July 21, 2015

Cartoon science

Comment on Henry on ‘Ignoring elementary economics’

Blog-Reference

Your reference to Keynes misses the point.

(i) The neoclassical program is broadly defined by: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals.” (Arrow, 1994, p. 1) Clearly, this implies the expectation that the explanation of human behavior eventually leads to the explanation of how the actual monetary economy works. This is the funamental error.

(ii) Keynes remained within this psychological/sociological/behavioral paradigm. He only made some outright idiotic neoclassical behavioral assumptions more realistic. This is laudable but does not count as paradigm shift.* It is more like adding an epicycle to the geocentric model.

(iii) Keynes kept economics firmly in the social sciences which are in fact cargo cult sciences “... there has been no progress in developing laws of human behavior for the last twenty-five hundred years.” (Hausman, 1992, p. 320), (Rosenberg, 1980, pp. 2-3)

(iv) It should be clear by now even to economists that second-guessing other agents and gossiping about motives and conceivable actions falls into the category of entertainment/ folk psychology/politics but is as far from science as can be.

(v) Keynes's approach suffers from severe logical defects and is provable false (2011). So Keynesianism is out of science just like Neoclassics. Logical consistency is the minimum requirement and this cannot be decried as scientism.

(vi) The problem is that economists of all camps simply violate scientific standards, as Morgenstern observed long ago: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941, pp. 369-370)

(vii) Conventional economics is refuted and over the cliff just like Wile E. Coyote of the road-runner cartoon.

Heterodoxy should do better. The alternative is that it is thrown out of science just like Walrasianism and Keynesianism.

Egmont Kakarot-Handtke


References
Arrow, K. J. (1994). Methodological Individualism and Social Knowledge. American Economic Review, Papers and Proceedings, 84(2): 1–9. URL
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Morgenstern, O. (1941). Professor Hicks on Value and Capital. Journal of Political Economy, 49(3): 361–393. URL
Rosenberg, A. (1980). Sociobiology and the Preemption of Social Science. Oxford: Blackwell.

* See ‘Mental messies and loose losers

Refers to ‘The case for pure economics