Blog-Reference and Blog-Reference on Feb 16 adapted to context
That economists are demolition men was already obvious to Napoleon: “Late in life ... he claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” Nothing has changed in the meantime.
Since Adam Smith, economists failed to rise above the proto-scientific level. Economics is still what Feynman called a cargo cult science, that is: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, ...”#1
What follows from all this? “So we really ought to look into theories that don’t work, and science that isn’t science.” And what do we realize when we look into economics? The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and ALL got profit wrong.#2 In methodological terms, axiomatically false is the death sentence for a paradigm because when the foundational premises are false the analytical superstructure is false.
In general terms, a theory is the mental representation of reality. Logically and empirically hardened theory is the highest form of knowledge that is humanly possible.
Why cannot everybody immediately recognize a false theory? (To recall, it took the physicists 1500+ years to realize that geocentrism is false.) A theoretical superstructure is never 100 percent false but every falsity or half-truth is sandwiched between two trivialities or common sense truths to which everybody can readily agree. These realistic or commonsensical or intuitively convincing elements are narrative additives to the abstract theoretical core in order to make it palatable to the intended audience. This sandwiching of false propositions between commonsensical trivialities makes it forever impossible for the commonsenser to detect the fatal error/mistake/blunder of a theory.#3
Because of this, commonsensers or realists or practical men are de facto the worst impediments to science as every economist knows from John Stuart Mill’s damnation: “People fancied they saw the sun rise and set, the stars revolve in circles around the pole. We now know that they saw no such thing; what they really saw was a set of appearances, equally reconcileable with the theory they held and with a totally different one. It seems strange that such an instance as this, ... , should not have opened the eyes of the bigots of common sense, and inspired them with a more modest distrust of the competency of mere ignorance to judge the conclusions of cultivated thought.”
False theories are effectively protected by the sheer presence and the all-pervasive blather of the stupid majority and they thrive in the intellectual swamp between true and false where “nothing is clear and everything is possible.” (Keynes) In the swamp, the subjective truth of like/dislike prevails and objective truth is nothing but an unfriendly disturbance of a casual sitcom.
By clinging to the pluralism of false theories, both orthodox and heterodox economists have trapped themselves at the proto-scientific level. After 200+ years they are still groping in the dark with regard to the two most important features of the market economy: the profit mechanism and the price mechanism.#4
The lack of true theory has grave consequences: since Adam Smith, economic policy guidance has NO sound scientific foundations. Two examples suffice:
- Because economists do not understand how the price mechanism works, in particular with regard to the labor market, they are ultimately responsible for mass unemployment, deflation, depression, and stagnation.#5
- Because economists do not understand how the profit mechanism works they have unintentionally produced with well-meant deficit-spending/money-creation the extremely biased income and wealth distribution most people regard now as a ticking social time bomb.#6
The general public always sees and discusses the policy proposals of economists but never the underlying theory, therefore it fails to see that there is a disconnect between the two. The economists’ proposals do not follow from a valid theory because there is none. Qualitatively, there is not much difference between the policy proposals of the representative economist and the soapbox propagandist. Political economics is proto-scientific blather. Political economists are fake scientists. Whether they are right-wing/center/left-wing is a matter of indifference.
To get out of failed economics requires nothing less than a full-blown Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations. Everything else is a continuation of cargo cult science and economic self-destruction.
#2 Profit and the collective failure of economists
#3 Misled by ordinary intuition and common sense
#4 Traditional Heterodoxy’s paradigmatic impotence
#5 Unemployment ― the fatal consequence of economists’ scientific incompetence
#6 Why Bernie Sanders is unintentionally a godsend for the one-percenters
Related 'Paul the Menace'. For details of the big picture see cross-references Scientific Incompetence and cross-references Failed/Fake Scientists and cross-references The Representative Economist.