Reviews of EP
Reviews and Rebuttals
Anonymous, Nov 14, 2014
University Press of America, web page, May 2002
Annotation, Reference & Research Book News, August 2002.
Book Citation, Journal of Economic Literature, December 2002.
Carmine Gorga, Rebuttal, May 18, 2005.
Author's review for Amazon Books.
Vincent Ferrini, "Gorga worthy of note", Gloucester Daily Times, December 11, 2002, p. A6.
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date:
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Fri, Nov 14, 2014 at 3:51
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subject:
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I=C
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Dear Mr. Gorga
I=C, I love it! In fact, I think Keynes’s General Theory is
incoherent without it. I can’t understand why a brilliant guy like your
friend Modigliani didn’t get it. And what an abomination of Paul Davidson
to press upon your book the scarlet letters I=H, and without so much as an
apology. Augh! Of course, Davidson, as the self-appointed keeper of
Keynes’s (not Keynesian) orthodoxy, was perhaps not the best choice of
reviewers. Someday, I=C will shift from radically ridiculous to patently
obvious. I hope you get some of the credit.
***** 4.5 Stars-A dynamic systems (the economic system as a
complex,evolving process)reinterpretation of Keynes's Y= C+ I model, July 8, 2007
By
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This
book will be extremely difficult to follow for a " modern" mainstream
economist brought up on general equilibrium theory(g.e.t) and the stochastic
version of g.e.t based on the assumption that all the relevant variables in any
macro model of the economy can be analyzed either as( or as if) they were
random variables that are independently and identically distributed so that
some type of normal distribution(log normal,bivariate normal,multivariate
normal,etc.)can be assumed, based on the central limit theorem,to apply to the
time series data generated by capitalist economies.
The
writing style of the book is similar to the writing styles of
Veblen,Schumpeter,Keynes,and von Hayek.This means that the reader is going to
have to think carefully about the fundamental nature of capitalism as a complex
system evolving through time.Gorga's(G) concern is to identify what the
fundamental problem is that prevents such a system from obtaining AND
MAINTAINING a full employment level of output.Why is such an economy subject to
a destabilizing boom-bust business cycle over time ? G is one of the very few economists
to identify the fundamental problem as hoarding behavior.Hoarding means that
the individual is not spending his income on consumption goods,investment
goods,public goods,exported goods or imported goods.Hoarding problems will
manifest themselves at the macroscopic level.Thus,involuntary unemployment can
be identified as a macro problem that results from the microscopic hoarding
behaviors of many individuals but will not be susceptible to a purely micro
analysis based on utility maximization subject to an income constraint
problem.It is an effective demand problem that shows up at the aggregate
level.This,naturally,may present a major stumbling block for a modern day
economist who believes that all macro behavior is merely the sum of all
microbehavior.
G's
framework of analysis is a reinterpretation of Keynes's syllogistic (double
entry accounting) model of chapters 6(pp.63-65)and 10 that deals with the
actual results.This is Keynes's simplist model and it can be used be
demonstrate or establish the multiple equilibrium nature of the capitalist
economy.Keynes' model specifies a positive relationship between consumption and
investment spending(the aggregate demand side)that conflicts with the necessity
for consumption goods and investment goods to be negatively related from the
production side(aggregate supply side)of the analysis since full employment of
all resources can only take place on the boundary of a production possibilities
frontier.This boundary must have a negative slope.Keynes has introduced the
possibility of a positive feedback effect.This effect is
destabilizing.Speculative behavior can have catastrophic results if the
commercial banking system is allowed to provide loans to
speculators(hoarders)that allows them to try to leverage their private hoards
so as to accumulate even more.For instance,Milton Friedman rejected Keynes's
analysis because he felt that it was based on "excessive " liquidity
preference.Naturally,Friedman views speculative behavior as stabilizing since
he argues that it takes place under conditions of risk and not uncertainty.This
distinction is fundamental Eliminating uncertainty and ignorance from decision
making effectively eliminates hoarding behavior as anegative.
Keynes'
model specification,however,does not allow him to specifically answer the
question of why the economy is unstable.Keynes's answer is that the economy is
unstable and suboptimal because of the propensity to hoard.Keynes calls this
also by the name liquidity preference.Keynes can't show this in the Y=C+I
modelsince there is no explicit role for money to play.Instead,Keynes
demonstrates this in the expectations-uncertainty D-Z model of chapters 20 and
21.Keynes 's result is that if L2(the speculative demand for money) is greater
than 0,you will have involuntary unemployment,which will increase as L2
increases.Gorga's reinterpretation of the Y model allows him to reach Keynes's
conclusion as well as integrating it into a complex systems analysis(non
Newtonian)as the economy evolves as a dynamic process over time.
G
also shows that this is the major problem that has impacted all types of
economies over the last 4,000 years and not just capitalist economies.This is
also the major economic problem that has been identified by the Roman Catholic
church during the many centuries that humans were subject to great
uncertainty.Technically,it is impossible to eliminate all uncertainty which
means that hoarding will be a problem.However,once identified,it's negative
impact can be reduced to a minimum.Keynes states this on pp.241-42 and 351-52
but does not emphasize it for his economist audience.G emphasizes it and
convincingly identifies it as the main problem.
There
is one technical problem that appears throughout the book which may lead to
confusion on the part of the reader.This is G's use of the symbol
"=".This symbol must be interpreted to mean equivalence or equivalent
to.I have deducted 1/2 of a star for this drawback.It can be remedied in a
future edition.I would then give the book a 5 star rating.
_______
Dr.
Michael E. Brady is a lecturer in the Operations Management Dept. at California State University
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***
Back to Top
University Press of America
website for the Economic Process
The Economic Process transforms
economic theory from a linear, sequential discipline into a structure in which
events happen simultaneously and are strictly interrelated. Author Carmine
Gorga describes the process of production of real goods and services, the
automatic distribution of ownership rights over these goods and services, and
the creation of money as legal representation of those rights, through
financial instruments. Making minimal use of mathematics and an in-depth use of
ancient tools of logic and epistemology, each module of the economic system is
analyzed by itself and is then seen in relation to all the other elements of
the economic process. Gorga undercuts the ideological polarization that exists
today between the right and the left to provide only one political and
sociological view of the economic problem: the problem of poverty.
***
The
Economic Process; an Instantaneous Non-newtonian Picture.
by Carmine
Gorga
Synopses
& Reviews
|
Book News Annotation:
Arguing that
economists have been reasoning more like natural than social scientists and
that they have naively trusted in the power of mathematics to rescue economics
from its inability to comprehend the reality of concrete human beings and
institutions, economist Gorga attempts to recenter formal logic as a foundation
of economic discourse. Focusing on the shifting meaning of savings and its
relationship to investment, consumption, and income, he argues that applying
formal logic to economics allows theorists to bring the supply, demand, and
institutional sides of economics into concord.
Annotation c.
Book News, Inc., Portland , OR
***
Title The economic process: An
instantaneous non-Newtonian picture
Publication
Information
Subject
Classification General
Aggregative Models: Keynes; Keynesian; Post-Keynesian (E120)
Annotation Describes the economic process,
restructures contemporary economic theory using the tools of logic, and
presents a new structure called Concordian economics. Discusses John Maynard
Keynes's thought as the apex of classical economics; a Concordian economics
that takes its lead from the economics of Keynes; the lack of homogeneity in
Keynes's model; the simplicism and forced doublespeak of Keynes's model; the
lack of true equivalence in Keynes's model; the classification of mainstream
economic analysis as rational economics; the dissection of Keynes's model and
the dissolution of the saving-investment nexus; the history of the word
"saving"; the need to go beyond Adam Smith's conception of saving
and beyond Keynes's "definition" of investment; the definition of
saving, hoarding, and investment; the real saving-investment system; the
process of turning Keynes' model of the economic system inside out or turning
mainstream economics into Concordian economics; the concept of consumption;
the concept of income and the flows model as a whole; the economic process as
a whole; simplistic descriptions of the economic process; the production
process; the consumption process; the distribution process; economic growth
as the normal outcome of the unfolding of the economic process; inflation as
an outcome of the economic process gone awry; how the newly introduced models
close the gap between macro- and microeconomics; poverty and the economic
process; and the elimination of absolute poverty through the right to create
all the wealth one needs. Gorga is President of Polis-tics Inc., a private
economic consulting firm. Index.
ISBN 0-7618-2156-2
Update on
EconLit 200211
This record is part of the EconLit bibliographic
database. Copyright © 2002, American Economic Association
Updated 12/2002
|
***
Reviews
Volume 6, Number 1 • Spring 2003, pp. 297-98
Carmine Gorga
A
much better title for this book would have been simply: “The Costs of
Hoarding.” Carmine Gorga does put his finger on an economic reality often
neglected by economists. Not all wealth is put to productive uses, and, when
wealth is wasted in this way-hoarded-bad things happen to the economy.
Instead
of stopping there, Gorga pushes his argument too far. He argues that the
neglect of hoarding by economic theory means that all of economic theory needs
to be rebuilt from the ground up. That includes everything from the theory of
the firm to monetary theory to the theory of consumer behavior. And Gorga, in
one volume of overwrought and discontinuous thought, attempts to do just that.
This is similar to the charge that every single problem in the Catholic Church
in the last thirty years has been caused by the abandonment of the Latin
liturgy. Imagine writing three hundred fifty pages explaining how Christian
doctrine, governance, and spirituality have been destroyed by the vernacular.
In Gorga's case, those pages would all explain how two hundred years of
economic thought have nearly been for naught due to the omission of hoarding as
the centerpiece of analysis. Not surprisingly, one must gravely oversimplify these
issues in order to make such a claim.
Most
economists would stipulate that hoarding hurts the economy. The individual who
chooses to give up liquidity for useless material goods makes a bad bargain for
himself. Ultimately, the market punishes those who engage in a strategy of
self-impoverishment. If enough people hoard their wealth, the size of the
economy would certainly shrink. But why would anyone do this? What evidence is
there that individuals and firms pass up genuine profit opportunities for the
option of burying their talents in the ground? Gorga provides no empirical
evidence that hoarding is a significant problem. If it were a significant
problem, then perhaps the issue would deserve some tightly focused attention.
It
should be obvious from this summary that this book is far from the mainstream
in economic thought. There is little here that will attract the interest of
those who follow the progress of economic science. Gorga's book proves that it
is much easier to attempt to reinvent the wheel from a new physics than it is
to make real, though limited, contribution in the marketplace of economic
ideas.
What
is unfortunate is that Gorga missed an opportunity to bring to bear his
substantial background in classical economics on an analysis of the causes of
hoarding. Clearly, people hoard as a hedge against uncertainty. It is true that
the basic Keynesian spending model does not account for this possibility. In
that case, the amount of savings by households might not equal the amount spent
in investment by firms. Hoarding, then, must be a function of a household's
effective time horizon, the stability of recent economic activity, and the
availability of reliable information about the future. Thus, the economic
significance of hoarding ought to be inversely proportional to economic
stability. One might see a great deal of hoarding, with grave negative
consequences, in societies where property rights are insecure, where contracts
are not enforced, or where monetary mismanagement destroys the reliability of
the price mechanism. What might result would be empirically testable
propositions that could be tested in sub-Saharan Africa, in contemporary Argentina
Gorga
would agree that hoarding is fundamentally a moral issue, something that should
be of great interest to those concerned with ethics in the marketplace, but he
missed an opportunity to explore the function of all those economic
institutions-the savings bank, the mutual fund, the insurance company-that
serve to deter hoarding by offering a less-costly hedge against disaster. The
fact is that the existence of hoarding represents a profit opportunity to those
firms that can find a way to eliminate it. It may be that the existence of
hoarding may not represent a moral failure as much as it reflects the failure
of institutions that should correct it. Indeed, the real story here is
how little hoarding there is, rather than how much.
It
is important to remember that modern economic theories are not meant to be
descriptively accurate. They are meant to be testable by empirical means, but
the most testable theories are the simplest, the same ones that seem least
plausible in terms of their assumptions. The one thing that the theory strives for
is microfoundations, a theory grounded in the behavior of rational,
self-interested firms and individuals. This does not mean that there is no room
for a reflective philosophy of the free market system, a philosophy that
operates from a richer set of assumptions. But if one wants to invent a
new science of economics, as Gorga seems to attempt with his
self-branded Concordian economics, then one must enter the ongoing conversation
more humbly, with less-extravagant claims.
-Mark Broski, O.S.B
http://www.acton.org/publicat/m_and_m/2003_spring/reviews3.html#r3" http://www.acton.org/publicat/m_and_m/2003_spring/reviews3.html#r3
***
This is not the place to unravel the theoretical intricacies
inherent in the existence of hoarding. This is the place for a much simpler
attempt to let the reader see hoarding by itself. This is an attempt worth
making because of a complex mental process that was identified by a Fields
Medalist at Princeton University, William Thurston (2006, p. D1), who put it in
this striking fashion: “You don't see what you're seeing until you see it, but
when you do see it, it lets you see many other things.”
Hoarding for Doubters
Economists do not physically see hoarding; hence, as Broski has
done, they intellectually deny its existence. The issue is not one of
economics. The issue is one of mathematics and logic: once the economic reality
is described by the given definitions of saving and consumption, saving becomes
“equal” to investment (cf. Keynes 1936, p. 63), and no space is left for
hoarding.
Through the new framework of analysis designed in Gorga (2002, pp.
23-40, 67-158, 303-328), it is again possible to speak of hoarding within the
context of formal economic theory. Many consequences ensue from the existence
of hoarding (cf. ibid., pp. 235-302, 329-358). So many
effects, indeed, to induce Broski (2003) to maintain that “A much better title
for this book would have been simply: `The Costs of Hoarding.'” Yet, even
accepting the validity of the new intellectual construction that includes
hoarding in its purview, a doubt evidently persisted in Broski about the existence
of hoarding.
This doubt is creating an interesting consequence that can be
explained only in terms of the relationship between intellectual paradigms and
real phenomena. Thomas E. Kuhn in The Structure of Scientific
Revolutions pointed out that the prevailing paradigm in physics for a
long time made scientists see a substance, phlogiston,
which eventually turned out to be a non-existent element. In economics today,
there is a reverse chain of causation. Since economists deny the existence of
hoarding, they tend to conclude with Broski that there is no reason for a new
intellectual construction such as elaborated in Gorga (2002) that unarguably
permits its vision.
phlogiston,
which eventually turned out to be a non-existent element. In economics today,
there is a reverse chain of causation. Since economists deny the existence of
hoarding, they tend to conclude with Broski that there is no reason for a new
intellectual construction such as elaborated in Gorga (2002) that unarguably
permits its vision.
Hence this attempt to clarify three questions: What is hoarding?
Is there any hoarding? Who does the hoarding? This exposition makes it clear
that, in daily reality, hoarding has a direct effect on the projection of
future economic activity as well as on our understanding of the economic
literature of the last 250 years.
What Is Hoarding?
Hoarding is the act of keeping wealth in an idle state. Hoarding
is the act of keeping wealth in an idle state for any reason apart from
a technical requirement for keeping it idle. More specifically, hoarded is
all wealth that is not used, at the moment of the observation,
as a consumer good or a capital good. Before starting the discussion, we shall
equip ourselves with an ad hoc methodology and a minimalist economic theory
that will allow us to see hoarding.
Ad Hoc Methodology on How to Find Hoarding
We shall abstract from the theoretical possibility or
impossibility of the existence of hoarding. We shall be totally indifferent to
either one of these two theoretical possibilities.
In other words, the primary focus of this Appendix is not on any
of the effects of hoarding, but on hoarding in itself and by itself. Yet,
nothing stands alone. Therefore, at times we shall call attention to some
effects of hoarding; and, given that any economic action has effects on
quantities and relative prices, we shall reason by excess. Whenever necessary
and appropriate, we shall run a peculiar thought experiment (cf. Kuhn 1996, p.
88); we shall assume that the entire stock of a particular item of wealth falls
under the exclusive control of only one person.
A Minimalist Theory
As an inescapable consequence of the given definition of hoarding,
all wealth is posited to be divided into three parts: consumer goods, capital
goods, and goods hoarded. This is a minimalist theory, but a theory
nonetheless. The assumption is that any item of wealth-not simply
money-can be hoarded.
What Is Hoarded
Currency. Currency hoarded is the simplest case to identify. Currency
under the mattress in excess of the need for daily transactions, as well as
currency kept in a safe deposit box, is money hoarded. It is money kept idle. A
more complex variant of this phenomenon is money that is owned by a bank while
keeping it idle in a safe deposit box. That currency is also hoarded. Let us
remember that the object of our observation is the specific item of wealth, not
its owner, and that here we are not primarily concerned with either the causes
or the effects of hoarding.
Land.
Land hoarded is simple to identify. All land that is used neither as a consumer
good (e.g., for recreational purposes) nor as a capital good is land hoarded.
Land that is kept idle for the esthetic pleasure of looking at it is not land
hoarded but land used as any other consumer good. All land that a government
keeps idle for recreational purposes is not land hoarded; yet land in an
unvisited park is land hoarded. Land covered with weeds and rubbish in the
downtown of a city is clearly land hoarded. All uncultivated and undeveloped
(landlocked) land is also hoarded. All land kept idle in a country in which
there are idle hands that would till or somehow make use of it, is land that is
clearly hoarded; see, e.g. latifundia.
Gold.
Gold in the course of extraction and sale in a gold mine is a capital good.
Gold in a microchip plant or a jeweler's workshop is also a capital good. An
interesting case is the case of a gold bracelet in a jeweler's shop: this is
still a capital good. It is only when the bracelet adorns a woman's wrist that
the item becomes a consumer good. And what is a gold ingot at Fort Knox
Supplies. Supplies are clearly capital goods; yet, even supplies can be
hoarded-as they are when they are bought and kept idle for a period of time
that goes beyond technical reasons for keeping them idle. One might say that
when the physical flow of supplies is changed into a stock of supplies, chances
are that those supplies are hoarded. When in the 70s oil was kept in tankers
waiting outside harbors, that oil was hoarded. Some of this oil was hoarded to
staunch the effect of expected higher prices; some of it was hoarded in fear of
future exhaustion of those supplies. The reason does not matter. It is the
economic condition that matters.
A coffee cup. A coffee cup in my home is a consumer good. A coffee cup in my
office is a capital good. And a coffee cup in my attic is a good hoarded-unless
I use it, even just once a year, on my patio during summertime.
Consumer goods. The hardest case to identify as hoarding, at least the last case
that was identified by this writer, is the case of the hoarding of consumer
goods. (Unless the eyes are never peeled away from the economic reality, words
become utterly misleading.) Again the case of voluntary hoarding is clear. The
case of the person who buys two pairs of boots because prices are skyrocketing
is clear: one pair is used as consumer goods and the other is hoarded. More
subtle is the case of unanticipated hoarding. Have you ever discovered in your
clothes closet a shirt with its price tag still attached after a couple of
years of its purchase? The item was clearly hoarded. More deviant still is the
case of “consumer goods” that have lost their utility to the owner, and are
hoarded because one is too lazy to offer them to others who would put them to
good use.
Any item of wealth can be hoarded. During the Great Inflation of the 70s
Johnny Carson, the famous comedian, one night made a joke about the
disappearance of tissue paper. The day after the shelves were bare. A shortage
was created because of the unexpected demand. Indeed, much of the gasoline
shortage those same years was created by the fact that many drivers would tend
to keep the tank constantly filled. They were hoarding gasoline.
Stocks and bonds. Stocks and bonds are not wealth; they represent wealth.
Therefore, they cannot be hoarded-even though the corporation in whose name
those stocks and bonds are issued might be hoarding some real wealth on its own
account. No matter how many consequences derive from accumulating even all the
stock of a corporation, this action does not directly affect other people's
wealth; at the limit, you can destroy all the stock certificates that you own,
and you do not directly affect other people's wealth. Other people would
benefit from a transfer of the title of ownership of these certificates to them,
but that is a moral issue with its own indirect economic consequences.
Directly, the wealth of the nation would not even minimally be affected by the
destruction or transfer of stocks and bonds; indirectly, you might increase the
value of the remaining stock certificates, but that would only be a monetary
change. Currency is significantly different from stocks and bonds. To say the
least, currency has an immediate and direct utility. Accumulate or destroy all
currency, and you do not destroy the value of any real wealth; yet you
immediately make all exchanges more cumbersome and gradually more expensive. As
a saying once went, currency saves shoe leather. This is the cost-in real
wealth-that would be incurred by the nation if all currency were destroyed.
Labor. To
evaluate the full cost of hoarding incurred by a nation, one has to realize
that involuntary unemployment is labor power that is hoarded. To reach an
accurate measurement of this phenomenon, one has to keep in mind, first, that
official unemployment rates from the ghettos to the Indian Reservations
generally vary anywhere from 15% to 75%; second, that official statistics
measure unemployment only among those who are still actively searching for
employment: those who have given up are not counted. Another group that might
be worth to look at with new eyes is the pool of officially retired people.
Is There Hoarding?
The specific question is: Is there any hoarding any time, anywhere
in the world? To answer this question in relation to money, it is important to
bring to mind two specific examples. First, the less developed the banking
system in a country, the more hoarding takes place under the mattress. The
deeper the condition of economic depression in a country, the higher the
accumulation of money hoarded in a bank-by a bank. How much deeper did the
Great Depression become because banks could not find borrowers for their
hoards?
To clearly see hoarding, one has to make a dynamic and
longitudinal analysis of the issue. One will then discover that the quantity of
certain forms of hoarding increases over time. During the same period, other
forms decrease: currency, for instance, is hoarded less when the prices of
goods rise. (This is another variation of Gresham
These observations lead to another consideration. At first sight,
one might be tempted to assume that all hoarding is “bad” or more specifically
that all hoarding has negative economics effects. That is not necessarily the
case. Some hoarding might cause positive effects for the individual person as
well as for society as a whole. For instance, some undeveloped and uncultivated
(landlocked) land might become a buried treasure for the next generation; and
some money kept in a safe deposit box keeps prices rising even minimally at a
slower pace. There are no general cases in economics; all cases are individual
ones. That is why one cannot let “the market” make decisions for oneself.
Who Does the Hoarding?
We all hoard wealth. Some more, some less, but we all hoard
wealth. Even in this brief excursus we have met governments hoarding gold,
landlords hoarding land, bankers hoarding currency, industrialists hoarding
supplies, and individual human beings hording consumer goods. A disclosure: One
of the two writers hoards books and computers: there are some books that he
knows full well he will never get to read or no longer needs to read; there are
some computers that he knows full well he will never get to use-he should give
them away, instead he hoards them.
Some Concluding Comments
The existence of hoarding is proof positive of the existence of
freedom, rather than determinism, in the world of economics.
As against the accumulation of goods hoarded, the consumption of
consumer goods is, indeed, determined by need: needs of physical survival and
needs of social status. The consumption of capital goods is also determined by
the need to reduce the amount of time-more precisely-the amount of life one
devotes to the production of goods; the resulting free time is proof positive
of the efficiency of the economic system in which one lives; to whom and to
what one devotes the resulting free time is determined by the degree of
civilization and spirituality stored in this person's character.
Is not the existence of hoarding, then, proof positive of the
amount of freedom granted to the individual person by the economic system in
which one lives? And the amount of dishoarding, by giving one's surplus wealth
to the people who need it and cannot produce it for themselves, is proof
positive of the degree of morality lived by the person who dishoards.
Clearly, neither consumption nor investment, but hoarding alone is
wholly determined by the free will of the individual economic agent.
Hoarding is an arbitrary and subjective activity. Of course, there
is much arbitrariness and subjectivity in consumption and investment as well.
To say the least, then, hoarding contains a greater degree of arbitrariness and
subjectivity than either consumption or investment. At the limit, as we know,
differences in degree are differences in kind. Hoarding therefore is an
economic activity fundamentally different from consumption and investment. The
discovery of the existence of hoarding in the economic system is not an
exclusively intellectual issue. The existence of hoarding has a clear concrete
effect on the measurement of economic activity. Hoarding can be measured only
by working in close collaboration with the person who does the hoarding. All
other measurements are purely arbitrary. Any national projection of future
economic activity that does not take this characteristic of hoarding into full
account is destined to remain entirely ambiguous. Once recognized, the
phenomenon of hoarding will eventually be classified as a Kuhnian anomaly.
the
phenomenon of hoarding will eventually be classified as a Kuhnian anomaly.
Finally, the phenomenon casts a new light on the understanding of
the economic literature of the last 250 years. The existence of hoarding has a
decisive influence on the understanding of Keynes' General Theory.
Hoarding is what fills the gap between the form and the substance of that
masterpiece. While the form is written on the basis of Keynes' model of the
economic system as presented at page 63, the substance of the General Theory is
written in terms of the existence of hoarding. Three major pieces of evidence
should suffice. First, if there were no hoarding in the economic system it
would make no difference whether people had a propensity to consume a little
less than one's income (Keynes 1936, p. 96), because the difference would be
taken up by saving and investing. Yet, Keynes knew full well that there is
hoarding in the community and therefore he specified that under given
circumstances “saving and spending will both decrease” (ibid.
p. 111; italics in original). With the recognition of hoarding, this
observation turns out to be true in a static examination of the economic
system, as well as in a dynamic investigation of the system. The second case
regards Keynes' prescription for the “only radical cure for the crises of
confidence which afflict the economic life of the modern world” (ibid.
p. 161); as analyzed in Gorga (2002, esp. pp. 93-115), the prescription becomes
clear only if one takes the existence of hoarding into account. Third, Keynes
defined interest in an outright fashion as “the reward of not-hoarding” (ibid. p.
174).
Going farther back in history, it is evident that the absence of a
clear definition of hoarding doomed the discussion that occurred between 1926
and 1933 among Ramsey, Sraffa, Hawtrey, Robertson, and Keynes on the definition
of saving. The Great Debate was such a debacle that economists are still shying
away from attempting to define terms in economics.
And going farther back still, one finds the source of today's
quandary. Hoarding was well known and widely discussed from Moses through Jesus
of the Parable of the Talents to Locke (1698, esp. Bk. II, Ch. V, pars. 46-51).
It was Adam Smith who, by destroying in the Wealth of Nations
(WN) the distinction between saving and investment, and conflating
them in the word “accumulation”, left no room for the understanding of
hoarding. To repeat, in formal, mathematical analysis, what is not consumed is
saved-and what is saved is considered to be investment. Hence, no room is left
for hoarding. Quite consistently, Adam Smith relegated hoarding to the
past (WN, pp. 859-60, p. 863) and, quite presciently, hoarding has ever
since disappeared from sight.
We have seen how the General Theory suffers from a lack of
understanding of hoarding; we have seen how tangled the conversation became in
the 30s. What is not often remarked is that the first to suffer from such
misunderstandings is Adam Smith himself. What most people read or want to
read in the Wealth of Nations is the doctrine of “accumulation
of riches” (WN, p. 327). Subtleties and qualifications of the great work
ought not to, but they do, fall by the wayside. The work is incredibly
impoverished.
REFERENCES
Broski, M. (2003). “The Economic Process: An Instantaneous
Non-Newtonian Picture. Carmine Gorga.” Journal of Markets and Morality 6,
no. 1: 297-98.
Gorga, C. (2002). The Economic Process: An Instantaneous
Non-Newtonian Picture. Lanham , MD and Oxford : University
Press of America
Keynes, J.M. (1936). The General Theory of Employment,
Interest, and Money. Harcourt, Brace, and Company, NY (1964).
Kuhn, Thomas S. 1996 ed. The Structure of Scientific
Revolutions. Chicago and London :
University of Chicago
Locke, John. 1698. Two Treatises of Government. London Mentor
Smith, A. (1776). The Wealth of Nations. Modern
Library (Cannan Ed.). Random House, NY.
Thurston, William. 2006. Quoted in Dennis Overbye, “An Elusive
Proof and Its Elusive Prover: That rabbit is actually a sphere. (Read on.) But
the man who proved it is missing,” New York Times, August 15.
***
The Economic Process: An Instantaneous Non-Newtonian
Picture. By Carmine
Gorga. Lanham, MD, and Oxford : University Press
of America
This book is dedicated to the author's mentor, Franco Modigliani,
and his teacher, Robert Mundell. With such a pedigree behind the author's
analysis, one expects a substantial, interesting contribution to the
development of economic theory. The author claims that this book will transform
mainstream “economic theory into Concordian economics... [where] mainstream
economics disappears as the linear, static `dismal science' of textbooks and is
replaced by an organic and dynamic structure capable of responding to the daily
needs of concrete human beings.”
The book is divided into five parts. Part 1 presents what the
author believes are fundamental weaknesses in the model that Keynes developed
in The General Theory. Part 2 analyzes why these weaknesses have
occurred and why no economist before the author has found these weaknesses. The
author then provides “remedial solutions” to these Keynesian weaknesses in
terms of Concordian “new models.” Part 3 uses these new models to analyze the
real world economic process. Part 4 suggests how Concordian economics “has the
potential to destroy the dichotomy between micro and macroeconomics.” Part 5
presents a few discursive comments on what the author believes is the
relationship between poverty and the economic system.
And what exactly is the analytical key of “Concordian Economics”
that allows the author to revolutionize economic analysis? The author claims
that since Keynes wrote in 1936, economists have been using the wrong
definition of things such as Savings, Investment, Consumption, etc. Once the
author has rewritten the economic dictionary of these terms the result is what
he calls Concordian economics. And somewhat surprisingly the author indicates
that his model was so novel that “I copyrighted this model in 1979” (p. 25).
Why no one has ever seen this copyrighted model before now is not explained.
The author warns that “nine tenths of the terminological
difficulties” that other economists have with his model are the result of his
definitions of saving and consumption. In Concordian taxonomy “saving is contracted to
mean hoarding (or production, ownership and sale of nonproductive wealth such
as money under the mattress, idle gold, idle land, etc.). And the meaning of
consumption is expanded to include all expenditure of money or
wealth in general; namely, expenditure for the purchase of consumer goods,
goods to be hoarded, and capital goods as well as expenditures for financial
instruments” (p. 26).
With these unusual definitions, the author takes the usual
Keynesian identities of Y = C + I; S = Y - C; and I = S; and presents the
Concordian version of them in terms of his definitions of S (savings) and C
(consumption) as follows:
Y = C + S;
I = Y - S;
I = C.
Later in the analysis, the last two equations are converted to: I
= H and P = D, where H is hoarding, P is production, and D is distribution of
ownership rights.
From these definitions some of the more bizarre statements
(conclusions) of the author are:
(1) “Investment has become something that is nonproductive” (p.
48);
(2) “Mainstream economic theory compels us to assert that dollar
bills in a safe deposit box, unused land, stockpiles of raw materials that are
not needed in the immediate future, contrary to all reality are items that
produce wealth” (p. 49);
(3) Idle machinery and idle land is “saving,” while machinery and
land that is being used is a “consumer good” (p. 100). But, I wonder, does this
mean that labor that is idle (unemployed) is “saving” in Concordian economics
and employed labor is a purchased consumer good?
(4) The reason for treating the purchase of consumer goods the
same as the purchase of capital goods (under the umbrella of C expenditures in
Concordian economics) is because both types of spending “transfer financial
resources...from the consumer to the producer” (p. 143)
(5) “Investment and consumption share a common formal definition.
They are both defined as income minus hoarding” (p. 155);
(6) “There are so many broad ramifications... [of this Concordian
model] that they can neither be analyzed nor listed in this book” (p. 193);
I believe these statements give the reader a flavor for what is
contained here.
What is a reviewer to say about this Concordian “revolution” when
the author utilizes economic terms to mean different things than is commonly
accepted terminology by economists? Perhaps I can utilize a passage from
Keynes's review of Hayek's book (“The Pure Theory of Money: A Reply to Dr.
Hayek,” Economica (1931), reprinted in Donald E. Moggridge,
ed. 1973, The Collected Writings of John Maynard Keynes, XIII,
London: Macmillan, pp. 252) to express my judgment:
“The book as it stands seems to be one of the most frightful
muddles I have ever read, with scarcely a sound proposition in it... It is an
extraordinary example of how, starting with a mistake [here substitute unusual
definitions for mistake], a remorseless logician can end up in Bedlam.”
Paul
Davidson
Professor Emeritus, University of Tennessee
NOTE: I wrote to Professor Davidson; he never answered.
I
informed the editors at JEL and, so far, they have refused to take any action.
So
the record stands. CG
***
Author Reviews Own Book and, in the Immortal
Words of Steven Cord, Finds It Meritorious, October 19, 2006
The
author finds his work meritorious on different levels. First, because the
language of economics is made again intelligible to non-economists. Second,
because the new comprehensive description of the economic process provides the
framework for truly productive and just economic policies. Third, because it
adds the following technical aspects to the language:
Separates real wealth from monetary wealth
Links both together again through ownership
rights
Builds
a model of stocks
a model of flows
a model of monetary values
a model of production of real goods and
services
a model of distribution of values of ownership
rights
and a model of consumption (i.e., expenditure)
of all financial instruments
Ties production to distribution and to
consumption in a relation of equivalence
Offers a geometric and mathematical
representation of the economic system as a whole.
In
addition, the book formally defines hoarding,
includes it into the new structure of economic theory, and observes its effects
in the fields of economic growth, inflation, and poverty. Thus it offers the
rudiments of a meta theory of sociology -- and, in even smaller doses --
political science.
For
a number of consilient reasons, I like to call the new structure Concordian
economics.
For
his enormous intellectual and moral assistance over the years, the book is
gratefully dedicated to Professor Franco Modigliani, Institute Professor
emeritus at MIT and 1985 Nobel laureate in economics.
***
Back to Top
Gorga
worthy of note
Carmine Gorga, of the
Gloucester Community Development, who studied with Nobel laureates in his
discipline, is a practitioner of creative economics.
In his book, "The
Economic Process," (University Press of America, 2002) he has the
answers to universal poverty and the anxieties of the affluent.
The blueprint for the
elimination of poverty among the masses of the planet. A manual for a healthy
mind, in a healthy body, in a healthy society. Gorga is a Ph.D. authority in
psychology, physics/metaphysics and his chosen center economics.
My ideal real man for the
rectification of the stuck human condition. What Gloucesterwas, it can become again.
Today flies off before we
know it and the future too. Can we make the leap and land into the promise.
Without a doubt.
I read his book, the first
I-IV sections were too abstract for me, incisive for the scholars, but it by
passed me without establishing a landing, Part V held me to his anchor and
the vessel's engine sang with the practical means for operating a spaceship
into cosmic plenty.
Gorga doesn't miss a
shadow. He talks with the angels in the angles, a holistic seeder.
VINCENT FERRINI
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