The Neoclassical Synthesis and the Mind-Body Problem

The neoclassical synthesis that emerged in the early postwar period aimed at reconciling the macroeconomic (IS-LM) analysis derived from Keynes via Hicks and others with the neoclassical microeconomic analysis of general equilibrium derived from Walras. The macroeconomic analysis was focused on an equilibrium of income and expenditure flows while the Walrasian analysis was focused on the equilibrium between supply and demand in individual markets. The two types of analysis seemed to be incommensurate inasmuch as the conditions for equilibrium in the two analysis did not seem to match up against each other. How does an analysis focused on the equality of aggregate flows of income and expenditure get translated into an analysis focused on the equality of supply and demand in individual markets? The two languages seem to be different, so it is not obvious how a statement formulated in one language gets translated into the other. And even if a translation is possible, does the translation hold under all, or only under some, conditions? And if so, what are those conditions?

The original neoclassical synthesis did not aim to provide a definitive answer to those questions, but it was understood to assert that if the equality of income and expenditure was assured at a level consistent with full employment, one could safely assume that market forces would take care of the allocation of resources, so that markets would be cleared and the conditions of microeconomic general equilibrium satisfied, at least as a first approximation. This version of the neoclassical synthesis was obviously ad hoc and an unsatisfactory resolution of the incommensurability of the two levels of analysis. Don Patinkin sought to provide a rigorous reconciliation of the two levels of analysis in his treatise Money, Interest and Prices. But for all its virtues – and they are numerous – Patinkin’s treatise failed to bridge the gap between the two levels of analysis.

As I mentioned recently in a post on Romer and Lucas, Kenneth Arrow in a 1967 review of Samuelson’s Collected Works commented disparagingly on the neoclassical synthesis of which Samuelson was a leading proponent. The widely shared dissatisfaction expressed by Arrow motivated much of the work that soon followed on the microfoundations of macroeconomics exemplified in the famous 1970 Phelps volume. But the motivation for the search for microfoundations was then (before the rational expectations revolution) to specify the crucial deviations from the assumptions underlying the standard Walrasian general-equilibrium model that would generate actual or seeming price rigidities, which a straightforward – some might say superficial — understanding of neoclassical microeconomic theory suggested were necessary to explain why, after a macro-disturbance, equilibrium was not rapidly restored by price adjustments. Two sorts of explanations emerged from the early microfoundations literature: a) search and matching theories assuming that workers and employers must expend time and resources to find appropriate matches; b) institutional theories of efficiency wages or implicit contracts that explain why employers and workers prefer layoffs to wage cuts in response to negative demand shocks.

Forty years on, the search and matching theories do not seem capable of accounting for the magnitude of observed fluctuations in employment or the cyclical variation in layoffs, and the institutional theories are still difficult to reconcile with the standard neoclassical assumptions, remaining an ad hoc appendage to New Keynesian models that otherwise adhere to the neoclassical paradigm. Thus, although the original neoclassical synthesis in which the Keynesian income-expenditure model was seen as a pre-condition for the validity of the neoclassical model was rejected within a decade of Arrow’s dismissive comment about the neoclassical synthesis, Tom Sargent has observed in a recent review of Robert Lucas’s Collected Papers on Monetary Theory that Lucas has implicitly adopted a new version of the neoclassical synthesis dominated by an intertemporal neoclassical general-equilibrium model, but with the proviso that substantial shocks to aggregate demand and the price level are prevented by monetary policy, thereby making the neoclassical model a reasonable approximation to reality.

Ok, so you are probably asking what does all this have to do with the mind-body problem? A lot, I think in that both the neoclassical synthesis and the mind-body problem involve a disconnect between two kinds – two levels – of explanation. The neoclassical synthesis asserts some sort of connection – but a problematic one — between the explanatory apparatus – macroeconomics — used to understand the cyclical fluctuations of what we are used to think of as the aggregate economy and the explanatory apparatus – microeconomics — used to understand the constituent elements of the aggregate economy — households and firms — and how those elements are related to, and interact with, each other.

The mind-body problem concerns the relationship between the mental – our direct experience of a conscious inner life of thoughts, emotions, memories, decisions, hopes and regrets — and the physical – matter, atoms, neurons. A basic postulate of science is that all phenomena have material causes. So the existence of conscious states that seem to us, by way of our direct experience, to be independent of material causes is also highly problematic. There are a few strategies for handling the problem. One is to assert that the mind truly is independent of the body, which is to say that consciousness is not the result of physical causes. A second is to say that mind is not independent of the body; we just don’t understand the nature of the relationship. There are two possible versions of this strategy: a) that although the nature of the relationship is unknown to us now, advances in neuroscience could reveal to us the way in which consciousness is caused by the operation of the brain; b) although our minds are somehow related to the operation of our brains, the nature of this relationship is beyond the capacity of our minds or brains to comprehend owing to considerations analogous to Godel’s incompleteness theorem (a view espoused by the philosopher Colin McGinn among others); in other words, the mind-body problem is inherently beyond human understanding. And the third strategy is to deny the existence of consciousness, because a conscious state is identical with the physical state of a brain, so that consciousness is just an epiphenomenon of a brain state; we in our naivete may think that our conscious states have a separate existence, but those states are strictly identical with corresponding brain states, so that whatever conscious state that we think we are experiencing has been entirely produced by the physical forces that determine the behavior of our brains and the configuration of its physical constituents.

The first, and probably the last, thing that one needs to understand about the third strategy is that, as explained by Colin McGinn (see e.g., here), its validity has not been demonstrated by neuroscience or by any other branch of science; it is, no less than any of the other strategies, strictly a metaphysical position. The mind-body problem is a problem precisely because science has not even come close to demonstrating how mental states are caused by, let alone that they are identical to, brain states, despite some spurious misinterpretations of research that purport to show such an identity.

Analogous to the scientific principle that all phenomena have material or physical causes, there is in economics and social science a principle called methodological individualism, which roughly states that explanations of social outcomes should be derived from theories about the conduct of individuals, not from theories about abstract social entities that exist independently of their constituent elements. The underlying motivation for methodological individualism (as opposed to political individualism with which it is related but from which it is distinct) was to counter certain ideas popular in the nineteenth and twentieth centuries asserting the existence of metaphysical social entities like “history” that are somehow distinct from yet impinge upon individual human beings, and that there are laws of history or social development from which future states of the world can be predicted, as Hegel, Marx and others tried to do. This notion gave rise to a two famous books by Popper: The Open Society and its Enemies and The Poverty of Historicism. Methodological individualism as articulated by Popper was thus primarily an attack on the attribution of special powers to determine the course of future events to abstract metaphysical or mystical entities like history or society that are supposedly things or beings in themselves distinct from the individual human beings of which they are constituted. Methodological individualism does not deny the existence of collective entities like society; it simply denies that such collective entities exist as objective facts that can be observed as such. Our apprehension of these entities must be built up from more basic elements — individuals and their plans, beliefs and expectations — that we can apprehend directly.

However, methodological individualism is not the same as reductionism; methodological individualism teaches us to look for explanations of higher-level phenomena, e.g., a pattern of social relationships like the business cycle, in terms of the basic constituents forming the pattern: households, business firms, banks, central banks and governments. It does not assert identity between the pattern of relationships and the constituent elements; it says that the pattern can be understood in terms of interactions between the elements. Thus, a methodologically individualistic explanation of the business cycle in terms of the interactions between agents – households, businesses, etc. — would be analogous to an explanation of consciousness in terms of the brain if an explanation of consciousness existed. A methodologically individualistic explanation of the business cycle would not be analogous to an assertion that consciousness exists only as an epiphenomenon of brain states. The assertion that consciousness is nothing but the epiphenomenon of a corresponding brain state is reductionist; it asserts an identity between consciousness and brain states without explaining how consciousness is caused by brain states.

In business-cycle theory, the analogue of such a reductionist assertion of identity between higher-level and lower level phenomena is the assertion that the business cycle is not the product of the interaction of individual agents, but is simply the optimal plan of a representative agent. On this account, the business cycle becomes an epiphenomenon; apparent fluctuations being nothing more than the optimal choices of the representative agent. Of course, everyone knows that the representative agent is merely a convenient modeling device in terms of which a business-cycle theorist tries to account for the observed fluctuations. But that is precisely the point. The whole exercise is a sham; the representative agent is an as-if device that does not ground business-cycle fluctuations in the conduct of individual agents and their interactions, but simply asserts an identity between those interactions and the supposed decisions of the fictitious representative agent. The optimality conditions in terms of which the model is solved completely disregard the interactions between individuals that might cause an unintended pattern of relationships between those individuals. The distinctive feature of methodological individualism is precisely the idea that the interactions between individuals can lead to unintended consequences; it is by way of those unintended consequences that a higher-level pattern might emerge from interactions among individuals. And those individual interactions are exactly what is suppressed by representative-agent models.

So the notion that any analysis premised on a representative agent provides microfoundations for macroeconomic theory seems to be a travesty built on a total misunderstanding of the principle of methodological individualism that it purports to affirm.


37 Responses to “The Neoclassical Synthesis and the Mind-Body Problem”

  1. 1 Marcus Nunes September 18, 2015 at 2:07 pm

    David, from more than 20 years ago. Why did it not havr a bigger impact?

    Click to access WhomOrWhatDoesRepIndRepresent.AKirman1992.pdf


  2. 2 Graham B September 19, 2015 at 6:55 am

    Stimulating read.

    Although I find your main point compelling, I would suggest a terminological amendment. Reductionism is certainly the project of explaining ‘higher level’ features in term of ‘lower level’ ones but, as you suggest, this does not entail a one-to-one correspondence between those levels. Appeals to individual motivations or to biochemistry can give us powerful insights about crowd behaviour and neurophysiology.

    The problem starts when we begin to believe that a higher level phenomenon is really *nothing but* its lower level. Daniel Dennett calls this a ‘nothing-but-ism’ and other philosophers call it eliminitivism. And, yes, it’s a crazy piece of metaphysics. I think it’s important to keep these apart.

    Now your main concern seems to be that methodological individualism fails to be properly reductionist since it postulates fictitious entities which really just make reference to macro-level phenonmena. Better for it to make reference to something *real* at a lower level then try to work back up again and see how much of the macro we can explain. This is intuitive and I think that the representative agent is often the wrong way forward, but I also think that more groundbreaking science exists by this method of wild conjecture than we would like to admit. James Clark Maxwell is a funny case: I’m going to get the details wrong but he originally postulated fictitious little balls called molecules/atoms to explain higher-level phenomena like the flow of electricity. “Let’s think of it as water” he mumbled, not believing that these entities *actually* existed. Then, somewhere later in his career, once the explanations were amazing and solid, he somehow came to believe there *really were* such low-level entities.

    What is it about postulating representative agents – a useful fiction – that is so different from this strategy? Why do we see one as a cheat and the other as brilliance (I think we should see Maxwell as brilliant)?


  3. 3 Miguel Navascués September 19, 2015 at 9:42 am

    Great! Don’t you say that this model is an “ad hoc” machine to justify the conclusion? A model constructed begining by the end?


  4. 5 A September 19, 2015 at 4:09 pm

    Off-topic, but I don’t think that this is true: “The mind-body problem is a problem precisely because science has not even come close to demonstrating how mental states are caused by, let alone that they are identical to, brain states, despite some spurious misinterpretations of research that purport to show such an identity.”

    One counter-example would be the treatment of PTSD near the time of trauma. Morphine seems to interfere with the response between stress hormones and the hippocampus that affixes the stressing experience into the long-term memory.


  5. 6 David Glasner September 21, 2015 at 1:11 pm

    Marcus, I wish I knew. It’s a great paper. I should have linked to it myself. Thanks for doing so.

    Graham, Explaining higher-level phenomena in terms of lower-level causes is certainly a good thing to aim for. Theoretical reduction is always an important scientific achievement, which is what Maxwell did. That’s not the kind of reductionism that I am criticizing. The kind of reductionism that I am criticizing is certain neuroscientists and certain philosophers who, because they believe that science requires that everything be explained in terms of material or physical causes deny that consciousness exists or that it is an illusion because we only think we are making decisions when in fact my striking the keys on the keyboard to write this reply to your post is simply my obeying the physical laws of nature that right now require me to do just what I am doing, my mind being nothing but an innocent bystander to what my fingers are now doing. That is just absurd. And the microfoundations crowd is making an argument that is exactly analogous to that. A scientific reduction is an actual translation of the higher level theory into the lower level theory. Lucas is not saying that you can derive all of macroeconomics from microeconomics, he is saying that macroeconomics does not exist period. In the meantime, macroeconomics has not been derived from microeconomics; it has just been abolished by methodological fiat.

    Miguel, Yes that is what I am saying, Thanks for the link.

    A, I don’t think that is a counterexample. Unless you are a philosophical dualist or idealist you don’t deny that the mind is related to the body. If you do something severe to the body, there will more than likely be an effect on the mind. Just because you can isolate a part of the brain that is affected does not mean that you have explained how affecting that part of the brain produces an altered state of consciousness in the individual.


  6. 7 Tom Brown September 21, 2015 at 3:05 pm

    David, an interesting post! In your reply to Graham above you write:

    “The kind of reductionism that I am criticizing is certain neuroscientists and certain philosophers who, because they believe that science requires that everything be explained in terms of material or physical causes deny that consciousness exists or that it is an illusion because we only think we are making decisions when in fact my striking the keys on the keyboard to write this reply to your post is simply my obeying the physical laws of nature that right now require me to do just what I am doing, my mind being nothing but an innocent bystander to what my fingers are now doing.”

    But aren’t you conflating consciousness and free-will? If how you strike the keys is deterministic (with your fingers under the control of your brain, which is in turn influenced by feedback from nerves in your fingers, and both ultimately determined by the “universal Schrodinger wave equation”), I don’t see why that excludes the possibility that you’re conscious of both the sensation of typing and also what is being expressed by those keystrokes. Perhaps all that is an illusion is that you’re “consciousness” is somehow in control. Are you saying that determinism and consciousness are mutually exclusive? I don’t see why that would be.

    There’s some evidence to indicate that our consciousness of what we’ve “decided” does come after that “decision” is made. For example, Soon et al. Here evolutionary biologist Jerry Coyne describes Soon’s experiments.

    On a slightly different topic, I’m surprised to not see you touch on the subjects of scale and emergence in your discussion here. I’m definitely no expert on either subject, but something tells me that physicist Jason Smith (who sometimes comments here) might bring those subjects up.

    I will now proceed to get myself in trouble talking about things I don’t really know much about. For example, you bring up “brain states” … however, I wonder if there might be large collections of “micro” brain states which are indistinguishable on the macro level. Analogous to how there may be many states of individual gas molecules in a container which are indistinguishable if we are interested in emergent macro states of the gas such as pressure, temperature and volume (three qualities that individual gas molecules do not have). If we’re interested in those macro quantities, very few details of the gas molecules carry over as important qualities to consider at the macro scale.

    Perhaps an analogous concept applies with neuroscience as well. For example, cochlear implants have existed for many years now. Of course they are not perfect, but they effectively replace specialized neurons (“hair cells”) in the inner ear (should they be missing, damaged or “disconnected” for some reason) with a machine that produces a recognizably similar pattern of nerve impulses in a set of secondary nerve cells which normally convey the hair cell induced impulses to the rest of the brain. From the scale of brain activity, it doesn’t actually matter how the nerve impulses were produced, it only matters that they are produced. The (micro) details of the machinery that produces them (biological or electronic) doesn’t matter for ensuring that sound is transduced and ultimately heard properly. How do we know? Because otherwise deaf people with cochlear implants can hear.

    You might check out this recent post by Jason Smith on an “emergent” representative agent. Also, he has another more recent post on microfoundations that I have not read yet. And actually, I just noticed now that he references your post here in that second one.

    OK, just a smattering of random thoughts on reading your piece here. Now I’ll go back and read Jason’s latest.


  7. 8 pliu412 (@pliu412) September 22, 2015 at 10:35 pm

    Microfoundation is an organism, beyond mechanisms and Turing-machine model, which have limitations in representing uncountably infinite things such as human decisions, behavior reactions, other subjective experiences, etc.

    All economic models are temporal logic assertions about time-series economic data. Temporal operators such as ALL, EXIST, FUTURE, etc., are associated with logic assertions.

    Accounting Identities are true statements for ALL time periods in past or future. Income-expenditure models are accounting identities. For example,

    1. Domestic production income-expenditure: ALL t GDP(t) = GDI(t),
    2. Sector Income-expenditure: ALL t Saving(t) = Income(t) – (Expense(t) – Investment(t)).

    In NIPA, the concept “saving” is operationally defined as a T-account balance item for income less consumed expense Investment is not consumed expense. Thus it is always true for all the time periods since it is a definition in terms of other terms income, expense and investment.

    Behavior equations and D-S equilibrium are logically true statements for a particular time period with some behavior assumptions implicitly. The equations can reflect real economy only if humans react according to intended behavior assumptions in these equations or equilibrium.

    But we can still consider them as logically true statements based on temporal operator “EXIST”. Logically speaking, theoretical existence at a time period, does not guarantee the existence in any given time period, or imply it will happen in our economy. Our economy is just one instance of many possible time-series economic data.


  8. 9 pliu412 (@pliu412) September 23, 2015 at 11:10 am

    We need to discuss David’s criticism in more general framework of mechanism-organism-Turing computation model to cover three inter-mixed worlds: physical, biosphere and information.

    Both reductionism and emergentism have limited view on materials. Both are trying to easily explain away out of our existing and subjective experiences in minds such as conscious, free-will, conscience, etc. in physical world and biosphere respectively.

    Emergentism considers subjective experiences as emergent properties of brains constructed “magically” from physical cells, tissues, and organs. There is information gap from microfoundation to macrofoundation.

    The puzzle is due to our limited knowledge about materials. Total mass-energy of our known universe contains only about 4% ordinary matter, 26% dark matter and 70% dark energy. Current particle physics cannot explain all phenomena by using ordinary matter only. Two well-known paradoxes in quantum physics are: non-local entanglement and Schrodinger cat

    Schrodinger wave equation has a pair of wave functions and one in i-space, imaginary units. We do not know how to interpret this part physically as far as I know. Some research has suggested that it may be related to entangled dark particles. Thus, the states of ordinary particles can be synced remotely without need of any other visible materials to explain non-local entanglement.

    Microfoundation study should be based on formal causes, not efficient causes (mechanisms) or final causes (purposes, goals) (see Aristotle’s 4 Causes). From information viewpoint, our Turing-machine model can only represent efficient causes. But before understanding formal and final causes (organisms), we need to know the material causes further and then abstract the lower level of information into higher level functions to fill up the information gap.


  9. 10 David Glasner September 25, 2015 at 8:29 am

    Tom, I think free will is an aspect of our consciousness. I am conscious of making decisions of agonizing about decisions. Do you seriously want to tell me that the idea that I am expressing as I am writing this to you, which may be either right or wrong or absurd, is on the same cognitive level as a yawn or some other bodily function that I am also conscious of performing. Have you ever deliberated before yawning and weighed the pros and cons of yawning or not yawning. Have you ever decided to yawn and then changed your mind? Have you ever yawned and regretted your decision? Are you saying that our judgments about truth and falsity right and wrong are simply predetermined by physical forces? If you can’t see why that notion is preposterous, I think it can only be because you have accepted a metaphysical doctrine that implies, against all our own experience and all our own intuition about what it’s like to be a human being, that our perception of reality is fundamentally mistaken.

    I am aware of the so-called evidence that decisions come before our awareness of the decisions. I am not very conversant with the evidence, but critics have pointed out that evidence does not prove what it purports to prove. The evidence simply shows that there is a lot of neural activity which is interpreted as decision-making before the subjects become conscious of making a decision. But the evidence could simply show that the neural activity reflects the heightened mental activity that precedes the decision itself.

    pliu412, I have a different take on accounting identities from yours. As you point out accounting identities are valid in every state of the world, but that means that they have no empirical content, empirical content being derived from the ability to exclude some possible states of the world as being inconsistent with the theory being advanced. So along with an accounting identity, a theory has to be able to identify some smaller categories that may not always satisfy the accounting identity as a way of excluding some states of the world as being inconsistent with whatever theory is being advanced. See a series of posts starting with this one in February

    and ending with this one in April.


  10. 11 pliu412 (@pliu412) September 28, 2015 at 10:13 am

    I actually read those blogs before and had some comments. The issue is that your accounting identities E(t) and Y(t) are more like behavior equations together with Robertsonian lag quite different from NIPA accounting identities.

    NIPA accounting identities are behavior-neutral and equilibrium-neutral equations for economic conservation laws and also they are independent of schools of economic thought.

    Let’s illustrate the issues in your accounting identities: production expenditure E(t) and income Y(t).

    E(t) = C(t)+I(t) (accounting identities)
    Y(t) = C(t)+S(t) (accounting identities)
    E(t) = Y(t) (behavior assumption)

    Assumptions in definition: E(t) = C(t)+I(t)
    E(t) is defined for production expenditure assumed closed economy. If it is for open economy, it needs to add net exports (X – M). If it is for total expenditure, it needs to add non-I and non-C expenditure such as interest payments, transfer payments, tax payments, etc.

    The problems in definition: Y(t) = C(t) + S(t)
    This definition has missed three important aspects in measuring production income Y(t) as added-value, irrelevant to issues about desired/planned, statistical discrepancy, and accounting methods.

    1. Consumption (C) expenditure is a part of total income, but not necessarily is a part of production income Y(t) since it needs to subtract costs when calculating added-value as production income. In NIPA, it measures ”Net Operating Surplus” for business production income.

    2. Not all saving(S) is a part of production income Y(t), only investment (I) part, non-consumed spending.

    3. Wages from business non-I and non-C expenditure are a part of production income for households.

    In NIPA, production income GDI =
    NetOperatingSurplus(business added value)+
    Wages(households added value)+
    (Tariff – Subsidies)(government added value)+
    Consumption of Fixed Capital (added value from all three sectors together)

    Robertsonian lag or C(t)=aY(t) is a specific behavior equation.
    In general, consumption(C) (a production expenditure) is not necessary a function of past income, particularly production income. Households or business sector can borrow money for consumption. In this case, the borrowed money is calculated as a negative saving, not as past or current income in NIPA. In NIPA, sector saving – sector investment = sector financial assets – sector financial liabilities. It is a very crucial identity for addressing financial issues in sector production.

    I believe that microfundations = NIPA accounting identities + incentives-based D/S dynamics. Current theoretical economic models are trapped in behavior/equilibrium equations such as IS_LM, QTM, etc. We need to synthesize accounting identities with a to-be-developed formalism for describing incentives-based D/S dynamics.

    Economic policies only set up incentives. Individuals based on their own interests make decisions, which could simultaneously reduce/boost demands and reduce/boost supplies on many GDP parameters. Equilibrium is not a necessary condition. The true behavior rules are incentives-based and non-enforced equations for describing formal causes. Current behavior/equilibrium equations are entailing rules and mechanized behaviors without individual variations, assuming a specific one out of many possible behaviors for efficient causes.


  11. 12 Tom Brown September 28, 2015 at 3:39 pm

    “The evidence simply shows that there is a lot of neural activity which is interpreted as decision-making before the subjects become conscious of making a decision.”

    David, I’m not conversant in the evidence either, but the way it was explained by Jerry Coyne and in that link I provided is that it can be predicted (with some accuracy… better than random chance) what decision a person will make prior to them being aware of making the decision. In other words, it’s not just detecting neural activity, it’s doing that and interpreting it to determine what the person will decide before they decide it. At least within the narrow confines of that experiment (deciding whether to add or subtract numbers). This cannot (currently) be done in real time, but translated to a real time line, it appears their decision can be determined on the order of a second or greater prior to the subject being aware of it (again, I’m going from memory of that article and of Coyne’s talk on the subject).

    Now like you say, perhaps there’s a problem with this experiment. However, their conclusion doesn’t surprise me. Of course it’s different than a yawn in several respects (I’d think!). I’ve had pretty good luck contacting some of these researchers when a question comes up. I can try contacting Dr. Soon and Dr. Coyne to see how they might respond to your objections. I’m no expert!!… but still, I don’t see anything shocking or weird about the conclusion. It fits perfectly well with my intuition about how my own brain works.

    I don’t think there’s anything fundamentally unpredictable going on in a brain. All the neural activity is pretty large scale compared to any indeterminate quantum activity. I know there was some ideas about possible quantum influences by “micro tubules” in the 1990s, by some bright people, but I think that was pretty well determined to be wrong. Here’s some information in rationalwiki about it:

    Read that article describing Soon’s experiment (in my 1st link): he addressed some problems with a previous study. It’s pretty clear what they were doing this time around, at least as far as the test set up. Of course I don’t know how they were able to make predictions based on the data.

    I play pub quiz with a guy who does fMRI studies… I can ask him about it. He’s a skeptic (in fact he’s the winner of an Ignoble Prize on the subject, demonstrating the mental states of dead salmon he purchased from our local fish market … “for science” Lol.)


  12. 13 Tom Brown September 28, 2015 at 3:48 pm


    For what it’s worth (not much, since I’m not a physicist) I prefer the Everettian interpretation of quantum mechanics: it’s the simplest (no extra collapse equations needed), and 100% deterministic. There’s the wave equation, and that’s it. This implies “many worlds” but so what?


  13. 14 Tom Brown September 28, 2015 at 10:04 pm

    David, I went to go find the paper by Chun Siong Soon, et all, and it appears I have to pay for it (so I won’t be doing that):

    However, while looking at other links, I noticed that Craig Bennett (my Ignoble Prize winning acquaintance), actually personally knows Dr. Soon and also he already wrote up his opinion of Soon’s study here on his own blog:

    So it looks like with ~60% accuracy they were able to tell WHICH button a subject would press before the subject did. Here’s Craig:

    “Using a free response task Soon et al. found that areas of frontopolar cortex and precuneus have activity that encodes which button a subject will press up to eight seconds before they actually push it (see above graph, red line). They also found that SMA and pre-SMA have activity that encodes when the subject will press a button up to five seconds before it actually happened. The most interesting timing number is that the subjects only became consciously aware of their motor intention within the last second of actually pressing the button.”

    But to be fair, he also had this to say, specifically about free will:

    “the paper says less about free will and perhaps much more about the range of cognitive operations necessary to freely press a button. Rather, I believe the key finding is that we are losing a large amount of information by limiting our search to individual voxel intensity values. By incorporating the spatial pattern of activity into our analyses we can increase the total amount of information available for hypothesis testing, which is always a desirable goal in science.”

    My co-worker is good friends with Craig. It’s been a while since I’ve been to pub quiz, so maybe I’ll ask my coworker if there’s space on the team this week and ask Craig about this (assuming he shows up). This is so interesting!

    Also, have you heard of the “Capgrass syndrome?” It’s a problem wherein people think that those they are close to have all been replaced by impostors. It sounds like it can be brought on by brain injury. There are some very specific hypotheses about what causes it here:

    Assuming those are basically correct: that the brain’s ability to recognize faces is intact, but the emotional response associated with that recognition is damaged… and that causes (apparently) the brain to spin a wild story about the person recognized being an impostor… it’s not difficult at all for me to imagine the brain spinning a wild story about how its conscious self determined the outcome of a decision, when in fact consciousness was only informed of the decision sometime after it was already made. Sure you can “decide” to contemplate a tough decision and then mull it over prior to making it, but perhaps the act of deciding to contemplate the decision in the 1st place wasn’t actually made “freely” nor was the primary decision contemplated made freely… but only apparently so. I don’t see why that would be so Earth shattering (if it were true). It seems to me that our brains are constantly making up stories. Ancient man all over the Earth made up stories about how the wind, ocean, rivers, stars and trees had agency, and thus invented gods to explain their seeming conscious activity. Perhaps we invent stories about our own agency as well. Perhaps there’s an evolutionary advantage for us to imagine we’re in control of ourselves.


  14. 15 Tom Brown September 28, 2015 at 10:54 pm

    BTW, I’m no philosopher, neuroscientist or physicist, but I do enjoy this subject. I heard philosopher Daniel Dennett explain his compatiblist take on free will… and it sounded convincing in parts. But after hearing Jerry Coyne’s criticism’s of Dennett and his much more straightforward take on the problem, Dennett’s compatibilism just seems like unnecessary complication to me now. I agree with Coyne: I don’t see any need to rescue free will with compatibilism. We can still justifiably punish those who transgress the law. Coyne explains himself very well on this point I think. IMO this eliminates any reason to keep free will on life support with compatibilism.

    Libertarian free will (as opposed to compatibilism) just seems completely wrong to me. It’s sometimes justified with some non-mainstream interpretation of quantum mechanics in which (for example) mind causes matter.

    But it wouldn’t surprise me if I’m the wrong one here. Lol. Here’s a pretty good discussion on the matter (determinist, libertarian and compatibilist):

    Thanks for the discussion.


  15. 16 pliu412 (@pliu412) September 30, 2015 at 12:11 pm

    One Economy with Two Tales: Fiction with Efficient Causes and Equilibrium vs. Nonfiction with Formal Causes and Conservation
    Or do we have OECE syndrome in microfoundations?

    Without solid microfoundations in economic models, macrofoundations become shaky. Macrofoundations are often just built upon the levels of information abstraction from microfoundations. Three information abstraction schemes are widely-used in computing science: classification/instantiation, aggregation/decomposition, and generalization/specialization

    In fact, the field of computing science is a good example for building higher level macrofoundations from microfoundations based on these levels of abstraction schemes. Computing science development path is as follows:

    Turing machine (microfoundation)
    -> computing hardware,
    -> operating system (called virtual machine),
    -> application-specific software platforms,
    -> software applications (only limited by our imagination).

    Unfortunately, the microfoundations in economic models are fictions based on efficient causes and equilibrium, which are behavior-specific and time-specific temporal logic assertions about economic data, and not general enough to assert economic true statements for all t time periods and behavior variations.

    Thus, IMO, from economic information modeling perspectives, we do not have mind-body synthesis issue, but we do have serious body issue: OECE syndrome (Obsessed with Efficient Causes and Equilibrium).


  16. 17 Rafael Bortoletto October 5, 2015 at 2:03 pm

    Hi there. I’m having a lot of trouble accepting the macro identities of economic textbooks and their conclusions such as the Philips curve and demand for money functions. Can anyone send me a link to some economic paper that can demonstrate clearly that the Investment=Savings identity is “wrong”? My intuition tells me that there is a temporal relation between I and S that common macroeconomic analyses don’t capture well enough, and that this relation can better explain long crises like Japan’s lost decade and the Great Depression. Also I can’t see how the Investment=Savings identity needs to hold in a fiat currency system and considering total Global Credit to GDP has been rising. I’m quite new to economics and may be missing data that could make things “look right”. Thanks beforehand for your help.


  17. 18 Miguel Navascués October 7, 2015 at 10:04 am

    Mister “Uneasy Money” has at least one very good post about the identity S=I.


  18. 19 TravisV October 8, 2015 at 9:05 am

    TravisV here.

    You might be interested in these passages from Bernanke’s new book (Chapter 19 on QE1). I think they contradict each other.


  19. 20 pliu412 (@pliu412) October 9, 2015 at 1:10 pm


    The issue you mentioned is related to OECE (Obsessed with Efficient Cause and Equilibrium) syndrome widely-spread in economic logical thinking .

    Our economic models and thoughts are often based on functional forms by associating two economic parameters in an ad-hoc way. For example, S(r) : saving S is a function of the interest rate r , functions IS(r) and LM(r) in IS_LM model , P(r): inflation is a function of interest rate r, Md(Ms): money demand is a function of money supply.

    Since they are assumed as functions, input parameter such as r, etc, is assumed to uniquely determine the output parameter.

    Since they are assumed as functions, the properties of closed-form functions can also be assumed such as upward slope, downward slope, 45-degree line, etc, and equilibrium cross can be further assumed as the intersection of two functions.

    In reality, these parameters are not functionally related since they do not satisfy the functional dependency of Y on X requirement. For example, the same interest rate at two different times t1 and t2 may have quite different values of the same output parameter. In other words, the input parameter cannot uniquely determine the output parameter values. These two parameters have no efficient causal relationship. The same interest rate hike can reduce or boost saving at different time periods with different economic environments.

    In general, if there is no functional dependency of Y on X,
    then there no closed-form functions Y=f(X) can be assumed, there is no efficient cause from X to Y , and furthermore, equilibrium cross become ill-defined and meaningless.


  20. 21 TravisV October 9, 2015 at 1:46 pm


    Hmmm, I doubt your interpretation is correct. See my discussion about this with Marcus Nunes:

    Nunes and I distinguish between the liquidity effect, inflation effect and growth effect. Scott Sumner has explained the difference between those effects in a number of posts at


  21. 22 David Glasner October 12, 2015 at 8:55 am

    pliu412, Forgive me for forgetting you, but it has been a while. I believe that the point is to be able to specify what components of savings and investment must not be equal during the adjustment process from one equilibrium to another. The conservation laws are always satisfied, but since they are always satisfied there has to be something else going on to explain the transition from one equilibrium state to another. Understanding that transition is what we are really interested in. The mistake in the conventional treatments is that they treat the conservation law as if it were mechanism by which the equilibrium state is restored, when in fact the conservation law doesn’t explain anything about the adjustment process.

    Tom, Thanks for the links, which I must admit that I have not been able check out. There are too many other things going on these days which is why I have been absent from cyberspace for the past few weeks. I hope to be back more frequently, but I’m not making any promises. Rather than respond to those links. Explain to me how you think neuroscience can explain the conversation we are having. Do you think that my responses to your arguments in this conversation are somehow determined by physical laws? What physical law could conceivably ever explain the process by which an argument made by me or by you would ever persuade the other person to change his, pardon the expression, mind? I don’t want to sound too dismissive – well maybe, I really do, but that would depend on what my neurons are doing and I have no idea what they were doing 5 seconds ago – but that idea seems to me so preposterous that I really can’t believe that anyone with a brain could possibly think of such a thing.

    Rafael, No one asserts that the savings investment identity is wrong. No definition can be wrong. It is just a question of how it is being used.
    Travis, Thanks for the link. I agree that there is basic problem in Bernanke’s understanding of how QE was supposed to work and how it did work. I wrote a few posts about that back in the day.

    pliu412, The fact that the same interest rate may be observed at different times corresponding to different output parameters may mean nothing more than that there are unobserved independent variables that also affect the output parameter. So I don’t think your conclusion that there is no functional dependency follows. The real world is very complicated and we can’t possibly include all the relevant variables in our models. The model is not a complete description of reality, it is a simplified representation of reality.


  22. 23 Tom Brown October 14, 2015 at 12:55 am

    Hi David,

    You write:

    “Do you think that my responses to your arguments in this conversation are somehow determined by physical laws?”

    Yes, I do, however it may well be that:

    1. Neuroscience will never be able to explain all the details.

    2. Even if an advanced neuroscience (say as practiced by hyper-intelligent alien beings) could explain it, an unaugmented human intellect could never understand it.

    But really I don’t know if either of those apply. Maybe it can someday explain it just fine and normally intelligent humans can understand it.

    “What physical law could conceivably ever explain the process by which an argument made by me or by you would ever persuade the other person to change his, pardon the expression, mind?”

    Of course I don’t know the details, but I’d expect a rough outline to go something like this: the meat computer in your skull causes you to type symbols on your keyboard in an attempt to communicate an idea to me that you’d like to persuade me of. My eyes see the symbols, which generate nerve impulses which are an input to the meat computer in my skull, and the result of that input and resultant meat-based computation is (among other things) that the opinion information stored in my neurons is replaced by new information representing a new opinion. Maybe I’ve got it wrong, but that seems like a reasonable 1st cut at an outline.

    “…but that idea seems to me so preposterous that I really can’t believe that anyone with a brain could possibly think of such a thing.”

    Lol!… well, I’m pretty sure I have a brain, granted it’s not as big as yours (I’m not being sarcastic, that’s my real opinion), and that’s pretty much what I think. I’m not alone in that opinion either. There are notable people with brains far exceeding my intellectual capacity with whom I share that opinion. For example:

    Sean M. Carroll (author and CalTech theoretical physicist)

    Note: there’s a Sean B. Carroll too, who’s an author and evolutionary developmental biologist at the University of Wisconsin who I think also shares this view, but I’m not 100% sure about his view on this.

    Steven Novella (Yale neurologist, executive director of Science-Based Medicine and medical adviser for QuackWatch)

    Sam Harris (author, philosopher and neuroscientist)

    Jerry Coyne (author and evolutionary biologist, University of Chicago)

    And if we count compatibilists (who admit they’re determinists, but who somehow think that determinism is compatible with free-will), then we also have:

    Daniel Dennet (philosopher, author and cognitive scientist at Tufts University)

    The above people I’m positive about. And though I don’t know, I’d be very surprised if the following people aren’t (weren’t) also determinists (at least compatibilist determinists): Richard Feynman (physicist, deceased), Victor Stenger (physicist/author, deceased), Christopher Hitchens (author, deceased), Richard Dawkins (author/biologist), PZ Myers (biologist), Carl Sagan (physicist/author, deceased), Lawrence Krauss (physicist/author), Steven Pinker (psychologist/cognitive scientist), Rebecca Goldstein (novelist/philosopher), James Randi (magician/skeptic), Neil deGrasse Tyson (physicist/TV personality), Bill Nye (science popularizer/TV personality), Peter Boghossian (philosopher/author), Julila Galef & Massimo Pigliuci (Center for Applied Rationality), Richard Carrier (historian/author), Hector Avalos (Biblical scholar/author) and Michael Shermer (skeptic/science writer).

    Why do I think these people are/were determinists? Because I’m a skeptic and I’m a fan of a lot of the notable people in the skeptic community and I regularly follow their work (debates, talks, books, blogs, vlogs etc). I can’t get enough of that stuff! All the people I listed in the above paragraph tend to be well regarded in skeptic circles (whether they self describe that way or not). I didn’t include Stephen Hawking because I don’t follow him closely, but if you put a gun to my head and made me guess, I’d say he was a determinist too. That goes for Einstein as well. Though I’m completely open to changing my mind about any of those!! (BTW, I don’t have a problem with the word “mind” … as Sean M. Carroll and Steven Novella say: the mind is what the brain does).

    Granted there are bright people (who’s opinions I mostly respect) on the other side of this issue, but I honestly can’t think of many. Jerry Coyne said, for example, that Steven Weinberg (theoretical physicist & Nobel Laureate) believes he has free will (which I took to be libertarian, not compatibilist). And I suppose you too, right? I did email Jeremy England once (biophysicist) and he told me he was a God-believing practicing Jew: so I’d guess he might believe in libertarian free will as well. Thus Kenneth Miller (evolutionary biologist) and Francis Collins (geneticist and head of human genome project) are probably believers in libertarian free will as well since they are practicing Christians (though some theists are determinists: John Calvin comes to mind, for example). Søren Kierkegaard, Jean Paul Sarte and Albert Camus I’d guess to have been libertarians. Austrian economists and political libertarians (e.g. Ayan Rand?) I’d guess are likely to be free-will libertarians too. Roger Penrose (mathematical physicist, philosopher of science, and collaborator with Stephen Hawking), like Stephen Weinberg, is an atheist, but co-developed a theory called orchestrated objective reduction (Orch OR) which postulates quantum computation in microtubules inside brain neurons underlying consciousness, and he uses this to argue that consciousness cannot be reproduced with deterministic computation. Their have been serious criticisms of this hypothesis though.

    So David, I did my best to list bright people on either side of this debate (granted with a healthy dose of speculation). It doesn’t surprise me at all that bright people can disagree on this issue. I’m surprised you find it surprising! Specifically there’s evidence to indicate that babies can detect “agency” in objects and agency detection (with the threshold set low to favor detection over false alarm suppression) was probably an evolutionary advantage. As Michael Shermer points out, if you mistake the wind for the sound of a lion in the tall grass, there’s not a big price to pay, but you might pay with your life if you do the opposite. Perhaps our internal agency detector works on ourselves too. But like I wrote above, I don’t see determinism and consciousness as mutually exclusive. It doesn’t mean consciousness is an illusion. Where is it written in stone that consciousness implies free-will though?

    In one of my links above, Jerry Coyne gives an example of (false) self-agency detection in humans, though he doesn’t spend much time on it (so I can’t vouch too strongly for it). He describes an experiment of people who’ve had direct stimulation of the brain to cause their arm to fly up (for example). He claims that when questioned about it afterwards, the subjects usually claim they chose to raise their arm (e.g. to wave at a passing nurse they know) when in fact it was caused by the external electrical stimulation. If that’s accurate and the study has stood up under scrutiny, that to me is powerful evidence that we make up a story about free will and our own agency after the fact. Again, my position is not that consciousness is an illusion, just free will.

    You seem like you are very interested in this mind/brain/consciousness/free-will question. What could be better than to challenge your beliefs on this subject with some of the people I list above? They do a much better job of presenting a compelling argument than I do. I’d start with Coyne, Carroll and Novella. I’d be happy to take any references you have for me as well.


  23. 24 David Glasner October 14, 2015 at 9:20 am


    Thanks for your response. I don’t think it’s unreasonable to believe that physical laws might determine our mental responses to the stimuli that we experience. The view that I was criticizing is the view that holds that we already know that physical laws do determined our mental responses to our physical environment. That’s the view I believe that is held by people like Sam Harris and Jerry Coyne, and they and others like them are the ones I was talking about. I have no doubt that they are very smart. Everybody knows that very smart people have believed in very ridiculous ideas and doctrines, so I don’t have to be convinced that there are a lot of smart people with that view. I still find it amazing that they believe what they believe. It is one thing to reject the personal evidence of our most basic experience of our own existence. The world still seems flat to me, but I am willing to reject that basic experience and reinterpret it based on very compelling arguments and a huge amount of evidence that the world is a sphere. It is another thing entirely to reject my own experience of consciousness and free will based on a few dubious experiments that people have misinterpreted what it was that caused them to raise their arms on a particular occasion without no alternative explanation for how we experience consciousness or make life-altering decisions than the promise that some day science will clear it all up for us. And these people scoff at the belief in an afterlife! OMG!


  24. 25 pliu412 October 14, 2015 at 10:12 am

    It is not a simplified representation for reality. It is a specialized reality with added nonexisted feature. I have called it fiction. In that case, we need to check if it is a Multivalued Dependency and different output parameter values with unobserved variables disassociated with any other parameters in deed.

    For example, saving S, investment I and interest rate r are functions of time t. But S and I are not functions of r or multivalued dependency on r. S is a function of I since it is an identity function with 45 degree line.


  25. 26 Tom Brown October 14, 2015 at 11:34 am

    David, thanks so much for your reply!… I love how passionate you are about this topic. I would absolutely love to just sit in on and listen to a discussion between you and any of them.

    BTW, I was inspired to email some of the people on my list I wasn’t sure about. I got a couple of responses so far:

    Paul Bloom (psychologist & cognitive scientist): determinist

    Peter Boghossian (philosopher/author): determinist (directed me to Coyne)

    Julia Galef and Richard Carrier I have yet to hear back from.

    Paul, actually directed me to his short write up. Here’s an excerpt:

    “…the deterministic nature of the universe is fully compatible with the existence of conscious deliberation and rational thought.”

    I know I’m not going to convince you by name dropping, but I thought I’d share references to opinions of people whose opinions are much more well informed than mine are while it’s fresh on my mind. (BTW, I’ve made a suggestion to Julia to invite some macroeconomists on her show (“Rationally Speaking”), and she seemed interested… I mentioned you… I have no idea if you’d ever be interested in something like that, but you’d be a top choice for me).

    Maybe there are differences between people in how strong their experience of self agency is. It doesn’t even seem counter-intuitive to me that I don’t have free will. Maybe that says something about my personality as compared to yours! Lol.

    Let me try the Peter Boghossian strategy on you: How would you know if you were wrong? What evidence would convince you? Also, on a scale of 0% to 100%, how certain are you that you are correct?

    Now I have to think about that myself (what would convince me that I’m wrong!),…. Hmmm… I’ll get back to you on that (actually, I know Sean Carroll answers emails too, so maybe I’ll spring that one on him!).


  26. 27 Tom Brown October 14, 2015 at 11:53 am

    … I emailed Sean. I suspect (if he does get back to me), he’ll say “the upending of all physics as we know it” but we’ll see.

    That’s basically the position that he and his debate partner, neuroscientist Steven Novella, took against their two opponents in the Intelligence Squared debate on the topic of “Death is Not Final” (Of course Carroll & Novella were arguing against the motion). Great debate BTW. I highly recommend it!


  27. 28 Tom Brown October 14, 2015 at 4:47 pm

    OK, a brief update on my survey:

    Richard Carrier says he’s a compatibalist, like 2/3 of other atheist philosophers.

    And I can report that I correctly predicted Sean’s response to my “What would change your mind?” question regarding libertarian free will (which he does not support)….
    HOWEVER, though I suspected he was somewhat of a compatibilist, I was very surprised at the strong argument he made for his version of compatibilism. The argument is in a blog post he published… definitely worth a read!! (You might find you’re largely in agreement with him there David, I don’t know):

    “Free Will is as Real as Baseball”


  28. 29 Tom Brown October 14, 2015 at 4:54 pm

    As a response to my question “What would change your mind?” on libertarian free will, Sean said the argument would be similar to this post of his (which I suspect you may not agree with):
    I’m very pleased on the responses… I have only to hear from Julia at this point.


  29. 30 David Glasner October 16, 2015 at 10:00 am

    pliu412, I disagree with your interpretation of savings and investment, but now is not the time and this is not the place to argue about that.

    Tom, I am perfectly happy to be convinced by evidence on the subject of free will, but the arguments I have seen are all based on a philosophical argument that is totally faith-based: i.e., science tells us that every event is the result of a physical/material cause, therefore all our actions must be determined by physical or material causes. That’s not science that’s metaphysics, and the rejection of free will that I and most human beings experience in their lives based on a metaphysical argument seems totally dogmatic to me.

    Thanks for supplying all those links which I’ll try to follow up on. The mind-body problem is not really one of my main interests; I just find it amusing that so many smart people make such silly arguments and that those arguments are almost exactly the same as the arguments that New Classical and Real-Business Cycle economists make for their models.


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About Me

David Glasner
Washington, DC

I am an economist in the Washington DC area. My research and writing has been mostly on monetary economics and policy and the history of economics. In my book Free Banking and Monetary Reform, I argued for a non-Monetarist non-Keynesian approach to monetary policy, based on a theory of a competitive supply of money. Over the years, I have become increasingly impressed by the similarities between my approach and that of R. G. Hawtrey and hope to bring Hawtrey’s unduly neglected contributions to the attention of a wider audience.

My new book Studies in the History of Monetary Theory: Controversies and Clarifications has been published by Palgrave Macmillan

Follow me on Twitter @david_glasner


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