December 29, 2014

Entertainment vs. Science

Comment on 'Mainstream macroeconomics distorts our understanding of economic reality'


In the introduction Lars Syll writes: “Studying mathematics and logics is interesting and fun. It sharpens the mind. In pure mathematics and logics we do not have to worry about external validity. But economics is not pure mathematics or logics. It’s about society. The real world. Forgetting that, economics is really in dire straits.”

Economists have their philosophical roots in Bentham's utilitarianism. And it seems that they never dare to get out of this shallow intellectual puddle and to swim in deeper waters. Have they never heard what real scientists have said about mathematics? Have Galilei or Newton or Einstein said that mathematics is fun? That a little intellectual gymnastics is good against mental enfeeblement? That it should be part of a comprehensive wellness program of any responsible citizen?

Above all: did one of these three better known scientists ignore the problem of external validity?

Exactly the contrary! For all of them, mathematics was the key to reality  to the very reality that is producing what the myopic utilitarian experiences when he looks in all his nativity out of the window.

“Experience can of course guide us in our choice of serviceable mathematical concepts; it cannot possibly be the source from which they are derived; experience of course remains the sole criterion of the serviceability of a mathematical construction for physics, but the truly creative principle resides in mathematics. In a certain sense, therefore, I hold it to be true that pure thought is competent to comprehend the real, as the ancients dreamed.” (Einstein, 1934, p. 167)

Lawson's ontology suffers from several misunderstandings (2013).

“The central message of Lawson’s critique of modern economics is that an economy is an “open system” but economists insist on dealing with it as if it were “closed.” (See intro)

This is true for equilibrium economics. And it is true that Orthodoxy is a failure. But now comes the logical blunder:

“Modern economics has become increasingly irrelevant to the understanding of the real world. In his seminal book Economics and Reality (1997) Tony Lawson traced this irrelevance to the failure of economists to match their deductive-axiomatic methods with their subject.” (See intro)

While Orthodoxy indeed applies the deductive-axiomatic method there is no necessary connection between the method and closed systems. Physicists apply mathematics and the deductive-axiomatic method for the description of an universe that certainly displays no equilibrium and no closure in the sense of orthodox economics. What has to be rejected is the notion of equilibrium/closure and not the deductive-axiomatic method.

Because they are fixated on equilibrium economics Tony Lawson and Lars Syll misunderstand the role of mathematics and the deductive-axiomatic method for scientific research. What indeed has to be criticized loud, clearly and unswervingly is the abuse of mathematics and the deductive-axiomatic method by Orthodoxy.

For more on this all-important issue see the following threads:  math   axiom

Lars Syll's second error is “It’s about society” (see intro). Society is the subject matter of sociology. Economics is about how the economic system works. And the actual fact is that neither Orthodoxy nor Heterodoxy can give a scientifically acceptable account of how the economy we happen to live in works. The deeper reason is that both cannot apply the deductive-axiomatic method properly.

It is not such a good idea to dismiss mathematics and logics as funny intellectual wellness exercises. Heterodoxy cannot do without it.

Egmont Kakarot-Handtke

Einstein, A. (1934). On the Method of Theoretical Physics. Philosophy of Science,
1(2): 163–169. URL
Kakarot-Handtke, E. (2013). Crisis and Methodology: Some Heterodox Misunderstandings.
SSRN Working Paper Series, 2083519: 1–25. URL