May 8, 2016

Heterodoxy’s biggest mistake is to repeat Orthodoxy’s biggest mistake

Comment on Roger Farmer on ‘The biggest mistake in the history of macroeconomic thought’


Roger Farmer summarizes: “Samuelson, in the new-classical synthesis, used the Phillips curve, which he saw as a price adjustment mechanism in which the wage adjusts in response to an excess demand or supply of labor. This was the biggest mistake in the history of macroeconomic thought and we are still suffering the consequences as central banks work with false ideas and broken models.”

Samuelson, indeed, messed up the Phillips Curve. For the identification of the foundational error/mistake see Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster.

However, the biggest mistake in all of economic thought is to build the analysis upon the green cheese behavioral assumptions of constrained optimization, rational expectations, supply function, demand function, equilibrium.

Every theory/model that contains one or more of these concepts is false. This includes Roger Farmer’s approach. In order to overtake Orthodoxy, Heterodoxy has, first of all, to develop a superior analytical apparatus that is entirely free of orthodox NONENTITIES.

The Iron Rule of Methodology says NONENTITIES in ― nonsense out.

Egmont Kakarot-Handtke