Blog-Reference and Blog-Reference
“Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.” (Schumpeter, 1994, p. 11)
Musgrave has argued convincingly that the methodology of standard economics is defective. The key argument is this: “The implications that follow from the kind of models that mainstream economists construct are always conditional on the simplifying assumptions used — assumptions predominantly of a rather far-reaching and non-empirical character with little resemblance to features of the real world.”
What are the foundational assumptions of Orthodoxy? Courtesy of Weintraub, here they are in a nutshell: “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. (1985, p. 147)
What can be said with certainty is that this set of five hardcore propositions has proven its worthlessness. Orthodoxy is a failure according to the formal and empirical criteria that define science. So Musgrave correctly concludes: “Mainstream economics building on such a modeling strategy does not produce science.” (See intro)
But then Musgrave adds “It’s nothing but pseudo-scientific cheating.” (See intro)
This is the wrong turn. Until this point, the argument has been well-conducted, i.e., “... a critical discussion is well-conducted if it is entirely devoted to one aim: to find a flaw in the claim that a certain theory presents a solution to a certain problem.” (Popper, 1994, p. 160)
As a result, we are entitled to assert that orthodox economists have made a fatal methodological mistake and that standard economics has to be buried at the Flat-Earth-Cemetery. However, any speculation about motives is pointless and misleading. With the allegation of cheating the discussion goes over the cliff.
To recall, heterodox economists have produced much debunking but until now no alternative to standard economics that satisfies the criteria of material and formal consistency.#1 Should they be called cheaters, too?
As a methodologist, Alan Musgrave should know that nothing of any value has ever come out of good/bad moralizing. This has always been the preferred method of political economics, and political economics has been out of science since Adam Smith. The criterion of theoretical economics has always been true/false and nothing else.
First Commandment of Science: Do not moralize!
Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and Rationality., chapter Models, Instruments, and Truth, 154–184. London, New York, NY: Routledge.
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford University Press.
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal.American Economic Review, Papers and Proceedings, 75(2): pp. 146–149. URL
#1 Heterodoxy, too, is scientific junk
ICYMI comment on Alexander Konnopka Nov 15 on Nov 17
This is an old chestnut of Heterodoxy: “But why should economic laws, or any laws for that matter, be expressed by analytical functions?” (Georgescu-Roegen, 1966, p. 123)
To merely reiterate doubt shows that Heterodoxy, too, is clueless. And this provokes the all-decisive question at the end of this 50+ years filibuster: How does the correct formal approach look like? (see for a start 2014).
Georgescu-Roegen, N. (1966). Analytical Economics, chapter General Conclusions for the Economist, pages 92–129. Cambridge, MA: Harvard University Press.
Kakarot-Handtke, E. (2014). The Synthesis of Economic Law, Evolution, and History. SSRN Working Paper Series, 2500696: 1–22. URL