April 15, 2016

Economics is NOT a science of behavior (IV)

Comment on Lars Syll on ‘Reinhard Sippel’s modern classic’


Most economists have not yet realized that economics is NOT a science of Human Nature/ motives/behavior/action — not of individual behavior, not of social behavior, not of rational behavior, not of irrational behavior (Hudík, 2011). All these issues belong entirely to the realms of psychology, sociology, anthropology, political science, history, etcetera.

Because of this, there is NO use at all to criticize or test utility maximization or revealed preferences or demand functions and all the marginalistic rest. This is simply brain-dead stuff.

What economists should know instead is what profit is. They do not, as the Palgrave Dictionary sums up: “A satisfactory theory of profits is still elusive.” (Desai, 2008, p. 10)

This means: to this day neither the Walrasian, nor the Keynesian, nor the Marxian, nor the Austrian sect can tell the difference between income and profit. Hence, they fail to capture the essence of the market economy (2015). By consequence, their economic policy guidance is worthless or even counter-productive.

It is NOT the task of economists to dabble in the so-called social sciences. The subject matter of economics is the economy. Economics is a system science and neither orthodox nor heterodox economists have realized that they are still caught in the wrong paradigm. To refute Samuelson’s revealed preference theory is like refuting the 17th epicycle of the geocentric theory.

Generally speaking, the way out of the cul-de-sac consists in the move from false Walrasian microfoundations and false Keynesian macrofoundations to objective-systemic macrofoundations.

Egmont Kakarot-Handtke

Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave Macmillan, 2nd edition. URL
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Profit. SSRN Working Paper Series, 2575110: 1–18. URL

Related 'Economics is NOT a science of behavior (I)' and 'Profit and the collective failure of economists' and 'A social science is NOT a science but a sitcom' and 'The real problem with the economics Nobel' and '10 steps to leave cargo cult economics behind for good' and 'First Lecture in New Economic Thinking'. For details of the big picture see cross-references Not a science of behavior and cross-references Paradigm shift.