December 31, 2014

Eureka

Comment on "The failure of economics is due to the use of axiomatic method"

Blog-Reference

You write: “A logically true statement can be total nonsense if the axioms are nonsense. So of course axioms have to be true. And whether an axiom is true or not cannot be determined through logic.”

Yes.

“A method of obtaining accurate premises is needed because science can only be true if its premises are true.” (Redman, 1997, p. 328)

Therefore, it is the first task of every science to find the true axioms. And this is exactly what J. S. Mill said:

“What are the propositions which may reasonably be received without proof? That there must be some such propositions all are agreed, since there cannot be an infinite series of proof, a chain suspended from nothing. But to determine what these propositions are, is the opus magnum of the more recondite mental philosophy.” (Mill, 2006, p. 746)

What is the real-world situation? Neither Orthodoxy nor Heterodoxy has accomplished the opus magnum. That is, there is no economics, only some people who call themselves economists but cannot tell the difference between profit and income (2014). This is indeed weird: having no better scientific foundation than any religious group these people claim to offer sound political guidance or to make the world a better place.

It is this mixture of alleged science and politics which is toxic. The first condition of doing proper science is to gain an objective standpoint beyond politics.

What Heterodoxy constantly overlooks is that debunking is necessary but not sufficient in the longer run.

“The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug, 1998, p. 703)

So Heterodoxy has to come up with a new paradigm. And that is the tough part.

“The problem is not just to say that something might be wrong, but to replace it by something -- and that is not so easy.” (Feynman, 1992, p. 161)

Egmont Kakarot-Handtke


References
Blaug, M. (1998). Economic Theory in Retrospect. Cambridge: Cambridge University
Press, 5th edition.
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics:
Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Mill, J. S. (2006). Principles of Political Economy With Some of Their Applications
to Social Philosophy, volume 3, Books III-V of Collected Works of John Stuart
Mill. Indianapolis, IN: Liberty Fund. URL (1866).
Redman, D. A. (1997). The Rise of Political Economy as Science. Methodology and
the Classical Economists. Cambridge, MA, London: MIT Press.