April 13, 2017

Economists’ proto-scientific shell games

Comment on Noah Smith on ‘Can rationalist communities still change the world?’


Changing the world is easy. From history and fresh personal experience we know that any moron can change the world. Change is a weasel word that covers both improvement and deterioration. In public discourse it is therefore regularly used to euphemize a deterioration. When a politician speaks of change people know that things are NOT going to be better but worse.

The word change is ideally suited for verbal shell games. The same holds for rational community. Without these weasel words Noah Smith’s question should read: ‘Can scientists still improve the world?’ His answer is, with some caveats, in the affirmative: “… I think it’s still clear that a relatively small community of smart people [e.g. “a group of physicists, mathematicians, and engineers who came out of Europe in the early 20th century”] can change the world.”

After this framing, the shell game begins: “Another group that changed the world was the Chicago School of economics.” By simple association we now have: economics = science, smart people = Chicago School, change = improvement.

The first thing to notice is that there is NO such thing as economics: there is theoretical economics and political economics. 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.

Theoretical economics has to be judged according to the criteria true/false and NOTHING else. A closer look at the history of economic thought shows that theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Lucas and almost everybody in-between falls into the category of political economist.

Political economics has produced NOTHING of scientific value in the last 200+ years. And if there ever was a political sect that violated the scientific standards of material and formal consistency then the Chicago School.

So, Noah Smith’s shell game has to be set right: economics = cargo cult science, agenda pushers = Chicago School, change = deterioration. To be sure “Gary Becker, Robert Lucas, Milton Friedman, Ronald Coase, Frank Knight, and many others” will never be accepted in the community of scientists. They have to be content with the membership of the political club Mont Pelerin.

Egmont Kakarot-Handtke

Immediately following 'Toward the New Academy'

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