February 5, 2017

New Economic Thinking, or, let’s put lipstick on the dead pig

Comment on Eric Beinhocker on ‘It’s Time for New Economic Thinking Based on the Best Science Available, Not Ideology’


For non-economists, the most important thing to know about economics is that there is NO economic science. Yes, there is a prize with the title: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” but NOTHING REAL corresponds to the word Sciences.

For non-economists, the most important thing is to keep political and theoretical economics apart. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

The goal of theoretical economics 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)

For non-economists, the most important thing is to realize is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Economics is a failed science.

So, yes indeed, new economic thinking is urgently needed. This new thinking has to advance from political agenda pushing to science. This, though, is not what Eric Beinhocker understands under new economic thinking. For him, new economic thinking means to replace the old political agenda by a new political agenda.

The political economist introduces himself as the emphatic person who fights for the good cause. He listens to the downtrodden people and takes them seriously: “But they [the populist movements] also contain many normal people who are fed up with a system that doesn’t work for them. People who have seen their living standards stagnate or decline, who live precarious lives one paycheque at a time, who think their children will do worse than they have. And their issues aren’t just economic, they are also social and psychological. They have lost dignity and respect, and crave a sense of identity and belonging.”

After this depressing reality check, everybody understands that the old agenda has failed and that a new one is urgently needed: “After we listen we then have to give new answers. New narratives and policies about how people’s lives can be made better and more secure, how they can fairly share in their nation’s prosperity, how they can have more control over their lives, how they can live with dignity and respect, how everyone will play by the same rules and the social contract will be restored, how openness and international cooperation benefits them not just an elite, and how governments, corporations and banks will serve their interests, and not the other way around.”

Conclusion: “This is why we need new economic thinking.”

This new thinking does NOT consist in replacing the existing false theories by the true theory but in replacing the old narrative by a new narrative: “... communications is critical ... stories, narratives, visuals, and memes are needed to shift the media and public thinking.”

And exactly at this point ‘new economic thinking’ turns into sheer political blathering: “So what might such a new narrative look like? ... I believe it will contain four stories: A new story of growth; A new story of inclusion; A new social contract; A new idealism.”

There is no better example for soap box economics and how science is hijacked by politics. False economic theory is not replaced by the true theory but the age-old storytelling continues with a made-over narrative. Evolutionary economists have listened to the good people and learned that the old rational models and all this mathiness stuff pisses them off.

The fact of the matter is, though, that “stories, narratives, visuals, and memes” are simply euphemisms for scientific crap. The average person dislikes an objective explanation (e.g. the thunderbolt is an electromagnetic phenomenon subject to physical laws) and likes a subjective explanation (e.g. Zeus threw the thunderbolt because he was angry). The scientific explanation takes the form of a theory, the non-scientific explanation takes the form of an emotionally reinforced narrative. Ninety-nine percent of all societal communication consists of storytelling/blather/wish-wash/truisms/propaganda/gossip, only one percent has scientific content.

The very problem of economics is that it has ZERO scientific content. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and ALL got profit wrong.#1 This includes evolutionary economics.

Economics claims to be a science, yet has never risen above the level of storytelling. Within the tiny box of folk psychology, folk sociology, folk history, and folk politics economic storytelling has taken place since Adam Smith: “Smith ... 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.” (Schumpeter)

The sole purpose of Eric Beinhocker’s new economic narrative is to make the dull folks feel comfortable again. The claim that his polit-kitsch is based on the best science available is a bad joke at the expense of the downtrodden masses.#2

Egmont Kakarot-Handtke

#1 See ‘The Profit Theory is False Since Adam Smith
#2 See also ‘Economists and the destructive power of stupidity

Related 'Scientific suicide in the revolving door' and 'Evolutionary economics: Just another degenerated research program' on 'The bigots of common sense' and 'New economic thinking ― false promises and hopes' and 'The x-th reinvention of evolutionary economics' and 'Yes, orthodox economics is poor science, but can Heterodoxy raise hope?' and 'First Lecture in New Economic Thinking'