September 15, 2015

The very real problem of the representative economist

Comment on Talldave on “The very real problem of wage inequality”


After more than 200 years it is pretty obvious that economics is a failed science. What has been produced so far is much opinion and little knowledge. Economists, of course, have an explanation for this. No, it is not that they are scientifically incompetent, but, somehow, it is the fault of their specific subject matter. Here is the one-fits-all excuse.

“Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998, pp. x-xi)

The fact of the matter is that the representative economist has not grasped until this very day what science is all about. He is devotedly commited to what Feynman identified as cargo cult science (see Wikipedia).

One of the crucial points of science — known since Aristotle (see Wikipedia) — is that one starts from correct premises. It is pretty obvious that a subjective concept like utility does not fit the methodological requirements.

Unfortunately, you have not realized this yet. Proof? You say: “If utility cannot be part of an economic theory, then you can’t study economics at all.” From the fact that you cannot do it, though, does not logically follow that others cannot do it either. This is the fallacy of composition — the most common among the numerous logical blunders in economics.

Of course, some people have clearly identified the crux: “... if we wish to place economic science upon a solid basis, we must make it completely independent of psychological assumptions and philosophical hypotheses.” (Slutzky, quoted in Mirowski, 1995, p. 362)

Utility is a psychological assumption and the representative economist has to get rid of it. You cannot do it? That is perfectly OK, you are free to stay behind the curve as long as you wish.

Standard economics is based on the concept of utility. This program has failed. Not to realize this is the very proof of scientific incompetence. It is as simple as that.

Egmont Kakarot-Handtke

Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton, NJ: Princeton University Press, 3rd edition.

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