Instead of insisting that all economists must be homogeneous in their approach to theorizing about the economy, why not be more tolerant and recognize that economics is a contested, changing discipline? =Frederic S. Lee I feel that if economics is to be a discipline, it should be the job of the disciples to follow some guru on account of the gurus success in the pursuit of knowledge. Contest is of course the sine qua non of all science: everybody is encouraged to ask for factual evidence and to insist on logical validity of arguments. Contesting without compelling arguments is indiscipline, and much of heterodox economics is sadly undisciplined addition of non-compelling voices in a Tower of Babel. I say this despite the feeling that I may be more heterodox than many. But I will also defend the devil. First, I reject tolerance. I should not tolerate counterfactual propositions; I should not tolerate illogical conclusions. Instead, I think that the first duty of science is to cultivate skepticism, that is, refuse to tolerate any viewpoints unless those stand on their merits of factual evidence and logical validity. This calls for a homogeneous approach: admit only what is factually correct and logically valid. Secondly, the contesting must be the everyday work of the scientist, but it must strive to convince others by way of providing compelling evidence and logic. Contesting without compelling arguments is not a path to success. Science thrives by compulsion as it compels the student to accept incontrovertible evidence and irrefutable logic. If we are debating, it is because somebody has failed to compel us and we are pointing out errors of fact and errors of logic to say why we do not tolerate such powerless arguments. Here are three examples of my intolerance, all involving choice theory. 1. The most advanced model in microeconomics is the Arrow-Debreu GE Model, and I refuse to regard it as proper economics. Why? I ask: if a biologist wants to model the behavior of an isolated mouse which has n different kinds of insects to catch (produce) and eat (consume) under various risks and uncertainties, then the biologist will write a model that looks exactly like the Arrow-Debreu Model in which optimization is an expression of conservation of energy. There is no entrepreneurship, no exchange, no market, and no money. In short, the model tells us nothing about the market economy. To become economics, it must cover the market where all things anti-Arrow-Debreu happen: people produce what they do not wish to consume (but to sell), they consume what they do not bother to produce (but they buy). Indeed, merchants buy what they do not consume, and sell what they do not produce. They are not isolated but dependent on others as customers and suppliers, and they add value to what was less valuable by way of exchange. I conclude that microeconomics as its stands today is a chapter of biology, and does not begin to be economics at all. Let a biologist worry about the little fates of the little mice that allocate what they already have. Let me have the excitement of looking at uniquely human enterprise in which they create what did not exist before, add value that was not there, and create new options to bust the earlier constraints. My rejection of microeconomics has an institutional message. The autarkic production and consumption activities of isolated Crusoe are of no interest except to a biologist. For economics, the staring point is mans audacity to abrogate natures law of subsistence by forbidding plunder and enforcing payment under exchange. Unless one can explain and model why and how a merchant buys what he does not consume and sells what he does not produce, one is not able to comprehend the market. The market is a social institution in which plunder is forbidden and payment is mandatory. This institution coexists with the state and culture; and one must be able to separate them as well as put each in context of the rest. The barrenness of microeconomics comes from its failure to grasp the smallest bit of real observed phenomenon of a market. Unless one can identify economic choices distinctly from political and cultural choices, one provides nothing compelling. Microeconomics is not economics because it misses the most crucial essence of the market: the interdependence. The Walrasian core of the GE model has n equations in which demand is equal to supply for each good. This must be wrong for a market, but right for autarky. In the market, the demand for X1 must be dependent on the demand for X2 if the buyer of X1 is the seller of X2. The simultaneous equation model presumes independence of the equations, and this presumption renders the model one of allocation by a solitary individual who alone produces and consumes all n goods with nobody around. To bring the interdependence in the model, one must show that the buyer of X1 pays with the proceeds of X2 and so on with another set of equations. All enterprising actions are in pursuit of profit, and a genuine model of the economy must allow profit in equilibrium. But autarky is by definition one in which no profit is possible. Microeconomics is intolerable because it derails economics. Economics is in practice a study of the economy, and what we really strive is to understand the behavior of economic goods. Human behavior is relevant in explaining behavior of goods, but only to that extent. Microeconomics sends us to the realms of psychology and anthropology and primatology and keeps us away from the economy. We want to know about employment, growth, and stability; but micro keeps us away from even raising those questions. So I have decided that a student of economics ought to begin by rejecting microeconomics. 2. Next, I also do not tolerate Arrows Impossibility Theorem. In a market, all choices are social choices because the kinds and quantities of every traded good are determined by the social choice of buyers, sellers, and intermediaries together. Those concerned people must be able to agree on the kinds and quantities of what they exchange, and the agreement must not be impossible. The basic game in this agreement is that people must have precisely opposite orders of preference over any given pair of goods they propose to exchange. They resolve conflicts by agreeing on what is possible to agree without having to agree on what is not possible to agree. Thus if John and Paul are to exchange X for Y, it must be the case that John prefers Y to X while Paul prefers X to Y, so that both of them stand to make net positive gains in utility: John gives up X to get Y which he prefers to X, while Paul gives up Y to get X which he prefers to Y. The key: they have to agree only on how much X will fully pay for a given quantum of Y and vice-versa, but they do not have to agree on how much utility the consumer will get from one compared to the other. John ignores what utility Paul gets from consuming X, just as Paul ignores what utility John gets from Y. John also ignores the cost of production of Y because he is not the producer: he cares only about the cost of what he produces, namely, only for X. So John compares the cost of X with the benefit of Y, while Paul compares the cost of Y with the benefit of X. One cares about what the other ignores and that is why there is no need for them to agree on preferences. Society does not need to have a social preference at all: it needs social order resting on agreements, and it lets its individuals have their preferences in any way they like. The only thing society needs is the agreement on price and payment. Microeconomics cannot teach us anything valid about price, and has never even thought about payment. It offers illogical ideas about price, and no ideas about payment. Microeconomic ideas about price are absurd. First, demand and supply functions are themselves derived from predetermined prices: it is impossible even to conceive of demand without predetermined price. It then proposes that demand and supply together determine price. Demand and supply together determine the quantity of output, but not the price. Price is determined by an arbitrage process in which the buyer ignores the marginal cost of production and the seller ignores the marginal benefit of consumption so that the price is set above the marginal cost and below the marginal benefit. Next, microeconomics knows nothing about payments, even though it is mandatory that the buyer must pay the seller. The opposite order of preference over the exact same pair of goods is the essence of double coincidence, and it is necessary for any trade. It determines what kind of good (including the artificial good called money) may serve as payment. Indeed, if one of the traded goods is money and stands proxy for some other real good, double coincidence still must hold. Thus if John sells wheat (X) for dollars (Y), he must prefer the dollars to the wheat, while Paul must prefer the wheat to the dollars. This is possible because what John can get with the dollars yields higher utility to him than the wheat, while what Paul gets with the same dollars is something which gives lower utility to him than the wheat does. The dollar may be proxy for the same or different goods to two people. There is no problem if the dollar is a proxy for real good Z such that John prefers Y to Z while Paul prefers Z to Y. But the dollars could represent Z for John but W for Paul. We can generalize the opposite order of preference to any number of goods and call it multiple coincidence. Thus suppose that John prefers Y to X and X to Z; Paul prefers Z to Y, and Y to X; and Tim prefers X to Z and Z to Y. In this case, no barter is possible between any two goods, and yet indirect trade is possible so that each gets what gives him the highest level of utility. Arrow thinks that social choice is impossible because the preferences are incompatible, and yet social choice is not just possible, it happens all the time in the market. Indeed, incompatibility of preference order (otherwise called double coincidence) is necessary for trade to occur. My intolerance comes from the undisciplined lapse into irrelevance. No society ever has a problem of choosing one of three goods X, Y and Z for three individuals John, Paul and Tim. In economics, the choice problem involves either allocation or exchange. In allocation, the optimizer must come with a budget, and his decision must be totally isolated from that of anybody else. But Arrow has three people who want something, but no budget. Why is there no budget? As soon as one specifies the budgets of each, one sees that the solution leaps from the tree to the ground and falls flat on its face: John buys as much Y as he can afford; Paul buys as much Z as he can, and Tim buys as much X as he is able to afford. The buying may be replaced by production in the state of autarky. All three goods would be produced as per budgets devoted to them. And such choices would be individual choices, not social choices at all. Next, I have already given the exchange solution. The problem was that John had X but he preferred Y to X; Paul had Y but he preferred Z to Y; and Tim had Z but he preferred X to Z. Society made arrangements such that John would give up X and get Y; Paul gives up Y for Z and Tim gives up Z for X. It is absolutely possible. To say that it is impossible is counter-factual, and I do not tolerate counter-factual claims. Arrows impossibility theorem means that trade is impossible, and for that absurd claim, I do not tolerate it. In politics, the people must already belong to a society that has been formed as one. If John, Paul and Tim are members of one economic household, it is not open to economics to ask how they figure out who speaks on behalf of all. This explanation must be left to anthropology and political science, not to economics. Some kind of power structure and some kind of cultural norms may govern the internal decision process, which involves neither allocation nor exchange but something very different: security in politics and acceptance in culture. Politics uses the formula: from each according to ability to each according to need, with each different political regime having its own definition of what constitutes ability and what constitutes need. This is based on the exercise of power. If there is a power stalemate, then the solution is to elect a parliament: John elects Y, Paul elects Z and Tim elects X so that the parliament of X, Y and Z carries on the unfinished business of exploring some common ground. If the whole polity needs one President, and no candidate has the required strength of support, the solution is primeval: send them back to the voters with a reworked agenda so one of them emerges as the most popular. To say that choice is impossible is intolerable. 3. I have no tolerance for incompetence either. Why would I presume the consumer to have a given income already earned and to face prices already predetermined? If the consumer John is to buy Y at all, he must sell X in order to earn the income, which cannot be taken as given, but must depend on his success as a seller: how much can he sell and at what price? His income is dependent on his customers income and the price bargains for his product. And why should he not exercise his power to choose the price in a bargain? It is simpler to show that John is at once a buyer and a seller. He sells X to several customers in the amounts X1, X2, .. Xn, and he buys a basket of goods from several suppliers in amounts Y1, Y2, ..Yn. So I should show all his sales in a row and all his purchases in a column. And then add the sales and purchases of all other related individuals in the same exchange table. With such a table, looking exactly like Leontiefs input-output table, I can describe the sales and purchases of all individual and all goods. I can keep track of all individuals who never represent one another and yet I can find all aggregates. I see absolutely no reason to split this table for micro and macro, but both must be done together in one go. I surely never need a representative individual, but I can gladly admit all the individuals with all the differences they can have. With an exchange table of all goods, we can fuse micro, macro, trade and monetary theory all in one inseparable compact model, all in one go. Why should I settle for the incompetence of trade theory which has no money, and for monetary theory which has no trade? Is there any real indirect trade without money, and is there any money without trade? I reject all trade models that do not show the use of money as a necessary means of payment in indirect trade just as I reject all models of money that do not show money as a necessary means of payment in indirect trade. Yes, I reject ALL existing models of trade and money on account of incompetence. And the reason is simple: I can have money and trade together. I reject incompetent micro that begs the question, just as I reject macro that does not even have a question. That is because I can have both micro and macro together in one and the same breath. So I do not tolerate Debreu for supposing that a grand unified theory of the economy is out of reach: no, it is firmly in our grips. It is not just unified, it is inseparable. What we need most is a sense of purpose: are we trying to learn something or are we merely canvassing our views that we have not bothered to test against factual evidence and logical validity? The guru of whose disciple we ought to be is the abstract principle of compulsion: compel with incontrovertible facts and irrefutable logic both applied to the same universal set of realities. Thus if I say <the buyer pays the seller>, I must mean that every buyer everywhere and at all times pays the seller, no exceptions. Le us throw away microeconomics, macroeconomics, trade theory and monetary theory and have some economics about the economy. My opinions are now left open for slaughter: please kill them. Mohammad Gani