Comment on the BoE conference on ‘Applications of Behavioural Economics, and Multiple Equilibrium Models to Macroeconomic Policy’
Blog-Reference
(i) Economics is NOT about Human Nature/behavior but about the nature/behavior of the economic system. Behavioral economics is the wrong approach because NO way leads from the understanding of human behavior to the understanding of how the actual economy works.#1
(ii) Equilibrium is a NONENTITY. All equilibrium models are a priori false.#2
(iii) Currently, macroeconomic policy is based on microfounded theory. This approach is provable false.#3
“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)
Economists do NOT have the true theory. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL got profit wrong.#4
With the pluralism of provable false theories economics fits Feynman’s description of a cargo cult science: “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.”
Economists lack the true theory.#5
Egmont Kakarot-Handtke
#1 See ‘Redefining economics’
#2 See ‘Equilibrium and the violation of a fundamental principle of science’
#3 See ‘First Lecture in New Economic Thinking’
#4 See ‘Profit theory in less than 5 minutes’
#5 See ‘The end of political economics’