January 1, 2015

What economists need now: the correct theory

Comment on Paul Davidson


In my papers I have quoted you saying:
“..., before accepting the conclusions of any economist’s model as applicable to the real world, the careful student should always examine and be prepared to criticize the applicability of the fundamental postulates of the model; for, in the absence of any mistake in logic, the axioms of the model determine its conclusions.” (Davidson, 2002, p. 41)

Currently, economists do not understand how the economy works. We therefore have good reason to look closely at the axiomatic foundations.

I agree with you that standard economics has been refuted once and for all and that its axioms are unacceptable. Perhaps you do not agree with me that Post Keynesianism has been refuted, too (2011; 2014b).

But certainly you remember that Keynes has called for a paradigm shift:
“Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.” (Keynes, 1973, p. 16)

Perhaps it is a really good idea to make a fresh attempt with a 'non-Walrasian-Keynesian' set of objective structural axioms (see 2014a).

Egmont Kakarot-Handtke

Davidson, P. (2002). Financial Markets, Money and the Real World. Cheltenham,
Northampton, MA: Edward Elgar.
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN
Working Paper Series, 1966438: 1–15. URL
Kakarot-Handtke, E. (2014a). Economics for Economists. SSRN Working Paper
Series, 2517242: 1–29. URL
Kakarot-Handtke, E. (2014b). The Three Fatal Mistakes of Yesterday Economics:
Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money.
The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke:
Macmillan. (1936).