Blog-Reference and Blog-Reference and Blog-Reference on Jun 19 adapted to context
David Glasner discusses the relationship between equilibrium and foresight. Thus he takes it for granted that something like equilibrium exists in the economy. This premise, though, is false and it does not matter much that it is shared by the majority of economists.
The majority accepts the neo-Walrasian axiom set with these hardcore propositions: “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, 1985) The Walrasian approach comes in several variants and a loose definition has been given by Krugman: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”
Now, three things are known: (i) the neo-Walrasian axiom set is methodologically inadmissible because it contains NONENTITIES like equilibrium or foresight, (ii) the neo-Walrasian approach is materially and formally inconsistent, (iii) the neo-Walrasian approach is a scientific failure: “At long last, it can be said that the history of general theory from Walras to Arrow-Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin”. (Blaug, 2001)
Therefore, all models that take the “maximization-and-equilibrium world as a starting point” are a priori false. It is well-known that the whole point of science is to identify and refute false theories and to eliminate them from the corpus of scientific knowledge. This, though, never happened in economics.
The whole issue is by no means new: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941)#1
Because equilibrium is a NONENTITY it is not a harmless exercise in economic thinking to discuss microfounded models but a violation of scientific standards and perfectly equivalent to the attempt of religious fundamentalists to reintroduce the geocentric theory.
False theories have to be fully replaced. Walrasianism is axiomatically false and therefore beyond repair. To defend Walrasianism is either moronic or fraudulent. The only legitimate economics is currently the Paradigm Shift, i.e. the overthrow of Walrasianism, Keynesianism, Marxianism, Austrianism.
The further application of the concepts of equilibrium or foresight is an indication of a failure of reason: “… we may say that … the omnipresence of a certain point of view is not a sign of excellence or an indication that the truth or part of the truth has at last been found. It is, rather, the indication of a failure of reason to find suitable alternatives which might be used to transcend an accidental intermediate stage of our knowledge.” (Feyerabend, 2004)
The suitable alternative to falsified Walrasian microfoundations is macrofoundations.#2 The maximization-and-equilibrium world, including David Glasner, has to be left behind on the proto-scientific garbage heap.
#1 The prime primer on equilibrium and Ground Control to David Glasner
#2 True macrofoundations: the reset of economics
Related 'Equilirium' and 'If it isn’t macro-axiomatized, it isn’t economics'. For the inexorable Paradigm Shift from false microfoundations to true macrofoundations see cross-references Paradigm Shift.
You quote Uneasy Money: “This property [equilibrium] is a consistency and coherence property that any model, regardless of its substantive predictions, ought to have. If a model lacks this property, there is something wrong with the model.”
Because equilibrium is a NONENTITY it is exactly the other way round: every model that applies the concept of equilibrium (or disequilibrium) is a priori FALSE. It is a gross methodological blunder to take equilibrium into the premises=axioms, see HC5 above, and then establish and discuss the properties of general/intertemporal equilibrium. This blunder is known since antiquity as petitio principii.#1
The classical case is ancient Greek astronomy which started with the premise that planet orbits are circles (because everything in heaven is perfect and the circle is the perfect geometrical form). It turned out 1500+ years later that this premise is false but until then every theory/model that lacked the circle property was rejected out of hand. In David Glasner’s words: “If a model lacks this [circle-] property, there is something wrong with the model.” It turns out, though, that there is something wrong with David Glasner.
Economists who use the equilibrium concept are incompetent scientists and methodologically 150+ years behind the curve. This includes Hayek, Krugman et al. (“most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point”), David Glasner, and you.
Because “there is something wrong” with all these folks, they have to be expelled from economics. Equilibrium economics is one of the worst scientific blunders of all time.
#1 Petitio principii — economists’ biggest methodological mistake