Comment on Adam Shaw/theguardian on ‘Why economic forecasting has always been a flawed science’
Blog-Reference and Blog-Reference on Sep 22
A theory cannot be dismissed because it cannot predict the future. Therefore, as a matter of principle, economics from Jevons/Walras/Menger to DSGE cannot be dismissed because it has not predicted crises. Neoclassical, as well as Keynesian economics, is unacceptable because it is logically and empirically inconsistent. In more colloquial terms, all models that have been built and are still being built upon the maximization-and-equilibrium axioms have to be rejected as scientific garbage and NOT for any other reason.#1 The same holds for Keynesian macro models.
Who, in all history, has been preoccupied with prediction? Mainly two groups, (i) prophets, priests, doomsters, apocalyptics, fear mongers, gurus, utopians, astrologers, Pythia and other oracles, rise-and-fall historians/sociologists, politicians, and (ii), people who want to make a killing in the casino of Monte Carlo or on the stock-market.
No scientist is occupied with the prediction of historical events because it is long known that “The future is unpredictable.” (Feynman)
The point is that scientists use the word prediction in a quite different sense from everyday usage. For example, Einstein deduced gravity waves from his theory in 1916, and in our days, 100 years later, they are observed. Only in the very specific sense of ‘testable hypothesis’ scientists make ‘predictions’.
All this is well-known among methodologists: “We are very far from being able to predict, even in physics, the precise results of a concrete situation, such as a thunderstorm, or a fire.” (Popper)
So Arrow’s argument that long-run weather forecasts are pointless is not a great revelation but additional proof that economists never understood what science is all about. And just because of this, economics has never been anything else than a cargo cult science. This, too, is well known: “Suffice it to say that, in my opinion, what we presently possess by way of so-called pure economic theory is objectively indistinguishable from what the physicist Richard Feynman, in an unflattering sketch of nonsense ‘science,’ called ‘cargo cult science’.” (Clower)
In the sense of a self-description, the Keynesian “we simply do not know” applies to economists for more than 200 years. That economists are incompetent scientists that much we know for sure — and it holds with absolute certainty for both orthodox and heterodox economists.#2, #3
So we can predict that nothing of real scientific value will ever come from these folks, in perfect analogy to the prediction of physics that pigs will never fly.#4 The problem of economics is NOT failed predictions but that it is a failed science.
Only charlatans predict the future, and only morons take them seriously.
Egmont Kakarot-Handtke
#1 First Lecture in New Economic Thinking
#2 What is dead certain in an uncertain world: economists’ abysmal incompetence
#3 Fact of life: your econ prof is scientifically incompetent
#4 The Law of Economists’ Increasing Stupidity
Related 'Prediction does not work? Try retrodiction first' and 'Scientists do not predict' and 'Prediction/Forecasting' and 'The brouhaha about prediction: which Feynman is right?'
