Once we set up society as a system, with the economy a single subsystem of the whole, we require other adjustments. We can no longer consider economic data - interest rates, growth, GDP and so forth, as scalars. A scalar is a simple quantity of some-thing that has no sense of direction. A vector, on the other hand, has a sense of

direction. The mass of a potato is a scalar, when I drop it, it is drawn by the earth's center of gravitation, a vector. It becomes the product of a scalar and a vector, which is al-ways a vector. When a vector crosses the borders between one subsystem and another it enters another field and interacts with it. A mind pickled in the prejudices of monetarist theory may perceive high interest rates just as a means of "licking inflation." But follow the effects of those rates to the government sector where they lead to a drop in revenues and a rise in the need for more spending for the environment, health, and practically every other subsystem, and disaster is sown.

We must learn to consider economic data vectors rather than scalars and track their influence as they cross subsystem boundaries.

Towards this end, I use a simple tool, known to most economists, but rarely applied to anything that really counts: the so-called Tinbergen Counting Rule. Jan Tinbergen was a Dutch economist who trained originally as a physicist, and thus had a better grasp of what science is about than most economists. His rule merely adapts a principle that everybody learned in her high-school algebra classes: to solve a problem with two independent variables, you need two independent equations. One won't do. Now if you set up a systems-theory mapping of the economy, there must be at least one independent variable per sub-system - there are actually many more. Hence you would have to have as many in-dependent variables in the solution as you can identify in the problem.

Back to High School

Where do we find enough variables for our solutions to match the proliferating variables in our problems? Not only do economic forces change the nature of their impact when they cross subsystem frontiers, but they open recognition of government investment in physical and human capital. That will unfreeze innumerable variables for use in designing solutions.' New subsystems can be designed for tactical effect.

We can, for our example, take as target the balance of the public treasury, that depends on two classes of variables - its revenues and its expenditures. Our policy variables in the design of such a new sub-system can be restricted to variables chosen from both of these classes in dosages that will cancel out for a zero-sum effect on the budget balance. Taxes, for example, may be lowered, and interest paid by the Treasury reduced by roughly the same amount. Their initial total fiscal effect would thus be nil. Taxes and interest paid by the state are chosen for balanced decrease, because of a broad consensus that exists that, other things being equal, less of these two items are prefer-able to more. We could call this "the fiscal shrinkage" subsystem. It could be enlarged and varied with any pair of measures for overall neutral effect. This would enable us to circumvent pillboxes of prejudice rather than butting our heads against them.

A specific means of achieving this, for example, could be reducing or eliminating the regressive Goods and Services Tax (GST), Canada's version of the VAT, while shifting enough federal debt from the chartered banks to the Bank of Canada to lessen the government's interest burden and achieve a wash. When the Bank of Canada holds government debt, the interest paid on it returns substantially to the Bank's one shareholder, the Government of Canada. These benefits, moreover, are delivered not "in the long run," which in conventional policy usually translates into "never, but immediately. The policy is thus instantly verifiable.

The second step in such policy is passive: monitoring the ensuing bonus as the benign influence of reduced taxation and government interest costs spread through sub-systems other than the Treasury. Note that this introduces a "collateral benefit" to the non-targeted subsystems, rather than the "collateral damage" resulting from using interest rates as the BoC's one blunt tool.

Such policy is an application of the modulus congruence calculus of the greatest of 19th century mathematicians, Friedrich Gauss. Don't be alarmed, like Moliere's hero when he learned that he had been speaking prose all his life. You have been using Gauss's modulus congruence whenever you mention a day of the week. Our ancestors could have developed a new name for every day since the birth of Christ, but it would have been cumbersome. So, intuitively, they took seven for their modulus and reverted to Sun-day on completing their modulus count.

But for this bird's eye overview of conventional economic theory, I must refer to a congenital flaw of the discipline: it is a hybrid of a stab at being a science and advocacy. In itself that is not a fatal flaw. We are all the offspring of two parents who may not always have gotten along. The problem of economists is one of these parents has done the other in.