March 25, 2016

The three fundamental economic laws

Comment on Lars Syll on ‘The non-existence of economic laws’

Blog-Reference and Blog-Reference

You say: “In mainstream economics there’s — still — a lot of talk about ‘economic laws.’ The crux of these laws — and regularities — that allegedly do exist in economics, is that they only hold ceteris paribus.” (See intro)

It is obvious that neither Orthodoxy nor Heterodoxy has found anything that deserves the title of an economic law. This, though, is due to sheer incompetence and not to the non-existence of laws.

Orthodoxy is wedded to methodological individualism. This is the original blunder because there is NO such thing as a BEHAVIORAL law. Because of this, economics never rose above silly behavioral speculation about utility maximization or rational expectations.

“Now, at any rate, we have an explanation for why the assumptions of economic theory about individual action have not been improved, corrected, sharpened, specified, or conditioned in ways that would improve the predictive power of the theory. None of these things have been done by economists because they cannot be done. The intentional nature of the fundamental explanatory variables of economic theory prohibits such improvement.” (Rosenberg, 1992, p. 149). In short, economists bark since more than 140 years up the wrong tree.

The point most economists cannot get their head around is that there are NO behavioral laws but that there are SYSTEMIC laws. The three fundamental laws of the monetary economy are:

The First Economic Law
The Profit Law
The Law of Supply and Demand

For the consistent derivation see the working paper ‘Objective Principles of Economics’ or ‘Economics for Economists’.

Systemic laws are composed of measurable variables and therefore are straightforwardly testable. All those who claim that there are no economic laws are invited to refute the systemic laws.

Egmont Kakarot-Handtke


References
Rosenberg, A. (1992). Economics - Mathematical Politics or Science of Diminishing Returns? Chicago, IL: University of Chicago Press.