February 3, 2016

Economists are a menace to their fellow citizens

Comment on Mark Thoma on ‘Economics is Changing’


“Apologetics may be a laudable objective. Its practical importance is unquestioned. People need to be shown that the institutions of their own society are good, those of others bad. But there is no place for apologetics in science. Scientific economics inquires only into the How and Why, not into the Good or Bad, of what is. From the scientific point of view preoccupation with Good and Bad is worse than useless since it not only fails to illumine anything but keeps the lightbeam of inquiry from being turned in directions where answers to significant questions can be found.” (Murad, 1953, p. 2)

To speak of economics tout court is always misleading because there is political and theoretical economics and there is storytelling and something like the true theory.

The crucial distinction is: (i) The goal of political economics is to push an agenda, the goal of theoretical economics is to explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, scientific standards are observed. The standards are well-defined as material and formal consistency.

Theoretical economics has to be judged according to the criteria true/false and nothing else. The criteria of political economics are good/bad or like/dislike. Economics started as Political Economy, never got out of this blind alley despite Jevon’s redefinition, and has produced nothing of real scientific value in the last 200 years. Economics is a failed science or what Feynman called a cargo cult science. The latter is roughly defined that the outer form looks like science, but it is not science, and it does not work.#1

“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)

Economists have no true theory but they have opinions and they change these opinions as soon as they are no longer accepted because they are too much at odds with reality or with current political opinion. These changes, though, are cosmetic because the foundational propositions, a.k.a. axioms have been the same for more than 150 years “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point” (Krugman). The neoclassical set of axioms is methodologically inadmissible and has to be fully replaced.#2

Economists have no true theory because they are incompetent scientists. The profit theory is provably false since Adam Smith (2014) and neither Walrasians, Keynesians, Marxians, nor Austrians have realized it to this very day.#3

Because economists do not have the true theory but propagate provably false theories/ models they violate scientific standards on a daily basis (2013).

There is no use in cosmetically changing provably false theories (Walrasianism, Keynesianism, Marxianism, Austrianism, MMT). False theories give rise to ineffective or even counterproductive economic policies. Hence, scientifically incompetent economists bear the intellectual responsibility for the social devastation of unemployment or financial breakdown.

Better to refer the whole lot without further ado to the depressing history of intellectual aberration a.k.a. history of economic thought. Joan Robinson defined real change thus "Scrap the lot and start again."

Mark Thoma is defending the indefensible.

Egmont Kakarot-Handtke

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
Kakarot-Handtke, E. (2014). The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? SSRN Working Paper Series, 2511741: 1–23. URL
Murad, A. (1953). Questions for Profit Theory. American Journal of Economics and Sociology, 13(1): 1–14. URL
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge: MIT Press.

#1 Wikipedia
#2 The creative destruction of Wren-Lewis
#3 How the intelligent non-economist can refute every economist hands down

Related 'Economists’ three-layered scientific incompetence' and 'Econogenics: economists pose a hazard to their fellow citizens'

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