Blog-Reference and Blog-Reference on Aug 9
To explain social behavior is the task of psychology, sociology, political science, and other so-called social sciences.
Explaining how the actual economy works is the task of economics. Economists have failed at this task. To be more specific, orthodox AND heterodox economists have failed. After more than 200 years economists have not even figured out what profit is, that is, they do not understand the foundational phenomenon of their subject matter. As a consequence, economic policy guidance NEVER has had sound scientific foundations.
The scientific incompetence of economists consists in the fact that it is beyond their means to realize that NO way leads from the understanding of Human Nature/motives/behavior/ action to the understanding of how the economic system works. What makes things worse is that there is NO scientifically valid knowledge of Human Nature/motives/behavior/ action, to begin with.
The failure of economics had been programmed by the founding fathers with the definition of the subject matter as a social science: “The fundamental problem, therefore, of the social science, is to find the laws according to which any state of society produces the state which succeeds it and takes its place.” (Mill, 2006, p. 912)
• “What is now commonly understood by the term ‘Political Economy’ is not the science of speculative politics, but a branch of that science. It does not treat of the whole of man’s nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging of the comparative efficacy of means for obtaining that end. It predicts only such of the phenomena of the social state as take place in consequence of the pursuit of wealth.” (Mill, 1874, V.38)
• “The laws of economics are to be compared with the laws of the tides, rather than with the simple and exact law of gravitation. For the actions of men are so various and uncertain, that the best statement of tendencies, which we can make in a science of human conduct, must needs be inexact and faulty. This might be urged as a reason against making any statements at all on the subject; ...” (Marshall, 1920, I.III.10)
• “The foundation of political economy and, in general, of every social science, is evidently psychology. A day will come when we shall be able to deduce the laws of social science from the principles of psychology ...” (Pareto, 2014, p. 20)
• “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins, 1935, p. 16)
What economists do not realize is that to study human behavior ― which is essentially the second-guessing/interpretation of motives/actions of individuals/groups one knows in most cases only from hearsay ― may be interesting and revealing and satisfying but is ultimately pointless, more precisely, scientifically pointless: “Alexander Rosenberg lays great emphasis on the role of intentionality in the social sciences, for in his view this role explains the nomological failures of the social sciences and supports the view that the social sciences (in anything like their current form) can never succeed in formulating real laws of human behavior.” (Hausman, 1992, p. 326)
The social sciences cannot, for deeper methodological reasons, rise above the level of storytelling. And this is exactly what Walrasianism, Keynesianism, Marxianism, and Austrianism are. Neither approach satisfies the non-negotiable criteria of science, i.e., material and formal consistency.
Economists face this option: either to be expelled from the sciences or to restart economics as a systems science. This means in concrete terms to move from unacceptable behavioral microfoundations and dilettantish Keynesian macrofoundations to objective/ structural/behavior-free macrofoundations.
Economists have until this day not understood how science works: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle). This means that science cannot be built upon behavioral assumptions because there is no such thing as a ‘certain, true, and primary’ behavioral assumption. This is the ultimate reason for the failure of both orthodox and heterodox economics and the persistence of science-fiction economics.
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Marshall, A. (1920). Principles of Economics. Library of Economics and Liberty. URL
Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On the Definition of Political Economy; and on the Method of Investigation Proper To It. Library of Economics and Liberty. URL
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, Vol. 8 of Collected Works of John Stuart Mill. Indianapolis: Liberty Fund.
Pareto, V. (2014). Manual of Political Economy. Oxford: Oxford University Press. URL
Robbins, L. (1935). An Essay on the Nature and Significance of Economic Science. London, Bombay, etc.: Macmillan, 2nd edition.
Related 'Objective Principles' and 'Economics and the social science delusion' and 'The happy end of the social science delusion' and 'The Science-of-Man fallacy' and 'How to get rid of the silly Queen' and 'Economics as fool’s paradise' and 'Disoriented and lost in folk psychology' and 'Economics between cargo cult, farce, and fraud' and 'The stupidity of Heterodoxy is the life insurance of Orthodoxy' and 'Economics is not a science, not a religion, but proto-scientific garbage' and 'A social science is NOT a science but a sitcom' and 'Overreach: Economists have their fingers in every pie except real economics' and 'Did economics fail? No! Yes, and everybody knows it!' and 'Why is economics a total scientific failure?' and 'PsySoc — the scourge of economics' and 'Economics as storytelling and entertainment for the masses' and 'Do first your macroeconomic homework!' and 'What’s the use of economists?' and 'Beware of the moralizing economist' and 'The canonical macroeconomic model'. For details of the big picture see cross-references Not a Science of Behavior and cross-references Failed/Fake Scientists.