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There is no such thing as economics, there are FOUR economixes and they are constantly played against each other. First, there is theoretical and political economics. The crucial distinction within theoretical economics is true/false, the crucial distinction within political economics good/bad. Economics exhausts itself since 200+ years in crossover discussion, that is, by NOT keeping science and politics properly apart. As a result, it got neither science nor politics right.
Heterodox economists say that orthodox economics is false and in this very general sense they are right. Heterodox economists have debunked much of Orthodoxy but this has not enabled them to work out a superior alternative. The proper task of Heterodoxy is not the repetitive critique of Orthodoxy but to fully replace it, that is, to perform a paradigm shift: “The problem is not just to say that something might be wrong, but to replace it by something ― and that is not so easy.” (Feynman)
Because Heterodoxy has never developed a valid alternative it advocates pluralism, more precisely, the pluralism of false theories. The argument boils down to: if Orthodoxy is allowed to sell their rubbish in the curriculum, Heterodoxy must also be allowed to sell their rubbish. Economics is not so much a heroic struggle about scientific truth but about a better place at the academic trough.
The fact of the matter is that neither Orthodoxy nor Heterodoxy has the true theory and that, by consequence, the political arguments of BOTH sides have NO sound scientific foundation.
Traditional Heterodoxy knows quite well that it has nothing to offer in the way of progressive science and therefore argues for dumping scientific standards altogether and to focus on politics pure and simple: “The case against austerity does not depend on whether it is ‘good economics’, but on its human impact. Nor does the case for combating climate change depend on the present discounted value of future costs to GDP. Reclaiming political debate from the grip of economics will make the human side of politics more central, and so can only serve a progressive purpose.”
This is a good idea, economists should no longer pretend to do science but openly push their respective political agendas, after all, this is what they have actually done the past 200+ years. Neither Orthodoxy nor traditional Heterodoxy satisfies the scientific criteria of material and formal consistency. So, both, orthodox and heterodox economists have to get out of science because of incurable incompetence.
It was John Stuart Mill who told economists that they must decide themselves between science and politics: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”
Both, orthodox and heterodox economists violate the principle of the separation of science and politics on a daily basis. Economics is what Feynman famously called cargo cult science and neither right wing nor left wing economic policy guidance has a sound scientific foundation since Adam Smith/Karl Marx. It is high time that economics frees itself from the corrupting grip of politics.
Related 'Economic policy has gone wrong because economic theory has gone wrong' and 'Kick out the king and don’t forget the jesters' and 'NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy' and 'Modern macro moronism' and 'Austerity and the idiocy of political economists' and cross-references Political economics
Economics is a cargo cult science. Feynman defined it thus: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”
What is missing among economists is a proper understanding of what science is all about.
You write: “… his [Vernon Smith’s] most famous experiments were ones in the early 1960s that showed that double auction markets will generally move very rapidly to conventional micro supply-demand equilibria. This fit with Vernon’s view that properly structured markets tend to work well, and he has long had a pretty pro-laissez faire view, including a very positive attitude towards Hayek as well as of Adam Smith.”
Vernon Smith’s blunder consist in concluding from the satisfactory functioning of one market that the market system as a whole functions well, i.e. is stable. This is the fallacy of composition which is the defining blunder of scientifically incompetent economists. The fact of the matter is that the grand claim of Adam Smith, Hayek, Arrow-Debreu et al. about the functioning of the market system has NEVER been proven. In fact, just the opposite can be demonstrated.
With regard to the labor market as a whole follows from the fallacy of composition: “We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price. If this is prevented by combinations in restraint of trade or by government regulations, then those impediments to competition should be removed.” (Tobin)
From the correct employment theory follows that an INCREASING average wage rate leads to INCREASING employment. This testable proposition asserts just the OPPOSITE of microfounded cargo cult economics.
The fallacy of composition follows ultimately from Walrasian microfoundations: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)
Methodologically, this behavioral axiom set is forever unacceptable. The Iron Law of Economic Methodology says: NO way leads from the understanding of human behavior to the understanding of how the monetary economy works. And this explains why the microfoundations approach has been doomed to failure from the very beginning.
It holds: (i) economic theory cannot be based on assumptions about human nature/ behavior/action, (ii) economics is NOT a social science but a system science, (iii) if it isn’t macro-axiomatized, it isn’t economics.
It is pretty obvious that Barkley Rosser has never grasped this and never will and this applies to the contributors, referees and readers of the Review of Behavioral Economics, the followers of Hayek, and all other scientifically retarded supply-demand-equilibrium economists.*
* See also ‘Austerity and the idiocy of political economists’
You said: “This fit with Vernon’s view that properly structured markets tend to work well, and he has long had a pretty pro-laissez faire view, including a very positive attitude towards Hayek as well as of Adam Smith.”
You said also: “He never made any statement about the general stability or instability of the market system as a whole, even though he is largely pro-laissez faire.”
Wikipedia says: “Being a system of thought, laissez-faire rests on the following axioms:
1. The individual is the basic unit in society.
2. The individual has a natural right to freedom.
3. The physical order of nature is a harmonious and self-regulating system.”
So laissez-faire = “harmonious and self-regulating system” = overall stability. This property has been put into the axioms of the laissez-faire doctrine. This methodological blunder is known since antiquity as petitio principii. Overall stability, which is compatible with partial and temporary instability, has to be PROVEN and NOT put into the premises.
By subscribing to laissez-faire Vernon Smith indeed made a statement about the general stability of the market system. This statement has always been false.*
* See ‘Could we, please, all focus on the key question of economics?’
There is genuine pluralism and look-alike pluralism. Heterodoxy advocates the wrong type. In science, pluralism is NOT a virtue, it is what Popper called an immunizing stratagem.
The scientific protocol demands (i) to tackle only questions that allow for clear-cut true/false results (and leave the rest to philosophical wafflers), (ii) to take only materially and formally consistent theories into the corpus of scientific knowledge, (iii) to throw out refuted theories.
Scientific ethic means that the scientific community relies on self-governance which in turn means that everybody sticks to the protocol and accepts refutation if it so happens. This, though, never worked in economics. Morgenstern reminded his fellow economists: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.”
The situation is this: the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the pivotal concept of the subject matter, i.e. profit, wrong. So, what we have is the pluralism of false theories. Economics is a failed science but Walrasianism, Keynesianism, Marxianism, Austrianism is still around “as if nothing had happened.” Methodology has been softened to the point of anything-goes by economists to rationalize overt failure.#1 Blaug called this playing tennis with the net down.
Because the representative economist is NOT a scientist but an agenda pusher he feels quite at home in the swamp where “nothing is clear and everything is possible” (Keynes) The beauty of vagueness and ambiguity and inconclusiveness is that it cannot be falsified: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman)
This has always been the life insurance of incompetent scientists. In economics, pluralism is an immunizing stratagem. There is theoretical economics (= science) and political economics (= agenda pushing). Theoretical economics is a failure and political economics is a fraud.
Economics needs a paradigm shift in order to overcome the pluralism of false theories. The take-away for Heterodoxy and Blissex is: stop rationalizing and justifying proto-scientific methodological rubbish.
#1 For details see ‘Failed economics: The losers’ long list of lame excuses’
See 'The market economy is inherently unstable and economists never grasped it'
You say: “I am not someone who believes all mainstream economics is junk. That would be stupid. Mainstream economics is the product of a lot of smart people working for decades in an established paradigm.”
It is a matter of indifference what you believe. The scientific criteria are true/false with truth objectively defined as material and formal consistency. Science is NOT about belief but about PROOF.
Fact is: the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/formally inconsistent. Not only mainstream economics is junk but heterodox economics, too.
The one thing that is common to all these failed approaches is that they do not get the fundamental economic concepts profit and income right. This is like medieval physics before the concepts of force, mass, energy, etc. were properly defined and understood.
You say: “Mainstream economics is the product of a lot of smart people working for decades in an established paradigm.” Yes, but this proves NOTHING. Geo-centrism was the product of smart people working more than 1500 years in an established paradigm. Unfortunately, this paradigm was FALSE and they were not smart enough to realize it.
The representative economist is not smart enough to realize that Walrasianism has already been dead in the cradle 140+ years ago and Keynesianism 80+ years ago.
Economics is proto-scientific junk but economists celebrate each year the ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’. The plural may well be a little excessive.