August 29, 2015

Schumpeter's two axioms of discourse

Comment on ‘Axiomatic economics — total horseshit’


I enjoyed Victor Aguilar's article, albeit — in rear view — sometimes for the wrong reasons. Aguilar's methodological critique of Tony Lawson is spot on but he unnecessarily dilutes his argument by becoming personally.

“Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.” (Schumpeter, 1994, p. 11)

It is sufficient to demonstrate how Tony Lawson conflates taxonomy and deductive logic, but counterproductive to add in a footnote a derogatory remark about Marxism/Feminism.

It is also counterproductive to equate empiricism one-to-one with idiotism. While it is true that the empiricism of the confederate artillerymen was indeed utterly dilettantish this does not hold for the immensely valuable work of Tycho Brahe, for example.

Finally, it is counterproductive not to mention that there has also been some dilettantism in the application of the axiomatic-deductive method. For example, the philosopher Spinoza applied the method to prove the existence of God. More important for economists is, of course, that Debreu messed things up by choosing the wrong set of axioms.

So it is a bit misleading to play idiotic empiricism against the overwhelmingly successful axiomatization of Euler or Newton. It cannot be stressed enough that the success of the axiomatic-deductive method depends on the selection of axioms, as already J. S. Mill knew.

“What are the propositions which may reasonably be received without proof? That there must be some such propositions all are agreed, since there cannot be an infinite series of proof, a chain suspended from nothing. But to determine what these propositions are, is the opus magnum of the more recondite mental philosophy.” (2006, p. 746)

Orthodoxy is based on the following propositions: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to  equilibrium states. (Weintraub, 1985, p. 147)

What can be said with certainty is that this set of axioms has proven its worthlessness. Orthodoxy is a total failure according to formal and empirical criteria. This is the decisive point where Lawson, Aguilar, Zaman — and in addition all economists and scientists who really understand the axiomatic-deductive method — agree.

Heterodoxy's most important task is to fully replace HC1 to HC5. As Schumpeter's 2nd axiom says: “If we feel misgivings ..., all we have to do is to start appropriate research. Anything else is pure filibustering.” (1994, p. 577)

Egmont Kakarot-Handtke

Mill, J. S. (2006). Principles of Political Economy With Some of Their Applications to Social Philosophy, volume 3, Books III-V of Collected Works of John Stuart Mill. Indianapolis, IN: Liberty Fund. URL
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford University Press.
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

For details of the bigger picture see the cross-references Axiomatization.