Lars Syll comments on the refutation of the permanent income hypothesis (PIH): “My doubts regarding macro economic modelers’ obsession with Euler equations is basically that, as with so many other assumptions in ‘modern’ macroeconomics, Euler equations, and the PIH that they build on, don’t fit reality. ... But it is still an undeniable fact that theoretical models building on piles of known to be false assumptions — such as PIH and the Euler equations that build on it — in no way even get close to being scientific explanations. On the contrary. They are untestable and hence totally worthless from the point of view of scientific relevance.”
This is true but not new. Economics is built for 200+ years now on false premises. In other words, economics is what Feynman called a cargo cult science. Friedman is but one fake scientist in the long line that stretches from the storyteller Adam Smith to the loudspeaker Paul Krugman.
It is of utmost importance to distinguish between political and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Theoretical economics has to be judged according to the criteria true/false and NOTHING else. Scientific truth is well-defined by material and formal consistency. But theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. Can there be the slightest doubt that Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Syll, and almost everybody in-between falls into the category of a political economist or fake scientist?
Political economics has produced NOTHING of scientific value in the last 200+ years. Since the founding fathers, economists claim to do science but they have never risen above the level of opinion, belief, wish-wash, storytelling, soapbox propaganda, and sitcom gossip. Milton Friedman produced plain proto-scientific garbage during his lifetime and never realized that his axiomatic foundations were false.
Friedman’s policy prescriptions are regarded as outdated but the representative economist still applies Friedman’s false premises. Orthodox economics is built since Jevons/Walras/ Menger upon this set of foundational 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)
Methodologically, these premises are forever unacceptable. The microfoundations approach has already been dead in the cradle. The axiom set contains three NONENTITIES: (a) constrained optimization HC2, (b) rational expectations HC4, (c) equilibrium HC5. Every theory/model that contains just one nonentity is a priori false. So, not only Friedmanian economics but orthodox economics from Jevons/Walras/Menger to DSGE/RBC/New Keynesianism is axiomatically false. There is no need to go into the details of the analytical superstructure, axiomatically false is the death sentence for a paradigm.
There is not much use criticizing a stupid/corrupt political clown-like Friedman much longer. Getting out of failed economic theory requires nothing less than a full-blown Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to entirely NEW macrofoundations. Everything else is a continuation of fake science.
Related 'Forget Friedman, forget the Quantity Theory' and 'If it isn’t macro-axiomatized, it isn’t economics' and cross-references Political Economics/Stupidity/Corruption and cross-references Failed/Fake scientists and cross-references Paradigm Shift.