To me the main issue underlying the OWNERSHIP discussions on COG has been
CREDIBILITY. How credible is binary economics as an explanation for how our
economy works now and how it could work in the future?

Determining a Theory's Credibility

We know that in the social sciences, and especially in the realm of economics, it is not possible to subject theory to rigorous experimental testing of the kind which could allow us to prove or disprove a hypothesis with an acceptable margin of error. For we cannot arbitrarily control the independent variables (antecedent conditions) while measuring the dependent variables (results). Therefore, we must rely on other means of establishing the credibility of a macro-economic hypothesis, theory, or paradigm.

A. One method might be to examine history and show that there were certain correlations between events which we might label "independent variables" (causes) and other events which we might label the dependent variables (effects). A less rigorous approach might be to anecdotally discuss how historical facts fit with our theory.

The problem with the historical approaches is that we can almost always come up with alternative theories which are equally well supported by the known facts. And it is always tempting to - consciously or unconsciously - "select" only the facts which support your favorite theory. Also, we often do not have access to all the relevant "facts" of the past or cannot obtain accurate data about them.

B. Another method of determining a theory's credibility might be to create a model or simulation and see if it not only fits known historical facts but continues to correctly predict future facts when given current data. With regard to economics I do not believe there yet exists a useful model that is intelligent or complex enough to usefully make economic forecasts. If there were, then somebody using such a model might have predicted the so-called "internet bubble" and its subsequent collapse long before these events actually occurred, resulting in the current economic downturn plaguing the U.S. economy.

C. Yet another method for determining a theory's credibility might be simply to judge whether the theory seems reasonable in light of all we know. Is it parsimonious (simple)? Is it elegant (beautiful)? Does it cause one to think and say, "Aha!" or "Eureka!"?

The binary economics paradigm does just that for many of us. It makes us think, "What a beautiful idea! See how it seems to explain so many things which previously seemed puzzling! Why didn't I think of that! It's so obvious!" For others - many of whom are professional economists - the binary paradigm seems naive, childish, utopian, unrealistic, overly optimistic, obviously wrong.

For this reason, the "Aha!" method is not very useful, either. Yet I'm afraid much of our discussions on COG have been of this very nature: The Aha! supporters vs. the naysayers. I may have been the most ardent practitioner of this method on COG.

Philosophy of Science - Epistemology - How Can We Know?

We took a brief time-out to study and discuss epistemology and philosophy of science, thanks to suggestions by moderator Keith Wilde. Some of us agreed that Karl Popper and Thomas Kuhn had much of value to say on the subject. Yet Popper does not offer a good way to assess the credibility of social or economic theories short of doing "piecemeal social engineering"
via government policy-making and institutional change. He rejects the notion that any person, group, organization, or government agency could come up with a comprehensive theory of macroeconomics or government policy which we could be certain would work as predicted, if it involved massive change or overhaul of existing policies or institutions.

I see binary economics as one of those comprehensive theories, neé paradigms, which it may be difficult to implement piecemeal. Some binary supporters disagree with me and believe that it can and must be implemented piecemeal. I hope so, for I see no alternative, short of a major crisis, which might motivate a quicker shift in thinking toward binary economic or other broad ownership prescriptions.

The largest change in policy which is needed, in my opinion, is a change in the way the Federal Reserve manages the nation's money supply. (I also advocate similar changes to other countries' central banks, but I know little about how they operate.) Chairman Greenspan seems most resistant to the idea that it matters who owns capital assets. Likewise, change is needed in the thinking and behavior of international financial institutions like the World Bank and the International Monetary Fund.

Going back to the issue of credibility: This is not only the underlying issue in our HOMESTEAD discussions - I believe it is the underlying issue among mainstream economists and policy makers. A completely new paradigm must be very convincing if it is to overcome the inertia of current thinking on a topic. Alan Greenspan (or his successor) is one of many people who would have to be willing and able to entertain this new paradigm before it has any hope of being implemented. Yet he is not inclined to do so.

So What's My Point?

There are many historical examples where a new paradigm which challenged current orthodoxy was initially rejected by the established "experts"of the time, including a major "academy of science".

I hereby concede that I cannot "prove" that binary economics is a credible theory, though I still believe that it is. I submit that it would be a shame if the paradigm turned out to be credible and workable, yet it continued to be rejected by mainstream policy makers and economists.

Karl Popper advocated criticism of all theoretical assertions. It is only through criticism that we can weed out inadequate, false assertions and perhaps come closer to the truth. On the other hand, I believe that we must be careful not to unfairly criticize a potentially useful theory by means of ridicule, polemic, and/or ad hominem attacks. In a field in which we cannot mathematically prove a hypothesis wrong nor perform controlled experiments, we must find other ways to "falsify" theories than these course tactics.

What we all need to try to do is remain skeptical not only of "new paradigms" but of the current paradigms which lead us to dismiss the new ones.