October 19, 2017

This is New Economic Thinking? Give me a break!

Comment on Lars Syll on ‘Twenty years ago’

Blog-Reference and Blog-Reference on Oct 27

Science is about the true theory. The true theory is the humanly best mental representation of reality. The rest of social communication is storytelling, agenda-pushing, exchange of superficial opinions/beliefs, blather, gossip, unintended comedy, disinformation, and white noise.

The characteristic of science is the insistence on material and formal consistency: “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)

Economics pretends to be a science but is only what Feynman called a cargo cult science. As everywhere in life, there is a genuine thing and a look-alike. The general public cannot spontaneously tell the difference and this provides a comfortable ecological niche for the look-alikes in all walks of life from the marriage-impostor, to the snake-oil seller, to the Ponzi schemer, to the fake scientist. Unsurprisingly, there are also two economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

What the general public is presented with is political economics. The public has no idea of the underlying theory and cannot assess its scientific worth. Fact is that political economics (= agenda-pushing) has virtually extinguished theoretical economics (= science).#1 The loudspeakers of economics ― right-wing or left-wing does not matter ― are without exception incompetent scientists.#2 Political economics has had no sound scientific foundations for 200+ years. Economic policy discussion has no scientifically valid content, it is just opinion and rhetoric.

“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) Economists do not have the true theory but dwell in the scientific no man's land where, in Keynes’ words, ‘nothing is clear and everything is possible’.

Political economics cannot be improved but only abandoned. What is needed is a Paradigm Shift. The problem with economists is that they have no clue what this is: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al.)

The goal of science is the true theory. Economics is a failed science. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong.#3

So, genuine New Economic Thinking is about the Paradigm Shift and nothing else. Given the history of economic thought, this is, of course, NOT what happens. Alleged New Thinking is a dilettantish proto-scientific dog and pony show, not much different in substance from what came before. It’s all a bit more user-friendly: no mathiness, no stress with true/false but peaceful coexistence of provably false theories, no offensive neoliberal hardcore ideology but an emotionally satisfying narrative, and a demonstrative commitment to a brighter future for humanity and the planet or at least to one’s own national society. All this is political marketing. Scientifically, it is essentially the old Walrasian/Keynesian/ Marxian/Austrian garbage in a new package. The foundational concept of profit is still not understood and this means that there is no analytical progress whatsoever.

The methodologically correct action to overcome scientific failure is the Paradigm Shift. This requires a redefinition of the whole subject matter. Economics is not about individual or social behavior but about the behavior of the economy. Economics is a systems science and the functioning of the economic system has to be explained without recourse to folk psychology and folk sociology.#4

Economics is a scientific failure and the ultimate cause is the utter incompetence of both orthodox and heterodox economists. The old thinking has been rather insufficient and the new thinking is not any better. These agenda-pushing folks simply cannot rise above the proto-scientific level.

Egmont Kakarot-Handtke

#1 For details of the big picture see cross-references New Economic Thinking
#2 For details of the big picture see cross-references Failed/Fake Scientists
#3 Why economists don’t know what profit is
#4 First Lecture in New Economic Thinking

Related 'Joan Robinson and the early death of Behavioral Economics' and 'Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist' and 'The real problem with the economics Nobel' and 'Economists understand neither Capitalism nor Socialism' and 'New Economic Thinking, or, let’s put lipstick on the dead pig' and 'CORE: more lipstick on the dead economics pig' and 'Dilettantes at the end of the coal-pit' and 'Economics between cargo cult, farce, and fraud' and 'What is the fuss with New Economic Thinking all about?' and 'New Economic Thinking: The 10 crucial points'. For details of the big picture see cross-references Not a Science of Behavior and cross-references Scientific Incompetence.


NOTE on INET conferencing beyond disappointment on Oct 24

Frances Coppola summarizes: “This is not ‘new thinking’, it is the same old elite economists’ voodoo in different clothes.”

True, orthodox ‘New Economic Thinking’ is bad but heterodox ‘New Economic Thinking’ is even worse. For details see This is New Economic Thinking? Give me a break!.


NOTE on INET conferencing beyond disappointment on Oct 25

Frances Coppola summarizes: “This is not ‘new thinking’, it is the same old elite economists’ voodoo in different clothes.”

True, orthodox ‘New Economic Thinking’ is a bad joke but heterodox ‘New Economic Thinking’ is even worse. For details see This is New Economic Thinking? Give me a break! and Everything you know about MMT is wrong.