April 14, 2016

Economics: ‘a tale told by an idiot ... signifying nothing’

Comment on Brad DeLong on ‘More Musings on the Fall of the House of Uncle Milton’


A fatal problem of economics in particular is that the format of communication is predetermined by the operational specifics of the entertainment industry, that is, all communication must take the form of an interesting story or a sitcom controversy full of sound and fury. The all-decisive criterion in the realm of entertainment is like/dislike and not true/false as it is in science.

Economics always claimed to be a science. Clearly, political economics from Marx to Keynes to Hayek to Friedman never was, it has been politics using and abusing economic theory to push an agenda. But some day in the history of economic thought economists left science altogether and became part of the entertainment industry. Thinking, of which there was never much in the first place, has now been entirely replaced by storytelling and gossip.

Accordingly, Krugman and DeLong present the history of Monetarism/Keynesianism in sitcom terms as funny encounters of the known characters uncle Milton, aunt Rand, the gold-bugs, Austrians, and ‘the Lucases and the Prescotts and the Cochranes and the Famas and the Boldrins and the Levines and the Steils and the Taylors and all the others and even the Zingaleses’.

There is not much to say about mumbonomics except for the fact that economists still uphold the claim that they are doing science. How so? Krugman explains: “Hicksian macro — IS-LM or something like it — remains an extremely useful tool of both analysis and policy formulation.” (See intro)

Not so! ALL I=S/IS-LM models are provable false since Hicks; and Krugman has not gotten the point until this day.* Provable means that this is not a matter of taste or opinion or wish-wash, but of straightforward mathematical proof.

The economy is a rather abstract entity and its working is not visible to the naked eyes. What is needed to get reality into focus is the third eye of theory. Scientific abstraction, though, is not exactly the business of the entertainment industry, but uncle Milton and storytelling Paul and gossiping Brad are.

With Friedman and the Chicagoans economics has been at the level of low-IQ political blather of Hayekian descent but over the years the Pauls and Brads have morphed it into pure Circus Maximus.

Remains only one thing to do: to expel economics officially from the sciences.

Egmont Kakarot-Handtke

* See ‘Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It

Related 'Econ 101 or How to train morons' and 'If You Meet the Storyteller on the Road, Kill Him'.