February 1, 2016

Heterodoxy and the nullity of dead horse beating

Comment on ‘Revealed preference and the fundamental flaws of conventional economics’

Blog-Reference and Blog-Reference

On multiple threads, Asad Zaman deals with the fundamental flaws of orthodox economics. This well-intentioned action, though, has the side-effect of keeping the Naked-Emperor-Zombie alive.*

Zaman wastes much time with refuting what has been refuted some time ago. He gives this reason “When the errors of the conventional approach become as obvious as the error in ‘2+2=5’ we will not waste time coming up with new proofs that this is a fallacious calculation.” And then he beats these dead horses again:

• Positivism,
• General Equilibrium Theory,
• utility theory,
• theory of the firm,
• price theory, i.e. supply-demand-equilibrium,
• revealed preference theory.

Now, the problem is this: all this methodological junk is already around for some time “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)

And here is the crux: construction never happened. Asad Zaman does not understand the proper task of Heterodoxy. It is necessary but not sufficient to expose the errors and blunders of Orthodoxy. Having done this once, the only worthwhile task is construction, or, to paraphrase the great economist and methodologist J. S. Mill: ‘Doubtless, the most effectual mode of showing how the science of Economics may be constructed, would be to construct it.’ (2006, p. 834)

This should be a relatively straightforward task after we know since more than 140 years what the fundamental flaws of Orthodoxy are, viz. (i) economics is not a science of individual or social behavior,** and (ii) there is no such thing as an equilibrium in the economy.***

Economics is about how the economic system works and neither Orthodoxy nor Heterodoxy has any idea of it.

Egmont Kakarot-Handtke

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.
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.

* See ‘How Heterodoxy keeps the Naked-Emperor-Zombie alive
** For details see cross-references ‘Not a science of behavior
*** See ‘How to restart economics

For details of the bigger picture see cross-references