February 16, 2017

Economics, Plato’s Cave and the Silver Blaze Case

Comment on Noah Smith on ‘My AMA on r/badeconomics’

Blog-Reference and Blog-Reference on Feb 19

There has been a wave of indignation about fake news lately. What people overlook is that fake news is not such a big problem because, as a matter of principle, everybody has a reasonable chance to realize the fake either immediately or after some cross-checking. The real problem is No-news because, as a matter of principle, you don’t see what you don’t see and you don’t hear what you don’t hear. The quandary resembles that of critically ill persons who do not know and, worse, do not get any chance to learn that an effective cure for their disease is available.

So, on closer inspection, there is a double fake: (i) the falsity that you are drowned with (= the alpha-fake), and the truth that you do not even know exists (= the beta-fake). The alpha-fake has been dealt with by Plato in the Allegory of the Cave. The beta-fake has been dealt with by Arthur Conan Doyle in The Adventure of Silver Blaze.

The alpha-fake: “Plato has Socrates describe a group of people who have lived chained to the wall of a cave all of their lives, facing a blank wall. The people watch shadows projected on the wall from objects passing in front of a fire behind them, and give names to these shadows. The shadows are the prisoners’ reality. Socrates explains how the philosopher is like a prisoner who is freed from the cave and comes to understand that the shadows on the wall are not reality at all, for he can perceive the true form of reality rather than the manufactured reality that is the shadows seen by the prisoners. The inmates of this place do not even desire to leave their prison; for they know no better life.”#1

We have three interconnected elements: (i) objective reality, (ii) the medium or in-between, (iii) subjective reality. The medium (hearsay, gossip, storytelling, propaganda, newspapers/books/videos/TV/Internet, scientific lectures/videos/papers/books) mediates all non-direct-non-immediate events/facts. Depending on the medium and the subject’s processing capacities the subjective reality can deviate more or less from objective reality. In the most extreme case, subjective reality becomes hallucinatory, that is, almost completely devoid of reality content.

Subjective reality is self-stabilizing, independent of the degree of deviation from objective reality. Plato described the fake reality inside the cave as the natural state of humanity except for philosophers/scientists. The difference between Plato and the actual condition is that the shadows on the cave wall have been fully replaced by pixels on a screen.

The beta-fake: “One of the most popular Sherlock Holmes short stories, ‘Silver Blaze’ focuses on the disappearance of the eponymous race horse (a famous winner) on the eve of an important race and on the apparent murder of its trainer. The tale is distinguished by its atmospheric Dartmoor setting and late-Victorian sporting milieu. It also features some of Conan Doyle’s most effective plotting, hinging on the ‘curious incident of the dog in the night-time’. Gregory (Scotland Yard detective): ‘Is there any other point to which you would wish to draw my attention?’ Holmes: ‘To the curious incident of the dog in the night-time.’ Gregory: ‘The dog did nothing in the night-time.’ Holmes: ‘That was the curious incident.’”#2

What can economists learn from Plato about alpha-fake, i.e. the presence of scientific falsity, and from Arthur Conan Doyle about beta-fake, i.e. the absence of scientific truth?

The alpha-fake: The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the pivotal concept of the subject matter, i.e. profit, wrong. Economics is a failed science. The claim as expressed in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a false claim.

In methodological terms, economics is in dire need of a paradigm shift from false microfoundations and false macrofoundations to consistent macrofoundations.#3 Therefore, it is rather straightforward to identify proto-scientific rubbish: if it isn’t macro-axiomatized, it isn’t economics.

The beta-fake: What does the absence of expected facts, that is, of materially and formally consistent economics mean? It could mean (a) that ALL orthodox and heterodox economists are incompetent scientists, or (b), that the dog cannot be heard barking, that is, the true theory exists but all hints and pointers are either promptly covered, explained away, diluted with floods of irrelevancies, or as far as possible removed.

Neither Orthodoxy nor traditional Heterodoxy has the true theory. Why exactly? It is imperative to distinguish between political and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and 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.

Political economics has produced NOTHING of scientific value in the last 200+ years. Theoretical economics has been hijacked since the founding fathers by political economics. And politics cannot do other than to corrupt science. The modus operandi of politics is to promote the own agenda and to hinder everything else. Political economists do not produce or promote scientific truth as an end in itself but apply the outer form if and insofar as it seems to help the agenda. Scientific knowledge that lies outside the agenda’s perimeter is ignored, blighted, hindered, covered, or suppressed.#4 Where policy dominates the dog’s barking cannot be heard.

The good thing about alpha-fake is that it is possible to spot it. Beta-fake is invisible. How to deal with it? Beware of the top ten charts, beware of two-way promotional expert talk, ignore the recommendations of the representative economist, and pursue his denunciations. In economics, which is a cargo cult science, it is the absence of expected facts that points the way to the missing truth. When both orthodox and heterodox economists, who have proven their utter scientific incompetence over 200+ years and are still wondering about the supply-demand-equilibrium shades in Plato’s cave, dismiss an alternative approach there might be great reason to allow this approach to be true.

The specifics and differences between the four false economic approaches are cave-dweller-blathering stuff. The absence of the true theory is the only worthwhile issue of economics.

Egmont Kakarot-Handtke

#1 Wikipedia Allegory of the Cave
#2 Wikipedia The Adventure of Silver Blaze
#3 From Orthodoxy to Heterodoxy to Sysdoxy
#4 The violation of scientific standards/ethics is the very definition of political economics. The question is not so much whether it happens but to which extent. See here.

Related 'Economics is a science? You must be joking!' and 'Why not simply throw all economists under the bus?' and 'Economics, methodology, morals ― a creepy freak-show' and 'New economic thinking, or, let’s put lipstick on the dead pig'

Wikimedia AXEC153 Allegory of the Cave

Allegory update, 2023:  "We naively tend to assume that our media accurately reflects the events of our world and its history, but instead what we all too often see are only the tremendously distorted images of a circus fun-house mirror, with small items sometimes transformed into large ones, and large ones into small." (Ron Unz)

Wikimedia AXEC176b