August 29, 2017

The moralizing economist is not a good guy but a fake scientist

Comment on Ben Chu/Independent on ‘After a long history of avoiding the morality factor, economists are beginning to include it in their work’


There are TWO economixes: political economics 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.

Economics consists of four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― which are mutually contradictory, axiomatically false, materially/formally inconsistent, and which got the foundational economic concept profit wrong. To repeat, the representative economist does until this day NOT know ― what he is supposed to know because it is his and nobody else’s subject matter ― what profit is: “A satisfactory theory of profits is still elusive.” (Palgrave Dictionary, Desai, 2008)

Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Economics is a failed science or what Feynman called a cargo cult science.

There is the political sphere and there is the scientific sphere. It is quite obvious that both are fundamentally different and because of this, it is of utmost importance to radically separate the two. The mixing of the two is the economists’ moral equivalent of the Fall of Man.

Politics is about the realization of the Good Society. This presupposes an idea what the Good Society is and the practical capacity to make things happen. In very general terms, the political sphere is about values and action, and the crucial distinction is between good/bad or better/worse. Science is about knowledge and the crucial distinction is between true/false with truth unequivocally defined by material and formal consistency. To mix politics and science is to corrupt science.#1

Economics is meant to be a science and the economist has to satisfy scientific standards and NOTHING else. Scientific standards are well-defined since antiquity: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

Since Adam Smith/Karl Marx economics is explicitly defined as science. The general public is year after year reminded of this fact with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#2 And every economist learned in Econ 101: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins)

Clearly, economics is since 200+ years a self-declared science. Clearly, the four main approaches are materially and formally inconsistent. Clearly, there is a contradiction.

Economics needs a paradigm shift. In methodological parlance, the Walrasian microfoundations and the Keynesian macrofoundations have to be fully replaced by an entirely new set of axioms. Therefore, the one and only question is: How is it done? That much is clear, it is NOT done
(i) by endlessly kicking the dead horse of Orthodoxy without ever coming up with a valid alternative; traditional Heterodoxy, too, is a scientific failure;
(ii) by blind empiricism and microeconomic case studies;
(iii) by adapting the underlying morality of current political economics instead of executing the final separation of politics and science.

The point to grasp is: economics is a system science and all questions about Human Nature/motives/behavior/action are NOT the economists’ business but have to be left to psychology, sociology, anthropology, history, Political Science, biology, etcetera.

The representative supply-demand-equilibrium economist is lost for science and can only continue with cargo cult science. For him New Economic Thinking amounts to moral window dressing.#3

At this year’s Lindau Nobel Laureate Meeting
• Oliver Hart/Luigi Zingales presented a paper that looked at how the personal morality of shareholders might affect the behavior of the companies in which they invest;
• Jean Tirole/Armin Falk presented a paper that tried to model behavior taking into account how certain popular “narratives” can inhibit people from doing what they would normally consider the right thing.

All this is a continuation of cargo cult science.#4 Fresh moralizing is not a substitute for the urgently required New Economic Thinking. Moralizing is political economics and political economics is fake science.

Egmont Kakarot-Handtke

#1 The irrelevance of populism for economics
#2 The real problem with the economics Nobel
#3 New Economic Thinking, or, let’s put lipstick on the dead pig
#4 Economics is NOT about Human Nature but the economic system

Related 'Feynman Integrity, fake science, and the econoblogosphere' and 'Ditch scientific incompetence!' and 'The economist as moralist' and 'New economic thinking = old political fake' and 'Gossip economics' and 'Economics: Poor philosophy, poor psychology, poor science' and 'Making the economy the focus of the economists’ dialogue' and 'Is Paul Krugman necessary?' and 'Do not moralize — simply beat them' and 'How to be a good scientist' and 'Confounding Is and Ought: the economist as moralist' and 'Knowledge vs. Belief' and 'Poor philosophy, poor science, poor job'. For more details see cross-references Political economics.