August 7, 2015

Economics as scientific South Seas

Comment on ‘Reconstructing macroeconomics’


As every heterodox economist knows, not only DSGE but Orthodoxy as a whole is a failure. The deeper reason is scientific incompetence. Adam Smith copied Newton, Veblen copied Darwin, others copied complexity and chaos theory and so on, yet economists simply did not get the point. As the mathiness discussion has shown, they even have trouble with the elementary mathematics of accounting.*

In the scientific South Seas all remains on the surface as Feynman observed back in the 1970s. “In the South Seas there is a cargo cult of people. During the war they saw airplanes with lots of good materials, and they want the same thing to happen now. So they've arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head to headphones and bars of bamboo sticking out like antennas — he's the controller — and they wait for the airplanes to land. They're doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn't work.” **

Heterodoxy has thoroughly debunked Orthodoxy. Now we are in the phase of steeply diminishing returns and the whole exercise becomes more like kicking a dead horse. Critically re-reading the Lucas/Sargent manifesto of yore, for example, is merely a waste of time. What the New Classicals have convincingly demonstrated is that copying the hallmarks of good science makes only ridiculous economics.

For Heterodoxy the future lies in a better understanding of the role of ontology, mathematics, empirical testing, and the axiomatic-deductive method. The fact that these methodological necessities produced no positive effects in economics is not a proof that they are inapplicable but only that economists hitherto did not apply them properly. The good scientist never blames the given tools. In case of need he invents his own.

Merely filibustering about methodology is pointless, as J. S. Mill already knew. “Doubtless, the most effectual mode of showing how the sciences of Ethics and Politics [and macro- economics] may be constructed, would be to construct them ...” ***

Egmont Kakarot-Handtke

* See here
** Here
*** For the proper construction of macroeconomics see here