Dear François, Ryan A, Florian, Horace, Marcus and all,
Thank you, François and Ryan A for your letters to our group, which I include below. When you write to our group, please be sure to send it to math4wisdom@freelists.org Unfortunately, this does not happen automatically unless perhaps you hit Reply-All.
I am writing from the fabulous National Library in Helsinki, Finland. Tomorrow I will arrive in Tampere where Marcus lives with his family.
I want to present a puzzle which arises in my investigation of the ways that economists figure things out. https://www.e-c-o.net/wiki/Econet/HowEconomistsFigureThingsOut I invite you to try out this puzzle and share your answers with us. This will help me see if others can understand my thinking.
In my understanding, from the examples that I have collected, the central way that economists figure things out is to characterize the ideal owner, which is to say, the typical participant of the economy. Often that participant is conceived as being self-interested and rational, although some economists may consider irrational or selfless participants. The key thing is that economics is based on considering that all participants are fundamentally the same and then considering the consequences of their behavior as a group.
I have noticed four more ways of figuring things out that relate to ownership.
A) Economists notice that every so often the entire economic world is unexpectedly turned upside down, by which I mean, that it is fundamentally changed in a way that was not and could not be foreseen. This could be a natural disaster, such as a volcano erupting, an asteroid hitting the earth, climate change or a pandemic. It could be a technological change such as electricity or railroads or the internet or Artificial Intelligence. It could be financial innovation such as insurance or financial derivatives. It could be a war or a reshifting of alliances. It could be the discovery of America or the building of a canal. When these events are significant then what was valuable can become worthless and vice versa, and the old ways of doing business may become irrelevant. Economists simply notice when they face such a radical change.
B) Economists make a simple model of the economy, which could be mathematical but could also simply be a metaphor. The economy may be thought of as a family or a kingdom or a human body or a ship or a garden or a beehive and so on. The crucial thing in this model is that the economist can argue where the authority is located and how it impacts others or how it moves about.
C) Economists think backwards when they forecast the future. They may want to predict the future one week or one year or one decade from now. So they look back to the past. They propose a simple model which does not actually have to be well founded. They take that model and they compare it with historical data and choose parameters so that the model fits the data as best it can. This fitting process is much more important for them than the model itself. Then they project that model into the future. Typically, they can't know whether their model turns out to be valid because generally there is too much fluctuation and so at different points in time the model may fit better or worse. But they like to generate forecasts much like weathermen do.
D) Economists distinguish and consider the different functions of money (I think they actually deal with four) and they consider pairs of functions (there are six) yielding properties of money.
Here now is the puzzle!
Consider the functions of money:
1) Money is a storage of value. 2) Money is a medium of exchange. 3) Money is a measure of account. 4) Money is a default, all purpose unit for paying obligations such as debts, fees, fines or taxes incurred.
The puzzle asks, explain how each way of figuring things out (from A, B, C, D) gives rise to a particular function of money (from 1, 2, 3, 4).
I will give my explanation. But first I am curious how others may try to explain it. This will help us see if I can think as you do and if you can think as I do.
I am happy if you try this!
Andrius
Andrius Kulikauskas Helsinki, Finland