January 4, 2017

Economics: The pluralism of false theories is over

Comment on Tom Hickey on ‘Steve Keen — Teaching Economics the Pluralist Way’


You say “Because the lines are blurred, econ is heavily infected with ideology and that is a reason that econ is less scientific than it should be ideally.”

This is obviously beside the point. Economics is not less scientific than it should be but economics is a failed science. From this, in turn, follows that economics as we know it cannot be repaired with some institutional quick fixes but that it has to be completely abandoned.

The problem of economics as a science has two dimensions: an economic and an ethical dimension.

In strictly economic terms economics itself has not produced any value: “Thousands upon thousands of scholars, as well as thousands of statesmen and men of affairs, have contributed their efforts to the attempt to understand the course of events of the economic world. And today this field of investigation is being cultivated more extensively, than ever before. How is it, then, that in all these years, and with all the undoubted talent that has been lavished upon it, the subject of economics has advanced so little?” (Schoeffler, 1955)

Translated into Tayloristic terms, the scientific productivity of economics has been zero. Translated into business school terms, economics has been a losing deal of epic proportions.

In addition to burning money, economics has caused enormous social devastations because mass unemployment is ultimately the result of false economic theory, more specifically, of defective labor market theory.#1

The ethical bottom line is even worse. Economists violate scientific standards on a daily basis. One of the fundamental principles of the self-regulation of science is that falsified theories have to be dropped and replaced. Morgenstern reminded his fellow economists already in 1941: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.”

As Hausman summarized the situation: “Yet most economists neither seek alternative theories nor believe that they can be found.”

Walrasianism, Keynesianism, Marxianism, Austrianism is provably false, i.e. materially and formally inconsistent, but economists do not only stick to their proto-scientific garbage but advertise it each year to the general public as genuine science: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

Exactly at this point, scientific failure turns into fraud. Political economics (= agenda-pushing) has not only crowded out theoretical economics (= science) but, as collateral damage, also tarnished the reputation of science in general with its fake Nobel.

To put it metaphorically: Economics is not a house with a hole in the roof that can be repaired but a termite-infested ramshackle hut that must be burned to the ground in order to clear the site for an entirely new state-of-the-art construction. In methodological terms, this is called a Paradigm Shift.

A Paradigm Shift is not to be confused with the ongoing infighting of political economists (Walrasians, Keynesians, Marxians, Austrians) for a better place at the political pig trough. The Paradigm Shift puts an end to the pluralism of false theories.

Egmont Kakarot-Handtke

#1 The one stone that kills orthodox and heterodox employment theory

For details of the big picture see cross-references Pluralism and cross-references Paradigm Shift.

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