Zero Intelligence

What we know so far from market is that its efficiency can be measured based on, at least, two things: either in term of its allocation or of its requirement of minimizing the presence of asymmetric action.

In the investigation conducted by Gode and Sunder (1993) through their market experiment, it is concluded that performance of an economy is the joint result of its institutional structure, which is in other word its market institution, and agent behavior.

By designing the experiment through creating double actions where agent, here replaced by so called “zero intelligence” machine program rather than “true” agent, can submit random bids and offers. No need the existence of intelligence agent, they told, in order to reach the allocative efficiency of this auction mechanism. The structure of the action it self, i.e. no permission to sell below the cost or buy above the value, conduct to the utmost efficiency the auction market can reach.

Paradox can be found, even with agent being set up to not maximize profit, not observe and not learn its environment, efficiency can still be realized. Short, institution does matter!

Pranata Kelembagaan

Sukar dipercaya bahwa individu yang bertindak secara tunggal-terpisah dan selalu bersaing satu dengan yang lain di dalam sebuah wilayah yang disebut sebagai pasar tidak akan mengakibatkan kehancuran ataupun kekacauan. Bukankah persaingan antar individu berpotensi menuju kondisi kacau? Mengapa kacau dan hancur tidak secara langsung terjadi di dalam pasar?

Thomas Hobbes, dalam hal ini, menyandarkan pada peran Negara melalui mekanisme pendelegasian dari individu kepada yang mewakilinya sebagai penjamin nihilnya kekacauan.

Ulasan klasik Adam Smith tentang hal ini lebih mengandalkan aktifitas tukar-menukar barang produksi –yang di dalamnya mencakup keteraturan alat perantara tukar menukar, yakni uang– dan sistem pembagian kerja sebagai faktor peredam kekacauan yang muncul dari individu yang egois, homo economicus. Pasar dan Negara seringkali dirujuk untuk meredam kondisi chaos dalam mekanisme persaingan pasar tersebut.

Jelas bahwa pasar dan Negara adalah sebuah lembaga (institution). Lebih jauh, lembaga moneter, corak persaingan suatu pasar pun adalah lembaga yang ikut meredam kondisi chaos. Prinsip dan pranata moral suatu masyarakat seperti: norma, nilai, konvensi, sistem hukum dapat dipandang sebagai pranata-pranata kelembagaan yang menjamin individu agar terus dapat memenuhi keinginannya dan yang menjaga agar kekacauan tidak akan pernah terjadi.

Comment on Schumpeter by Deno Hervino

Teori Schumpeter

Teori Schumpeter ini pertama kali dituangkan dalam bukunya berjudul “The Theory Economic Development” yang merupakan sadur dalam bahasa Jerman. Lalu dijelaskan lebih lanjut dalam buku yang judulnya “Bussiness Cycle”

Inti dari teori pembangunan Schumpeter bahwa pembangunan ekonomi akan pesat hanya dalam sistem ekonomi kapitalisme, namun dalam jangka panjang sistem kapitalisme akan mengalami stagnasi (Pendapatan ini sama dengan pendapat dari kaum klasik).

Schumpeter menegaskan bahwa invosi dan entrepreneur merupakan generator dalam pembangunan ekonomi. Tersedianya para inovator, lingkungan sosial, politik, dan teknologi merupakan suatu syarat mutlak terjadinya proses inovasi. Dan tentunya ada satu faktor yang sangat penting juga yaitu tersedianya sistem perkreditan yang mampu menyentuh seluruh lapisan masyarakat.

Apa yang menjadi benefit bagi para inovator? Tentunya Schumpeter merinci bahwa siapapun yang behasil dalam melakukan proses inovasi maka akan menikamti hak monopoli dan tentunya keuntungan monopolis juga.

Lalu efek apa yang diharapkan terjadi setelah terjadi inovasi? Jawabannya, munculnya teknologi baru dan imitasi. Kedua faktor inilah yang akan memicu terjadi investasi dan akhirnya terjadi penyebaran teknologi ke masyarakat luas.

Kenapa dalam jangka panjang, kapitalisme akan stagnasi dan runtuh?

Karena dalam jangka panjang, snowball effect dari inovasi tersebut tentunya akan meningkatkan pendapatan per kapita masyarakat dan kemerataan distribusi pendapatan (karena inovasi akan membuat produknya bisa dinikmati orang banyak). Namun dengan semakin makmurnya masyarakat akan memicu terjadinya perubahan kelembagaan dan pandangan masyarakat yang semkain jauh dari sistem kapitalisme asli. Dimana sistem tunjangan sosial (bantuan tunai langsung) kepada para pengangguran, sekolah gratis, sistm asuransi, dll..

Inilah yang membuat sistem kapitalisme dalam jangka panjang runtuh dan beralih menjadi sistem sosialis.

Walking in other’s shoes

By Arsoni Buana

Economics has been for so long perceived as the science of human behavior. The decision coming out from an agent is a complex process involving so many things such as past knowledge, social environment and so on and so forth. Our society has been built from that complex process. Hence, analyzing a society never stands alone from the discussion of human behavior. That is why we see institutional economics nowadays as a branch of economics. The complex process of decision making is one of the institutional settings one can recognize in a society, in an economy. As we know, theory of regulation not only speaks economics in the boundary of market but it is more important than that: placing agent’s behavior in the very heart of economics (remind you on wage relation in the theory). Below is a story of human behavior when they take the perspective of others in their decision-taking process. The story is often called as “walking in other’s shoes” story in the literature.

Suppose that there is an impartial judge k who wants to share a certain amount of resources, let say c, to two members of society which are in conflict to a certain subject. In doing so, the judge identifies herself with those n group members (n>1) and then shares the sum c between them, maximizing an EU which is dependent of the state of the world:

(1)
subject to and
with for all i.



The social preference which results from a complete identification with others consists in making the final marginal utilities as equal as possible within the group. If the group members have highly different initial wealth but the same utility function, the transfers will first be allocated to the poorest, and will be highly unequal. This unique solution of the judge’s behaviour has two goods properties: it does not depend on the judge’s membership in a group and brings about Pareto-optimal allocations.

A caution should be considered as the judge should know exactly the preferences, the characteristics of the two conflicting parties in order to be able to “walk properly in the parties’ shoes”. If it does not hold the judge then tends to project in other way around: her own characteristics on those of the others. This principle of projecting his own characteristics on others has also underlined by Adam Smith and widely known as Principal of Smithian Sympathy. He stated:
“As we have no immediate experience of what other men feel, we can form no idea of the manner in which they are affected, but by conceiving what we ourselves should feel in the like situation. […] Every faculty in one man is the measure by which he judges of the like faculty in another. I judge of your sight by my sight, of your ear by my ear, of your reason by my reason, of your resentment by my resentment, of your love by my love. I neither have, nor can have, any other way of judging about them.” (Adam Smith 1982, pp. 9 et 19)

Beyond the market

By Arsoni Buana


We, put it as economist, kind of have a little concern to the things outside the boundary of market. To that, take the idea of neo-classical point of view, be more precisely the Chicago school, as an example. Another good example, it might be the neo-Keynesianism that appeared partly to correct the failure of the former mentioned school of thought. The construction of two relies on the fact that agent is rational and always maximizes his/her utility. Market is regarded as a place where agent coordinates each other while (s)he behaves to maximizes his/her perceived utility. Even neo-Keynesian approach admit the role of government intervention, a little place has been reserved for this role in the building of the ideal concept of free market competition.

Having a look to the Marxian tradition, it is more on the role of firm rather than that of market that drives all the vehicle of analysis. Through so called wage relation there is known a social relation that one could not find in the market terminology of the mainstream approach. When a laborer agrees to work and to accept certain condition of working given by an employer, there can be found a wage relation that also involves a social relation –not only market relation– between the two because, in that situation, which makes it different with the economy of market, it is known a vertical submission. A delegation of tasks from employer to worker cannot be seen as the same form of horizontal coordination among agent in the market.

If we combine market-type coordination with coordination similar to that of coordination in a firm and also with medium-to-long period of macroeconomic evolution then we will have beyond-the-market economics: School of Regulation.

Post Autistic Economics

Ilmu Ekonomi, semestinya, adalah ilmu sosial, yang bertujuan memahami fakta-fakta (sosial ekonomi) serta memberikan rekomendasi kebijakan dalam rangka memecahkan berbagai masalah pokok. Sehingga, peralatan rumit yang berbasis pada matematika hanyalah soal cara atau metode yang membantu memahami fakta-fakta tersebut.

Dan bukan sebaliknya, tenggelam dalam kerumitan serta justru menjauh dari fakta konkritnya. Maka dari itu, ilmu ekonomi harus dikembalikan pada akarnya ilmu sosial-nya.

Itulah kira-kira cita-cita gerakan post autistic economics (PAE) yang berkembang di Cambridge dan beberapa sekolah di Prancis (ENS).

Keterangan selengkapnya: http://www.paecon.net/

Six winners of the Bank of Sweden Prize for Economics have written as follows.

". . . economics has become increasingly an arcane branch of mathematics rather than dealing with real economic problems"
Milton Friedman

“[Economics as taught] in America's graduate schools... bears testimony to a triumph of ideology over science.”
Joseph Stiglitz

"Existing economics is a theoretical [meaning mathematical] system which floats in the air and which bears little relation to what happens in the real world"
Ronald Coase

“We live in an uncertain and ever-changing world that is continually evolving in new and novel ways. Standard theories are of little help in this context. Attempting to understand economic, political and social change requires a fundamental recasting of the way we think”
Douglass North

“Page after page of professional economic journals are filled with mathematical formulas […] Year after year economic theorists continue to produce scores of mathematical models and to explore in great detail their formal properties; and the econometricians fit algebraic functions of all possible shapes to essentially the same sets of data”
Wassily Leontief

“Today if you ask a mainstream economist a question about almost any aspect of economic life, the response will be: suppose we model that situation and see what happens…modern mainstream economics consists of little else but examples of this process”
Robert Solow


Post-Autistic Economics is about changing this state of affairs.

"Economics is supposed to be social science, i.e. an intellectual discipline resting upon empirically-observed facts, in which mathematics and conceptual frameworks are tools for understanding. But in contemporary mainstream economics, the tools are often in the driver's seat, declaring evident facts impossible and reducing the subtleties of the real world to whatever clockwork economists best know how to build. Post-Autistic economics is the attempt to escape the tyranny of these tools and build new ones that will work properly."
Ian Fletcher

“Modern economics is sick. Economics has increasingly become an intellectual game played for its own sake and not for its practical consequences for understanding the economic world. Economists have converted the subject into a sort of social mathematics in which analytical rigour is everything and practical relevance is nothing.”
Mark Blaug

Five Pillars of the School of Regulation

By Arsoni Buana
Universitas Paris I, ENS,EHESS (Paris school of economics)


Since the study of capitalist regime –and also its form of crises– is one of the main departure point in the Regulationist’ tradition, by taking into account all type of institutions are stable in the mid-term and changing slowly in the long term, it is believed that a certain form of institution permits the reproductions or the changes of particular pattern of economic growth and of the economy’s dynamic condition. Aglietta (1976) and Boyer (1979) repose their analysis of the Fordist regime -which prevailed between 1945 to the first-half of seventies- to five institutional forms as following:

i) Wage relation that represents the sharing of productivity gains between capital and labor. This is a central issue of the school of thought and it implies a different characterization of labor market, an aggregate consumption and also an endogenization of productivity change.

ii) Form of competition among the firm. It is known two dominant forms: oligopoly and monopoly. The latter is often described as intensive accumulation. A different formulation of the price equation and the investment function mark a bold demarcation point with the orthodoxy widely held in economics.

iii) A state intervention in the economy which determines the economic performance through rule and/or law on which the labor market, for example, depend so much. It justifies also an active act of fiscal policy in regulating economic growth. The determination of the form of competition among firm is also determined by the active state intervention. Regulating and maintaining the stability in the economy is in so many ways related with the role of the state.

iv) A monetary regime which is, based on the analysis of Fordism, assumed that money supply is endogenous and, in other side, monetary policy is exogenous. Central bank in this kind of analysis has a full control on interest rate. All have a root to the Fordism era that came with the emergence of the flexible exchange rate policy –which gained its popularity as a best practice in the international context– and also the deterioration of monetary policy authority over its monetary policy since credit money is created without involving a creation of real value.

v) A mode of insertion toward the international order: international trade (WTO), foreign investment, the regulation on structural adjustment conducted by the World Bank and the IMF, the appropriateness to the rule of financial markets, etc.