November 13, 2019

Econogenics: economists pose a hazard to their fellow citizens

Comment on Bill Mitchell on ‘The evidence from the sociologists against economic thinking is compelling’*

Blog-Reference and Blog-Reference

Bill Mitchell summarizes: “One of the stark facts about the academic economics discipline is its insularity and capacity to deliver influential prognoses on issues that affect the well-being of millions with scant regard to the actual consequences of their opinions and with little attention to what other social scientists have to say. The mainstream economists continually get things wrong but take no responsibility for the damage they cause to the well-being of the people.”

And this is how it is done “So we get a formulaic approach to publications in macroeconomics that goes something like this
  • Assert without foundation ― so-called micro-foundations ― rationality, maximisation, RATEX.
  • Cannot deal with real world people so deal with one infinitely-lived agent!
  • Assert efficient, competitive markets as optimality benchmark.
  • Write some trivial mathematical equations and solve.
  • Policy shock ‘solution’ to ‘prove’, for example, that fiscal policy ineffective (Ricardian equivalence) and austerity is good. Perhaps allow some short-run stimulus effect.
  • Get some data ― realise poor fit ― add some ad hoc lags (price stickiness etc) to improve ‘fit’ but end up with identical long-term results.
  • Maintain pretense that micro-foundations are intact ― after all, it is the only claim to intellectual authority.
  • Publish articles that reinforce starting assumptions. Knowledge quotient ― ZERO ― GIGO.”

Not only mainstream economics, though, is proto-scientific garbage. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong. With their provably false theories, economists pose a hazard to their fellow citizens. However, the same holds for MMT, the approach Bill Mitchell represents.#1-#13

Bill Mitchell is right in his critique of what passes as economics but he has drawn the wrong conclusion from obvious scientific failure: “A mainstream professor who was supervising my economics graduate program once said to me: ‘Bill you are a bright boy but you should be doing sociology’, which was an example of the negative control mechanism designed to weed out dissidents (like me). It didn’t work. But I always considered the disciplines of sociology and anthropology (not to mention psychology, political science, social welfare etc) to be important in my journey to become ‘well read’.”

The correct conclusions from the lethal methodological blunders of economists are
  • Leave sociology to the sociologists and psychology to the psychologists.
  • Take their findings whenever needed.
  • Focus instead on how the economic system works.
  • Economics is NOT a social science but a systems science.#14, #15
  • Economists are responsible for the social devastations that result from the application of provably false theories.

From this follows that economics needs a full-blown Paradigm Shift. In concrete terms, this means that false microfoundations#16 have to be replaced by true macrofoundations#17.

Walrasianism, Keynesianism, Marxianism, Austrianism, and Bill Mitchell’s MMT have to be buried at the Flat-Earth-Cemetery.#18

Egmont Kakarot-Handtke

* Billy Blog
#1 Econogenics in action
#2 How the representative economist gets it wrong big-time
#3 Economics: The greatest scientific fraud in modern times
#4 Economics ― worse than fake
#5 Economics ― a doctor worse than the disease
#6 Economists and the destructive power of stupidity
#7 MMT: The economics moron as problem solver
#8 Mass unemployment: The joint failure of orthodox and heterodox economics
#9 No culpa, only stultitia
#10 As Napoleon said: don’t listen to economists
#11 Why do workers not tar and feather economists?
#12 Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion
#13 Scrap the EconNobel
#14 PsySoc — the scourge of economics
#15 Homo oeconomicus: the never-ending folk-psychological shitshow
#16 Microfoundations are verbally given by: “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)
#17 The true Macrofoundations are given by (A0) The objectively given and most elementary systemic configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X. See True macrofoundations: the reset of economics
#18 The real trouble with Capitalism: stupid/corrupt economists

Related 'Economists: scientists or political clowns?' and 'Economists ― medics or barber-surgeons?' and 'False economic theory makes bad economic policy' and 'Economics is indefensible' and 'The real trouble with Capitalism: stupid/corrupt economists' and 'Economic policy has gone wrong because economic theory has gone wrong'.

For more about iatrogenic economics see AXECquery.