June 5, 2016

Economics reading: a kind of mental bulimia

Comment on Peter Radford on ‘Gordon, McCloskey and growing pains’

Blog-Reference

You say: “Economists actually do think they know something about economics. Whether they know much about economies is the open question. This is because the relationship between economics and real life economies is somewhat vague.” (See intro)

You speak of economists as if heterodox economists were no part of it. The fact of the matter is that BOTH orthodox AND heterodox economists do not know how the actual economy works (2014a; 2015).

Yes, neoclassical growth theory is rubbish, but McCloskey is no alternative, she is firmly trapped in rhetoric, storytelling, sociology, history, and still thinks that economics is a social science. Urgent update: the so-called social sciences are what Feynman called cargo cult sciences.

Yes, economics is a failed science, but Heterodoxy is an integral part of it. The scientific incompetence of traditional Heterodoxy consists in “a failure of reason to find suitable alternatives” (Feyerabend).*

You say: “It is simply not possible to explain growth without reference to its context: the cultural, institutional, political, social, and geographic factors that enabled it to take root.”

Yes, but the cultural, institutional, political, social, and geographic factors are the subject matter of OTHER sciences and have to be imported by way of multidisciplinary cooperation. The subject matter of economics proper is the economy as a complex system. So economics has to refocus itself and has to leave all subjective/behavioral/human nature issues to psychology, sociology, history, political sciences, etc. and to focus on the objective systemic properties of the (world-) economy.

Orthodoxy has failed at this task because it is predicated on methodological individualism. In Krugman’s words “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” Indeed, from this starting point NO way leads to the correct theory of economic growth. Historians on the other hand are not equipped with the true economic theory and because of this they, too, cannot understand economic growth.

The result of devouring economics junk is: “No wonder I have a headache and have nothing to say.” At this point, the fault of Heterodoxy is to throw in the towel. The correct way is this: “If we feel misgivings ... all we have to do is to start appropriate research. Anything else is pure filibustering.” (Schumpeter, 1994, p. 577)

Perhaps it is time now to switch from the proto-scientific orthodox and heterodox garbage to the real scientific stuff (2014b).

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014a). The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? SSRN Working Paper Series, 2511741: 1–23. URL
Kakarot-Handtke, E. (2014b). The Synthesis of Economic Law, Evolution, and History. SSRN Working Paper Series, 2500696: 1–22. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford University Press.

* For details see cross-references Heterodoxy