Shostak on The Importance of Theory

Shostak on 'The Importance of Theory'.

In “Fed confused about what drives inflation?”, Dr. Frank Shostak writes:

“The purpose of a theory is to enable to ascertain the definition of a phenomenon that is subject to investigation.
    The correct definition attempts to identify the essence of the phenomenon i.e. the key parts that drives the phenomenon.
    For instance, the definition of human action is not that people are engaged in all sorts of activities, but that they are engaged in purposeful activities – it is purpose that gives rise to an action.
    So when Tarullo states that Fed policy makers do not know the causes that drive inflation he basically says that Fed policy makers have not as yet established the correct definition of inflation.
    Is it then valid to be practical, as suggested by Tarullo, to focus only on the data to understand what inflation is all about? If Fed policy makers respond to changes in price indices without establishing what drives these changes this runs the risk of making things much worse.”

My literal translation (into English).

The reason for propounding a theory is to make possible the definition of the phenomenon under investigation. A correct definition identifies the essence of the phenomenon, i.e. the forces that drive the phenomenon. For instance, the correct definition of “human action” indicates that activities are purposeful, not merely varied; for it is the purpose that gives rise to the action.

So, when Tarullo states that policy makers at the Federal Reserve do not know the causes that drive inflation, that is tantamount to saying that they have the wrong definition of inflation. Is it then valid to focus only on the data (as a means of understanding the ‘meaning’ of inflation)?  To react to change in the Consumer Price Index without understanding what is causing those changes could make matters worse. 

My Comment

I do not think the reason for propounding a theory is the one given, and I disagree with Shostak’s definition of “definition”, and (in addition) his definition of “human action”. But this nonsense is not germane, and perhaps can be safely ignored. I agree with Shostak that the Federal Reserve should try to understand the cause (or causes) of any current inflation. 

It may be that inflation indicates that something is changing; the volume of money, or of goods. An intelligent Government would try to identify what exactly is changing, and adjust for that. They should not merely obliterate the signal. There is a parallel in healthcare. Pain is a signal of something going wrong. An analgesic like paracetamol obliterates the signal but does nothing to identify precisely what is going wrong, and nothing to rectify the problem.

Dr. Shostak is angry about inflation because it robs value from those with positive bank balances. But there will (presumably) be others who like inflation because it gives value to those with negative balances, and those who create the money. 

But let us get back to the "importance of definition". Dr. Shostak writes:

"However, if we accept that inflation is about rises in money supply and not a rise in prices then all ........ can be easily explained.  It is not the symptoms of a disease but rather the disease itself that causes the physical damage. Likewise it is not a general rise in prices but rises in money supply that inflicts the physical damage on wealth generators."

Once again  I disagree. I believe that the money supply should increase as and when necessary, for example, when there is an increase in goods. 

But there is a quite different, and much more subtle argument in favour of a controlled low level (2%p.a.) of inflation. Is the Keynesian position not generally accepted that, for psychological reasons, an economy is more stable and more easily controlled when there is a constant low level of inflation? Do we throw out the "General Theory" and 8 decades of largely successful government for the sake of simple mathematics? I do not think the case is made, yet.  

Maybe we could agree that, as a type of covert taxation, inflation is a bit underhand. 

Angina — further questions

Angina — further questions

Predictable, effort-related, chest pain is called stable angina.  The consensus view is that ‘diseased’ (or atherosclerotic) arteries, partly occluded with cholesterol-rich plaques, require raised blood pressure, so more effort is required from the heart. If the coronary arteries supplying the heart muscle are healthy, blood pressure would rise, and in time ventricular hypertrophy would be evident. But if they are themselves partially occluded, part of the heart muscle becomes inadequately oxygenated when under this increased work load; this ischaemia causes pain — in the myocardium (and referred areas such as: neck, jaw, shoulder, or arm).

There are two main coronary arteries, but they branch and fuse, and there is considerable variation between individuals. Occlusion can occur in one, or more limbs, and can, in time, cause the vascular network to adapt. When 130 patients with chest pain syndromes were examined for physical evidence of coronary artery disease 93 patients showed positive, but 37 showed no sign of disease [1].  I understand that ischaemia in a small part of the heart can be as painful as in a large part. So it is possible that the physical tests for occlusion were not sufficiently discriminating. But it is also stressed that not every chest pain shows the effort-induced aetiology of stable angina. A very similar pain can be caused by emotional stress, where the transient cardiac ischaemia presumably results from adrenaline stimulating β1 receptors, which results in increased cardiac effort (and oxygen-demand) by increasing heart rate, conduction velocity, and stroke volume. According to one source [2], in about 2% of people with angina, the closure of the artery (or arteriole) is due to “coronary artery spasm”. According to another source [3] this aetiologiy is 5 times more common in women than men. 

One question that nags me is as follows: Does the pain experienced during exercise coincide with (and thus 'flag') further damage occurring to the coronary vessels? There seem to be two ways in which this might be the case. 

1. The pain (ex hypothesi) indicates ischaemia, which in turn can cause cell-death (when the cells are unprepared). Dead cells may lead to scar tissue and possible foci for plaque build-up.
2. Ischaemia can cause cells to generate superoxide radicals, which can modify lipids (including cholesterol), or can react with nitric oxide to form peroxynitrite. Peroxynitrite can nitrate protein tyrosines. The presence of antibodies against nitrotyrosine in patients with  atherosclerosis, myocardial ischemia, have confirmed the occurrence of such nitration. [4] 

This question is important, because the patient will want to know whether to exercise as much as possible, or to avoid (as much as possible) the pain of over-exertion. 

REFERENCES:

[1]   Cohn et al., (1971) Circulation; 44:196-202

[2]   https://medlineplus.gov/ency/article/000159.htm

[3]   Bugiardini, et al. (2005) JAMA.; 293:477-84; https://doi.org/10.1371/journal.pmed.0040012.

[4]   Beckman and Koppenol (1996) Am J Physiol. 1996;271:C1424-37.

Brexit Negotiations

    I find stressful, and begin to resent, the shilly-shallying on the Brexit negotiations.   
    Here is a simplifying suggestion.  Britain has offered to honour commitments made during membership.  Barnier wants to know how much that is.  Why not everything that we were paying before the brexit referendum? But during the transition period, we receive all the benefits that we received as a full member before the referendum. (No more closed-door stuff.)
    At least we know how much that was, and that we can afford it; and we know that it is regarded as value for money by 48% of Britons.  
    During the transition period we enter no new commitments, and we pull out, one by one, from the costs and the privileges of membership. The transition ends when the negotiations end. They might take decades.
    Yours sincerely, Ian West
--
Ian West, 9 Thenford road, Middleton Cheney, Banbury, OX17 2NB. (Tel: 01295 713889; mob: 07906 750986)

“Coppola Comment” Comment

“Coppola Comment” Comment

Frances Coppola is always an enjoyable read, enunciating good sense in lucid prose. But she can be teasing, as in her latest blog.

Growth:

     Like organisms, I believe economies can grow until they approach maturity, when they will enter a ‘steady-state’. It is neither possible nor desirable to grow for ever. By the way, GDP cannot be used as a measure of improvement unless corrected for devaluation of the currency, and for change in the population. True growth (in wealth) would have to involve either an increase in population or productivity (per worker), or both.  I cannot see why anyone should want a mature economy to grow.  No sane Briton could want an increase in the population (of Britain), nor an increase in the ratio of concrete to green-space, in Britain. There will (in Britain) be even less interest in the growth of economies elsewhere in the world. 

Inflation:

     I suppose inflation is (in essence) the willingness of some people (sufficient people) inside a currency zone to pay more for a standard item (or sufficient basket of items).  And I suppose this could happen if the items become more scarce, or if the currency becomes more plentiful. 

     I assume that the conventional aim of 2% inflation depends entirely on politics and psychology; not on economics. People are unwilling to accept a lowering of money wages. If government wishes to lower real wages (for whatever reason), that can be achieved most easily by fixing money wages and waiting for inflation (devaluation). In Japan, with a mature and stable economy, I cannot see why anyone could possibly want inflation, whether in the form of devaluation, or of growth.  (If Japan wanted inflation, I think that could be achieved, with a printing press.) 

Interest Rates:

     From Cowen, I read “Peter Olson and David Wessel write:

‘The natural rate of interest, also called the long-run equilibrium interest rate or neutral real rate, is the rate that would keep the economy operating at full employment and stable inflation’.”  When base interest rate was the only lever the Central Bank could pull, the Olson and Wessel definition probably made some sense; the central bankers spent their time sliding the lever up and down while watching their two indicators of success. Quantitive easing provides another lever for the Central Bank, and doubtless upsets the theory of ‘natural interest rate’.  Even without the complication of quantitative easing, it seems quite possible that the concept of Natural Interest Rate contains internal contradictions: [a] Full employment may not be ‘natural’. [b] Full employment, when achieved, might not be compatible with the interest rate required for stable inflation (unless stable inflation is used to provide a definition of “full employment”).

Coppola clearly knows all that, and in her blog is not so much dismayed, as laughing at the discomfort of the economists who were armed not with basic principles but with rules of thumb.  

Angina – Some Questions

Angina — Some Questions

     The heart must deliver oxygenated blood to (inter alia) the brain, skeletal muscle and the heart muscle itself. Exercise increases the oxygen requirement of the skeletal muscles, and the heart pumps harder. That increased effort, in its turn, increases the oxygen requirement of the heart muscle. The consensus view is that ‘diseased’ (or atherosclerotic) arteries, partly occluded with cholesterol-rich plaques, require raised blood pressure, so more effort is required from the heart. If the coronary arteries supplying the heart muscle are healthy, blood pressure would rise, and in time ventricular hypertrophy would be evident. But if they are themselves diseased (>69% occluded), the heart muscle becomes inadequately oxygenated when under this increased work load; this ischaemia causes pain — in the myocardium (and referred areas). This predictable, effort-related, chest pain is called stable angina. (A very similar pain can be caused by emotional stress, where the transient cardiac ischaemia is presumably the result of vaso-constriction caused by adrenaline and the ’stress-response’; a significantly different mechanism.)

Cause of Pain

     Note that ischaemia in the brain causes fainting, but not pain. Ischaemia in the legs might be expected to cause pain there, or at the very least weakness but, by some mechanism, the legs keep working and it is the heart muscle (which also keeps working) that experiences pain. The biochemistry causing the pain is still mysterious but may involve adenosine, and possibly ATP [1]. 

Cause of Sclerosis

     If you ask what ‘causes’ the atherosclerotic obstruction the answer given is indistinct. The literature will tell you that the major (modifiable) risk factors for cardiovascular disease are [2]:

• Blood Cholesterol (LDLch > 3, HDL< 1.0 for men; mmol/L).
• High fasting Triglyceride:HDL ratio (>2:1)
• High Blood Pressure (> 140/90 mmHg).
• Diabetes [or Impaired Glucose Tolerance] (fasting blood glucose >7mM [>6mM]; HbA1c >48 mM [>42 mM])
• Smoking
• Obesity (Waist:Hip > 0.9 for men)
• Inactivity 
• Excess alcohol
• Mental (emotional) Stress.

     But Risk Factors do not in general cause anything; they merely correlate, they are markers. Amongst them there may be one 'cause' that causes all the rest. Or the 'cause' may still elude detection. It is said that these risk factors interact, either additively, or possibly even synergistically [3]. But they are clearly linked. For example, it is easy to see that narrowed arteries might necessitate raised blood pressure; but it is harder to see how raised blood pressure could directly cause narrowing of arteries; bloating rather. 

     It is hard to see from this list what mechanism really ‘causes’ atherosclerosis. There are two theories; one is called the “reverse cholesterol transport’” hypothesis, the second theory involves lipid oxidation.

     Evidence for the Reverse Cholesterol Transport hypothesis [3] comes from finding that unloaded HDL apoproteins, capable of binding cholesterol, is protective. So also is contriving (by gene-therapy) to raise circulating levels of various of the protein components of HDL such as apoE and apoA [5].

     The Oxidised Lipids hypothesis [4] notes that the oxidation of phospholipids bound in the LDL particle, and especially phospholipids containing arachidonic acid, are inflammatory. In the presence of such oxidized LDL, HDL is found to be anti-inflammatory. What starts the inflammation is not clear, but an early step is entry of monocytes from the blood into the artery wall [5], possibly recruited by oxidised LDL, or by Cholesterol peroxides, which are particularly inflammatory.. The monocytes then become macrophages and generate cytokines from arachidonic acid.  Apolipoprotein B in LDL becomes tagged with a product of lipid oxidation, and is then accumulated by cells in the artery wall. Lipoxygenase-negative mice have “significantly” less atherosclerosis. (Hmm!). However, in humans, vitamin E and other antioxidants have proved clinically ineffective in combating atherogenesis. It seems that the growing plaque can do one of three things: [a] regress, [b]  stabilise, [c] rupture. Even the ruptured plaque can stabilize, but leaving the artery with a restricted lumen [5]. 

     Accounts emphasise different aspects but none are clear on the first step. Does dietary cholesterol get oxidised by oxygen radicals generated in the intimal layer of the artery wall? Nor is it clear why the body generates all this fuss; is the inflammation and the plaque protective?

     Isoprostanes (peroxidized products of arachidonic acid and other polyunsaturated fatty acids that participate in the perception of pain) flag the presence of oxidative stress. They are found in the urine, particularly of smokers. So, smoking correlates with increased oxidative stress, perhaps by blocking the flow of electrons to oxygen, for smoke contains both CO and CN-. 

     Is there a feedback loop here? with the ischaemia causing radicals, which then attack the intima and cause further occlusion? 

REFERENCES:

[1]  Belardinelli & Pelleg ( 2012) Adenosine and Adenine Nucleotides: From Molecular Biology to Integrative ...edited by Luiz Belardinelli, & A. Pelleg

[2]  http://www.mayoclinic.org/diseases-conditions/angina/basics/risk-factors/CON-20031194

[3]  Reverse transport review – https://www.jci.org/articles/view/11538; 

[4]  Navab et al. (2004) The Journal of Lipid Research, 45, 993-1007.

[5]  Oka, (2005) Acta Biochim Pol. 2005; 52(2): 311–319. 

See also: 

Temel, RE & Brown, JM (2015) trends Pharm. Sci. 36, 440–451, July 2015

https://www.healio.com/cardiology/learn-the-heart/cardiology-review/topic-reviews/coronary-artery-disease-stable-angina 

The Joint British Societies third consensus report (JBS3) is published at http://heart.bmj.com/content/100/Suppl_2/ii1

Leach (chatty review) Br J Pain. 2013 Feb; 7(1): 23–30.

The ‘Signed for’ Scam

The ‘Signed for’ Scam

Have you received unsolicited anonymous mail containing — Nothing?

     I recently received a small yellow padded envelope by second class ‘Royal Mail Signed ForTM’ delivery. I was out when it was first delivered and I had the choice of going down to the sorting office in the town some miles away, or requesting that the package be re-delivered on  the next available day. I chose the latter as the least inconvenient; I had only to stay in the house till the package arrived. 

     It was addressed to “The Manager”, but I signed my usual squiggle on the little electronic box the postie held out for me. Inside there was nothing. Figuring that the operation would cost the sender over £1 (including envelope and franking), I began to wonder what the purpose was. I went online to search for similar experiences. 

     One blogger posted the suggestion that the hidden reason was harmless enough, simply that of inflating apparent turnover of online sales to impress clients or competitors. Well, I saluted the ingenuity of both the poster and the blogger, for I had not come up with any cogent explanation of my own (not that I had tried that hard).

     Then I came across the suggestion that the scam is more sinister and works as follows. An innocent online customer buys and pays for an item and is given the ‘tracking number’ (in this case KK461028710GB). The scammer posts an empty package to an arbitrary addressee who innocently signs for the package before opening it and finding it empty. The ‘mark’, waiting in vain for his item, eventually checks with Royal Mail who tell him (to his surprise) that the item has been delivered and shows the irrelevant signature. No redress!  

     The scammer no doubt trusts that the innocent addressee, as he is little affected, will forget the incident. In order to frustrate that expectation I post this here and invite comments. 

Yanis, and DiEM25

Dear Yanis, and DiEM25,

     A year and a half ago, the launching of DiEM filled me with hope, particularly in the context of the British referendum. Since then DiEM25 seems to have slipped off the main stage, which is a pity. I wish I could help it re-find its momentum.

    One way of seeing the problem is when we hear Yanis Varoufakis describe his confrontations with the central powers of the EU. They met, talked, listened. He left. They did nothing. My first analysis was that they did not understand. Indeed, I found it very hard to repeat the argument to myself;  about how it is all Germany's fault, so stubbornly bent on recycling money so that the Greeks can go on buying Mercedes cars. My second analysis is that Yanis does not understand. Oh yes, he understands the  economics; but the crux, the movable fulcrum, the point in the argument against which a popular movement might push and win — has he identified that? 

    Martin West thinks the single currency is a mistake. No single interest rate can suit both Germany and Greece. Put another way: how does it work in the USA, and how can Ecuador and the USA both use the same currency?  I believe there is an understanding in the USA that federal money must be returned to poor states if they are going to be kept in the union. I do not know how. There may, in that complex and subtle constitution, be a degree of political integration that is still missing in Europe. Or is it just the common language? But perhaps we do agree that something needs to be done about the Euro Currency Union.  

     Yanis Varoufakis suggests there is a democratic deficit? Before the Brexit Referendum, that sounded like a promising slogan, but we now see what a mess is made if complex issues are decided by simple people. It is not obvious to me that it is democracy that we lack. I believe it is education.  

     Can Europe be 'cured' by allowing more power to the EU parliament?  I doubt it. Or by curbing the EU civil service? Possibly. But we have to recognize that the origin of the EU depended on the dreams of a very few people; integrated Europe is not the product of a popular dream. Only by imbedding the guiding force in a hidden and inaccessible committee was it possible to get the project of a united and inter-dependent Europe off the ground.  It is true that we pay lip service to democracy, but I doubt we really believe in it, except to rally forces against flagrant corruption. I do not think we are quite there yet; I mean the corruption is not flagrant enough; people are not convinced that revolution would improve their situation. 

     I think the Pro-Europe lobby finds its greatest traction at present by showing that the EU is protecting workers rights, clean beaches, fish-stocks and, by instituting uniform production standards, is allowing economies of scale. These are the tangible and practical benefits of integration. For me, and for a considerable fraction of Europeans, there is some appeal in the thought that United Europe could be (would be) a great power. Britain being part of Europe would allow Britain to effect some control in world affairs.

     Arguably the most depressing sign at present is the resurgence of nationalism. The British seem to think they are special (which may be true), but special in a ‘good’ way; this, to any travelled person is clearly a delusion. 

     Yanis Varoufakis believes that right-minded people will spontaneously support socialism. In Britain, they do not; or they are too few. He suggested that all businesses subvert a fraction of their profits towards the public purse, to illustrate the principle that wealth is generated by a combination of capital and labour**. That suggestion sounds drastic and risky, and unlikely to garner mass public support. (Though admittedly, it is little different from our widely accepted but as widely resented corporation tax.) 

    But thank you DiEM25; please keep the ideas coming.

    Yours sincerely, Ian West

(**capital and labour — See http://occidentis.blogspot.co.uk/2012/09/pre-distribution.html)