Barkley Rosser summarizes: “One other outcome of Black Monday also was that it was the beginning of the end for the dominance in economic theory of the rational expectations axiom. Yes, it is still around and strong in the whole DSGE modeling world. But increasingly people take more behavioral assumptions seriously, and Black Monday was a body blow to ratex big time.”
Economics is a failed science for 200+ years. How does this cargo cult science survive nonetheless? An important ingredient of the time-tested survival strategy of incompetent scientists is to readily admit and superficially fix striking defects in the so-called protective belt in order to save the methodological core. Let us call this the epicycle stratagem because it was by adding epicycle after epicycle how the Geo-centrists tried to postpone the final admission of empirical and logical refutation.
Economists have always been incompetent scientists but managed to cover it vis-a-vis the general public with some skill in the application of what Popper called immunizing stratagems.
The inevitable failure of economics started with Jevons/Walras/Menger but was officially institutionalized much later by Arrow with this methodological specification: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.”
The neoclassical concretization of methodological individualism translates into the following hardcore propositions a.k.a. axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)
Obviously, this axiom set contains THREE NONENTITIES: (i) constrained optimization (HC2), (ii) rational expectations (HC4), (iii) equilibrium (HC5). Every theory/model that contains a nonentity is A PRIORI false. By consequence, economics of the Arrow-Debreu type and its offspring until DSGE/RBC/New Keynesianism is scientifically worthless.
The economist’s immunizing stratagem consists of admitting the most blatant defect but adhering to the paradigm of methodological individualism. One example is the replacement of the obviously idiotic behavioral axioms of constrained optimization and rational expectations by something more commonsensical which is readily provided by Behavioral Economics. It should be obvious that Behavioral Economics is not a new paradigm but just another version of methodological individualism as defined by Arrow.#1
One of the loudest proponents of the proto-scientific approach of Behavioral Economics is Barkley Rosser and his buddies in the econoblogoshpere.#2 What these folks do not understand is that economics is NOT a science of behavior and that if it isn’t macro-axiomatized, it isn’t economics at all.#3
#1 See also ‘Joan Robinson and the early death of Behavioral Economics’
#2 Rather weird examples of Behavioral Economics are ‘The Case of the Spitting Legionnaire’ and ‘Why I Lack Sympathy For The Catalan/Catalunyan Independence Movement’ and many others at EconoSpeak
#3 For details of the big picture see cross-references Failed/Fake scientists
Most people/economists have no proper understanding of what economics is all about. Therefore 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 with truth well-defined as material and formal consistency. Political economics has produced NOTHING of scientific value in the last 200+ years. The four major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism — are mutually contradictory, axiomatically false, and materially/formally inconsistent. Economics is a failed science but economists award themselves the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” (note the brain-dead plural).
The political agenda pushing of orthodox and heterodox economists normally comes in the form of a verbal/formal model/theory that pretends to satisfy scientific criteria. This, of course, is what Feynman called cargo cult science.#1 However, soapbox economist like you and Sandwichman do not even care about pretending to do science but vomit their political agenda directly into the econoblogosphere.
To argue that you have done this already at the predecessor of this blog does not make things better but worse. It proves only that the scientific self-governance never worked in economics.#2
You are right in assuming that I do not discuss the crash of 1987 with you.#3 For cargo cult scientists who have until this day not realized that constrained optimization, rational expectations, supply-demand-equilibrium, Arrow-Debreu economics up to DSGE, Behavioral Economics, Keynesian I=S, Post Keynesianism up to MMT is proto-scientific garbage and who after 200+ years still do not understand what profit is there is only one message: get out of the way.
# 1 Krugman is a case in point, see ‘Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It’
#2 For the perversion of peer-review see Heckman ‘Publishing and Promotion in Economics: The Curse of the Top Five’
#3 For the correct economic crash theory see ‘Mathematical Proof of the Breakdown of Capitalism’
BloombergView writes: “Economists have come to rival even journalists and politicians in lack of public esteem. That might be partly because so many economists seem as interested in journalism and politics as in advancing their science. But there’s also a deeper problem: Far from advancing, the science of economics has been going backwards.”
The article is titled ‘Why Not Make Economics a Science?’ Hmm, stupid folks at Bloomberg! Have they never heard of the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”? Take notice of the plural, Bloomberg editors: economics is already sciences not merely science.
Obviously, someone is taking the general public for a ride, is it the journalists or the ‘Nobel’ committee?
To make economics a science presupposes the eviction of all failed/fake scientists and political blatherers like you, Sandwichman, and Barkley Rosser. You complain that this is not very polite. That is true but misses the point.
Here is Schumpeter’s good advice for all complainers: “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.”
Refute my post above if you can but spare the world the horrors of your ruminations about politeness.
You say: “… you have said nothing you have not said a thousand times previously in your now two new posts above.”
Even you in your utter confusion should understand that to repeat a thousand times 2+2=4 does not make it false. Physicists repeat the Law of the Lever for more than 2000 years and it is still true. To repeat a thousand times the statement of fact that Barkley Rosser is a scientifically incompetent political agenda pusher does not alter the fact.
You hallucinate: “I have refuted these arguments many times and am not going to waste peoples’ time by indulging you with more refutations, …”
My argument is that the profit theory is false since Adam Smith.#1 The axiomatically correct macroeconomic relationships are:
- Qm=−Sm in the case of the elementary production-consumption economy,
- Qm=I−Sm in the case of the investment economy,
- Qm=(I−Sm)+Yd+(G−T)+(X−M) in the general case.
You say “I have refuted these arguments many times”. Fact is (i) that you have NOT refuted them once, and (ii), that you have blathered your lifetime about economics without understanding the pivotal concept of the subject matter.
#1 For details and sources see cross-references Profit