July 23, 2017

The myth of economics knowledge

Comment on Simon Wren-Lewis on ‘The politics of ignoring knowledge’


Simon Wren-Lewis muses about the psychology of the Brexit vote and then generalizes: “I do not think this ignorance and hubris is confined to the UK’s role in the world. It also extends to an attitude to knowledge of all kinds, and I suspect it is possible to date when this began to the revolutionary zeal of the right under Thatcher.”

This explanation implies that there is valuable scientific knowledge of economists which is thrown to the wind by ignorant politicians. This is not how economic policy works. There is, to begin with, NO such thing as valid economic knowledge, only a rummage table of opinions from which politicians pick one for giving the impression that their measures have the blessing of science. This is not different from selling toothpaste with the testimonial of a white-coated dentist.

Here is the snag: “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)

It is well-known that economists do not have the true theory. This is their scientific track record: provably false
• profit theory, since 200+ years,
• Walrasian microfoundations (including equilibrium), since 140+ years,
• Keynesian macrofoundations (including I=S, IS-LM), since 80+ years.

ALL theories/models that contain profit, maximization-and-equilibrium, or I=S/IS-LM are a priori false and this is more than 90 percent of the content of peer-reviewed economic quality journals and 100 percent of textbooks of renowned authors since 1947, as well as 100 percent of what orthodox or heterodox or pluralistic economics professors teach beyond commonsensical trivialities.

It is, first of all, 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 has to be judged according to the criteria true/false and NOTHING else. The history of political economics from Adam Smith to Keynes and Arrow can be summarized as utter scientific failure. Economics never had any truth value, only political use value.

Egmont Kakarot-Handtke

Related 'New Economic Thinking: the 10 crucial points' and 'Delusions of useful idiots' and 'Why Hayek was not a scientist' and 'Economics: Two ages of scientific incompetence' and 'Heterodoxy, too, is scientific junk' and 'Nothing to choose between Orthodoxy and traditional Heterodoxy' and 'First Lecture in New Economic Thinking' and 'Lacking the Midas touch of science' and 'Economics is a scientific zombie waiting to be put down' and 'Heterodoxy, too, is scientific junk' and 'The non-existence of economics' and 'Economists and the destructive power of stupidity'