January 14, 2016

Are economists natural born scientific failures?

Comment on ‘Is mainstream academic macroeconomics eclectic?’

Blog-Reference and Blog-Reference and Blog-Reference Dec 15

Science was already well-established, yet the economic founding fathers were slow to realize that scientific standards and political popularity are different things.

“But he [A. Smith] had no such ambitions; in fact he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter, 1994, p. 185)

Storytelling worked fine but progressively economics looked rather retarded compared to the genuine sciences.

“The backward state of the Moral Sciences [i.e. political economics] can only be remedied by applying to them the methods of Physical Science, duly extended and generalized.” (Mill, 2006, p. 833)

Economists never really understood what science is all about but they understood quite well that they had to repackage their stuff in order to progress from the soap box to academia. This is how the greatest methodological simulation of all times started (Mirowski, 1995). It duly ended in what Feynman readily identified as cargo cult science.

Cargo cult science is defined as “The form is perfect. ... But it doesn’t work.” (Wikipedia)* Dilettantes always fall for the outer form.

How, then, do the genuine sciences work? “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)

As a consequence, theories/models that are found to be formally or materially inconsistent have to go out of the window. This Iron Rule of scientific methodology, though, had been tacitly suspended, as Morgenstern reminded his colleagues “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (1941, pp. 369-370)

Nothing has changed since the 1940s; logical and material inconsistency is simply filibustered away. Because economists never satisfied the standards of science they had to lower them successively to anything goes, pluralism, or eclecticism, that is, to the peaceful coexistence of false theories. This is why we have Walrasianism, Keynesianism, Marxianism, and Austrianism — and all of them are provable false.

Wren-Lewis sells abject failure as merit. The methodological fact of the matter is that economists have until this very day no idea of what the crucial difference between the elementary concepts income and profit is. As the Palgrave Dictionary summarizes “A satisfactory theory of profits is still elusive.” (Desai, 2008, p. 10)**

In plain words this means that economists have no idea of the pivotal phenomenon of their discipline. Which means in turn that they have no idea of how the economy works. But they have a heap of incoherent and contradictory models. In economics, everything and the exact opposite has already been said and because of this, no matter what happens in the economy, some economist has modeled it long ago or is in the very process of doing so. This is not how science works.

Economists are scientifically incompetent. All models, including all variants of DSGE, are false because they are based on an inconsistent definition of income/profit and take plain nonentities like equilibrium, constrained optimization or rational expectation into the axiomatic foundations.***

No scientist will ever accept Walrasianism, Keynesianism, Marxianism, or Austrianism. These approaches are logically and/or empirically refuted. They cannot be enlarged or improved, only abandoned.****

Egmont Kakarot-Handtke


References
Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave Macmillan, 2nd edition. URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.
Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected View of the Principles of Evidence and the Methods of Scientific Investigation, volume 8 of Collected Works of John Stuart Mill. Indianapolis, IN: Liberty Fund.
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Morgenstern, O. (1941). Professor Hicks on Value and Capital. Journal of Political Economy, 49(3): 361–393. URL
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford University Press.

* Wikipedia
** See ‘How the intelligent non-economist can refute every economist hands down
*** See ‘Addendum to “Musings on Whether We Consciously Know More or Less
than What Is in Our Models”
**** See ‘The future of economics: why you will probably not be admitted to it,
and why this is a good thing