James Ransom, 2003-2016

My wife, my daughters, and I have lost our beautiful son and brother, James Ransom, 2003-2013 to the long-term psychological effects of a traumatic brain injury.  My family believes it is important that people know that James was not depressed, he was a boy with a pre-born intensity and stress-causing sense of need to always do the right thing, who suffered a serious brain injury that damaged his ability to handle the blow to his life that his injury had caused.

James’s September, 2015 brain injury wrecked his vision and made him essentially sea sick when doing school work, reading or attempting to do computer coding. It sent his life into a tailspin and turned a mild case of OCD into a life threatening condition.  James fell apart last year, withdrew from school and was under the care of professionals. Time seemed to have healed James, he was happy, reintegrated into school and with his friends, and playing basketball, learning martial arts and all other kinds of boy activities. James took his life for reasons that only God knows.

James got a chance to take a trip to see family and do the things he loved in Washington state this summer, and then to take a wonderful vacation to Hawaii for Thanksgiving, events which were a great blessing to the family.

James will be buried with his Jefferson Bible and pocket Constitution which he bought for himself last month.

Memorial contributions in honor of James Ransom may be made to Mission Hospital Foundation to support the Children’s Hospital of Orange County/Mission Hospital’s newly launched Mental Health and Wellness Initiative focused on Adolescent Behavioral Health http://www.mission4health.com/Mission-Hospital-Foundation.aspx

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Books — Expand On Your Hayek, Expand On Your World

Friedrich Hayek’s work opens a world of ideas and historical events. Read more:

The Road to Serfdom / Stalin, Hitler / Totalitarian Societies

Institutions / Culture / Evolution / Competition

Intellectuals / Economists / Experts

History of Ideas / Philosophy

Britain / British Labour / Thatcher

Mont Pelerin Society / Revival of Liberalism

Vienna / Austria

Business Cycles / Financial Crisis / Monetary Policy

Liberalism / Conservativism / Classical Liberalism

Socialism / Central Planning 

Economists

Neuroscience / Mind & Brain

Prices / Market Mechanism / Competition

Philosophers

European History 1900-1950

Marginal Valuation Applied to Production Goods

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James Ransom 2003 – 2016

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Setting up Hayek’s Revolution: extending the logic of choice from consumer goods to production goods (draft)

Thomas Kuhn describes how science precedes working on normal science puzzles which have anticipated, non-problematic solutions. When those don’t work out, scientists begin to rethinking the conceptual space, the empirical problem to be explained, and the possible explanatory solutions to these re-thought problems, see for example, what Darwin, Einstein, and Copernicus did.

Hayek worked on a set of normal science problems which arose when Menger, Walras, and  Jevons came up with a new way to think about the logic of the valuation of directly consumable goods. The task was to apply the new logic of valuation to old problems having to do with what was called “distribution theory”.  There were several standard problems which the old Smith/Ricardo account of value theory helped answer about the valuation of various non-consumable resources used in production.

When Copernicus rethought the cosmos, our conceptions of what stars and planets were changed, and were placed in a new problem situation with a new explanatory apparatus.  When Darwin rethought the biological world, he reconceptualized our species concept and our understanding of what an adaptation was, all placed within a new empirical problem / explanatory mechanism nexus.

When we first see Hayek taking up the challenge of extending the value logic of Menger et al to production goods in the effort to answer the standard questions of distribution theory, we see him assuming that much of the old conceptual scheme is non-problematic, and that the problem and solution set has not much need for revision. By the time he is finished, Hayek is living in another world, one which economists today still don’t grasp, living as most of them are closer to the classical world of Ricardo than to the new world of post-revolutionary Hayek.  It was hard for many biologists to grasp and accept what Darwin and Copernicus were doing when they re-conceived the problems and explanatory schemes of biology and astronomy.  The same has been true of Hayek and economics, perhaps more so given the special, difficult conceptual and empirical issues which arise in the social science.

Hayek’s Dissertation for Wieser

The problem of exploiting the new Mengerian logic of valuation to tackle the old problems of the valuation of the resources used in production, conceived by Ricardo as the theory of distribution, was first taken up by Eugen Bohm-Bawerk and Friedrich Wieser.  Wieser directed Hayek’s dissertation at the U. of Vienna, which took up the specific problem of extending the logic of marginal valuation from the case of directly consumed goods to non-labor production goods.

Menger had established the paradigm which illustrates how the value of distinguishable tokens of a category of items, e.g. individual apples among a basket of apples, derives from our ability to set before our minds an ordering of alternative preferred uses. That is, the value of any particular apple in the basket comes down to the last preferred use of any particular apple, e.g. feeding the last remaining apple to your horse as a treat versus earlier, more preferred uses on direct consumption eating up individual apples yourself.

The task Hayek set before himself was the problem of laying out the logic of ordering the preferred alternative uses of production goods used in the making of consumption goods, e.g. the shovels, fertilizer, land, seeds, water, trees, ladders, buckets, insecticide, etc. which go into the production of consumable apples.

We can think of a simpler example to isolate some of the issues at hand. If we own two barrels, we can lay out before our mind alternative preferred uses for the barrels with different consumable outcomes, we can use it to store water or we can use it to make wine, if one of our barrels burns up, the value of that barrel is the preferred use would would choose to give up, e.g. give up the wine and use the remaining barrel to store water. In the language made famous by Weiser, the opportunity cost of losing one of a number of barrels is the benefit lost made possible by the barrel in its least preferred production use.

So that it the paradigm case of the logic of imputation, we impute value to the barrel by the consumption uses that the barrel at the margin of choice makes possible for us.

The pure logic of valuation is about the ordering of preferences and uses in one’s own head involving a private closed personal economy of goods and alternative uses. In the old economics of Smith, Ricardo and others, valuation theory was used to explain changing patterns in the public money economy, things like changing prices relations and changing incomes and  changing stores of saved wealth.

“In seeking to determine the value of a given quantity of consumer goods, although the answer overcame the spurious contraction between value and utility and simultaneously laid the groundwork for all value theory, the problem thus solved constituted only a part of the problems of theoretical economics. The foundations for answering the question of the structure of the economy as a whole and hence the problem of distribution are only addressed by the theory of imputation.” (Hayek, 1926/2015, p. 3.)

“A satisfactory solution of the imputation problem is thus a precondition for a distribution theory based on the theory of subjective value.” (Hayek, 1926/2015, p. 2)

“According to the modern theory of subjective value, the determination of prices is basically explained by individual valuation. At the same time, since Ricardo, it has been widely agreed that the objective of economic theory is to discover the determinants of income, primarily by investigation what determines the prices of factors of production.” (Hayek, 1926/2015, p. 2)

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Logic versus empirical problems and causal processes — Hayek’s revolution

Economists do not understand Hayek.

They simply don’t.

I want here to explain in simple terms what economists don’t get, and what they would grasp if they were to ever understood what Hayek is doing.

Thomas Kuhn explains how roadblocks to explanatory success, and conceptual novelties inspired by explanatory failure, providing new avenues to understanding, open the way to new explanatory strategies and success.

Here is what Hayek does. Hayek identifies roadblocks to explanatory success in economic science, and then he recasts the explanatory problem and explanatory strategy of economics to overcome these roadblocks. He achieves a new understanding of the science of economics which solves old problems and puts is on a secure logical foundation.

If we think about how economist have locked themselves into a titanium box inherited from an old tradition of what “knowledge” demands and what “science” must look like, then we can grasp why economists haven’t yet begun to see what Hayek has achieved.

To get from the current state of non-understanding to a position of understanding, we need to sketch out a few things, and then show how they are related to one another.  We need to sketch out the old picture of what “knowledge” and “science” must be, and how that formed into a powerful central dogma. We need to identify the roadblocks to explanatory coherence and success which economics faced over the last century, and how those problems came to a head in the work of Friedrich Hayek on prices, production goods, trade cycle dis-coordination, and in the economics of socialism. We need to talk about how the false dogma of what “knowledge” and “science” demand has shaped economics, and how that dogma contributed roadblocks to explanatory coherence and success in economics.  Finally, we need to show how Hayek overcame these roadblocks to explanatory success my recasting the explanatory problem and explanatory solution set in economic science, braking away from old fallacies and dogmas once set in concrete among economists and philosophers.

Here is what we are going to learn.

We are going to learn that Hayek’s research project was dominated by a closely related set of conceptual problems, all of which had been running into conceptual roadblocks. Among other thinks, Hayek was working on extending the pure logic of choice, also known as the pure calculus of marginalist valuation, from the case of multiple consumption goods to the case go multiple production goods. Hayek was also working on the problem of using the pure logic of choice to understand what is happening when the economy cycles from boom phases to bust phases. Closely related to both problems, Hayek was working on the problem of using the calculus of marginalize valuation to rethink what classical economists had said about the distribution of income and the nature of money and interest, problems which were interrelated through pre-marginalist theories of profit, interest, and capital.

We are going to learn that the a false image of “knowledge” and “science” dominates the imagination of economists, a false image derived from 19th century German economists and philosophers, ultimately grounded in false ideas derived from the Greeks.  Hayek challenges and smashes this false image, combining his revolutionary work in neuroscience and epistemology with insights derived from David Hume, Carl Menger, Karl Popper, and Ludwig Wittgenstein, among others.  Hayek marshals his new thinking in a process of re-casting the explanatory problem and explanatory mechanisms of economics, making use of a constellation of new ideas and forgotten explanatory achievements from the past.

 

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My Reply to David Wilson on Hayek & the Use of Mathematical Population Biology Models in the Social Sciences (draft)

David Wilson has asked me to read his discussion of Hayek and the growing literature on multilevel selection modeling and the wider literature of human cultural evolution. This is my reply which I hope he will welcome in the spirit of filling the gap in the literature on “the sphere of economic thought centered on Hayek and the modern study of cultural multilevel selection.”  My discussion will also engage his lecture (listen here) on Hayek and multi-level selection delivers before Peter Boettke’s F.A. Hayek Center for Advanced Study in Philosophy, Politics, and Economics at George Mason University.

Let me begin by saying that I admire his work, and I have read the literature in which he works for over 35 years with great interest, stretching back to the pioneering work of Richard Alexander, which I encountered almost concurrently with my encounter with the work of Hayek.  My own background is in the philosophy of biology and scientific explanation, working with Alex Rosenberg and Larry Wright, which has involved studying most of the foundational work in the history and philosophy of biology, including that of Wilson’s colleague Elliott Sober.  I have also constructed a functioning selection model of cultural evolution in which individual behaviors creating group-exhibited properties give selective advantage both to the individual vis-a-vis individuals not displaying the behavior and vis-a-vis species which do not display the group property, as in the case of schooling behavior by individual fish and the fish species to which they belong.

Let me suggest that the crucial first step in “bridging the gap between Hayek and cultural multilevel selection” is simply this:  o identify and remove a host of false conceptions and mythologies found in Wilson’s discussion concerning both (1) the domain of Hayek’s work and (2) the domain of evolutionary and selection explanations.  Let me go through a list of these false conceptions and unhelpful mythologies.

  1. “Hayek Crossed a Continental Divide in the Landscape of Economic Thought”

Hayek actually did TWO things.  Hayek (1) resurrect the pre-20th century world of the enlightenment where thinking about social institutions involved combinations of both evolutionary thinking and economic thinking. And Hayek (2) showed how these elements made sense only in light of an empirical undesigned order problem seen already in the 18th century, fleshed out and put into an powerful explanatory frame involving the causal mechanisms of learning in the context of changing individual understandings of local conditions and prices relations, following negative rules of conduct like “no stealing”, and using the pure logic of choice as a window on global economic plan coordination.

David Wilson suggests that there existed a “continental divide” between two elements (1) The Age of Reason / The Physics of Social Behavior; and (2) Evolutionary Biology, which Hayek “crossed”.

In fact, Hayek developed as a scholar steeped in the work of Carl Menger, Friedrich Wieser, Ernst Mach, and a number of other continental thinkers, all of whom never bought into many elements of “The Age of Reason / The Physics of Social Behavior,” and all of whom combined economic and evolutionary elements in their explanatory paradigms, accounting for the growth of knowledge, institutions, and human flourishing.

So the “continental divide” identified by Wilson didn’t exist for Hayek as a budding scientist. What is more, Hayek went back and showed that many important enlightenment thinkers working in social theory rejected modern conceptions of “The Age of Reason / The Physics of Social Behavior” as became prominent especially in the 20th century, and these thinkers combined economic, competitive and evolutionary conceptions in their explanatory paradigms matched with undesigned order problems fully compatible with the later Darwinian vision, a vision which Hayek shows was itself derived and inspired in large measure from economic, competitive and evolutionary conceptions from social theory.

Hayek points out, for example, that John Locke had a socially evolutionary conception of “reason” and rejected what Hayek often referred to as a “French” conception of reason.  Hayek points out that Darwin’s branching tree conception of historical evolution by descent derives from the linguistic work of William Jones. Hayek points out that Adam Ferguson, Bernard Mandeville, Rene Descartes, David Hume, and Edmund Burke identified social institutions and structures which were the product of a multitude of human behaviors across time but were not the result of any one man’s intentional design.

And of course the work of Thomas Malthus on scarce resources, declining marginal utility and competition for goods was the direct inspiration for the Darwinian paradigm itself.

Hayek also does something very similar to what Ernst Mayr does in his book The Growth of Biological Thought, Hayek shows how conceptual roadblocks fixed in the very terminology of Greek thought block space for a domain of ordered phenomena between the intentionally designed and the physically regular. Hayek shows how Greek conceptions block room for undersigned order thinking in social theory and Mayr showed how Greek conceptions of types, kinds and concepts blocked the notion of change across time in biological categories like species and adaptive features.

So right here we identify a meaty, fruitful and substantive “gap” area significant for exploring the character of economic, selective and evolutionary undesigned order explanations — and how those have been blocked by the intellectual traditions stretching back to Greek thought.  There is a great deal on the plate here in Hayek’s work, from his rejecting of justificationalism in epistemology to his Wittgensteinian rejection of rationalistic Platonic or Fregean pictures of conceptual significance, work that could be enriched with connection to David Hull’s work on concepts as historical individuals. This work could also be connected to Hayek discussion of the problematic and misleading nature of God’s Eye View models of social phenomena, work directly linked to Ludwig Wittgenstein’s work on this same topic.  David Hull’s discussion of the problematic man-many relation between phenotype and genotype would also be of significance here, directly related to Hayek’s account of the many-many problem of brain classification and perceptual categories.  There is a lot to think about here.  Anyone wanting to “fill the gap” needs to do so.  And the issues involved only get started with these topics.

There is massively more to be said about how Hayek never began within a “continental divide”, how Hayek established that no such “continental divide” existed in much of the best of enlightenment social theory, and about how Hayek replaced the mistakes of “Age of Reason / The Physics of Social Behavior” social science as it came to dominate 20th century economic thought, even as Hayek provided crucial new components to the formalization and mathematization of the pure theory of choice and the equilibrium construct.  More importantly, their is the central story of how Hayek managed to recast economics as a science originating in an empirical undesigned order problem, and the role of the pure logical of choice and equilibrium constructs in our conception of that problem, and the relation of these to the central causal mechanisms accounting for plan-like social coordination (1) changes in individual understanding in the context of changing local conditions and relative prices; and (2) inherited negative rules of just like rules against lying, stealing, and breaking contracts.

 

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How economists have blinded themselves with their math constructions

Hayek’s multi-dimensional normal science research project, tackling the relation between the new marginal valuation logic and the old problem 0f distribution theory  (among several other problems) opened Hayek’s eyes to how the math construction of economics had blinded economists to the central problems, structures and causal processes of the market economy.  What I will do here is explicate where and how economists, according to Hayek, have been blinded to the problems, structures and causal processes of the market economy by the formal constructions and the false philosophical pictures which mandate the particular ways that economists feel compelled to think about these constructions.

“there can be no doubt that for the understanding of the dynamic processes [the discussion of ‘capital’ in terms of some single magnitude] was disastrous.” (Hayek, 1941/2007, p. 33)

“the doubtful meaning of equilibrium analysis .. if applied to the conditions of a competitive society.” (Hayek, 1937/2014, p. 61)

“My criticism of the recent tendencies to make economic theory more and more formal is not that they have gone too far but they have not yet been carried far enough to complete the isolation of this branch of logic and to restore to its rightful place the investigation of causal processes.” (Hayek, 1937/2014, p. 59)

“the sense in which we use the concept of equilibrium to describe the interdependence of the different actions of one person does not immediately admit of application to the relations between the actions of different people.” (Hayek, 1937/2014, p. 61)

“What seems so far to have escaped notice is that this whole procedure involves a confusion of a much more general character .. which is due to an equivocation of the term ‘datum.” The data which here are suppose to be objective facts and the same for all people ware evidently no longer transformations of the Pure Logic of Choice. There ‘data’ meant those facts and only those facts, which were present in the mind of the acting person, and only this subjective interpretation of the term ‘datum’ made those propositions necessary truths.” (Hayek, 1937/2014, p. 62)

“‘Datum’ [in the Pure Logic of Choice] meant given, known, to the person under consideration. But in the transition from the analysis of the action of an individual to the analysis of the situation in a society the concept has undergone an insidious change of meaning.” (Hayek, 1937/2014, p. 62)

“in the usual presentations of equilibrium analysis it is generally made to appear as if these questions of how the equilibrium comes about were solved. But, if we look closer, it soon becomes evident that these apparent demonstrations amount to no more than the apparent proof of what is already assumed.”  (Hayek, 1937.2014, p. 68)

“The assumption of a perfect market [in the sense that if people know everything they are in equilibrium] is just another way of saying that equilibrium exists but does not get us any nearer an explanation of when and how such a state will come about.” (Hayek, 1937/2014, p. 69)

“The statement that, if people know everything, they are in equilibrium is simply true because that is how we define equilibrium.” (Hayek, 1937,2014, p. 68-69)

Blinded by math theories of the “monetary economy”

“Monetary theory should .. study those phenomena which distinguish the money economy from the equilibrium inter-relationships of barter economic which must always be assumed by ‘pure economics’.” (Hayek, 1929/1931/2012, p. 102)

“All these theories .. are based on the idea — quite groundless but hitherto virtually unchallenged,

“In complete contrast to those economics changes conditioned by ‘real’ forces, influencing simultaneously total supply and total demand, changes in the volume of many have, so to speak, a one-sided influence which elicits no reciprocal adjustment in the economic activity of different individuals.” (Hayek, 1929/1931/2012, p. 104)

“As a theory of these one-sided influences, the theory of monetary economy should .. be able to explain the occurrence of phenomena which would be inconceivable in the barter economy, and notably the disproportional developments which give rise to crises.” (Hayek, 1929/1931/2012, p. 104)

 

 

 

 

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