December 3, 2016

The disutility of debunking Econ 101

Comment on James Kwak on ‘Economics 101, Economism, and Our New Gilded Age’

Blog-Reference and Blog-Reference and Blog-Reference

All are agreed: Econ 101 is rubbish.#1 However, there is not much use to debunk it over and over again. What is needed is the true theory: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

The true theory of the market economy is neither to be found in Econ 101 nor in the textbooks#2 nor in the newspapers nor in the history books.

Because standard employment theory is false, standard economic policy guidance regularly worsens the situation, that is, economists bear the intellectual responsibility for unemployment, deflation, depression, stagnation.#3

In order to get rid of Econ 101 a paradigm shift is needed: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

This is the current state of economics: Walrasian microfoundations are false since 140 years and Keynesian macrofoundations are false since 80 years. What is urgently needed are the true macrofoundations and the true employment theory#4 and NOT just another debunking exercise.

The sooner Econ 101 is forgotten, the better. The sooner the blathering ‘throng of superfluous economists’ (Joan Robinson) is fired, the better.

Egmont Kakarot-Handtke

#1 For details see cross-references Econ 101
#2 See ‘The father of modern economics and his imbecile kids
#3 See ‘How economists murdered the economy and got away with it
#4 For details see cross-references Employment

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REPLY to Bob on Dec 3

James Kwak gives everybody a choice: “Economism is a logical fallacy used rhetorically to persuade through mathiness. It’s not science but persuasion that amounts to sophistry. Intelligent economists know this. Those who don’t realize it are unintelligent. So take you pick between liar and moron.” (See intro)

This resonates with my estimate of standard economics.#1

It seems that you have made your pick. This is your solution of the distribution problem: “The full equation can be summarized as follows: Economics of inequality + Meritocracy + Use of force = Theory of Power.”

That sounds like good old folk sociology. Take notice that (i) economics is different from sociology/ psychology, and (ii), that the Profit Law for the investment economy reads Qm=Yd+I-Sm. Legend Qm: monetary profit, Yd: distributed profit, Sm: monetary saving, I: investment expenditures. The correct profit equation gets longer when government and foreign trade is included; it contains only MEASURABLE variables.

Obviously, the correct profit equation explodes the marginal theory of distribution and the familiar Keynesian alternatives and the rest of Econ 101 and, last but not least, your moronic folk-sociological wish-wash.#2

#1 See post ‘Pseudo-voodoo-moron-proto-mumbonomics
#2 See paper ‘The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?

Immediately following 'The economist’s pick: liar, moron or what?'

Related 'The false foundations of economics'