November 15, 2020

Economists’ foundational conceptual blunder

Comment on Editor on “necessities of thought”

Editor quotes Einstein: “Concepts that have proven useful in ordering things easily achieve such an authority over us that we forget their earthly origins and accept them as unalterable givens.” And “For that reason, it is by no means an idle game if we become practiced in analyzing the long commonplace concepts and exhibiting those circumstances upon which their justification and usefulness depend, how they have grown up, individually, out of the givens of experience. By this means, their all-too-great authority will be broken. They will be removed if they cannot be properly legitimated, corrected if their correlation with given things be far too superfluous, replaced by others if a new system can be established that we prefer for whatever reason.”

Applied to economics, the conceptual state of affairs is as follows: the lethal defect of economics is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL get the foundational economic concept of profit wrong. To get the concept of profit wrong in economics is comparable to getting the concept of energy in physics wrong. Because the foundational concept is ill-defined the whole analytical superstructure of economics is scientifically worthless.#1-#3

For 200+ years, economics is a failed science. Since Adam Smith/Karl Marx, economic policy guidance never has had NO sound scientific foundations.#4

Any critique of or conversation about the main approaches is a waste of time. This proto-scientific embarrassment has without further ado to be buried at the Flat-Earth-Cemetery and forgotten.

The way forward consists of a Paradigm Shift. Economics has to move from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.#5-#6

The good news is that, while economists were sinking deeper and deeper in the methodological mire, the Paradigm Shift has been accomplished.#7

Egmont Kakarot-Handtke