March 25, 2016

The three fundamental economic laws

Comment on Lars Syll on ‘The non-existence of economic laws’

Blog-Reference and Blog-Reference

You say: “In mainstream economics there’s — still — a lot of talk about ‘economic laws.’ The crux of these laws — and regularities — that allegedly do exist in economics, is that they only hold ceteris paribus.” (See intro)

It is obvious that neither Orthodoxy nor Heterodoxy has found anything that deserves the title of economic law. This, though, is due to sheer incompetence and not to the non-existence of laws.

Orthodoxy is wedded to methodological individualism. This is the original blunder because there is NO such thing as a BEHAVIORAL law. Because of this, economics never rose above silly behavioral speculation about utility maximization or rational expectations.

“Now, at any rate, we have an explanation for why the assumptions of economic theory about individual action have not been improved, corrected, sharpened, specified, or conditioned in ways that would improve the predictive power of the theory. None of these things have been done by economists because they cannot be done. The intentional nature of the fundamental explanatory variables of economic theory prohibits such improvement.” (Rosenberg, 1992, p. 149). In short, economists bark for more than 150 years up to the wrong tree.

The point most economists cannot get their heads around is that there are NO behavioral laws but that there are SYSTEMIC laws. The three fundamental laws of the elementary production-consumption economy are:

• The First Economic Law Wikimedia AXEC06
• The macroeconomic Profit Law Wikimedia AXEC08
• The macroeconomic Law of Supply and Demand Wikimedia AXEC64

For the consistent derivation see the working paper Objective Principles of Economics or Economics for Economists.

Systemic laws are composed of measurable variables and therefore are straightforwardly testable. All those who claim that there are no economic laws are invited to refute the systemic laws.

Egmont Kakarot-Handtke

Rosenberg, A. (1992). Economics  Mathematical Politics or Science of Diminishing Returns? Chicago: University of Chicago Press.

Related 'Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster' and 'Economists understand neither Capitalism nor Socialism' and 'Rectification of MMT macro accounting' and 'How Keynes got macro wrong and Allais got it right' and 'A social science is NOT a science but a sitcom' and 'False and true economic laws'.


Extended set of elementary systemic laws

Wikimedia AXEC112c