November 14, 2018

Causality in economics

Comment on Lars Syll on ‘In search of causality’

Blog-Reference and Blog-Reference and Blog-Reference on Nov 19

Lars Syll summarizes: “In a time when scientific relativism is expanding, it is important to keep up the claim for not reducing science to a pure discursive level. We have to maintain the Enlightenment tradition of thinking of reality as principally independent of our views of it and of the main task of science as studying the structure of this reality. Perhaps the most important contribution a researcher can make is revealing what this reality that is the object of science actually looks like. Science is made possible by the fact that there are structures that are durable and are independent of our knowledge or beliefs about them.”

These structures (invariances in Nozick’s terminology) relate to the economic system and NOT to economic behavior. Hence, the lethal methodological blunder consists of thinking of economics as a social science instead of a systems science.#1 The blunder started with Adam Smith and this explains why economists have achieved nothing of scientific value in the past 200+ years. Economics is a cargo cult science; economists have misspecified their subject matter from the very beginning.#2

The heterodox economist Lars Syll is no exception and part of the wholesale failure.

Systemic laws are invariances much like physical laws but do not entail the physicists’ specific notion of causality. So, the concept of causality has to be redefined for the economic system. There is no use to turn to philosophy and seeking help from Aristotle.

The elementary version of the economic system is formally given with the First Economic Law as shown on Wikimedia.#3

As it stands, the Law as a whole is deterministic but causality-free. Systemic causality consists of the fact that if one variable is altered the others must change such that the equation is satisfied. However, it is NOT predetermined which of the other variables is altered and to what extent. The First Economic Law is an invariance with undetermined multiple inner causalities. The inner causalities can be said to be opportunistic or to follow the path of least resistance.

In order to establish a simple unidirectional causality, it is necessary that two of the four variables are fixed by the policymaker. So if, for example, ρE and ρX are fixed and ρD is changed, then the change of ρF is causally determined with absolute precision by the systemic interrelations. The problem is that the four ratios ρF, ρE, ρX, ρD consist, in turn, of multiple variables, ρF, for example, is given as the quotient of wage rate W, price P, and productivity R, i.e ρF≡W/PR. This multiplies the number of variables to be controlled.

So, causality in economics is real but consists of undetermined multiple inner systemic causalities. As far as the required number of variables can be controlled, a politically defined causality can be established. Without knowledge of the systemic laws, this is impossible.

It holds: “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)

To this day, neither orthodox nor heterodox economists have more to offer than common sense blather.#4, #5

Egmont Kakarot-Handtke

#1 Economics is NOT a science of behavior (III)
#2 The economics Cargo Cult Prize
#3 Wikimedia First Economic Law
#4 The Law of Economists’ Increasing Stupidity
#5 A brief history of soapbox economics

REPLY to Clint Ballinger on Nov 15

You ask “… what would your ‘system’ imply should be done to make wellbeing higher?”

The axiomatically correct economic theory implies that the well-being of humanity is greatly increased if all stupid/corrupt political agenda pushers are expelled from economics. Draining the economics swamp is the precondition for scientific progress and should be done immediately. Scientific progress is, as everybody remembers from the Neanderthal, the only way to increase the physical and cultural well-being of humanity.

Political, religious, psychological, sociological, and philosophical blather has produced nothing positive throughout human history.

REPLY to Lars Syll on Nov 16

What has become of Lars Syll? He writes: “I can’t but agree with Clint Ballinger on the so called ‘comments’ with which E.K-H pollutes this and other blog sites. E.K-H is a troll. He should be banned.”

What has become of the man who does not get tired of praising unconquerable freedom fighters on his own blog site?#1

What has become of the man whose evening prayer is Rosa Luxemburg’s “Freedom is always, and exclusively, freedom for the one who thinks differently.”

What has become of the tireless fighter for pluralism in economics?#2, #3

What has become of the man who has been refuted on all counts with regard to Keynesianism, Post-Keynesianism, and methodology?#4

What has become of the man who has quietly censored/manipulated his own blog site for a long time?#5

This man now forgets himself and desperately demands that E.K-H is banned from Mike Norman Economics.

In fact, nothing has changed. Behind the idealistic kitsch, Lars Syll has always been a scientifically incompetent political agenda pusher.#6

#1 Nelson Mandela — the captain of my soul
Nelson Mandela In Memoriam
The captain of an unconquerable soul
An unconquerable soul
Edward Snowden — unbroken and unconquerable
Unbroken and unconquerable
For my unconquerable soul
#2 Heterodoxy and pluralism in economics
#3 On the importance of pluralism
#4 Kalecki and Keynes: The double macroeconomic false start
#5 Cryptoeconomics ― the best of Lars Syll’s spam folder
#6 Feynman Integrity, fake science, and the econblogosphere

REPLY to Clint Ballinger on Nov 17

Again: “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)

Neither you nor Lars Syll has the true economic theory. You do not even get the elementary mathematics that underlies macroeconomics right. You have not produced one tiny bit of sound economics.

Next time you board an airplane with the expectation to land safely at a distant place be aware that this is possible due to the work of scientists/engineers and not to political, religious, psychological, sociological, and philosophical blather and certainly not to the brain-dead agenda pushing of stupid/corrupt economists since Smith/Marx.

Your and Lars Syll’s contribution to the welfare of humanity is less than zero.