June 9, 2015

Ditch it all

Comment on ‘Ditch ‘ceteris paribus’!’

Blog-Reference

Environmental pollution is, no doubt, one of our most serious problems. Second, perhaps, only to intellectual pollution. It can be said without much exaggeration that the collective human brain is a voluminous stockpile of slogans, memes, beliefs, legends, barren paradigms, and defunct theories. Orthodox economics has contributed much to this pile. Think of general equilibrium, constrained optimization, rational expectation, supply-demand-equilibrium.

It has to be admitted, though, that Heterodoxy too has contributed a fair amount of confused stuff. Dave Taylor's monetary communication PIDs are a case in point (see his previous posts on this blog).

This big heap of analytical rubble has to be shoved aside. What is most urgently needed is a new beginning on cleared ground. This reset requires a small number of absolutely transparent foundational propositions that are entirely free from hidden assumptions and, above all, from psychologism/sociologism. From historical experience we have learned that this dabbling in PsySoc is the bane of economics.

All this applies also to the theory of money. There is a subjective and an objective theory of money. The former is not much different from gossip, only the latter is of real interest. The fault of traditional Heterodoxy is that it could not get out of the PsySoc impasse. In marked contrast, Constructive Heterodoxy gives an objective and consistent account of how money and the diversity of financial markets emerge from the elementary monetary circuit (2015).

Orthodoxy and traditional Heterodoxy have been ditched. Constructive Heterodoxy is the only game in town.

Egmont Kakarot-Handtke

References
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Financial Markets. SSRN Working Paper Series, 2607032: 1–33. URL

Cross-references here and here