Comment on Roger Farmer on ‘The Marriage of Psychology with Multiple Equilibria in Economics’
(i) Roger Farmer does not understand what science is all about and that economics fits Feynman’s definition of a cargo cult science to a T: “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.”
(ii) Roger Farmer does not understand that the subject matter of economics 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.#1 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.
(iii) Roger Farmer is trapped in the tradition of methodological individualism. It is not at all sufficient to replace defunct constrained optimization with the more realistic assumptions of behavioral economics. 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.
(iv) It should be pretty obvious that economics has hitherto dealt with NONENTITIES: the two behavioral axioms constrained optimization HC2 and rational expectations HC4, and the systemic NONENTITY equilibrium HC5.#1 There is NO such thing as equilibrium/ disequilibrium in the market economy. To replace a single equilibrium by multiple equilibria is, therefore, a futile exercise. Every theory/model that contains a NONENTITY is A PRIORI false. Because of their absorbing occupation with cargo cultic NONENTITIES, Roger Farmer and the representative economist do until this very day not know what profit ― the foundational and very real entity of economics ― is.
(v) Economics has to be macrofounded and this requires the full replacement of false Keynesian macrofoundations. This is the absolutely necessary first step of any New Economic Thinking. All else is a mere repackaging of failed economics. Psychologism and Equilibrism have always been and will always be proto-scientific garbage.
#1 “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)
Related 'After-Keynesian zombie interbreeding' and 'Fact of life: your econ prof is scientifically incompetent'. For details of the big picture see cross-references Scientific Incompetence.