March 4, 2017


Comment on Antonella Palumbo on ‘Can “It” Happen Again? Defining the Battlefield for a Theoretical Revolution in Economics’


Antonella Palumbo cites signs of growing public distrust of economic experts and calls for “new theoretical foundations for economic policy”.

First of all, there is a difference between scientist and expert. Roughly speaking, the scientist follows his own agenda, that is, he tries to find out how the universe or some greater or smaller part of it works, while the expert uses science in order to push an agenda: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. … A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack)

Accordingly, there is not one economics but TWO: there is 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.

Accordingly, political economics is the realm of the expert and theoretical economics is the realm of the scientist. Theoretical economics has to be judged according to the criteria of material and formal consistency. It is obvious that political economics has produced NOTHING that satisfies these criteria since Adam Smith.

A closer look at the history of economic thought shows that theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Lucas, and almost everybody in between fall into the category of political economist or fake scientist.

Economists claim for more than 200 years that they are doing science and this is celebrated each year with the ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’. Although economics has never risen above the level of a proto-science the general public bought the economists’ self-description at face value: “If the popular consensus over the wisdom of economists is now wavering, this is due to the growing social distress brought about by austerity policies, and by the growing inequality of incomes and opportunities that characterized these decades of globalization ― with the great numbers of losers it produces.” (See intro)

As a matter of principle, science is not affected by the wavering of public opinion because it is NOT AT ALL about trust or belief or credibility or disappointed expectations but about proof. Political economics, on the other hand, has nothing to do with consistency and proof, it is plain and simple storytelling or rhetoric. Political economics is the realm of the Sophist who is since Plato defined by his claim to win any case INDEPENDENTLY of the truth or falsehood of the matter. The political economist is driven by and actively drives public opinion. Material and formal consistency is NOT his guiding principle.

The actual state of economics is this: the major 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. So what the experts are in effect doing is giving policy advice without sound theoretical foundations and that is in no way different from ancient Roman poultry entrails reading. Needless to emphasize that the general public cannot see this because it is fixated on the policy proposals on the surface and absolutely ignorant of the scientific defects of the underlying theory.

The schizophrenia between political and theoretical economics is what characterizes the representative economist.

Antonella Palumbo is right: new theoretical foundations are needed: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

To this very day, economists lack the true theory. What they had to offer in their capacity as experts since Adam Smith was proto-scientific sitcom blather, storytelling, and soapbox agenda pushing.

However, what Antonella Palumbo is telling her fellow economists is NOT that they have to execute a scientific paradigm shift but that they have to adapt their political narrative. In other words, Neoliberalism, which always has been a political agenda and NOT a scientific theory, no longer sells.

Antonella Palumbo leaves no doubt who calls the shots in ‘economic sciences’: “… for the most active and informed parts of the public it is clear that the desire for a change in politics also implies deep rethinking of economic relations…” Econ 101 has to change NOT because it is scientifically refuted on all counts but because it is politically out of favor. Schizophrenic economists call this a scientific revolution.

Egmont Kakarot-Handtke

Related 'Economics, methodology, morals ― a creepy freak-show' and 'Economic policy advice has never had sound scientific foundations' and 'FakeNews, FakeScience: economics in the information age' and 'The economist as stand-up comedian' and 'Economists: Jacks-of-all-trades ― except economics' and 'A new curriculum for swampies?' and 'It is better to be precisely right than roughly wrong' and 'There is NO such thing as an economic expert'