Blog-Reference and Blog-Reference on Oct 22
“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
How do scientists eventually arrive at the true theory? “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)
Neither orthodox nor heterodox economists have developed anything that remotely resembles the true (= materially/formally consistent) theory.
Samuelson, to his credit, at least realized that utility is a NONENTITY and that, by consequence, marginalism had no sound scientific foundations: “The very raison d’être for developing revealed preference theory in the 1930s and 1940s was to be able to ascertain people’s preferences by observation of their actual behaviour on markets and not having to make unobservable psychological assumptions or rely on any utility concepts.” (Lars Syll, Intro)
What Samuelson did realize was that economics cannot be based on a behavioral axiom like constrained optimization but he did not realize that it cannot, as a matter of principle, be based on any other behavioral assumption whatsoever. The economy is a system and economics has to be based on objective-systemic macrofoundations and not on subjective-behavioral microfoundations.
The significance of the failure of revealed preference theory lies in the fact that economics is not a science of behavior and that microfoundations are the methodologically wrong approach.#1
It was Joan Robinson who drew the correct conclusion: “Scrap the lot and start again.”
However, Keynes’ attempt to move from microfoundations to macrofoundations failed.#2 Thus, the propagation of silly orthodox and heterodox economics goes on and on. The scrapping of the false micro-behavioral paradigm did not happen. What indeed happened was the pseudo-progress from the entirely vacuous behavioral assumption of utility maximization to more ‘realistic’ assumptions under the label of Behavioral Economics.
For Behavioral Economics, though, holds what held already for the microfoundations of Jevons, Walras, Menger: Scrap the lot and start again. In other words, if it isn’t macro-axiomatized, it isn’t economics.
To award in 2017 the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” for Behavioral Economics is the point where the abysmal scientific incompetence of orthodox and heterodox economists for 150+ years turns into a deception of the general public. Economics is not a science but what Feynman called a cargo cult science.
#1 A social science is NOT a science but a sitcom
#2 From false micro to true macro: the new economic paradigm
Related 'The father of modern economics and his imbecile kids' and 'What makes economics a failed science?' and 'Hunting down the economics body snatchers' and 'You are fired!' and 'Joan Robinson and the ‘throng of superfluous economists’' and 'Why don’t you do what Joan Robinson told you to do?' and 'Yes, economics is a bogus science' and '10 steps to leave cargo cult economics behind for good'. For details of the big picture see cross-references Not a science of behavior and cross-references New Economic Thinking