April 25, 2018

Economics between misguided and lethal critique

Comment on Noah Smith on ‘Econ Critics Are Stuck in the Past’


Misguided critique is characterized by a lack of understanding of what science is all about. Relevant examples include
  • predictive failure ⇒ scientists do not predict (only charlatans do)#1,
  • politically biased ⇒ false if applied by left-wingers against right-wingers and vice versa but appropriate if applied to ALL political agenda pushers/useful idiots.#2
  • mathiness ⇒ false if application comes first and mathematical tool is tailored to application but appropriate if tool comes first and application is trimmed to fit the tool,
  • deductive enterprise ⇒ false if premises are true but appropriate if NONENTITIES are put into the premises.
“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, 300 BC)#3

“For it can fairly be insisted that no advance in the elegance and comprehensiveness of the theoretical superstructure can make up for the vague and uncritical formulation of the basic concepts and postulates, and sooner or later ... attention will have to return to the foundations. (Hutchison)

Lethal critique
  • Walrasian microfoundations (in particular equilibrium), are false for 150+ years,
  • Keynesian macrofoundations (in particular I=S/IS-LM), are false for 80+ years,
  • Walrasianism, Keynesianism, Marxianism, Austrianism, and all variations/ derivatives thereof are axiomatically false and materially/formally inconsistent,
  • economists are scientifically incompetent,
  • economics is a cargo cult science,
  • because profit theory is false since Adam Smith, economic policy guidance has no sound scientific foundations for 200+ years.*
From the lethal critique follows that economics needs a Paradigm Shift from microfoundations to macrofoundations. For methodological reasons, more empirical partial analysis does NOT lead to a better understanding of the monetary economy as a whole.#4

Egmont Kakarot-Handtke

#1 Scientists do not predict
#2 Time to retire political economists
#3 Infantile model bricolage, or, How many economists can dance on a non-existing pinpoint?
#4 Overreach: Economists have their fingers in every pie except real economics