May 30, 2016

The mad flip-floppers

Comment on ‘Wren-Lewis/Mirowski/Syll on neoliberalism’


Since Adam Smith, economics consists of political and theoretical economics. It is, though, pretty obvious that the political sphere is ontologically different from the scientific sphere and because of this, it is of utmost importance to separate the two. Yet, it is an outstanding characteristic of the representative economist to persistently flip-flop between them.

This lack of focus guarantees all-round confusion but what is worse is that economic policy advice has no sound scientific foundation, to begin with: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum, 1991, p. 30)

It is a fact that economists do not have the true theory — Walrasianism, Keynesianism, Marxianism, Austrianism is provably false. Therefore, as a matter of principle, economic policy advice has no better scientific foundation than old Roman poultry entrails reading. Educated common sense and personal opinion, that is all that has been achieved in more than 200 years.

This point gets entirely lost in actual political discussions because the criterion for political economics is whether or not it fits an agenda and NOT whether the underlying theory is true or false. As soon as political economics dominates, the very task of the theoretical economist — to explain how the monetary economy works — is forgotten and the well-defined scientific standards of material and formal consistency are ignored.

Both, orthodox and heterodox economists have to be reminded of what science implies and why politics and science have to be strictly separated: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (Mill, 2006, p. 950)

The history of political economics can be summarized as a perpetual violation of scientific standards and as an abject failure. Not one of the political economists and agenda pushers from Smith, Ricardo, Marx to Keynes, Hayek, Friedman, Krugman or Varoufakis will in the final assessment be accepted as scientists.

Egmont Kakarot-Handtke

Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected View of the Principles of Evidence and the Methods of Scientific Investigation, volume 8 of Collected Works of John Stuart Mill. Indianapolis, Liberty Fund.
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.

For more details see cross-references Political Economics.