that Phil really has in mind is the neoclassical economic paradigm, which has true believers and for which there is abundant contrary evidence. Are followers of this ‘false’ paradigm in the grip of a psychotic delusion? I honestly do not know the answer, but it is possible that Phil has asked the wrong question. And the answer concerning what question he ought to have asked instead depends on what term we replace ‘psychosis’ with. And to that conundrum, I have no real answer at the present time.

Randall Wray on Necessary & Sufficient Conditions in Economics July 5, 2014

Posted by larry (Hobbes) in economics, Logic, money, Philosophy.
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In a recent post about debt-free money, Randy Wray makes some remarks about the relationship between the role of taxation and the movement of the monetary circuit. It is my purpose here to explore the character of this relationship from a logical perspective. Wray contends that taxes are a sufficient but not necessary condition for driving the monetary circuit. As his comments were not entirely clear to me, I asked him what he meant. Among other comments he made, which we will get to, he made these remarks.

If I said “taxes are a necessary and sufficient condition” then that means you must have taxes and nothing else will do. I don’t say that.

If I said taxes are a necessary condition, then that means you must have taxes, but maybe that alone is not enough. I don’t say that.

If I say taxes are a sufficient condition then that means if you have taxes you will drive a currency. However something else might drive it, too.

I think these statements are relatively clear even if not entirely logically so. In order to show what I mean by this, let me specify, how, logically, necessary and sufficient conditions are specified. First, we have a variable, x, that ranges over taxes. Now, we are in a position to specify the exact character of necessary and sufficient conditions relevant to Wray’s concerns.

Sufficient condition (for tax to drive monetary circuit): if x is a tax, then x drives the monetary circuit.

Necessary condition (for tax to drive monetary circuit): is x drives the monetary circuit, then x is a tax.

Necessary & Sufficient condition (for same): x is a tax iff x drives the monetary circuit.

It is probably apparent that my formulations do not quite conform to Wray’s formulations.  We can ignore the stipulation about tax being a necessary and sufficient condition for driving the monetary circuit, as it is obviously false. Therefore, we need concentrate only on the other two. First, we must note that Wray is engaged in a complexly compacted argument. Let us take sufficient condition first.

The first sentence is nothing more than a statement of what a sufficient condition is. When he mentions that other factors may drive the circuit, he is merely pointing out that for something to be a sufficient condition for something else, this does not rule out the possibility of other sufficient conditions being operative. He is right about this; it is a logically elementary feature of the context.

When we come to Wray’s discussion of necessary conditions, we encounter a little prolixity. When Wray says that were taxes a necessary condition, this would mean that one must have taxes but that this might not be enough, it is not entirely clear, logically, what he is trying to say. For tax to be a necessary condition,this means that if you don’t have taxes (via an application of modus tollens), the circuit will stop unless some other factor can drive the circuit (like the situation with the sufficient condition). While Wray may be clear what he means, the logical structure of what he is trying to get across certainly isn’t.

However, in denying that taxes are a necessary condition for the movement of the monetary circuit,he seems to be saying more than that if x drives the monetary circuit, then x is a tax, from which follows, if x is not a tax, then x does not drive the monetary circuit. This situation does not allow one to contend, as Wray does, that if taxes were a necessary condition of monetary motion, one must have taxes. Additional assumptions are needed in order to derive this conclusion. Hence, I can do no other than to conclude that Wray’s comments in this regard obfuscate the point he is trying to make. Which I think is a straightforward one. it is that the stipulation that taxes are a necessary condition for the driving of the monetary circuit are false because he denies the implication that if something isn’t a tax, then it doesn’t drive the monetary circuit. From which one can conclude that only taxes can do this driving. Which is false. There are other factors that can drive the monetary circuit besides taxes, such as fines, tithes, and the like.

Taxes as a sufficient condition allow for these additional factors to be drivers of the monetary circuit along with taxes. Hence, Wray’s contention that taxes are only sufficient but not necessary.

Upshot: while the logical structure of Wray’s argument isn’t entirely clear, he is consistent. And the role he assigns taxes vis-a-vis the monetary circuit seems to be more than reasonable.

Public Debt Vs. Private Debt July 5, 2014

Posted by larry (Hobbes) in economics, Philosophy.
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While it can be generally agreed that the terms ‘public debt’ and ‘private debt’ on their own don’t imprint themselves easily on the mind, I think there is a way around this seeming impasse. And this is to link them to simple equivalences. This can be accomplished by emphasizing the direction of the debt relationship. And this can be done quite simply. Public debt = what the government owes its creditors, while private debt = what members of the public, including firms, owe their creditors.

To further spell this out, you can then elaborate who the creditors are in each case. In the case of the public/government debt, the primary creditor is the public as a collective, and this is shown on the so-called US national debt clock (which ought to be called the US national public resource clock). In the case of private/individual debt, there may be many creditors – in short, anyone you owe money to, which would include the government. I am including business firms within the penumbra of the public qua collective for the sake of simplicity. It is important to note that it is not particular individuals with whom the government has this general indebtedness relationship, but the public considered as a collective body. When we speak of public debt in general, it is the public as a whole to whom the government is indebted, not individual members of this public (though such relationships do exist, though not in this sense).

Logically speaking, debt is an asymmetric relationship, analogous, say, to temporal relations. Taking two logical individuals, A and B, to say that the indebtedness relation is asymmetric is to say that the nature of the indebtedness of A to B and that of B to A are distinct in character. Using the general terms, government, creditors, and individuals (persons or firms), we can put the relationships between the three this way.

With G = government, C = creditors, and I = private individual(s) or firms, public debt is one where G is indebted to C qua q, while private debt is one where I is indebted to C qua r, where q and r characterize, in general terms, the two different modes of indebtedness. The characters of the two distinct types of indebtedness are distinct in many ways while simultaneously possessing fundamental underlying similarities. These two modes of indebtedness are logically distinct from one another. The nature of government indebtedness is different in essential ways from the indebtedness of the individual citizen or resident. This difference is captured I think by formulating the indebtedness relationships in this way. The formulation is quite abstract, but that is by necessity.

While the nature of creditorhood in both types of indebtedness may be so similar as to be effectively identical in the two cases, the character of the indebtedness relations themselves will not necessarily be similarly similar (ugh).

When spelled out in this way, it is easy to see that the debt relationship goes both ways but in distinct respects. To reiterate, while there are differences, there is a fundamental similarity and this similarity can interfere with appreciating the differences between the two types of indebtedness relations. Formulating the two distinct indebtedness relations in this way can, I trust, render the differences more salient without allowing the underlying similarity to inhibit understanding the fundamental characteristics of this relationship. Or so I would argue.

Therefore, when the terms, ‘public debt’ and ‘private debt’, are used, they should be considered to be parsed in the way I have suggested above and displayed starkly in the picture at the top. In this way, hopefully whatever confusion there might be between the two terms will vanish or become insignificant. And we can, therefore, go on using the two terms without confusing ourselves.

Definition of the Situation April 24, 2014

Posted by larry (Hobbes) in Culture, Frame Analysis, Philosophy, Psychology.
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The concept of the definition of the situation originates with William Isaac Thomas, possibly in Thomas and Florian Znaniecki’sThe Polish Peasant in Europe and America (1918-1920).  The concept was given new vigor and poignancy in the fifties by Erving Goffman in his study of roles in face-to-face social interaction in Presentation of Self in Everyday Life (1957).  Goffman agreed to a significant extent with what has become known as the Thomas theorem (1928): “If men define things as real, they are real in their consequences”.

Most situations bring their histories along with them.  To do well in a situation, it pays to know something of its history.  And to successfully redefine a situation, it may be essential to know that situation’s history.  Sometimes the history can be daunting and intimidating thereby rendering the situation daunting and intimidating.


The concept of the definition of the situation is closely related to frame analysis, although this relationship is not always explored, to the detriment of both approaches, I think.

Piketty & the recent US Supreme Court decision April 3, 2014

Posted by larry (Hobbes) in economics, Justice, Philosophy.
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Uh oh!
It is looking worse for the 99% every week in the US, and eo ipso potentially in the UK. The piece linked to is by a law prof at University of Colorado at Boulder. Piketty’s Capital in the 21st Century gets a mention in this context, and it is relevant. I will quote from Campos: Piketty argues that

“…[I]n the long run, the return on capital tends to be greater than the growth rate of the economies in which that capital is located.

What this means [concludes Campos] is that in a modern market economy the increasing concentration of wealth in the hands of the already-rich is as natural as water flowing downhill, and can only be ameliorated by powerful political intervention, in the form of wealth redistribution via taxes, and to a lesser extent laws that systematically protect labor from capital. (Piketty argues that, because of historical circumstances that are unlikely to be repeated, this sort of intervention happened in the Western world in general, and in America in particular, between the First World War and the early 1970s.)”

This is as pessimistic as it gets. What is not mentioned in most discussions of this outcome is the view put forward a few years ago by Republicans that corporations are individuals, that is, people. This is a logical howler of immense proportions, but in this context, such fine distinctions seem to be irrelevant. It is this view that partially underpins the Supreme Court decision that,  just like people, corporations have free speech rights that need protection. This apparently includes the way that their CEOs and board members spend the corporation’s money.

Piketty’s data is extensive and runs for hundreds of years. It is a door-stopper of a book, around 600 pages of text and 100 pages of notes, not including the material Piketty has placed online. One could be forgiven for concluding that the greater the economic inequality, the greater the chance of political plutocracy and that this is the inevitable consequence of the political implementation of neoclassical economic principles. This relationship seems to me to inevitably entail that politics can not be divorced from economics, which is a central tenet of the neoclassical paradigm. It seems to follow, therefore, as the night the day, that since politics can never be value-free, the idea that economics can be, as claimed by the neoclassical econs, is a non-starter.

I would like to think that this constitutes another nail in the coffin of the neoclassical paradigm, but it doesn’t look like it. Despite the mounting evidence against it, the dominant economic paradigm rumbles on with hardly a hesitation along the way.

Also have a look at this and the links therein: http://www.slate.com/blogs/moneybox/2014/04/02/wealth_inequality_is_it_worse_than_we_thought.html. It is about new research by Saez and Zucman on US wealth disparity. As has been pointed out previously by researchers, it isn’t the 1% who are the biggest gainers from this financial crisis, it is the 0.1%, the 1/10th of 1%.

Bayes’ theorem: a comment on a comment March 10, 2014

Posted by larry (Hobbes) in Bayes' theorem, Logic, Philosophy, Statistics.
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Assume the standard axioms of set theory, say, the Zermelo-Fraenkel axioms.

Then provide a definition of conditional probability:

1. BayesEq1, which yields the identity

1a. BayesEq2, via simple algebraic cross multiplication.

Because set intersection is commutative, you can have this:

1b. BayesEq3, which equals

2. BayesEq4.

What we have here is a complex, contextual definition relating a term, P, from probability theory with a newly introduced stroke operator, |, read as “given”, so the locution becomes, for instance, the probability, P, of A given B. Effectively, the definition is a contextual definition of the stroke operator, |, “given”.

Although set intersection (equivalent in this context to conjunction) is commutative, conditional probability isn’t, which is due to the asymmetric character of the stroke operator, |. This means that, in general, P(A|B) ≠ P(B|A). If we consider the example of Data vs. Hypothesis, we can see that in general, for A = Hypothesis and B = Data, that P(Hypothesis|Data) ≠ P(Data|Hypothesis).

Now, from the definition of “conditional probability” and the standard axioms of set theory which have already been implicitly used, we obtained Bayes’ theorem trivially, mathematically speaking, via a couple of simple substitutions.


Or the Bayes-Laplace theorem, since Laplace discovered the rule independently. However, according to Stigler’s rule of eponymy in mathematics, theorems are invariably attributed to the wrong person (Stigler, “Who Discovered Bayes’ Theorem?”. In Stigler, Statistics on the Table, 1999).

Now, since we have seen that Bayes’ theorem follows from the axioms of set theory plus the definition of “conditional probability”, the following comments from a recent tutorial text on Bayes’ theorem can only be interpreted as being odd. The following quote is from James V. Stones’ Bayes’ Rule: A Tutorial Introduction to Bayesian Analysis (3rd printing, Jan. 2014).

If we had to establish the rules for calculating with probabilities, we would insist that the result of such calculations must tally with our everyday experience of the physical world, just as surely as we would insist that 1+1 = 2. Indeed, if we insist that probabilities must be combined with each other in accordance with certain common sense principles then Cox (1946) showed that this leads to a unique set of rules, a set which includes Bayes’ rule, which also appears as part of Kolmogorov’s (1933) (arguably, more rigorous) theory of probability (Stone: pp. 2-3).

Bayes’ theorem does not form part of Kolmogorov’s set of axioms. Strictly speaking, Bayes’ rule must be viewed as a logical consequence of the axioms of set theory, the Kolmogorov axioms of probability, and the definition of “conditional probability”.

Whether Kolmogorov’s axioms for probability tally with our experience of the real world is another question. The axioms are sometimes used as indications of non-rational thought processes in certain psychological experiments, such as the Linda experiment by Tversky and Kahneman.  (For an alternative interpretation of this experiment that brings into question the assumption that people either do or should reason according to a simple application of the Kolmogorov axioms, cf. Luc Bovens & Stephan Hartmann, Bayesian Epistemology, 2003: 85-88).

A matter of interpretation

In the discussion above, the particular set theory and the Kolmogorov axioms mentioned and used were interpreted  via the first-order extensional predicate calculus. This means that both theories can be viewed as not involving intensional contexts such as beliefs. The probability axioms in particular were understood by Kolomogorov and others using them as relating to objective frequencies and applicable to the real world, not to beliefs we might have about the world. For instance, an unbiased coin and die, in the ideal case admittedly, are considered to have a .5 and 1/6 (or .1666) probability for the side of the coin and a side of a six-sided die, respectively, on each flip or throw of the object in question. In these two particular cases, it is only via behavior observed over a long period of time that can produce data that will show whether in fact our assumption that the coin and the die are unbiased is true or not.

Why does this matter. Simply because Bayes’ theorem has been interpreted in two distinct ways – as a descriptively objective statement about the character of the world and as a subjective statement about a users’ beliefs about the state of the world. The derivation above derives from two theories that are considered to be non-subjective in character. One can then reasonably ask: where does the subjective interpretation of Bayes’ theorem come from? Two answers suggest themselves, though these are not the only ones. One is that Bayes’ theorem is arrived at via a different derivation than the one I considered, relying, say, on a different notion of probability than that of Kolmogorov’s. The other is that Bayesian subjectivity is introduced by means of the stroke (or ‘given’) operator, |.

Personally, I see nothing subjective about statements concerning the probability of obtaining a H or a T on the flip of a coin as being .5 or that of obtaining one particular side of a 6-sided die being .166. These probabilities are about the objects themselves, and not about our beliefs concerning them. Of course, this leaves open the possibility of alternative interpretations of probabilities in other contexts, say the probability of guilt or non-guilt in a jury trial. Whether the notions of probability involving coins or dice are the same as those involving situations such as jury trials is a matter for further debate.

‘Logic’ of Sociopathy April 3, 2013

Posted by larry (Hobbes) in Philosophy, Psychology.
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In a previous post, I briefly discussed and distinguished between true psychopathy and sociopathy. I will assume here that the concept of psychopathy is understood and concentrate on the concept of sociopathy, particularly as I define the term differently from Hare.

Hare defines “sociopathy” as behavior associated with a social group that is considered to be anti-social by a more inclusive group, which may consist of the entire society.

Although Hare does not explicitly mention social groups in his definition of psychopathy, the term could be defined as behavior considered to be extremely anti-social by the entire society, no matter what social role the individual is playing or what situation he is in. (Most of them are male.) According to my definition of sociopathy, sociopathic behavior is anti-social behavior carried out only in certain situations, such as work environments, or when the individual is playing certain roles, such as the role of the CEO.  No essential reference is made to any social group.

According to both our definitions, there are more sociopaths than true psychopaths. Hare estimates that around 2% of the US population is psychopathic. There is evidence to suggest that true psychopathic behavior involves neurological alterations in the brain of the psychopath not found in the normal brain. Sociopathic behavior need involve no such neurological functionality. It may be completely situationally determined, or influenced. If the latter is the case, there will be a significant cultural component involved in bringing out sociopathic behavior in certain people (e.g., general ideas or particular beliefs concerning what is appropriate).

Experiments comparing so-called normal people with those diagnosed as psychopathic show distinct differences in reactions to emotional words. Certain kinds of cruel behavior has also been found in the teenage behavior of those diagnosed as being psychopathic. I will mention again that in order to properly diagnose someone as being a true psychopath, you need an immense amount of clinical and behavioral data over a number of years. This is often available for those who have been imprisoned. It is not so easily available for the organized psychopath who is not violent. Nevertheless, it can and has been acquired. For detailed, authoritative accounts, see Babiak and Hare, Snakes in Suits: When Psychopaths Go to Work (2007) and Bakan, The Corporation: The Pathological Pursuit of Profit and Power (2005).

Hazards of Black Swans April 3, 2013

Posted by larry (Hobbes) in economics, Philosophy, Statistics.
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Black Swan land = massive uncertainty = the domain of ignorance.


Black Swan event (or idea): highly improbable, massive impact, rationalized afterward.  A Black Swan is so extreme that its probability distribution is unknown hence there is no ability to assess the risk of encountering it, and hence something of which we are ignorant until it occurs.  It is possible to create a financial instrument whose behavior is completely unpredictable and hence whose risk is incalculable.  A sufficient number of these in circulation could, under certain circumstances that can not be predicted in advance, trigger a Black Swan event.

Thin-tailed probability distributions give the likelihood of an extreme event too low a probability.  Thick-tailed probability distributions provide a greater probability to the likelihood of extreme events.  However, even the latter can not adequately handle Black Swan events.  Here, we are at the limits of statistics.  Thin-tailed: mild volatility at the extremes of the distribution; thick-tailed: harsh to unknown volatility at the extremes of the distribution.

Normal stocks reside in Mediocristan.  The derivatives that put us in the red zone are the complex derivatives invented after the early 1970s subsequent to the initial round of deregulation.  After the further deregulation of 1999, these types of derivatives went off the scale in terms of risk assessment and potential volatility. (“Mediocristan” must be understood in a Galtonian sense, that of the average.  So, in Mediocristan, we are in average-land.  Galton’s term, “regression to mediocrity” we interpret as “regression to the mean”.)

The derivative payoff domain lies of course in Extremistan.  The payoffs are incredibly complicated and often impossible to assess before they are “traded”.  Hence, I have dubbed them Schrödinger derivatives.

Distributions are descriptive and reflect real processes, so any planned alterations must be carried out in terms of the payoff matrix.  Therefore, to eliminate as much as possible the hazardous effects of Black Swans, complex financial instruments, such as complex derivatives, could be banned completely or strictly limited in some way.

The only justification of a complex derivative and related synthetic financial instruments is income generation for the few.  They do not, and can not, benefit the many, contrary to the claims of some of their advocates, for which there is no evidence. In fact, evidence exists to the contrary – the recent volatility in the price of oil, the run on the pound in the ’90s, the present global financial crisis. All were considered highly unlikely, all had massive impact. And in the last case, where there was, and still is, massive fraud, virtually no one has gone to jail, largely because the event has been rationalized for the benefit of the well-off. Were there many successful prosecutions, many wealthy investors would lose their shirts.  Therefore, so far, everything is being done in order to ensure that this does not happen. Even to the disbenefit of society as a whole.

Temple Grandin, animal behavorist and sufferer from autism June 1, 2009

Posted by larry (Hobbes) in Animal Behavior, Philosophy, Psychology.
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Temple Grandin is a remarkable person by any reasonble definition. I have been aware of her work and the insights she has into animal behavior for a number of years. A film of her life and achievements is due to come out this year entitled simply Temple Grandin.

Her achievements are all the more remarkable because she is severly autistic. As terrible as this is, she has been able to utilize her autism in some way to better understand the ways in which animals “see” their world. She is an animal behaviorist at the University of Colorado and a consultant to livestock producers, solving some of their most perplexing problems; she has also designed livestock enclosures and related apparatuses that she contends renders the animals’ treatment more humane. She is also a superb draftswoman.

However, don’t take my word for this. She describes herself in terms of Oliver Sacks’ phrase, ‘an anthropologist from Mars’ and I highly recommend her own writing – the content I found astonishing.

Thinking in Pictures (1995);

Animals in Translation (2005); and the newly published

Making Animals Happy: How to Create the Best Life for Pets and Other Animals (2009).

She has her own web site and there are videos on youtube.


A critical assessment of Grandin’s thesis, put forward in Animals in Translation, that animals are cognitively much like autistic humans, including a response by Grandin, can be found at http://www.plosbiology.org/article/info:doi/10.1371/journal.pbio.0060042 (“Are Animals Autistic Savants”: 2008).   Grandin contends that humans think narratively with language, while animals, lacking language, think in sensory terms. Animals also attend to details at the expense of the overall picture, which she claims is what those with autism do. The authors disagree with this and contend that animals and humans are not dissimilar in the ways they attend to detail, using data from brain function studies in animals to support their case.

The article is exceedingly interesting and I recommend it without endorsing its conclusions. I am neutral with respect to Grandin’s hypothesis as well. The article and Grandin’s response is a prime example of how scientific discussion should proceed.

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