Abstract
All the chapters of Vol. III of this trilogy are dedicated to the construction of the Planning Accounting Framework (PAF), and to its political management; that volume will also focus on the traces of methods suggested by Ragnar Frisch and the other economists recalled in Vol. I and revisited in the other chapters of Vol. II. The methodological bases of neo-classical economics could be insufficient, and also possibly dangerous, in creating non-tested programming for the managers of applications of the new economic policy itself. With such a critique we can, at most, contest the functionality and validity of the proposed solutions by different economic policies based on the behaviour of uncertain effectiveness—solutions that can suggest actions through erroneous instruments of analysis and forecasts.
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Notes
- 1.
We must distrust any economic determinism on this matter: the history of the distribution of the wealth has been always a deeply political history and could not be reduced to mechanisms merely economic. On the other hand, I pronounce afraid and doubtful the word ‘polity’, not because it could be inappropriate for the use made in itself …., but because it is the same word that allows, in name of it, to many and uncultivated and irresponsible ‘newcomers’ political leaders to say so many silly ideas about the ‘supremacy’ of polity in respect of economics, and to do so many silly actions in name of the ‘supremacy’ or ‘priority’, in respect the Economics, easily misunderstandable words and facts, concepts and meanings, degrading inevitably the level of the dialogue and the reciprocal understanding between the people and producing great muddledness, between roles and interests, individual and community interests and preferences.
- 2.
A good collection of such criticism is found in the essays collected by Edward Fullbrooks (2004): A Guide to What’s Wrong with Economics and classified in seven parts: (1) Basic problems; (2) Micro nonsense; (3) Macro nonsense; (4) Ethical Voids and Social Pathologies; (5) Misuse of Mathematics and Statistics; (6) Category Mistakes Regarding Wealth; and (7) Globalist Distortions. In this anthology, 27 brilliant critics and economists participated, with rich contributions on the different aspects of the fallacy of economic theory. I am sure that each of the 27 critical aspects would be reduced to a lack of sense, if conceived in terms of the Frischian ‘programming approach’ (as exposed in this book), and if conceived by incorporating the overturning of the approach recommended in this book into their epistemology.
- 3.
In their recent book, Economic Policy in the Age of Globalisation, Cambridge University Press, 2005, N. Acocella, G. Di Bartolomeo and A. Hughes Hallet, a well-known Anglo-Italian group of economists, reflect on the changes intervened recently in the global ‘structure’ of the capital and in the information communications. I consider this book a valuable tool for not forget the advantages (often ignored) of the globalisation in our epoch. In 1999, Acocella published another useful handbook, to be recommended, on the contemporary evolution of the economic policies, Foundations of Economic Policy: Values and Techniques (Cambridge University Press, 1999).
- 4.
Of course, we are speaking about the PAF to which Vol. III of this book is dedicated. I refer to the next chapters of that Vol. III for every detail on the construction and the evaluation criteria of PAF.
- 5.
I would say: permanently discussed, according to reasonable time procedures, which is already described in particular in Vol. III, Chap. 4. On the other hand, once the system is introduced, through the management of an ad hoc technically independent agency, the participants could permanently have at their disposal a tool for cognitive elaborations for simulating alternative combinations of interventions and actions to improve the capacity of study, proposal and discussion, and to be involved in real changes and more serious engagements with respect to the starting point.
The usual technique for measuring the effectiveness of results is always that of formulating (technically, but in cooperation of the representative of the parts) for any sector of political action, public and collective, by means of plans, programmes and projects ex ante, in order to measure and control ex post, (after a reasonable period of development of the actions programmed), the results obtained, (and the difficulties encountered). Consequently, comparing the difference between results expected and the results obtained—in a report—the analysis of their difference and of the factors which have been the cause of the difficulties encountered; and, analysing and evaluating such factors, decide the necessary adjustment for the next period, changing into more or less the previous targets. Obviously, all this in consideration of reducing the future gap between expectation and result, in the permanent aim to their consistence.
- 6.
I am thinking, overall, of the workers’ unions that are weaker in cognitive structures; when—in the 1960s—(in my role as chairman of an Economic Committee of the European Union, adhering to the ICFTU) I invited unions, of which I was consultant, to create some study organs in order to build a framework (of the type outlined above) in order to ‘pry into the government’s financial affairs’ (see Archibugi 1957): this is the same framework that, in the meantime, Ragnar Frisch was elaborating in his Institute of Economics of the Oslo University ten years before receiving the Nobel Prize for Economics, but also and some time before being totally forgotten by the powerful and a-critical community of academic econometricians, see Chap. 3, Vol. I.
- 7.
This, according to Keynes, would be ‘pensioned off ’ since 1926 (see Keynes 1926).
- 8.
Briefly already described in the chapters of Vol. I of this trilogy.
- 9.
Free from easier ‘positivistic’ laws of the economy and equipped with a sufficient number of instruments and data, and already carefully prepared in order to assess alternative solutions of maximum results, given the constraints and the maximum agreement among interests, and given different viewpoints of the participants.
- 10.
Leif Johansen , in his two volumes, Lectures in Macro-economic Planning, 1977–1978, amply quoted in this book, dealt with many of the questions of planning under of uncertainty, especially in the chapters of his second volume. He does so with an abundance of hypotheses relating to the diverse structure of the market and of the diverse reactions and liberty of behaviour by market operators. I believe that any further step in this subject cannot ignore the work of Johansen.
- 11.
See some quotations referred in the chapters of Vol. I.
- 12.
Even if the largest of entrepreneurs attempted to maintain contact with the interventions and insertions into the financial world, and to fragment themselves in financial affairs, risking losing their entrepreneurial function and passing radically into the field of financial operators, often with success, but most of the time without success yet with personal failure.
- 13.
A young French scholar, Thomas Piketty, published a book, some years ago (Le capital au XXIe siècle) which received great attention to have dedicated his research—as specialist—on the theme of wealth and income inequality in the world (and its implications), passing from the nineteenth century to date across 20 countries and incorporating other historical information on the development of patrimony (using relative data from a diverse set of sources). The essential result of the accurate and surprising research confirms how for a certain number of years many people (including myself) believed that the return of capital in the most important capitalist countries not only diminishes in respect to workers but tends to grow (with the exception of a few periods of inverse trends, such as post-war periods in the USA, which would have misled Simon Kuznets, the American guru of gross national product). The principle results obtained by Piketty’s research are summarised, briefly, as follows:
-
1.
There is a need to distrust all forms of economic determinism: the story of re-allocation of wealth is always a story profoundly political and could not re-emerge in the form of purely economic mechanisms.
-
2.
The second conclusion that constitutes—according to Piketty—the heart of his findings is that the dynamic of wealth reallocation puts into play the mechanisms that alternatively push towards convergence and divergence, and that no other natural or spontaneous process could avoid their destabilising and inegalitarian tendency in the long-term.
-
1.
- 14.
It is important to remember the structural effects of the retribution between labour and capital, which can be produced in the transition from industrial to post-industrial society (a subject on which I focused a book called ‘The Associative Economics’, Insight beyond the Welfare State and into Post-Capitalism (Archibugi 2000a, Macmillan) and the effects of such a transition from an industrial society and a post-industrial society, on the functioning of the Keynesian-type model.
- 15.
To this method, of strategic planning and to the operational guidelines of reinventing the general guidelines, Chap. 9 of Vol. II will be dedicated. In addition, another work of mine is in publication, in English, on strategic planning, Introduction to Strategic Planning in the Public Domain.
- 16.
Joseph Stiglitz has received notable recognition and awards of the highest order as an economist: he was President of the Council of Economic Advisers of the President of the USA (under President Clinton); Vice President and Chief Economist of the World Bank; on a scientific level, he performed his activities of research and teaching first at MIT, where he concluded his studies and then at Columbia University, receiving the Nobel Prize for Economics in 2001. From 2011 Stiglitz was elected as President of the International Economic Association. In addition to his rich biography (including books, essays and comments in the mainstream press), he found himself in a powerful position to influence the direction of political and global actions, including: (a) in 2008 as President of an International Commission of experts on the subject of ‘On the Measurement of Economic Performance’ and Social Progress’ established as an initiative of the then French president and as co-director of two other well-known economists, Amartya Sen and Jean Paul Fitoussi; (b) in 2009 as the United Nations designated President of a Commission of international experts asked to discuss and plan a Reform of the international monetary and financial system (called the ‘Stiglitz Report’).
He is an ideal candidate to be assumed as an ambiguous representative of official economic theory of a positivist type and, at the same time a radical critic of the same official economics in many ways. Stiglitz found himself in strategic positions to strongly influence with his ideas the actions of governments and international organisations, in addition to implementing reform himself. But he is also in a privileged position to perceive the fallacious positions of those ‘orthodox’ positions of diverse schools of thought. I have the impression that his theoretical positions and methodologies have been, in recent times, progressively moving towards a more radical view (the use of the word ‘paradigm’ is a signal that should be increasingly clarified by him).
- 17.
In fact, he represents an almost perfect synthesis of economic doctrine in its actual state, with all of its dissatisfactions and ambiguity. And, at the same time, he is an ideal representative of ‘mainstream’ economics (that is, of conventional economic theory), and—especially in recent times—an authentic, radical critic of it.
Therefore, it represents an ideal candidate to represent the scholars of official economic theory, referred to in this book as positivistic; at the same time it offers affirmations to represent the radical criticism of official economic theory under many aspects. For example, the invisible hand does not exist.
Stiglitz found himself strategically positioned to influence by means of his ideas the actions of government and international organizations, as well as his own implementation of reform. He was also in a privileged position in perceiving the fallacious positions and ‘orthodox’ positions from a different school of thought. I have the feeling that his theoretical and methodological positions were progressively becoming more radical in later periods (the use of the world ‘paradigm’ is a sign of this).
It is my conviction that he had the opportunity of expressing with great authority that which is presented as a ‘new paradigm’ of economic thought (as he declared he wanted to do) and, gradually, gravitating towards potentially very interesting ideas.
- 18.
Many other governments, victims also of the subordination to traditional (mainstream) economics, follow the positivist error.
- 19.
See Geoffrey M. Hodgson, one of the most accredited scholars of ‘institutional’ and evolutionary economics. I remember another joke from another American scholar of labour economics, Lloyd G. Reynolds, who opened his course of labour economics with the phrase (if I remember well) ‘the fact that labourers are not moving from one work to another in attempt of finding a higher salary, does not say anything against the behaviour of these workers. But it does say a lot on the urgent need to consult a psychiatrist for economists that assume it was that way.’
- 20.
The scientific contribution which motivated the assigning of the Nobel Prize to Stiglitz (2001) is ‘for laying the foundations for the theory of markets with asymmetric information’ (with G. Akerlof and A. Michael Spence, economists of different school). With the utmost respect for the Nobel evaluators of Stiglitz, I think that this motivation is a little restrictive, as addressed to Stiglitz, given his important role in the knowledge of the financial factors in the evolution of real activity flows. Moreover, it should not be forgotten that at least since 50 years, some illustrious economists, like Frisch or Leontief thundered that builders of the aggregated models for forecasting had to distrust the behavior of the variables in the game, if they were not determined a priori, upon the basis of the goal to regulate and control the programmatic flows, and if they were arriving—as Frisch at the World Congress of Econometrics in Rome in 1965 has declared them as playometrics (see Chap. 3, Vol. I)—together useless and dangerous, if employed for the scoped of prognosis and prevention. Indeed due to their unknown ‘asymmetry’. If these economists (also however granted a Nobel prize) would have been more listened and studied, and above all, utilized by the most responsiblized Governments, who are also the most informed not only about the asymmetries in financial behaviour but also fully aware of their real effect, we all would have made serious steps forward in the planning technology (a ‘dirty’ word from the vocabulary of official Economics). Instead the situation was contrasted by the Governments, inspired by the thing, which Stiglitz has names ‘market fundamentalism’ (as was already used even by Soros) the level of control on the cognitive compatibility, which would account for the objectives, to be reached by the real economic policies and to be negotiated by the Governments as well as political forces, would have surely been greater.
- 21.
If we now prefer to use this word.
- 22.
And from the silence, I re-enter into conventionality, highly accelerated by the sickness and premature death of Frisch, from the strong orthodox economy, and from ‘Reagonomics’. Personally, I was unable to follow the essays of Frisch, which were still in a confused editorial state, and living—in Italy—in a periphery of communication amongst economists and lacking the necessary instruments for me to be heard. Only recently was I able to order Frisch’s essays (see Chap. 3, Vol. I) but also to my own ideas as well, a product of an abandoned philosophical culture and limited economic culture tied to my difficult Myrdalian background that was unable to find in Italy, as in the rest of the world, an easy welcome between blind students and closed horizons.
- 23.
Among those could be there my own role, with that of my interdisciplinary Centre for Planning Studies in Rome, if my initiative agreed with the Italian government and of which to I provide with a research, Progetto Quadro, on the traces of the Frisch’s programming approach (see information in Vol. III, Appendix 1) of this book, had not been interrupted for reasons of bigotry and political dissent by conservative governments in Italy, and for the modest cultural tenor (except some due exceptions) of the Italian Academy in the field of the social sciences.
- 24.
I again wish to recall that Frisch—being the thinker, and not only economist, that he was—often repented in his works and in his conversations a frequent phrase: ‘We have to get used to not forgetting—as economists and planners of thinking in real terms and not only monetary.’
- 25.
Management in which econometrics founded on alternative objectives in play could serve in finding alternatives to reaching those objectives, which compromised among participants of the game and, in general (in more praxeological terms) which new objectives should be studies, producing a ‘new awareness’ (cognitive effect of planning). This was the ancient argument of the ‘sociology of awareness’ (Karl Mannheim, Wissensoziologie, Vol. II, Sect. 2.8.2).
- 26.
I would like not forgetting that since the most elementary visions of political science, the concept of democracy appropriate (until where in eighteenth century has been introduced the functional study of the Constitutions for communities of big demographic dimensions) people have almost unanimously preferred to connect to the concept of ‘democracy’ to the functioning of representativity, rather forms of direct participation.
- 27.
This distinction useless for the single modeling useful only for single mathematical modelling of labor only for specific models, but are no more useful when in political decisions—of all variables in gaming in their relative importance.
- 28.
This is the most important political and technical message of Frisch (see what has already been outlined in Vol. I, Chap. 7).
- 29.
As it happened in all fields of the knowledge and human progress, with all positions that in the history have seek to keep old conceptions lacking of any real historical sense, (if never they were enjoyed of it) in relation to the knowledges in the history itself lived in every field.
- 30.
If we prefer now to use this word.
- 31.
And from the silence returns the conventionality, strongly aided by the illness and premature death of Frisch, from the powerful orthodox economics and from ‘Reaganomics’.
- 32.
Among those could have been myself, with my Centre for Research in Planning (in Rome), if my initiative agreed with the Italian government and of which I provide some information in Vol. III, Appendix 1 had not been interrupted for reasons of disinterest and political dissent by conservative governments in Italy. Personally, I was not yet ready to follow up the writings of Frisch, which were in an editorial state of confusion and disorder and experiencing, as Italian, (a periphery of media communication between economists), I did not have the instruments to make myself heard (admitting that the situation has changed, but also it has not!). Only today have I managed to reorder not only the writings of Frisch (see Chap. 3, in Vol. I) but also my own ideas, fruit of a rejected and abandoned philosophical culture and a pained limitation of an economic culture linked to my difficult Myrdalian background that has not found in Italy or in all the world, an easy welcome from a discipline that is heavily defended and little open to debate.
- 33.
I would again like to point out that Frisch, as a thinker, and not only economist, often repeated in his work and his conversations a frequent phrase ‘we must get used to not forgetting—as economists and as planners—to think in real terms and not just monetary terms’.
Bibliographical References to Chapter 7 (Vol. II)
Acocella, N., Di Bartolomeo, G. and Hallet, A. H. Eds. (2013). The Theory of Economic Policy in a Strategic Context. Cambridge University Press.
Archibugi, Franco. (1957). ‘Pianificazione economica e contrattazione collettiva’, [Economic Planning and Collective Bargaining] in Studi economici, (Journal of the Facoltà di Economia of di University of Napoli, 1957).
Fullbrooks, Edward, Ed. (2004). A guide to what’s is wrong with Economics. London: Anthem Press.
Stiglitz E. Joseph (2010a). The ‘Stiglitz Report’: Reforming the International Monetary and Financial Systems in the Wake of the Global Crisis, New Press. New York, New Press.
Stiglitz E. Joseph (2010b). http://ineteconomics.org/stiglitz-new-paradigm. Financial Time, 2010.
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Archibugi, F. (2019). A Project for a New Worldwide, Strategic Methodology for Planning (Under the Sponsorship of a Renovated University of the United Nations). In: The Programming Approach and the Demise of Economics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-78060-3_7
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