May 10, 2017

The tragicomedy of Heterodoxy

Comment on Lars Syll on ‘The tragedy of pseudoscientific and self-defeatingly arrogant economics’

Blog-Reference and Blog-Reference

Lars Syll reminds us that back in 1991 a commission of well-respected economists reported that “… graduate programs may be turning out a generation with too many idiot savants skilled in technique but innocent of real economic issues.”

The well-respected economists (Krueger, Arrow, Leamer, Stiglitz et al.) were themselves participants in one of the most annoying failures in the history of the sciences ― idiots savants instead of scientists.

“Science is a process that does lead to a broadly shared consensus. It is arguably the only social process that does. Consensus forms around theoretical and empirical statements that are true.” (Romer)

This did and does not happen in economics because the representative economist is an incompetent scientist. Incompetence comes in two forms. This is due to the fact that scientific research consists of two essential and inseparably linked elements: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

Formal consistency is established by the axiomatic-deductive method. Material consistency is established by state-of-the-art testing. Accordingly, the incompetence of economists consists of two blunders: (i) of vacuous theory, and (ii), of blind application of statistical tools to poorly defined data sets.

From the undeniable fact that economists have messed up both elements of science cannot be concluded that scientific methodology does not apply to economics or, as J. S. Mill put it, that economics is a ‘separate’ science. There is no such thing. There are only science and non-science.#1

To this day, economics belongs to the category of what Feynman called cargo cult science, that is, the outer appearance is perfect but somehow it simply does not work. Theory is vacuous without empirical content, data analysis is blind without guidance from theory.

Despite all the political sound and fury, there is no real difference between Walrasians, Keynesians, Marxians, or Austrians. All these approaches fail to satisfy the two criteria of science. The tragedy of Heterodoxy is that it is well aware of all blunders but that it has no idea of how to get out of the proto-scientific cul-de-sac.

Debunking Orthodoxy is good, yet a Paradigm Shift is better: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

There is nothing to choose between obsolete-arrogant Orthodoxy and clueless-humble Heterodoxy. Both are destined for the wastebasket. The Paradigm Shift is overdue.#2

Egmont Kakarot-Handtke

#1 Failed economics: The losers’ long list of lame excuses
#2 For detail of the big picture see cross-references Paradigm Shift