Epicuro Samos: "Forget Market Rules"

At Mike Norman's, Tom Hickey links to Andrew Sheng and Xiao Geng — Micro, Macro, Meso, and Meta Economics. I had a look.

Given the crisis weighing down the world economy and financial markets, it is not surprising that a substantive reconsideration of the principles of modern economics is underway.

Nice opening!

Nobel laureate Ronald H. Coase has complained that microeconomics is filled with black-box models that fail to study the actual contractual relations between firms and markets...

Another Nobel laureate, Paul Krugman... argues that economists became blind to catastrophic macro failure because they mistook the beauty or elegance of theoretical models for truth.

Both Coase and Krugman bemoan the neglect of their profession’s patrimony – a tradition dating at least to Adam Smith – that valued grand and unifying theories of political economy and moral philosophy.

Oh, I like that. Grand and unifying theories. What it's all about. This'll sound petty, but it bothers me that our understanding of economics today is founded on a seemingly endless train of individual discoveries made by different economists over the last forty years. The think is a patchwork quilt. Where is the overriding theory?

It doesn't feel like a theory. It feels like an agenda. If you have an idea that serves the agenda, your idea gets added to the quilt. But even before the first two pieces were stitched together, the overall design of the quilt was known.

I know it's probably not like that. It's probably the same for them as it is for me: I am always on the lookout for the best explanation that makes the most sense, that fits or forces adjustment in my own understanding of the world we call the economy.

So long as everyone is willing and able to adjust their understanding when adjustment is needed, there is no quilt, no agenda.

Oh, and the grand and unifying theory? You don't start with that. You just go looking for it. Keynes developed of one. Adam Smith developed of one. Marx, maybe, and others I have not read. But -- forgive me -- most economists seem not to have anything of their own like that. Most economists seem not to have such thoughts. Most economists seem to identify themselves with somebody else's theory or somebody else's patchwork quilt.


Andrew Sheng and Xiao Geng wrap up their intro, saying "today’s mainstream micro- and macroeconomic models are insufficient". They offer two additional approaches for model builders, a total of four:

• Macroeconomics, "the study of economic performance, structure, behavior, and decision-making at the national, regional, or global level".
• Microeconomics, "the study of resource allocation by households and firms".
• Meso-economics, the study of "the institutional aspects of the economy that are not captured by micro or macroeconomics... The most important feature of a meso-economic framework is to study the actual web of contracts..."
• Meta-economics, the study of "deeper functional aspects of the economy, understood as a complex, interactive, and holistic living system... The British economist Fritz Schumacher ... defined meta-economics as the humanizing of economics by accounting for the imperative of a sustainable environment..."

Sheng and Xiao Geng consider the four approaches together "a particularly useful framework".

I would go the other way.

Sure, it's probably all useful stuff. But it depends what you're trying to accomplish, doesn't it.

I only know a bit of macro, none of micro, and nothing of the other two. But I know that economics results from human behavior, and I know also that economics is not the study of human behavior. I know it comes down to money.

Economics is the study of changes in the balances of wealth and money over time. The economy is different when half the money is in the spending stream, than it is when only ten percent of the money is in the spending stream. The economy is different when public debt is high and private debt is low, than it is when public debt is low and private debt is high. It's all balances.

When balances wander too much in one direction or another, they lead to problems in the economy, seemingly insoluble problems. So I say balances and imbalances.

Economists never seem to speak of such things. And now, with meso and meta, they'll have twice as many other things to think about, other than the things that must be thought about if we are to solve the economic problem.


I was not so very happy with the post. Interesting, but it goes to the wrong place. But then, the first comment I read had me almost jumping up and down for joy.

The comment is from Epicuro Samos. I would guess that English is not Epicuro's first language, so go easy on the guy's grammar:

Is useless give new names to that you don't understand. Economy still economy, like physics still always physics. The point is that market is not economy. Market is a game to get power, not to get economy. Market is a game like war, with same objectives: power over the others. Market has no economic basis like reality shows. For example, by market rules rich people can spend what ever they want. By economy rules nobody can spend in excess. By economy rules nobody can spend excessively no matter if he is good or bad in market game. So market has market rules, and not economy rules. And because market rules are not the economy rules, market has no economic sustainability. So market will always collapse like a motor that didn't obey to physics rules.

Economy is not something you can invent. You never will understand economy if you look with market point of view. Because is the same that observe physics under the rules of a dysfunctional motor. By the rules of a dysfunctional motor physics have no sense. The reality is the opposite: physics are not wrong, it is the motor that is wrong. So is not the economy that is wrong or have problems (economy never have problems, like physics never have problems), it is the market that have problems because is a wrong behavior. So is better forget those offer demand game, forget market rules, because this is not economy, no matter the name you gave it.

And no matter the way you try to play it he will always collapse because is do not respect the basis of economy. A dysfunctional motor moves but never lasts, like markets (free market, planed market, you name it, it will never lasts because market did not respect economy rules).

Sorry, where is "And no matter the way you try to play it he will always collapse because is do not respect the basis of economy." should be "And no matter the way you try to play market, he will always collapse, because market do not respect the economy rules".

Reality has his own rules, so economy has is own rules. Market did not respect the economy rules so collapse always. Reality is sovereign, economy has is own rules and did not obey to the rules invented by market agents. So is time to learn the reality rules, forget market game bullshits.

Here's what I take from Epicuro:

• He distinguishes between "markets" and "the economy", saying they operate by different rules.
• The rules of the economy are not of human invention. More like laws of nature.
• It is never the economy that is wrong or has problems. It can only be the markets that have problems.
• The market is not the economy.
• The economy does not obey the rules of the market.

I buy all of that. I sometimes say "the economy wants" this or "the economy wants" that. The economy has its own rules which we did not invent and -- if we want the economy to do what we want -- we must respect those rules.

I sometimes say "the economy does not care" about inflation or unemployment. Those are not problems for the economy. They are problems for people. For the economy, they are simply ways to correct imbalances.

Bravo Epicuro!


What is needed is not "a substantive reconsideration of the principles of modern economics" but rather a reconsideration of the way economic principles have been misconstrued. You never will understand the economy if you look with a market point of view.