January 20, 2018

Time to retire political economists

Comment on Simon Wren-Lewis on ‘Microfoundations and the values of policymakers’


Economics started as Political Economy. Adam Smith and Karl Marx were agenda pushers who used theoretical economics (= science) not so much for enlightenment about how the actual economy works but as the appropriate format of political communication. After the breathtaking successes of science and the debunking of all variants of religious/moral/ mythical world interpretation, there was simply no other format left.

The dilemma of the soapbox economist is this: the overwhelming majority of any population likes storytelling, gossip, and moralizing and dislikes the insistence on objectivity, consistency, and proof which defines science. In other words, science does not yield emotional approval, likes on Facebook, votes, and all the other social goodies that have top priority for the agenda pusher. Yet, on the other hand, religions have convincingly demonstrated that speaking in the name of some higher authority and/or eternal truth is very effective.

From Adam Smith/Karl Marx to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”, economists claim to do science and exploit the prestige of science but economics never rose above the level of proto-scientific garbage. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, etc. ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.

When economists are taken to task for the indefensible pluralism of false theories or ask themselves occasionally ‘Why economists disagree’ they argue that most of the disagreement is only apparent. Friedman and Machlup argued that economists generally agree on theoretical fundamentals ― the basic models ― and disagree only with regard to values and politics. (Prychitko, 1998, p.1) Nothing could be further from the truth.

The mission of economics is to figure out how the economic system works and NOTHING else. Economists need the true theory “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 a true theory but a heap of inconsistent approaches/models. Alone, for this reason, their answer to the IS-OUGHT question is beside the point. Simon Wren-Lewis argues “It was … an exciting breakthrough. We could now tell policymakers that, if this is the utility function of the representative consumer, and the model was a good representation of reality (yes, I know), this is how you should be trading off output and inflation losses.”

The crucial fact of this paradigmatic case is, unfortunately, that there never was any trade-off between output and inflation but both evils always come in tandem, i.e. higher inflation=lower output/employment. Economists got the Phillips curve dead wrong.#1 Because of scientific incompetence, the scientific basis for any political valuation is lacking.#2

Politics and science do not mix, never have, never will. Political economics has produced NOTHING of scientific value in the last 200+ years. For economics to move from agenda-pushing, infotainment, and inconclusive sectarian squabbles to science, economists have to be discouraged from assuming the roles of fake scientists, opinion managers, and useful idiots in the political Circus Maximus.#3

Egmont Kakarot-Handtke

#1 Economists never understood how the price mechanism works
#2 Microfoundations R.I.P.
#3 Krugman and the scientific implosion of economics

Related 'The end of political economics'. For details of the big picture see cross-references Political Economics.

Wikimedia AXEC123f