August 28, 2016

Turning the bananatization of economics around

Comment on Dean Baker, Robert Locke, Ken Zimmerman, Dave Taylor, gracchibros et al. on ‘Trade, Truth and Trump’

Blog-Reference

Truth in the title of this thread refers to science, Trump refers to politics, or more specifically, to the ongoing bananatization of the body politics.

The first thing to notice is that science and politics do not mix, never did, and never will. Hence, a decision has to be made: either―or. According to the still accepted self-definition economics is a science: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins, 1935)

If economics cannot satisfy the well-defined criteria of science ― material and formal consistency ― it faces the option of either to leave science voluntarily or to be thrown out eventually. This is not a catastrophe, though, economics can live happily thereafter as part of the entertainment industry with grand debates about free markets, voluntary unemployment, housing bubbles, the absurd distribution of income/wealth, and taxation as legalized theft. All that has to be done is to renounce the title of science. Because to keep this title much longer would be misleading and even fraudulent.

Walrasianism, Keynesianism, Marxianism, Austrianism is materially/formally inconsistent. In other words, they are all scientifically indefensible. The problem is that all four approaches are tied to political groups/interests and are used as a means of persuasion/ propaganda/ justification. The current versions of economics have no scientific raison d’être, merely some political utility.

When Krugman supports the Democrats, when Wren-Lewis and Keen support Corbyn, when Varoufakis fights for democratizing the Eurozone, has this anything to do with science? What have they and Hayek and Keynes and Friedman in common? NEITHER of these so-called economists has a scientifically valid theory about how the economy works. So, ALL arguments ― right-wing/left-wing does not matter ― are scientifically worthless.

Political economists have made economics a banana science. The mission of Heterodoxy is to switch from the four degenerated research programs to a progressive research program.*

The paradigm shift involves a focusing on the subject matter of economics. Needless to emphasize that economic history, history of scientific thought, psychology, sociology, anthropology, philosophy, religion, literature, political science, biological evolution, or ethics are somehow interwoven with economics but they do not belong to economics proper. The insights of these disciplines are imported into economics in the normal interdisciplinary process IF NEEDED.

That there never has been any problem with borrowing from other disciplines is clear since J. S. Mill: “[Economics], therefore, presupposes all the physical sciences; it takes for granted all such of the truths of those sciences as are concerned in the production of the objects demanded by the wants of mankind; or at least it takes for granted that the physical part of the process takes place somehow. It then inquires what are the phenomena of mind which are concerned in the production and distribution of those same objects; it borrows from the pure science of mind the laws of those phenomena, and inquires what effects follow from these mental laws, acting in concurrence with those physical ones.” (Mill, 1874)

The point of interdisciplinary cooperation is that economics has NOTHING to offer in return because economists ― orthodox and heterodox alike ― have no scientifically valid theory of how the monetary economy works. They do not even understand what profit is.** In other words, economists have not done their scientific homework. What they have done instead is to entirely ignore other disciplines and to apply their do-it-yourself folk psychology (e.g. utility maximization), folk sociology (e.g. methodological individualism), and even folk physics (e.g. well-behaved production functions). How weird is this: “Indeed, here we find the neoclassical economist dictating the laws of physics to the physicist!” (Mirowski, 1995)

The banana economics of DSGE, RBC, Post-New-After-Keynesianism, however, has its counterpart in the banana politics of the presidential candidates. This gives economists the opportunity to join agenda pushing with their vacuous scientific expertise.

Economics has to entirely withdraw from politics and to focus on how to perform the scientific U-turn called paradigm shift. The new definition of the subject matter is: Economics is the science which studies how the monetary economy works.

Egmont Kakarot-Handtke

* See chart
** See post 'How the intelligent non-economist can refute every economist hands down'

Immediately preceding 'Failed institutions'