Blog-Reference and Blog-Reference
Hayes characterizes the corpus of Hayek, Friedman and neoclassical economics as “incredibly powerful, really important, really influential, tremendous amount of incredible insight, helpful for understanding how capitalism works, etc.”
Fact is that Hayek et al. is plain proto-scientific rubbish. No amount of information theory make-up can change the fact that neoclassical economics had already been dead in the cradle 140+ years ago. Some retarded folks, though, have not realized this, among them Jason Smith. He maintains: “One thing that I think needs to be more widely understood is that Hayek did have some insight into prices having something to do with information, but got the details wrong.”
One thing that has to be clearly understood is that there in NO such thing as economics. There are TWO economixes and they are constantly confounded. Therefore, it is of utmost importance to distinguish between political and theoretical 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 (= science) has to be judged according to the criteria true/false and NOTHING else. Hayek et al. is provably false. Neoclassical economics has no truth-value, merely political use-value.
Hayek et al. is false because it is based on microfoundations. Microfoundations are defined with this behavioral axiom set: “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)
From these axioms together with some auxiliary assumptions follows what Leijonhufvud called the Totem of Micro/Macro, that is, SS-curve―DD-curve―equilibrium, which is the representative economist’s all-purpose tool.
This approach is false on all methodological counts, that is, supply-demand-equilibrium is a NONENTITY or plain proto-scientific rubbish. Microfounded economics is what Feynman famously called cargo cult science.
Hayek et al. argued that the existing economic system is self-adjusting. He could never prove it in a way that satisfies the criteria of material and formal consistency. Worse, it can be rigorously proved that the market system is NOT self-adjusting.#1
Clearly, economics has to abandon microfoundations altogether and move forward to macrofoundations.
Macrofoundations do away with the brain-dead blather of supply-demand-equilibrium. From macrofoundations follows the correct objective/systemic/behavior-free/testable Law of Supply and Demand which is shown on Wikimedia.#2
- Hayek et al. NEVER understood how the price and profit mechanism works.
- The economic policy guidance of Hayek et al. NEVER had a sound scientific foundation.
- NOT ONE of the political economists and agenda pushers from Smith to Hayek et al. will ever be accepted as scientist.
- Hayek et al.’s approach cannot be improved only abandoned because it is axiomatically false.
#1 See ‘Could we, please, all focus on the key question of economics?’
#2 For details see ‘Essentials of Constructive Heterodoxy: The Market’
Related 'Economists’ proto-scientific shell games' and 'The non-existence of economics' and 'Friedman and the cluelessness of fake scientists' and 'Why Hayek was not a scientist' and 'Krugman is not an economist' and 'Economics: Deadlocked between politics and science' and 'Hayek ― agenda pusher or scientist?' and 'Hayek or how economists miss their subject matter since more than 200 years' and 'Economics: ‘a tale told by an idiot ... signifying nothing’' and 'Hayek was not an economist' and 'Hayek: mad, bad, or just another incompetent economist?' and 'Hayek or how economists miss their subject matter since more than 200 years' and 'Pareto-efficiency, Hayek’s marvel, and the invisible executor' and 'The philosophy of know-nothingers' and 'Keynes, Hayek, Kant' and 'Time to get rid of political economics' and 'Nominal and real distribution' and 'Austrian idiocy ― the case of Hayek'.
(i) There is political economics (= agenda pushing) and theoretical economics (= science).
(ii) Political economics is scientifically worthless since Adam Smith.
(iii) Hayek was a political economist (= fake scientist).
(iv) Hayek’s contribution to theoretical economics is proto-scientific rubbish.
(v) Jason Smith is putting lipstick (= Information Theory) on the dead pig.
(vi) By promoting Hayek, Jason Smith is promoting political economics (= fake science).
It is a curious fact that substandard physicists, mathematicians, and engineers turned in great number to economics. Mirowski has dealt with this phenomenon at great length in More Heat Than Light. It explains why economics is still at the proto-scientific stage.
The argument about identities/human action is one of the oldest clichés from the long list of lame excuses.#1
Obviously, you lack any understanding about the vital difference between political economics (= agenda pushing) and theoretical economics (= science).
Economics is NOT about human behavior but about the behavior of the economic system.#2
Economists (including Hayekians) do until this very day NOT understand how the price and profit mechanism works. This is why they have NOTHING worthwhile to say.#3
#1 See ‘Failed economics: The losers’ long list of lame excuses’
#2 See ‘The stupidity of Heterodoxy is the life insurance of Orthodoxy’
#3 See ‘Economists and politics: Will you kindly shut up!’
You kicked off this thread with “Getting the left up to speed by understanding information. There’s a lot of good stuff in this post.”
It is a puzzle wrapped in a conundrum how you can recommend Jason Smith’s post. Take note of:
- Economics is a science and deals exclusively with true/false and NOT with left/right.
- Political economics is proto-scientific rubbish and Hayek is one of the better-known examples for fake science. Jason Smith’s attempt to improve Hayek is a no-go.
- Jason Smith has NO idea of how the market economy works.
- Jason Smith has NOT realized that microfounded neoclassical economics is dead since 140+ years and macrofounded Keynesianism is dead since 80+ years.*
- Jason Smith practices censorship on his blog and therefore throws himself out of the econ blogosphere.
- There is NOT one iota of ‘good stuff’ in his post or on his blog.
* See ‘IS-LM ― a crash course for EconoPhysicists’