Occasional Xs: What economists really do (CCXXXIV)

 

#Economics#FailedFakeScience

For 200+ years, economics claims to be #Science but is NOT. The major approaches (#Walrasianism, #Keynesianism, #Marxianism, #Austrianism, and their derivatives) are mutually contradictory & axiomatically false & materially/formally inconsistent &…

— E.K-H (@AXECorg) May 3, 2024

Occasional Xs: What economists really do (CLXXV)

 

#Economics claims to be #Science but is NOT. The major approaches are axiomatically false & materially/formally inconsistent & ALL got #Profit wrong. The representative #Economist is a #Clown in the political #CircusMaximus. Their #Forecast games are just #DisInfoTainment. pic.twitter.com/XCoQ1Y64AS

— E.K-H (@AXECorg) February 16, 2024

Occasional Tweets: Economists and their silly prediction games

 

#Economics#FailedScience#FakeScience#Economists#StupidOrCorruptOrBoth

“The future is unpredictable.” (Feynman) Only charlatans predict the future, and only morons take them seriously.

Scientists do NOT predict the futurehttps://t.co/FLouHTlQD0

Only silly economists do.

— E.K-H (@AXECorg) June 18, 2021

For more about prediction see AXECquery. 

Economists’ silly kindergarten games

Comment on Barkley Rosser on ‘Robert J. Samuelson Denounces Economists’

Blog-Reference

Barkley Rosser refers to a Washington Post article: “However, today he [Robert Samuelson] has written on ‘What economists don’t know,’ which comes across as a pretty big spanking for economists, among whom he does not make much differentiation. We are all pretty much as ignorant as each other and just plain not willing to admit it, given that we are also all (actually here he admits not all) trying to ‘gain and retain political relevance and power’.” and “Indeed, we like to think that we have exposed this Establishment for its high crimes and misdemeanors, at least on a few occasions, even if we ourselves sometimes make erroneous remarks as well on various matters (and, of course, we get visited by good old Egmont from time to time, whose denunciations of all economists except for himself and maybe one or two others makes Samuelson’s complaints look like high praise).”

Under the headline ‘What economists don’t know’, Robert Samuelson criticizes the profession for bad forecasting performance. This, indeed, is a silly game that economists play with great enthusiasm in order to entertain their audience. This only proves that economists do not understand what science is all about. Genuine scientists do not participate in the prediction game because they know “The future is unpredictable”. (Feynman) Prophesy, the forerunner of pseudo-scientific forecasting, is known since time immemorial to be a tool of social programming/manipulation/psycho-terror.

Scientific ‘prediction’ does not predict the future but the observable empirical consequence of a theory.#1, #2, #3 If successful, the theory is corroborated, otherwise, it is refuted. The bottom line of the prediction brouhaha is: scientists do not predict the future, only charlatans do, and only morons take them seriously.

The second point to note is that Egmont does NOT denunciate economists but refutes their approaches. More specifically, he proves that Walrasianism, Keynesianism, Marxianism, Austrianism, and MMT are axiomatically false, materially/formally inconsistent, mutually contradictory and that all approaches get the foundational concept of the subject matter ― profit ― wrong. In brief, it is demonstrably true that economics is proto-scientific garbage and that economists are scientifically incompetent.#4, #5, #6 This includes, of course, the political agenda pushers Robert Samuelson and Barkley Rosser.

Egmont Kakarot-Handtke


#1 Scientists do not predict
#2 Prediction does not work? Try retrodiction first
#3 Predictably confused
#4 Economists: scientists or political clowns?
#5 Economics a science? Surely you're joking, Mr. Cochrane
#6 Economics: The greatest scientific fraud in modern times

Related 'Economics debate ― just another variant of hardcore wrestling' and 'Economics ― nothing but claptrap, twaddle, drivel, slip-slop, wish-wash, waffle, and proto-scientific garbage' and 'Economics: ‘a tale told by an idiot ... signifying nothing’'.

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ADDENDUM on May 16

Barkley Rosser is pleased about Robert Samuelson’s civility: “Also, it must be admitted that RJS does say complimentary things about most economists he deals with as being ‘extremely smart’ and ‘public spirited’ and ‘generous with their time,’ albeit ‘with a few exceptions’.”

Another silly kindergarten game economists play is the peer-recommendation/reciprocal-hype/self-congratulation game. Reality is different: economists are either stupid or corrupt or both. For details see There is NO such thing as “smart, honest, honorable economists”.

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REPLY to Barkley Rosser on May 16

You ask: “Does this absolute statement you make that there are ‘no’ smart or honest or honorable economists apply to you as well? Or are you not an economist?”

When I deal with how the economy works and prove that Keynes’ macroeconomic proposition I=S is false because Keynes got macroeconomic profit wrong, I am an economist. When I deal with how the economics profession works I am a sociologist.

You are right in pointing out that absolute statements may lead to paradoxes. An issue that has been dealt with under the heading of auto-reference by Luhmann and recursion/self-reference by Hofstadter and Russel’s Paradox by mathematicians.#1 Not to forget this ‘extremely smart’ Crete philosopher Epimenides. The finer points of logic, though, are a moot point among the confused confusers of economics.

To this day, both the microfoundations and macrofoundations of economics are provably false but economists have not realized it. So, Robert Samuelson’s self-referential characterization of economists as ‘extremely smart’ and ‘public spirited’ and ‘generous with their time’ only confirms what is long known, i.e. that economists are not scientists but stand-up comedians in the political Circus Maximus who senselessly repeat their ridiculous prophesy stunts.

If Robert Samuelson (and the rest of his ilk including Barkley Rosser) is an economist I am NOT an economist and vice versa. There is nothing paradoxical here.


#1 “In the foundations of mathematics, Russell’s paradox (also known as Russell’s antinomy), discovered by Bertrand Russell in 1901, showed that some attempted formalizations of the naïve set theory created by Georg Cantor led to a contradiction. The same paradox had been discovered in 1899 by Ernst Zermelo but he did not publish the idea, which remained known only to David Hilbert, Edmund Husserl, and other members of the University of Göttingen.” (Wikipedia)

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REPLY to Barkley Rosser on May 17

You proudly present your ancestors: “As a matter of fact this is a family specialty, with me writing papers on these, such as ‘On the Foundations of Mathematical Economics’ that appeared a few years ago in New Mathematics and Natural Computation, with a couple more in the publication pipeline (with yours probably still empty I gather).”

Obviously, you still have not realized that the foundations of mathematical economics are false. See Barzilai and the crumbling of the unsafe citadel. See, in particular, the Open Letter to the President of the American Economic Association.

For proof that people who call themselves economists are too stupid for the elementary mathematics that underlies macroeconomics see #DrainTheScientificSwamp.

There are political economics and theoretical economics. Political economists are agenda pushers, and theoretical economists are scientists. Political economists are fake scientists and have to be expelled from economics. See Who is really a scientist?

There is no contradiction. You are a P-economist and I am a T-economist. It is absolutely correct to say that an [T-] economist is NOT an [P-] economist and vice versa. It sounds only paradoxical for people who have not realized that economics has been captured long ago by useful political idiots and is a cargo cult science since Adam Smith/Karl Marx.

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REPLY to Barkley Rosser on May 18

Why don’t you simply read the post There is NO such thing as “smart, honest, honorable economists”?

Excerpt: The fact of the matter is that the four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong.

For 200+ years now, economists do not know what profit is. Because of this foundational blunder, economics is scientifically worthless. And because of this, economic policy guidance NEVER had sound scientific foundations. And because of this, economists are the major cause of economic crises. By default, every economic mess is econogenic unless proven otherwise.

Economics is for 200+ years at the proto-scientific level. What is long overdue is a Paradigm Shift. This cannot happen with the given personage. Economists’ modus operandi is to simply ignore scientific standards and to imperturbably recycle falsified theories: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern)

Krugman, for example, who is on the list of “smart, honest, honorable economists” has not realized to this day that Keynes’ I=S is false for 80+ years and still recommends IS-LM as a useful model.

Economists are not smart because they have not figured out to this day what profit is and how the monetary economy works. They are neither honest nor honorable because what they are doing for 200+ years now is NOT science but political agenda-pushing.

The brouhaha about prediction: which Feynman is right?

Comment on David Orrell on ‘The Economics Debate: The Problem isn’t Bad Economics, It’s Bad Science’

Blog-Reference

Feynman said:
(i) “The test of science is its ability to predict.”
(ii) “The future is unpredictable.”#1

Which Feynman is relevant for economics? Both, of course, but economists in their confusion took (i) and ran away with it. The bottom line of the prediction brouhaha is: scientists do not predict the future, only charlatans do, and only morons take them seriously.#2

As a matter of principle, a theory cannot be dismissed because it does not predict the future. Therefore, economics from Jevons/Walras/Menger to DSGE cannot be dismissed because it has not predicted crises. The criterion of science is logical and empirical consistency: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant) So, economics ― Walrasianism, Keynesianism, Marxianism, Austrianism ― has to be dismissed because of material/formal inconsistency and nothing else.#3

The point is that scientists use the word prediction in a quite different sense from everyday usage. For example, Einstein deduced gravity waves from his theory in 1916 and in our days, 100 years later, they are observed. Only in the very specific sense of ‘testable hypothesis’ scientists make ‘predictions’.

Science proceeds from the known to the unknown: “The object of reasoning is to find out, from the consideration of what we already know, something else which we do not know.” (Peirce) Only in this sense science makes ‘predictions’.

All this is well-known among methodologists: “We are very far from being able to predict, even in physics, the precise results of a concrete situation, such as a thunderstorm, or a fire.” (Popper)#4

The problem of economics is NOT failed predictions but that it is a failed science or, in Feynman’s famous term, a cargo cult science.#5

Egmont Kakarot-Handtke


#1 For the full quotes see Scientists do not predict
#2 Scientists do NOT predict the future
#3 What is dead certain in an uncertain world: economists’ abysmal incompetence
#4 Uncertainty: ‘Whereof one cannot speak, thereof one must be silent’
#5 What is so great about cargo cult science? or, How economists learned to stop worrying about failure

Related 'Why is economics a total scientific failure?'. For details of the big picture see cross-references Paradigm Shift.

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REPLY to Tom Hickey on Apr 30

The topic is prediction in economics and you landed at causality. And what you as the distinguished MMT philosopher and opinion leader have to tell the audience is: “There are many theories of causality.” So what?

The point is that if there are many theories the field is in the state of utter confusion because, as a matter of principle, only one theory can be true. Science is the quest for the true theory as philosophers know since Plato.

In economics, there are folks who claim that they saw the financial crisis of 2008 coming and that Orthodoxy badly failed on this account. What these folks try to bring across is that they have the true theory because, as everybody knows: “The test of science is its ability to predict.”

Fact is that prediction is ill-understood in economics. There are basically two types of prediction: the pre-scientific and the scientific:
(i) The shaman says that in his state of superhuman awareness it has been communicated to him that in the near future the great dragon will swallow the sun.
(ii) The scientist says, according to my calculations, which are based on the Theory of Gravity and given initial conditions, I conclude that the people in Togo will observe a total solar eclipse on March 29, 2006.

Let us assume that the event happens as ‘predicted’ then follows from (i) that the shaman has extraordinary/inexplicable abilities, and from (ii) that the theory is true, with the qualification that in the future perhaps somebody will come up with an even better theory.

Because in economics we do not have the true theory ― Walrasianism, DSGE, Keynesianism, Post Keynesianism, MMT, Marxianism, Austrianism are provably false ― a prediction that comes true is not more than a lucky guess at the betting shop.

The crisis prediction brouhaha is just another distraction from the fact that economics is a failed/fake science. This applies also to MMT which is just another political fraud.#2


#1 The futility of testing economics blather
#2 For the full-spectrum refutation of MMT see cross-references MMT

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REPLY to Noah Way on May 2

You say: “I've got a couple of theories about Franko, …”

NO. You have, at the very best, got a couple of HYPOTHESES about Franko. Your blather does not deserve the designation theory. A theory is the humanly best mental representation of reality and satisfies the criteria of material/formal consistency.

Scientists do NOT predict the future

Comment on Adam Shaw/theguardian on ‘Why economic forecasting has always been a flawed science’

Blog-Reference and Blog-Reference on Sep 22

A theory cannot be dismissed because it cannot predict the future. Therefore, as a matter of principle, economics from Jevons/Walras/Menger to DSGE cannot be dismissed because it has not predicted crises. Neoclassical, as well as Keynesian economics, is unacceptable because it is logically and empirically inconsistent. In more colloquial terms, all models that have been built and are still being built upon the maximization-and-equilibrium axioms have to be rejected as scientific garbage and NOT for any other reason.#1 The same holds for Keynesian macro models.

Who, in all history, has been preoccupied with prediction? Mainly two groups, (i) prophets, priests, doomsters, apocalyptics, fear mongers, gurus, utopians, astrologers, Pythia and other oracles, rise-and-fall historians/sociologists, politicians, and (ii), people who want to make a killing in the casino of Monte Carlo or on the stock-market.

No scientist is occupied with the prediction of historical events because it is long known that “The future is unpredictable.” (Feynman)

The point is that scientists use the word prediction in a quite different sense from everyday usage. For example, Einstein deduced gravity waves from his theory in 1916, and in our days, 100 years later, they are observed. Only in the very specific sense of ‘testable hypothesis’ scientists make ‘predictions’.

All this is well-known among methodologists: “We are very far from being able to predict, even in physics, the precise results of a concrete situation, such as a thunderstorm, or a fire.” (Popper)

So Arrow’s argument that long-run weather forecasts are pointless is not a great revelation but additional proof that economists never understood what science is all about. And just because of this, economics has never been anything else than a cargo cult science. This, too, is well known: “Suffice it to say that, in my opinion, what we presently possess by way of so-called pure economic theory is objectively indistinguishable from what the physicist Richard Feynman, in an unflattering sketch of nonsense ‘science,’ called ‘cargo cult science’.” (Clower)

In the sense of a self-description, the Keynesian “we simply do not know” applies to economists for more than 200 years. That economists are incompetent scientists that much we know for sure — and it holds with absolute certainty for both orthodox and heterodox economists.#2, #3

So we can predict that nothing of real scientific value will ever come from these folks, in perfect analogy to the prediction of physics that pigs will never fly.#4 The problem of economics is NOT failed predictions but that it is a failed science.

Only charlatans predict the future, and only morons take them seriously.

Egmont Kakarot-Handtke


#1 First Lecture in New Economic Thinking
#2 What is dead certain in an uncertain world: economists’ abysmal incompetence
#3 Fact of life: your econ prof is scientifically incompetent
#4 The Law of Economists’ Increasing Stupidity

Related 'Prediction does not work? Try retrodiction first' and 'Scientists do not predict' and 'Prediction/Forecasting' and 'The brouhaha about prediction: which Feynman is right?'

Barkley Rosser, fake scientist

Comment on Barkley Rosser on ‘The Financial Crisis Tenth Anniversary’

Blog-Reference

Economics is a failed science or what Feynman called a cargo cult science. Needless to emphasize that the general public cannot tell the difference between genuine science and cargo cult science. Feynman defined the latter as follows: “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.” What is missing is scientific competence.

There are some typical identifiers for the cargo cultic economist.

(i) Barkley Rosser, as a prime example, maintains that science is about predicting the future: “As one of those who analyzed what was going on better than most and with better timing, …, which analyzed what had been happening and forecast a full-out crash coming soon, which indeed occurred a bit over two months later.” and “Needless to say, I have praised her [Janet Yellen] forecasting abilities on several occasions, and she was calling the housing bubble from 2005 on.”

As a matter of principle — science is NOT AT ALL in the business of prediction because it is long known among scientists: “The future is unpredictable.” (Feynman)#1 Only charlatans predict the future, and only morons take them seriously.

(ii) Barkley Rosser cannot tell the difference between prophecy and a scientific ‘prediction’. The latter is a conditional proposition that presupposes: (i) the exact knowledge of initial conditions, (ii) the knowledge of one or more universal laws, (iii) the absence of disturbances. (Popper)

Scientific ‘prediction’ presupposes the true theory. Economists, though, lack the true theory. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/formally inconsistent.

For lack of the true theory, economic prediction is an exercise that is in no way different from the poultry entrails reading of the old Roman haruspex.

(iii) Barkley Rosser does not know how the actual market economy works. He does not even know what profit ― the foundational concept of all of economics ― is.#2

(iv) Barkley Rosser represents the wrong type of economics. There are TWO economixes: political economics and theoretical economics. The main differences are: (a) 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. (b) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

As a political economist, Barkley Rosser routinely violates scientific standards. His economic policy assessments and proposals do not follow from a valid theory because there is none.

(v) Political economics degenerates quite naturally to proto-scientific inconclusive blather, pure gossip about colleagues, celebrities, or political figures, and sitcom reputation management with vacuous euphemism/slander.

The lack of scientific knowledge is compensated for by the hint to piles of hot and exclusive insider knowledge: “There is so much more I have to say about all this, but these are a few items that either were not well known at the time or have been largely forgotten since.”

Political economics is essentially storytelling of the ‘throng of superfluous economists’ (Joan Robinson).#3

Egmont Kakarot-Handtke


#1 Scientists do not predict
#2 Economists: scientists or political clowns?
#3 Fact of life: your econ prof is scientifically incompetent

Related 'In search of new economists' and 'Economics and Project Augean Stable' and 'Economists are NOT scientists but stupid/corrupt storytellers'. For details of the big picture see cross-references Incompetence and cross-references Political economics.

Economists: only good at excuses

Comment on Brian Romanchuk on ‘Rigour and Macroeconomics’

Blog-Reference

Brian Romanchuk introduces himself: “Much of my writing about macroeconomic theory is of the hand-wringing variety: it cannot be ‘scientific’ because (useful) forecasting is essentially impossible to do.”

This one sentence is enough for scientific self-debunking. Economics is a cargo cult science because economists never understood what science is all about. Proof No 1: like the average commonsenser, economists maintain erroneously that science is about predicting the future.

John Kay, for example, explains why this does not work in economics: “Big data can help us understand the past and the present but it can help us understand the future only to the extent that the future is, in some relevant way, contained in the present. That requires a constancy of underlying structure that is true of some physical processes but can never be true of a world … in which important decisions or discoveries are made by processes that are inherently unpredictable and not susceptible to quantitative description.”

This is so trivial that it hurts and, above all, it is entirely beside the point. It is not a specific failure of economics that it cannot predict the future because — as a matter of principle — science is NOT AT ALL in the business of prediction because it is long known among scientists: “The future is unpredictable.” (Feynman)#1 Only charlatans predict the future, and only morons take them seriously.

The first thing to understand is that science is NOT about prediction but about knowledge. So, to begin with, things that are not knowable are a priori OUTSIDE of science. Scientific knowledge satisfies two criteria: material and formal consistency. Everything else is storytelling, sitcom blather, clueless filibuster, and hand waving.

Scientific knowledge is embodied in the true theory. The true theory is the best possible mental representation of reality.

Economists do not have the true theory and the representative economist does not realize that the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that ALL got the pivotal economic concept of profit wrong.

The representative economist is content with the pluralism of provably false theories and he simply tries to explain/excuse manifest failure away.#2 The recurring keywords are complexity, non-ergodicity, radical uncertainty, emergence, novelty, spontaneity of human behavior, and so on and on.

Economists do not understand that their subject matter is ill-defined. Economics is NOT a social science but a systems science. The lethal methodological defect of economics is that it is microfounded, that is, based on behavioral axioms. Now it holds that (1) there is NO such thing as an invariant of human behavior, and (2), NO way leads from the explanation of Human Nature/motives/behavior/action to the explanation of how the economic system works.

Economics is NOT AT ALL about Human Nature/motives/behavior/action. This is the subject matter of psychology, sociology, anthropology, history, political science, biology, etc. Economics is about the economic system and objective systemic laws.#3

The ultimate proof of utter scientific incompetence is that neither orthodox nor heterodox economists have gotten the foundational concepts of their subject matter ― profit and income ― right. This is embarrassing, laughable, and inexcusable.

Economics has to be macrofounded and this requires the full replacement of false Walrasian microfoundations and false Keynesian macrofoundations.#4 Economics is not a science until this day because economists are nothing but cargo cultic blatherer.#5, #6

Egmont Kakarot-Handtke


#1 Scientists do not predict
#2 Failed economics: The losers’ long list of lame excuses
#3 First Lecture in New Economic Thinking
#4 Macro for dummies
#5 Economists: scientists or political clowns?
#6 With regard to MMT, in particular, see cross-references MMT

Fact of life: Your econ prof is scientifically incompetent

Comment on Lars Syll on ‘The conundrum of unknown unknowns’

Blog-Reference and Blog-Reference on Aug 9 adapted to context

Economics is a cargo cult science because economists never understood what science is all about. Proof No 1: like the average commonsenser, economists maintain that science is about predicting the future.

John Kay explains why this does not work in economics: “Big data can help us understand the past and the present but it can help us understand the future only to the extent that the future is, in some relevant way, contained in the present. That requires a constancy of underlying structure that is true of some physical processes but can never be true of a world … in which important decisions or discoveries are made by processes that are inherently unpredictable and not susceptible to quantitative description.”

This so trivial that it hurts and, above all, it is beside the point. It is not a specific failure of economics that it cannot predict the future because — as a matter of principle — science is NOT AT ALL in the business of prediction because it is long known among scientists: “The future is unpredictable.” (Feynman)#1

Only charlatans predict the future, and only morons take them seriously. The silly game, who predicted the last crash of the stock market or the real estate market, is the proper stuff for the Circus Maximus.

The first thing to understand is that science is NOT about prediction but about knowledge. So, to begin with, things that are not knowable are a priori OUTSIDE of science. Scientific knowledge satisfies two criteria: material and formal consistency. Everything else is storytelling, sitcom blather, and clueless filibuster about unknown unknowns.

Scientific knowledge is embodied in the true theory. The true theory is the best possible mental representation of reality.

Proof No 2: the representative economist does not realize that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that ALL got the pivotal economic concept of profit wrong.

The identifier of the representative economist is that he is content with the pluralism of provably false theories and that he tries to explain/excuse manifest failure away.#2

The final proof of scientific incompetence is that neither orthodox nor heterodox economists have gotten the foundational concepts of their subject matter ― profit and income ― right. Because of this economics stagnates for 200+ years at the proto-scientific level.

The study of economics is an intelligence test. Who does not realize until his final exam that supply-demand-equilibrium does NOT explain how the actual economy works, that DSGE and Post Keynesianism are provably false, that Marxiansim, Austrianism, or Pluralism is NO alternative, that the scientific content of economics textbooks from Samuelson to Mankiw is zero, and who becomes himself an economics teacher without any serious idea of how to get out of the swamp proves only a complete lack of scientific competence.

Egmont Kakarot-Handtke


#1 Scientists do not predict
#2 Failed economics: The losers’ long list of lame excuses

Related 'The myth of economics knowledge' and 'Why economists have not been effective in economics' and 'There is NO such thing as an economic expert' and 'Economics: a science without scientists' and 'Lucas: Confession of a scientific write-off' and 'Milton Friedman, fake scientist' and 'How Arrow pushed economics over the cliff' and 'The father of modern economics and his imbecile kids' and 'Economics: The greatest scientific fraud in modern times' and 'To this day, economists have produced NOT ONE textbook that satisfies scientific standards' and 'In search of new economists' and 'First Lecture in New Economic Thinking'. For details of the big picture see cross-references Incompetence and cross-references Failed/Fake Scientists and Ch. 13, The indelible scientific disgrace of economics, in Sovereign Economics.

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Wikimedia AXEC136g

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REPLY to Tom Hickey, Matt Franko on Aug 10

The representative economist has no idea of what science is all about. What is called prediction in science is categorically different from the commonsensical meaning of ‘predicting the future’.

Scientists do not predict when the next apple will fall from the tree. What they indeed predict is position and velocity at any point in time once the apple has started to fall. The commonsenser’s view of reality is entirely DIFFERENT from the scientist’s view. The commonsenser’s view is practical, trivial, and false but utterly convincing for other commonsensers.

Each falling apple is a unique historical event. There are arbitrary many proximate causes for an apple to fall: a hailstorm, playing children, an exploding meteorite, material fatigue, an earthquake, and so on. In almost all cases the singular event is uncertain and unpredictable. That is so OBVIOUS that no physicist ever lost many words about the historicity and uncertainty of falling apples.

A SCIENTIFIC prediction is a conditional proposition that presupposes: (i) the exact knowledge of initial conditions, (ii) the knowledge of one or more universal laws, (iii) the absence of disturbances. (Popper, 1994)

The idiocy of economists consists in running around and warning of the next crash and making policy proposals without having the true economic theory, that is, without knowing how the economic system works, that is, without having figured out the objective systemic laws of the monetary economy, for example, the Profit Law. The idiocy of economists consists in not knowing after 200+ years what profit is. And this includes MMT.

There are, of course, economic laws but they do NOT, of course, relate to human behavior.

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REPLY to Matt Franko on Aug 11

When the apple fell on his head, Newton suddenly understood how gravitation works and he wrote down one of the most profound physical laws which enabled the precise calculation of planetary trajectories.

When the apple fell on his head, Matt Franko predicted that the next apple harvest will take place in the first two weeks in October.

Here you have the difference between a scientist and an imbecile economist in a nutshell.

Post Keynesianism, too, is proto-scientific garbage

Comment on Lars Syll on ‘What is Post Keynesian Economics?’

Blog-Reference and Blog-Reference and Blog-Reference

This is the first rule of scientific research: “… before accepting the conclusions of any economist’s model as applicable to the real world, the careful student should always examine and be prepared to criticize the applicability of the fundamental postulates of the model; for, in the absence of any mistake in logic, the axioms of the model determine its conclusions.” (Davidson)

Hence: “To develop an economic theory applicable to a monetary economy, Keynes suggested rejecting three basic axioms of classical economics.” And: “The rejected axioms are the ergodic axiom, the gross-substitution axiom, and the neutral-money axiom.” (Davidson)

So far, Davidson is methodologically on firm ground. However, rejection is the easy part: “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) And here is the snag for Keynesians and Post Keynesian: “As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction.” (Nell)

The fact of the matter is that Keynes#1 and the Post Keynesians#2 failed at construction. In technical terms, what has to be done is to fully replace the false Walrasian microfoundations with true macrofoundations. This is what a Paradigm Shift is all about.

Davidson proposes to take the following propositions as axioms

• money matters,
• rational calculations regarding the future are impossible,
• money contracts are a human institution developed to efficiently organize time-consuming production and exchange processes,
• unemployment, rather than full employment, is a common laissez-faire situation,
• the future is uncertain (nonergodic) and cannot be reliably predicted.

There is nothing to say against these propositions except that they cannot be taken as axioms.

Paul Davidson does not really understand what science and axiomatization are all about. The statement “the future is uncertain (nonergodic) and cannot be reliably predicted” is trivially true except for the fact that science, to begin with, does not predict the future.#3 When, according to folklore, an apple fell on his head Newton did NOT predict when the next apple would fall but he formulated the general Law of Falling Bodies.

In brief, Davidson's nonergodic axiom is not an axiom but an instance of moronic realism. The lethal blunder of Post Keynesians in general and Paul Davidson and Lars Syll, in particular, consists in the Fallacy of Insufficient Abstraction.

Keynes realized that the core of economics is the 'monetary theory of production'. Accordingly, the macroeconomic axioms have to describe the most elementary configuration of the monetary economy.#4

Imagine Archimedes sitting in the bathtub and trying to solve the problem of the gold content of Hiero’s crown and someone tells him the world is complex, uncertain, and unpredictable. Yes, Archimedes would have said, the only thing that is certain is that you are a moron. Eureka!

What scientists have come to understand is that historical uncertainty is compatible with eternal law/invariance. This holds for physics as well as economics. The problem of orthodox and heterodox economics is that neither approach has figured out how the monetary economy works and this has nothing to do with ergodicity but with stupidity.#5

Egmont Kakarot-Handtke


#1 Finalizing the Keynesian Revolution
#2 Why Post Keynesianism Is Not Yet a Science
#3 Science does NOT predict the future
#4 The problem with macro in two words
#5 For details of the big picture see cross-references Keynesianism

Related 'Keynes’ intellectual non-existence' and 'Economics and the Fallacy of Insufficient Abstraction' and  'First Lecture in New Economic Thinking'.

For more about Post Keynesianism see AXECquery.

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Wikimedia AXEC138

 The common denominator of the heterogenous Post-Keynesian camp is that they have not realized to this day that Keynes messed up macrofoundations.

Macro imbeciles

Comment on Jason Smith on ‘The reason for the proliferation of macro models?’

Blog-Reference

This is known for 2300+ years ― except among economists: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

Jason Smith quotes Noah Smith: “One thing I still notice about macro, including the papers Reis cites, is the continued proliferation of models. Almost every macro paper has a theory section. Because it takes more than one empirical paper to properly test a theory, this means that theories are being created in macro at a far greater rate than they can be tested.” And then he comments: “This is fascinating, as it’s completely unheard of in physics.”

In his full-blown naivité, Jason Smith has not realized that economics is what Feynman called a cargo cult science. As Hands remarked: “… suppose they [the economists] did reject all theories that were empirically falsified … Nothing would be left standing; there would be no economics.”

Economists need no testing at all because the outcome is ALREADY KNOWN: it is either refutation or inconclusiveness. The reason is simple, ALL macro models are axiomatically false.

Because of this, Jason Smith’s proposal ― more testing ― is in the given context entirely beside the point. When the theory/model is known to be axiomatically false testing does NOT help, only the replacement of false axioms by true axioms helps.

Obviously, the physicist and hobby economist Jason Smith has never heard that progress in physics has always come from Paradigm Shifts, e.g. from geocentrism to heliocentrism. In Keynes' words: “Something similar is required to-day in economics.”

Egmont Kakarot-Handtke


Related 'If it isn’t macro-axiomatized, it isn’t economics' and 'From the pluralism of false models to the true economic theory' and 'The IS-LM macro imbeciles' and 'IS-LM ― a crash course for EconoPhysicists' and 'What is REALLY wrong with macro' and 'From false micro to true macro: the new economic paradigm' and 'How economists missed out on the essential relationship of economics'. For details of the big picture see cross-references Employment/Phillips Curve and cross-references Profit/Distribution.

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COMMENT on Ignacio on May 3

You simply do not get the interdependence of economic law and history straight. As Keynes used to say: “a little clear thinking or more lucidity can solve almost any problem” see The Synthesis of Economic Law, Evolution, and History.

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REPLY to Ignacio on May 3

What you believe is irrelevant. Science is about knowledge, and when you know nothing you are out. It is as simple as that. And if economists as a collective know nothing they are out, too. And the first thing they have to do is to abolish the so-called Nobel which is explicitly titled “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#1 Science is well-defined as material and formal consistency, so there is NO room for belief, opinion, storytelling, and another wish-wash.

Bring scientific knowledge to table#2 or hit the road.


#1 The real problem with the economics Nobel and Heterodoxy’s scientific self-burial and How to get rid of the silly Queen and Failed critique of failed economics
#2 Here is the macroeconomic Law of Supply and Demand, Wikimedia AXEC64.

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REPLY to Tom Hickey on May 3

The most noise in economics comes from economists because they are too stupid to put 2 and 2 together.#1 The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong. Economics is a failed science and economists are incompetent scientists.

#1 Review of the economics troops

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REPLY to Ignacio on May 3

Bring yourself methodologically up to speed and replace Wikipedia’s outdated definition of Law with the more general notion of Invariance.#1 There is NO causality in E=mc² but it is a Law.#2


#1 The Law of Economists’ Increasing Stupidity
#2 This is the causality-free First Economic Law, Wikimedia AXEC06.

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REPLY to Ignacio, Tom Hickey on May 3

When you have no scientific knowledge you have NOTHING whatsoever to contribute to economic policy: “If economics cannot aspire to any substantive knowledge of economic relationships, it cannot speak with authority about questions of economic policy.” (Blaug)

So, take the remote control, sit down on the couch and watch sitcoms. This is the best every economist can do for the survival and welfare of humanity.


Related ‘Economic policy advice has never had sound scientific foundations’ and ‘How economists shoot themselves non-stop in the methodological foot’ and 'True macrofoundations: the reset of economics'.

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Wikimedia AXEC121i

The Law of Economists’ Increasing Stupidity

Comment on Matias Vernengo on ‘Economic Regularities and "Laws" and the Riksbank Prize too’

Blog-Reference

Because of its many connotations, the notion of scientific law has caused a lot of confusion among laypersons and a lot of blather among philosophers. It has in the meantime been replaced by the neutral notion of invariance. Nozick defines invariance thus: “An objective fact is one that is invariant under all admissible transformations.” The general notion of invariance goes back to Noether and it embraces special cases like causality or conservation of energy.

The representative economist still sticks to an obsolete notion of law. The centerpiece of economists’ scientific incompetence is the Law of Supply and Demand.

Science is well-defined: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

Science is cumulative. Only certain knowledge can be admitted to the corpus of science because nothing can be built upon uncertain knowledge or mere opinion. And here is the crux of the so-called social sciences: “By having a vague theory it is possible to get either result.  ... It is usually said when this is pointed out, ‘When you are dealing with psychological matters things can’t be defined so precisely’. Yes, but then you cannot claim to know anything about it.” (Feynman)

This is why there is no growth of knowledge in the so-called social sciences: “Indeed, Alexander Rosenberg maintains that there has been no progress in developing laws of human behavior for the last twenty-five hundred years.” (Hausman)

Manifest failure, in turn, is the main reason why the so-called social sciences stubbornly try to soften scientific standards wherever they can, or, as Blaug put it, to play tennis with the net down. This is what the talk of economics as ‘inexact and separate science’ amounts to. The limiting case of continuous softening of scientific standards is anything-goes which is the motto in the pluralistic swamp where “nothing is clear and everything is possible”. (Keynes)

For 200+ years economists have bridged the chasm between scientific appearance and proto-scientific reality with excuses: “Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses.  ... There are always differences of opinion at the cutting edge of a science, … But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, ... You can’t even count on a long and undisturbed run of history because the ‘laws’ of behavior change and evolve. ” (Solow)

Economists have to redefine their subject matter. To explain individual and social behavior is NOT their business but the task of psychology, sociology, political science, social philosophy, history, anthropology, biology, Darwinism/Evolution Theory, etcetera.

Explaining how the actual economy works is the proper task of economics. Economists have failed at this task. After more than 200 years they have not even figured out what profit is, that is, they do not understand the foundational phenomenon of their subject matter.

For deeper methodological reasons, the so-called social sciences cannot rise above the level of storytelling. And this is what Walrasianism, Keynesianism, Marxianism, and Austrianism are. Neither approach satisfies the non-negotiable criteria of science, i.e., material and formal consistency.

Economists face this option: to continue with storytelling and to be expelled from the sciences or to restart economics as a systems science. This means in concrete terms to move from false behavioral microfoundations and false Keynesian macrofoundations to objective/structural/behavior-free/consistent macrofoundations. This Paradigm Shift yields exact and testable Systemic Laws.#1

Economists to this day have not understood how science works: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle). This means that economics cannot be built upon NONENTITIES like constrained optimization, rational expectations, equilibrium, or the Keynesian Income = Value of Output.#2

To paraphrase Matias Vernengo: ‘So when you hear Walrasianism, Keynesianism, Marxianism, Austrianism, Pluralism, think proto-scientific BS’.

Egmont Kakarot-Handtke


#1 For example, the First Economic Law on Wikipedia AXEC06 or the Profit Law Wikimedia AXEC08.
#2 How Keynes got macro wrong and Allais got it right

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REPLY to Tom Hickey, Magpie on Apr 13

Your shop talk about Marx lacks substance because Marx never understood what profit is. This lethal blunder is the common denominator of Walrasianism, Keynesianism, Marxianism, Austrianism, and Pluralism. For details see Profit for Marxists.

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REPLY to Tom Hickey, Magpie on Apr 13/2

The economists’ idea of law traditionally refers to sociology or psychology or something in between called Human Nature:

"The fundamental problem, therefore, of the social science, is to find the laws according to which any state of society produces the state which succeeds it and takes its place." (Mill)

"Intrinsically, it is not a question of the higher or lower degree of development of the social antagonisms that result from the natural laws of capitalist production. It is a question of these laws themselves, of these tendencies working with iron necessity towards inevitable results." (Marx)

"That Political Economy informs us of the laws which regulate the production, distribution, and consumption of wealth. ... This definition is free from the fault which we pointed out in the former one. It distinctly takes notice that Political Economy is a science and not an art; that it is conversant with laws of nature, not with maxims of conduct, and teaches us how things take place of themselves, not in what manner it is advisable for us to shape them, in order to attain some particular end." (Mill)

"The foundation of political economy and, in general, of every social science, is evidently psychology. A day will come when we shall be able to deduce the laws of social science from the principles of psychology …" (Pareto)

"From the above considerations the following seems to come out as the correct and complete definition of Political Economy: – 'The science which treats of the production and distribution of wealth, so far as they depend upon the laws of human nature.' Or thus – 'The science relating to the moral or psychological laws of the production and distribution of wealth'.” (Mill)

That there is NO such thing as a behavioral/social/historical law has been known to scientists (in contradistinction to economists) in all ages:

"The bifurcation of motion into two fundamentally different types, one for natural motions of non-living objects and another for acts of human volition ... is obviously related to the issue of free will, and demonstrates the strong tendency of scientists in all ages to exempt human behavior from the natural laws of physics, and to regard motions resulting from human actions as original, in the sense that they need not be attributed to other motions." (Brown)

There are NO laws of human behavior/nature/action, neither psychological nor social nor historical, but there are systemic laws of the monetary economy, e.g. the Profit Law.#1

It is a SYSTEMIC law that the monetary economy will eventually break down.#2


#1 The Synthesis of Economic Law, Evolution, and History
#2 Mathematical Proof of the Breakdown of Capitalism

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REPLY to Tom Hickey, Magpie on Apr 14

The time evolution of the economic system is given with the Economics God Equation as shown on Wikimedia AXEC25

The Economics God Equation®

This equation embodies the open simulation of the elementary consumption economy from t=0 to infinity.

Could you please condense the essentials of Marx’s theory to one equation in order to enable the transition from clueless philosophical blather to science?

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REPLY to Tom Hickey on Apr 14

You sum up: “Marx would say it is the dynamics of capitalism that creates the conditions for its own transformation into the succeeding phase.”

This, of course, is an entirely vacuous statement. Replace capitalism with kitten or universe and it fits just as perfectly. Tautologies are always true.

To recall, the challenge was: “The fundamental problem, therefore, of the social science, is TO FIND THE LAWS according to which any state of society produces the state which succeeds it and takes its place. (Mill)

What Marx did was sociology, history, storytelling, prophecy, and agenda-pushing. He had NO idea how the monetary economy works because he never figured out what profit is.#1 That is rather bad for an economist but what is worse is that After-Marxians did not spot and rectify Marx’s blunders in the past 200+ years.

Marx would say that the dynamics of Marxianism is zero and that it creates the conditions for its own deadlock in every succeeding phase. The same holds for Walrasianism, Keynesianism, and Austrianism. The dynamic next thing in economics is the “transformation into the succeeding phase” also known as the Paradigm Shift.


#1 Profit for Marxists

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REPLY to Tom Hickey, Magpie on Apr 14

Between the early Marx and the late Marx lies Darwin. It is well-known that Darwinism changed the whole notion of natural law: “The concept of natural selection gave Darwin the greatest difficulty. True to the principles of mechanistic determinism, which like others of his generation he thought to be the essence of science, Darwin rejected Lamarck’s view ... Darwin’s persistence on this point produced finally not simply reinforcement of the mechanistic philosophy, but a fundamentally altered concept of order in nature.” (Bannister)

What is the VERY LAST word in the whole issue? “And in 1883, at Marx’s funeral, Engels said, ‘Just as Darwin discovered the law of development of organic nature, so Marx discovered the law of development of human history.’”#1

So, Marxianism is history and sociology and storytelling but neither economics nor science: “That is why Descartes said that history was not a science ― because there were no general laws which could be applied to history.” (Berlin)

Science looks for invariance and is therefore ahistorical.

Each falling apple is a unique historical event. There are many causes for an apple to fall: a hailstorm, playing children, an exploding meteorite, material fatigue, an earthquake, and so on. That is so OBVIOUS that no physicist ever lost many words about the historicity of falling apples.

Accordingly, when the apple fell on Newton’s head* he did NOT run to his neighbor in order to tell him the story but he wrote down the COMMON principle that underlies the motion of ALL falling bodies including the moon and the stars, i.e. the Law of Gravity. This law is ahistorical but can be used to explain (in conjunction with other factors) the history of the universe. This is how law and history consistently fit together.

Scientists are NOT AT ALL interested in predicting when the next apple will fall from the tree. Feynman: “The future is unpredictable”. What they indeed predict is position and velocity at any point in time once the apple has started to fall. The commonsenser’s view of reality is entirely DIFFERENT from the scientist’s view. The commonsenser’s view is practical, utilitarian, trivial, and false, while the scientist’s view is abstract, general, and true.

Marx’s narrative is the old narrative about bad and good guys (capitalists, workers) and that the bad guys will eventually be punished and the good guys will be victorious. Everybody understands and likes this story but it is NOT science.

Economics is about how the market system works. Marx did not understand it, and neither did Adam Smith.#2 There is not much use discussing at great length what Marx, Smith, Keynes, Walras, and other incompetent scientists really meant and thus perpetuating the pluralism of false theories.


#1 ISR
#2 The Profit Theory is False Since Adam Smith

* It does not matter in the present context that the apple story is folklore and not an accurate historical account.

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REPLY to Tom Hickey, Magpie on Apr 15

Let us sum up. The starting point was: “Economists need lose the term ‘law.’ There are no ‘laws of economics,’ or any other social science, that are comparable the laws of nature discovered in the natural science, owing to the differences in subject matter.” (Vernengo)

It is clear by now:
― There are NO historical laws that determine the development of society.
― Economics is NOT about society but about the economic system as a subsystem of society.
― There are systemic laws, e.g. the Profit Law.
― Matias Vernengo is utterly wrong about (i) the subject matter of economics, (ii) the concept of scientific law.

Neither Walrasians, Keynesians, Marxians, nor Austrians have any idea of the systemic laws because they wasted 200+ years second-guessing human motives and behavior, which is a pursuit that can be left to psychologists, sociologists, philosophers, and other fake scientists.

Time to get all proto-scientific folks out of economics.

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REPLY to Tom Hickey on Apr 15

There is political and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and 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.

A closer look at the history of economic thought shows that theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Lucas and almost everybody in-between falls into the category of a political economist.

Political economics has produced NOTHING of scientific value in the last 200+ years. The four main approaches ― Walrasianism, Keynesianism, Marxianism, and Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept of profit wrong.

An economist who does not understand profit, i.e. the pivotal concept of his subject matter, is a scientific laughing stock. This holds for Walras, Keynes, Marx, and Hayek who failed as scientists but were accredited as useful idiots in the political Circus Maximus.

Because economists lack the true theory their economic policy guidance has had NO sound scientific foundation since Adam Smith/Karl Marx. Both, the defense and the critique of the market economy lack valid proof and therefore cannot be taken seriously. It’s merely a confused political blather.

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REPLY to Tom Hickey on Apr 16

I said: “Political economics has produced NOTHING of scientific value in the last 200+ years. ... This holds for Walras, Keynes, Marx, and Hayek who failed as scientists but were accredited as useful idiots in the political Circus Maximus.”

You said: “Right. That is how political economy works.”

The crucial point is that this is NOT how SCIENCE works. Yet, since Adam Smith AND Karl Marx economists claim to do science. Marx condemned political economics in no uncertain terms as vulgar economy: “Vulgar economy really does nothing else but to interpret, in doctrinaire fashion, the ideas of persons entrapped in capitalist conditions of production and performing the function of agents in such production, to systematize and to defend these ideas. ... So long as the ordinary brain accepts these conceptions, vulgar economy is satisfied. But all science would be superfluous, if the appearance, the form, and the nature of things were wholly identical.” And “The real science of modern economy does not begin until theoretical analysis passes from the process of circulation to the process of production.”#1 This is the essence of Marx’s approach.

So we have first to distinguish between theoretical economics (= science) and political economics (= agenda-pushing) and then check whether a theory satisfies the well-defined criteria of science.

Marx committed himself to science: “I welcome every opinion based on scientific criticism.” This means that he accepted the scientific criteria of material and formal consistency as the ultimate arbiter.

Because Walrasianism, Keynesianism, Marxianism, and Austrianism are PROVABLY false these failed approaches have to be thrown out of science and their adherents, too. Let’s face the facts, that includes you.


#1 Capital, Vol. III, A Critique of Political Economy

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REPLY to Bob, Magpie on Apr 16

You said: “You cannot predict the future, I gather. Fine. What can you actually do to show you really know what you are talking about? In practical, everyday terms, what’s your theory good for? Speak now or forever hold your peace.”

For details about the difference between the ordinary and the scientific sense of prediction see ‘Science does NOT predict the future’.#1

So what is the true theory good for? “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)

False theory leads to false policy guidance. Scientifically incompetent economists bear the intellectual responsibility for the social devastation of mass unemployment#2 and the extremely biased distribution.#3

Incompetent scientists are a menace to their fellow citizens. Napoleon recognized this long ago: “Late in life, moreover, he claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner)

If you do not want to be reduced to dust, endorse the true theory.


#1 See here and the label Prediction
#2 Mass unemployment: The joint failure of orthodox and heterodox economics
#3 Austerity and the idiocy of political economists

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REPLY to Magpie on Apr 16

You said: “I just want an small sample of the revelation, of the your true teachings. And I want it now. Here, for all of us to see. Immediately.”

You are suffering from grave misunderstandings. As the philosopher Peirce once remarked on a similar occasion: “My book will have no instruction to impart to anybody. Like a mathematical treatise, it will suggest certain ideas and certain reasons for holding them true; but then, if you accept them, it must be because you like my reasons, and the responsibility lies with you. Man is essentially a social animal: but to be social is one thing, to be gregarious is another: I decline to serve as bellwether. My book is meant for people who want to find out; and people who want philosophy ladled out to them can go elsewhere. There are philosophical soup shops at every corner, thank God!”

In one word: Skiddoo!

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SUMMING UP on Apr 17

Keynesianism has been scientifically dead in the cradle 80+ years ago but Matias Vernengo has not realized it to this day.

Marxianism has been scientifically dead in the cradle 200+ years ago but Tom Hickey/Magpie/Bob have not realized it to this day.

There are indeed laws in economics as I stated in my initial post, first and foremost ‘The Law of Economists’ Increasing Stupidity’. This law holds also for Walrasians and Austrians and this explains why economics is a failed science.

The key to macro and Keen's debt-employment model

Comment on Jason Smith on 'Qualitative economics done right, part 2'

Blog-Reference

Like Walrasian, Keynesian, Marxian, Austrian models, Steve Keen’s model is provably false. For details see

― Where advanced Heterodoxy — represented by Steve Keen — took the wrong turn
― Keenonomics, aggregate demand/change of debt, and some misleading critique
― Putting the production function back on its feet
― The key relationship between employment and growing/shrinking debt
― Debunking Squared.

Heterodox economists are scientifically just as incompetent as orthodox economists.

Egmont Kakarot-Handtke

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REPLY to Jason Smith on Feb 9

You say: “Therefore we don’t really know what the key to macro is.”

YOU don’t know, WE know. This is the elementary core of foundational macro propositions, a.k.a. axioms: (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.

These macro axioms are certain, true, and primary, and therefore satisfy all methodological requirements. The set of premises is minimal, that is, it cannot be reduced further, only expanded. The set is behavior-free, contains no nonentities like constrained maximization or equilibrium, and no normative assertions. All variables are measurable.

For more details see How to restart economics.

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REPLY to Tom Hickey on Feb 9

You say: “The problem is that there are an infinite # of explanations that can be given for anything. Most will likely be absurd or highly implausible, and so can be rejected out of hand. But there may be several plausible explanations. Science is about distinguishing the best explanation available from contenders.”

Confronted with the vastness and complexity of reality every branch of the sciences faces the problem of where to start. J. S. Mill put it thus: “What are the propositions which may reasonably be received without proof? That there must be some such propositions all are agreed, since there cannot be an infinite series of proof, a chain suspended from nothing. But to determine what these propositions are, is the opus magnum of the more recondite mental philosophy.”

Krugman, for example, is quite explicit about how he has solved the starting problem: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”

The neoclassical world is given with these hardcore propositions, a.k.a axioms: “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)

These microfoundations are the wrong starting point as everybody knows by now. So they have to be replaced with the correct macrofoundations. This is the actual challenge.

For details see Economists’ three-layered scientific incompetence and Macro poultry entrails reading.

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REPLY to Jason Smith on Feb 10

You say: “There doesn’t seem to be any comparison with data at this link or at the links in your previous comment.”

Your attention span seems to be worse than that of a fruit fly. To recall, the question at issue is ‘What the key to macro is’ (see your post above)

I have given you the key with the systemic axiom set (A1)/(A3). As you well know, deriving a testable formula from theory and testing the formula are two DIFFERENT things. Einstein did not test relativity theory himself, it was Eddington who measured the bending of light during a solar eclipse. Higgs did not test his formula himself, it was the folks at CERN who did it and they had to build first the biggest machine ever.

In the post The key relationship between employment and growing/shrinking debt you can find the elementary relationship between employment and credit expansion/contraction and the conclusion: “the Employment Law delivers the testable formal underpinning of the empirical correlations found by Keen. Both elements support each other nicely.”

It is a long way from the premises/axioms/foundational propositions/principles to the testing of the implications of the well-defined axiom set. Yet, obviously, one has FIRST to get the axiomatic starting point right. Both, the Walrasian microfoundations and the Keynesian macrofoundations are provably false. So the starting problem has to be solved FIRST.#1 It has been solved with (A1)/(A3).

Testing the systemic employment function is an entirely DIFFERENT matter.#2 To mix up the two fundamental methodological questions is a bit dilettantish. There is a productivity-enhancing division of labor: economic theory provides the testable propositions, econometrics does the testing. The theoretical part has been settled with A1/A3. It is time for the econometricians to come up to speed now.

#1 “What are the propositions which may reasonably be received without proof? That there must be some such propositions all are agreed, since there cannot be an infinite series of proof, a chain suspended from nothing. But to determine what these propositions are, is the opus magnum of the more recondite mental philosophy.” (J. S. Mill)
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster

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REPLY to Matthew Franko on Feb 10

You say: "The author seems to emphasize the ability of a model to predict the future."

Predicting the future is the business of charlatans/prophets/agenda pushers/morons. See
― Science does NOT predict the future
― Prediction/Forecasting
― Prediction does not work? Try retrodiction first.

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REPLY to Matthew Franko on Feb 10

You say: “People make successful predictions every day...”

Scientists know better: “The future is unpredictable.” (Feynman)

See also Predictably confused.

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REPLY to Jason Smith on Feb 10

Your physics example shows that you are good at testing. Fine. Here is, let us call it the Leverrier challenge: “Thirty years after Laplace wrote this apotheosis of mechanics, something happened that tended to prove that mechanics has the power over existence as he described it. In 1846 a French astronomer, Urbain Leverrier, at the end of some calculations in which he confronted the astronomical observations of the known planets with the results of an appropriate mechanical system, was led to proclaim that there existed a still unknown planet, which, moreover, must be visible in a certain region of the sky. Direct observation of that region soon confirmed the existence of that planet, now called Neptune. Neptune, therefore, was discovered not by scanning the firmament with telescope, but ‘at the tip of a pencil.’ We can very well imagine the dream that this feat must have inspired in all social scientists, especially in economists. It is the dream of being able to predict the location of any share on the firmament of the Stock Exchange Market, whether tomorrow or one year from now, by solving certain equations that govern the motion of that market. Undoubtedly, the essence of that dream must still be nursed in the subconscious of many modern economists. The role of such a hope in the founding of the Cowles Commission is evidenced by several articles in the early volumes of Econometrica.” (Georgescu-Roegen, 1979)

So, here is the challenge: (i) I have given you the correct macro axioms, (ii) from these axioms follows the systemic Employment Law#1 which gives one employment in dependence of, inter alia, changes of household sector’s debt ‘at the tip of a pencil’, (iii) the results should be in agreement with Keen’s numbers or with the US numbers or with previous Phillips curve studies. This is retrodiction.#2, (iv) From successful retrodiction one can then proceed to conditional prediction (which has NOTHING to do with predicting the future or the Stock Market).

#1 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
The equation has to be augmented with government deficit/surplus and foreign trade deficit/surplus.
#2 Prediction does not work? Try retrodiction first

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REPLY to Jason Smith on Feb 11

You say: “It is the responsibility of the researcher to show how the equations fit the data. As I do here on my blog: I posit some equations (“axioms”) and then look at what they say about the data.”

Your description of what you are doing on your blog fits perfectly Feynman’s description of cargo cult science: “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.”

What is missing is a proper understanding of methodology. Here is the axiomatic-deductive method in brief directly from the horse’s mouth: “A complete system of theoretical physics consists of concepts and basic laws to interrelate those concepts and of consequences to be derived by logical deduction. It is these consequences to which our particular experiences are to correspond, and it is the logical derivation of them which in a purely theoretical work occupies by far the greater part of the book. This is really exactly analogous to Euclidean geometry, except that in the latter the basic laws are called ‘axioms’; and, further, that in this field there is no question of the consequences having to correspond with any experiences.” (Einstein)

Cargo cult scientists reduce the complete system of theoretical economics to: “I posit some equations (“axioms”) and then look at what they say about the data.” (J. Smith)

Note first that “some equations” is NOT the same thing as “axioms” which is pretty obvious from Einstein’s quote. And, second, what you call “some equations” is NOT the same as what Einstein calls “consequences to be derived by logical deduction” from axioms.

It is the defining characteristic of cargo cult scientists that they imitate the scientific method without any understanding.#1

Every economist can know that the neo-Walrasian axioms#2 are provably false. Therefore, all “consequences to be derived by logical deduction” are false, that is, the whole analytical superstructure falls apart.

Faced with manifest failure, every economist has this choice: (i) to do the inescapable paradigm shift and to replace the false neo-Walrasian microfoundations by true macrofoundations, or (ii), to continue with cargo cult science.

Needless to emphasize that the representative economist, who has forever disqualified himself by accepting silly constructs like supply-demand-equilibrium as an explanation of how markets work, cannot take up the challenge of a paradigm shift.

It is the first and foremost responsibility of the researcher to come up with the true theory: “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)

Until this day, economists have not even gotten the foundational concepts of profit and income right. This is like medieval physics before the concepts of mass, force, energy was properly understood.

Plucking “some equations” out of thin air and doing some data fitting exercises with some fancy tools borrowed from the physics/math department is NOT a substitute for figuring out the true economic theory.

#1 See also Mirowski’s More Heat Than Light.
#2 “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)

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REPLY to Jason Smith on Feb 12

You say: “I take I(A) = I(B) for processes A and B to be an axiom, derive the equation of motion dA/dB = k A/B, and then see if the solutions to that differential equation match up with any of “our particular experiences” (i.e. data).”

What you are doing is to apply the technique of differential equations to economics where it is not applicable because something like well-behaved functions does NOT exist.

This is the same mistake as with production functions. These do NOT exist but are introduced in order to apply constrained optimization which follows from the absolutely idiotic behavioral assumption of utility maximization which is given as axiom HC2 of the neo-Walrasian axiom set (see footnote #2 above).

The first mistake of cargo-cult economics has been to borrow the concept of well-behaved functions from the physics/math department. The fact of the matter is, that there simply are NO such things as supply-, demand-, or production functions. In other words, the whole of marginalism lacks a proper foundation. Standard economics is nothing but a ridiculous behavioral INTERPRETATION of calculus which in turn depends on well-behaved functions that do NOT exist.

Metaphorically speaking, scientists put first their trousers on and then their boots, economists as cargo cult scientists do it the other way round: “The mathematical language used to formulate a theory is usually taken for granted. However, it should be recognized that most of mathematics used in physics was developed to meet the theoretical needs of physics. ... The moral is that the symbolic calculus employed by a scientific theory should be tailored to the theory, not the other way round.” (Wittgenstein)

Your application of differential equations to economics proves the complete lack of understanding of methodology and economics. What you have in economics is, for example, output O per period and quantity sold X and the delta O-X which is the change of stock. Hence, the change of stock per period is the DISCRETE AND MEASURABLE economic counterpart of the first derivative of a well-behaved function. In economics, difference equations apply for processes and NOT differential equations.#1

What you are doing on your blog is brainless cargo cult economics.

#1 This, by the way, is the methodological blunder of Keen’s approach that produces the well-known types of cycles/explosions/implosions which are mere software artifacts with NO correspondence in reality.

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REPLY to Jason Smith on Feb 12

You say: “They’re actually well-defined differential equation limits (via Kurtz theorem) of stochastic processes (bounds via Gronwall’s lemma).”

Of course, they have done a great job in the math department, but my argument has been that in economics only difference equations are applicable.#1 It is always the same mistake of EconoPhysics that fancy tools are borrowed from the physics/math department and applied where they are not applicable#2 ― this is the very definition of cargo cult science.#3

You say: “But I think we’ve established that you are refusing to compare your results to empirical data.” That is NOT the case. I have challenged you to test the systemic employment equation. Your answer has been: “Why should I do this?” (see your post of Feb 10)

You say: “One of your equations (eq. 24)#4 is total nonsense.” Note, the relevant equation is the systemic employment equation/true Phillips curve eq. (33). Eq. (24) restates only the truism that over ALL periods total consumption expenditures and total income are equal in the pure consumption economy, that is, cumulated saving and dissaving cancels out eventually. In other words, all debts have to be paid back eventually.

It is eq. (33) which establishes, inter alia, the relationship between growing/shrinking debt and employment. The equation contains only measurable variables and is testable with existing data after proper specification. Theoretical economics has done its job, now econometricians can do theirs.

I am looking forward to an empirical refutation of standard employment theory and corroboration of systemic employment theory.

#1 Primary and Secondary Markets
#2 Toolism! A Critique of EconoPhysics
#3 See also Jonathan Barzilai An Open Letter to the President of the American Economic Association.
#4 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster

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REPLY to Jason Smith on Feb 13

We certainly agree about the scientific method: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-the-art testing.

We certainly agree that BOTH the theoretical part (= securing logical consistency of axioms and derived testable propositions) AND the empirical part (= securing material consistency) has to be done properly, that is, without violating well-defined methodological standards.

We certainly agree that both parts are usually NOT done by the same person because they require different qualifications. Example: Einstein did not test relativity theory himself.

From the true statement that theories have to be properly formulated and tested does NOT follow as a methodological rule that both tasks have to be performed by the SAME person.

Your argument that I have provided the employment equation (as an alternative to Keen) but not the data, therefore, misses the point. The part of theoretical economics is (in analogy to theoretical physics) to provide TESTABLE propositions. NOBODY ever criticized Einstein for not having tested the field equation himself.

So it is NOT “a nice trick to play for the null hypothesis” but NORMAL practice to put forward a proposition for testing by an independent and qualified third party.

For the testable content of the structural employment equation, I refer you to the posts Unemployment ― the fatal consequence of economists’ scientific incompetence and Macroeconomics without Keynes.

Your argument that “If you plug in all the definitions, you get back L = L.” is a formal proof that the employment equation has been consistently derived from the axioms and definitions and NOT a proof that it has no content. Never heard of Wittgenstein’s quip: “The propositions of logic are tautologies.”? So L=L does NOT come as a surprise when you REVERSE the deduction.

When you cannot see the empirical content of the structural employment equation (= true Phillips curve) the fault is NOT in the equation.

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REPLY to Jason Smith on Feb 14

Let us return for a moment from the structural employment equation to the point at issue, i.e., that you are doing cargo cult science, more precisely, that you grab an equation out of thin air, borrow an unsuitable tool from the physics/math department, and fool around on your PC with data from the St.Louis Fed. This is a brain-dead exercise because the theoretical frame in which your equations are embedded is axiomatically false. To recall, what is actually at issue on this thread is the relationship between employment and debt.

So, what we are talking about is employment theory. What orthodox employment theory says is this: “We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price. If this is prevented by combinations in restraint of trade or by government regulations, then those impediments to competition should be removed.” (Tobin, 1997)

What textbook economics says is that there is a NEGATIVE relationship between wage rate and employment. If you were able to read the structural employment equation you would realize immediately that the MACROECONOMIC relationship between wage rate and employment is POSITIVE.

It should be possible to establish which of the two opposing propositions is true. In fact, the Great Depression and the current mass unemployment give one a clear hint that orthodox labor market theory is dead wrong.

Now, a hint is not proof. The fact of the matter is that the relationship between wage rate and employment is but one element of the complete employment equation.#1 Other factors are the expenditure ratio rhoE, i.e. credit expansion/contraction, productivity, prices, investment expenditures, distributed profits etcetera.

So, what has to be tested with the utmost precision and reliable data is a very detailed employment equation and not just a simple correlation. This is a challenging task for the best econometricians. And it resembles more what they are doing at CERN than your rather self-delusional fooling around with excel-file data.

What the employment equation makes possible is to carry out what is in methodology known as experimentum crucis (see Wikipedia), that is, to answer the fundamental question of employment theory, that is, whether the relationship between wage rate and employment is positive or negative. This is on a par with the question of whether the geocentric or the heliocentric model is true.#3

If an economic equation ever had real content then the structural employment equation. And if you were a scientist instead of a cargo cult scientist you would hurry to test it instead of spreading methodological crap. Your blathering about Einstein and Poincaré symmetry is a blatant distraction.#2

Poincaré, by the way, debunked economic cargo cult science long ago: “Walras approached Poincaré for his approval. ... But Poincaré was devoutly committed to applied mathematics and did not fail to notice that utility is a nonmeasurable magnitude. ... He also wondered about the premises of Walras’s mathematics: It might be reasonable, as a first approximation, to regard men as completely self-interested, but the assumption of perfect foreknowledge ‘perhaps requires a certain reserve’.” (Porter, 1994)

Walras did not get the point and neither did you. So, the real takeaway for economists from Einstein is the famous dictum: “Only two things are infinite, the universe and economists’ stupidity, and I’m not sure about the former.”#4

If you want to refute the structural employment equation, test it and do not tell that it is not testable. It is a simple question to decide empirically: is the macroeconomic relationship between wage rate and employment negative as standard economics claims or positive as the structural employment curve claims? This goes in one with determining the relationship between employment and debt.

Stop dropping methodological crap on people.


#1 See the elementary version for the investment economy
#2 For details go to the AXEC Blog and enter Einstein in the search field.
#3 The one stone that kills orthodox and heterodox employment theory
#4 This is what Einstein said about the LOGICAL PRIORITY of theory over testing:
“Whether you can observe a thing or not depends on the theory which you use. It is theory which decides what can be observed.”
“... the axioms Science is the attempt to make the chaotic diversity of our sense-experience correspond to a logically uniform system of thought”
“If then it is the case that the axiomatic basis of theoretical physics cannot be an inference from experience, but must be free invention, have we any right to hope that we shall find the correct way?”
“... any attempt logically to derive the basic concepts and laws of mechanics from the ultimate data of experience is doomed to failure.”

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ANSWER of Jason Smith of Feb 14

Jason SmithFebruary 14, 2017 at 10:27 AM

I had to ban commenter AXEC / E.K-H from this blog because the conversation was not productive. AXEC did not appear to listen to or understand what was being said, frequently repeating errors even after being corrected.

To some degree I find arguing with people fun. It helps hone my skills and sometimes you learn something you might never have stumbled across until you tried to debunk the pet theory of some random person on the internet who decided your blog is the perfect venue for it.

But at some point it becomes monotonous. What happened to taking in information? If I say something and then you say something that could only have been said if I never said what I said, then there's really no progress.

AXEC: Einstein never tested his own theory!

Jason: Yes he did. He computed the perihelion shift of Mercury.

AXEC: Yes, but Einstein never tested his own theory, so I need not be bothered with looking up widely available data to see if my equations have any bearing on reality.

Jason: Again, Einstein did test his general theory. He also showed it reduced to Newtonian physics in the non-relativistic limit.

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For the record: The first calculation of the deflection of light by mass was published by Johann Georg von Soldner in 1801. Einstein calculated the relativistic deviation of light two times. Ironically, he got it wrong the first time in 1908 without realizing it until 1915. Luckily for him, the First World War prevented testing. It was Eddington (and two other expeditions to Brazil and Russia) who tried in 1919 to actually test = measure the deviation during a solar eclipse. Einstein did NOT test relativity himself (see my post of Feb 10).

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NOTE on Mike Norman Blog on Feb 15

For the record: The parallel discussion on the Information Transfer Economics blog ‘Qualitative economics done right, part 2’ got to the core of the matter. It ended with Jason Smith deleting my post of Feb 14. Here it is (post of Feb 14 above).

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Blog capture May 26

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#PointOfProof

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