August 9, 2017

Economists: only good at excuses

Comment on Brian Romanchuk on ‘Rigour and Macroeconomics’


Brian Romanchuk introduces himself: “Much of my writing about macroeconomic theory is of the hand-wringing variety: it cannot be ‘scientific’ because (useful) forecasting is essentially impossible to do.”

This one sentence is enough for scientific self-debunking. Economics is a cargo cult science because economists never understood what science is all about. Proof No 1: like the average commonsenser, economists maintain erroneously that science is about predicting the future.

John Kay, for example, explains why this does not work in economics: “Big data can help us understand the past and the present but it can help us understand the future only to the extent that the future is, in some relevant way, contained in the present. That requires a constancy of underlying structure that is true of some physical processes but can never be true of a world … in which important decisions or discoveries are made by processes that are inherently unpredictable and not susceptible to quantitative description.”

This is so trivial that it hurts and, above all, it is entirely beside the point. It is not a specific failure of economics that it cannot predict the future because — as a matter of principle — science is NOT AT ALL in the business of prediction because it is long known among scientists: “The future is unpredictable.” (Feynman)#1 Only charlatans predict the future, and only morons take them seriously.

The first thing to understand is that science is NOT about prediction but about knowledge. So, to begin with, things that are not knowable are a priori OUTSIDE of science. Scientific knowledge satisfies two criteria: material and formal consistency. Everything else is storytelling, sitcom blather, clueless filibuster, and hand waving.

Scientific knowledge is embodied in the true theory. The true theory is the best possible mental representation of reality.

Economists do not have the true theory and the representative economist does not realize that the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that ALL got the pivotal economic concept of profit wrong.

The representative economist is content with the pluralism of provably false theories and he simply tries to explain/excuse manifest failure away.#2 The recurring keywords are complexity, non-ergodicity, radical uncertainty, emergence, novelty, spontaneity of human behavior, and so on and on.

Economists do not understand that their subject matter is ill-defined. Economics is NOT a social science but a systems science. The lethal methodological defect of economics is that it is microfounded, that is, based on behavioral axioms. Now it holds that (1) there is NO such thing as an invariant of human behavior, and (2), NO way leads from the explanation of Human Nature/motives/behavior/action to the explanation of how the economic system works.

Economics is NOT AT ALL about Human Nature/motives/behavior/action. This is the subject matter of psychology, sociology, anthropology, history, political science, biology, etc. Economics is about the economic system and objective systemic laws.#3

The ultimate proof of utter scientific incompetence is that neither orthodox nor heterodox economists have gotten the foundational concepts of their subject matter ― profit and income ― right. This is embarrassing, laughable, and inexcusable.

Economics has to be macrofounded and this requires the full replacement of false Walrasian microfoundations and false Keynesian macrofoundations.#4 Economics is not a science until this day because economists are nothing but cargo cultic blatherer.#5, #6

Egmont Kakarot-Handtke

#1 Scientists do not predict
#2 Failed economics: The losers’ long list of lame excuses
#3 First Lecture in New Economic Thinking
#4 Macro for dummies
#5 Economists: scientists or political clowns?
#6 With regard to MMT, in particular, see cross-references MMT