Profits and Loss

Isn’t there something called “market power” that allows larger firms to bump the clearing price and thus provide profits for everybody? I seem to remember that was one of the characteristics in the model I programmed years ago. Or maybe the spec I used wasn’t an orthodox model.

Aren’t what we call “profits” in an income statements just part of the “cost of capital”?

In other words, isn’t this just the equity risk premium puzzle, restated.

I see. That was certainly a micro-model, but “market power” seems like a very simple concept, I think it was probably computed as simply market share by ownership. Then you can look at the distribution of this value and try to figure out whether an equilibrium is even possible. It seems that it shouldn’t be too difficult to calculate some sort of aggregate index of ‘market power’ on the macro level. Although I probably have no idea what I’m talking about.

When the heterodox manage to succesfully combine general equilibrium (i.e. macro) with market power, wake me up. For now, I’m gonna go take a nap.

Wha… they did it … no? Oh, well, the reasons that make it’s hard in GE are gonna pop up no matter how you approach it … GE cult? Are you sure you wanna start throwing the word “cult” around when discussing heterodoxy?

In mainstream economics you can have models which give “excess profits” for some firms and models which give “excess profits” = 0 for everyone. That is, in the latter case only “normal profits” are earned.

It all depends on the assumptions made about the economy.

Whether any of these models, however, has anything to do with “the real world” ™ is a totally separate question that mainstream economists are not interested in asking. But, then, when there is publishing to be done and tenure to be awarded, who cares about such questions? ;>

What does dynamic programming have to do with anything?
If you think that what happens in one market affects what happens in other markets, which affects still other markets, then you’re gonna have problems introducing market power into the picture. If you don’t ignore the problem.

Also you can go with monopolistic competition. Joan Robinson would be proud.

But you know I really really promised myself not to get in anymore discussion on this topic.

So I’ll just concede. Neoclassical economics bad.

I think this is a profound outstanding problem. Remember Marx (pre-marginalist revolution) thought profits in aggregate would decline over time, and that didn’t happen. Galbraith argued that market power came from size, and we see no correlation between size and profitability of capital. Austrian approaches like Oliver Williamson try to talk about profitability via a disequilibrium model, but disequilibrium is difficult to model! Leibenstein’s X-efficiency was a good stab, but I think this thread ran out of steam too.

If risk were related to return, we could see profits as just an increase in risk taking, but other than the fact that equities seem to return more than bonds (ignoring transaction costs, survivorship bias to equity indices, and asymmetric taxation of gains vs losses), and bond return more than bills, we rarely see a nice risk-return relationship anywhere (I argue here that in fact the risk-return relation is absent other than in the very short front end of the yield curve). That is, profits in theory are just risk-adjusted returns that accrue via firms with positive betas, but then, why does beta suck so bad empirically?

Given that profit is a major source of innovation in our economy, I’m fairly sure that NC econ has some way to factor it in. My own knowledge of economics is somewhat limited, but it seems to me that adding technological innovation and incorporating a few “irrational” preferences to consumers would be one way to go about this (even the most orthodox economists could justify this as the “added value” of a brand). This is where economics begins to fall short, because its tools for examining consumer preferences, technological change, or barriers to entry are extremely limited.

I share some of the puzzlement on a couple of points.

(1) Why the focus on dynamic programming? A common criticism of neoclassical GE models, even the intertemporal ones, is that they are effectively static. I suppose there is an implicit assumption that consumers are solving the DP problems they face – is this what you meant?

(2) If you define normal=average and economic profits as the difference between accounting profits and actual profits, it’s true by definition that aggregate economic profits are equal to zero. This seems to underlie some of the concerns that are being raised.

Here’s the thing: mainstream economists like to present themselves as doing something obviously important and meaningful. And, they justify what they do by some invoking of “science.”

But the core mainstream models:
(1) are based on assumptions that are obviously false (e.g., assume a very large if not infinite number of firms in every industry each of which has access to identical techology)
(2) give rise to predictions about the real world that are obviously false (all firms earn the same profit rate) and
(3) is associated with lots of empirical work b ut the underlying mainstream model is itself never presented in a way that permits it to be falsified.
(4) are never tested against other economic theories (that is, alternative to the mainstream theories).
and so on and so on.

The above should be potentially, for those who take thinking seriously, important flaws. But none of the above seems to lead to any concern within the mainstream of the economics profession.

Eric’s comment is interesting. Are there any (Karl) Popperians still out there? If so, what do they think about the ‘core assumptions’ of neoclassical economics? Are they ‘falsifiable’ in Popper’s sense?

[And here’s another point that’s just occurred to me. Poppper loved Hayek’s theorising. But is it not the case that the inital assumptions of Austrian economics are also unfalsifiable?]

I realise this is a slightly different context, but don’t profits play a big part in the Schumpeterian-type growth models of Aghion and Howitt?

Concerning Popper:

There was an interesting debate in economics a few decades back about whether an economic model should a) try to use true assumptions and derive whatever results they may derive, or b) use approximations and simplifications of the real world, but keep the models that make good predictions about the nature of the economy. If I remember correctly, Friedman was well into the second camp.

That said, many of the heterodox types don’t like *either* of these methods; my feeling is that if you want to try to use true assumptions and derive true results, you’re going to be in for quite a Sisyphean challenge, and will end up with nothing more than some qualitative work (aka Galbraith) or no results of interest at all (aka many prominent heterodox economists).

this wouldn’t be an equilibrium though; such a firm would tend to expand production until its (nice, well behaved) cost function delivered only the normal rate of profit.

“this wouldn’t be an equilibrium though; such a firm would tend to expand production until its (nice, well behaved) cost function delivered only the normal rate of profit.”

Maybe I’m not understanding the question properly, but why is this an objection? Very few firms–even in relatively mature markets–are at equilibrium. It certainly doesn’t happen instantaneously. There is almost always someone on the way up and someone on the way down. I suspect this happens because very rarely does any one firm have the ideal management structure for their area PLUS the ideal production PLUS the ideal market development PLUS the ideal product improvement chain PLUS the ideal distribution chain PLUS all the stuff that I don’t have any idea about. Often some firms have better aspects in some areas and worse in others when you compare them to each other. They make improvements in their weak areas and gain a leg up. But it seems to me that only rarely does a market stay unchanging enough to reach a broad based equilibrium. And when it does, we don’t in fact see much profit (Think basic pencils or nails or something like that).

(And all this would be true in just the two identical competing firms case. Add two more and an additional one that competes with a distinguishable pseudo substitute–perhaps a bunch of tile guys and a slate-for-bathrooms manufacturer–and all worries about a stable equilibrium killing off profit go right out the window).

well no, because the out-of-equilibrium states of the “standard micro model” are typically entirely unanalysed and certainly not generally considered for purposes of policy analysis.

Well this has nothing to do with your initial statement (“models in which there are no profits”). There is a difference between the impossibility of (non-monopoly) profits and vanishing profits. I don’t even see that the “heterodox” theories of the firm disagree with NC there that profits are vanishing. Whether the dynamic process of reaching the vanishing point is underanalyzed and underused is a different question, but I don’t see much benefit from a model that allows for positive profits in a stable, non-innovative, atomistic industry.

“But regardless of the above, what is the relationship between a model that makes tons of wild and crazy assumptions and the real world?”

But that isn’t the standard model doesn’t require steady state. Almost all modern economics I can think of readily acknowledges that innovation can create a state of flux. Who argues otherwise? Isn’t that a huge part of Schumpeter’s thesis? He died in 1950.

Apparently they are saying similar things at MarginalRevolutions only they note that Schumpeter might be considered a heterodox economist.

RE
“Is there some new economic model out there with worse predictive capability than heterodox economics, but more accurate underlying assumptions?”

One of the main issues is whether heterodox economics should be judged by how well it “predicts” the variables of interest to mainstream economics. It is not obvious that mainstream economics is even talking about the right things. If that is correct, then it seems odd to require that heterodox economics do a better job of predicting the wrong things.

Plus, it might be the case that the methods used by mainstream economists might not be the “right” methods. If so, then judging heterodox economics based on the fact that they don’t use the same tools in the same way as mainstream economists is again odd.

Perhaps, and I think this might be the case, mainstream economics talks about the wrong things using the wrong tools for the wrong reasons.

Other than that, its pretty cool.

eric, that would mean that mainstream economics is already broad enough. So why should there be a need for heterodox approaches?

You were picked up by marginal revolution:

http://www.marginalrevolution.com/marginalrevolution/2007/06/profits.html#comments

I don’t think we should be using falsifiability as a criterion to bash neo-classical economics with. It (falsifiability) went out of fashion a long time ago, at least among philosophers (to give you a flavor of the problems with this standard, try “falsifying” a singular probabilistic statement). No one talks about it much since Lakatos kinda scuppered it (he of course called it “naive falsifiability”, and suggested his own version of falsifiability that looked nothing like the falsifiability talked about here). However what is important are the empirical implications of any model. Actually neo-classical economics falls flat on its face even by this standard.

“I think if I wanted to improve life with economics, I’d try to get the economy to be more productive. The more it produces things people want, the more there is to go around.”

I’d just observe that some have argued in the past that slave production was more productive than free worker production. (Whether this is true is a different question).

So …. using an unfair rhetorical move… you’re in favor of slavery?

(Perhaps unfair rhetorically, but it seems to be an issue that the more stuff is better crowd needs to address).

Or, is it possible that more is not always better (taking everything into account)? Is it possible that that notion that more is better is a culturally generated idea?

In any case, simplistic notions that all you need to know is that ‘more is better’ are debatable.

Finally note: why are mainstream economists ignorant about “theories of science” and related stuff? Because graduate programs have relentlessly removed any material from their curriculum that exposes economics graduate students to these ideas.

Very quickly the new faculty teaching the new graduate students are ignorant of important philosophical issues and so are unable to teach such material.

Implicitly, the notion seems to be that any real thinking about what they do will only hinder the newly minted economist from doing the important thing: generating more mainstream economics! Again, the goal seems to be to produce idiot savants through intellectual mistraining.

“Yes, slavery with modern working standards might indeed be more efficient and better all-around.”

How to respond? How to an argument that slavery (whatever it’s called in modern dress) might be a “better all-around”?

Of course, dozens of ways immediately come to mind.

But what’s important here is the ease with which a follower of mainstream economics considers instituting slavery for “efficiency” reasons. Some might say this is just “hard headed thinking”; others might way that it reveals an essential, and fundamental flaw, in the mainstream approach: a narrow-minded and simplistic notion that only consequences matter and the only consequence that matters is output per capita.

>”if it helps you win arguments on blogs that’s a third way.”

Well in that case it looks like mainstream economics falls short (except to someone who already believes in this particular theory).

I believe that economics needs to more clearly address the issue of “what is the good economy” and “how do we get there.”

(What now follows is a debate over normative vs. positive which will reveal that the mainstream economist had only a poorly understood notion of what these things mean and an inability to see how “normative” concepts are already embedded in mainstream economices. The debate will seemingly die out but then, after a pause, mainstream economists will start using math and drop big names and theories and this will drive out most who don’t understand these things. They will be driven out not because they are wrong but because they feel they no longer can compete with the math/names dropped. Soon the only one left standing in the mainstream economist who believes that he/she has won the debate while all they have done is successfully excluded those who they disagree with.)

(However, perhaps sadly, in this case someone who disagrees with the mainstream approach can actually match the mainstream economists in math/name dropping ability and can argue the case well that the math/names mainstream economists drop are not really responsive to the key issues.)

eric: You are being trolled. The number of economists who would argue for instituting slavery on efficiency grounds is very, very small.

_And_ falsificationism is alive and well in physics, so maybe they’re shitty scientists too.

If slavery is more “efficient” (which is an open question by the way) why would mainstream economists be against slavery?

They overrule certain conclusions of their own theory based on non-theoretical notions.

Indeed, the fact that they do NOT advocate slavery suggests that they actually use some socially determined “normative” notions to limit what they find acceptable conclusions of their theory.

So, if they unthinkingly reject certain potential conclusions of their own theory in the case of slavery, is it not possible that they reject lots of other stuff simply based on their unexamed prior non-theoretical beliefs?

So we’re making some progress here: mainstream economists implicitly/explicitly accept that some conclusions of their own theory must be censored.

“I’d just observe that some have argued in the past that slave production was more productive than free worker production.”

Please name them, I’ve never heard the argument outside of drunken college-BS sessions.

“If slavery is more “efficient” (which is an open question by the way) why would mainstream economists be against slavery?”

That is a mighty big ‘IF’ for someone who is so interested in empiricism. I would think the argument against the efficiency of slavery would be rather obvious: the effort expended in keeping slaves is a huge drain on resources. I’m not aware of anyone who argues that the South was an economic powerhouse compared to the North.

“Please name them, I’ve never heard the argument outside of drunken college-BS sessions.”

I have always agreed that Fogel and Engerman’s Time on the Cross was BS but now someone else has agreed! Thanks!

“That is a mighty big ‘IF’ for someone who is so interested in empiricism. I would think the argument against the efficiency of slavery …”

Lots has been written on the “efficiency” of slavery and the ante-bellum US southern economy versus the North. This includes both theoretical and empirical literature. You don’t need to make stuff up when a huge literature exists out there. Once you give it a read we can talk about it. ;>

But the point remains: if slavery IS efficient (once everything is taken into account) why would a mainstream economist be reluctant to promote slavery?

“This is NOT falsification; it is merely a type of verificationism”.

What you described is not verificationism either.I don’t have the time to go over this here, but remember that verificationism failed not because it was “bad” or “cheating” (which is basically what you describe), but because there were logical problems with it. It was difficult to combine the method of verficationism at the level of methodology with the concept of universal laws at the ontological/metaphysical level.

if slavery IS efficient (once everything is taken into account) why would a mainstream economist be reluctant to promote slavery?

Because the question is outside the scope of economics – by design. Economists don’t promote automation either, CFOs do.

Most of the discussion here is about the difference between pure science and applied science. You can argue that economics as a pure science is not useful to you as a policymaker for various reasons, but you cannot argue that those who take a scientific approach to economics doing it poorly simply because they are doing it.

“Physicists are not simplistic falsificationists..”

Perhaps and perhaps not.

But for sure mainstream economists are NOT falsificationists. It is unclear if the mainstream approach can be falsified and it is clear that mainstream economists do not seek to falsify their own theory. But they claim they should be called “scientists” because they believe (but don’t implement!) falsification.

Now that is okay with me: I’m not sure that falsificationism is a reasonable approach. But I’m not the one saying I’m falsificationist: it’s the mainstream economists.

Saying the mainstream approach is a paradigm or research program is much more reasonable (and one which seeks to find evidence consistent with their approach). But once this move is made, mainstream economists lose what they desire: to present themselves as objective scientists. So the choice mainstream economists face is: (1) be truthful about what they do (paradigm/research program) and admit they don’t do science as this is typically defined or (2) be dishonest in what they really do and claim they are objective scientists.

“Economists would not advocate slavery because it’s, you know, immoral.”

Of course it is immoral.

But this is a case in which a “normative” agenda drives the mainstream theory. When it was first proposed that slavery might be “efficient” (see Fogel and Engerman) this set of a frenzy of mainstream research to show that slavey was NOT efficient. Lots of effort was made to prove this point and it required lots of hard thinking and work. That is, the normative goal of showing slavery was bad lead to the goal of showing that slavery was NOT efficient and this goal was apparently obtained (but not without a lot of work). The mainstream stuggled to find a way to label slavery as “inefficient” because they did not like slavery.

Moral of the story: mainstream economists are likely often driven by certain ideas (generated outside their theory) to “prove” certain things within their theory. Not exactly what they say they do.

“You want to hold economics to a different standard than other sciences. When has a paradigm shift in any science NOT been met with widespread resistance by the mainstream in the discipline? ”

Not at all. I want mainstream economists to drop this “science” stuff and admit that they are merely defending their own paradigm/research program. And that when they judge heterodox economics they, partly, are just using criteria generated within their paradigm/research program that is not “universal” but designed to justify what the mainstream does.

I also want the mainstream to drop the pretense that they do “positive” science and forsake “nomative” statements. (The positive vs. normative ideas is a bit out of date but it is one that is invoked constantly by the mainstream). Mainstream economics is infused from top to bottom with what can be called “value judgments.” This includes sneaking in the value judgment that “efficiency” is important and that by, more or less, saying that only efficient outcomes are valid to consider for an economy. Also, the mainstream theory is utilitarian from top to bottom and holding to utilitarianism is a major ethical claim. Yes the mainstream has dropped happiness as a concern but it still presumes that only consequences matter and only a limited number of consequences (related perhaps to output per person) are worthy of consideration.

This represents a HUGE ethical claim despite the fact that mainstream economists say the reject value judgments.

In addition, it is not clear that the mainstream vision of the economy itself (as a set of interlinked markets) is even helpful for revealing whether an economy is good or bad.

How to respond? How to an argument that slavery (whatever it’s called in modern dress) might be a “better all-around”? [….]

But what’s important here is the ease with which a follower of mainstream economics considers instituting slavery for “efficiency” reasons. Some might say this is just “hard headed thinking”; others might way that it reveals an essential, and fundamental flaw, in the mainstream approach: a narrow-minded and simplistic notion that only consequences matter and the only consequence that matters is output per capita.

Perhaps I should admit here that I don’t know enough economics to be mainstream.

The argument that agricultural whip slavery was “efficient” is probably flawed, and in any case is specialised. It was surely much harder to sabotage a farm run entirely with hand tools, versus a factory. Similarly, to build canals and railroad tunnels etc you wouldn’t want slaves anywhere near dynamite or blasting powder. And in theory slaveowners were responsible for their slaves’ retirement; though to reduce that problem they could perhaps sell old slaves to someone who would work them to death. In a society that didn’t have adequate financial institutions, a farmer could trade his commodity crop for commodity slaves without money actually having to change hands. Later sharecropping provided the same advantage — the slave didn’t have to be paid money but could be paid in crops at harvest time. Of course, one-company mining towns could pay in scrip that could be redeemed at the company store — another solution to a similar problem.

Slavery let owners get jobs done fairly cheaply that could not be done at all at any reasonable price during a labor shortage. Could they have used slaves for higher-value work instead? Perhaps agricultural labor was particularly easy to train workers who didn’t know english.

People say that wage-slaves are better workers than whip-slaves. It makes sense. If you work hard and save your money then you can have something when you get old. And if there’s a labor surplus and you don’t work hard enough they can just throw you into the street and try somebody else. But if you’re a slave who works harder than the bottom 10% they won’t whip you, and there’s nothing you can do to keep them from selling you down the river when you get old. The arguments for lazy slaves are about the same as the arguments for lazy government workers and corporate bureaucrats. Wage-slaves are more scared than whip-slaves.

But there’s nothing to keep owners from motivating slaves with rewards more than punishments. One traditional reward for a job well done by plantation slaves, like Marines, was beer. There’s no limit to the rewards that can be offered to slaves, except that it shows on the bottom line. Romans commonly believed that slaves lived better (materially, at least) than most freemen. And it was true for many house slaves, though not at all for mine slaves.

Some years ago many people claimed that top japanese corporations did well because their employees were for life. Employees were naturally very loyal to their corporations, and they willingly taught OTJ because they weren’t threatened by younger people who could do their jobs — their pay increased by seniority and they would never be fired. They said that top US corporations ought to do it that way too. But then the japanese economy stagnated, and US corporations started doing big layoffs and scared their employees into working long hours for reduced pay, and the whole idea got dropped.

It’s traditional for network administrators to put time bombs into their networks — to give themselves job security. A network administrator with a lifetime contract wouldn’t need to do that. He could afford to be more efficient.

It might work. But then there are the problems that if the company gets into trouble it can’t fire its slaves and it can’t easily reduce their perks. The really good thing about wage slavery is that the company has no responsibility for its people, it can just dump them whenever it sees an advantage. So the inflexibility of lifetime contracts has some minuses.

I believe that economics needs to more clearly address the issue of “what is the good economy” and “how do we get there.”

Yes! That’s the whole point of economics, isn’t it? Apart from the pleasure of figuring things out, and the pleasure of making clever models that do clever things that might get applause from smart people.

There’s also the smaller issue of “what is the good corporation” and “how do we get there” which is likely to be more lucrative. Also, you can collect better data. Individual corporations fail faster, so to some extent you can see which approaches result in quicker bankruptcy. Particular answers to “how do we get there” can be falsified much quicker.

What now follows is a debate over normative vs. positive which will reveal that the mainstream economist had only a poorly understood notion of what these things mean and an inability to see how “normative” concepts are already embedded in mainstream economices.

Yes, when you try to decide what’s good, you need to notice what you’ve already assumed is good. And you have to decide where you draw the line between economics and everything else. The economics intertwines with the rest of society, and economic decisions affect social things, political choices affect the economy, etc. You have to put it together somehow.

You can’t get results without understanding *how* things work, and one of the main points of understanding it is so you can keep it working and make it work better, once you choose what better means.

Mainstream economics is infused from top to bottom with what can be called “value judgments.” This includes sneaking in the value judgment that “efficiency” is important and that by, more or less, saying that only efficient outcomes are valid to consider for an economy. Also, the mainstream theory is utilitarian from top to bottom and holding to utilitarianism is a major ethical claim.

I am not a professional economist, and so most of what I hear is from other amateurs. I think we might wind up with similar arguments, just out of focus and dumbed down. I keep running into a sort of panglossian claim that whatever the economy does must be optimal, because it has feedback mechanisms to respond to suboptimality.

Sometimes I get that argument from electrical engineers who themselves work with control theory, who design control structures and who know how hard it can be to get a feedback system to respond appropriately.

And I hear the argument that free-market economies always tend toward full employment, that everybody who wants to work can get a living wage. When this is spelled out to a point, the argument invokes comparative advantage. Even if you aren’t very good at anything, there will always be jobs that the better-skilled people don’t have time to do because they’re doing something more valuable. Therefore an unregulated economy will always approach full employment.

It occurs to me that one of the major products of academic economics departments is undergraduates who are not economics majors but who have taken economics courses and who have opinions about political economy. If economists take responsibility for what laymen who’ve taken introductory economics classes believe, then they have a lot to answer for.

J Thomas, sounds like you may want to read Going Postal by Mark Ames (Going Postal: Rage, Murder, and Rebellion: From Reagan’s Workplaces to Clinton’s Columbine and Beyond); it has lots of stuff about socio-economics of slavery vs. ‘new deal’/’great society’ model vs. ‘Reagan revolution’/neoliberalism model. Excellent book.

Why do you say that, notsneaky? Businesspeople and investors, for example, are well-aware that the accounting profits that appear in a balance sheet are only a proxy for the true profit number.

That’s the definition we all use in the real world, notsneaky. We’re very sensitive to the whims and fancies of Daniel Davies.

Elliot, if you can’t think of profits in the financial services industry in the long term, you’re not imagining hard enough.

Radek: How jolly, jolly decent of mainstream economics to “allow for” accounting and economic profits! I don’t think I’d ever suggested that economists had banned them. However, “mainstream economics” does not, as I think you agreed not so long ago, work on the basis of models in which economic profits are systematically nonzero and positive.

Gdr, I don’t know much about economics either, but I know you can’t tell much at all about what jargon means from the way it sounds.

I have the strong impression that “mainstream economics” includes the idea that apart from monopolies etc all profit is just something that happens naturally for the good of the whole economy, and it also includes the idea that weird things can happen away from equilibrium but that things tend toward equilibrium where weird things stop happening and “profit” balances out with the cost for needed expansion and the cost of capital and so on.

I think “mainstream economics” includes a lot of variety, and for many ideas that get the label you can find some mainstream economists who disagree with them. But that variety still leaves a whole lot of room for heterodox economics which is labeled as not mainstream.

Sometimes the difference between mainstream and heterodox is just in who’s saying it. In genetics, at one point there was a “neoclassical synthesis” that put together most of the genetics known at that time into a coherent whole. You could mostly tell what was part of the neoclassical movement and what wasn’t, though there was some variety within it. I don’t think we have that in economics now.

However, there is a normative economic philosophy that is espoused by a lot of amatuer economists, that goes roughly: “Whatever happens in a free-market economy is good and is the best that could possibly happen, unless a government is involved.” This is similar to the oldstyle view in ecology that ecosystems are each optimised for something-or-other and are as good as they possibly could be so long as human beings aren’t involved. And these people believe that this simple wrong idea is derived from mainstream economics. I can’t prove that it isn’t.

In the math models of mainstream economists there is the variable called “profit.” In the real world there is also something called “profits.”

But just because the same word (“profits”) appears in the math model and in the real world, this does not mean they refer to the same thing.

Indeed, we have no reason to suppose that the “variable called profits” tells us anything about profits in the real world. If I renamed my cat Max, giving him the new name “Profits,” I have no reason to suppose that because Profits (aka, Max) sleeps alot that in the real world profits sleep alot.

Mainstream economists have yet to clearly indicate what the relationship is between their models and the “real world.” Just because the models and the real world utilize the same labels (for different things), this does not mean the math model “says” anything about the real world.

#82: Misleading jargon tells us something about the beliefs and attitudes of the people who coined and popularized the jargon. For example, in mathematics the misleading terms “real number” and “imaginary number” tell us something about the attitudes of Descartes and his contemporaries.

Misleading jargon can also help perpetuate those beliefs: many people continue to wrongly believe that “real numbers” are more real than “imaginary numbers”; it’s hard to avoid the suspicion that the terminology has had something to do with this.