From Orthodoxy to Heterodoxy to Metadoxy

Comment on Noah Smith on ‘Occult Mysteries of the Heterodox’

Blog-Reference

Orthodoxy has failed on all counts and has no future. This is the point of departure of all new economic thinking.

Because every theory is defined by its foundational premises, a.k.a. axioms, there is, as a matter of principle, no need to refute every single proposition of the elaborated theoretical superstructure, it suffices to ‘throw over’ (Keynes) the axioms. Yet, this is not enough. The negative/destructive first step must be followed by a positive/constructive second step. As Blaug put it: “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.” (1998, p. 703)

First step: economics has to throw over the orthodox set of axioms which is defined by these six hardcore propositions:
HC1 There exist economic agents.
HC2 Agents have preferences over outcomes.
HC3 Agents independently optimize subject to constraints.
HC4 Choices are made in interrelated markets.
HC5 Agents have full relevant knowledge.
HC6 Observable economic outcomes are coordinated, so they must be discussed with reference to equilibrium states. (Weintraub, 1985, p. 109)

Note that we follow here Keynes’s methodological insight as laid down in the General Theory: “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight ― as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.” (1973, p. 16)

In other words, the methodological revolution in economics consists of the switch from behavior-centered bottom-up, i.e. subjective microfoundations, to structure-centered top-down, i.e. objective macrofoundations.

Accordingly, Keynes went on to define the new set of foundational propositions: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, p. 63)

Unfortunately, at this critical juncture, an error slipped in because Keynes did not come to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al., 2010, p. 12)

Because of this, Keynes’s two foundational macroeconomic equations (Y=C+I, S=Y−C) have to be replaced. The most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm and is given by these three objective/structural/systemic axioms:
(A1) Y_w=WL wage income Y_w 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.

The investment good sector comes in at a later stage. So, what we have with (A1) to (A3) is the pure production-consumption economy as the most elementary economic structure. This structure is the core of what Keynes called the monetary theory of production and it fully replaces the silly real exchange models.

After-Keynesians either got stuck at IS-models which are provably false (2011) or fell back to maximization-and-equilibrium, i.e. HC1 to HC6, or both as in the case of the maximal confused Krugman (2014).

Human behavior, tastes, choice, or society have no durable underlying structure but the monetary economy has and this systemic structure is given in the most elementary case by (A1) to (A3). Economics is not a behavioral or social science but a systems science. A system can be unambiguously defined. This is the indispensable condition to do science. The alternative to science is storytelling. This is what Walrasians, Keynesians, Marxians, and Austrians are actually doing.

Keynes started the Paradigm Shift from micro to macro. However, he got stuck with the definition of overall profit. Not knowing what profit is turns out to be fatal for every economist and every approach. This methodological deadlock is overcome with the axiomatic set (A1) to (A3) which provides the formally and materially consistent economic theory (2015). Thus Metadoxy replaces both Orthodoxy and Heterodoxy.

This is the alternative for Noah Smith: to move on to Metadoxy or to be buried behind the curve.

Egmont Kakarot-Handtke


References
Blaug, M. (1998). Economic Theory in Retrospect. Cambridge: Cambridge University Press, 5th edition.
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. 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.
Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL
Weintraub, E. R. (1985). General Equilibrium Analysis. Cambridge, London, New York, etc.: Cambridge University Press.

Immediately preceding Just one more absurdity

Related 'Finalizing the Keynesian Revolution'. For details of the big picture see cross-references Paradigm Shift.

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Finalizing the Keynesian Revolution

Comment on Lars Syll on ‘Mainstream economics — a wildly inconsistent project’

Blog-Reference and Blog-Reference on Mar 7

Orthodoxy is a failed approach. Because every theory is defined by its foundational premises, a.k.a. axioms, there is, as a matter of principle, no need to refute every single proposition of the vast theoretical superstructure, it suffices to ‘throw over’ (Keynes) the axioms. Yet, this is not enough. The negative/destructive first step must be followed by a positive/constructive second step. As Blaug put it: “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.” (1998, p. 703)

First step: economics has to throw over the orthodox set of axioms which is defined by these six hardcore propositions:
HC1 There exist economic agents.
HC2 Agents have preferences over outcomes.
HC3 Agents independently optimize subject to constraints.
HC4 Choices are made in interrelated markets.
HC5 Agents have full relevant knowledge.
HC6 Observable economic outcomes are coordinated, so they must be discussed with reference to equilibrium states. (Weintraub, 1985, p. 109)

Note that we follow exactly Keynes’ methodology as laid down in the General Theory: “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight ― as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.” (1973, p. 16)

In other words, the methodological revolution in economics consists of the switch from behavior-centered bottom-up, i.e. subjective microfoundations, to structure-centered top-down, i.e. objective macrofoundations of the world economy.

Accordingly, Keynes went on to define the new set of foundational propositions, a.k.a. axioms: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, p. 63)

Unfortunately, at this critical juncture, an error slipped in because Keynes did not come to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al., 2010, p. 12)

Because of this, Keynes’ two foundational macroeconomic equations (Y=C+I, S=Y−C) have to be replaced. The most elementary configuration of the economy consists of the household sector and the business sector which in turn consists initially of one giant fully integrated firm and is given by these three objective structural axioms:
(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.

The investment goods sector comes in at a later stage. So, what we have with (A1) to (A3) is the elementary production-consumption economy as the most elementary economic configuration. These premises are certain, true, and primary, and therefore satisfy perfectly all methodological requirements. Note that unacceptable nonentities like utility, maximization, or equilibrium are absent.

Human behavior, tastes, choice, or society have no durable underlying structure, but the monetary economy has and it is given in the most elementary case by (A1) to (A3). Economics is not a behavioral or social science but a systems science. A system can be unambiguously defined.

Keynes started the Paradigm Shift from microfoundations to macrofoundations. However, he got stuck with the definition of overall macroeconomic profit. The consistent axiomatic set (A1) to (A3) overcomes this fatal deadlock and finalizes the Keynesian revolution (2011; 2014; 2015).

To paraphrase a summary of Blaug: ‘At long last, it can be said that the history of general theory from Walras to Arrow-Debreu and on to DSGE has been a journey down a blind alley, and it is the set (A1) to (A3) to have finally hammered down the nails in the coffin.’ (Cf. 2001, p. 160)

Egmont Kakarot-Handtke


References
Blaug, M. (1998). Economic Theory in Retrospect. Cambridge: Cambridge University Press, 5th edition.
Blaug, M. (2001). No History of Ideas, Please, We’re Economists. Journal of Economic Perspectives, 15(1): 145–164.
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2014). Economics for Economists. SSRN Working Paper Series, 2517242: 1–29. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. 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.
Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL
Weintraub, E. R. (1985). General Equilibrium Analysis. Cambridge, London, New York, etc.: Cambridge University Press.

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Lawson’s fundamental methodological error and the failure of Heterodoxy

Comment on Lars Syll on ‘Critical realism and scientific explanation’

Blog-Reference and Blog-Reference on Mar 5

As far as the critique of orthodox economics is concerned, critical realism is correct. Yet, the fundamental error of critical realism is to assume that economics is about ‘how society works’. No! This is the subject matter of sociology. Economics is about ‘how the economy works.’ Society and economy are intertwined but must be separated analytically.

Since Adam Smith, economics claims to be a science. Methodologically, it started as a mixture of sociology and political science: “The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object.” (Mill, 1874, V.39)

With respect to the subject matter, there is no difference between Mill and Marx: “My stand-point, from which the evolution of the economic formation of society is viewed as a process of natural history, ...” (Marx, 1906, M.9)

With Jevons/Walras/Menger the focus shifted to methodological individualism and economics became a mixture of dilettantish psychology, sociology, and political science. This approach has failed abysmally.

Economics is NOT a science of individual/social/political behavior but of the behavior of the monetary economy. Accordingly, the correct definition of the subject matter is objective/ structural/systemic: “Economics is the science which studies how the monetary economy works.”

As a consequence, the long-overdue Copernican turn in economics consists of the methodological switch from behavior-centered bottom-up, i.e. subjective microfoundation, to structure-centered top-down, i.e. objective macrofoundations. All Human-Nature issues are the subject matter of other disciplines (psychology, sociology, anthropology, biology/Darwinism, political science, history, philosophy, etcetera) and are taken in from these by way of multidisciplinary cooperation. To paraphrase J. S. Mill: ‘Economics as a systems science presupposes all the physical and social sciences; it takes for granted all such of the truths of those sciences as are concerned with the working of the economic system.’ (cf. Mill 1874, V.29)

Lars Syll summarizes Tony Lawson: “We have to maintain the Enlightenment tradition of thinking of reality as principally independent of our views of it and of the main task of science as studying the structure of this reality. Perhaps the most important contribution a researcher can make is reveal what this reality that is the object of science actually looks like.”

Exactly so.

Therefore, economics has to drop these axioms/microfoundations:
HC1 There exist economic agents.
HC2 Agents have preferences over outcomes.
HC3 Agents independently optimize subject to constraints.
HC4 Choices are made in interrelated markets.
HC5 Agents have full relevant knowledge.
HC6 Observable economic outcomes are coordinated, so they must be discussed with reference to equilibrium states.” (Weintraub, 1985, p. 109)

Lawson’s critique fully applies to the theoretical superstructure that has been built upon HC1 (= methodological individualism) to HC6 (= closure).

The proper object of economics is neither the individual nor society but the economy. So we have to move on and, first of all, describe the structure of the monetary economy.

(A0) The 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 and is given by three objective structural axioms/macrofoundations:
(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 premises are certain, true, and primary, and therefore satisfy perfectly all methodological requirements (2014). In the words of Lars Syll: “Science is made possible by the fact that there are structures that are durable and are independent of our knowledge or beliefs about them. There exists a reality beyond our theories and concepts of it. It is this independent reality that our theories in some way deal with.”

Society has no durable structures but the monetary economy has and they are given in the most elementary case by (A1) to (A3). Economics is not a social science but a systems science and it deals not with the defects of society but with systemic defects that produce what every superficial observer can see but not understand (2015).

The fundamental flaw of Lawson’s methodology is that he defines economics as a social science.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
Marx, K. (1906). Capital: A Critique of Political Economy, Vol. I. The Process of Capitalist Production. Library of Economics and Liberty. URL
Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On the Definition of Political Economy; and on the Method of Investigation Proper To It. Library of Economics and Liberty. URL
Weintraub, E. R. (1985). General Equilibrium Analysis. Cambridge, London, New York, NY, etc.: Cambridge University Press.

Related 'Economists’ three-layered scientific incompetence'. For details of the big picture see cross-references Heterodoxy and cross-references Paradigm Shift and cross-references Axiomatization.

For more on Lawson see AXECquery.

Just one more absurdity

Comment on Noah Smith on ‘Occult Mysteries of the Heterodox’

Blog-Reference

The major problem of economics is not that the subject matter is occult but that economists are stupid.

From the Palgrave Dictionary, every student of economics can know: “A satisfactory theory of profits is still elusive.” (Desai, 2008, p. 10)

Let this sink in: Neither Classicals, nor Walrasians, nor Marshallians, nor Marxians, nor Keynesians, nor Institutionalists, nor Monetary Economists, nor MMTers, nor Austrians, nor Sraffaians, nor Evolutionists, nor Game theorists, nor EconoPhysicists, nor RBCers, nor New Keynesians, nor New Classicals ever came to grips with profit. Therefore, ALL these approaches fail to capture the essence of the market economy.

It is self-evident: an economist who cannot tell the difference between income and profit has nothing worthwhile to say about how the economy works. Economics is at the level of medieval physics before the concept of energy and the difference between potential and kinetic energy was properly understood.

In fact, it is even worse. Not to understand a physical or social phenomenon is the natural state of human beings. But to offer an explanation that is false on the face of it is to violate well-defined scientific standards.

An orthodox economist subscribes to this set of axioms:
HC1 There exist economic agents.
HC2 Agents have preferences over outcomes.
HC3 Agents independently optimize subject to constraints.
HC4 Choices are made in interrelated markets.
HC5 Agents have full relevant knowledge.
HC6 Observable economic outcomes are coordinated, so they must be discussed with reference to equilibrium states. (Weintraub, 1985, p. 109)

This set is unacceptable as the foundation of economics. Some economists have clearly seen this and drawn the logical conclusion: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990, p. 362)

And here is the crux: neither orthodox nor heterodox economists have until this very day any clue about ‘what it might mean’.

Orthodoxy is unacceptable and indefensible. Before he even opens his mouth, the orthodox economist has disqualified himself as scientifically incompetent. So, Noah Smith is, to begin with, not at all in the position to criticize Heterodoxy for a lack of methodologically sound foundations.

To top the absurdity, instead of refraining from spreading the provably false orthodox approach and doing his own research, Noah complains about not being spoon-fed with the true economic theory for free. To recall, the first thing every Econ 101 student learns as the gospel of Orthodoxy is that there is no such thing as a free lunch.

Indeed, logic has never been the strong point of economists and this is why they are for more than 200 years behind the curve: “We are not yet out of the wood; in fact, we are not yet in it.” (Schumpeter, 1994, p. 7)

This applies to Orthodoxy in general and to Noah Smith in particular.

Egmont Kakarot-Handtke


References
Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online,1–11. Palgrave Macmillan, 2nd edition. URL
Ingrao, B., and Israel, G. (1990). The Invisible Hand. Economic Equilibrium in the History of Science. Cambridge, London: MIT Press.
Schumpeter, J. A. (1994). History of Economic Analysis. New York: Oxford University Press.
Weintraub, E. R. (1985). General Equilibrium Analysis. Cambridge, London, New York, etc.: Cambridge University Press.

Immediately preceding How to rise above proto-scientific garbage.

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REPLY  to rosserjb on Mar 5

It is widely known that the universal quantifier ALL may in some cases lead to a paradox (see Wikipedia). You are perfectly right to remind me of this.

By consequence, the statement ‘economists are stupid’ has to be replaced by ‘economists are stupid ― except those who assert that economists are stupid’. A good example is provided by Hausman: “If one takes seriously what Popper says about falsifiability and the critical attitude, then the methodological practice of economics is not only mistaken, it is stupid and intellectually reprehensible.” (1992, p. 275)

This applies to Orthodoxy in general and to Noah Smith and you in particular.


References
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.

How to rise above proto-scientific garbage

Comment on Noah Smith on ‘Occult Mysteries of the Heterodox’

Blog-Reference

Economists do not understand how the market system works. Every interested non-economist gets this intuitively after reading one of the popular textbooks: “What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work: were it engineering, the bridge would collapse.” (McCauley, 2006, p. 17)

Because of this, every thinking economist finds himself by default in the heterodox camp. But here only one obvious fact is agreed upon, the rest is blank: “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, 1980, p. 1)

Construction, though, never happened. What we have is an incoherent multitude of individual approaches. Heterodoxy never rose above naive empirical/historical/partial/ sociological commonsense analysis and did not succeed in formulating a general theory of how the monetary economy works. Keynes took on the task, but After-Keynesians lost focus and did not finish it.

So Noah’s key statement is spot-on: “Critiquing the old is fine and good, but it is not the same as inventing the new.” (See intro)

True indeed, and well-known for a long time: “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)

Accordingly, the current state of economics is this: Heterodoxy has failed to fully replace the fundamentally defective Orthodoxy or, in the jargon of methodology, to perform the inevitable Paradigm Shift. Strictly speaking, there is no economics at all, only confused blather (2013; 2014).

What, then, follows from Noah’s justified critique? The right thing to do is to leave Orthodoxy and traditional Heterodoxy behind and to move on to constructive Heterodoxy, that is, to perform the required Paradigm Shift and ― after more than 200 years ― to make economics a science.

Egmont Kakarot-Handtke


References
Blaug, M. (1998). Economic Theory in Retrospect. Cambridge: Cambridge University Press, 5th edition.
Kakarot-Handtke, E. (2013). Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series, 2207598: 1–16. URL
Kakarot-Handtke, E. (2014). Economics for Economists. SSRN Working Paper Series, 2517242: 1–29. URL
McCauley, J. L. (2006). Response to "Worrying Trends in EconoPhysics". EconoPhysics Forum, 0601001: 1–26. URL
Nell, E. J. (1980). Growth, Profits, and Property, chapter Cracks in the Neoclassical Mirror: On the Break-Up of a Vision,1–16. Cambridge, New York, NY, Melbourne: Cambridge University Press.

Immediately preceding The unveiled mystery of economic blather.
Immediately following Just one more absurdity.

The unveiled mystery of economics blather

Comment on Noah Smith on ‘Occult Mysteries of the Heterodox’

Blog-Reference

(i) Science is about true/false and methodology is about how to ascertain the truth/ falsity of a theory/model. There is no mystery in science, just the contrary, it is the very opposite of mystery.

(ii) Logical and empirical consistency are the criteria of a true theory/model. Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-the-art testing.

(iii) Orthodoxy and Heterodoxy got the axiomatic foundations wrong.

(iv) Orthodoxy is built upon the following hard core 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, 1985, p. 147)

These premises are provably false. Because of this, the whole theoretical superstructure from Jevons/Walras/Menger to DSGE is false. Not to realize the axiomatic falsity of orthodox economics proves the scientific incompetence of proponents and opponents alike.

(v) Keynes formulated the macroeconomic premises of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, p. 63)

This elementary syllogism is conceptually and logically defective because Keynes did not come to grips with profit and therefore “discarded the draft chapter dealing with it.” (Tómasson et al., 2010, p. 12). As a result, all I=S models including the Keynesian multiplier are false (2014).

(vi) Neither Keynesians nor Walrasians have grasped the fundamental difference between profit and income. Because of this fatal conceptual defect, their theories/models are scientifically worthless. Because the profit theory is false economists do not know how the economy works. From all this follows that economic policy guidance has no scientifically valid foundations and is therefore useless or even harmful.

(vii) Keynesians are for more than 80 years in the dark. Sorta-kinda neoclassicals are since more than 150 years in the dark. Because they have disqualified themselves neither Keynesians nor Walrasians can be taken seriously. The same holds for Marxians and Austrians and all the rest.

Because of their incompetence, economists are a scientific nuisance and a menace to their fellow citizens. They can significantly increase the welfare of humanity by simply shutting up.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. 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.
Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

Related 'Orthodoxy?―NO, Heterodoxy?―NO: Scrap ALL this crap!' and 'How to rise above proto-scientific garbage'.

For details of the big picture see cross-references Proto-Science/Cargo Cult Science/Fake Science.

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Bentham,  Utilitarianism and the methodologically unacceptable axiomatic foundations  of economics

Orthodoxy?―NO, Heterodoxy?―NO: Scrap ALL this crap!

Comment on Noah Smith on ‘Occult Mysteries of the Heterodox’

Blog-Reference

Economics is a failed science. Orthodoxy has not produced anything of scientific value since Adam Smith (2014) and Heterodoxy has been unable since Veblen to develop a superior alternative (2011). The core problem of economics is that there is nothing to choose from (2013).

Economics claims to be a science. This is a serious case of self-delusion. 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, 1994, p. 31). The fact of the matter is that neither Orthodoxy nor Heterodoxy fits the bill. Accordingly, what we actually have is what Feynman famously characterized as cargo cult science.

There is absolutely no need for anyone to invent a new methodology. Science has been defined already by the ancient Greeks as formal and material consistency. Economics has never satisfied these standards. Worse, economists violate scientific standards on a daily basis. There is no exception: Walrasian, Keynesian, Marxian, and Austrian economics is provably false.#1

The fact that Orthodoxy produces lots of free educational stuff is of no merit. Just the contrary, because this stuff is provably false: “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, 1941, pp. 369-370)

Boiled down to the essentials, Orthodoxy’s methodological position is “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). Clearly, everything based on maximization-and-equilibrium is proto-scientific garbage.#2 No matter how many slides and videos are produced ‘like crazy’ for dull Econ 101 students, it remains garbage for all eternity.

Orthodoxy has been refuted on all counts. What currently parades as economics is a heap of ill-founded opinions. What Orthodoxy and traditional Heterodoxy have in common is scientific incompetence.

The most urgent task for every economist is NOT to produce fancy slides of brain-dead economic models like crazy but as Joan Robinson defined it: "Scrap the lot and start again." This is what Paradigm Shift means.

For both orthodox and heterodox economists, though, it is already too late. The only thing they can do for the scientific progress of economics is to shut up and retire.

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). Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series, 2207598: 1–16. URL
Kakarot-Handtke, E. (2014). The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? SSRN Working Paper Series, 2511741: 1–23. URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield: Edward Elgar.
Morgenstern, O. (1941). Professor Hicks on Value and Capital. Journal of Political Economy, 49(3): 361–393. URL

#1 How the intelligent non-economist can refute every economist hands down
#2 Economists’ three-layered scientific incompetence

Related 'The unveiled mystery of economic blather'.

For details of the big picture see cross-references Failed/Fake Scientists

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