Economists do not understand how the market system works (2015). Every interested non-economist with a modicum of scientific instinct or background in the genuine sciences gets this after reading one of the popular textbooks: “What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work: were it engineering, the bridge would collapse.” (McCauley, 2006, p. 17)*
Because of this, every thinking economist finds himself by default in the heterodox camp. But here only one obvious fact is agreed upon, the rest is blank “As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction.” (Nell, 1980, p. 1)
Construction never happened. Since Veblen kicked off heterodox economics with the question “Why is Economics Not an Evolutionary Science?” Heterodoxy never rose above naive empirical/historical/partial/sociological commonsense analysis and never formulated anything in the way of a general theory of how the monetary economy works.
So, there is nothing to choose. Economics is a failed science. Heterodoxy offers no hope. For lack of an alternative, Orthodoxy vegetates as a scientific zombie (Quiggin, 2010). There is only one way out “... to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990, p. 362)
UnlearningEcon concludes “I think this is a sad state of affairs.” What she/he overlooks is that this applies as well to Heterodoxy. Critique of the secular stagnation of Orthodoxy is justified but not enough; in the longer run it even becomes self-defeating “... we may say that ... the omnipresence of a certain point of view is not a sign of excellence or an indication that the truth or part of the truth has at last been found. It is, rather, the indication of a failure of reason to find suitable alternatives which might be used to transcend an accidental intermediate stage of our knowledge.” (Feyerabend, 2004, p. 72)
What is common to Orthodoxy and Heterodoxy is “a failure of reason to find suitable alternatives.” Because all are agreed “that the point of the criticism is to clear the ground for construction” traditional Heterodoxy has now to get on its feet and become constructive Heterodoxy.
Feyerabend, P. K. (2004). Problems of Empiricism. Cambridge: Cambridge University Press.
Ingrao, B., and Israel, G. (1990). The Invisible Hand. Economic Equilibrium in the History of Science. Cambridge, MA, London: MIT Press.
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
McCauley, J. L. (2006). Response to "Worrying Trends in EconoPhysics". EconoPhysics Forum, 0601001: 1–26. URL
Nell, E. J. (1980). Growth, Profits, and Property, chapter Cracks in the Neoclassical Mirror: On the Break-Up of a Vision, pages 1–16. Cambridge, New York, NY, Melbourne: Cambridge University Press.
Quiggin, J. (2010). Zombie Economics. How Dead Ideas Still Walk Among Us. Princeton, NJ, Oxford: Princeton University Press.
* See also ‘How the intelligent non-economist can refute every economist hands down’
Preceding 'Agenda pushing or science?'
REPLY Nonentity modeling, comment on sam on Jan 25
You correctly argue that “...this doesn’t imply that equilibrium itself is a good modeling assumption.”
Equilibrium does not exist in the economy. It is a nonentity like the Easter Bunny. By consequence nonequilibrium does not exist either.
Because of this, equilibrium cannot be put into the premises of a theory/model. This is not a question of modeling strategy. It is a methodological blunder of the worst sort to take a nonentity into the axiom set.
This, though, is exactly, was Krugman does, that is, “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point”.
All theories/models that are based on maximization-and-equilibrium are false and forever unacceptable. Not to realize this is scientific incompetence.
REPLY Senseless model bricolage, comment on Luis Enrique of Jan 26
You say economists have “many models, which use equilibrium solution concepts, ... ‘disequilibrium processes’ are also done.”
This, indeed, is the very problem because neither equilibrium nor disequilibrium exists in the economy. So, what economists are in effect doing is what the genuine scientist Feynman called cargo cult science which is roughly defined as: The outer form looks like science, but it is not science, and it does not work.
The middle-of-the-road economist is like an engineer who is constructing the next perpetual motion machine. The more intelligent economists realized this, of course, “Suffice it to say that, in my opinion, what we presently possess by way of so-called pure economic theory is objectively indistinguishable from what the physicist Richard Feynman, in an unflattering sketch of nonsense ‘science,’ called ‘cargo cult science’.” (Clower, 1994, p. 809)
Economists are doing all sort of things, except science (2013).
Clower, R. W. (1994). Economics as an Inductive Science. Southern Economic Journal, 60(4): 805–814.
Kakarot-Handtke, E. (2013). Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series, 2207598: 1–16. URL