May 4, 2018

Why is economics a total scientific failure?

Comment on Simon Wren-Lewis on ‘Why was economics so insular?’


Simon Wren-Lewis wonders about “what seems like the never ending stream of popular articles in the UK slagging off economics (or economists).” And he comes up with this explanation: “Here I outlined three potential reasons for this epidemic: people do not understand unconditional macro forecasts, politicians from the right do not like economists spoiling their pet schemes (e.g. Brexit), and many heterodox economists from the left wage endless war against the mainstream. All these complaints get airtime when the economy is bad.”

The explanation of why there is an “epidemic” of critique boils down to three points:
  • “The natural reaction when the economy is bad is to criticise economists.”
  • “… economics is an easy target. Historically it has been very insular.”
  • “There is something distinctive about thinking like an economist” which people apparently do not understand/appreciate.
This leads to the solution: “… economists as a collective has to get better at communicating the core insights of economics.”

This argumentation is beside the point and shows that economists have entirely lost sight of what science is all about. No, not communication is the problem but content, or what Simon Wren-Lewis calls “the core insights of economics”.#1

The problem is that there are none: “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 the true theory.

Simon Wren-Lewis gives a correct description of methodology: “… nearly all economics can be derived from the basic axioms of rational choice. For example, the modern macroeconomics of consumption is just the choice between buying apples or pears transformed into the choice between consumption at different times. In that sense economic theory is like an immense tree, where every branch deductively builds on this core.”

The core of standard economics is given with this verbalized set of 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 orthodox hardcore contain three NONENTITIES: (i) constrained optimization (HC2), (ii) rational expectations (HC4), (iii) equilibrium (HC5). Every theory/model that contains just one NONENTITY is a priori false. When the axioms are false the whole analytical superstructure is false.

There is nothing wrong with economic methodology except the lack of “certain, true, and primary“ (Aristotle) premises: “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)

Because of the NONENTITIES in the axioms, standard economics is indefensible.#2

The good luck of Orthodoxy has been that it NEVER faced an effective critique of Heterodoxy: “The enemies, on the other hand, have proved curiously ineffective and they have very often aimed their arrows at the wrong targets.” (Hahn)

So, Orthodoxy is a scientific failure but traditional Heterodoxy has not been one iota better.#3, #4, #5 What is needed is NOT the repetitive silly critique of Heterodoxy but a Paradigm Shift: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

Orthodoxy has failed, no doubt,#6 but Heterodoxy has failed to develop a superior alternative. As a result, what we have is permanent stagnation at the proto-scientific level.#7 Heterodoxy attacks with silly arguments and Orthodoxy defends itself with silly arguments.

The  major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the pivotal concept of the subject matter ― profit ― wrong.#8 With the pluralism of provably false theories economics sits squarely at the proto-scientific level.

Egmont Kakarot-Handtke

#1 Economics: communication without content
#2 Economics: Defending the indefensible
#3 Silly criticism of economics: 11 signs that you are the imbecile
#4 The stupidity of Heterodoxy is the life insurance of Orthodoxy
#5 How Heterodoxy keeps the Naked-Emperor-Zombie alive
#6 Overreach: Economists have their fingers in every pie except real economics
#7 Secular intellectual stagnation
#8 Profit: after 200+ years still elusive

Related 'Economics, methodology, and the Molehill Impossibility' and 'Profit theory in less than 5 minutes' and 'Failed economics: The losers’ long list of lame excuses' and 'Again and again: economists are incompetent scientists' and 'When substandard thinkers dabble in science it is called economics' and 'Economists ― medics or barber-surgeons?' and 'Eclecticism, anything goes, and the pluralism of false theories' and 'Economics has arrived at the bottom of the proto-scientific shithole' and 'What’s the use of economists?' and 'Economics ― not science, not ideology, just useful idiocy' and 'Econ 101: Economists flunk the intelligence test at the first hurdle' and 'Links on the Economics Nobel' and 'Your economics is refuted on all counts: here is the real thing'.


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