Blog-Reference and Blog-Reference on Jan 18 adapted to context
Economics of the last 200+ years is the most embarrassing failure in the history of modern science.
The basic question of economics is whether “the existing economic system is, in any significant sense, self-adjusting.” (Keynes) Walrasian economics failed to prove this. The lethal methodological blunder of standard economics has been to put equilibrium (and other nonentities) into the premises. This blunder is known since antiquity as petitio principii.#1
Keynes realized that the classical microfoundations approach had led into a cul-de-sac and therefore switched to macrofoundations. This was ― in principle ― the right first step towards a Paradigm Shift, except for the fact that Keynes messed up his macrofoundations. This is why Keynesianism, too, is a failure.#2
Because the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/formally inconsistent, economic policy guidance never had sound scientific foundations from Adam Smith/Karl Marx onward. This applies, of course, to the so-called free-market ideology.
There is 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.
Economics claims to be a science but is NOT. Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics is scientifically worthless. It is pretty obvious that Keynes, Hayek,#3 Friedman,#4 etcetera were not scientists but clowns in the political Circus Maximus.
True economic theory tells us how the economic system works. The economist needs the true theory, i.e. the humanly best mental representation of reality: “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)
Keynes, Hayek, Friedman, and their heirs/parrots up to DSGE and MMT never rose above the proto-scientific level of common-sense rhetoric, opinion, and political agenda pushing. The claim as expressed in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a joint Walrasian/Keynesian/Marxian/Austrian deception of the public.
#1 Petitio principii — economists’ biggest methodological mistake
#2 What Keynes really meant but could not really prove
#3 Austrian idiocy ― the case of Hayek
#4 Milton Friedman, fake scientist