Comment on Lars Syll on ‘On the value of theoretical models in economics’
Blog-Reference
Economists are in a state of manifest self-delusion. They are convinced that what they do is science. Time to face reality.
“Suffice it to say that, in my opinion, what we presently possess by way of so-called pure economic theory is objectively indistinguishable from what the physicist Richard Feynman, in an unflattering sketch of nonsense ‘science,’ called ‘cargo cult science’.” (Clower, 1994, p. 809)
After summarizing the neoclassical premises Paul Schächterle concludes: “That is no science. That is madness. In a better world there we would have no reason to even discuss such models.” (Preceding post)
Indeed, no other conclusion is possible for everyone with a modicum of scientific intuition. Economics is a proto-science, at best on the level of medieval physics. That is bad enough, but it gets worse when economists start talking about methodology.
How can anyone take seriously what Krugman, who cannot tell the difference between profit and income (2014), says about the significance of simplicity? Simplicity as such has never been a truth criterion: “A theory is the more impressive the greater the simplicity of its premises, the more different kinds of things it relates, and the more extended is its area of applicability.” (Einstein, quoted in Brown, 2011, 244)
Note that Einstein talks about the area of applicability. How large is the area of applicability of neoclassical economics in all its current variants? Yes, exactly zero, and this has nothing to do with simplicity but with simple-mindedness.
Note also that it is the extent of applicability that makes the difference between Einstein's and Newton's theories. Newton is the limiting case of Einstein for low speeds. This has nothing to do with simplicity.
Beginning with equilibrium, economists borrowed most of their concepts from physics and then misapplied them (Mirowski, 1995). The same holds for methodology. Neither Orthodoxy nor Heterodoxy understands to this day how the axiomatic-deductive method is to be applied correctly.
As Einstein said: ‘A theory is the more impressive the greater the simplicity of its premises ...’. It is Constructive Heterodoxy that displays the greatest simplicity of premises. These premises are objective and have no resemblance at all with the green cheese assumptionism of New Classicals or New Keynesians. The Paradigm Shift, which leaves these approaches as well as traditional Heterodoxy behind, is already on the way. See the cross-references here.
Egmont Kakarot-Handtke
References
Brown, K. (2011). Reflections on Relativity. Raleigh: Lulu.com.
Clower, R. W. (1994). Economics as an Inductive Science. Southern Economic Journal, 60(4): 805–814.
Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
