May 30, 2016

End of confusion

Comment on Asad Zaman on ‘Economists confuse Greek method with science’


(i) You say: “Feynman agrees that if we have a complete valid body of knowledge, it may be possible to axiomatize it, but this is not true today.” False. Feynman makes the distinction between context of discovery where the axiomatic-deductive method plays NO role and the context of justification, where it plays a DECISIVE role. This is an ongoing mutually dependent process and NOT either/or—all/nothing. Newton famously axiomatized the Theory of Motion and did not wait until the body of physical knowledge was complete. The same holds a fortiori for the ancient Greeks and THIS was the ultimate reason why they got science off the ground.

(ii) Indeed, it can be very hard to distinguish between unobservables and nonentities. Gravity is a case in point, so are the ether, phlogiston, or quarks. But eventually gravity could be expressed in a testable formula while phlogiston could not. Nowadays, all scientists agree that angels, superman, and the Easter Bunny are nonentities. As far as economics is concerned we can agree that utility, constrained optimization, perfect foreknowledge, well-behaved production functions or supply-demand-equilibrium are nonentities like the Easter Bunny. Because the axiomatic foundations of Walrasianism contain several nonentities standard economics is storytelling and NOT science.

(iii) You say: “The distinction that I am trying to make here is between IDEOLOGY and SCIENCE. Economics is an ideology — there is a commitment to a methodological framework of rational and optimizing behavior, methodological individualism and some others which MUST BE MAINTAINED regardless of massive empirical evidence to the contrary.” False. The very essence of science is to ABANDON theories that are logically or empirically inconsistent. Therefore, the task of Heterodoxy is to REPLACE the already refuted Walrasian axiom set with the correct heterodox axiom set which contains exclusively objective concepts/entities and enables the derivation of testable propositions about how the economy works. Science is about PROOF and therefore the very opposite of ideology/belief/ wishful thinking/credibility/storytelling/hallucination. Political economics is scientifically worthless and this holds for Orthodoxy and Heterodoxy.

(iv) Boiled down to the essentials, what we have is this “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). Heterodoxy has to abandon this false starting point and to reconstruct economic theory consistently from an entirely NEW starting point which does NOT contain maximization-and-equilibrium. This is called a paradigm shift and it consists in the move from microfoundations to MACROFOUNDATIONS.

(v) The problem of economics is twofold: (a) The scientific incompetence of Orthodoxy consists in sticking to the Walrasian axioms despite the fact that they are logically and empirically indefensible, and (b), the scientific incompetence of traditional Heterodoxy consists in “a failure of reason to find suitable alternatives” (Feyerabend).*

Summary: Economics is a failed science and Asad Zaman neither identifies the ultimate cause correctly nor has he any idea how to get out of the mess.

Egmont Kakarot-Handtke

* See ‘Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist’ and ‘Objective Principles of Economics’.

Immediately preceding post 'The consistent ancients and the confused moderns'.