Comment on Asad Zaman on ‘Economic Theory as Ideology’
Asad Zaman quotes Joseph Stiglitz’s remark “... that modern economics represents the triumph of ideology over science”. This is only half of the calamity because modern economics represents also the triumph of scientific incompetence.
First of all, one has to distinguish between theoretical and political economics. The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. From the viewpoint of science, political economics as a whole is a no-go, no matter what the agenda is. The main problem of economics is that the vast majority of economists are agenda pushers of one sort or another. This has always been an impediment to scientific advance.
Currently, the situation is as depicted in this chart.
Square D: Economics started as Political Economy. The better-known representatives of the two main factions were Smith/Ricardo with a bias for the one-percenters and Marx with a bias for the ninety-nine-percenters.
From the very beginning, economists claimed to do science but the agenda pushers were dominant and captured theoretical economics as a scientific poster-child. Nevertheless, there was also a strong undercurrent away from politics toward genuine science. Because of scientific incompetence, however, neither Orthodoxy nor Heterodoxy could rise above the proto-scientific level and both landed in square C with no sharp demarcation line between science and politics.
The methodological characteristic of square C is that the axiomatic foundations, that is, Walrasian microfoundations and Keynesian macrofoundations, are defective.#1 Now, the Iron Law of Methodology says: When the premises/axioms/foundational propositions are false the WHOLE theory/model/superstructure is false. Because of this, ALL economic policy advice lacks sound scientific foundations and is squarely hanging in midair. Economists simply do not know how the market economy works.
So here we are: “Nothing is more difficult than to turn an entire discipline around, asking in effect to jettison its own history over the last 200 years.” (Blaug, 1990, p. 205)
What economics needs is a move from square C to A, i.e. a replacement of defective Walrasian microfoundations and Keynesian macrofoundations by true macrofoundations. In other words, nothing less than a Paradigm Shift will do.#2
Theoretical economics has to be judged according to the criteria true/false and NOTHING else. The history of political economics from Adam Smith onward can be summarized as an utter scientific failure. Economics never could itself fully emancipate from politics: Keynes was an agenda pusher, so were Hayek and Friedman, and so are Krugman and Varoufakis. As a consequence, what we actually have is Walrasianism, Keynesianism, Marxianism, Austrianism, and ALL FOUR are axiomatically false and politically biased.
Blaug, M. (1990). Economic Theories, True or False? Aldershot, Brookfield: Edward Elgar.
#1 How Keynes messed macro up
#2 For details of the big picture see cross-references Paradigm Shift.