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Showing posts sorted by relevance for query thinking. Sort by date Show all posts

October 19, 2017

This is New Economic Thinking? Give me a break!

Comment on Lars Syll on ‘Twenty years ago’

Blog-Reference and Blog-Reference on Oct 27

Science is about the true theory. The true theory is the humanly best mental representation of reality. The rest of social communication is storytelling, agenda-pushing, exchange of superficial opinions/beliefs, blather, gossip, unintended comedy, disinformation, and white noise.

The characteristic of science is the insistence on material and formal 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)

Economics pretends to be a science but is only what Feynman called a cargo cult science. As everywhere in life, there is a genuine thing and a look-alike. The general public cannot spontaneously tell the difference and this provides a comfortable ecological niche for the look-alikes in all walks of life from the marriage-impostor, to the snake-oil seller, to the Ponzi schemer, to the fake scientist. Unsurprisingly, there are also two economixes: political economics and theoretical economics. The main differences are: (i) 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. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

What the general public is presented with is political economics. The public has no idea of the underlying theory and cannot assess its scientific worth. Fact is that political economics (= agenda-pushing) has virtually extinguished theoretical economics (= science).#1 The loudspeakers of economics ― right-wing or left-wing does not matter ― are without exception incompetent scientists.#2 Political economics has had no sound scientific foundations for 200+ years. Economic policy discussion has no scientifically valid content, it is just opinion and rhetoric.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum) Economists do not have the true theory but dwell in the scientific no man's land where, in Keynes’ words, ‘nothing is clear and everything is possible’.

Political economics cannot be improved but only abandoned. What is needed is a Paradigm Shift. The problem with economists is that they have no clue what this is: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al.)

The goal of science is the true theory. Economics is a failed science. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong.#3

So, genuine New Economic Thinking is about the Paradigm Shift and nothing else. Given the history of economic thought, this is, of course, NOT what happens. Alleged New Thinking is a dilettantish proto-scientific dog and pony show, not much different in substance from what came before. It’s all a bit more user-friendly: no mathiness, no stress with true/false but peaceful coexistence of provably false theories, no offensive neoliberal hardcore ideology but an emotionally satisfying narrative, and a demonstrative commitment to a brighter future for humanity and the planet or at least to one’s own national society. All this is political marketing. Scientifically, it is essentially the old Walrasian/Keynesian/ Marxian/Austrian garbage in a new package. The foundational concept of profit is still not understood and this means that there is no analytical progress whatsoever.

The methodologically correct action to overcome scientific failure is the Paradigm Shift. This requires a redefinition of the whole subject matter. Economics is not about individual or social behavior but about the behavior of the economy. Economics is a systems science and the functioning of the economic system has to be explained without recourse to folk psychology and folk sociology.#4

Economics is a scientific failure and the ultimate cause is the utter incompetence of both orthodox and heterodox economists. The old thinking has been rather insufficient and the new thinking is not any better. These agenda-pushing folks simply cannot rise above the proto-scientific level.

Egmont Kakarot-Handtke


#1 For details of the big picture see cross-references New Economic Thinking
#2 For details of the big picture see cross-references Failed/Fake Scientists
#3 Why economists don’t know what profit is
#4 First Lecture in New Economic Thinking

Related 'Joan Robinson and the early death of Behavioral Economics' and 'Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist' and 'The real problem with the economics Nobel' and 'Economists understand neither Capitalism nor Socialism' and 'New Economic Thinking, or, let’s put lipstick on the dead pig' and 'CORE: more lipstick on the dead economics pig' and 'Dilettantes at the end of the coal-pit' and 'Economics between cargo cult, farce, and fraud' and 'What is the fuss with New Economic Thinking all about?' and 'New Economic Thinking: The 10 crucial points'. For details of the big picture see cross-references Not a Science of Behavior and cross-references Scientific Incompetence.

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NOTE on INET conferencing beyond disappointment on Oct 24

Frances Coppola summarizes: “This is not ‘new thinking’, it is the same old elite economists’ voodoo in different clothes.”

True, orthodox ‘New Economic Thinking’ is bad but heterodox ‘New Economic Thinking’ is even worse. For details see This is New Economic Thinking? Give me a break!.

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NOTE on INET conferencing beyond disappointment on Oct 25

Frances Coppola summarizes: “This is not ‘new thinking’, it is the same old elite economists’ voodoo in different clothes.”

True, orthodox ‘New Economic Thinking’ is a bad joke but heterodox ‘New Economic Thinking’ is even worse. For details see This is New Economic Thinking? Give me a break! and Everything you know about MMT is wrong.

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AXEC106i

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May 27, 2017

What is the fuss with New Economic Thinking all about?

Comment on Barkley Rosser on ‘Fighting Zombies with Zombies’

Blog-Reference

I said: ‘It is obvious from your posts that you never had a proper understanding of what axiomatization, equilibrium, or profit is all about, and in this all-inclusive scientific incompetence you are the very personification of the representative economist.’

You answered: “… I actually read your papers on why Keynesian economics is incomplete, wrong, and so on.”

So, let us see whether you understood what you read.

The whole point of axiomatization is known since J. S. Mill: “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.”

Or, as Aristotle put it: “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.”

By consequence, when the premises are false, the whole analytical superstructure is false even if the intermediary logical steps are all correct. This is the case with the four main approaches. From this follows that the Walrasian-Keynesian-Marxian-Austrian premises have to be fully REPLACED. This is what paradigm shift means. Because economics is a failed science, the paradigm shift is the PRIMARY task for ALL economists. This is what the much-touted New Economic Thinking means.

What can actually be observed, though, is that the representative economist messes up new thinking just as he messed up old thinking.

You say the first axiom [total income is wage rate times hours worked (WL) plus dividend times the number of shares (DN)] is false because there is interest, royalties, land rent, etc. Yes, there are many other phenomena in the economy, but this is NOT the point. The point of axiomatization is to consistently formulate the MINIMUM set of premises and then to successively derive all other economic phenomena from the axioms. It holds: “A theory is the more impressive the greater the simplicity of its premises, the more different kinds of things it relates, and the more extended is its area of applicability.” (Einstein)

Schumpeter understood this: “The highest ambition an economist can entertain who believes in the scientific character of economics would be fulfilled as soon as he succeeded in constructing a simple model displaying all the essential features of the economic process by means of a reasonably small number of equations connecting a reasonably small number of variables. Work on this line is laying the foundations of the economics of the future.” In economics, the most elementary systemic configuration is the elementary production-consumption economy. So, ALL of economics has to start here.

The immediately obvious point of the first axiom is that it does NOT state that total income is the sum of wage income and profit but that total income is the sum of wage income and DISTRIBUTED profit.

The crucial point of the first axiom is that it replaces the hitherto false concept of total income with the correct concept. From the first axiom then follows profit as Qm≡DN−Sm. In methodological terms: the Profit Law follows as a theorem; profit is NOT in the axioms.

The idiocy of the representative economist consists of starting with the superficial assumption that profit is just another form of income. #1 This is dead wrong. It is distributed profit that is just another form of income. #2 To treat profit as income is a category mistake.

The significance of the first axiom is that it brings the foundational concepts of income, profit, and distributed profit into the logically correct relationship. This is something the founding fathers should have done 200+ years ago. Their inexcusable sloppiness has not been rectified by their equally incompetent heirs to this day. The first axiom is sufficient to send Walrasianism-Keynesianism-Marxianism-Austrianism directly into the scientific wastebasket.

You say: “somehow he does not notice that output involves inputs besides labor.”

The second axiom replaces the unacceptable concept of a production function. The formal representation of the relationship between output, productivity, and various inputs comes with the DIFFERENTIATION of the second axiom. #3 According to the methodological minimum principle ― also known as Occam’s Razor ― the axioms contain one output and one input. #4
 
You say: “The problem is that the X or ‘quantity sold’ is completely meaningless. It is an aggregation that makes aggregating capital look like child’s play.”

Given the axioms, which refer explicitly to ONE giant firm, one has to proceed top-down by successive DIFFERENTIATION until one arrives at the individual agent. Differentiation is the inverse of bottom-up or aggregation. It is microfoundations and bottom-up that are the defining idiocy of Walrasianism, which literally PRODUCES the aggregation problem. With macrofoundations, there is NO aggregation problem.

Your statement “X or ‘quantity sold’ is completely meaningless” is the ultimate proof of your illiteracy. The enumeration of the macrofoundational axioms starts with: “(A0) The objectively given and most elementary configuration of the (world-) economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm.” So X unambiguously refers to ONE firm and ONE product and is NOT an aggregate.

Economics is a failed science because economists are incompetent scientists. Their lethal blunder consists of the Fallacy of Insufficient Abstraction. The old sloppy micro-thinking of the representative economist has, for all to see, finally crashed against the wall at the end of the cul-de-sac. New thinking requires first of all the replacement of the premises of the old thinking. As Hutchison put it: “For it can fairly be insisted that no advance in the elegance and comprehensiveness of the theoretical superstructure can make up for the vague and uncritical formulation of the basic concepts and postulates, and sooner or later ... attention will have to return to the foundations.”

The axiomatic foundations of economics have been false for 200+ years. The representative economist has proved beyond doubt that he is incapable of thinking, so new thinking is forever beyond his means. NOT ONE of Barkley Rosser’s arguments holds water.

New Economic Thinking starts with a new axiom set, or it is just another futile variant of the same old proto-scientific Walrasian-Keynesian-Marxian-Austrian-Rosserian garbage. The methodological rule of New Economic Thinking is: If it isn’t macro-axiomatized, it isn’t economics.

Egmont Kakarot-Handtke


#1 How the Intelligent Non-Economist Can Refute Every Economist Hands Down
#2 For the correct treatment of interest, land rent, and nonmonetary profit, see the papers on SSRN.
#3 See Section 4 of Matter Matters: Productivity, Profit, and Non-Marginal Factor Prices.
#4 For the introduction of capital, see Squaring the Investment Cycle.

Immediately preceding Productivity and the zombie apocalypse.

Related 'New economic thinking, or, let’s put lipstick on the dead pig' and 'The thinking economist' and 'Smart young empirically-minded economists: another vain hope' and 'The stupidity of Heterodoxy is the life insurance of Orthodoxy' and 'Media-fake-farce-fraud-storytelling-macro' and 'Economics between cargo cult, farce, and fraud' and 'Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist'

Related 'First Lecture in New Economic Thinking'.
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November 30, 2015

New Economic Thinking: cross-references

Posts

Working papers



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February 5, 2017

New Economic Thinking, or, let’s put lipstick on the dead pig

Comment on Eric Beinhocker on ‘It’s Time for New Economic Thinking Based on the Best Science Available, Not Ideology’

Blog-Reference

For non-economists, the most important thing to know about economics is that there is NO economic science. Yes, there is a prize with the title: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” but NOTHING REAL corresponds to the word Sciences.

For non-economists, the most important thing is to keep political and theoretical economics apart. The main differences are: (i) 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. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

The goal of theoretical economics is 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)

For non-economists, the most important thing to realize is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Economics is a failed science.

So, yes indeed, new economic thinking is urgently needed. This new thinking has to advance from political agenda-pushing to science. This, though, is not what Eric Beinhocker understands by new economic thinking. For him, new economic thinking means replacing the old political agenda with a new political agenda.

The political economist introduces himself as the emphatic person who fights for a good cause. He listens to the downtrodden people and takes them seriously: “But they [the populist movements] also contain many normal people who are fed up with a system that doesn’t work for them. People who have seen their living standards stagnate or decline, who live precarious lives one paycheque at a time, who think their children will do worse than they have. And their issues aren’t just economic; they are also social and psychological. They have lost dignity and respect, and crave a sense of identity and belonging.”

After this depressing reality check, everybody understands that the old agenda has failed and that a new one is urgently needed: “After we listen we then have to give new answers. New narratives and policies about how people’s lives can be made better and more secure, how they can fairly share in their nation’s prosperity, how they can have more control over their lives, how they can live with dignity and respect, how everyone will play by the same rules and the social contract will be restored, how openness and international cooperation benefits them not just an elite, and how governments, corporations, and banks will serve their interests, and not the other way around.”

Conclusion: “This is why we need new economic thinking.”

This new thinking does NOT consist in replacing the existing false theories with the true theory but in replacing the old narrative with a new narrative: “... communications is critical ... stories, narratives, visuals, and memes are needed to shift the media and public thinking.”

And exactly at this point, ‘new economic thinking’ turns into sheer political blathering: “So what might such a new narrative look like? ... I believe it will contain four stories: A new story of growth; A new story of inclusion; A new social contract; A new idealism.”

There is no better example of soapbox economics and how science is hijacked by politics. False economic theory is not replaced by the true theory, but the age-old storytelling continues with a made-over narrative. Evolutionary economists have listened to the good people and learned that the old rational models and all this mathiness stuff piss them off.

The fact of the matter is, though, that “stories, narratives, visuals, and memes” are simply euphemisms for proto-scientific garbage. The average person dislikes an objective explanation (e.g., the thunderbolt is an electromagnetic phenomenon subject to physical laws) and likes a subjective explanation (e.g., Zeus threw the thunderbolt because he was angry). The scientific explanation takes the form of a theory; the non-scientific explanation takes the form of an emotionally reinforced narrative. Ninety-nine percent of all societal communication consists of storytelling/blather/wish-wash/truisms/propaganda/gossip, and only one percent has scientific content.

The very problem of economics is that it has ZERO scientific content. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives ― are mutually contradictory, axiomatically false, and ALL got profit wrong. #1 This includes evolutionary economics.

Economics claims to be a science, yet it has never risen above the level of storytelling. Within the tiny box of folk psychology, folk sociology, folk history, and folk politics, economic storytelling has taken place since Adam Smith: “Smith ... disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter)

The sole purpose of Eric Beinhocker’s new economic narrative is to make the dull folks feel comfortable again. The claim that his polit-kitsch is based on the best science available is a bad joke at the expense of the downtrodden masses. #2

Egmont Kakarot-Handtke


#1 The Profit Theory is False Since Adam Smith
#2 Economists and the destructive power of stupidity

Related 'Scientific suicide in the revolving door' and 'Evolutionary economics: Just another degenerate research program' on 'The bigots of common sense' and 'New economic thinking ― false promises and hopes' and 'The x-th reinvention of evolutionary economics' and 'Yes, orthodox economics is poor science, but can Heterodoxy raise hope?' and 'First Lecture in New Economic Thinking' and 'How economists missed out on the essential relationship of economics' and 'Your economics is refuted on all counts: here is the real thing'.

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Graphic AXEC121g

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March 17, 2017

The thinking economist

Comment on Noah Smith on ‘Beware of "thinking like an economist"’

Blog-Reference

What it means to think like an economist is well-defined: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” (Arrow)

The definition of the subject matter translates into the following 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)

So, thinking like an economist boils down to: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” (Krugman)

The problem with the maximization-and-equilibrium world is that it consists of NONENTITIES: constrained optimization, rational expectations, equilibrium. One must be a rather feeble thinker to accept these green cheese assumptions as premises of economic analysis. Economists have done this for 150+ years.

Those economists who do not subscribe to HC1/HC5 are called heterodox economists. Unfortunately, Heterodoxy is good at debunking but failed to replace the neoclassical starting point with something better. As a result, the current state of economics is this: the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives  ― are mutually contradictory, materially/formally inconsistent, axiomatically false, and ALL got profit — the foundational concept of economics — wrong.

No economic advice ever had valid scientific foundations. Obviously, “thinking like an economist” does not yield acceptable results. Noah Smith tries to save the situation and to put some lipstick on the dead pig: “So while “thinking like an economist” is in principle a good thing, beware of people who claim to know how to do it.”

The fact of the matter is that “thinking like an economist” amounts to accepting proto-scientific garbage as science. No thinking being will ever do this. #1

Egmont Kakarot-Handtke


#1 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist

Related 'How Arrow pushed economics over the cliff' and 'In economics, the scientific breakthrough is always just around the next corner' and 'Where economics went wrong' and 'Economics is NOT a misunderstanding but cargo cultic crap' and 'There is no scientific elite in economics' and 'The economist as stand-up comedian' and 'Confounding Is and Ought: the economist as moralist' and 'Economists’ proto-scientific shell games' and 'The inexorable Paradigm Shift in economics'. For details of the big picture, see cross-references Paradigm Shift.
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August 11, 2017

In search of new economists

Comment on Benjamin Friedman on ‘The Search for New Assumptions’

Blog-Reference and Blog-Reference

Economics is a failed science. But economists were not only unable in the past 200+ years to figure out how the market economy works they are also unable to realize that the only thing that they can do for the progress of economics and the welfare of humanity is to retire.

The utter self-delusion of economists consists in the idea of New Economic Thinking. This is absurd. People who have proven their scientific incompetence by clinging to assumptions that were already dead in the cradle 150+ years ago and who cannot even get the elementary mathematics of accounting right lack the capacity of thinking altogether.#1 Joan Robinson called them the ‘throng of superfluous economists’. To suggest New Thinking to the representative economist is like suggesting pole-jumping to someone who cannot take two steps without falling over his own feet.

The fact is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that ALL got the foundational economic concept of profit wrong.#2

The only thing that works fine in economics is the survival strategy. Confronted with an economic crisis and the obvious failure of standard economics, economists readily admit/justify everything and enthusiastically promise New Thinking.#3 New Thinking, though, consists only in a repacking of the old garbage.

As Krugman put it “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” More specifically, the 150+ years old starting point consists of this set of 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)

It should be pretty obvious that the axiomatic core of Orthodoxy contains THREE NONENTITIES: (i) constrained optimization (HC2), (ii) rational expectations (HC4), (iii) equilibrium (HC5). Every theory/model that contains a nonentity is a priori false. The fact is that the dimwitted Krugmen have not realized this until this very day. The chances that they will understand anything better in the future are zero. The same holds for Keynesians, Marxians, Austrians, and Pluralists.

Benjamin Friedman sums up: “Without assumptions there is no theory, and without theory there is no analysis. Whether macroeconomists will be willing to find new assumptions on which to base their ideas, leaving behind the ones that straight-jacketed their thinking during the crisis, will largely determine whether the discipline will regain the usefulness it once seemed to have.”

Benjamin Friedman, too, is a proto-scientific wish-washer. Translated into proper methodological terms, this is the case: Without true axioms, there is no true theory and without true theory, economists have NOTHING WORTHWHILE to say: “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)

Scientific truth is for 2300+ years well-defined by material and formal consistency: “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)

Economics does not need ‘new assumptions’ but a Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations. Nothing less will do.#4

Economics is a science without scientists. The present generation of ― orthodox and heterodox ― economists have disqualified themselves and cannot make a significant contribution to the discussion about how the actual economy works. Their chances of New Economic Thinking have been wasted long ago.

Egmont Kakarot-Handtke


#1 Fact of life: your econ prof is scientifically incompetent
#2 How the intelligent non-economist can refute every economist hands down
#3 Failed economics: The losers’ long list of lame excuses
#4 First Lecture in New Economic Thinking
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June 11, 2021

Occasional Tweets: Rethinking economics a.k.a the inevitable Paradigm Shift

 



Rethinking / New Economic Thinking / Paradigm Shift / Reset

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December 1, 2020

Clear thinking in economics: hahaha!

Comment on Tom Hickey on ‘Jude Murdoch and Steven Hail argue modern monetary theory offers desperately needed clear thinking and fresh ideas for our society and our democracy’


Well, economists need, first of all, clear thinking about how the economy works. To figure out how society or democracy works is NOT their business. Dabbling in sociology and political science is known as economics imperialism. #1

Economics imperialism has always been a bad joke because economists have not gotten the foundational concepts of their own discipline straight to this very day. #2, #3 In the interdisciplinary exchange, they have nothing of scientific value to offer.

Clear thinking is not the economists’ forte. MMTers are NO exception. Their foundational sectoral balances equation is false, proving that MMTers are too stupid for the elementary algebra that underlies macroeconomics. #4, #5, #6

Because the foundational concepts are ill-defined, the analytical superstructure is scientifically worthless, and because of this, economic policy guidance has NEVER had valid scientific foundations. #7 So, what economists in general, and MMTers in particular, are actually doing is brain-dead political agenda pushing. #8

Needless to emphasize that economists do not meet the high ethical standards of science. Steven Hail is an #EconBlocker like most MMTers. #9 EconBlockers violate the AEA Code of Professional Conduct. #10

Clear thinking arrives at the conclusion: bury all this proto-scientific garbage and its authors in the darkest corner of the Flat-Earth Cemetery.

Egmont Kakarot-Handtke



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November 16, 2015

Heterodoxy as superior alternative

Comment on Lars Syll on ‘Deductivist modeling leading economics astray’

Blog-Reference and Blog-Reference Nov 18

Since the human brain works sequentially, every analysis has a start and then proceeds logically from there. It seems pretty obvious that if the premises are false, then the conclusions are false, too, or as the IT-crowd always had it: garbage in, garbage out. This is known since antiquity: “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.” (Resume of Aristotle’s Posterior Analytics)

Every day thinking, of course, works differently: “The animistic fallacy is the informal fallacy of arguing that an event or situation necessarily arose because someone intentionally acted to cause it. While it could be that someone set out to effect a specific goal, the fallacy appears in an argument that states this must be the case. The name of the fallacy comes from the animistic belief that changes in the physical world are the work of conscious spirits.” (See Wikipedia)

So, animistic thinking explains the appearance of a thunderbolt with Zeus being angry, while physics explains it as an electromagnetic phenomenon. The latter thinking eventually leads to the lightning rod. Animism regularly leads to a milder or stronger form of paranoia, that is, in speculation about the behavior of unknown entities, which are seen as either benevolent or malevolent. Thus, everyday thinking or common sense runs essentially in the categories good/bad or like/dislike, while scientific thinking runs in the categories true/false.

Economics is a strange mixture of analytical and animistic thinking. Orthodoxy holds that the working of the economy is explicable as the result of the interactions of an entity called homo oeconomicus and an entity called the Invisible Hand. Both are benevolent and increase an entity called welfare.

These ideas are explicitly formulated as hardcore premises: “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, 1985, p. 147)

Now, remember Aristotle, the crucial condition is that ‘premises are certain, true, and primary’. It has also been observed since antiquity that there is no such thing as certain, true, and primary premises about human behavior.

“Alexander Rosenberg lays great emphasis on the role of intentionality in the social sciences, for in his view this role explains the nomological failures of the social sciences and supports the view that the social sciences (in anything like their current form) can never succeed in formulating real laws of human behavior.” (Hausman, 1992, p. 326)

This, too, is known since antiquity: “For arguments about matters concerned with feelings and actions are less reliable than facts: and so when they clash with facts of perception they are despised, and discredit the truth as well.” (Aristotle, quoted in Georgescu-Roegen, 1966, p. 184)

So, what Jon Elster demands is a contradiction in terms: “To achieve explanatory success, a theory should, minimally, satisfy two criteria: it should have determinate implications for behavior, and the implied behavior should be what we actually observe.” (See intro)

Gossiping about human behavior is popular, but definitely the wrong angle of analytical attack. The crucial methodological point is that economics cannot be based on behavioral assumptions. Neither constrained optimization nor animal spirits will do (Hudík, 2011).

The set of five hardcore propositions has proven its worthlessness. Orthodoxy is a failed approach according to the formal and empirical criteria that define science. And, most importantly, the failure has been built into the premises. Keynes knew this very well: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.” (Keynes, 1973, p. xxi)

Therefore, economics has to be redefined, and this amounts to emancipation from the animistic thinking of the so-called social sciences.

Old definition, subjective-behavioral: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

No! It is not the task of the economist to dabble in psychology, sociology, political science, history, anthropology, law, ethics, or philosophy. The subject matter of economics is the economy.

New definition, objective-structural: “Economics is the science that studies how the monetary economy works.”

This requires a new set of hardcore propositions to start with, which — and there is no way around it — have to be ‘certain, true, and primary’ (2014b; 2014a).#1

Heterodoxy will either succeed in this task or it will be thrown out of science just like Orthodoxy.

Egmont Kakarot-Handtke


References
Georgescu-Roegen, N. (1966). Analytical Economics, chapter Choice, Expectations, and Measurability, pages 184–215. Cambridge: Harvard University Press.
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Kakarot-Handtke, E. (2014a). Economics for Economists. SSRN Working Paper Series, 2517242: 1–29. URL
Kakarot-Handtke, E. (2014b). Objective Principles of Economics. SSRN Working
Paper Series, 2418851: 1–19. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

#1 For a start see cross-references New Curriculum


***

ICYMI (comment on Bruce Wilder of Nov 12 on Nov 19)

‘Uncertainty’ has become the shibboleth of Post-Keynesianism and the mantra is ‘We simply do not know.’ This raises the question: why do Post Keynesians still waste their time with economics instead of making long and healthy walks in the lovely countryside?

That much is sure; the flight path of a down feather is uncertain. All that can be said after countless meticulous empirical observations is that it eventually falls to the ground. This is why physicists ignored the uncertainty of the down feather entirely and took another route to figure out the Law of Falling Bodies.

In any case, physicists have not made a habit out of telling the world what they do not know or what is unknowable. They are famous for telling the world what is known and what can be known.

So the answer to Post Keynesian know-nothings is to get out of the way, or as G. B. Shaw put it ‘People who say it cannot be done should not interrupt those who are doing it.’


***

ICYMI (comment on Silwyson of Nov 21 on Nov 21)

You say that the fallacy called ‘denying the antecedent’ is “a very common logical mistake, particularly among economists.” This is true, indeed, and here is the best example I can think of.

First, a specimen of the fallacy from Wikipedia:
(i) If it is raining, then the grass is wet.
(ii) It is not raining.
(iii) Therefore, the grass is not wet.
Proposition (ii) denies the antecedent. While all premises are true, the conclusion is provably false.

Now, the application to a central tenet of economics:
(i) If a system explodes/implodes, then it has no equilibrium.
(ii) The market economy has not exploded/imploded in the last 200 years.
(iii) Therefore, the market economy is an equilibrium system.
Not much more than this logical crap is needed to convince the representative economist of the General Equilibrium approach.

Economics is traditionally awash with logical fallacies. So much so that already J.S. Mill took it upon himself to categorize and expose them at great length (see the chapter Fallacies in 2006).

The worst fallacy of economics, however, is the Fallacy of Composition, i.e., to generalize what is true for a single case (individual, firm) for the whole economy. This fallacy is the very foundation of Marshall’s approach, and it is literally built into the neoclassical program of methodological individualism (Arrow, 1994, p. 1). For the fatal Keynesian fallacy, see (2011).

In sum: While I agree with you that true propositions can follow from wrong premises — classical case: the sun goes up (true) because it circles around the earth as the center of the universe (false) — I am pretty sure that there is no logical fallacy in my post of Nov 18.

References
Arrow, K. J. (1994). Methodological Individualism and Social Knowledge. American Economic Review, Papers and Proceedings, 84(2): 1–9. URL
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected View of the Principles of Evidence and the Methods of Scientific Investigation, Vol. 8 of Collected Works of John Stuart Mill. Indianapolis: Liberty Fund.

***
AXEC113h What the Paradigm Shift is all about

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November 30, 2015

Methodology: cross-references

Posts
  • Lethal blunder   here
  • Clear thinking in economics: hahaha!   here
  • Economists’ foundational conceptual blunder   here
  • The GDP-death-blow for the economics profession   here
  • OMG, after 200+ years, economics becomes a science   here
  • The Paradigm Shift is an accomplished fact   here
  • Not all academic pursuits are science   here
  • Economists’ scientific incompetence is worse than the plague   here
  • The unconditional surrender/sellout of science   here
  • Psychologism: how morons explain the world   here
  • Let's bury economics now   here
  • The tragedy of economics: stupid/corrupt economists   here
  • Bye, bye economic philosophers   here
  • The new economic Paradigm requires a new textbook   here
  • The trouble with truth   here
  • All behavior-based economic textbooks are false   here
  • Disgrace again ― is economics really that bad?   here
  • Economists can hardly wait for their burial at the Flat-Earth-Cemetery   here
  • Economics as thought-reading and motive-imputation   here
  • The question economists could not answer for 200+ years   here
  • #HallOfScientificShame   here
  • Wikipedia, economics, scientific knowledge, or political agenda pushing?   here
  • Your economics is refuted on all counts: here is the real thing   here
  • There are NO crank scientists in economics because economics is NOT a science   here
  • The problem with economics as a discipline   here
  • Lars Syll, MMT, and the other failures of New Economic Thinking   here
  • Economic narratives are for the scientific garbage dump   here
  • Economics, philosophy, and the crapification of science   here
  • Econogenics: economists pose a hazard to their fellow citizens   here
  • Homo oeconomicus: the never-ending folk-psychological shitshow   here
  • Economics, math, pluralism, and corruption   here
  • Economics: No method to the madness   here
  • The only thing we can learn from economic models is what proto-scientific garbage looks like   here
  • How incompetent are economic methodologists? Very!   here
  • Opportunity cost ― another case of poor economic logic   here
  • Links on History and Economics   here
  • Dialectic: the swampies’ methodology of choice   here
  • Links on McKinsey’s ‘A new look at the declining labor share of income in the United States’   here
  • Economics: failure, fake, fraud   here
  • Heterodox economics ― stupidity, masochism, or disinformation?   here
  • Scientific ignorance is political strength   here
  • MMT and the canonical macroeconomic model   here
  • Dear idiots, government deficits do NOT fund private savings   here
  • The retirement of a fake scientist and real agenda pusher   here
  • Economists: Either stupid or corrupt or both   here
  • Dear idiots, Marx got profit and exploitation wrong   here
  • Still beyond the reach of economists: The Holy Grail of Science   here
  • Who is really a scientist?   here
  • The half-truths and half-falsehoods of MMT   here
  • Basics of Value Theory   here
  • Economists/MMTers: agenda pushers, distractors, blockers, muters, censors   here
  • Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems   here
  • Socialism and scientific incompetence   here
  • MMT and Marxism ― blather as immunizing stratagem   here
  • MMT vs The Rest of Economics ― a Punch and Judy show   here
  • If religion is opium of the people, economics is crack of the people   here
  • “But economics is not pure mathematics or logic” No, it is pure blather   here
  • Economics as storytelling and entertainment for the masses   here
  • There is NO such thing as “smart, honest, honorable economists”   here
  • MMT’s virtue-signaling distracts from failure/fraud   here
  • Ontological uncertainty is NOT the problem but economists’ ontological stupidity   here
  • How to minimize econogenic outcomes   here
  • MMT sucks   here
  • Economists: Time to say goodbye   here
  • Economics: A pointless left-right wrestling show   here
  • Macroeconomics: Drain the scientific swamp   here
  • Kalecki and Keynes: The double macroeconomic false start   here
  • Causality in economics   here
  • More on economists’ sticky brains   here
  • Where economics went wrong (II)   here
  • Legitimacy lost   here
  • MMT = Modern Monetary Trash   here
  • Whatever this is, it is NOT economics   here
  • The inexorable Paradigm Shift in economics   here
  • Hooray! The formalization issue is finally settled   here
  • Nietzsche, entropy, full employment, and NO class war   here
  • Economics between misguided and lethal critique   here
  • Macroeconomics: self-delusion and empty promises   here
  • Infantile model bricolage, or, How many economists can dance on a non-existing pinpoint?   here
  • Overreach: Economists have their fingers in every pie except real economics   here
  • Equilirium   here
  • Knowledge is attainable ― even in economics   here
  • Economics is NOT about what Happiness is but about what Profit is   here
  • The curious non-existence of profit in economics   here
  • Economies are culturally different but economic laws are universal   here
  • Economics: communication without content   here
  • Ricardo and the invention of class war   here
  • From false microfoundations to true macrofoundations (II)   here
  • Again and again: economists are incompetent scientists   here
  • Dear philosophers, economics is a systems science   here
  • Lethal criticism of economics? Here it is!   here
  • Basics of monetary theory: the two monies   here
  • How the representative economist gets it wrong big-time   here
  • Economists understand neither Capitalism nor Socialism   here
  • This is New Economic Thinking? Give me a break!   here
  • Joan Robinson and the early death of Behavioral Economics   here
  • Proof of the inherent instability of the market economy   here
  • MMT: Just political heat, no scientific light   here
  • Setting the history of economic non-thought right   here
  • What makes economics a failed science?   here
  • The flat-earth realism of economists   here
  • Economic methodology for the little guy   here
  • A bitter pill for political economists   here
  • The abject failure of orthodox and heterodox distribution theory   here
  • In search of new economists   here
  • There is NO such thing as supply-demand-equilibrium   here
  • Economics, philosophy, and mathematics   here
  • Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need   here
  • New Economic Thinking: The 10 crucial points   here
  • We are not yet out of the wood; in fact, we are not yet in it   here
  • Empiricism, or looking through the microscope at the universe   here
  • Economics and the Fallacy of Insufficient Abstraction   here
  • Morons on math   here
  • How Heterodoxy got lost in the methodological woods   here
  • Economics: 200+ years of scientific incompetence and fraud   here
  • What is the fuss with New Economic Thinking all about?   here
  • The equilibrium of idiocy   here
  • Does Asad Zaman fly with POL or SCI Airlines?   here
  • The stupidity of Heterodoxy is the life insurance of Orthodoxy   here
  • Ricardian vice and Keynesian confusedness   here
  • Hayek and other informationally retarded proto-economists   here
  • Ditch scientific incompetence!   here
  • How Heterodoxy became the venue for science’s scum   here
  • The Law of Economists’ Increasing Stupidity   here
  • Redefining economics   here
  • From the pluralism of false models to the true economic theory   here
  • The economist as moralist   here
  • Methodology for heterodox one-cell-brainers   here
  • Economists’ eternal problem with methodology   here
  • Economics and truth   here
  • Heterodoxy’s chronic thinking incapacity   here
  • Bad economics, futile critique, and elusive new thinking   here
  • The thinking economist   here
  • Economics ― from attention and reputation management to science   here
  • Humble pie economics: the next fake   here
  • NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy   here
  • Pants kicking is over, let’s do serious economics now   here
  • The methodological blunders of fake scientists   here
  • Why you should NEVER use supply-demand-equilibrium   here
  • Economics, Plato’s Cave and the Silver Blaze Case   here
  • Economics, methodology, morals ― a creepy freak-show   here
  • Paul the Menace   here
  • Economists and the destructive power of stupidity   here
  • Friedman and the cluelessness of fake scientists   here
  • Narrative economics and the imperatives of the sitcom   here
  • Failed economics: The losers’ long list of lame excuses   here
  • Complexity and stupidity   here
  • When fake scientists call out on fake politicians   here
  • Economics, methodology, and the Molehill Impossibility   here
  • Heterodoxy and the re-invention of science   here
  • Macro for dummies (I)   here
  • The prime primer on equilibrium   here
  • Methodology 101, economic filibuster, and the mother of all excuses   here
  • The disutility of debunking Econ 101   here
  • It is better to be precisely right than roughly wrong   here
  • Does economics matter?   here
  • Economists have no brains here
  • Economics between physics and psychiatry   here
  • Great souls’ methodology   here
  • All models are false because all economists are stupid   here
  • Marshall and the Cambridge School of plain economic gibberish   here
  • Clueless about money and profit   here
  • The end of traditional Heterodoxy in the Malmö coal pit   here
  • Economists’ full-scale retreat   here
  • Heterodoxy’s scientific self-burial   here
  • The unfinished Keynes (III)   here
  • Economics: The chief demerit is inconsistency   here
  • Substandard reasoners   here
  • Feeble minds, shaky assumptions, and the inevitable failure of economics   here
  • Don’t tell me that Krugman’s economics is false, tell me instead what is true   here
  • What’s wrong with Econ 101? Economists, of course!   here
  • Economics is locked in idiocy: How could this happen?   here
  • Fatal defects of profit and market theory   here
  • Keynes, the methodologist   here
  • The scientific self-elimination of Heterodoxy   here
  • History delivers the questions but not the answers   here
  • End of confusion   here
  • The tiny little problem with economics   here
  • Petitio principii — economists’ biggest methodological mistake   here
  • The consistent ancients and the confused moderns   here
  • When substandard thinkers dabble in science it is called economics   here
  • Methodological wrong-way drivers   here
  • The real trouble with Econ 101   here
  • Econ 101 — worse than useless   here
  • Don’t blame the model, blame the modeler    here
  • Marginalism is the landmark of scientific incompetence   here
  • Show first your economic axioms or get out of the discussion   here
  • There is no truth in political economics   here
  • The futility of testing economics blather   here
  • The three fundamental economic laws   here
  • Macro of and for the scientifically blind and deaf   here
  • Toward the true economic axioms   here
  • Economics and the weapons of mass distraction   here
  • Lawson’s fundamental methodological error and the failure of Heterodoxy   here
  • Postmodernism — the philosophy of scientific write-offs   here
  • Scientists do not predict   here
  • Economics — the fly that cannot see the glass   here
  • Causa finita    here
  • Economists’ three-layered scientific incompetence   here
  • Incompetence — the original sin in economics   here
  • Heterodoxy and the nullity of dead horse beating   here
  • How to restart economics    here
  • Economists and methodology: the horror of all horrors   here
  • Full methodological illiteracy   here
  • Economists’ proto-scientific methodology   here
  • Why the Naked-Emperor-Zombie cannot die   here
  • Confused Orthodoxy vs. confused Heterodoxy   here
  • Are economists natural-born scientific failures?   here
  • Bagehot’s wisdom and the silliness of modern economists   here
  • Addendum to ‘Musings on Whether We Consciously Know More or Less than What Is in Our Models’   here
  • Axiomatized NONENTITIES and the failure of methodologists   here
  • Buddha on the microeconomic men in the dark   here
  • Still on the wrong track   here
  • The existence of economic laws and the nonexistence of behavioral laws   here
  • Economics is NOT a science of behavior (III)   here
  • Worthless Canadian model bricolage   here
  • Methodological retards   here
  • Towards the true economic theory   here
  • Warning: Einstein can be hazardous to heterodox methodology  here
  • Methiness  here
  • Poor philosophy, poor science, poor job  here
  • Eureka  here
  • Replacing the neoclassical axioms  here
  • Failure: method or incompetence?  here
  • Time to get out of gossip economics  here

Debate
"The failure of economics is due to the use of axiomatic method"  here
See also: Proper use of math in economics  here


Graphic AXEC105a

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