Comment on ‘Rational expectations — totally incredible bogus’
It was one of the Top 20 heterodox economists who observed some time ago:
“No science has been criticized by its own servants as openly and constantly as economics. The motives of dissatisfaction are many, but the most important pertains to the fiction of homo oeconomicus.” (Georgescu-Roegen, 1971, p. 1)
The most conspicuous characteristic of economists is that they mess virtually everything up. The long standing gossip about realistic/unrealistic behavioral assumptions and the vacuous filibuster about use/abuse of formalization are only two points on a long list. When both topics are mixed, when behavioral realism is played against formal beauty, the apex of surrealism is finally reached.
What is wrong with economics — in the last instance — is economists. They get neither behavior nor math right.*
The student of economics either understands in his first course of Econ 101
- that behavioral assumptions like utility, optimization, rational expectation, supply/demand functions, and equilibrium are nonentities;
- that in mathematics there exists a ‘whole crop of monster-structures, entirely without application’ (Bourbaki, 2005, p. 1275, fn. 9);
The student with a modicum of scientific guts becomes by logical necessity a heterodox economist. He will avoid nonentities and monster-structures and debunk them wherever they appear. But that is not enough, what he desperately wants and needs is the correct theory and the congenial math. This is the central issue of Constructive Heterodoxy.
What nobody needs is another surrealistic discussion about beauty and truth in economics. There is neither and exactly this is the real problem.
Bourbaki, N. (2005). The Architecture of Mathematics. In W. Ewald (Ed.), From Kant to Hilbert. A Source Book in the Foundations of Mathematics, volume II, pages 1265–1276. Oxford, New York, NY: Oxford University Press.
Georgescu-Roegen, N. (1971). The Entropy Law and the Economic Process. Cambridge, MA: Cambridge University Press.
* For the exception see here