January 1, 2015

Balderdash or discourse?

Comment on 'Lies that economics is built on'


Scientific communication is guided by the code true/false, moral communication by good/bad-evil, and social communication by like/dislike. Economists have traditionally some problems to keep these spheres apart. And this is the main reason why economics is still at the stage of a proto-science.

The title 'Lies that economics is built on' signals that the author commits a category mistake. The body of the text deals with the application of a statistical tool. Now, it is well known that tools may be inapplicable. This is often the case when they are transferred from one domain to another, say, from physics to economics. No doubt, economists, more often than not, apply statistical tools incorrectly. This, though, is a question of professional competence but not a moral problem. Who hammers his thumb is a botcher not a villain.

Moreover, what economics is actually built upon are behavioral axioms (Debreu, 1959; Arrow und Hahn, 1991; McKenzie, 2008). These foundational propositions may be false but they cannot be characterized as lies.

Lies belong to the social and political sphere. In scientific matters we take it for granted that the dialog partner thinks and acts within the framework of true/false, well knowing that we cannot be perfectly sure.

The argument that the other economist tells a lie is entirely misplaced in a discourse because it diverts the attention away from the question on hand. Researcher and detective are different occupations.

“Scientific economics inquires only into the How and Why, not into the Good or Bad, of what is. From the scientific point of view preoccupation with Good and Bad is worse than useless since it not only fails to illumine anything but keeps the lightbeam of inquiry from being turned in directions where answers to significant questions can be found.” (Murad, 1953, p. 2)

Or, as Schumpeter put it:
“Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.” (1994, p. 11)

Standard economics is built on false premises. That is a perfectly acceptable statement -- both in form and content. Let politicians excel in vituperation, science is content with refutation.

Egmont Kakarot-Handtke

Arrow, K. J., and Hahn, F. H. (1991). General Competitive Analysis. Amsterdam,
New York, NY, etc.: North-Holland.
Debreu, G. (1959). Theory of Value. An Axiomatic Analysis of Economic Equilibrium.
New Haven, London: Yale University Press.
McKenzie, L. W. (2008). General Equilibrium. In S. N. Durlauf, and L. E. Blume
(Eds.), The New Palgrave Dictionary of Economics Online, pages 1–18. Palgrave
Macmillan, 2nd edition. URL
Murad, A. (1953). Questions for Profit Theory. American Journal of Economics
and Sociology, 13(1): 1–14. URL
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford
University Press.

For the correct formal foundations of theoretical economics see the here.