Peter Dorman summarizes his insights: “There are many reasons for doing this. One is frankly political: a lot of the political babble in this country is framed by erroneous economic thinking, … Another is pedagogical: if you don’t put effort into deconstructing pre-existing beliefs as well as developing new knowledge, what you will see on papers and exams is a weird mishmash of the two. It took me too many years to figure this out.”#1
Current economics fits the description of a weird mishmash. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong.
So, the first thing to do is to deconstruct pre-existing beliefs. Standard economics is given with this set of neo-Walrasian hardcore propositions a.k.a. axioms:
HC1 There exist economic agents.
HC2 Agents have preferences over outcomes.
HC3 Agents independently optimize subject to constraints.
HC4 Choices are made in interrelated markets.
HC5 Agents have full relevant knowledge.
HC6 Observable economic outcomes are coordinated, so they must be discussed with reference to equilibrium states. (Weintraub, 1985)
The methodological blunder that suffices to make this axiom set unacceptable is that HC3, HC5, and HC6 are NONENTITIES like angels, unicorns, the Easter Bunny, or Superman.
First insight from Meta-Learning: all theories/models that contain just one NONENTITY are a priori false. Never ever apply any of the propositions of the set HC1/HC6.
Krugman once introduced himself as follows: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point ...”. From Meta-Learning we know by now that Krugman has always been an idiot.
Of course, there are not only scientifically incompetent Neoclassicals but also Keynesians. Keynes defined the set of foundational macroeconomic propositions as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)
Unfortunately, exactly at this point, the lethal error slipped in because Keynes never came to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)
Because Keynes got profit wrong the whole of Keynesianism and Post Keynesianism and New Keynesianism is scientifically worthless.
Second insight from Meta-Learning: All theories/models that contain Income = Value of Output or I=S are a priori false.
Now we could go on with Meta-Learning and deconstruct Marxianism and Austrianism but the Meta-Learner doubtlessly got the point. Deconstructing pre-existing beliefs means to flush both microeconomics and macroeconomics and the textbooks from Samuelson’s sorry effort to Mankiw and Rodrik down the drain. Or, as Joan Robinson put it: “Scrap the lot and start again.”#2
#1 How to get rid of an obsolete theory
#2 How to restart economics
Related 'The GDP-death-blow for the economics profession'.