Blog-Reference and Blog-Reference on Feb 27
A theory cannot be dismissed because it cannot predict the future. Therefore, as a matter of principle, economics from Jevons/Walras/Menger to DSGE cannot be dismissed because it has not predicted crises. Neoclassics is unacceptable because it is logically and empirically inconsistent. In more colloquial terms, all models that have been built and are still being built upon the maximization-and-equilibrium axioms have to be rejected straightforwardly as scientific garbage and not for any other reason.
Who in all history has been preoccupied with prediction? Mainly two groups, (i) prophets, doomsters, apocalyptics, fear mongers, gurus, utopians, astrologers, Pythia and other oracles, rise-and-fall historians/sociologists, politicians, and (ii), people who want to make a killing in the casino of Monte Carlo or on the stock-market.
No scientist is occupied with the prediction of historical events because it is long known that “The future is unpredictable.” (Feynman, 1992, p. 147)
The point is that scientists use the word prediction in a quite different sense from everyday usage. For example, Einstein deduced gravity waves from his theory in 1916 and in our days, 100 years later, they are observed. Only in the very specific sense of ‘testable hypothesis’ scientists make a ‘prediction’.
All this is well-known among methodologists: “We are very far from being able to predict, even in physics, the precise results of a concrete situation, such as a thunderstorm, or a fire.” (Popper, 1960, p. 139)
So Arrow’s argument that long-run weather forecasts are pointless is not a great revelation but an additional proof that neoclassical economists never understood what science is all about. And just because of this, economics has never been anything else than a cargo cult science. This, too, is well known: “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)
In the sense of a self-description, the Keynesian “we simply do not know” applies to economists since more than 200 years. That economists are incompetent scientists that much we know for sure — and it holds with absolute certainty for both orthodox and heterodox economists.
So we can predict that nothing of real scientific value will ever come from these folks, in perfect analogy to the prediction of physics that pigs will never fly.
Clower, R. W. (1994). Economics as an Inductive Science. Southern Economic Journal, 60(4): 805–814.
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Popper, K. R. (1960). The Poverty of Historicism. London, Henley: Routledge and Kegan Paul.
Related 'Science does NOT predict the future' and 'Prediction does not work? Try retrodiction first' and 'What is dead certain in an uncertain world: economists’ abysmal incompetence' and 'ICYMI Prediction/Forecasting' and 'Uncertainty: ‘Whereof one cannot speak, thereof one must be silent’' and 'Economics: stories, narratives, and disinformation' and 'Why economists have not been effective in economics'.
"There are those who are going to be disappointed when no life is found on other planets. Not I — I want to be reminded and delighted and surprised once again, through interplanetary exploration, with the infinite variety and novelty of phenomena that can be generated from such simple principles. The test of science is its ability to predict. Had you never visited the earth, could you predict the thunderstorms, the volcanoes, the ocean waves, the auroras, and the colorful sunset? A salutary lesson it will be when we learn of all that goes on on each of those dead planets — those eight or ten balls, each agglomerated from the same dust cloud and each obeying exactly the same laws of physics." (Feynman, Wikiquote)
"Suppose that I have an experiment so set up that with the light out I get the interference situation. Then I say that even with the light on I cannot predict through which hole an electron will go. I only know that each time I look it will be one hole or the other; there is no way to predict ahead of time which hole it will be. The future, in other words, is unpredictable. It is impossible to predict in any way, from any information ahead of time, through which hole the thing will go, or which hole it will be seen behind. That means that physics has, in a way, given up, if the original purpose was — and everybody thought it was — to know enough so that given the circumstances we can predict what will happen next." (Feynman, Probability and Uncertainty)