Saturday, 11 September 2010

Capitalism 4.0 - Government: It's not how big it is, but what you can do with it that counts

I'm currently reading  Capitalism 4.0 by Anatole Kaletsky.  I've been enjoying it immensely, but I think I might have spotted a flaw in his reasoning.  What do you think?

It is in essence a history of recent Western politico-economic thought (version 1.0 as Adam Smith, 2.0 Keynes, 3.0 Friedman) together with some ideas about what the post-credit crunch future might bring (4.0).  The history part is fantastic - he presents a cogent macroeconomic story which is especially good on the 20th Century.

Also, his prognostications about the future also have a lot of merit.

However, he lays this all out with a kind of Hegelian thesis-antithesis-synthesis analysis.  And furthermore he makes a claim to justify many of his predictions based on the following logic.

Economics, he tells us, is really an adaptive system.  It is messy, pragmatic, experimental.  And so should our theories about it.  This justifies many of his 4.0 analysis and indeed it makes sense of his general criticism of the neoclassical / mathematical approaches within the 3.0 space.

I disagree with the 'should'.  I think it is a permutation of the is-ought problem is ought problem and is also a bit like Gilbert Ryle's category mistake.

Take other chaotic or adaptive systems.  These are usually modelled with mathematical precision or embodied in a running algorithm.  In neither case can you say the piece of mathematics is 'adaptive'.  You've no need or grounds for saying that.  The logistic map properties themselves don't have to be properties of the mathematics of the logistic map.

Given this disagreement, my question is: does it matter?  Under what circumstances does it matter in general, and when doesn't it?  It reminds me of those old exam papers where you had to identify the true primary statement from amongst a selection of statements.  Then you had to identify the true secondary statement from  another list, and finally  you had to work out statement A was true because statement B was true.

What do you think?


  1. I haven't read the book but it sounds very interesting. I tend to agree with the notion that the economic system (4.0) will be messy and needs to be adaptive, but not for the reasons the author suggests.

    The older economic models assumed a top-down, almost mathematical approach to how economies work and function. The Internet has reversed this putting enormous power in individuals and groups to the point that the ability to change the future is spread widely rather than in the hands of the elites.

    Take for instance, how the all-powerful traditional media is being decimated by nothing more than bloggers.

    Or how Microsoft is losing relevance when faced with groups of programmers working for nothing.

    Everywhere you look different models, ideas are bubbling up and it is chaotic and any economic system has to somehow adapt to the chaos.

    Mmmm this is not a bad topic to extend on my blog.

  2. Hi George, I checked your blog. Looks interesting. You may be interested in two of my other posts on this blog - Logophilia and Flogger Radar. It would be interesting to know what you thought.