October 29, 2016

Does economics matter?

Comment on Adam Levitin on ‘Does Behavioral Economics Matter?’

Blog-Reference and Blog-Reference on Oct 29

You say: “Indeed, we’ve been seeing the academic pushback or skepticism, not just from the adherents of neoclassical economics, but also from those who are more open to behavioral approaches.”

What you are overlooking is that economics defines itself as a behavioral science and this explains why it is an utter failure.

“It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” (Arrow)

The fundamental methodological blunder resides in the idea that economics is about human behavior. It is pretty obvious that the foundational assumption of standard economics ― constrained optimization ― is patently false, and behavioral economics tried to replace it with something ‘more realistic’.

So far, so good, but economists doggedly overlook that human behavior is the subject matter of psychology, sociology, anthropology, political science etcetera. The subject matter of economics is the economic system.

Economics is a failed science because it cannot explain how the actual monetary economy works. The fact of the matter is that the very definition of economics as a social science is false.*

Economic policy guidance has no sound scientific foundation since about 200 years. So, it does not matter whether the administration turns to a behavioral, neoclassical or Keynesian economist because they are ALL scientifically incompetent.

Egmont Kakarot-Handtke

* For details see ‘Feeble minds, shaky assumptions, and the inevitable failure of economics