August 13, 2016

Samuelson or Who is the smartest smartie?

Comment on Barkley Rosser on ‘The Man Who Saved The World From Nuclear Holocaust During The Cold War’


Who needs an overdose of soft soap? Here it is: “That would be Thomas C. Schelling, now age 95, whom the late Paul Samuelson once stated that Tom was the most intelligent person he ever met, presumably beating out John von Neumann, whom Samuelson argued with about cigars and general equilibrium theory, and his relative by marriage, Kenneth Arrow, a few months younger than Schelling, who is generally viewed as by far the most respected living economist, and who was a coauthor of the most famous and influential paper on the conditions for the existence of general equilibrium. But Samuelson thought Schelling was ultimately smarter than either of them.” (See intro)

The problem with Samuelson has always been that he talked about things he definitively did not understand. These were economics, politics, and intelligence.

Let us put some things straight.
(i) There is Orthodoxy with microfoundations and it has been nicely defined by Krugman: “... most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”#1

(ii) Methodologically, these premises are forever unacceptable.#2 A smart person realizes this at first glance. Samuelson did not realize anything.

(iii) There is Keynesianism with macrofoundations.#3

(iv) These formal foundations are conceptually and logically defective because Keynes never came to grips with profit. Methodologically, Keynes’s premises are forever unacceptable. A smart person realizes this at first glance. Samuelson did not realize anything.

(v) In Samuelson’s synthesis the defective Walrasian micro axioms and Keynes’s defective macro axioms were cobbled together. Samuelson’s textbook consisted of two well-balanced halves: micro and macro. Needless to emphasize that both halves do not logically fit together.

Science is committed to material and formal consistency. Samuelson’s textbook has ― with a probability close to 1 ― the lowermost scientific content of all textbooks ever written. Supply-demand-equilibrium will forever stand out as the silliest model in the history of sciences. Samuelson’s textbook is an intelligence test and economics students and other textbook writers flunk it for more than 50 years.

(vi) Economic policy proposals NEVER had sound theoretical foundations. Whatever economists in general or Samuelson, in particular, have argued for or against the market economy is scientifically worthless storytelling. General equilibrium theory is the epitome of a collective intellectual aberration. Economists have no scientific legitimacy in their own domain and by implication none at all in the wider political realm. Having disqualified themselves thoroughly, they are in NO position to assess the intelligence or smartness of people from other domains.

What could be more ridiculous than economists who cannot tell the difference between profit and income philosophizing about the history of the Cold War?

If Samuelson could pass as smart economist, one trembles to contemplate what the rest of the profession was then and is now.

Egmont Kakarot-Handtke

#1 More detailed, the starting point is given with these hardcore propositions, a.k.a. axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to  equilibrium states.” (Weintraub, 1985)
#2 For details and proofs see blog and working papers.
#3 Keynes started the macrofoundations research program in the General Theory formally as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.”

Following Economics: Science or cheap talk?.