Blog-Reference and Blog-Reference
Imagine for a moment, there is one world economy and the government consists, as Plato dreamed, of wise philosophers. There is — unfortunately, the government does not understand why — a grave problem: unemployment is rising. Understandably, this crisis shatters the faith in the economic advisers who hitherto all came from the orthodox school.
So, the Minister for Economic Affairs calls for a heterodox economist and he speaks thus: “You know, Lars, we are unhappy with our previous economic advisers and we have heard that you criticize these DSGE guys for several years now in no uncertain terms. It seems you know better. Are you prepared to help us to solve our current problem?
“Yes, of course Phil, but let me tell you something important about Heterodoxy first: we do not believe that we have access to this mythical Holy Grail, the data-generating process.”
“Hm, what does this mean?”
“It means that we simply do not know. We know this since Keynes's Treatise on Probability of 1921. We know, for example, that we cannot predict the rate of interest 20 years hence.”
“No problem, I talked the other day to this physicist Feynman and guess what he told me: The future is unpredictable. I understand quite well that only folks like soothsayers, astrologers, stock market gurus, fear mongers or prophets make predictions.”
“Yes, this is the core message of Heterodoxy: neither the economist, nor the deciding individual, can fully pre-specify how people will decide when facing uncertainties and ambiguities that are ontological facts of the way the world works.”
“I understand, it's ontological, ignoramus et ignorabimus as du Bois-Reymond always said. But this physicist could at least tell me how the Quarks and the Universe works. Seems he believed more in Hilbert, the axiomatist.”*
“Heterodoxy is different, you know, we do not lull us into the comforting thought that we know everything and that everything is measurable and we have everything under control. We just admit that we often simply do not know, and that we have to live with that uncertainty as well as it goes.”
“That is indeed quite honest. Like good old Socrates: I know that I know nothing.”
“Yes, and telling this truth is dangerous. Remember, the Athenians poisoned him.”
“Yes, afterward he became the patron saint of all know-nothings. But let us put Socrates aside, he was a gossiping sitcom sophist not a scientist.”
“He could be regarded as a forerunner of Keynesianism. After all, he was well aware that many activities, relations, processes and events are of the Keynesian uncertainty-type.”
“I think I understand uncertainty now, but is there anything heterodox economists know beyond this?”
“Yes, of course, fooling people into believing that one can cope with an unknown economic future is a sure recipe for only one thing — economic catastrophe!”
“That's indeed a bold prediction! But, frankly Lars, I expected that you could help us to prevent a catastrophe. Let me put it more precisely: we have rising unemployment and some economists say that the wage rate must be lowered others say it must be raised.** What, as a spokesperson of the heterodox school, is your take on this age-old chestnut?”
“As Keynes said: we simply do not know and it is better to be vaguely right than precisely wrong.”
“And this was already in 1921 and it is still true.”
“You got it, Phil!”
“Yes, Orthodoxy means knowing nothing and Heterodoxy means being proud of knowing nothing.”
* See Wikipedia
** The average wage rate must rise, see ‘No future for the representative economist’
ICYMI (comment on Jan Milch of Nov 4 on Nov 5)
Lars Syll’s heterodox methodology shares the common sense intuition that economics belongs to the social sciences and that human behavior is the first and foremost issue. This is a methodological cul-de-sac. In order to leave Orthodoxy alone behind the curve, Heterodoxy needs a methodologically superior approach. For details see the following posts.
The Science-of-Man fallacy
From PsySoc to SysHum
Getting out of mumbonomics
PsySoc — the scourge of economics
You say “... when it comes to the Core-thinking in Economics (and other social sciences) I sadly can’t say much more, than that it’s been more of regression than progress, with few exceptions for much too long.”
Yes, and here are the reasons why
Are economists methodological retards?