April 8, 2016

From mathiness to empiriness: forget it!

Comment on Noah Smith on ‘A new age of econ imperialism is coming’

Blog-Reference

Since Adam Smith, economists are too incompetent for science but smart enough to borrow manners and tools from successful disciplines. The result comes as no surprise: “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)

Pure economic theory in all variants from General Equilibrium to RBC and DSGE, and from Keynes to post-Keynesianism, is a failure. Yet, science consists of TWO elements: “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)

Eureka! there seems to be a way out of the impasse: fact-free model bricolage has not worked, so let us try the theory-free application of sophisticated statistical tools. True to form, economists mess it up again, because the ONLY way to get out of a failed approach is a paradigm shift.

But, the fact of the matter is: “A new idea is extremely difficult to think of. It takes a fantastic imagination.” (Feynman, 1992, p. 172) Economists lack scientific imagination since Adam Smith, but they are just smart enough to use tools that have been developed elsewhere.

Economists have no clue at all about what the new paradigm could look like: “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)

To apply the latest powerful statistics package on the latest powerful hardware is NOT a paradigm shift. It is just another dog and pony show for the general public, signaling ‘we are at the forefront of research’. This is tried and tested crisis communication since the gold makers: Yes, sadly, the last big idea exploded into our face as all the others before, but NOW the breakthrough is just around the corner.

For everybody who is aware of economists’ track-record of consistent failure Noah Smith’s hallucination of future triumph is an empty promise/threat that can merely serve as pep-talk for disoriented losers.

The economics paradigm shift will not come from scientifically retarded people who expose themselves with “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point” (Krugman).

Dear sociologists, you have nothing to fear. Economists cannot tell until this day how the economy works and you can beat them on their own turf before they even get their new age pants on (2015).

Egmont Kakarot-Handtke


References
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.
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
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.

Immediately following 'New age economics in ten bullet points'.