July 31, 2015

Yes, it's scientific junk, so leave it behind for good

Comment on ‘On the poverty of microfoundationalist fantasies’

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Heterodoxy is one crucial step ahead of Orthodoxy. As a matter of fact, today it is simply no longer possible to be an orthodox economist. So far, so good, but what comes next?

“As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction.” (Nell, 1980, p. 1)

Above, Kevin Hoover summarizes: “Not only does the representative-agent model fail to provide an analysis of those interactions, but it seems likely that that they will defy an analysis that insists on starting with the individual, and it is certain that no one knows at this point how to begin to provide an empirically relevant analysis on that basis.”

Orthodoxy starts off on the wrong foot, that is, with individual behavior. From Orthodoxy's failure follows for Heterodoxy as the negative heuristic: first of all abandon nonentities like utility, equilibrium, rational expectations, and the use of functions (supply, demand, and all the rest). As the positive heuristic follows: start with the economic system as a whole and then differentiate consistently into ever smaller sub-units.

Traditional Heterodoxy has cleared the ground for construction. Now the time of Constructive Heterodoxy has come.* The citadel has been conquered and found to be empty. It can safely be left behind.

“The point ... is to suggest ... that if one maintains the fundamentally individualistic approach to constructing economic models no amount of attention to the walls will prevent the citadel from being empty. Empty in the sense that one cannot expect it to house the elements of a scientific theory, one capable of producing empirically falsifiable propositions. (Kirman, 1989, p. 126)

Egmont Kakarot-Handtke


References
Kirman, A. (1989). The Intrinsic Limits of Modern Economic Theory: The Emperor has No Clothes. Economic Journal, Conference Papers, 99(395): 126–139. URL
Nell, E. J. (1980). Growth, Profits, and Property, chapter Cracks in the Neoclassical Mirror: On the Break-Up of a Vision, pages 1–16. Cambridge, New York, NY, Melbourne: Cambridge University Press.

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