December 6, 2019

Economics ― the science that never was

Comment on Michael Roberts on ‘Economics as a social science’*

Blog-Reference and Blog-Reference and Blog-Reference on Dec 9

“Recently, Benoît Cœuré, a leading French member of the Executive Board of the European Central Bank, delivered an address to economics students at the job forum of Paris School of Economics. He wanted to explain to the gathered students that becoming an economist was a great thing to do and paid well. ... But the money was less important because ‘your PhD should be fuelled by your passion and your love for research rather than by hopes of earning more money’.”

Economics officially declares each year to be a science with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. The problem is that economics does to this day not satisfy the well-defined criteria of science. And this means that economics is a fraud. Economists have never been scientists. Since Adam Smith/Karl Marx, they are clowns and useful idiots in the political Circus Maximus. Economics is NOT part of science but of the entertainment industry. The EconNobel is the Oscar for the best science look-alike.#1

The challenge for economists is this: “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 but many opinions. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong. Economics is a heap of proto-scientific garbage.

The outstanding characteristic of the economist is utter scientific incompetence. Economists are simply too stupid for the elementary algebra that underlies macroeconomics. This seems surprising because economists are often accused of applying too much math. However, the fact of the matter is that they do not understand how to apply it properly. As Feynman put it: “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.”#2 The stupidity of economists is the ultimate reason why all economic models are provably false.

Worse, economists are not only stupid but politically corrupt. Let us take macroeconomics as example.#3 In his General Theory, Keynes asserted: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This syllogism is conceptually and logically defective because Keynes never came to grips with profit. “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end, he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Let this sink in, the economist Keynes never understood profit, i.e. the foundational concept of economics. So, Keynes’ I=S is false and consequently the multiplier and all IS-LM models. Instead, Q≡I−S is true with Q as macroeconomic profit. Neither pro-Keynesians nor anti-Keynesians spotted Keynes’ elementary blunder in 80+ years — except Allais.#4 Needless to emphasize that lack of the true theory never hindered an economist from giving economic policy advice and pushing a political agenda.

Because Keynes got macroeconomic profit wrong for the most elementary case, economists messed up the more complex sectoral balances equation which reads (I−S)+(G−T)+(X−M)=0.#5

This provably false equation, though, is applied by MMTers.#6 It provides the theoretical foundation for the MMT policy of deficit-spending/money-creation. And this is the point where scientific incompetence becomes hazardous to the general public.#7 Economists bear the intellectual responsibility for the social devastation of all economic crises since the Great Depression.

As Monsieur Cœuré summarized it: “… economics is a social science. Models will not take away the burden and responsibility of making judgements. Economics involves much trial and error — you have to take decisions in the fog when you can barely see your hand in front of your face. This makes our profession exciting!”

The general public does not need this kind of excitement. The sooner it can leave 200+ years of scientific incompetence and generously rewarded agenda-pushing for the Oligarchy behind the better.

Egmont Kakarot-Handtke

* Michael Roberts Blog
#1 Scrap the EconNobel
#2 What is so great about cargo cult science? or, How economists learned to stop worrying about failure
#3 Get it econ suckers: behavioral microfoundations ⇒ false, systemic macrofoundations ⇒ true
#4 How Keynes got macro wrong and Allais got it right
#5 The axiomatically correct balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.
#6 Down with idiocy!
#7 Econogenics: economists pose a hazard to their fellow citizens

Related 'The economics Cargo Cult Prize' and 'When substandard thinkers dabble in science it is called economics' and 'Economics is NOT a social science' and 'Economics is NOT a science of behavior (IV)' and 'The only thing we can learn from economic models is what proto-scientific garbage looks like' and 'False models and true incompetence' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?'. For details of the big picture see cross-references Not a Science of Behavior.