October 7, 2016

Cheerleading the cargo cult

Comment on Barkley Rosser on ‘Hunting the Rational Expectations whale’


Economics is a cargo cult science ― not a science. In science, the criteria true/false apply and nothing else. By diligently applying these criteria, as a matter of principle, every intelligent person can find out that Walrasianism, Keynesianism, Marxianism, Austrianism is provably false, i.e. materially/formally inconsistent. Economists have not found out this until today.

There are reality and social hyper-reality. Social hyper-reality is a historically evolved mental construct composed of multiple elements from religion, philosophy, art, politics, entertainment, PR/propaganda, storytelling/gossip, and its strength depends critically on the number of participants and the intensity of their mutually reinforcing interactions. Hyper-reality is created and maintained by communication and is for all practical purposes MORE real than objective reality except in the case of a head-on confrontation.

Economists have talked themselves and the general public into the hyper-real belief that what they do is science. It is NOT, it is storytelling/gossip. Barkley Rosser, for example, does not talk about the economy at all but about economists: “The difference between Simon and Stigler is that the latter was quite certain that people would be able to optimize on their information costs.”

Now, as a matter of fact, there is NO REAL difference between Simon, Stigler and the representative economist because they ALL share the social science delusion, that is, the belief that economics is about human behavior and therefore economic theory has to be based on some fundamental behavioral assumptions. Where they differ is what the most “realistic” assumption is.

What cargo cult economists fail to realize is that NO WAY leads from the understanding/ explanation of human behavior to the understanding/explanation of how the actual economy works.

Economics is methodologically defective. The foundational defect is given with the very definition of the subject matter: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals.” (Arrow, 1994)

The scientific incompetence of economists consists of accepting the behavioral/ psychological/sociological/anthropological definition of economics.#1 From this Ur-Blunder the way leads to accepting the three nonentities constrained optimization/rational expectations/equilibrium, to supply/demand/equilibrium, to general equilibrium, and eventually to DSGE/RBC at the end of the cul-de-sac.#2

By evaluating the respective merits of Stigler and Simon, Barkley Rosser in effect distracts from the fact that BOTH are cargo cult scientists and have no scientific merits at all. Worse, he distracts from the fact that economics as a whole has decoupled itself entirely from science.

It does not matter what Barkley Rosser thinks or claims he is doing, the social reality is that he is promoting cargo cult science and the real reality is that he impedes science.

Egmont Kakarot-Handtke

#1 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist
#2 The unfinished Keynes (III)

Immediately preceding It’s in the hardcore, stupid.