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Asad Zaman

Asad Zaman

Physician executive. All opinions are my personal. It is okay for me to be confused as I’m learning every day. Judge me and be confused as well.

Articles by Asad Zaman

Our meaningless modern lives: Part 1

June 14, 2024

From Asad Zaman and WEA Pedagogy Blog
The Most Valuable Kind of Knowledge
These lectures aim to provide the reader with knowledge. But what is knowledge? Our lives consist of a small number of infinitely precious moments. What makes it worthwhile to invest these moments in the acquisition of knowledge? Is it the kind of knowledge that can teach us how to lead better lives—how to make the most of the few moments that we have? This has been the central preoccupation of philosophers and thinkers across the millennia of human history. What is the good life, and how can we learn to live it? This type of knowledge would be invaluable, well worth the time invested in learning it. Knowledge that distracts us from these central questions would be useless. Knowledge that provides us with the

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Lessons from monetary history: The quality-quantity pendulum

February 8, 2024

From Asad Zaman and WEA Pedological Blog
In the previous section, we saw how economic theories changed from classical to Keynesian to Monetarist over the course of the 20th century. These changes were driven by historical events. Taking this historical context into account deepens our understanding of economic theories. This contrasts with conventional methodology of economic textbooks, which treats economic theories as scientific laws, which are universally applicable to all societies. In this section, we describe one of the central lessons which emerges from the study of money over the millennia.
The Battle of Methodologies (Methodenstreit)
In the realm of economic ideas, prevailing theories often align with the interests of powerful classes rather than the pursuit of truth. The late

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Positivism & the loss of meaning

December 7, 2023

From Asad Zaman and WEA Pedagogy Bog
I recently gave a talk to students of Modern Money and Economics of Sustainability at Torrens University. The video of the talk is here. I have also written up some notes about this talk which clarify some points only sketched briefly in the talk, and provide links to more detailed discussions. 
The following writeup provides some details and background missing from the talk, and also links to related materials:
The transition from a traditional Christianity based society to secular modern society which took place in Europe over the course of the two centuries has been studied by many authors. Radical changes took place in all dimensions: politics, economics, society, education, environment. In this talk, I will focus on a dimension which has not

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Brainstorming: negative impact of economics

June 14, 2023

From Asad Zaman and the WEA Pedagogy Blog
In my previous post (The Religion of Economics), I explained why economic is a religion, even though it claims to be a science. This religion preaches a toxic morality, where the goal of life is maximization of personal pleasure, with no moral or social constraints. Some months ago, I read an article which suggested that we should do a cost/benefit analysis of economic theory itself – how much harm it has caused, versus any benefits that it has brought to mankind – (I tried to search for this review, which references two books which the article reviews, which strongly support the idea that economic theory itself is the cause of great human misery – but I could not find it because I could not recall the name of the author or the article title or

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The Religion of Economics

June 1, 2023

From Asad Zaman 
Maeshiro (2016) in “The Capitalist Religion and the Production of Idols“, writes that Capital is the God, and Capitalism is the religion of modern society. Gauthier’s review of Nelson’s Economics As Religion states that “economics became the modern theology that replaced traditional theology as the set of doctrines that give meaning to our social reality and hope to our endeavors to improving our lives … (Nelson analyses) the works of the major twentieth century American economists to show how professional economists are equivalent to the priesthood of this religion of economics which justify, disseminate and legitimize in scientific discourse, normative foundations required for a rapidly growing modern economy”. These articles provide numerous additional sources which

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A student among the econ: Seeing through mathemagics

May 23, 2023

From Asad Zaman

In my article on “Education of an Economist”, I have explained how I gradually came to realize that all I had learnt during my Ph.D. training at Stanford University was false. I would like to make this more specific and concrete, by providing some examples. A leading example is a paper on Power and Taxes which I studied as a graduate student. But, let me start from the beginning.

Leijonhufvud, in his classic “Life Among the Econ” explains how the priestly caste of the Math-Econ is the most admired and revered among the Econ. With a math degree from MIT, I was eager to join the ranks of the Mathematical Economists, the most prestigious among the alternatives facing me. But a few experiences soured me on this idea. I ended up with a degree in Econometrics, which also

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Decolonization: a necessary first step

May 17, 2023

From Asad Zaman
This is part 3 of a talk on Current Economic Crisis in Pakistan and Solutions, from an Islamic Perspective. A summary of the first two parts is given below. This third part explains that colonization requires the assent of the colonized, which is achieved by an educational system which teaches the inherent superiority of the colonizers, and the inferiority of the colonized. To solve the problems created by colonial institutions meant for extraction of resources, we must first decolonize our minds. In this process, learning to see through economic theories which keep us dependent is a necessary first step.  Read more

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Weekend read – Bizarre methodology blinds us to solutions

May 5, 2023

From Asad Zaman

The truth-sensing section of the brain is lobotomized by Friedman’s methodology, according to which wildly inaccurate assumptions lead to the most significant theoretical advances. But also, complete omission of power and class struggle makes it impossible to find solutions to our economic problems.[embedded content]
Even though the current economic crisis in Pakistan has a simple cause, and an equally simple solution, policy debate in Pakistan focuses almost entirely on irrelevant red herrings! Why? Because Economic Theory puts blindfolds on our eyes, and makes it impossible to see the problem, or the solutions.  To remove these blindfolds, we must learn to situate economic theories within their historical context. Applying this principle, we study the historical

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Exploiting the South: power & knowledge

April 26, 2023

From Asad Zaman 
This is the first of a sequence of posts on the current economic crisis in Pakistan. Although the discussion is in the context of Pakistan, all the poor countries in grips of the modern neo-colonial global system face essentially the same problems. The financial basis of the system is outlined by Jason Hickel in Aid-in-Reverse: How the Poor Countries Develop the Rich. He describes how the poor countries receive 1.3 Trillion USD in financial inflows, aid, etc. from the rich. But, the poor transfer 3.3 Trillion USD to the rich countries, essentially preventing any possibility of development of the global South. The financial inflows are really payments to the local power elites (army, bureaucrats, politicians, influential people, and media) as well as infrastructure and

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Is it Rational to be a Sociopath?

April 12, 2023

From Asad Zaman

Cold: we let our emotions influence our behavior.
Callous: concern for others causes us to share our good fortune with others, instead of keeping everything for ourselves.
Cruel: We feel pain for the suffering of others, and sorrow for the extinction of species, or destruction of their habitat, instead of joy at the resulting profits.
Calculating: We are not concerned with maximizing our monetary gains, down to the last penny.
The paper “The Empirical Evidence Against Neoclassical Utility Theory: A Review of the Literature” shows how each of these human failings causes us to deviate from the lofty standards of ideal rational behavior. The fact that all four of these characteristics are pejoratives in common parlance suggests that economists’ view of “rationality” does

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Origins and consequences of US monetary hegemony

February 13, 2023

From Asad Zaman
The two World Wars in the 20th century depleted the gold stocks of European governments and made a return to the (UK Sterling based) gold standard impossible. This led to the Bretton Woods conference of 1944, where leaders of the world came together to find an alternative, non-gold-based, global trading system. John Maynard Keynes brought a proposal for a symmetric trading system, but it was rejected in favor of the dollar standard, which transferred global hegemony from the UK to the USA. The US had enough gold reserves to guarantee convertibility of the USD into gold at $35 per ounce, and this system worked fairly well until the Vietnam War led to excessive expenditures of dollars and an insufficiency of gold to redeem them.
In 1971, President Nixon renounced the

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Development economics

December 2, 2022

From Asad Zaman

The prescriptions of Development Economics were applied to generate growth in Pakistan in the 1960s by a group of expert economists from Harvard. As already discussed, these theories focus on the accumulation of capital, rather than the lives of human beings. Pakistani economist Mahbubul-Haq saw through the mathematical formulations to the heart of the strategy proposed for growth. He wrote: “ It is well to recognize that economic growth is a brutal, sordid process. There are no shortcuts to it. The essence of it lies in making the laborer produce more than he is allowed to consume for his immediate needs, and to reinvest the surplus thus obtained.” Despite this clear recognition, he thought that exploiting the poor was necessary to create growth, which would bring

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Modern money and inflation

November 28, 2022

From Asad Zaman
Milton Friedman was a powerful magician. His words charmed people into believing that night was day, against the evidence of their own eyes. Friedman’s maxim that “inflation is everywhere and always a monetary phenomenon” is widely believed by economists, even though it is abundantly obvious that costs of production, especially energy costs, play a major role in creating inflation.
                                             Pinochet meets Friedman (STF/AFP/Getty Images)Today, inflation is soaring around the globe. Economists under the spell of Friedman search for, and find, monetary causes. Central Banks around the world pursued vastly expansionary monetary policies to combat the Great Recession which followed the Global Financial Crisis of 2007. To the great surprise

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Weekend read – Four flaws in foundations of statistics

October 9, 2022

From Asad Zaman and the WEA Pedagogy Blog
Rejecting Arbitrary Distributional Assumptions
In the early 20th Century, Sir Ronald Fisher initiated an approach to statistics that he characterized as follows:: “… the object of statistical methods is the reduction of data. A quantity of data, which usually by its mere bulk is incapable of entering the mind, is to be replaced by relatively few quantities which shall adequately represent the whole …” As he clearly indicates, we want to reduce the data because our minds cannot comprehend large amounts of data. Therefore, we want to summarize the data in a few numbers which adequately represent the whole data set.
It should be obvious from the start that this is an impossible task. One cannot reduce the information contained in 1000

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Real statistics: a radical approach

June 13, 2022

From Asad Zaman
In a previous posts Preface to Radical Statistics and Why an Islamic Approach to Statistics?, I have explained how we can develop a new approach to statistics, which rejects a century of developments based on a methodology created by Sir Ronald Fisher, father of modern statistics. It is my hope that this will be a disruptive technology – it will eventually sweep away the entire structure of knowledge which has been built up under this name, and replace it with a radically different alternative. This structure of statistics (which I studied in detail and depth at the Ph.D. Statistics program at Stanford University), is currently being taught in universities around the globe. This structure is deeply deficient for a number of reasons. The most important among these is the

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Weekend read – Fisher’s flawed foundations of statistics

February 12, 2022

From Asad Zaman
This lecture is about the personality of Sr Ronald Fisher and his foundational ideas about statistics. The idea that statistics is all about “data reduction” is due to lack of computational capabilities at the time of Fisher – it was not possible to analyze 1000’s of data points, without reducing them to manageable summaries. Even though computer capabilities now make this possible, intellectual inertia has kept the discipline of statistics bound to the now obsolete mold into which it was cast by Fisher.
Fisher was a prominent Eugenicist, and he had six children in accordance with his belief that the path to improvement of the human race involved increasing the propagation of superior specimens of humanity. A central question for us is:  “Is modern statistics FREE of

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Weekend read – More quotes against economics

December 17, 2021

From Asad Zaman
A previous post Quotes Critical of Economics collected assorted quotes which are useful in writing up different kinds of critiques of economics. In addition, I collected quotes from Romer’s Trouble With Macro which are sharply critical of economics. In terms of the “Loyalty, Voice, Exit” paradigm, I look for “Exit” quotes, which suggest that we need to throw out the entire discipline and rebuild on new foundations; for a proposed alternative, see “Uloom-ul-Umran: An Islamic alternative to Western Social Science“. I try to avoid “Voice” critiques which suggest that we can rescue economics by making modifications, minor or major. I have been collecting more quotes along these lines for two years. I was hoping to sort them into categories, and organize them via some

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More quotes against economics

December 3, 2021

From Asad Zaman
A previous post Quotes Critical of Economics collected assorted quotes which are useful in writing up different kinds of critiques of economics. In addition, I collected quotes from Romer’s Trouble With Macro which are sharply critical of economics. In terms of the “Loyalty, Voice, Exit” paradigm, I look for “Exit” quotes, which suggest that we need to throw out the entire discipline and rebuild on new foundations; for a proposed alternative, see “Uloom-ul-Umran: An Islamic alternative to Western Social Science“. I try to avoid “Voice” critiques which suggest that we can rescue economics by making modifications, minor or major. I have been collecting more quotes along these lines for two years. I was hoping to sort them into categories, and organize them via some

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Causality as child’s play

November 26, 2021

From Asad Zaman
1      THE DILEMMA OF CAUSALITY
Study of causality confronts us with a huge dilemma. Intense controversy has raged for centuries over this topic among the philosophers. At the same time, studies of child development show that infants learn about causal concepts almost from birth, and toddlers have a sophisticated approach to causality. How can causality be easily understood by babies, but remain confusing and complicated to the best philosophers for centuries? The difficulty is compounded by the fact that philosophical approaches serve as a basis for empirical data analysis in statistics and econometrics. Even though correct estimation of causal effects is essential for policy, widely used econometric textbooks are deeply defective in their approaches to causality.

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Weekend Read – Hockey Stick or Growth Illusion?

July 10, 2021

From Asad Zaman
Most economists are committed to Friedman’s methodology which advocates a nominalist philosophy of science. Theories do not aim to discover hidden real structures which explain the observations. Instead, they aim to “save the appearances”: provide a good match to the observations. Although a small minority of voices has advocated a realist methodology – Bhaskar Roy, Peter Manicas, Tony Lawson, and some others – the vast majority remains unconvinced. One important reason for this is the Duhem-Quine thesis. Any given set of core assumptions about hidden reality can be put into conformity with any collection of observations by suitable auxiliary assumptions. Furthermore, the protective belt for core theory can accommodate any incoming stream of contrary observations. Peter

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Causal explanation of autonomy and invariance of regression relationships

May 6, 2021

From Asad Zaman
Brief History of Econometrics: Launched in early 20th Century by Ragnar Frisch, econometric methodology was strongly shaped by the Cowles Commission (CC) in the 1960’s. The CC approach relied on structural equations, which embodied causal information known in advanced to the researcher. The goal was estimation of causal effects, and not discovery or assessment of the hypothesized causal structures. The oil shock of the 1970’s led to dramatic failures of macroeconomic regression models, leading to general distrust of econometric methodology. Two major critiques emerged.  read more

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Brief history of econometrics

April 26, 2021

From Asad Zaman
Launched in early 20th Century by Ragnar Frisch, econometric methodology was strongly shaped by the Cowles Commission (CC) in the 1960’s. The CC approach relied on structural equations, which embodied causal information known in advanced to the researcher. The goal was estimation of causal effects, and not discovery or assessment of the hypothesized causal structures. The oil shock of the 1970’s led to dramatic failures of macroeconomic regression models, leading to general distrust of econometric methodology. Two major critiques emerged. The Sims critique argued that hypothesized causal structures were false, and should be abandoned. We should go back to a purely descriptive analysis, looking for patterns in the numbers, without any reference to the real world

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Causal versus Positivist Econometrics

April 17, 2021

From Asad Zaman
Defining Feature of Real Econometrics
We can define “Real Econometrics” as being the search for causal relationships within a collection of variables. There exists an enormous amount of confusion about what exactly is a causal relationship. We will take a simple and practical approach, developed by Woodward in his book on “Making Things Happen”. Given a collection of variables X,Y,Z1,Z2,…,Zn, we will say that X is a cause of Y if we can create changes in Y by changing the values of X. This is a “practical” definition in the sense that if we learn about causal relationship, we can use it to create changes in the world around us.
Why is there confusion about causality?
Children (and animals) are born with the ability to learn about causal relationships, and to use them to

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Econometrics versus reality

March 31, 2021

From Asad Zaman
Underlying Philosophy of Science
Many important structures of the real world are hidden from view. However, as briefly sketched in previous lecture on Ibnul Haytham: First Scientist, current views say that science is only based on observables. Causation is central to statistics and econometrics, but it is not observable. As a result, there is no notation available to describe the relationship of causation between two variables. We will use X => Y as a notation for X causes Y. Roughly speaking, this means that if values of X were to change, then Y would have a tendency to change as a result. This is not observable for two separate reasons. ONE because it is based on a counterfactual. In another world, where the value of X was different from what was actually observed in

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Critique of Rajan on debt

February 2, 2021

From Asad Zaman 
“my views are based on insights acquired from MMT, but  .  . . . . . . . . . . . ”         
In this post, I will provide a critique of Raguram Rajan’s article “How Much Debt is Too Much?”. (Alternative link to Rajan’s article)
The article opens with a description of the governments “opening their coffers, to support small households and firms” in the COVID era. Required spending has been on the order of 15-20% of the GDP, and the article examines the extent to which government can finance this extra expense by borrowing at low interest rates from the private sector.
The language reminded me Robin Hood and his team swooping down on government convoys laden with coffers of gold. In face of this generosity by the government, it seems churlish to examine their coffers, to

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Marilyn & the Goats: A new solution to an old problem

January 21, 2021

From Asad Zaman
Introduction: In a previous lecture, we gave a New Definition of Probability. In this lecture, we will show how this definition enables us to resolve the massive amount of controversy which surrounds an apparently simple probability puzzle, known as the Monty-Hall problem. The book The Power of Logical Thinking, quotes cognitive psychologist Massimo Piattelli Palmarini: “No other statistical puzzle comes so close to fooling all the people all the time [and] even Nobel physicists systematically give the wrong answer, and that they insist on it, and they are ready to berate in print those who propose the right answer.” Before proceeding to discuss this problem, we review the key features of our new definition:
Probability is a feature of external reality, not an aspect of

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A new definition of “probability”

January 13, 2021

From Asad Zaman
An article by Alan Hajek in Stanford Encyclopedia of Philosophy lists six major categories of definitions. Many more are possible if causality is also taken into account. These definitions conflict with each other, and face serious problems as interpretations of real-world probabilities. The basic definition of probability we will offer in this lecture falls outside all of these listed categories. Before going on to present it, we briefly explain why there is such massive confusion about how to define probability.  read more

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Why do we need pluralism in times of disruption? A practical guide

January 7, 2021

From Asad Zaman
Today we are going through a period of disruption due to the COVID-19 pandemic that impacts us individually and collectively in an unprecedented manner. Because we see how interconnected we are, the sense of unity, solidarity in time of crisis is necessary. So why bother with pluralism in the first place?
Introductory remarks about pluralism and the new normal
We are currently in an unprecedented moment in human history. Although humanity went through several pandemics and disruptions, this is the first time that all the globe is equally affected by the virus, and everyone, everywhere, has to deal with the lock-down and its consequences. Our normal is gone, and we do not know what is ahead of us. The world as we knew it is not there, and there is little left of the

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Debt, levered losses, & unemployment

December 29, 2020

From Asad Zaman
A previous post on “Causes of the Global Financial Crisis” provided a detailed summary of the first three chapters of “House of Debt” by Mian and Sufi. This post provides a brief summary of Chapters 4 and 5, in which they present a theoretical framework which explains why leveraged debt leads to high unemployment following a shock to asset prices. The main insight is that the problem is caused by interest-based debt contracts which put most of the risks of default on the weaker party (borrowers), and very little on the stronger party (lenders). Equitable risk sharing between lenders and borrowers would provide a solution.
Background: In the Keynesian Revolution and the Monetarist Counter-Revolution, I have explained how high and persistent unemployment after the Great

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Differentiating social, market, and government debts

December 25, 2020

From Asad Zaman
In a previous post on “ABC’s of MMT”, I explained the basics of MMT as a preliminary to a critique of Raghuram Rajan’s article on “How Much Debt is Too Much?”. A significant part of the discussion on this post consisted of debates over words and their meanings. My use of words like assets, savings, wealth, liability, and debt was contested, and alternative usages were offered. It seems necessary to pause for a discussion of these terminological confusions, prior to going on Rajan’s article. This is because part of the critique is about the terminology used by Rajan. Standard terminology is based on false analogy between the government and the household. In a previous post on “The Power of False Names”, I have explained how the use of misleading terminology can lead to

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