Blog-Reference and Blog-Reference on Mar 30
David Glasner cites James Buchanan: “The inverse relationship between quantity demanded and price is the core proposition in economic science, … Just as no physicist would claim that ‘water runs uphill,’ no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teachings of two centuries; we have not yet become a bevy of camp-following whores.”
The fact is that economists are since the founding fathers “a bevy of camp-following whores”. It is of utmost importance to distinguish between political and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Theoretical economics has to be judged according to the criteria true/false and NOTHING else. The history of political economics from Adam Smith onward can be summarized as an utter scientific failure. Theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. The different camps of political economics have produced NOTHING of scientific value in the last 200+ years. 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.
One of the most consequential failures is employment theory. From microfounded economics follows an inverse relationship between wage rate and employment. However, microfoundations are methodologically unacceptable. From the correct macrofoundations,#1 follows that there is a positive relationship between (average) wage rate and employment.#2, #3, #4, #5, #6
False theory leads to false policy guidance. With their defective microfounded employment theory, economists bear for 150+ years now the political responsibility for the social devastation of mass unemployment.
David Glasner concludes: “Buchanan was implicitly applying an inappropriate paradigm of price adjustment in a single market to the analysis of how wages adjust in the real world. The truth is we don’t have a good understanding of how wages adjust, and so we don’t have a good understanding of the effects of minimum wages. But in arrogantly and insultingly dismissing Krueger’s empirical research on the effects of minimum wage laws, Buchanan was unwittingly exposing not Krueger’s ideological advocacy but his own.”
Not quite right. Buchanan was exposing himself and his academic colleagues as incompetent scientists. Contrary to naive common sense, this is not at all a sorry fate. There are always excellent employment opportunities in the political sphere for failed/fake scientists. Lenin called them useful idiots.#7 False theories have great use-value in the political Circus Maximus where nobody cares much for scientific validity. Political economics does not work according to the principles of science. Fake scientists like Buchanan are sponsored by billionaires.#8 False theories are NOT eliminated in the peer-review process, just the opposite, they are eventually rewarded with the faux Nobel.
Since Adam Smith/Karl Marx economics claims to be a science. It is NOT. James Buchanan is not an example of an incompetent/corrupt outlier but the proof that economics has never been anything else than brain-dead political agenda-pushing.#9
#1 From false microfoundations to true macrofoundations
#2 More on economists’ sticky brains
#3 Full employment through the price mechanism
#4 Employment theory as an example of proto-scientific soapbubbling
#5 Full employment, the Phillips Curve, and the end of Gaganomics
#6 Go! ― test the Profit and Employment Law
#7 The economist as stand-up comedian
#8 Lynn Parramore, Meet the Economist Behind the One Percent’s Stealth Takeover of America
#9 For details of the big picture see cross-references Political Economics/Stupidity/Corruption
Related 'Equilibrium and the violation of a fundamental principle of science' and 'Ground Control to David Glasner' and 'How economic thinkers think they think about interest' and 'Economics ― from attention and reputation management to science' and 'What’s wrong with Econ 101? Economists, of course!' and 'Equilirium' and 'The prime primer on equilibrium' and 'The Krugman curse' and 'NAIRU and economists’ lethal swampiness' and 'Modern macro moronism' and 'Sticky prices or sticky brains?' and 'Beware of the moralizing economist' and 'What is so great about cargo cult science? or, How economists learned to stop worrying about failure' and 'Econogenics in action' and 'Your economics is refuted on all counts: here is the real thing'.