December 31, 2014

Nonentity: the emptiness of economic thinking

Comment on  'Still dead after all these years -- general equilibrium theory'

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The discussions among physicists, for example, became enormously productive just by no longer applying concepts like perpetual motion machine or epicycle because these words signify nonentities. It took some time to find this out. The specific difficulty with nonentities is sometimes that they cannot be readily recognized or disproved. It is simple with the Easter Bunny and rather demanding with the concept of absolute space.

Likewise, students of economics can gain a wealth of time by immediately stopping to read an article or a book as soon as the concept of equilibrium is introduced.

Equilibrium, or by implication disequilibrium, is a nonentity. Of course, there are some other nonentities in conventional economics but equilibrium is the most wasteful.

Note well that Keynesians could never emancipate themselves from equilibrium thinking.

“Keynesian economics also provided crucial impetus to the development of two other key developments of the middle part of the century — general-equilibrium reasoning in economic theory, and simultaneous-equation modelling in econometrics.” (Woodford, 1999, p. 7), see also (2014)

Identifying nonentities is one of the defining activities of science. In took the physicists about eighteen centuries to find out that epicycles are nonentities. As J. S. Mill put it: "Mankind in all ages have had a strong propensity to conclude that wherever there is a name, there must be a distinguishable separate entity corresponding to the name; ..."

General equilibrium is the economic counterpart of a perpetual motion machine; no real thing could possibly correspond to the name. The scientific content of all variants of equilibrium models is nil — it is superstition wrapped in mathematics. The fact that conventional economics clings to equilibrium does not testify for equilibrium but against conventional economics.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics:
Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Woodford, M. (1999). Revolution and Evolution in Twentieth-Century Macroeconomics.
Mimeo, pages 1–32. URL