August 26, 2020

All behavior-based economic textbooks are false

Comment on John Komlos on ‘A new real-world economics textbook’


Mainstream economics is known for a long time to be dead and in need of a Paradigm Shift “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990)

John Komlos echoes this insight “… how misleading it can be to apply oversimplified models of perfect competition to the real world. The math works well on college blackboards but not so well on the Main Streets of America.”

However, “The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy.” (Feynman)

John Komlos takes up the challenge. His textbook “… demonstrates how we should take into account the inefficiencies that arise due to asymmetric information, mental biases, unequal distribution of wealth and power, and the manipulation of demand.”

This is laudable, except for one point: John Komlos’ approach is behavior-centered like the mainstream approach, only the behavioral premises have been changed and are certainly more ‘realistic’. However, John Komlos remains in the old economics-is-a-social-science paradigm. This is a lethal blunder because economics is a systems science. Economics is NOT about how people behave but how the economic system behaves. Human behavior is the subject matter of psychology and sociology and history and political science but NOT of economics.

Why do economists cling so tenaciously to the behavioral approach? Because they are political agenda pushers and NOT scientists. And politics is about the control of behavior. Economic incentives are but one form of behavioral control.

It is a scientific fact that economics as social science has to this day not figured out what macroeconomic profit — the foundational concept of economics — is. The behavioral approach is a methodological failure. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent.#1, #2

What economics needs is a Paradigm Shift from behavioral microfoundations to structural macrofoundations.#3

This Paradigm Shift and its far-reaching consequences can be studied with Sovereign Economics. This textbook contains the axiomatically true theory as an indispensable prerequisite of economic policy guidance.

“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)

John Komlos’ textbook is an outstanding example of educated common sense. The fact of the matter is, though, that neither orthodox nor heterodox economists have realized to this day what science is all about.

Egmont Kakarot-Handtke

#1 Economics is a disgrace ― now more than ever
#2 Wikipedia, economics, scientific knowledge, or political agenda pushing?
#3 Your economics is refuted on all counts: here is the real thing