January 1, 2015

Objection, your Honour! There is objective truth in economics

Comment Lars Syll on 'Understanding capitalism'

Blog-Reference

It is proverbial that the representative economist does not know how the economy works. Many explanations and excuses have been advanced. Putting aside all individual specifics and possible exceptions for the moment, the main reason is this.

Neither Classicals, nor Walrasians, nor Marshallians, nor Marxians, nor Keynesians, nor Institutionialists, nor Monetary Economists, nor Austrians, nor Sraffaians, nor Evolutionists, nor Game theorists, nor Econophysicists, nor RBCers, nor New Keynesians, nor New Classicals ever came to grips with profit (cf. Desai, 2008). Hence, 'they fail to capture the essence of a capitalist market economy' (Obrinsky, 1981, p. 495).

Neither orthodox nor heterodox economists understand the two most important phenomena in the economic universe: profit and income (2014). And, clearly, if the premises of a theory are muddled the whole thing ends up in intellectual nirvana. Economics still stands where physics stood in the Middle-ages before the concepts of force and mass were properly defined and clearly understood.

“We are not yet out of the wood; in fact, we are not yet in it.” (Schumpeter, 1994, p. 7)

To conclude from the plain fact that the representative economist is a confused confuser (2013) that “There is no objective truth in economics” (see intro) seems rather far-fetched.

Egmont Kakarot-Handtke


References
Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume
(Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave
Macmillan, 2nd edition. URL
Kakarot-Handtke, E. (2013). Confused Confusers: How to Stop Thinking Like
an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series,
2207598: 1–16. URL
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics:
Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Obrinsky, M. (1981). The Profit Prophets. Journal of Post Keynesian Economics,
3(4): 491–502. URL
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford
University Press.