December 13, 2015

History and the identity problem of economics

Comment on ‘History and Economics’


Peter Radford summarizes “Sorting all that out is what historians do well. Rediscovering the past is hard work. It is a lot more difficult than developing rational choice theory for instance. The one has to deal with ambiguities or uncertainties and tease them apart. The other simply assumes them away.
A richer economics has room for both. It is after all about the behavior of human beings.”

Economics is not at all about the behavior of human beings. Psychology and sociology is about the the behavior of human beings.* Economics is about the behavior of the economy.

Economics is not a social science like sociology and not a natural science like physics but a system science.

Neither orthodox nor heterodox economists got this point. Rational choice theory, for example, is not economics at all, it is a scaring example of amateur psychology.

The blatant methodological blunder of Orthodoxy consists in taking the green cheese behavioral assumption of constrained optimization into the set of foundational propositions, aka axioms. Because of this the whole neoclassical axiom set is untenable and this explodes the whole theoretical superstructure.**

Because economics is not a social science no behavioral assumption whatever must appear in the foundational propositions of economics (Hudík, 2011). The explanation for the manifest lack of success of Heterodoxy in replacing Orthodoxy is that it suffers from the social science delusion just as Orthodoxy.

The second delusion is that history deals with plain facts while theory takes place in some Platonic parallel universe. Suffice it to remind oneself that historians could not establish beyond reasonable doubt in more than 2000 years whether Jesus existed or not. As a matter of fact, history consists largely of a pointless speculation about nonentities and nonevents. Not to forget that historians have devoted and still devote a considerable part of their ingenuity and energy on the production of ‘historical facts’.

If Peter Radford means with “A richer economics has room for both” that waffling about utility maximization and storytelling about the Medicis and medieval banking can coexist, then he is in full accordance with experience. If he means with richness more scientific knowledge about the actual economy, then he is certainly mistaken.

It is a historical fact, that, taken as a whole, historical reality as uncovered/produced by historians is less real than theoretical reality as uncovered/produced by scientists.

The role of history is to gather the facts and the data that are necessary for testing economic theories. To lecture about economic methodology is not the historian's job.

Egmont Kakarot-Handtke

Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.

* See ‘PsySoc— the scourge of economics’ and ‘The Science-of-Man fallacy’ and ‘From PsySoc to SysHum
** See ‘How economists became the scientific laughing stock