Heterodoxy’s popular but silly math denial

Comment on Lars Syll on ‘Formalized economics bordering on the insane’

Blog-Reference

It is well known that orthodox economics is misapplied math (Mirowski). The abuse has been criticized under the label mathiness but in fact, has a wider methodological dimension. The problem with economists is that they are cargo cult scientists: “... they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.” (Feynman) What is missing is a deeper understanding of science and mathematics and the relation between the two.

Metaphorically speaking, scientists put first their trousers on and then their boots, economists do it the other way round: “The mathematical language used to formulate a theory is usually taken for granted. However, it should be recognized that most of mathematics used in physics was developed to meet the theoretical needs of physics. ... The moral is that the symbolic calculus employed by a scientific theory should be tailored to the theory, not the other way round.” (Wittgenstein)

In the same vein: “Surely it would be considered absurd, bordering on the insane, if a surgical procedure was implemented because a tool for its implementation was devised by a medical doctor who knew and believed in topological fixed-point theorems?” (Velupillai, see intro)

The absurdity began with economists borrowing the tool ― calculus ― from physics and making a behavioral axiom out of it: “HC2 agents individually optimize subject to constraints.” (Weintraub) This has been the fundamental methodological mistake: the tool came first and the pivotal behavioral assumption was tailored to the tool.

Walras’s determination of general equilibrium was found wanting by mathematicians: “You know, Oskar, if those books are unearthed sometime a few hundred years hence, people will not believe they were written in our time. Rather, they will think that they are about contemporary with Newton, so primitive is their mathematics. Economics is simply still a million miles away from the state in which an advanced science is, such as physics.” (von Neumann) And this critique led eventually to the fixpoint theorem.

However, the formal rectification left Walras’s conceptual root structure unchanged: “It seems clear that Debreu intended his Theory of Value to serve as the direct analog of Bourbaki's Theory of Sets, right down to the title. ... But this required one very crucial maneuver that was nowhere stated explicitly: namely, that the model of Walrasian general equilibrium was the root structure from which all further scientific work in economics would eventuate.” (Weintraub)

Walras’s root structure is defined with this axiom set: “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)

Two things should be obvious: (i) the axiom set contains three nonentities (HC2, HC4, HC5) and is therefore forever unacceptable, and (ii), when the conceptual root structure is false then it does not help much to express it in set-theoretical terms. Formalization does not make a false behavioral assumption like utility maximization true.

When the elementary framework of concepts consists of economic nonentities then no amount of formalization helps and math cannot unfold its specific strength. Physics took off not until the foundational concepts of energy, mass, force, velocity, acceleration, etcetera were clearly defined and properly understood.

Economics is still at the proto-scientific level and the representative economist cannot even tell the difference between profit and income.#1 In order to get out of utter confusion and to put economics on firm ground formalization is indispensable: “I mean by this that formalization eliminates provincial and inessential features of the way in which a scientific theory has been thought about. ... Formalization is a way of setting off from the forest of implicit assumptions and the surrounding thickness of confusion, the ground that is required for the theory being considered. ... In areas of science where great controversy exists about even the most elementary concepts, the value of such formalization can be substantial.” (Suppes)

Orthodoxy has misapplied formalization and traditional Heterodoxy has never been able to put it to good use. With incompetent scientists, it is no wonder that economics is a failed science. As long as Heterodoxy insists on storytelling and is unable to apply the enormous leverage of mathematics it will not get out of its proto-scientific burrow.

With regard to mathiness holds: from the misapplication of Orthodoxy does not follow the non-application of traditional Heterodoxy but the proper application of constructive Heterodoxy.#2

Egmont Kakarot-Handtke


#1 Profit and the collective failure of economists
#2 For the complete and consistent set of foundational equations see cross-references Paradigm Shift.

For details of the big picture see cross-references Heterodoxy and cross-references Math/Mathiness.

A new curriculum for swampies?

Comment on Lars Syll on ‘The need for a new economics curriculum without the present suicidal formalism’

Blog-References and Blog-Reference and Blog-Reference on Nov 18 and Blog-Reference on Apr 25, 2017, adapted to context

A new economics curriculum is needed, no doubt about this. But why exactly? Some say because there is too much mathematics. Others say there is not enough history/ psychology/ sociology/ philosophy/ ethics. Still, others demand that heterodox economists like Schumpeter or Marx should be given more weight.

There is some superficial plausibility in all of this, but these popular arguments miss the crucial point. The fact of the matter is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism ―  are provably false. What economics needs is a scientifically valid curriculum, but there is none because there is no scientifically valid economic theory. After 200+ years, economics is still at the level of what Feynman called a cargo cult science.

So, when Keynesian and Marxian economists argue that the Walrasian curriculum is false, unrealistic, or biased, then one can readily agree. The problem is that Keynesian or Marxian economics is not one iota better; it is only false in a different way. Actually, both Keynesian and Marxian profit theories are provably false (2013; 2014), just like Walrasian profit theory.

To mix a new curriculum of Walrasian, Keynesian, Marxian, and Austrian contents is an idea of unsurpassable idiocy. The true theory does not emerge from a mixture of provably false theories.

The state of economics is this: there are political economics and theoretical economics. The founding fathers called themselves political economists; that is, they left no doubt that their main business was agenda-pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing). And this is how economics became a failed science.

What is entirely missing among economists is an understanding of what science is all about. Science is digital = binary = true/false and NOTHING in between. There is NO such thing in science as roughly right or roughly wrong; there is only materially/formally true/false. All the rest of human communication is storytelling, gossip, sitcom, rhetoric, and opinion. Vague blather, untestable wish-wash, inconclusive either-or, plain inconsistency, moralizing, and preaching have always been the hallmark of political economists.

So, there are the hard rocks of true and false and the swamp between them where “nothing is clear and everything is possible” (Keynes). The swamp is the natural habitat of morons, agenda pushers, confused confusers, trolls, and incompetent scientists.

Economists are natural-born swampies. In marked contrast, scientists drive the question under discussion to the point of a clear-cut decision between true and false. And they do not touch questions that cannot be decided by the accepted means, that is, by logic and testing.

The fraternity of orthodox and heterodox swampies has no genuine interest in a definite true/false outcome but seeks to stay in the swamp. Their common enemy is science. Swampies have produced the gigantic heap of toxic scientific waste that is called economics.

Have swampies learned anything from their abysmal failure? Only this that they want more than ever to stay in the swamp: “Economics should not be taught as if it were about the discovery of timeless laws. Those who champion the discipline must remember that, at its core, it is about human behaviour, with all the messiness and disorder that this implies.” (Financial Times)

Economists never understood what their subject matter is. Economics is NOT a social science that deals with the behavior of people, but a systems science that deals with the behavior of the economic system. #1 Human behavior does not follow timeless laws, but the economic system does. The fact of the matter is that neither orthodox nor heterodox economists have figured out the fundamental systemic laws (the Profit Law, for example) to this very day.

More than two hundred years of failure are enough. Time to expel the swampies from the scientific community. And, of course, high time to install a scientifically valid economics curriculum. #2

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2013). Why Post Keynesianism is Not Yet a Science. Economic Analysis and Policy, 43(1): 97–106. URL or URL
Kakarot-Handtke, E. (2014). Profit for Marxists. SSRN Working Paper Series, 2414301: 1–25. URL

#1 For details, see cross-references Not a Science of Behavior
#2 For details, see cross-references Old Curriculum/New Curriculum

Related 'There is NO such thing as an economic expert' and 'The father of modern economics and his imbecile kids' and 'To this day, economists have produced NOT ONE textbook that satisfies scientific standards' and 'The economist as stand-up comedian' and 'How to make economics a science'. For more details of the big picture, see cross-references Econ 101/Old Curriculum/New Curriculum and cross-references New Curriculum.

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Graphic AXEC121f

How to end the futile economics zombie ping-pong

Comment on Simon Wren-Lewis on ‘Do New Keynesians assume full employment?’

Blog-Reference

It is impossible for Nick Rowe and Simon Wren-Lewis to get their heads around the fact that Walrasianism, Keynesianism, Marxianism, and Austrianism are axiomatically false, that is, beyond repair. So, not to get them out from behind the curve ― just for the record: it is pointless to pick one aspect, e.g., employment, and to discuss the respective faults or merits of some model variants. The iron methodological rule says: when the axioms are false, the whole analytical superstructure is false.

Already Keynes knew this: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.”

Standard economics is built upon false premises. Therefore, the way forward is to bury all variants for good and to fully replace the false Walrasian micro axioms and the false Keynesian macro axioms with true macro axioms. #1

This is the correct set of premises: (A0) The objectively given and most elementary configuration of the (world-) economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

(A1) to (A3) define the elementary production-consumption economy. #2 Note that the set of foundational equations is ENTIRELY FREE of behavioral assumptions like constrained/intertemporal optimization or equilibrium, that is, the axiom set is OBJECTIVE SYSTEMIC. This new analytical workhorse fully replaces Nick Rowe’s hallucinatory behavioral construct.

In the elementary production-consumption economy, this is what happens if, for example, the productivity falls, due to some shock, by 50 percent: the price doubles because the correct Law of Supply and Demand says for the most elementary case that P=W/R, i.e., the market-clearing price is equal to unit wage costs or, in other words, the real wage is equal to the productivity at any employment level, i.e. W/P=R. This is the objective-systemic configuration to start with. The usual guessing ping-pong about what agents might maximize or expect or do has always been futile, is futile with Nick and Simon, and will be futile for all eternity.

From the minimalist formal core, (A1) to (A3) follows with consistent logical steps the investment economy with the systemic Employment Law, a.k.a. Phillips curve. #3,#4

The systemic Employment Law says that employment increases if productivity falls and all other variables are held constant. Secular stagnation results from productivity and price rising faster than the wage rate, with all other variables held constant.

To paraphrase a summary of Blaug: ‘At long last, it can be said that the history of general theory from Walras to Arrow-Debreu and on to DSGE and New Keynesianism has been a journey down a blind alley, and it is the set A1/A3 to have finally hammered down the nails in the coffin.’

Egmont Kakarot-Handtke


#1 How to restart economics and From microfoundations to macrofoundations
#2 For a detailed description, see ‘The future of economics: why you will probably not be admitted to it, and why this is a good thing’
#3 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#4 Graphic AXEC62

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REPLY to Anonymous on Nov 18

You say: “in Keynes y=I+C consumption is spending from current income only like, you know, the marginal propensity to consume, consume out of what?”

Yes, I know what Keynes said. And I know also (i) what Keynes said is false, (ii) After-Keynesians have not realized it until this day.

This is what Keynes said in the General Theory “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This syllogism is conceptually and logically defective because Keynes did not come to grips with profit.

“His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Because profit ― the pivotal magnitude of economics ― is ill-defined, the whole theoretical superstructure of Keynesianism is false, in particular, all I=S and IS-LM models. #1

Neither pro-Keynesians nor anti-Keynesians detected Keynes's foundational error/mistake in the last 80 years. It was Allais who got the elementary mathematics of national accounting right. #2

Keynes was not a great thinker, but what came after him is abysmal. Anonymous is a case in point.


#1 For the formal proof, see Why Post Keynesianism Is Not Yet a Science.
#2 How Keynes got macro wrong and Allais got it right

Political economics: a deadhead sitcom

Comment on Lars Syll on ‘Why Trump won the election’

Blog-Reference

There is political economics and theoretical economics. The founding fathers called themselves political economists; that is, they left no doubt that their main business was agenda pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing). And this is how economics became one of the most embarrassing scientific failures of all time.

The fact of the matter is that economists do not know how the actual economy works. #1 They do not even understand the foundational concepts of their subject matter, that is, profit and income. This is comparable to medieval physics when physicists did not properly understand the foundational concepts of their subject matter, that is, energy, mass, force, velocity, acceleration, etc.

The actual state of economics is this: the main approaches, Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives, are provably false. In methodological terms, all approaches are axiomatically false, that is, beyond repair. There is no use at all to discuss their respective faults or merits; the way forward is to fully replace them. At the moment, about 90 percent of the content of peer-reviewed economic quality journals and 100 percent of textbooks is proto-scientific garbage. #2

The double insanity of economists consists of (i) not realizing that they are failed scientists, (ii) stepping forward as experts, and issuing economic policy guidance. The election campaign has delivered as much proof as anybody ever wanted to see. #3

Economists do not understand what their subject matter is. They do not even realize that the question ‘Why Trump won the election’ is a question for Psychology, Sociology, Political Science, etc., and NOT AT ALL for economics. Economics is NOT a social science that deals with the behavior of people, but a systems science that deals with the behavior of the economic system, or more specifically, with the interrelation of measurable economic variables like wage income, profit, productivity, employment, money, etc.

Political economists do not know how the actual economy works. They lack the true theory. Instead, they senselessly speculate about NONENTITIES like utility maximization, rational expectations, equilibrium, and hallucinate about the marvelous feats of the Invisible Hand. The whole stuff is exactly at the same level as ‘Had Adam a navel?’ or ‘How many angels can dance on a pinpoint?’.

First of all, it is important to realize that economic policy guidance has NEVER had sound scientific foundations. And it does not matter at all whether this guidance has been more rightist or more leftist. ALL political economists are scientific failures.

Political economists have captured economics 200+ years ago and steered it in the wrong direction: “... but when the road ends at a coal-pit, he [the traveler] doesn’t need much judgment to know that he has gone wrong, and perhaps to find out what has led him astray.” (Hume)

To be sure, it has been political agenda-pushing that has led economists astray.

The general public’s idea that economists can solve economic problems has always been a bad joke because economists are the VERY CAUSE of economic problems. #4 And there is NO difference between team blue and team red.

Egmont Kakarot-Handtke


#1 There is NO such thing as an economic expert
#2 The father of modern economics and his imbecile kids
#3 Krugman and the scientific implosion of economics
#4 How economists murdered the economy and got away with it

For details of the big picture, see cross-references Political Economics/Stupidity/Corruption.

Better precisely right than roughly wrong (II)

Comment on Lars Syll on ‘Why it is better to be roughly right than precisely wrong’

Blog-Reference

Scientists know it, but economists do not: “The chief demerit is inconsistency, including inconsistency with the results of experiments that a competing theory can explain.” (Popper, 1994)

Scientists know it, but economists do not: “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, 1994)

So, science is about formal AND material consistency ― BOTH simultaneously, NOT either/or. It is all simple and clear.

But in all walks of life, there is always the original and a look-alike. Accordingly, there is science and cargo cult science. Feynman characterized the look-alikes: “they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

What is missing is an understanding of what science is all about. Science is digital = binary = true/false and NOTHING in between. There is NO such thing in science as roughly right or roughly wrong; it is only materially/formally true/false. All the rest is storytelling, gossip, sitcom, and blather.

Vague blather, untestable wish-wash, inconclusive either-or, and storytelling have always been the hallmark of political economists. Political economics is the look-alike of theoretical economics. Walrasianism, Keynesianism, Marxianism, and Austrianism are political economics.

So, there are the hard rocks of true and false and the bottomless swamp between them where “nothing is clear and everything is possible” (Keynes). The swamp is the natural habitat of morons, agenda pushers, confused confusers,#1 trolls, and incompetent scientists.

Economists are natural-born swampies. This explains why economics is a failed science. Walrasianism, Keynesianism, Marxianism, and Austrianism are mutually contradictory, and the proponents fight each other. But this does not go very deep, and it never goes to the final refutation of one approach or the other. Every swampie respects the other swampie's wish to fool around in the swamp.

In marked contrast, scientists drive the question under discussion to the point of a clear-cut decision between true and false. And they do not touch questions that cannot be decided by the accepted means, that is, by logic and testing.

The swamp cronies have no genuine interest in a definite true/false outcome but seek to stay, for whatever reasons, in the status quo swamp. Swampies subscribe to a common methodological hallucination: it is better to be roughly right than precisely wrong, anything goes, truth is subjective and relative, reality is a social construct; nobody has the truth with a big T, everybody has some truth with a small t, and finally, to the pluralism of provably false theories. Swampies have produced the gigantic heap of toxic scientific waste that is called economics.

Swampies simply do not understand what science is all about. As Feynman put it: “The first principle is that you must not fool yourself ― and you are the easiest person to fool. So you have to be very careful about that. After you’ve not fooled yourself, it’s easy not to fool other scientists. You just have to be honest in a conventional way after that.”

Neither orthodox nor heterodox economists fit this description of a scientist. But BOTH orthodox and heterodox economists fit the description of lookalike scientists, political agenda pushers, and self-foolers. And this is exactly why it is best to throw BOTH now speedily out of the scientific community.

Egmont Kakarot-Handtke


#1 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist

Related 'There is NO such thing as an economic expert' and 'The father of modern economics and his imbecile kids' and 'How Keynes got macro wrong and Allais got it right' and 'From false micro to true macro: the new economic paradigm' and 'New Economic Thinking: the 10 crucial points' and 'There is NO such thing as “smart, honest, honorable economists”' and 'Your economics is refuted on all counts: here is the real thing'.

There is NO such thing as an economic expert

Comment on Sandwichman on ‘Welcome to the Amusement Park at the Edge of the Abyss’

Blog-Reference and Blog-Reference Nov 9 adapted to context

Sandwichman comments on the pre-election discussion: “The experts were not even wrong. They didn’t know what they were talking about.”

This presupposes that there exist experts who know how the market economy works. This is NOT the case.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.”

(Stigum, 1991)

Economists do NOT have the true theory. Both Orthodoxy and Heterodoxy is provably false.#1 Economists are scientifically incompetent, their policy guidance has no sound theoretical foundations and is at best worthless.

It is NOT AT ALL a question of right-wing or left-wing. The representative economist does not know what he is talking about ― it is just proto-scientific garbage and personal opinion.

Egmont Kakarot-Handtke


#1 For details see
► How economists murdered the economy and got away with it
► Unemployment is high because economics is false
► Economics: a science without scientists
► Enough! Economists, retire now!

Related 'Just for the record: economics is dead' and 'The general theory of scientific incompetence' and 'A basket of scientific deplorables' and 'All models are false because all economists are stupid' and 'Outside of science' and 'Dead men tweeting' and 'Krugman and the scientific implosion of economics' and 'It is better to be precisely right than roughly wrong' and 'Krugman is not an economist' and 'Feeble minds, shaky assumptions, and the inevitable failure of economics' and 'Heterodoxy, too, is scientific junk' and 'Economics: ‘a tale told by an idiot, full of sound and fury’?' and 'Economists and the destructive power of stupidity' and 'New economic thinking, or, let’s put lipstick on the dead pig' and 'Where economics went wrong' and 'There is no scientific elite in economics' and 'Schizonomics' and 'Economists cannot do the simple math of profit — better keep them out of politics' and 'Economics as storytelling and entertainment for the masses' and 'Econogenics in action' and 'Econogenics: economists pose a hazard to their fellow citizens' and 'Macroeconomics: Economists are too stupid for science' and 'Macroeconomics and the fake History of Economic Thought' and 'The demise of phony experts: macroeconomics is provably false' and 'First Lecture in New Economic Thinking'.

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AXEC117

There is no such thing as THE market

Comment on Editor on ‘There are two price levels in capitalism’

Blog-Reference

In standard economics, the market is a clear-cut thing, and it is depicted as SS-curve―DD-curve―equilibrium, or what Leijonhufvud famously called the Totem of Micro/Macro. This construct is the one-size-fits-all formal description of THE market.

It is known since the founding fathers, though, that there are at least TWO different types of markets that run on different principles. Consequently, Ricardo excluded the pricing of ‘rare statues and pictures, scarce books and coins’ from his formal theory of value and called them non-produced consumption goods (Mandler, 1999, p. 68). The labor theory of value was always meant to apply to produced consumption goods only, more specifically to non-durable consumption goods.

The subjective value theory of Jevons/Walras/Menger blurred this distinction again. The peak of absurdity was reached with the “solution” of the famous water/diamond paradox, that is, the explanation of the respective price of water (= consumption good) and diamonds (= store of value, asset) by marginal utility.

Since non-produced consumption goods have indeed been produced, albeit some time ago, their price has to be determined in the secondary market. The pricing in the secondary market is entirely different from the pricing in the primary market. Hence it is not correct to speak of THE market without qualification. As Tobin put it: “’Market’ is one of the most overworked and imprecise words in economics.” (1980, p. 796)

In actual fact, the representative economist has NO idea how interdependent markets work. It is one of the greater blunders of Orthodoxy to apply the silly supply-demand-equilibrium plaything across the board. The price determinants of the primary and the secondary market are entirely different (2011).

But the situation is in fact far worse. The markets of consumption goods and investment goods run on different principles, as Keynes made clear. Finally, the market for financial assets/liabilities also runs on different principles, as Minsky made clear. Therefore, the standard supply-demand-equilibrium tool is not applicable to these markets.

The worst thing, though, is that economists have not realized until this day that THE product and THE labor market run on different principles. As a result of this, economists have not realized that an elementary market system that consists of a consolidated product market and a consolidated labor market is unstable. This means that, as a matter of principle, there is NO such thing as an overall equilibrium in the market system. The system is NOT self-regulating; there is NO such thing as an Invisible Hand, and this has NOTHING to do with market imperfections or rigidities, or information asymmetry. This is a STRUCTURAL feature that is built into the core of the market system. #1

The orthodox market theory is provably false, but traditional Heterodoxy has not developed a valid alternative that could replace supply-demand-equilibrium as the most ridiculous construct in the history of modern science. #2

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2011). Primary and Secondary Markets. SSRN Working Paper Series, 1917012: 1–26. URL
Mandler, M. (1999). Dilemmas in Economic Theory. Oxford: Oxford University Press.
Tobin, J. (1980). Are New Classical Models Plausible Enough to Guide Policy? Journal of Money, Credit and Banking, 12(4): 788–799. URL

#1 Unemployment is high because economics is false
#2 For the correct approach Essentials of Constructive Heterodoxy: The Market