June 10, 2015

Around the world: storytelling vs science

Comment on Simon Wren-Lewis on ‘What is it about German economics?’


It is important to distinguish first between political and theoretical economics. The goal of political economics is to push an agenda, and the goal of theoretical economics is to explain how the monetary economy works. Theoretical economics has to be judged according to the scientific criteria true/false and nothing else.

When economics is understood as a science there is, first of all, no such thing as German or UK economics. When economics is understood as a sub-discipline of politics then, of course, there are at least as many “economixes” as there are nation-states.

The scientific value of these political variants is zero. As a matter of principle, there is no such thing as national mathematics or physics or, for that matter, economics. True scientists transcend the trivial fact that they are born into some specific regional entity.

Political economics consists mainly of the reshuffling of psycho-sociological stereotypes. The standard explanation of folk psychology is childhood trauma, in the collective variant it then reappears as depression- or inflation- or debt trauma. All this is ridiculous as an economic explanation, but most people are happy with it.

Yet, even if political economics aims at a scientific explanation it could at best explain the functioning of society but not the working of the economic system. In a strict sense, therefore, political economics has not much to do with economics proper.

Broadly speaking: whether German economists are more Keynesian or more Walrasian, or whether Ordo-Liberalism is for all practical purposes better than Neo-Liberalism, or whether they are for or against a minimum wage is a matter of indifference because they, too, do not realize that they have no proper scientific understanding of how the monetary economy works. German economists are in the political storytelling business just like their colleagues elsewhere.

Egmont Kakarot-Handtke