This is the consensus to start with: economics is a failed science. The main reason is that the representative economist never had a proper understanding of what science is all about. This lack of understanding gave rise to the following definition of standard economics: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” (Arrow, 1994, p. 1)
This touchstone is subject to the Slutzky-Critique: “... if we wish to place economic science upon a solid basis, we must make it completely independent of psychological assumptions and philosophical hypotheses.” (quoted in Mirowski, 1995, p. 362)
And this quite naturally leads to the correct definition of economics: “It is a touchstone of accepted economics that all explanations must run in terms of objective and testable structural relationships. Our behavior in judging economic research, in peer review of papers and research, and in promotions, is governed by the criterion that the explanation of the evolving monetary economy, and the numerous embedded sub-units, must be consistently derived from a set of elementary structural propositions.
Economics pushes no agenda whatsoever and applies/accepts exclusively the scientific criterion true/false and neither good/bad nor like/dislike nor useful/useless nor any other social or political criterion. From this follows immediately that subjective/behavioral/ psychological/sociological/political approaches like Walrasianism, Keynesianism, Marxianism, Austrianism are ruled out as proto-scientific.”
The criterion true/false is in turn based on formal and material consistency: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant, 1994, p. 31)
Material consistency is secured by the application of well-defined statistical methods. Logical cohesion is secured by the axiomatic-deductive method. This method presupposes a set of clearly stated premises. To determine this set is the all-decisive task as every economist knows from the great methodologist among the founding fathers: “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.” (J. S. Mill, 2006, p. 746)
Approaches that cannot lay out their foundational premises unambiguously or apply obvious NONENTITIES like constrained optimization or equilibrium are a priori hopeless, methodologically inadmissible, and cannot be admitted to a serious economic discussion. They fall into the categories of political economics, storytelling, propaganda, entertainment, or nuisance.
The propositions to start with must relate to the monetary economy as a whole and not to individual/social behavior. An example of structural axiomatization has been submitted for scrutiny (2014). Serious alternatives are NOT known at the moment.
Therefore, all preconditions for the indispensable Paradigm Shift are met. Economics can leave Walrasianism, Keynesianism, Marxianism, and Austrianism safely behind in the eternity of oblivion.
“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum, 1991, p. 30)
After more than 200 years of flat common sense and silly model bricolage, the time has come for the true economic theory.
Arrow, K. J. (1994). Methodological Individualism and Social Knowledge. American Economic Review, Papers and Proceedings, 84(2): pp. 1–9. URL
Kakarot-Handtke, E. (2014). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.
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 J. S. Mill. Indianapolis: Liberty Fund. URL
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge: MIT Press.
For details see Paradigm Shift and New Curriculum