December 4, 2016

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

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


James Kwak gives every economist 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 your pick between liar and moron.” (See intro)

Economics claims since Adam Smith/Karl Marx being a science, explicitly with “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. Yet, everybody who looks closer into the matter comes to the conclusion that economics is a failed science. Economics consists of the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― which are mutually contradictory and axiomatically false. More specifically, all approaches miss the scientific criteria of material and formal consistency.

So, on the surface James Kwak is right, the representative economist is either a liar or a moron. The two questions of real interest, though, are (i) how did economics become the honeypot of liars and morons, and (ii), how do we get out of the swamp?

The first thing to notice is that neither Adam Smith nor Karl Marx was a scientist ― they were storytellers. As Schumpeter noticed: “But he [A. Smith] had no such ambitions; in fact, he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.”

The story Smith told was that capitalists look like the bad guys but are unintentionally the good guys because the Invisible Hand somehow manages that the market system works to the benefit of all. The story Marx told was that capitalists are indeed the bad guys and that the market system will eventually break down. In more than 200 years, economics has not risen above the level of proto-scientific storytelling.

In order to understand the failure of economics one has, first of all, to realize that there are political economics and theoretical economics. The founding fathers called themselves political economists, that is, they left no doubt that their main business was agenda-pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing).

Political economics is fake science. And all agenda pushers from Smith, Ricardo, and Marx to Keynes, Hayek, Friedman, and onward to Krugman and Varoufakis are fake scientists.

This brings us to the real question: how to get out of the swamp of political economics? The very first thing to do is to accurately inform the general public about the present state of economics by deleting the word Sciences from the Bank of Sweden Prize. The second step is to implement the strict separation of politics and science in economics and to throw out all agenda pushers, liars, and morons. The third step is to do the Paradigm Shift and make economics a science. How this is done is known since Aristotle: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

Neither the premises of microeconomics nor the premises of macroeconomics are certain, true, and primary and because of this, economics is one of the most embarrassing failures in the history of sciences.

Egmont Kakarot-Handtke

Related 'The disutility of debunking Econ 101'