Posted tagged ‘thoughts’

The Search of Neuroscience for the Quintessence of Economics

November 17, 2014

By Con George-Kotzabasis—October 03, 2014

A reply to “of markets and minds” –by professor Peter Bossaerts

Melbourne University Magazine

Economics is the application of scarce means for the attainment of countless abundant ends. Since all ends cannot be fulfilled because of the scarcity of resources, human choice selects those ends that are more needful or pleasurable to man than those that are less so. The attainment of those more needful ends is a result of human action. These ends, however, are the fruits of the future and the inevitable uncertainty that is riveted upon it. Therefore human action is always speculation based, however, not upon the throw of the dice but upon ratiocination. Furthermore, actions are determined by the value judgments of individuals i.e., the ends they are eager to attain. These valuations differ among individuals due to the different circumstances and living conditions of these individuals and to the variable desires and wishes that emanate from the plethora of their personalities. There is no constant relationship between these valuations, as they emanate from the different wishes, desires and caprices of an umpteenth of individuals, and are therefore beyond the bailiwick of science to measure them; what scientific method could measure with precision the capricious longings of man and the uncertainty that surrounds his existence?

Professor Bossaerts’ attempt therefore, to identify and control the ‘cells’ of the economy and finance and the complex interactions that determine their course by the scientific method of neuroscience for the purpose of rationally directing the process of the economy to a more beneficial path, is in vain and is bound to fail. Science measures constant relationships in the controlled experimental environment of the lab but cannot measure uncontrolled innumerable variants that determine, in our case, the process of a free market economy. The search, therefore, of finding the inexorably elusive quintessence of the economic process by the tools of the hard sciences, though a laudable task, is purblind, as it cannot see nor understand that science is incapable of measuring the measureless.

The endeavour to supplant and redress, on the one hand, the imperfections of the free market economy, and on the other, the failures of government dirigisme to regulate and direct the economic process of the free market to a more optimal state, by the powerful algorithmic tools of science, will be found to be another futile attempt to direct the economy from a central command post, this time by the methods of neuroscience and not by an omniscient cabal of socialist planners.

In an imperfect and uncertain world, the free market economy will proceed and move by trial and error and continue to spread its benefits to mankind. But the intervention of man’s reason and understanding will substantially diminish the errors by increasing their correction in time by the power of man’s imagination and ratiocination.

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In Greece Political Midgets on a High Wire Act

November 7, 2011

By Con George-Kotzabasis—November 02, 2011-11-02

Political midgets, a la Papandreou, have chosen to take the risk of the high wire act by this proposal of the referendum. Hoping that the people will vote for the lesser of two evils, i.e., accepting the debt deal as formulated in Brussels last week and rejecting default and departure from the euro zone. At a time when strong leadership is a prerequisite for diminishing the crisis that Greece is facing, Papandreou abdicates his own and passes it to the people through this future referendum. It’s as if the polloi had somehow a better knowledge and understanding of the critical dimensions of the economic situation and could provide a better solution to the crisis than the expertise of the economically and politically savvy.

Once again politicians, who are more concerned of holding power than of the future of their own country, are ready to prostrate themselves before and pay homage to the idol of the Demos. Papandreou facing in Parliament a no-confidence vote and the ousting of his government promptly announced a referendum that would decide the future of the country, hoping that this would allay the anger and opposition of the people against the austerity measures, imposed by the EU, and at the same time put an end to the disarray within his own government that itself stems from the revolt of the people. It’s clever politicking to avoid defeat and save for him the prime ministership. But he is doing this at the expense of the future well being of the country, as it would take years for Greece to recover from the shock of a default if the electorate voted for it, which is highly likely. This is no less than the revisiting of the ‘sinful’ genius of his pere who himself was the preeminent progenitor of the economic ills that Greece is presently plagued with. The fils merely continues , like father like son, the ‘sins’ of his sire in a more acute form and projects them into the future.

World Bank president, Robert Zoellick said that “if voters reject the plan, it’s going to be a mess.” Economists claim that the immediate effects of a default would probably be a 20 percent to 30 percent drop in domestic demand and a fall of 5 to 10 percent of domestic product. Evangelos Venizelos, the Finance Minister, and his deputy broke ranks and opposed the referendum, saying it would jeopardize Greek membership in the euro zone. Ilias Nicolakopoulos, professor of political science and close to the governing socialist party, stated that a “referendum would put the country in danger of blowing everything up.” In contrast, Henry Ergas writing in The Australian, on November 3, 2011, “Greek Vote a Banana Republic Moment,” praises Papandreou for having the “balls” to propose the referendum, and compares him to the gutsy warning of Paul Keating’s “Banana Republic.” He says, that “to call a referendum on the austerity program is hardly irrational. But he adds the caveat, “true, it is a gamble, and a risky one.” Nonetheless, “the best hope of what comes next must lie in securing a genuine popular mandate.”

Regrettably, however, Papandreou’s proposal of a referendum does not rise from his “balls” but from his impotence. Unable to lead and convince the country, as a weak leader, to accept the inevitable “scenario, Greece must face a lengthy period of austerity and structural reform,” Papandreou passes this leadership to the impassioned people to decide whether to accept or not this scenario. Professor Ergas’ quote of Sophocles, “truth is always the strongest argument,” though generally accurate, is misplaced in the context of a long corrupt electorate that the fiscal profligacy of past governments accustomed it to indulge in ‘free suntans’ in sunny Greece. In such circumstances, the only truth that this pampered electorate will accept is the continuation of these free suntans at public expense. And that is why they will vote NO to austerity measures and thus turn the referendum into an ogre for the future economy of Greece.

Fortunately the proposed referendum like the balloon it was fizzled out within twenty four hours. Under external and internal pressure Papandreou reneged his proposal and withdrew it. Tonight (November 4, 2011), he places his fate on the lap of the god, parliament, on a confidence vote. Even if he survives by the smallest margin his prime ministership is foreclosed.

I rest on my oars: your turn now