ASSRU Newsletter July 15, 2013 Vol. 3, # 1

Algorithmic SocialASSRU Sciences Newsletter Date Research September Unit15, 2012 (ASSRU) Vol. 2, # 1 Björn Thalberg In Memoriam (1924-2013)

‘The appearance,’ writes [Thalberg], ‘of yet another study dealing with Keynes’ General Theory does not, of course, make the air electric with expectancy.’ This, I fear is true, but in this slender volume Mr Thalberg has given us a very neat and interesting account of an aspect of the Keynesian system.’ Amartya Sen, Review of A Keynesian Model Extended by Explicit Demand and Supply Functions for Investment Goods by B.Thalberg, EJ, Vol. 73, Mar., 1963.

Björn Thalberg belonged to the interregnum – I trace a development of his macrodynamics, from the enlightened generation of economists of the the Haavelmo-inspired ‘Mod K’ of the early Golden Quarter Century of Keynesian 1960s, to the Extensions of the Goodwin Model, of Economics and its policy successes: 1947 – the mid-1960s, to, finally, the ‘stabilization’ phase 1972. The generation that had a complete determined by forging the above two rich Oodwin Model mastery of the ‘four’ (actually six) defining formalizations to a framework which generalized classics of the age of the neoclassical synthesis: Phillips’ EJ contributions of 1954 & 1957. Value and Capital by , the On the way, explicit considerations of delivery Foundations of Economic Analysis by Paul lags and order-book timings (from the Corfu Samuelson , Money, Interest and Prices by Conference to ‘Mod K’), ‘time-to-build’ and the Don Patinkin and Roy Allen’s ‘trilogy’ on important supply considerations in both Mathematical Analysis for Economists, consumption and investment goods productions, Macro-Economic Theory and Mathematical intractable nonlinearites tamed by simulations, at Economics. least pro tempore, and finally, those transparent This mastery was built on the foundations of policy themes that Phillips embodied in the what I have come to call the ‘Oslo Tradition’* – MONIAC, were all part of the classy lectures on that which was built on the outstanding advanced we were privileged to pioneering works by , Trygve follow, in our graduate studies in the department Haavelmo and, later, Leif Johansen, to which of economics at the University of Lund. adding the name of Jan Tinbergen, Bent Hansen and Herman Wold was only natural, at least as far as Thalberg’s own intellectual building blocks were concerned. These were unusually solid foundations and students of my generation, who did not foresee the demise of the neoclassical synthesis, were privileged to be taught – particularly in macroeconomics – the concepts and tools that were not only considered necessary for disciplined thinking , but also absolutely

essential for an enlightened approach to active economic policy. Thalberg’s own interests in, and fundamental contributions to, Macrodynamics, Methods of mathematics in macroeconomics, Econometrics, Computationally underpinned simulations and Nonlinear endogenous business cycle theory The ASSRU Logo were the result of his intellectual – direct and From L to R (Clockwise): indirect - inspirations from the teachings and Turing, Simon, Brouwer, Goodwin, Sraffa & Keynes The four Professors during Velupillai’s years, in the writings of Ragnar Frisch, , late 1970s, in Lund: Richard Goodwin, Roy Allen and A.W.Phillips *Thalberg is reluctant to call this ‘tradition’ a ‘school’ in Ingemar Ståhl, Bo Södersten, Björn Thalberg (in his stabilization policy incarnation) most the sense in which one refers to the ‘Stockholm School’, & Bengt Höglund directly, and indirectly from his mastery of the is unfortunately in terms of a reference to a specious classics by Wicksell and Keynes. characterization attempted by Björn Hansson in his seriously deficient study, based on his deeply flawed Because he was such a humble, old fashioned Cambridge doctoral dissertation. He, and others, who (in all its good and decent senses), scholar- indulge in referring to a ‘Stockholm School’ forget that gentleman, because he – like Schumpeter – the two important contributions to the monetary theory, never referred to his own work during the being forged by Wicksell’s younger followers, led by lectures I had the pleasure and privilege of Lindahl and Myrdal of a senior generation and attending, it was only with some effort that I continued by Hammarskjöld, Lundberg, Alf Johansson, came to realize how masterly his knowledge of Ingvar Svennilsson and Bent Hansen of a younger generation, were NOT part of this group: Ohlin & the General Theory was (as amply testified by Palander, who added the appellation ‘Stockholm’ Sen’s above sensitive and characteristically (against the explicit protests of the above younger scholarly review of Thalberg’s elegant yet, generation). I develop these themes in my forthcoming Velupillai & Thalberg at the latter’s home, in Lund, Christmas 1979 sadly neglected, Keynes Booklet). essay, Hammarskjöld, Wigforss & Ohlin.

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Thalberg’s fundamental work in macrodynamics was inspired and influenced by the pioneering contributions of his teachers, Frisch & Haavelmo, and his distinguished contemporaries, Goodwin and Phillips – the latter two on nonlinear cycle theory and macroeconomic stabilization policy. Leif Johansen’s influence was of an entirely different ‘dimension’.

Thalberg’s last letter to me, in response to my request for a brief note on remembrances of his years at Cambridge, with Goodwin and the Phillips Machine.

Festschrift in honour of Thalberg

Phillips Stabilization in a Keynes-Goodwin Model Thalberg’s ‘Extension of the Goodwin Model’ ASSRU NL v.3 # 1 Page 3

Leif Johansen, the Correspondence Principle and Frisch’s Decision Models

Björn Thalberg’s wonderful lectures on macroeconomics which I had the pleasure and privilege to attend as a graduate student at

Lund, in Spring 1972, were seriously underpinned by an appeal to the ‘correspondence principle’. Coming from an applied mathematics background, with emphasis on the mathematical methods of physics – in the Hilbert-Courant tradition – I was astonished to discover that there was such a thing also in economics – knowing, till then, only the famous Niels Bohr version which was formulated to reconcile classical and quantum physics. It was, therefore, quite natural for me to mention the

‘correspondence’ between the two versions, the Bohr and the Hicks-Samuelson formulations, in an appendix to my ‘essay’ for Thalberg’s course. Imagine my surprise, when I received a meticulously annotated ‘essay’ back, with a suggestion that I write up the appendix so that Thalberg could get it published in the Swedish Journal of Economics – which he did, in 1973!

Of all my own work, the ones that Thalberg found most satisfying were those that built on the Frischian tradition of decision models, framed so as to facilitate interactions between an economic theoretical modeller and an actual politician, like a Finance Minister*.

Thalberg’s almost passionate allegiance to Leif Johansen, as a scholar of impeccable integrity – matching his own – was most elegantly and persuasively evident in his long and thorough survey of his great Norwegian contemporary’s contributions to economics, published in 2000 in the Norsk Økonomisk Tidsskrift. The 157 page document – and this brings the story only till December, 1961 - is meticulously detailed and is also a reflection on the Oslo Tradition in which he and Leif Johansen were schooled. The most impressive feature of this study is the sympathetic, yet wholly objectively argued, endorsement of Leif . Johansen’s vast and varied visions of economics, economic *Hicks, in a letter to me of 23 December, 1983, wrote, theory and applied economics. This is particularly so for Leif regarding what he called my ‘Frischian paper’: ‘The paper you Johansen’s two enduring contributions to macroeconomics – his sent me made me think of Dobb Lindahl and Wigforss (I once had lunch with them together). No doubt Frisch had someone ‘Putty-Clay’ model and the path-breaking monograph on A Mutli- ** in Norway with whom he could have similar relations.’ A Sectoral Study of Economic Growth . reading of this letter gave Thalberg immense pleasure. **Thalberg was careful to attribute the false claim that this The thoroughness is strengthened by detailed quotations even classic study was the pioneering contribution to what came to from Leif Johansen’s Cambridge diaries*** be called CGE modelling, to Lars Begman. I have discussed this, and related false claims, in my detailed simulation paper dedicated to Thalberg (OUP, 2013). CGE modelling, linking the Brouwer fix point theorem to a (Walras)-Arrow-Debreu . equilibrium, was the creation of Uzawa and Scarf (see my forthcoming EPW paper, too). ***The entry for 6/11/1958 gave me particular pleasure: ‘The Department had a visit by A.W. Phillips from London who gave a talk on ‘Buffer stocks and price stabilization. … Kaldor, Joan Robinson, Goodwin and Meade, among others, were present. Kaldor tried to steal the show, J.R was not easy to follow. Goodwin was the one who understands all and was always ready to intervene in a supportive way.’ (My translation from the original Norwegian; italics added). It gave me enormous satisfaction to write my JEBO paper of 1993, linking Goodwin’s classic Growth Cycle with Leif Johansen’s Classical Model of Growth, both published in the Dobb Festschrift.

Page 4 ASSRU NL v.3 # 1 Almost exactly forty one years ago, on optimal control & dynamic programming 1st July, 1972, I was appointed a ‘3:e and, above all, nonlinear endogenous Brief Personal Reminiscences Amanuens’ – the lowliest level of the business cycle theory. The worlds of academic rung - in the department of Frisch, Haavelmo, Keynes, Goodwin, economics, at the University of Lund. I Samuelson, Leif Johansen and Phillips never had the slightest doubt that it was loomed large in the visions I was carving entirely due to the fact that Björn for myself, sitting and learning at his noble Thalberg, as head of the department of feet. economics, opted for me. It was my first Alas, his enthusiasm for Econometrics, in ever academic appointment and finally the Haavelmo tradition, never left any gave me the chance to devote all of my trace on my intellectual development. time to economic studies. Till then, I had worked as a cement factory labourer, in From 1980 for the next 33 years, till the far south of Sweden – in Limhamn – almost the eve of his death, I kept in touch often 16 hours on every formal holiday, with him, via old-fashioned penned letters living in the factory barracks. on paper and card, telephone and, as times changed, by means of e-mails. He visited He even ‘engineered’ a temporary me in London, Florence and Galway. appointment for me, as an ‘Acting Professor’ for the princely period of 8 One day, just before his official weeks! No doubt this left lingering retirement, he came home to me, bitterness in the tongues of many of my unannounced, in the Skalderviken, bearing more senior colleagues in Lund, which a ‘kranskaka’. He wanted to persuade me was not slow in manifesting itself very to apply for his Chair. I was reluctant, but shortly and led to my eventual peripatetic agreed, just to please him. Of course, I did life. not succeed, nor did I expect to do so. In the path to that failure – one of many in The initial lowly appointment was the Lund - I also learned, through him, how beginning of my lifelong indebtedness to dormant viciousness had reared its Thalberg, as I look back now, at the Caliban head, in the form of rumours, academic and intellectual trajectory my spread by two of my former colleagues: wandering life has taken. Göte Hansson and Björn Hansson. It The topics on which I gradually began to pained him, later, to ring and inform me of work on were all based on the seeds that their Iago-like deed – and to ‘name’ them. were planted in those early years under It was one of three occasions when he A card from BT to KV, Thalberg’s enlightened guidance.: expressed his sadness, in his reserved way, ‘One day in [Autumn] from the Norwegian Macrodynamics, capital theory, growth at not being able to ‘protect’ me, in Lund. fjords & a letter from theory, the theory of economic policy, Lund to Florence, BT I considered my friendship with Thalberg 1971 Vela appeared at history of economic thought, to KV one of the jewels that crowned my life – my lectures in Lund. A mathematical methodology in economics, both personal and intellectual. few days later we met in computationally underpinned simulation, the street and talked together a long time. ..

He had arrived in

Sweden .. in 1970, where he … worked as a labourer at a cement factory, and did at the same time attend classes in Swedish. .. One day in Kyoto he came across ’s Asian Drama and became so fascinated that he decided to go to Sweden. Many years later Myrdal got wind of the story and they had several long conversations in Stockholm.’ Thalberg (in the Festschrift ed., by Zambelli, Routledge, 2010, p.287)

ASSRU NL v.3 # 1 Page 5

ASSRU Publications and Editorial Activities 2012/13

5. Three Notes on ’s Three books on themes central to the research Contribution to Emergence, program and methodology of ASSRU, were Problem Solving and edited by affiliated members of ASSRU Constructive Mathematics: including chapters by Velupillai and Velupillai & a. Reflections on Wittgenstein’s Zambelli, during the academic year 2012/13: Debates with Turing during his I. Velupillai’s comprehensive chapter on Lectures on the Foundations of Postkeynesian Precepts for Nonlinear, Mathematics (pp. 77-79); Endogenou , Nonstochastic, Business b. Turing on Solvable and Cycle Theories is included in Vol. 1 of Unsolvable Problems & Simon The Oxford Handbook of Post- on Human Problem Solving (pp. 339-342); Keynesian Economics, Edited by G.C. Harcourt & Peter Kriesler, Oxford c. Four Traditions of Emergence: Morphogenesis, Ulam-von University Press, 2013. Neumann Cellular Automatas, II. A Computable Universe: the Fermi-Pasta-Ulam Problem Understanding Computation & and British Emergentism (pp. Exploring Nature as Computation, 759-762); edited by Hector Zenil, with a Foreward By K. Vela Velupilllai in: Alan by Sir Roger Penrose, World Turing – His Work and Impact, Scientific/Imperial College Press, edited by S. Barry Cooper & J. December/January, 2012/13. van Leeuwen, Elsevier Science, III. Irreducibility and Computational 2013. Equivalence: 10 Years After 6. The Relevance of Computation Wolfram’s A New Kind of Science, Irreducibility as Computation

edited by Hector Zenil, Springer, 2013. Universality in Economics by K.

Vela Velupillai, in: Irreducibility and Computational Equivalence: Wolfram Science 10 Years After the Publication of A New Kind of Science, edited by Hector Zenil, Springer, 2013. 7. Computability and Algorithmic Complexity in Economics by K. Vela Velupillai & Stefano Zambelli, in: A Computable

‘Now we are Four’ Universe: Understanding and The four ‘surviving’ ASSRU members, at Velupillai’s home, on Exploring Nature as the occasion of his 65th birthday. Computation, edited by Hector The following articles have been published in Zenil, World Scientific/Imperial 2012/13 by the resident members of ASSRU: College Press, 2012/13. 1. A Nonlinear Model of the Trade Cycle: Mathematical Reflections on Hugh Hudson’s Classic, K. Vela Velupillai, V. Ragupathy & Stefano Zambelli, Australian Economic Papers, Vol. 52 , 2013. 2. Turing’s Economics: A Birth Centennial Homage, Economia Politica, Vol. XXX, #1. 3. A Journey Through the Corridors of a Labyrinth, Interdisciplinary Journal of Economics and Business Law, Vol. 2, Issue 2, 2013. 4. Foley’s Thesis, Negishi’s Method, Existence Proofs and Computations, in: The Festschrift in Honour of Professor Duncan Foley, edited by Lance Taylor, Armon Rezai and Thomas Michl, Routledge, London, 2013.

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Christopher Alexander & Herbert Simon

Design, Discovery, Complexity & Indecomposability

“If a complex structure is completely unredundant …. then it is its own simplest description. We can exhibit it, but we cannot describe it by a simpler structure.” Simon, 1962, p. 478; italics added. Thus, Herbert Simon signalled one aspect of the basis of his approach to complexity theory, in terms of what later came to be called Kolmogorov

Complexity. It is not surprising, after all Ray Solomonoff who, together with

Kolmogorov and Chaitin is considered one of the founding fathers of this approach

to complexity, presented his original paper on the subject at the famous Dartmouth

Conference.

Moreover, the setting of an evolving hierarchical system, in which Simon placed

this concept of complexity to fruitful use, was also underpinned by the notion of

near decomposability – culled, in the early 1950s, by Simon, from Goodwin’s

notion of unilaterally coupled, vertical and horizontal markets.

In addition, Simon was never an adherent of either untrammelled reductionism or

of fashionably emergent holism (cf, Simon, op.cit., p. 468). Visions

Finally, the evolution of complexity, whether in hierarchic or other systems, in space and time, was – for Simon – a special case of Human Problem Solving,

which was also the basis for his fundamental contributions to a theory of design and discovery (where his original inspiration for the role of heuristics came from Polya’s work in the domain of mathematics).

Christopher Alexander, who was intimately acquainted with Simon’s work on human problem solving, even at the time of his own 1964 classic, was a reductionist, who turned into its opposite, and an advocate of a version holism in the sense of the British Emergentists by the time he came to write his outstanding tetralogy on The Nature of Order.

The superficial similarities between Simon’s computability theoretic approach to human problem solving, in general, and Alexander’s entirely different problem solving visions for design, underpinned by ‘Cartesian Rationalism’ – all of which he explicitly disowned (see quote below) – has led unserious and unscholarly claims on the feasibilities of a so-called modular approach to economic modelling.

Simon extolled the virtues of method; Alexander disowned method.

http://www.assru.economia.unitn.it/

Indeed, since [Notes on the Synthesis of Form] was published, a whole academic field has grown up around the idea of “design methods” – and I have been hailed as one of the leading exponents of these so-called design methods. I am very sorry that this has happened, and want to state, publicly, that I reject the whole idea of design methods as a subject of study… . In fact people who study design methods without also practicing design are almost always frustrated designers who have no sap in them, who have lost, or never had, the urge to shape things. Such a person will never be able to say anything sensible about “how” to shape things either. Christopher Alexander: Preface to the Paperback edition (1971) of Notes on the Synthesis of Form; italics added.