1) One’s value scale is totally (linearly) ordered:

i) Transitive; p ≤ q and q ≤ r imply p ≤ r

ii) Reflexive; p ≤ p

iii) Anti-Symmetric; p ≤ q and q ≤ p imply p = q

iv) Total; p ≤ q or q ≤ p

2) Marginal (diminishing) utility, u(s), is such that:

i) It is independent of first-unit demand.

ii) It is negative monotonic; that is, u’(s) < 0.

iii) The integral of u(s) from zero to infinity is finite.

3) First-unit demand conforms to proportionate effect:

i) Value changes each day by a proportion (called 1+εj, with j denoting the day), of the previous day’s value.

ii) In the long run, the εj’s may be considered random as they are not directly related to each other nor are they uniquely a function of
value.

iii) The εj’s are taken from an unspecified distribution with a finite mean and a non-zero, finite variance.

A Non-Mathematical Explanation of the Axioms: http://www.axiomaticeconomics.com/axioms.php

Socrates and Hume at Billiards: http://www.axiomaticeconomics.com/socrates.php

This latter paper is a simulated dialogue between Socrates and David Hume over a game of billiards in heaven. They are visited by a swami and a physicist, both of whom counsel Socrates on where his billiard ball will go after he hits it with his cue ball. Then, Socrates and Hume contrast these two quotations:

David Hume: “When I see, for instance, a billiard ball moving in a straight line toward another,… may I not conceive that a hundred different events might as well follow from that cause?… All these suppositions are consistent and conceivable. Why then should we give preference to one which is no more consistent or conceivable than the rest?”

Cristobal Young: “Milton Friedman, torchbearer for the ‘free market’, insisted that the realism of background assumptions is not important. ‘In general, the more significant the theory, the more unrealistic the assumptions’. Good theory may well make use of ‘wildly inaccurate’ assumptions, and proceed ‘as if’ the assumptions held true. The purpose of theory is to generate testable implications.”

Here I am quoting Cristobal Young’s review of Robert Nelson’s book, Economics as Religion, which Bouchard mentions in his paper.

This is because economics is not controlled by rules, it is driven by behaviour. As soon as you could prove, with evidence, that, say, the stock market will go down because of X. Because everyone knows that is what is going to happend, they will adjust their bevaiour, and that will change the situation, making the “proof” no longer true.

We would all love if economics could produce laws and proofs, but in fact, we actually KNOW that such a thing is not possible

Krugman makes a valid point however, that economists then begin to confuse reality with their models, which leads them to sometimes believe ridiculous things.

Re: “Free markets are wild markets. It is foolish to believe that the market can impose its own self-discipline.”

Free markets are self-regulating, if everything they manage are private goods. Of course, not everything is a private good, and so free markets cause problems if left unattended.

Re: “Bouchaud could also have added the example of economists’ assumption that sustained and unlimited economic growth is possible on a planet with limited resources.”

Technically, our resources are not as limited as one might think. Given sufficient energy, any resources can be created or transmuted at will. It always comes down to energy, and we’re nowhere near tapping the limits of the energy available from the surface of the Earth, let alone in our solar system.

Obama wants to tax the rich a bit more to “distribute the wealth”. Many VERY democratic countries already do this.

My advice for after we get out of the sh*t-hole we’re in? Put away the cold war hang over and lets empirically find the optimum balance between a free and controlled market. Sure burning off the whole forest stops future fires as well but that’s not too useful.

The reference to forest fires reminded me that the Australian aborigines used to upset the settling English farmers by regularly burning off the forests. Australians now do the same, having realised that ever since they started to do so, the incidence of huge forest fires has diminished significantly.