Blog-Reference and Blog-Reference and Blog-Reference on Jul 2 adapted to context
Mark Thoma summarizes: “In recent years the public has lost faith the in the economics profession. One reason for the lack of faith is the failure to predict the Great Recession, but the public’s dismissal of macroeconomists is based upon more than the failure to foresee the dangers the housing bubble posed for the economy.”
This, of course, is a misleading explanation. It rests on a misunderstanding of what economics is and what science is. First of all, science does NOT ‘predict the future’ because as a genuine scientist said: “The future is unpredictable.” (Feynman, 1992)
What is called prediction in science is categorically different from the commonsensical meaning of ‘predicting the future’. The sole criterion of science is true/false and not predicting the next crash or any other extraordinary event. This is the job of prophets, fear mongers, astrologers, gold bugs and other freaks/swindlers. In marked contrast, science is about invariants or timeless laws.
The problem with economics is not commonsensical prediction but that it is NOT a science yet pretends to be one. It is of utmost importance to clearly distinguish between political and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, scientific standards are observed.
Theoretical economics has to be judged according to the criteria true/false and NOTHING else. The history of political economics from Adam Smith onward can be summarized as an utter scientific failure. A closer look at what is naively called economics as if it were a homogeneous entity shows that theoretical economics has been captured by the agenda pushers of political economics. Smith and Ricardo fought for Liberalism, Marx and Keynes were agenda pushers, so were Hayek and Friedman, and so are Krugman and Varoufakis.
As a consequence, what we actually have is Walrasianism, Keynesianism, Marxianism, Austrianism, and all four are false. This has NOTHING AT ALL to do with faith, trust or credibility but with PROOF.
Economics started as Political Economy. It tried to become a science but failed. The ultimate reason is scientific incompetence. However, the fact of the matter is that the general public cannot assess scientific competence and has to fall back on all sorts of proxies like published opinion or authority.
There is one thing that economists can immediately do to correct false expectations. Let us call this the scientific exit or Sexit for short.
The rules of conduct of the scientific community demand that the actual state of economics is at all times unambiguously communicated to the general public. This implies, as the VERY FIRST step, that the word sciences is deleted from the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.
Economists cannot be accused of being incapable of ‘predicting the future’ but of falsely claiming to do science. What can legitimately be demanded of Thoma and the majority of economists is to retire as soon as possible because of PROVEN scientific incompetence.
Related 'Free the academy from economics' and 'Here it comes: the Sexit' and 'The irrelevance of economics' and 'Political economics: as worthless as ever'.
You say “I’m not quite sure what you mean.”
Science is well-defined since more than 2000 years: “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)
According to the criteria of material/formal consistency Walrasianism, Keynesianism, Marxianism, Austrianism is PROVABLE false. Because of this, economics is OUT of science. Which part of OUT do you not understand?
You write: “The central argument of Keynes’ General Theory is that classical economists put the cart before the horse in assuming that the economic progress is driven by savings and investment.”
Keynes was a busy agenda pusher but not a profound thinker. He defined the formal core of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, p. 63)
This two-liner is conceptually and logically defective because Keynes never came to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al., 2010, p. 12)
Let this sink in, Keynes had NO idea of the fundamental concepts of economics, viz. profit and income. Because profit is ill-defined the whole theoretical superstructure of Keynesianism is false, in particular, ALL I=S/IS-LM models.
Neither Post Keynesians nor New Keynesians nor Anti-Keynesians have realized Keynes’ logical blunder until this day (2011; 2014). Your RWER article shows that you, too, are way behind the curve.*
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. London, Basingstoke: Macmillan.
Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL
* See also cross-references
Related 'Why should people trust failed scientists?' and cross-references Incompetence.