May 30, 2019

Finally, the embarrassment of economics is over

Comment on Robert Heilbroner/Brad DeLong on ‘The Embarrassment of Economics’*

Blog-Reference and Blog-Reference and Blog-Reference on May 31

The embarrassment of economics is that it is NOT, as claimed, part of science but part of the entertainment industry. Robert Heilbroner as an early representative of Circus-Maximus economics applies the tried and tested communication tools.

• Personality gossip instead of knowledge transfer: “Schumpeter arrived in his famous riding habit and great cloak, of which he divested himself in a grand gesture. He greeted us in a typically Schumpeterian way: ‘Gentlemen, a depression is for capitalism like a good, cold douche.’ The remark shocked us for two reasons: First, was a depression a good thing? Second, few of us knew that a douche was the European term for ‘shower’.”
• Appeal to prestige/celebrity/popularity: “Milton Friedman-Nobel laureate, famous theorist”, Alvin Hansen (one of America’s best-regarded economists), “Friedman is a brilliant man”, “Scientific thought is probably the most highly regarded of all the activities that make up our complex modern way of life”.

Needless to emphasize that the audience likes this stuff, after all, it got all its education in the talk-show format. Needless to emphasize that the scientific criteria true/false do not appear once in the whole article.

With his blather, Robert Heilbroner misses the point. The lethal embarrassment of economics is this: there is political economics 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. The fact is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has 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 foundational economic concept ― profit ― wrong.

The embarrassment of economics is NOT so much that it hides ideology but that it claims from Adam Smith/Karl Marx onward to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” to be science.

The fact is that economics is what Feynman called cargo cult science. In his utter scientific incompetence, Robert Heilbroner maintains “… a Martian who came across a copy of the American Economic Review might be forgiven for concluding that it was a journal of physics.” As a being with superior intelligence, a Martian would immediately recognize: “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.”

Economics is a failed/fake science. What is needed is a Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations. Curiously, Robert Heilbroner saw the light for a short moment before he fell back into the darkness of political economics: “Surely the recognition of the inextricably social roots of all behavior leads to the view that macrofoundations must precede microbehavior, not the other way round, as modern economic thought perceives the issue.” (p. 8)#1

In other words: If it isn’t macro-axiomatized, it isn’t economics.#2

Egmont Kakarot-Handtke

* Weekend reading
#1 Heilbroner, R., and Milberg, W. (1995). The Crisis of Vision of Modern Economic Thought. Cambridge, New York, Melbourne: Cambridge University Press.
#2 Do first your macroeconomic homework

Related 'Did economics fail? No! Yes, and everybody knows it!' and 'Why is economics such a scientific embarrassment?'.

Wikimedia AXEC121i