May 19, 2017

The equilibrium of idiocy

Comment on Peter Radford on ‘Equilibrium: a weed to pull’


Peter Radford maintains: “There are silly things in economics that need to be weeded out, so that something better can emerge.” And then he goes on to quote Jevons and concludes: “Equilibrium is a nasty weed. It clutters up our garden. It distracts us from reality. Rip it out!”

All this is trivially true except for the crucial snag: Jevons published The Theory of Political Economy in 1871. Time enough, one would think, for Heterodoxy to rip equilibrium out. However, like all his heterodox predecessors since Veblen, Peter Radford somehow seems incapable of doing the job himself.

Merely criticizing Orthodoxy does not make it to go away: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

This is the perennial crux of Heterodoxy: “As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction.” (Nell)

But construction NEVER happened. Standard economics since Jevons/Walras/Menger is built upon these foundational propositions a.k.a. axioms: “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)

Every sober person who takes a deep breath and then reads the Walrasian axioms carefully one by one comes to the conclusion that the whole set, and not only equilibrium, is proto-scientific garbage. This raises three questions for the future researchers of the history of economic thought:
(i) How could it happen that the vast majority of economists adhered 140+ years to a set of axioms that had already been dead in the cradle?
(ii) How could it happen that Heterodoxy never replaced the patently defective Walrasian axiom set with something better?
(iii) How could it happen that economists have not simply been fired or jailed for falsely claiming that they are doing science?

After all, in view of the fact that the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/ formally inconsistent the claim as expressed in the title: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is untenable.#2 Economics cannot be admitted to the sciences ― neither orthodox nor heterodox economics.

Orthodox economics is proto-scientific rubbish. What is needed since Jevons/Walras/ Menger is a paradigm shift. By not fully replacing the orthodox axiom set but pleading for pluralism, which is nothing else than the pluralism of false theories, Heterodoxy has failed at its very task and become integral part of one of the greatest scientific failures of all times.#3

Egmont Kakarot-Handtke

#1 See ‘The prime primer on equilibrium
#2 See ‘The real problem with the economics Nobel
#3 For the bigger picture see cross-references Heterodoxy