July 9, 2016

Enough! Economists, retire now!

Comment on Lars Syll on ‘Krugman’s dangerous lack of methodological reflection’

Blog-Reference

(i) There is Orthodoxy with microfoundations and it has been nicely defined by Krugman: “... most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” #1

(ii) Methodologically, these premises are forever unacceptable. #2

(iii) When the premises/axioms/foundational propositions are false or contain nonentities the WHOLE theory/model/superstructure is false. Because of this, there is NO need to check the theoretical superstructure or the policy conclusions of Neoclassics in great detail.

(iv) Hydra Rule: It is not only a waste of time to fight the countless heads of the beast and to decapitate them one by one but de facto counterproductive. #3 The only effective method of refutation is to go directly to the heart of the matter, i.e. to the axioms.

(v) Neoclassical policy proposals have NO sound theoretical foundations. However, because many details/add-ons/illustrations of a longer and mixed argument are accurate, commonsensical, tautological, approximately true on a small/micro scale, credible, or part of the unquestioned social belief system, the general public cannot see that there is a TOTAL DISCONNECT between an economic policy proposal and the underlying theory. Just as there is a total disconnect between poultry entrails and the utterances of the haruspex which guided ancient Roman policy. #4

(vi) The Disconnect Generalization: ALL economic policy arguments of Walrasians, Keynesians, Marxians, and Austrians are hanging in midair and are scientifically unfounded.

(vii) The only general statement that can be made with certainty about human behavior is that it is target-oriented. Targets, though, are dependent on expectations. Expectations in turn are almost instantaneously adaptable, only loosely connected to objective reality, emotionally inflated, and subject to sudden changes which are transmitted with high speed between individuals. Because of ONTOLOGICAL UNCERTAINTY of expectations and by implication targets there can be NO such thing as a behavioral axiom. Axioms must be certain, or as Aristotle put it, certain, true, and primary.

(viii) Because human behavior cannot be axiomatized, the microfoundations program has already been dead in the cradle 140 years ago.

(ix) Keynes started the macrofoundations research program in the General Theory formally as follows: “Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment.” These formal foundations are conceptually and logically defective because Keynes never came to grips with profit (2011; 2012).

(x) Because of this, the macrofoundations approach (including After-Keynesianism, Post Keynesianism, New Keynesianism, and all I=S/IS-LM models) has already been dead in the cradle 80 years ago.

Review of the Troops. Provable false
• profit theory, since more than 200 years,
• microfoundations, since 140 years,
• macrofoundations, since 80 years,
• application of elementary (2012) and high powered mathematical tools, since apprx. 100 years. #5

ALL models that contain maximization-and-equilibrium or I=S are a priori false and this is more than 90 percent of the content of peer-reviewed economic quality journals and 100 percent of textbooks of renowned authors.

(xi) No more proof of scientific incompetence is needed. Remains only one question for society: how to get rid of the ‘throng of superfluous economists’. #6

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2012). The Common Error of Common Sense: An Essential Rectification of the Accounting Approach. SSRN Working Paper Series, 2124415: 1–23. URL

#1 More detailed, the starting point is given with these axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub, 1985)
#2 For details and proofs see blog and working papers
#3 See Wikipedia Lernaean Hydra
#4 See Wikipedia
#5 For the REAL mathiness problem see Jonathan Barzilai, Scientific Metrics, Open Letter to the President of the American Economic Association and papers
#6 Joan Robinson

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COMMENT on Kingsley Lewis on Jul 11

Your positioning of Krugman’s approach is false. Krugman is NOT on the right way and at an early stage of an development that will eventually lead to success. Krugman is definitively at the dead end of the wrong way. So he is not comparable to a precursor like Tycho Brahe* but to Ptolemy** the iconic representative of Geo-centrism. Geo-centrism was refuted by Copernicus, Kepler, Galileo, Newton in the course of the Scientific Revolution and fully REPLACED by Helio-centrism.

So, Krugman is the representative of an approach that will vanish from the corpus of accepted scientific thruths without a trace.

The actual situation and the alternative futures of economics are summarized in this Wikimedia-chart.
(i) Neoclassical economics is dead but not buried (squares D and G).
(ii) Most heterodox economists are on square E (traditional Heterodoxy) and have the choice between E-C, E-F, and E-I.
(ii) I am on square B (constructive Heterodoxy).
(iii) Some heterodox economists are on square H (nihilistic Heterodoxy) and they are going to nowhere.

The two wrong ways are E-F (toward the pluralism of false/inconclusive theories) and E-I (toward the weaponizing/capturing/politicizing of economics).

Like you, I see Lars Syll in squares H/E but you in squares G/D. In brief, Orthodoxy/ Krugman/Lewis is at the ultimate end of a cul-de-sac. Compared to this, Lars Syll’s position is a progress. All depends on where he goes from there. Krugman, in marked contrast, is locked and will not go to anywhere. Your positioning of Krugman as hopeful and modestly successful precursor of scientific truth is indefensible.

* See Brahe
** See Ptolemy

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REPLY to Kingsley Lewis on Jul 11

If you have serious interest in rigorous formal proofs of Krugman’s and your own scientific incompetence I recommend:
Alternatively, you can enter Krugman’s and my full name in Google and you will get 1.910 hits in 0,38 seconds. This is much faster and productive than typing silly questions and comments.