May 7, 2018

Did economics fail? No! Yes, and everybody knows it!

Comment on Silvia Merler’s ‘Did Economics Fail?’

Blog-Reference and Blog-Reference on May 9

Silvia Merler reports: “The debate about rethinking economics keeps rambling.” True. And the wonderful thing is that we have heard all arguments already multiple times.

The Pavlovian answer to the question Did Economics Fail? goes as follows: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998)#1

Fact is: “… suppose they [the economists] did reject all theories that were empirically falsified … Nothing would be left standing; there would be no economics.” (Hands, 2001)

Fact is: the main approaches and their variants and derivatives ― Walrasianism, DSGE, Keynesianism, Post-Keynesianism, New Keynesianism, MMT, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong.#2 What we actually have is the pluralism of provably false theories.#3

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.

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.#4 And this means, in turn, that economic policy guidance has NO sound scientific foundations since Adam Smith/Karl Marx. The gigantic intellectual battle about Capitalism and Socialism has never been more than a pygmy wrestling show.#5

Fact is that economists bear the intellectual responsibility for all economic crises and the resulting social devastation. This is known since Napoleon: “Late in life … he claimed that he had always believed that if an empire were made of granite the ideas of economists, if listened to, would suffice to reduce it to dust.” (Viner)

What failed economics needs is NOT another pointless critique, or one more silly discussions between scientifically incompetent orthodox and heterodox economists, or just another cosmetic reformation or breakthrough ― but a paradigm shift.

Needless to emphasize that the paradigm shift will NOT come from people who swallowed supply-demand-equilibrium hook line and sinker and never realized that what they are doing is cargo cult science.

Egmont Kakarot-Handtke


#1 For the comprehensive list of excuses see ‘Failed economics: The losers’ long list of lame excuses
#2 Why is economics a total scientific failure?
#3 Economics: 200+ years of scientific incompetence and fraud
#4 For details of the big picture see cross-references Political Economics
#5 Profit and the Private-Property-Irrelevance Theorem

Related 'The Law of Economists’ Increasing Stupidity' and 'Both orthodox and heterodox economists are cargo cult scientists' and 'Economics: a science without scientists'.