It is trivial but worth repeating: political economics and theoretical economics are different things. The goal of political economics is to push an agenda, the goal of theoretical economics is to explain how the economy works. The core problem of economics as a science is, of course, that by its very nature it is closely entangled with politics. The biggest threat to theoretical economics is that it gets hijacked by those with a political agenda. It does not matter whether this agenda is good or bad in preset moral terms. Science is committed to its own criteria or it ceases to be science.
But are we not all inescapably involved in the struggle between good and evil? Politics, religion, and philosophy say so. But even if this were true this would be no justification to hijack science or to let it be hijacked. What has to be recognized is that science is about true/false and not about good/evil. This distinction is part of the demarcation problem, which is the fundamental problem of methodology (Popper, 1980, p. 34). Since the ancient Greeks, the first act of science is to throw out politics, religion, and philosophy.
Because there is theoretical and political economics there are two types of inquirers.
“A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. ... A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack, 1997, p. 1)
Let us make no mistake: politics is legitimate, to influence public opinion is legitimate, yet all this has nothing to do with science.
“Apologetics may be a laudable objective. Its practical importance is unquestioned. People need to be shown that the institutions of their own society are good, those of others bad. But there is no place for apologetics in science. Scientific economics inquires only into the How and Why, not into the Good or Bad, of what is. From the scientific point of view preoccupation with Good and Bad is worse than useless since it not only fails to illumine anything but keeps the lightbeam of inquiry from being turned in directions where answers to significant questions can be found.” (Murad, 1953, p. 2)
The classical economists started openly as agenda pushers. They had only different agendas.
Smith: “But in the introduction to Book IV we read that Political Economy ‘proposes to enrich both the people and the sovereign,’ and it is this definition which expresses both what Smith wanted above everything and what interested his readers more than anything else.” (Schumpeter, 1994, p. 186)
Mill: “... John Stuart Mill wrote ..., that in the years around 1830 his circle (the so-called Philosophical Radicals) had adopted the following programme: they wanted to achieve an improvement in human society by ‘securing full employment at high wages to the whole labouring population’.” (Popper, 1994, p. 188)
The rest: “The old-fashioned political economist adored, as alone capable of redeeming the human race, the glorious principle of individual greed, although, as this principle requires for its action hypocrisy and fraud, he generally threw in some dash of inconsistent concessions to virtue, as a sop to the vulgar Cerberus.” (Peirce, 1931, 1.75)
Marx and Keynes, too, were noteworthy agenda pushers. The same holds for Hayek and Friedman. All these economists used economics for political purposes. This is unacceptable. Note well, it does not matter what the respective agenda is ― each attempt to instrumentalize science is unacceptable.
Since Adam Smith, all economists are committed to science as they understand it: “Now there is simply no doubt that whatever was the source of inspiration for Jevons, Menger, and Walras, all three invoked whatever physics they knew to lend prestige to their theoretical innovations. ... Adam Smith, Ricardo, James Mill and McCulloch had been just as eager in earlier days to invoke the name of Newton to legitimize their theoretical claims.” (Blaug, 1989, p. 1226)
What exactly does the commitment to science entail? “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, p. 31)
Therefore, the core question of theoretical economics is not who benefits from a theory. The core question is how the actual economy works. By consequence, the decisive argument against DSGE is not that it benefits the Plutocrats but that it does not meet the criteria of material and formal consistency. DSGE is simply out of science.
Blaug, M. (1989). Review. Economic Journal, 99(398): 1225–1226. URL
Haack, S. (1997). Science, Scientism, and Anti-Science in the Age of Preposterism. Skeptical Inquirer, 21(6): 1–7. URL → URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield: Edward Elgar.
Murad, A. (1953). Questions for Profit Theory. American Journal of Economics and Sociology, 13(1): 1–14. URL
Peirce, C. S. (1931). Collected Papers of Charles Sanders Peirce, Vol. I. Cambridge: Harvard University Press. URL
Popper, K. R. (1980). The Logic of Scientific Discovery. London, Melbourne, Sydney: Hutchison, 10th edition.
Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and Rationality., chapter Science: Problems, Aims, Responsibilities, 82–111. London, New York: Routledge.
Schumpeter, J. A. (1994). History of Economic Analysis. New York: Oxford University Press.