March 8, 2016

Economics and the social science delusion

Comment on Maria Alejandra Madi on ‘The formal and the substantive meanings of “economics”’


Economics is a failed science. This means more specifically: Orthodoxy has failed to produce anything of real scientific value and Heterodoxy has failed to develop a superior alternative.

Quite naturally, there are many ideas about causes and cures: “There is another alternative: 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)

Let us face reality: economists have proven their scientific incompetence over more than 200 years and have no clue about how to proceed. Until this day, the representative economist cannot tell what profit is and what the essential difference between profit and income is and what this means for growth/boom/bust.

Since Adam Smith, economics claims to be a science. It started as a mixture of sociology and political science: “The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, ...” (Mill, 1874, V.39)

Right from the beginning, economists saw themselves as agenda pushers for some greater good and science as a means to that end. The idea of pure science, i.e. the free and independent pursuit of knowledge, never occurred to these storytellers and propagandists.

With the Marginalists the focus shifted to methodological individualism and economics became a mixture of dilettantish psychology, sociology, and political science.

The red thread of the history of economic thought is that both orthodox and heterodox economists regarded economics as a social science. This is why they both failed.

Economics is NOT a science of individual/social/political behavior — this is the social science delusion — but of the behavior of the monetary economy . All Human-Nature issues are the subject matter of other disciplines (psychology, sociology, anthropology, biology/ Darwinism, political science, social philosophy, history, etcetera) and are taken in from these by way of multi-disciplinary cooperation.

The contributions of sociologists/historians/etc are valuable for economics but social scientists are, strictly speaking, out of economics. Economists have to answer the question how the monetary economy works. Until now they cannot even answer the question of what profit is (2015). And, of course, Karl Polanyi cannot answer it either.

Egmont Kakarot-Handtke

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). How the Intelligent Non-Economist Can Refute Every Economist Hands Down. SSRN Working Paper Series, 2705395: 1–6. URL
Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On the Definition of Political Economy; and on the Method of Investigation Proper To It. Library of Economics and Liberty. URL

Related 'Economists’ three-layered scientific incompetence' and 'The happy end of the social science delusion' and 'The Science-of-Man fallacy'.