April 18, 2017

Toward the New Academy

Comment on Noah Smith on ‘Can rationalist communities still change the world?’


The all too obvious problem of economics is that political economics (= agenda-pushing) has dominated theoretical economics (= science) since the founding fathers. The Chicago School with Hayek and Friedman as iconic figures is one of the better-known examples.

Political economics has changed the world but has not produced anything of scientific value: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum) Economists still lack the true theory. False theory, though, leads to false policy guidance. Scientifically incompetent economists bear the intellectual responsibility for the social devastation of mass unemployment since the Great Depression.

To get out of the current pluralism of provably false theories requires that theoretical economics emancipates itself from political economics. Or, more generally, that science emancipates itself from politics or any other conceivable other-directedness. Other-directedness — this is rather trivial — takes mostly the form of money. Clearly, if politics/ business is thrown out of science funding evaporates.

The proper separation of politics/business on the one hand and science on the other presupposes the solution to the funding problem. There can be no full scientific sovereignty without full financial sovereignty.

The curious thing is that what we call material wealth/innovative products/civilization/ culture/knowledge has for the most part been created by science but scientists have to go begging for funds and are de facto continuously threatened with the withdrawal of funds. As a result, science is leveraged where government or business pour money in and it is de-leveraged elsewhere. How the relationship between science and politics/business gradually developed over time can be gleaned from the following episodes.

“At one point in that 100 years, Lord Ernest Rutherford was visited by a minister of the Queen. He proudly and busily demonstrated what he had learned about radio. The minister said that’s all very good, but what is it good for. Lord Rutherford replied that he did not know, but he guaranteed that at some point the government would tax it.”#1

“The investors showed little interest in Tesla’s ideas for new types of motors and electrical transmission equipment. They were more interested in developing an electrical utility than inventing new systems. They eventually forced Tesla out, leaving him penniless. He even lost control of the patents he had generated, since he had assigned them to the company in lieu of stock. He had to work at various electrical repair jobs and as a ditch digger for $2 per day.”#2

“In the mid-1890s the conglomerate General Electric, backed by financier J. P. Morgan, was involved in takeover attempts and patent battles with Westinghouse Electric. A patent-sharing agreement was signed between the two companies in 1896, but Westinghouse was still cash-strapped from the financial warfare. To secure further loans, Westinghouse was forced to revisit Tesla’s AC patent, which bankers considered a financial strain on the company. … In 1897, Westinghouse explained his financial difficulties to Tesla in stark terms, saying that, if things continued the way they were, he would no longer be in control of Westinghouse Electric and Tesla would have to ‘deal with the bankers’ to try to collect future royalties. Westinghouse convinced Tesla to release his company from the licensing agreement over Tesla’s AC patents, in exchange for Westinghouse Electric purchasing the patents for a lump sum payment of $216,000. This provided Westinghouse a break from what had turned out to be an overly generous $2.50 per AC horsepower royalty, due to alternating current’s rapid gain in popularity.”#2

“Starting in 1934, the Westinghouse Electric & Manufacturing Company began paying Tesla $125 per month as well as paying his rent at the Hotel New Yorker, expenses the Company would pay for the rest of Tesla’s life. Accounts on how this came about vary. Several sources say Westinghouse was worried about potential bad publicity surrounding the impoverished conditions their former star inventor was living under. It has been described as being couched in the form of a “consulting fee” to get around Tesla’s aversion to accept charity, …”#2

Between Rutherford’s independent research and Tesla’s living from the corporate charity, something has gone badly wrong with science.

Roughly speaking, scientists are individuals who are confident that they can figure out exactly how a greater or smaller part of the universe works. Often, this part of reality is outside the perimeter of commonsensical everyday reality or of what Marshall called the ordinary business of life. What scientists need is time, the absence of all kinds of disturbances/ distractions, more or less expensive tools, cooperation/exchange of ideas, protection from morons/commonsensers/trolls, and, just like anybody else, food/clothing/shelter/health care. Whether this investment of time/resources/talent/genius produces (i) new scientific knowledge, (ii) a social surplus, and (iii) an economic profit is highly uncertain. This makes scientists dependent on people with a mindset and an agenda that is very different from their own, i.e. investors, speculators, bankers, sponsors, financiers, entrepreneurs, CEOs, politicians, etcetera.

While for the individual scientist, the outcome of her/his research is highly uncertain the monetary and nonmonetary profit of science as a collective enterprise is gigantic. What science as an institution — let us call it the New Academy — has to achieve is to get x percent of the selling price of every product/service that incorporates the results of scientific research. This money then flows back to new research. It takes two forms (i) unconditional lifelong support of researchers with the normal/minimum necessities of life, (ii) spending on necessary tools/instruments/hardware/software/materials etcetera. The decisions about the budget lie in the sovereignty of the members of the New Academy. Thus, the efforts/risks/rewards of scientific research are inter-generationally shared within the supra-national scientific community with NO interference from non-scientists.

The basic idea is to make science entirely free from other-directedness and to put it on its own financial feet. Needless to emphasize that the New Academy is strictly focused on science, education, and the dissemination of knowledge. It is separated from politics and all other non-, anti-, or unscientific activities by a very strong Chinese Wall.

What we have learned from the failure of political economics is that the political/business mindset is incompatible with the scientific mindset and that the former invariably cripples and corrupts the latter: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. … A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack)

The practical/institutional separation of politics/business and science is an urgent necessity for scientists in general and economists in particular. The community of scientists has, first of all, to solve its funding problem in order to get politics/business off its back and then, in full material and intellectual sovereignty, to figure out how the universe, the world, and the economy work. The sole mission of the New Academy is to produce truth-value. And this also means that political economics as we know it from Keynes, Hayek, Friedman, Krugman, Varoufakis, and all the scientifically incompetent rest, and all their proto-scientific garbage, becomes a thing of the past.

Will the New Academy change the world? Yes. Will the New Academy improve the world? Who else could? Politician X? Spiritual leader Y? Businessman Z? The one-percenters? The ninety-nine-percenters? Conservative or liberal blatherers? Walrasians, Keynesians, Marxians, Austrians? Would you ever board an aircraft that is said to have been designed and built by these folks?

Egmont Kakarot-Handtke

#1 Source PSW
#2 Wikipedia

Related 'Economists’ proto-scientific shell games' and 'Scientific suicide in the revolving door' and 'There is NO such thing as an economic expert' and 'There is no scientific elite in economics' and 'Schizonomics'