Comment on David Glasner on ‘A Primer on Equilibrium’
Blog-Reference and Blog-Reference
Economics is the science that tries to figure out how the actual economy works. Scientific knowledge takes the form of a theory that satisfies the criteria of material and formal consistency. A theory is the humanly best mental representation of reality.
David Glasner and his interlocutors, though, do not talk about the economy but indulge in meta-communication. The whole discussion circles around the question of the content and meaning of different features and versions of the general equilibrium model. In their communicative parallel universe, they are mainly occupied with the difference between rational expectations, perfect foresight, perfect knowledge, complete knowledge, and so on.
Economic equilibrium does NOT exist. And it has been PROVEN that it does not exist. So ALL equilibrium theory ― partial and general ― is axiomatically false because this concept is built right into the premises of standard economics.#1 This is methodologically inadmissible. Axiomatically false means that the theory has to be shredded and fully replaced, there is no twisting and tweaking of behavioral assumptions that can save it.
This is NOT news: “At long last, it can be said that the history of general theory from Walras to Arrow-Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin (Ingrao et al., 1991). It has been a dead alley because the most rigorous solution of the existence problem by Arrow and Debreu turns general theory into a mathematical puzzle applied to a virtual economy that can be imagined but could not possibly exist, while the extremely relevant ‘stability problem’ has never been solved either rigorously or sloppily. General theory is simply a research program that has run into the sands.” (Blaug, 2001)
Equilibrium is a NONENTITY, that is, it has nothing to do with the real world which is the subject matter of economics understood as science.
From this follows that the whole equilibrium paradigm has to be replaced. This, too, is NOT news: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1991)
Instead, David Glasner discusses the relationship between equilibrium and rational expectations. To see the absolute senselessness of this economics sitcom, equalize the NONENTITY equilibrium with angels-dancing-on-a-pinpoint and the nonentity rational expectations with navel-of-Adam, then David and Nick and Henry are clarifying the question of how many angels can dance on Adam’s navel ― without ever realizing that they are making fools of themselves.
Needless to emphasize that the participants are also confused about other foundational concepts like pure competition and profit and their relationship: “Pure competition simply means that transactors are price-takers. Perfect competition adds the condition that (economic as opposed to accounting) profit is zero.” The zero-profit economy is another NONENTITY that follows from the methodological fact that economists do not understand until this day the difference between income, profit, and distributed profit. So, the concept of zero-profit-perfect-competition, too, is a NONENTITY.
Standard economics is proto-scientific garbage. The concept of equilibrium has already been dead in the cradle 150 years ago. Since Jevons, Walras, Menger all talk about equilibrium is vacuous.
Ground Control to David Glasner. Your circuit’s dead, there’s something wrong. Can you hear me, David Glasner?
#1 The prime primer on equilibrium