Comment on 'Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the economic statisticians and rent incomes’
Blog-Reference
As it happens, the interconnection between profit, distributed profit, ‘rent’ and land ownership has already been untangled by Constructive Heterodoxy under the title Essentials of Constructive Heterodoxy: Institutions.
The correct rent theory is part of the new heterodox curriculum.
Why should anybody wait for Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney ‘to take steps in the right direction’ (as orthodox economists they are irrecoverably over the cliff)? The real message is that Heterodoxy has already settled the question.*
Egmont Kakarot-Handtke
*See also the working paper When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism at SSRN
May 5, 2015
From PsySoc to SysHum
Comment on Lars Syll on ‘Rational expectations — totally incredible bogus’
Blog-Reference
The student of economics either understands at their very first encounter with Econ 101
• that behavioral assumptions like utility, optimization, rational expectation, supply/ demand functions, and equilibrium are NONENTITIES;
• that in mathematics there exists a ‘whole crop of monster-structures, entirely without application’ (Bourbaki, 2005, p. 1275, fn. 9);
or unfortunately, not.
The student with a modicum of scientific guts becomes by logical necessity a heterodox economist. He will avoid NONENTITIES and inapplicable monster structures and debunk them wherever they appear.
This is right and good, but it is not good enough.
What everybody wants and needs is the correct theory and congenial math. What nobody needs is another surrealistic discussion about rational expectations, ergodicity, the fixpoint theorem, or multiple equilibria.
The reason why Heterodoxy has only been marginally successful is that it shares the foundational blunder with Orthodoxy.
The crucial point is that economics deals — in the first place — not with individual human behavior or society at large. This is the realm of psychology, sociology, anthropology, history, political science, etcetera. Insofar as economics deals with behavioral assumptions like utility maximization, greed, power-grabbing, etcetera, it is a dilettantish variant of Psycho-Sociology or PsySoc.
What is the real subject matter of economics?
As a first approximation, one can agree on the general characteristic that the economy is a complex system.
However, with the term system, one usually associates a structure with components that are non-human. In order to stress the obvious fact that humans are an essential component of the economic system, the market economy should be characterized more precisely as a complex hybrid system/human entity or SysHum (Luhmann, 1995).
The scientific method is straightforwardly applicable to the sys component but not to the hum component. While it is clear that the economy always has to be treated as an indivisible whole, for good methodological reasons, the analysis has to start with the objective system component.
In Gestalt psychological terms, the economic system is the foreground, and individual behavior is in the background. Common sense wrongly insists that the hum component must always be in the foreground. This fallacy is similar to geocentrism. The economic system has its own logic, which is different from the behavioral logic of humans. Systemic logic is what Adam Smith called the Invisible Hand.
Heterodoxy will be inextricably tied to failed Orthodoxy as long as it is content with making homo oeconomicus ‘more realistic.’ The student with a modicum of scientific guts goes beyond flat behavioral common sense, quits PsySoc altogether, and turns to SysHum. #1
Egmont Kakarot-Handtke
References
Bourbaki, N. (2005). The Architecture of Mathematics. In W. Ewald (Ed.), From Kant to Hilbert. A Source Book in the Foundations of Mathematics, Vol. II, 1265–1276. Oxford, New York, Oxford University Press.
Blog-Reference
The student of economics either understands at their very first encounter with Econ 101
• that behavioral assumptions like utility, optimization, rational expectation, supply/ demand functions, and equilibrium are NONENTITIES;
• that in mathematics there exists a ‘whole crop of monster-structures, entirely without application’ (Bourbaki, 2005, p. 1275, fn. 9);
or unfortunately, not.
The student with a modicum of scientific guts becomes by logical necessity a heterodox economist. He will avoid NONENTITIES and inapplicable monster structures and debunk them wherever they appear.
This is right and good, but it is not good enough.
What everybody wants and needs is the correct theory and congenial math. What nobody needs is another surrealistic discussion about rational expectations, ergodicity, the fixpoint theorem, or multiple equilibria.
The reason why Heterodoxy has only been marginally successful is that it shares the foundational blunder with Orthodoxy.
The crucial point is that economics deals — in the first place — not with individual human behavior or society at large. This is the realm of psychology, sociology, anthropology, history, political science, etcetera. Insofar as economics deals with behavioral assumptions like utility maximization, greed, power-grabbing, etcetera, it is a dilettantish variant of Psycho-Sociology or PsySoc.
What is the real subject matter of economics?
As a first approximation, one can agree on the general characteristic that the economy is a complex system.
However, with the term system, one usually associates a structure with components that are non-human. In order to stress the obvious fact that humans are an essential component of the economic system, the market economy should be characterized more precisely as a complex hybrid system/human entity or SysHum (Luhmann, 1995).
The scientific method is straightforwardly applicable to the sys component but not to the hum component. While it is clear that the economy always has to be treated as an indivisible whole, for good methodological reasons, the analysis has to start with the objective system component.
In Gestalt psychological terms, the economic system is the foreground, and individual behavior is in the background. Common sense wrongly insists that the hum component must always be in the foreground. This fallacy is similar to geocentrism. The economic system has its own logic, which is different from the behavioral logic of humans. Systemic logic is what Adam Smith called the Invisible Hand.
Heterodoxy will be inextricably tied to failed Orthodoxy as long as it is content with making homo oeconomicus ‘more realistic.’ The student with a modicum of scientific guts goes beyond flat behavioral common sense, quits PsySoc altogether, and turns to SysHum. #1
Egmont Kakarot-Handtke
References
Bourbaki, N. (2005). The Architecture of Mathematics. In W. Ewald (Ed.), From Kant to Hilbert. A Source Book in the Foundations of Mathematics, Vol. II, 1265–1276. Oxford, New York, Oxford University Press.
Luhmann, N. (1995). Social Systems, Stanford, Stanford University Press. (For Luhmann's methodological development to AI, see link Apr 20, 2026)
#1 For details of the big picture, see cross-references Paradigm Shift and cross-references New Curriculum
Related 'The Science-of-Man fallacy' and 'The Ur-Blunder of economics and its rectification'
Related 'The Science-of-Man fallacy' and 'The Ur-Blunder of economics and its rectification'
May 4, 2015
Economics is not what most economists think it is
Comment on 'Coase and Reality’
Blog-Reference
Imagine for a moment a rather elementary economy. Total employment is L and there are two firms. The wage rate W is equal and fix. So total income Y=W(L1+L2) is fix. The household sector spends this total income, hence total consumption expenditures C are equal to Y and fix. No saving/dissaving. The productivities R1, R2 are fix in both firms. Under the condition of zero profit the respective market clearing prices are equal to unit wage costs, i.e., P1=W/R1 and P2=W/R2. Labor can be shifted between the two firms at short notice, so the only question that is open from the viewpoint of the business sector is how will the households split consumption expenditures C between the two goods? As soon as the firms know this they will allocate total labor input accordingly. As a result, consumers get exactly want they want, markets are cleared, all budgets are balanced, labor is fully employed and gets the whole product.
How does standard economics answer this elementary question? The partitioning of C is defined by the equality of the marginal rate of substitution MRS and the price ratio.
Seems to be a sensible answer. We have the price ratio — but how exactly do we get the MRS?
This is the moment of truth. In this way, nobody can ever answer the most elementary question of consumer theory because MRS is a nonentity.
This, though, is not the end of the story. Now phantasy gets busy. Can you imagine a set of preferences? Yes, I can, but then the MRS follows from my definition of the set. That is, I put the answer in the hat in the form of well-defined preference curves and then pull it out as MRS. Obviously, this is scientifically illegitimate. End of story. Nice try. Orthodoxy is gone.
Not yet, because now the heterodox economist steps in and tells us:
“The consumer in economics is not a life form, for life forms have to realize their needs for real and measurable benefits from consumption, rather than maximize their so-called preferences, if they to survive.” (See previous post of Larry Motuz)
Very true, nobody can say much against survival. But, wait a minute! The question was how do the households partition the total consumption expenditures C?
Heterodoxy is correct in pointing out that the introduction of preferences is a methodologically unacceptable move. But frankly, is the waffling about life form, benefits and survival one iota better?
Actually, it is worse. Because now we are entangled in a discussion about the motives of the consumers. And, clearly, this is psychology, sociology, politics, and what you have, but it is not economics. Economics is first and foremost about how the economy works* and not about how people tick.
Egmont Kakarot-Handtke
* For the correct approach see cross-references
Blog-Reference
Imagine for a moment a rather elementary economy. Total employment is L and there are two firms. The wage rate W is equal and fix. So total income Y=W(L1+L2) is fix. The household sector spends this total income, hence total consumption expenditures C are equal to Y and fix. No saving/dissaving. The productivities R1, R2 are fix in both firms. Under the condition of zero profit the respective market clearing prices are equal to unit wage costs, i.e., P1=W/R1 and P2=W/R2. Labor can be shifted between the two firms at short notice, so the only question that is open from the viewpoint of the business sector is how will the households split consumption expenditures C between the two goods? As soon as the firms know this they will allocate total labor input accordingly. As a result, consumers get exactly want they want, markets are cleared, all budgets are balanced, labor is fully employed and gets the whole product.
How does standard economics answer this elementary question? The partitioning of C is defined by the equality of the marginal rate of substitution MRS and the price ratio.
Seems to be a sensible answer. We have the price ratio — but how exactly do we get the MRS?
This is the moment of truth. In this way, nobody can ever answer the most elementary question of consumer theory because MRS is a nonentity.
This, though, is not the end of the story. Now phantasy gets busy. Can you imagine a set of preferences? Yes, I can, but then the MRS follows from my definition of the set. That is, I put the answer in the hat in the form of well-defined preference curves and then pull it out as MRS. Obviously, this is scientifically illegitimate. End of story. Nice try. Orthodoxy is gone.
Not yet, because now the heterodox economist steps in and tells us:
“The consumer in economics is not a life form, for life forms have to realize their needs for real and measurable benefits from consumption, rather than maximize their so-called preferences, if they to survive.” (See previous post of Larry Motuz)
Very true, nobody can say much against survival. But, wait a minute! The question was how do the households partition the total consumption expenditures C?
Heterodoxy is correct in pointing out that the introduction of preferences is a methodologically unacceptable move. But frankly, is the waffling about life form, benefits and survival one iota better?
Actually, it is worse. Because now we are entangled in a discussion about the motives of the consumers. And, clearly, this is psychology, sociology, politics, and what you have, but it is not economics. Economics is first and foremost about how the economy works* and not about how people tick.
Egmont Kakarot-Handtke
* For the correct approach see cross-references
May 3, 2015
Freaky games
Comment on Peter Radford on 'Coase and Reality’
Blog-Reference
“Criticizing the bulk of modern economics for its extraordinary lack of realism has become a tiring and unproductive exercise.” (See intro)
Really? It seems that the protagonists show no signs of tiredness. On the contrary. The Heterodox ridicule utility maximization, the Orthodox escalate with even more ridiculous rational expectations. The Heterodox point to uncertainty, the Orthodox escalate with ergodicity. The Heterodox say equilibrium is impossible, the Orthodox escalate with the outer-worldly fixpoint theorem. In the course of a lively debate, the distance from reality grows in fact exponentially. What goes wrong?
“The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug, 1998, p. 703)
And exactly at this crucial juncture, the differences between Orthodoxy and Heterodoxy vanish.
“... most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992, p. 248)
Thus, the funny game goes on, with occasional regrets. “Whether it is what the rest of us need to know as we grapple with our economic issues is another matter entirely.” (See intro)
High time that ‘the rest of us’ simply leaves traditional Orthodoxy and Heterodoxy behind in their conjoint proto-scientific cul-de-sac.
Egmont Kakarot-Handtke
References
Blaug, M. (1998). Economic Theory in Retrospect. Cambridge: Cambridge University Press, 5th edition.
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Blog-Reference
“Criticizing the bulk of modern economics for its extraordinary lack of realism has become a tiring and unproductive exercise.” (See intro)
Really? It seems that the protagonists show no signs of tiredness. On the contrary. The Heterodox ridicule utility maximization, the Orthodox escalate with even more ridiculous rational expectations. The Heterodox point to uncertainty, the Orthodox escalate with ergodicity. The Heterodox say equilibrium is impossible, the Orthodox escalate with the outer-worldly fixpoint theorem. In the course of a lively debate, the distance from reality grows in fact exponentially. What goes wrong?
“The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug, 1998, p. 703)
And exactly at this crucial juncture, the differences between Orthodoxy and Heterodoxy vanish.
“... most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992, p. 248)
Thus, the funny game goes on, with occasional regrets. “Whether it is what the rest of us need to know as we grapple with our economic issues is another matter entirely.” (See intro)
High time that ‘the rest of us’ simply leaves traditional Orthodoxy and Heterodoxy behind in their conjoint proto-scientific cul-de-sac.
Egmont Kakarot-Handtke
References
Blaug, M. (1998). Economic Theory in Retrospect. Cambridge: Cambridge University Press, 5th edition.
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Neither truth nor beauty
Comment on Lars Syll on ‘Rational expectations — totally incredible bogus’
Blog-Reference
It was one of the Top 20 heterodox economists who observed some time ago: “No science has been criticized by its own servants as openly and constantly as economics. The motives of dissatisfaction are many, but the most important pertains to the fiction of homo oeconomicus.” (Georgescu-Roegen, 1971, p. 1)
The most conspicuous characteristic of economists is that they mess virtually everything up. The long-standing gossip about realistic/unrealistic behavioral assumptions and the vacuous filibuster about the use/abuse of formalization are only two points on a long list. When both topics are mixed, when behavioral realism is played against formal beauty, the apex of surrealism is finally reached.
What is wrong with economics — in the last instance — is economists. They get neither behavior nor math right. #1
The student of economics either understands in his first course of Econ 101
The student with a modicum of scientific guts becomes by logical necessity a heterodox economist. He will avoid nonentities and monster structures and debunk them wherever they appear. But that is not enough; what he desperately wants and needs is the correct theory and congenial math. This is the central issue of Constructive Heterodoxy.
What nobody needs is another surrealistic discussion about beauty and truth in economics. There is neither, and exactly this is the real problem.
Egmont Kakarot-Handtke
References
Bourbaki, N. (2005). The Architecture of Mathematics. In W. Ewald (Ed.), From Kant to Hilbert. A Source Book in the Foundations of Mathematics, Vol. II,1265–1276. Oxford, New York: Oxford University Press.
Georgescu-Roegen, N. (1971). The Entropy Law and the Economic Process. Cambridge: Cambridge University Press.
#1 For the exception, see Graphic AXEC137b.
It was one of the Top 20 heterodox economists who observed some time ago: “No science has been criticized by its own servants as openly and constantly as economics. The motives of dissatisfaction are many, but the most important pertains to the fiction of homo oeconomicus.” (Georgescu-Roegen, 1971, p. 1)
The most conspicuous characteristic of economists is that they mess virtually everything up. The long-standing gossip about realistic/unrealistic behavioral assumptions and the vacuous filibuster about the use/abuse of formalization are only two points on a long list. When both topics are mixed, when behavioral realism is played against formal beauty, the apex of surrealism is finally reached.
What is wrong with economics — in the last instance — is economists. They get neither behavior nor math right. #1
The student of economics either understands in his first course of Econ 101
- that behavioral assumptions like utility, optimization, rational expectation, supply/demand functions, and equilibrium are nonentities;
- that in mathematics there exists a ‘whole crop of monster-structures, entirely without application’ (Bourbaki, 2005, p. 1275, fn. 9);
The student with a modicum of scientific guts becomes by logical necessity a heterodox economist. He will avoid nonentities and monster structures and debunk them wherever they appear. But that is not enough; what he desperately wants and needs is the correct theory and congenial math. This is the central issue of Constructive Heterodoxy.
What nobody needs is another surrealistic discussion about beauty and truth in economics. There is neither, and exactly this is the real problem.
Egmont Kakarot-Handtke
References
Bourbaki, N. (2005). The Architecture of Mathematics. In W. Ewald (Ed.), From Kant to Hilbert. A Source Book in the Foundations of Mathematics, Vol. II,1265–1276. Oxford, New York: Oxford University Press.
Georgescu-Roegen, N. (1971). The Entropy Law and the Economic Process. Cambridge: Cambridge University Press.
#1 For the exception, see Graphic AXEC137b.
May 2, 2015
Walras is long gone
Comment on Lars Syll on ‘On the irrelevance of general equilibrium theory’
Blog-Reference
Let me start with your summary. You [Ezra Davar] say: “In development of any science a continuity plays crucial role. So, it is impossible to neglect achievement of such authors as Smith, Marx, Walras, Marshall and so many others eminent authors.”
Since economics is scientifically in secular stagnation, most economists, you included, have obviously lost sight of the idea of the scientific revolution: “... most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992, p. 248)
Apply your argument to Copernicus, Kepler, and Galileo in their relation to Ptolemy, and you immediately see that continuity is not exactly the top priority of great scientists. This is especially so when they are confronted with savants (instead of real scientists): “These savants, as Galileo put it, first decided how the world should function in accordance with their preconceived principles. ... He openly criticized scientists and philosophers who accepted laws which conformed to their preconceived ideas as to how nature must behave. Nature did not first make men’s brains, he said, and then arrange the world so that it would be acceptable to human intellects.” (Kline, 1982, p. 48)
So let us, first of all, put the authors Smith, Marx, Walras, and Marshall into the category of savants and place them next to Ptolemy in the scientific Walhalla.
With regard to economics, the most deleterious of the preconceived ideas has been equilibrium: Wherever economics is used or thought about, equilibrium is a central organising idea.” (Hahn, cited in Boland, 2003, p. 99)
In a previous post, I summarized, ‘Because equilibrium is a NONENTITY, all equilibrium models are methodologically unacceptable.’ And this means that the differences between the multitude of variants of equilibrium models play no role at all.
So your attempt to argue 'What Walras really meant’ is futile because if anything is indisputable, then that Walras was an equilibrist. Of course, I agree with you that there are differences and overlaps between the original Walrasian, the input-output, and the Neo-Walrasian approach (see Mitra-Kahn 2008), but these are only of historical interest.
“At long last, it can be said that the history of general equilibrium theory from Walras to Arrow-Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin ...” (Blaug, 2001, p. 160)
Let Walras rest in peace and equilibrium with him.
Equilibrium, in whatever definition, must not be taken into the premises. Methodologically, this amounts to a petitio principii (cf. Mill, 2006, pp. 819-827). Not admitted are, in addition, utility, optimization, and rational expectation. The first rule of theory-building says: never put NONENTITIES into the axiomatic premises (2014, p. 11).
Egmont Kakarot-Handtke
References
Blaug, M. (2001). No History of Ideas, Please, We’re Economists. Journal of Economic Perspectives, 15(1): 145–164.
Boland, L. A. (2003). The Foundations of Economic Method. A Popperian Perspective. London, New York: Routledge, 2nd edition.
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Kakarot-Handtke, E. (2014). The Logic of Value and the Value of Logic. SSRN Working Paper Series, 2399550: 1–20. URL
Kline, M. (1982). Mathematics. The Loss of Certainty. Oxford, New York: Oxford University Press.
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.
Mitra-Kahn, B. H. (2008). Debunking the Myths of Computable General Equilibrium Models. CEPA Working Paper 2008-1, 1–93. URL
For the correct and complete set of macrofoundations — structural axioms and behavioral propensity function — see Graphic AXEC137b.
Blog-Reference
Let me start with your summary. You [Ezra Davar] say: “In development of any science a continuity plays crucial role. So, it is impossible to neglect achievement of such authors as Smith, Marx, Walras, Marshall and so many others eminent authors.”
Since economics is scientifically in secular stagnation, most economists, you included, have obviously lost sight of the idea of the scientific revolution: “... most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992, p. 248)
Apply your argument to Copernicus, Kepler, and Galileo in their relation to Ptolemy, and you immediately see that continuity is not exactly the top priority of great scientists. This is especially so when they are confronted with savants (instead of real scientists): “These savants, as Galileo put it, first decided how the world should function in accordance with their preconceived principles. ... He openly criticized scientists and philosophers who accepted laws which conformed to their preconceived ideas as to how nature must behave. Nature did not first make men’s brains, he said, and then arrange the world so that it would be acceptable to human intellects.” (Kline, 1982, p. 48)
So let us, first of all, put the authors Smith, Marx, Walras, and Marshall into the category of savants and place them next to Ptolemy in the scientific Walhalla.
With regard to economics, the most deleterious of the preconceived ideas has been equilibrium: Wherever economics is used or thought about, equilibrium is a central organising idea.” (Hahn, cited in Boland, 2003, p. 99)
In a previous post, I summarized, ‘Because equilibrium is a NONENTITY, all equilibrium models are methodologically unacceptable.’ And this means that the differences between the multitude of variants of equilibrium models play no role at all.
So your attempt to argue 'What Walras really meant’ is futile because if anything is indisputable, then that Walras was an equilibrist. Of course, I agree with you that there are differences and overlaps between the original Walrasian, the input-output, and the Neo-Walrasian approach (see Mitra-Kahn 2008), but these are only of historical interest.
“At long last, it can be said that the history of general equilibrium theory from Walras to Arrow-Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin ...” (Blaug, 2001, p. 160)
Let Walras rest in peace and equilibrium with him.
Equilibrium, in whatever definition, must not be taken into the premises. Methodologically, this amounts to a petitio principii (cf. Mill, 2006, pp. 819-827). Not admitted are, in addition, utility, optimization, and rational expectation. The first rule of theory-building says: never put NONENTITIES into the axiomatic premises (2014, p. 11).
Egmont Kakarot-Handtke
References
Blaug, M. (2001). No History of Ideas, Please, We’re Economists. Journal of Economic Perspectives, 15(1): 145–164.
Boland, L. A. (2003). The Foundations of Economic Method. A Popperian Perspective. London, New York: Routledge, 2nd edition.
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Kakarot-Handtke, E. (2014). The Logic of Value and the Value of Logic. SSRN Working Paper Series, 2399550: 1–20. URL
Kline, M. (1982). Mathematics. The Loss of Certainty. Oxford, New York: Oxford University Press.
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.
Mitra-Kahn, B. H. (2008). Debunking the Myths of Computable General Equilibrium Models. CEPA Working Paper 2008-1, 1–93. URL
For the correct and complete set of macrofoundations — structural axioms and behavioral propensity function — see Graphic AXEC137b.
May 1, 2015
What are the alternatives?
Comment on Lars Syll on ‘On the irrelevance of general equilibrium theory’
Blog-Reference
You [Ezra Davar] ask "Is Input-Output Analysis of Leontief a nonentity?"
As far as it is used as a mathematical device, it is not; as far as it is abused to illustrate the Walrasian equilibrium of all markets, it is. For a formal proof, see (2013).
You say, "So, our task to change them [the assumptions of general equilibrium] by much more realistic assumptions."
It is not so much a matter of assumptions. Each theory is based on axioms, so we have to move from the obsolete orthodox axiom set to a heterodox axiom set. This is what a Paradigm Shift is all about. Playing with realistic/unrealistic assumptions keeps economists busy without ever leading to worthwhile results.
You ask, "What is an alternative?"
I agree with you, Keynes's approach is not an alternative to Walras's. It too suffers from severe methodological deficits. For a formal proof, see (2011).
The alternative has already been pointed out by Joan Robinson: Scrap the lot and start again!#1
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN
Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2013). Walras’s Law of Markets as Special Case of the
General Period Core Theorem. SSRN Working Paper Series, 2222123: 1–12. URL
#1 For the new formal start with structural axioms and the behavioral propensity function, see Graphic AXEC137b.
Blog-Reference
You [Ezra Davar] ask "Is Input-Output Analysis of Leontief a nonentity?"
As far as it is used as a mathematical device, it is not; as far as it is abused to illustrate the Walrasian equilibrium of all markets, it is. For a formal proof, see (2013).
You say, "So, our task to change them [the assumptions of general equilibrium] by much more realistic assumptions."
It is not so much a matter of assumptions. Each theory is based on axioms, so we have to move from the obsolete orthodox axiom set to a heterodox axiom set. This is what a Paradigm Shift is all about. Playing with realistic/unrealistic assumptions keeps economists busy without ever leading to worthwhile results.
You ask, "What is an alternative?"
I agree with you, Keynes's approach is not an alternative to Walras's. It too suffers from severe methodological deficits. For a formal proof, see (2011).
The alternative has already been pointed out by Joan Robinson: Scrap the lot and start again!#1
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN
Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2013). Walras’s Law of Markets as Special Case of the
General Period Core Theorem. SSRN Working Paper Series, 2222123: 1–12. URL
#1 For the new formal start with structural axioms and the behavioral propensity function, see Graphic AXEC137b.
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