September 12, 2017

Economics: the emancipation of science from politics

Comment on Simon Wren-Lewis on ‘Revolutions in Economic Policy’


There is the political realm and there is the scientific realm. Roughly speaking, the issue in the political realm is about the realization of the Good Society and the issue in the scientific realm is to gain knowledge about how the universe or one of its numerous sub-domains works. Knowledge takes the form of a theory that fits the criteria of material and formal consistency. The true theory is the humanly best mental representation of reality.

In politics, open questions are decided by the legitimate sovereign, in science they are decided by proof/disproof. Scientific standards are well-defined: “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)

There is 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.

Political economics has produced NOTHING of scientific value in the last 200+ years. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit wrong. The pluralism of false theories is the characteristic of what Feynman called cargo cult science.

The lack of the true theory has grave consequences: since Adam Smith, economic policy guidance has NO sound scientific foundation. The general public always sees and discusses the policy proposals of economists but never the underlying theory, therefore it fails to see that there is a total disconnect between the two. The economists’ proposals do not follow from a valid theory because there is none.

Thomas Kuhn’s The Structure of Scientific Revolutions refers to science and by no stretch of the imagination to economic policy. A political revolution is something quite different from a scientific revolution. A scientific revolution, i.e. a paradigm shift, is caused by a failure of the current paradigm and not by a political upheaval or because of populist pressure. Scientific laws do not change when POTUSes come and go.

In economics, a paradigm shift is urgently needed because economic theory in its four incarnations ― Walrasianism, Keynesianism, Marxianism, Austrianism ― is provably false, that is, materially and formally inconsistent.

Economists do not understand until this day how the profit- and price mechanism works. Economics has no truth value, only some political use value. The economist is NOT appreciated as scientist, only as useful idiot.

A Scientific Revolution in economics means that theoretical economics (= science) emancipates itself from the corrupting grip of politics (= agenda pushing).

Egmont Kakarot-Handtke

For details of the bigger picture see cross-references Political Economics