July 15, 2013

Anything goes — for a while (I)

Comment on Fred Zaman on 'Rethinking Keynes’ non-Euclidian theory of the economy'

Blog-Reference

Your post comes to the heart of the matter. Please allow me to answer it in two separate parts. The second part will follow within one or two days.

(1a) I am aware that you wrote an article about who is a Post Keynesian. By rephrasing Eichner's title [Why Economics is Not Yet a Science] I by no means intended to take a hand in that discussion. Whether Eichner is a Post Keynesian or not is tangential to the content of my paper Why Post Keynesianism is Not Yet a Science (2013).

(1b) My point of departure is the quote: “For Keynes, as for Post Keynesians the guiding motto is 'it is better to be roughly right than precisely wrong!'" (Davidson, 1984, p. 574). It is this motto which I attack because it provides the justification for conceptual carelessness and I am by no means the first to realize that intellectual sloppiness is the hallmark of both neoclassical and Keynesian economics:

“I think it is the lack of quite sharply defined concepts that the main difficulty lies, and not in any intrinsic difference between the fields of economics and other sciences.” (von Neumann, quoted in Mirowski, 2002, p. 146 fn. 49), see also Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist (2013).

(1c) The methodological anythings-goes mentality is the main reason for the proto-scientific condition of theoretical economics.

(1d) The stated purpose of my paper is to demonstrate that conceptual and formal sloppiness leads to theoretical errors. It is well known that a theory that contains logical errors is worthless even if it makes good sense from a political point of view. To resume that Keynesianism is logically defective is not anti-Keynesian. The errors can be corrected and it can even be shown that some of Keynes's verbal statements that were hitherto hanging in the air are fortified by a correct formal underpinning. That is: axiomatization is healthy for Post Keynesianism.

(1e) I have demonstrated that a correct formalism would have saved the life of Post Keynesianism in the Phillips curve debate, see Keynes Employment Function and the Gratuitous Phillips Curve Disaster (2012).

(1f) I think two of your statements deserve rigorous refutation:
• You can define anything you want but as a sage once said: “A rose by any other name will smell as sweet!”
• ... the two cited equations [Y=C+I, S=Y-C] are simply accounting identities  and by definition, they can not be false as long as one accepts the definitions. But I=S is merely an ex-post accounting identity and by itself is just as true for neoclassical economics as for anything else  including Marxian economics.

(1g) I have refuted the first statement in Keynes's Missing Axioms (2011, Sec. 17-20) and Why Post Keynesianism is Not Yet a Science (2013, Sec. VI-VIII)

(1h) I have refuted the second statement in The Common Error of Common Sense: An Essential Rectification of the Accounting Approach (2012).

For details see my forthcoming post.

Egmont Kakarot-Handtke


References
Davidson, P. (1984). Reviving Keynes’s Revolution. Journal of Post Keynesian Economics, 6(4): 561–575. URL
Kakarot-Handtke, E. (2011). Keynes’s Missing Axioms. SSRN Working Paper Series, 1841408: 1–33. URL
Kakarot-Handtke, E. (2012a). The Common Error of Common Sense: An Essential Rectification of the Accounting Approach. SSRN Working Paper Series, 2124415: 1–23. URL
Kakarot-Handtke, E. (2012b). Keynes’s Employment Function and the Gratuitous Phillips Curve Disaster. SSRN Working Paper Series, 2130421: 1–19. URL
Kakarot-Handtke, E. (2013a). 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. (2013b). Why Post Keynesianism is Not Yet a Science. Economic Analysis and Policy, 43(1): 97–106. URL
Mirowski, P. (2002). Machine Dreams. Cambridge: Cambridge University Press.