Blog-Reference and Blog-Reference
Economics is a failed science and the ultimate cause is the proven multi-generation scientific incompetence of economists. Since Adam Smith economists have not grasped what science is all about — despite the fact that it is unambiguously defined: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant, 1994, p. 31)
It is always BOTH, logical AND empirical consistency and NOT either/or. This is the critical hazard: instead of keeping the balance on the high methodological tightrope the incompetent researcher tumbles down either on the side of vacuous deductivism or on the side of blind empiricism. What the history of economic thought clearly shows is a pointless flip-flop between fact-free model bricolage and theory-free application of statistical tools or, worse, commonsensical stylized-facts storytelling.
So it comes as no surprise that, after the proven failure of maximization-and-equilibrium economics, it is again the turn of ‘empirical revolution’ (See intro). Needless to emphasize that this is just another instant of scientific incompetence because methodologically the theoretical revolution must precede any empirical revolution: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug, 1998, p. 703)
Walrasianism, Keynesianism, Marxianism, and Austrianism is logically inconsistent or empirically inconsistent or both (2015).
Always when economics is in open crisis four reactions are to be observed: (i) self-delusional denial, (ii) back pedaling and relativization, e.g. ‘economics is not a Science with a capital S’ (Solow), (iii) admission of the most noticeable flaws with the reassurance that our best brains are already working on them, (iv) clueless actionism and innovation showbiz.
The two main pseudo-innovations consist of borrowing from either evolution theory or from the latest vintages of physics (complexity, networks, chaos, non-linearity, thermodynamics, disequilibrium, information, emergence, etc.). The actual confused state of these misdirected approaches may be gleaned from The Journal of Evolutionary Economics and from the EconoPhysics blog.
Mindless copying/borrowing is the characteristic of what Feynman famously characterized as cargo cult science. Neither evolution theory nor EconoPhysics is the way forward. Economics has to redefine itself in a genuine paradigm shift. In very general terms, the methodological revolution consists in the switch from behavior-centered bottom-up, i.e. subjective microfoundation, to structure-centered top-down, i.e. objective macrofoundation (2014).
First of all, the orthodox set of axioms (Weintraub, 1985, p. 109) has to be fully replaced.* Nothing short of a theoretical revolution, a.k.a. paradigm shift, will do. Needless to stress that the superior paradigm has to be logically AND empirically consistent. After more than 200 years of failure and Noah Smith’s latest methodological wind egg economics needs the true theory — fast.
Blaug, M. (1998). Economic Theory in Retrospect. Cambridge: Cambridge University Press, 5th edition.
Kakarot-Handtke, E. (2014). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.
Weintraub, E. R. (1985). General Equilibrium Analysis. Cambridge, London, New
York, NY, etc.: Cambridge University Press.
* For details see the post ‘From Orthodoxy, to Heterodoxy, to Sysdoxy’ and cross-references Paradigm shift
Related 'Toward the true economic axioms' and 'Low-IQ economics: the beginner’s guide'.
REPLY to Tom Brown on Mar 21
Specifically, I propose to test the structural-axiomatic employment equation/Phillips curve (33) of the working paper ‘Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster’ because of its overriding importance for improving the actual employment situation.
Immediately following post 'How to get out of the morass of ignorance'.