by Bill O’Grady
In mid-August 2016, I published a two-part series titled “Thinking about Thinking” (see Part I and II). Occasionally, I will be asked which WGR is my favorite or most important. I generally refer readers to the aforementioned reports.
One facet of that report is the three statements of knowledge—a priori analytic statements, a posteriori synthetic statements and a priori synthetic statements. The first are logic statements, where the subject is contained in the predicate. These statements are always true but generally trivial, essentially tautologies. To say “all unmarried men are bachelors” is true if one defines all bachelors as unmarried men. The second type of statements are inductive in nature. We observe the world and draw generalized conclusions about it. Such statements are always conditional. The concept of such statements was well described by Nicholas Taleb in The Black Swan. Ornithologists in Europe suggested that black swans didn’t exist because no one had ever seen one. Then, someone from Europe traveled to Australia and, lo and behold, black swans exist. A posteriori statements are true only until contrary evidence is found. Since science is built on induction, the notion of “settled science” is faulty; what we know from science is true based only on what we know now. But, if contrary evidence emerges, concepts based on induction must adjust.
The real battleground in philosophy are a priori synthetic statements. These are essentially “self-evident truths” that we believe to be true in all cases and are not derived from experience. The skeptical Scottish philosopher David Hume argued that a priori synthetic statements were not possible. Instead, he suggested that such statements were based on experience and thus a posteriori. Emmanuel Kant tried to rescue a priori synthetic statements by suggesting that humans were born with the ability to impose patterns of thinking on the world. In other words, we don’t actually perceive the world directly but we do so through the filter of one’s mind. This filter essentially impresses our views on reality and allows us to make a priori synthetic statements.
Although Kant’s attempt to “save” a priori synthetic statements has generally thought to have failed, there is an insight from Kant’s thought that is useful. Essentially, people tend to think in paradigms. In other words, we adopt a certain worldview or narrative for how things work and then impose them on reality. The problem is, of course, that our worldview or paradigm may not be true. In fact, almost by design, paradigms of reality are mere models and thus will be incomplete. At the same time, the paradigms we adopt shape how we interpret the world. Thus, it makes sense that we understand the models that we adopt to be aware of their strengths and weaknesses.
In this report, we will examine supply and demand as a model of markets and suggest that at the macro level a different model, the “Economic Triangle,” might offer better insights into how the political economy actually operates. We will discuss how the Economic Triangle explains the way various economic participants operate and how political factors affect the triangle. Next week, we will show how the Economic Triangle fits into the major economic systems, offer two contemporary examples, and conclude with market ramifications.
 Taleb, Nassim Nicholas. (2007). The Black Swan: The Impact of the Highly Improbable. New York, NY: Random House.