Blog-Reference and Blog-Reference
Economics is a failed science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.
Quite naturally, there are a lot of explanations/lame excuses swirling around.#1 One of them relates to the use of models: “Pop critics such as John Rapley should at least understand why economists use models with obviously false assumptions, they should understand why such models can be useful even they are wrong, and they should be aware that all sciences, not just economics, routinely use models with false assumptions.” (Chris Auld)
This is true but the argument is nonetheless idiotic.
A chimpanzee can solve problems. For example, he can put chairs and boxes on top of another and use a stick in order to get the bananas that the experimenter has fixed on the ceiling. Other chimpanzees then imitate the problem-solving strategy. This works fine until the problem situation changes such that the hitherto successful strategy fails and a new solution is required.
Let us call the creative problem solver scientist. Economists, unfortunately, are only imitators/epigones/look-alikes: “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.” (Feynman)
It is pretty obvious that economists fall into the category of cargo cult scientists, they lack genuine problem-solving capacity. The problem is NOT that they apply models and abstractions and simplifications and ‘unrealistic’ assumptions and mathematics, the problem is that they do not apply these scientific tools properly. They are incompetent imitators and do not really understand what science is all about.#2
One example suffices. Walrasian Orthodoxy is defined by these verbalized axioms: “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)
The Walrasian hardcore contains three NONENTITIES ― HC2, HC4, HC5. To take equilibrium into the premises and then establish the properties of general equilibrium is a methodological blunder known since antiquity as petitio principii.
The basic question of economics is whether “the existing economic system is, in any significant sense, self-adjusting.” (Keynes) One simply cannot put the unknown answer into the premises. This is a primitive methodological blunder. Because of this, ALL equilibrium models are a priori false.
All this is known for 2300+ years: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle)
But instead, this happened in economics: orthodox microfoundations, as well as Keynesian macrofoundations, are provably false. Economics has no sound axiomatic foundations, because of this, the whole analytical superstructure is false, and because of this, economic policy guidance NEVER has had sound scientific foundations.
Economists are simply scientifically incompetent.#3 Their striking mental deficiency is the Fallacy of Insufficient Abstraction.#4
#1 Failed economics: The losers’ long list of lame excuses
#2 All models are false because all economists are stupid
#3 Throw them out! Orthodox and heterodox economists are unfit for science
#4 “The highest ambition an economist can entertain who believes in the scientific character of economics would be fulfilled as soon as he succeeded in constructing a simple model displaying all the essential features of the economic process by means of a reasonably small number of equations connecting a reasonably small number of variables. (Schumpeter, 1946)
Related 'Economics and the Fallacy of Insufficient Abstraction' and 'Petitio principii — economists’ biggest methodological mistake' and 'Replacing the neoclassical axioms' and 'Economists’ proto-scientific methodology' and 'Cranks? What cranks? That’s economics!' and 'Toolism! A Critique of EconoPhysics' and 'Dilettantes at the end of the coal-pit' and 'Macro for dummies'. For more details of the big picture see cross-references Scientific Incompetence.