Blog-Reference and Blog-Reference and Blog-Reference on Oct 3
After 200+ years it is obvious to even the dullest news consumer that economics is a failed science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the pivotal economic concept of profit wrong.
What we have today is the pluralism of provably false theories.#1 This, of course, is no accident. Economists are fake scientists. The crucial point is this: the genuine scientist drives every problem he chooses to solve relentlessly to a clear-cut true/false answer, with truth defined as material and formal consistency. The fake scientist solves nothing but keeps everything in the swamp of inconclusiveness, where "nothing is clear and everything is possible" (Keynes). Inconclusiveness is what Popper called an immunizing stratagem because: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman) This, of course, is good news for fake scientists.
If it so happens that a theory has been proven wrong, the follow-up stratagem is ignorance and business as usual. This malpractice has been addressed by Morgenstern already in 1941: “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.”
These two stratagems could produce nothing else than the observable pluralism of false theories which, in turn, brings another stratagem into play: excuses and rationalizations.#2
It is not too hard to identify a genuine scientist and a fake scientist. The genuine scientist speaks thus: “We must not believe those, who today, with philosophical bearing and deliberative tone, prophesy the fall of culture and accept the ignorabimus. For us, there is no ignorabimus, and in my opinion none whatever in natural science. In opposition to the foolish ignorabimus, our slogan shall be: We must know — we will know!” (Hilbert)
The fake scientist speaks thus: “As far as I can make out, there are relevant and important senses in which all these statements are each of them right and each of them wrong.” (Hicks) Feynman pointed out the benefit of inconclusiveness: “By having a vague theory it is possible to get either result.” Because of this, fake scientists subscribe to the methodology of anything-goes and the faux humility of ‘I know that I know nothing’.
The benefit of wish-wash and clueless filibuster is much appreciated by Post Keynesians: “It is better to be roughly right than precisely wrong.” This false dichotomy has its deep roots in the Cambridge School of Loose Verbal Reasoning: “Another danger is that you may ‘precise everything away’ and be left with only a comparative poverty of meaning. . . . Such a problem was avoided, said Keynes, by Marshall who used loose definitions but allowed the reader to infer his meaning from ‘the richness of context’.” (Coates)
This is good news, in economics everybody is entitled to his own multiple truths: “What a tricky business this all is! In his Treatise on Money, Mr. Keynes told the world that savings and investment are only equal in conditions of equilibrium; that an excess of investment over saving means rising prices, and vice versa. In his General Theory, he told us that saving and investment are always equal, and that this is a mere identity or truism, without significance for the determination of prices. As far as I can make out, there are relevant and important senses in which all these statements are each of them right and each of them wrong.” (Hicks)
In his utter scientific incompetence, Hicks did not realize the blunder in Keynes’ premises: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63) but incorporated I=S into IS-LM, which became one of the most extensively used silly constructs in the history of the failed science economics.#3
#1 Getting out of the economics swamp
#2 Failed economics: The losers’ long list of lame excuses
#3 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
For details of the big picture see cross-references Refutation of I=S