Comment on Paul Schächterle on ‘In Greece, NO is the answer’
Blog-Reference
(i) I agree about the “unfortunate way that neoclassical economists actually do make politics by giving advice towards a very specific and highly disputed set of policies, but hide their political attitudes and beliefs behind a veil of pseudo-science.”
If there is a scientific analogon to Dante's Inferno all political economists will eventually meet again in the 9th circle.
(ii) The Greek referendum was a political manifestation and has to be accepted as such. It compares directly to political manifestations of the other European democracies which are uncomprehending.
(iii) When I speak of economic laws I clearly do not mean man-made laws but objective and testable structural laws. I agree, of course, that in economics any silly behavioral assertion is illegitimately advertised as a law.
(iv) You say “those well-defined scientific criteria *is* a somewhat political question.” That criteria are to some extent negotiable is, in fact, the representative economist's greatest self-delusion. The scientific criteria are material and logical consistency. And there is absolutely no way around this. There is true/false and nothing in-between. Economists know that neither Walrasianism nor Keynesianism nor the rest satisfies these criteria.
“... suppose they [the economists] did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.” (Hands, 2001, p. 404)
Because of this, economists have moved from science's true/false to Hollywood's good guy/bad guy. Actually, that's more fun for all.
(v) The task of Heterodoxy is to refute Orthodoxy according to well-defined scientific rules and not to complain about political bias. It is too easy to return this compliment and thus all ends with the pluralism of false theories and the uneasy coexistence of confused confusers.
Economics has to get out of politics before it drowns with it in idiocy. Better one iota of knowledge than a heap of opinion.
Egmont Kakarot-Handtke
References
Hands, D.W. (2001). Reflection without Rules. Economic Methodology and Contemporary
Science Theory. Cambridge, New York, etc: Cambridge University Press.
July 6, 2015
True/false is different from good/bad
Comment on merijnknibbe on ‘In Greece, NO is the answer’
Blog-Reference
Yes, the Classics called themselves political economists. But at the same time, they claimed to do science, even Marx, who arguably was the most political of all political economists. This is where schizophrenia started. However, as the quote from J. S. Mill shows, it was quite clear from the very beginning what it meant to be an economist who is committed to science.
Economics has been, but is no longer, about the economy of the polis. Nowadays, it is about the world economy. Because of this, there is no such thing as American, European, or Greek economics as there is no American, European, or Greek physics or mathematics. Economic laws apply everywhere.
Of course, economics is intertwined with politics. As a matter of fact, political economics has hijacked theoretical economics. The conclusion from this is that economics has to emancipate itself from politics.
The only relevant criterion for economics as a science is true/false and not whether it serves any political party, social group, or nation.
To instrumentalize/weaponize economics for any power struggle, whatever is the original intellectual corruption in economics and incompatible with the ethics of science. The fact of the matter is that it is simply beyond human capacities to be a politician and a scientist at the same time. All this is long known.
“But if a man occupies himself with investigating the truth of some question for some ulterior purpose, such as to make money, or to amend his life, or to benefit his fellows, he may be ever so much better than a scientific man, if you will — to discuss that would be aside from the question — but he is not a scientific man.” (Peirce)
So, eventually, a decision has to be made. To be more precise, (i) you can look at the actual economic conditions in a country like the US or Greece and come to the conclusion that they are unacceptable for a number of good reasons and therefore have to be changed; this is a political decision, or (ii), you can look at economics and come to the conclusion that it is unacceptable according to well-defined scientific criteria and therefore has to be changed; this is a scientific decision that eventually leads to a Paradigm Shift.
What I say is that to flip-flop between the two spheres has not yielded results for over two hundred years. The proof is in the dismal state of economics as a science and of too many economies in dire straits as the inevitable practical result. The false theory makes bad policy. As economists, our task is to fix the former.
Egmont Kakarot-Handtke
Blog-Reference
Yes, the Classics called themselves political economists. But at the same time, they claimed to do science, even Marx, who arguably was the most political of all political economists. This is where schizophrenia started. However, as the quote from J. S. Mill shows, it was quite clear from the very beginning what it meant to be an economist who is committed to science.
Economics has been, but is no longer, about the economy of the polis. Nowadays, it is about the world economy. Because of this, there is no such thing as American, European, or Greek economics as there is no American, European, or Greek physics or mathematics. Economic laws apply everywhere.
Of course, economics is intertwined with politics. As a matter of fact, political economics has hijacked theoretical economics. The conclusion from this is that economics has to emancipate itself from politics.
The only relevant criterion for economics as a science is true/false and not whether it serves any political party, social group, or nation.
To instrumentalize/weaponize economics for any power struggle, whatever is the original intellectual corruption in economics and incompatible with the ethics of science. The fact of the matter is that it is simply beyond human capacities to be a politician and a scientist at the same time. All this is long known.
“But if a man occupies himself with investigating the truth of some question for some ulterior purpose, such as to make money, or to amend his life, or to benefit his fellows, he may be ever so much better than a scientific man, if you will — to discuss that would be aside from the question — but he is not a scientific man.” (Peirce)
So, eventually, a decision has to be made. To be more precise, (i) you can look at the actual economic conditions in a country like the US or Greece and come to the conclusion that they are unacceptable for a number of good reasons and therefore have to be changed; this is a political decision, or (ii), you can look at economics and come to the conclusion that it is unacceptable according to well-defined scientific criteria and therefore has to be changed; this is a scientific decision that eventually leads to a Paradigm Shift.
What I say is that to flip-flop between the two spheres has not yielded results for over two hundred years. The proof is in the dismal state of economics as a science and of too many economies in dire straits as the inevitable practical result. The false theory makes bad policy. As economists, our task is to fix the former.
Egmont Kakarot-Handtke
***
Graphic AXEC108l
A lesson for Heterodoxy
Comment on merijnknibbe on ‘In Greece, NO is the answer’
Blog-Reference
There have been two essentially different, although intertwined, issues (i) economics, austerity, default, euro/drachma, etcetera, and (ii) democracy, independence, honor, and the European identity of the Greek people.
No doubt, good answers have to be found for both issues. The problem is that humans are serial thinkers, that is, they can tackle only one problem at a time. Because of this, political economics is an approach that almost guarantees that both issues are botched up.
Yanis Varoufakis's task as a Greek finance minister and economist has been to solve the economic problem. What he has achieved is something else: “Our NO is a majestic, big YES to a democratic, rational Europe!” (Yanis Varoufakis on Twitter 7 July 2015)
This is the perfect moment to recall what the economist's task is: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)
Heterodoxy is at a crossroads and has to decide between becoming a political movement or a scientific endeavor with one and only one goal, that is, to replace Orthodoxy.
As Keynes put it: “If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!”
Seen from the perspective of science, political economics has always appeared as a rare mental disorder, that is, a constant flip-flop between two fundamentally different issues that frustrate the solution of either.
To recall, economics is a failed science.
Egmont Kakarot-Handtke
Blog-Reference
There have been two essentially different, although intertwined, issues (i) economics, austerity, default, euro/drachma, etcetera, and (ii) democracy, independence, honor, and the European identity of the Greek people.
No doubt, good answers have to be found for both issues. The problem is that humans are serial thinkers, that is, they can tackle only one problem at a time. Because of this, political economics is an approach that almost guarantees that both issues are botched up.
Yanis Varoufakis's task as a Greek finance minister and economist has been to solve the economic problem. What he has achieved is something else: “Our NO is a majestic, big YES to a democratic, rational Europe!” (Yanis Varoufakis on Twitter 7 July 2015)
This is the perfect moment to recall what the economist's task is: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)
Heterodoxy is at a crossroads and has to decide between becoming a political movement or a scientific endeavor with one and only one goal, that is, to replace Orthodoxy.
As Keynes put it: “If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!”
Seen from the perspective of science, political economics has always appeared as a rare mental disorder, that is, a constant flip-flop between two fundamentally different issues that frustrate the solution of either.
To recall, economics is a failed science.
Egmont Kakarot-Handtke
July 4, 2015
An exercise in futility
Comment on Mark Thoma on ‘Stability of a Market Economy’
Blog-Reference
You correctly say that it is a belief that the market system is inherently stable/self-adjusting. As a matter of fact, this belief is either ultimately derived from Walrasian general equilibrium theory, which has been thoroughly refuted (Ackerman and Nadal, 2004), or from wishful thinking. The opposite belief is not any better founded. The lethal defect of Keynes, Hicks, Kaldor, Kalecki, etcetera, is that the subjacent profit theory is false (2011). Hence, neither belief has a sound theoretical foundation. A multitude of models is no substitute for a comprehensive theory but gives only rise to utterly confused discussions.
To show that the market economy is stable/unstable, first of all, a consistent formal description of the structure has to be given. In the second step, it has to be shown that this structure supports positive feedback. You argue instead that human behavior has a tendency for self-reinforcement. This is a psycho-sociological hypothesis and not a structural hypothesis.
In sum, your analysis lacks a sound theoretical foundation.
The correct structural approach (2015) leads to the result that the market economy is inherently unstable. This result is, of course, formally consistent and directly testable. This makes the usual inconclusive wish wash redundant.
Egmont Kakarot-Handtke
References
Ackerman, F., and Nadal, A. (Eds.) (2004). Still Dead After All These Years: Interpreting the Failure of General Equilibrium Theory. London, New York: Routledge.
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
Blog-Reference
You correctly say that it is a belief that the market system is inherently stable/self-adjusting. As a matter of fact, this belief is either ultimately derived from Walrasian general equilibrium theory, which has been thoroughly refuted (Ackerman and Nadal, 2004), or from wishful thinking. The opposite belief is not any better founded. The lethal defect of Keynes, Hicks, Kaldor, Kalecki, etcetera, is that the subjacent profit theory is false (2011). Hence, neither belief has a sound theoretical foundation. A multitude of models is no substitute for a comprehensive theory but gives only rise to utterly confused discussions.
To show that the market economy is stable/unstable, first of all, a consistent formal description of the structure has to be given. In the second step, it has to be shown that this structure supports positive feedback. You argue instead that human behavior has a tendency for self-reinforcement. This is a psycho-sociological hypothesis and not a structural hypothesis.
In sum, your analysis lacks a sound theoretical foundation.
The correct structural approach (2015) leads to the result that the market economy is inherently unstable. This result is, of course, formally consistent and directly testable. This makes the usual inconclusive wish wash redundant.
Egmont Kakarot-Handtke
References
Ackerman, F., and Nadal, A. (Eds.) (2004). Still Dead After All These Years: Interpreting the Failure of General Equilibrium Theory. London, New York: Routledge.
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
All economists together now: Solow’s Swan Song
Comment on Bruce Edmond on ‘Economic Value is NOT Price’
Blog-Reference
The wonderful thing about economists of all shades is that the only fact they can convincingly explain is why they know nothing.
“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, pp. x-xi)
Those who hallucinate being at the cutting edge of science, please take notice: “... suppose they [the economists] did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.” (Hands, 2001, p. 404)
By the way, the exchange value in the pure production/consumption economy is fully determined by the objective factors market clearing, budget balancing, and zero profit (2011). Utility drops completely out of the equation. All subjective approaches since Jevons have predictably ended in folk-psychological blather.
Pace Solow: there is no such thing as ‘laws of behavior.’ Orthodoxy started on the wrong foot. “But the point is not to provide excuses.” Yes, and today is the perfect day to start with it.
Egmont Kakarot-Handtke
References
Hands, D.W. (2001). Reflection without Rules. Economic Methodology and Contemporary
Science Theory. Cambridge, New York, NY, etc: Cambridge University Press.
Kakarot-Handtke, E. (2011). The Pure Logic of Value, Profit, Interest. SSRN Working Paper Series, 1838203: 1–27. URL
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton, NJ: Princeton University Press, 3rd edition.
Blog-Reference
The wonderful thing about economists of all shades is that the only fact they can convincingly explain is why they know nothing.
“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, pp. x-xi)
Those who hallucinate being at the cutting edge of science, please take notice: “... suppose they [the economists] did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.” (Hands, 2001, p. 404)
By the way, the exchange value in the pure production/consumption economy is fully determined by the objective factors market clearing, budget balancing, and zero profit (2011). Utility drops completely out of the equation. All subjective approaches since Jevons have predictably ended in folk-psychological blather.
Pace Solow: there is no such thing as ‘laws of behavior.’ Orthodoxy started on the wrong foot. “But the point is not to provide excuses.” Yes, and today is the perfect day to start with it.
Egmont Kakarot-Handtke
References
Hands, D.W. (2001). Reflection without Rules. Economic Methodology and Contemporary
Science Theory. Cambridge, New York, NY, etc: Cambridge University Press.
Kakarot-Handtke, E. (2011). The Pure Logic of Value, Profit, Interest. SSRN Working Paper Series, 1838203: 1–27. URL
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton, NJ: Princeton University Press, 3rd edition.
July 3, 2015
It's about institution-building, stupid
Comment on Michael Hudson on ‘Finance as Warfare’
Blog-Reference
Finance has not necessarily much to do with warfare — but it can if things are messed up.
Mortgage financing, for example, is an ancient and rather simple business. In Germany, it was institutionalized in 1900 with the Mortgage Banking Act. This law was so well-crafted that it worked with minor modifications until 2005 when it was abolished in an act of institutional suicide. The new law was sold under the slogan ‘Strengthening Germany as a Financial Centre.’ This was when deregulation was the hype of the day, which lasted until Wall Street's meltdown. This financial mega-crash, first of all, showed one thing: what happens when you do mortgage banking the American way.
Note, that a mortgage debtor saw and heard nothing for 10, 20, or 30 years of his creditor if he paid his fixed annuity monthly. If a loan became non-performing, mostly due to private misfortune like unemployment or divorce, the mortgage bank tried to help the debtor back on his feet because the last thing a mortgage bank wanted was the real estate that had been pledged as collateral. All it ever wanted was the money back plus interest as agreed upon in the mortgage contract. Then it could, in turn, fulfill its obligations vis-à-vis the Pfandbrief owners, mostly pension funds, and other long-term buy-and-hold investors.
This changed when it became possible to sell non-performing loans to firms that were specialized in making money from talking to the debtors in the bonebreaker jargon that people had hitherto only encountered in Hollywood movies.
Note further, that the margins of mortgage banks were usually seen as razor-thin and not something an investment banker would get out of bed for in the morning.
Most importantly, note that Germany has never had a real estate boom-bust cycle. That is quite remarkable when you consider that Japan, the US, Britain, Spain, and many other economies have been badly damaged by a real estate bust.
Likewise, the margins of commercial banks like Deutsche Bank were unspectacular. Yes, until Mr. Ackermann came and announced that he aimed at something about 20 or so percent — like the American investment banks. This made the stock market happy.
Now, whoever has been long enough in the banking business knows that margins way above the average can only be made by magic or fraud. People preferred to believe in magic while the latter happened as a trivial reality throughout the banking industry.
After everything had duly crashed against the wall in 2008/09 the actual resume is this. There is no use to lament too long over banksters. It has been convincingly demonstrated that, for example, mortgage lending can be institutionalized in such a way that it works smoothly to the benefit of lenders, borrowers, and the economy at large. It can be done for other financing businesses, too.
The point is whether a country is good at institution-building or not. There is a lot at stake. If you mess up your political institutions you end up in a banana republic, if you mess up your banking institutions, first and foremost the central bank, you end up in large-scale bankruptcy and QE.
I think it would be acceptable to get out of this war rhetoric, not because there is nothing to it, but because it keeps us from building proper functioning political and economic institutions.
There is a way to get rid of financial war, banksters, and — not to forget — the small-scale corruption of people who do not belong to the one-percenters. Economics is, in the first place, not about good guys vs. bad guys, it is about effective vs. ineffective institutions (including laws, judges, and prisons for financial warmongers).
Egmont Kakarot-Handtke
Blog-Reference
Finance has not necessarily much to do with warfare — but it can if things are messed up.
Mortgage financing, for example, is an ancient and rather simple business. In Germany, it was institutionalized in 1900 with the Mortgage Banking Act. This law was so well-crafted that it worked with minor modifications until 2005 when it was abolished in an act of institutional suicide. The new law was sold under the slogan ‘Strengthening Germany as a Financial Centre.’ This was when deregulation was the hype of the day, which lasted until Wall Street's meltdown. This financial mega-crash, first of all, showed one thing: what happens when you do mortgage banking the American way.
Note, that a mortgage debtor saw and heard nothing for 10, 20, or 30 years of his creditor if he paid his fixed annuity monthly. If a loan became non-performing, mostly due to private misfortune like unemployment or divorce, the mortgage bank tried to help the debtor back on his feet because the last thing a mortgage bank wanted was the real estate that had been pledged as collateral. All it ever wanted was the money back plus interest as agreed upon in the mortgage contract. Then it could, in turn, fulfill its obligations vis-à-vis the Pfandbrief owners, mostly pension funds, and other long-term buy-and-hold investors.
This changed when it became possible to sell non-performing loans to firms that were specialized in making money from talking to the debtors in the bonebreaker jargon that people had hitherto only encountered in Hollywood movies.
Note further, that the margins of mortgage banks were usually seen as razor-thin and not something an investment banker would get out of bed for in the morning.
Most importantly, note that Germany has never had a real estate boom-bust cycle. That is quite remarkable when you consider that Japan, the US, Britain, Spain, and many other economies have been badly damaged by a real estate bust.
Likewise, the margins of commercial banks like Deutsche Bank were unspectacular. Yes, until Mr. Ackermann came and announced that he aimed at something about 20 or so percent — like the American investment banks. This made the stock market happy.
Now, whoever has been long enough in the banking business knows that margins way above the average can only be made by magic or fraud. People preferred to believe in magic while the latter happened as a trivial reality throughout the banking industry.
After everything had duly crashed against the wall in 2008/09 the actual resume is this. There is no use to lament too long over banksters. It has been convincingly demonstrated that, for example, mortgage lending can be institutionalized in such a way that it works smoothly to the benefit of lenders, borrowers, and the economy at large. It can be done for other financing businesses, too.
The point is whether a country is good at institution-building or not. There is a lot at stake. If you mess up your political institutions you end up in a banana republic, if you mess up your banking institutions, first and foremost the central bank, you end up in large-scale bankruptcy and QE.
I think it would be acceptable to get out of this war rhetoric, not because there is nothing to it, but because it keeps us from building proper functioning political and economic institutions.
There is a way to get rid of financial war, banksters, and — not to forget — the small-scale corruption of people who do not belong to the one-percenters. Economics is, in the first place, not about good guys vs. bad guys, it is about effective vs. ineffective institutions (including laws, judges, and prisons for financial warmongers).
Egmont Kakarot-Handtke
From economics to politics to idiocy
Comment on merijnknibbe on ‘Breaking: ECB states that Euro is reversible and not irrevocable’
Blog-Reference
Remember how it all started? The majority of Europeans wanted one Europe to do away with these ridiculous borders, and they wanted — and still want — it to be democratic and prosperous. At the latter point, economics comes in. What is the economist's task? Roughly this: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)
The economist's task is to figure out how a prosperous Europe can be realized (as a step between The Wealth of Nations and The Wealth of the World). The decision about the political future of Europe has been taken by legitimate political bodies. For the economist qua economist, this is a fixpoint. What is required is his professional competence for a successful realization.
Here, the problem starts. Economists have no clear idea about how the actual economy works. What they have produced so far under the label of Walrasianism, Keynesianism, Austrianism, etcetera, is scientifically worthless. The representative economist cannot tell the difference between profit and income. This is like physics before they had figured out such elementary things as the difference between velocity and acceleration.
The great scandal of economics is that without deeper knowledge, but much opinion economists turn to politics. The scandal consists of speaking with a scientific authority, of which not much exists. One of the many low points had been reached, for example, when Hayek volunteered as an academic fig leaf for Thatcher's rather straightforward power politics. To be sure, Hayekian economics never satisfied the scientific criteria of material and formal consistency and never will. His economics was not good enough for science but good enough for politics. This example can easily be multiplied.
The Greek crisis has to be seen in the context of the initial plan. The economist's task at this juncture is to find a solution that helps to realize the initial political decision. Of course, every economist qua citizen is free to abolish the eurocrats, but then he has to put his political hat on and his scientific hat off.
Where has heterodox economics landed in the grand scheme of things? After leaving economics proper and taking part in the idiotic good guy/bad guy discussion, they landed in a quarrel about whether Bulgarians are ugly.
That's economics at its best.
Egmont Kakarot-Handtke
Blog-Reference
Remember how it all started? The majority of Europeans wanted one Europe to do away with these ridiculous borders, and they wanted — and still want — it to be democratic and prosperous. At the latter point, economics comes in. What is the economist's task? Roughly this: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)
The economist's task is to figure out how a prosperous Europe can be realized (as a step between The Wealth of Nations and The Wealth of the World). The decision about the political future of Europe has been taken by legitimate political bodies. For the economist qua economist, this is a fixpoint. What is required is his professional competence for a successful realization.
Here, the problem starts. Economists have no clear idea about how the actual economy works. What they have produced so far under the label of Walrasianism, Keynesianism, Austrianism, etcetera, is scientifically worthless. The representative economist cannot tell the difference between profit and income. This is like physics before they had figured out such elementary things as the difference between velocity and acceleration.
The great scandal of economics is that without deeper knowledge, but much opinion economists turn to politics. The scandal consists of speaking with a scientific authority, of which not much exists. One of the many low points had been reached, for example, when Hayek volunteered as an academic fig leaf for Thatcher's rather straightforward power politics. To be sure, Hayekian economics never satisfied the scientific criteria of material and formal consistency and never will. His economics was not good enough for science but good enough for politics. This example can easily be multiplied.
The Greek crisis has to be seen in the context of the initial plan. The economist's task at this juncture is to find a solution that helps to realize the initial political decision. Of course, every economist qua citizen is free to abolish the eurocrats, but then he has to put his political hat on and his scientific hat off.
Where has heterodox economics landed in the grand scheme of things? After leaving economics proper and taking part in the idiotic good guy/bad guy discussion, they landed in a quarrel about whether Bulgarians are ugly.
That's economics at its best.
Egmont Kakarot-Handtke
Subscribe to:
Posts (Atom)