October 22, 2016

Economics between physics and psychiatry

Comment on Noah Smith on ‘Do economists have physics envy Pt2?’

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Mirowski messed up his methodological critique of Neoclassics with the now famous meme of ‘physics envy’. Physics envy derives from Freud’s penis envy and this immediately frames the whole discourse as an exercise in psychologism.

Psychologism is scientific rubbish, as Popper made clear long ago with his methodological debunking of Psychoanalysis, but people stick to it because it gives them an easy to apply explanation template. There are three psycho-sociological templates: myth/religion, psychologism, conspiracy ‘theory’. The strength of these thought patterns is that they are emotionally effective and virtually irrefutable. This makes them dear to all sitcom storytellers but forever unacceptable to scientists.

The underlying thought pattern consists of three elements: there is a powerful but unknown entity A (e.g. god, subconscious, illuminati, communists, extraterrestrials) which effects the phenomenon/event under discussion B (e.g. crisis, accident, windfall, strange behavior) because of an emotional cause/motive C (e.g. anger, vindictiveness, jealousy, greed, malevolence, benevolence). In economics, this one-size-fits-all template is known as Invisible Hand explanation.

Science is fundamentally different from ABC-storytelling as it is laser guided by the criterion true/false which in turn is well-defined as material and formal consistency.

Accordingly, the scientific critique of Neoclassics consists in the proof that it is materially/formally inconsistent which is followed by the full replacement of the obsolete paradigm through a superior paradigm. Mirowski’s critique, though, consists in the detailed demonstration that Neoclassicals (i) do not understand their underlying physical metaphor, (ii) do not follows its implications to their logical end, and (iii), misapply the mathematics that comes with the metaphor.

All this is true, of course, but the whole psychologism about physics envy is entirely beside the point. The founding fathers were Political Economists but realized that after Newton’s Principia agenda pushing, too, had to take a scientific form. Simple soap box rhetoric was no longer acceptable: “The backward state of the Moral Sciences can only be remedied by applying to them the methods of Physical Science, duly extended and generalized.” (Mill, 2006, p. 833)

After more than 200 years it is pretty obvious that the representative economist never really grasped what science is all about and this is why economics is what Feynman famously called a cargo cult science. Neoclassical economics in its actual incarnation as DSGE/RBC is an outstanding example of cargo-cultish rubbish. No genuine scientist will ever accept it. But, as it happens, economists have emancipated themselves and do no longer care about the approval of genuine scientists.

Mirowski’s summary assessment of neoclassical economics as a scientific failure is accurate. Unfortunately, he steered the whole discussion into the psycho-social cul-de-sac. Accordingly, the discussion is not about how to get out of the bottomless neoclassical morass and to get rid of incompetent scientists but more about Mirowski’s sputtering disdain, his patronizing tone, his literary extravagances.

The unsurpassable apex of brain dead psychologism is this intro of Hoover*: “Mirowski’s hatred of neoclassical economics borders on the pathological: one sometimes wonders if his mother didn’t run off with a neoclassical economist, leaving little Phil bereft in the cradle.” Oedipus has finally arrived in the economics sitcom. You cannot make this stuff up.

Egmont Kakarot-Handtke

* See Book Review

Immediately following 'Economics between science and magic'