How to get rid of the silly Queen

Comment on Lars Syll on ‘Economics — spending time doing silly things’

Blog-Reference and Blog-Reference

Currently, economists are in the mode of thorough self-critique. Yes, we have done too much math, yes, our reduction of multi-dimensional homo sapiens to one-dimensional homo oeconomicus has been rather one-sided, yes, the Chicago free market philosophy has gone over the top, yes, there has been too much abstract model building and too little empirics and, yes, we have done all these silly things because “the profession” has told us so. Economics, it seems, has all these years not at all been about the economy but about signaling: “So DSGE might be an expensive way of proving that you’re willing to spend a lot of time and effort doing silly stuff that the profession tells you to do.” (See intro)

Why are the once-proud heralds of the famous Queen of the so-called social sciences all of a sudden so conspicuously back-pedaling and ducking and discounting relevance? This question opens a wide field for speculation and second-guessing. But, clearly, to enter this playground of storytellers, gossipers, and wish-washers would be beyond silly. The very practical point is to take the opportunity and to get people who have disqualified themselves by doing silly things and talking nonsense finally out of science.

Economics is a failed science. Let us briefly spot the causal blunders. These are NOT located in the theoretical superstructure: “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.” (Hutchison 1960)

Standard economics is built upon this set of foundational 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)

Methodologically, these premises are forever unacceptable but economists swallowed them hook, line and sinker from Jevons/Walras/Menger onward. The failure of methodological individualism and all other psycho/socio-approaches can be stated as an impossibility theorem: NO way leads from the explanation of human nature/behavior/action to the explanation of how the economic system works.

Keynes, as the other main protagonist, defined his set of foundational propositions in the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.”

This elementary syllogism is conceptually defective because Keynes never came to grips with profit. As a result, all I=S models and the Keynesian multiplier are false.

Conclusion: The one silliness of economists consists of the inability to spot the errors/mistakes in their respective axiom sets and to blindly build their respective theoretical edifices higher and higher upon unsuitable foundations. This holds also for Marxianism and Austrianism. The other silliness consists of the repetitive critique of well-known defects: “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)

And here is how to transcend the silliness of Orthodoxy and Heterodoxy: the forever unacceptable microfoundations have to be replaced by macrofoundations. This is achieved with this set of objective-structural foundational propositions. (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. (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 good sector and more and more individual firms come in at a later stage. This increases complexity step by step. So, what we initially have with (A1) to (A3) is the pure consumption economy as the most elementary economic configuration. These premises are certain, true, primary, entirely free of green cheese behavioral assumptions, and therefore perfectly suited as the foundations of an “edifice that one wishes to expand and to build higher while preserving its stability.” (Hilbert 2005)

Human behavior, tastes, choices, 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). A system can be unambiguously defined.

Economics has to step down as Queen of the so-called social sciences in order to eventually become King of the systems sciences. This Paradigm Shift, clearly, is beyond the means of the silly folks of traditional orthodox and heterodox economics.

Egmont Kakarot-Handtke

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REPLY to Ken Zimmerman on Jun 24

You write: “As sociologist Edward Ross pointed out to the AEA in 1889, ignorance of custom, tradition and authority left economists ill-equipped to carry out their analysis of trade. It’s my view Ross hit the error of economists today on the head.”

The fundamental error of Ross and you 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, ...” (J. S. 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 Human Nature or 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 overdue Copernican turn in economics consists in the methodological switch from behavior-centered bottom-up, i.e. subjective microfoundations, to structure-centered top-down, i.e. objective macrofoundations of the world economy. All Human-Nature issues are the subject matter of other disciplines (psychology, sociology, anthropology, biology/Darwinism/evolution theory, political science, social philosophy, etcetera) and are taken in from these by way of multidisciplinary cooperation IF NEEDED.

Economics is NOT a science of behavior (Hudík, 2011).#1 Economics is not a so-called social science like psychology/sociology and not a natural science like physics but a systems science.

By the way, it seems to have escaped your attention that Luhmann has defined sociology as a systems science (1995) and this, indeed, is the common methodological platform of sociology and economics (2014). With Edward Ross of 1889, you are way behind the curve.


References
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Kakarot-Handtke, E. (2014). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
Luhmann, N. (1995). Social Systems. Stanford: Stanford University Press.
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

#1 See also cross-references

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REPLY to Ken Zimmerman on Jun 27

For somebody with a small horizon, the earth is for all practical purposes flat and all empirical evidence is so convincing that it is almost impossible to transcend this commonsensical worldview and ever get out of the tiny box. All the more so because science is, as a rule, counter-intuitive and requires the emancipation from small-scale idiosyncratic personal experience.

Because of this, nothing seems more commonsensical than your assertion: “All that happens, I repeat, ALL is created via interactions (relationships) among a number of actors.” As a matter of fact this view ― let us call it the Science-of-Man fallacy ― is as old as the hills. It goes back to Hume.

“And as the science of man is the only solid foundation for the other sciences, so the only solid foundation we can give to this science itself must be laid on experience and observation.” (2012, Introduction)

It reappears with the Austrian sect.

“Mises’ contribution was very simple and at the same time extremely profound. He pointed out that the whole economy is the result of what individuals do.” (Foreword, von Mises, 2007, p. v)

And it is the tenet of Orthodoxy.

“It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals.” (Arrow, 1994, p. 1)

The common denominator of all Science-of-Man approaches is that they are scientific failures. Not much profound insight about how the economy works has come from them. Until this day the representative economist cannot even tell the difference between income and profit.

Consistent with the low performance of flat-earthers in general you have not put forward one single testable proposition about an important economic relationship. This is rather odd for a person who claims to apply the right methodology. In science, claims and opinions do not count for much, only proof counts.


References
Arrow, K. J. (1994). Methodological Individualism and Social Knowledge. American Economic Review, Papers and Proceedings, 84(2): 1–9. URL
Hume, D. (2012). A Treatise of Human Nature. Project Gutenberg EBook. URL
von Mises, L. (2007). Human Action. A Treatise on Economics, Vol. I. Indianapolis: Liberty Fund. (1949).

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REPLY to Ken Zimmerman on Jun 28

(i) You say: “The entire structure of western (but not all sciences) rests on the assumption that’s possible to go from an observation to conclusions about that observation.”

False. This holds only for the proto-scientific stage. For details see this chart.

The scientific stage starts with a well-articulated theory that is based on axioms. Axioms, in turn, are NOT DIRECTLY based on naive observation/experience but are a sophisticated logical construct: “If then it is the case that the axiomatic basis of theoretical physics cannot be an inference from experience, but must be free invention, have we any right to hope that we shall find the correct way?” (Einstein, 1934, p. 167)

As we know from history, scientists have found the correct way. You definitively do not understand the specific characteristics of science and mess it up with observationism: “The Baconian dogma I have in mind asserts the supreme merits of observation and the viciousness of theorizing speculation. I shall call this dogma, briefly, by the name ‘observationism’.” (Popper, 1994, p. 84)

(ii) You say: “Putting forth testable propositions about economic interactions is not my job. I’m not an economist. Rather, it’s your job as an economist. As a historian I don’t test propositions, I examine the stories of how humans live together.”

True. Historians are storytellers and second-guessers but NO scientists. Because of this, they have NOTHING useful to say about methodology. Psychologists, too, have not much to say because economics is NOT about human psychology/behavior but about the behavior of the economic system. Economics is NOT a so-called social science but a systems science. For more about the cargo-cult science psychology see Feynman on Wikipedia or YouTube.

(iii) You say: “Finally, following this dictum if you can find some other variables to measure and test except relational ones let me know. That would change everything. A brand new universe would emerge.”

Yes, indeed. Here you have the First Economic Law which defines the measurable and testable economic relations for the elementary consumption economy which in turn are entirely FREE of green cheese psychological/behavioral assumptions.#1 If you think this equation is false you can try to empirically refute it. This is how science works.


References
Einstein, A. (1934). On the Method of Theoretical Physics. Philosophy of Science, 1(2): 163–169. URL
Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and Rationality., chapter Science: Problems, Aims, Responsibilities, 82–111. London, New York: Routledge.

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REPLY to Ken Zimmerman on Jun 29

Science is well-defined by material AND formal consistency and scientists judge and are judged according to these criteria. Genuine scientists have NO problem with these methodological essentials but the so-called social scientists have. Their persistent attempts to redefine science are understandable but pointless: either one plays according to the rules of science or one is OUT. Your view “that science is the study of the relationships among all the things, forces, thoughts, etc. that make the world and are made by it” is simply irrelevant.

Economics: 200+ years of scientific incompetence and fraud

Comment on Noah Smith on ‘Is economics a science?’

Blog-Reference

“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)

The fact of the matter is that economists do NOT have the true theory. More precisely, economists do not know how the price and profit mechanism works. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit wrong.#1 With the pluralism of provably false theories economics sits squarely at the proto-scientific level.

The representative economist either does not realize it or cannot officially admit it. In this dire situation, the Pavlovian reaction is always and everywhere to muddy the waters and to retreat deeper into the swamp. Noah Smith is no exception, he rhetorically asks: “What the heck is a ‘science’?” and answers “No one knows.”

This is patently false. Science is ― since the ancient Greeks made the distinction between opinion (= doxa) and knowledge (= episteme) ― well-defined by 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)

The first question to Noah Smith: if no one knows what science is how does it come that we have a prize with the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#2 And how does it come that economics is since Adam Smith/Karl Marx explicitly defined as science? And what does every economist learn in Econ 101?: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins)

The fact is that economics claims to be a science but is what Feynman called a cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

What is missing is the true theory. Economics is a failed science because none of the major approaches satisfies the criteria of material and formal consistency. When this is pointed out economists immediately retract and fire their barrage of brain-dead excuses.#3 Noah Smith applies the same old defense maneuvers. Needless to emphasize that every single of these excuses has been refuted long ago.

Economists have found a way to deal with the problem of manifest failure: they simply ignore and violate scientific standards. Or, as Blaug put it, they are playing tennis with the net down. Morgenstern reminded his fellow economists back in 1941: “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.”

This is why Walrasianism is still around although it has already been dead in the cradle 150+ years ago. Standard economics has been based on provably false axioms but economists proudly cling to them until this day: “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) Note in passing that maximization and equilibrium are NONENTITIES like angels or the Easter Bunny. Time for Krugman and the rest to end stubborn self-delusion: all equilibrium models are a priori false and this starts with textbook supply-demand-equilibrium.#4

Economics is a failed science because economists (i) are scientifically incompetent, and (ii), violate scientific standards/ethics on a daily basis. Since Adam Smith, economic policy guidance has never had sound scientific foundations. Both, orthodox and heterodox economists sell proto-scientific garbage in the bluff package of science.

In order to become a science, economics needs a Paradigm Shift.#5 Nothing less will do.

Egmont Kakarot-Handtke


#1 First Lecture in New Economic Thinking
#2 The real problem with the economics Nobel
#3 Failed economics: The losers’ long list of lame excuses
#4 The father of modern economics and his imbecile kids
#5 The identification problem and the dumping of the old guard

Related 'Yes, economics is a bogus science' and 'Media-fake-farce-fraud-storytelling-macro' and 'Schizonomics' and 'The miracle cure of economists’ micro-macro schizo'. For details of the big picture see cross-references Scientific Incompetence and cross-references Proto-Science/Cargo Cult Science/Science and cross-references Failed/Fake Scientists.

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REPLY to Jake Thompson on Jun 18

You argue: “It’s certainly, by a long shot, the most scientific of the social sciences.”

Your lethal methodological blunders are:
(i) The underlying binary code of science is true/false with NOTHING in between. Because of this, economics is either a science or not. The statement, that economics is more scientific than X, is entirely devoid of meaning. (Just like the statement, Jake Thompson is by a long shot more innocent than Lee Harvey Oswald. Guilty/not guilty is also binary with NOTHING in between.)
(ii) Scientific truth is well-defined by material and formal consistency. It is not an easy task to establish scientific truth but from these practical difficulties cannot be concluded that it does not exist or that anything goes.
(iii) The major approaches ― Walrasianism, Keynesianism, Marxianism, and Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept of profit wrong.

Conclusion: Economics is NOT a science.

In order to rise above the proto-scientific level, economics needs a Paradigm Shift.#1 What failed economists first of all have to understand is that economics is NOT a social science but a systems science. To define economics as a social science has been the foundational blunder 200+ years ago. Being scientifically incompetent, though, economists will not understand this. It is Catch 22 and the representative economist is trapped in the scientific coal pit.#2


#1 For details see Redefining economics and cross-references Paradigm Shift
#2 “... but when the road ends at a coal-pit, he [the traveler] doesn’t need much judgment to know that he has gone wrong, and perhaps to find out what has led him astray.” (Hume) Obviously, you lack even this tiny quantity of judgment.

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REPLY to Anonymous on Jun 20

You argue: “Some parts of Econ are a science (game theory and I’d argue basic macro in simple markets) while the rest is more of an art (everything else).”

You are trying to evade a clear-cut conclusion and your argument is way beside the point.
(i) Economics is either a science or not. That some parts of it are acceptable is irrelevant. Every false theory has acceptable parts. Even the flat earth theory has some content that is true. False theories are always partially and commonsensically true. This is exactly why they can survive.
(ii) Game theory is NOT economics because economics does not deal with human behavior but with the behavior of the economic system. Economics is a systems science and all Human Nature/behavior issues belong to psychology, sociology, anthropology, and so on. To define economics as a social science has been the foundational blunder 200+ years ago.
(iii) Basic macro is provably false.#1
(iv) To call economics an art is simply a euphemism.

The conclusion is inescapable: Economics is NOT a science.


#1 For details see Textbooks and the mental cloning of dumb economists and Why Post Keynesianism Is Not Yet a Science.

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REPLY to Anonymous on Jun 24

You say: “Tell me your definition of science and we can debate this further.”

(i) Science is well-defined for 2300+ years. There is NO such thing as “my” or “your” definition. Because of this, there is NOTHING to debate.
(ii) Either one complies with the well-defined and well-known scientific standards or one is outside of science.
(iii) Economics is materially and formally inconsistent and therefore outside of science.#1
(iv) The definition of science has been given in the post above.#2 It seems that your attention span is less than that of a fruit fly.
(v) You say “I thought rational choice theory and behavioral economics was a thing.” Yes, this is the defining characteristic of the scientifically incompetent economist.#3
(vi) All of your arguments show that you are trying to play silly semantic games.


#1 “… suppose they [the economists] did reject all theories that were empirically falsified … Nothing would be left standing; there would be no economics.” (Hands)
#2 See here or here
#3 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist

The Supreme Being handed over these Twelve Economics Commandments

Comment on Barkley Rosser on 'Anniversary of Yeshua bin Yusuf dying on a cross'

Blog-Reference

The Supreme Being ― which is by logical necessity absolutely indifferent with regard to galaxy, planet, gender, age, race, nation, religion, party, social status, income/wealth ― spoke out of the clouds and handed over these Twelve Economics Commandments:

1. Never cite the Bible or other religious texts in an economic argument.

2. Maintain the strict separation of science and religion under all circumstances.

3. Maintain the strict separation of science and politics under all circumstances.#1

4. Do not dabble in psychology, sociology, anthropology, history, political science, philosophy, theology, social philosophy, or any other of the so-called social sciences. Economics is a systems science.

5. Do not believe: prove. The number of followers on social media does NOT count as scientific proof.

6. Figure out how the actual economic system works and communicate your results in the format of a materially/formally consistent theory.

7. Absolutely refrain from storytelling, metaphors, analogies, narratives, gossip, insinuation, filibuster, sermonizing, propaganda,  disinformation, foretelling/ prophecies/predictions, and other rhetorical means.

8. Do not apply methodological individualism/microfoundations/partial analysis.#2

9. Do not moralize, the subject matter of economics is IS not OUGHT. How the Good Society can be realized has to be determined in the political sphere by the Legitimate Sovereign. See 3.

10. Be, first of all, aware that there are knowledge and opinion, science and non-science, scientific standards/ethics and anything-goes, true and false with nothing in-between. The ethics of science is objectivity, i.e. material and formal consistency. The goal of economics is the true theory.

11. Rest assured that those who violate scientific standards/ethics go to hell and will be tortured in all eternity with the senseless blather of Walrasianism, Keynesianism, Marxianism, Austrianism, and Pluralism.#3

12. Make no mistake: alone scientists will go to heaven. As everyone can easily imagine, the Supreme Being will NOT share eternity with morons, imbeciles, political agenda pushers, blatherers, trolls, believers, impostors, journalists, the bigots of common sense, and failed/fake scientists.

Egmont Kakarot-Handtke


#1 The strict separation of the scientific realm and the political realm is necessary because politics always and everywhere corrupts science. This point has been made abundantly clear by J. S. Mill: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” For details see
Throw them out! Orthodox and heterodox economists are unfit for science
#2 If it isn’t macro-axiomatized, it isn’t economics
#3 Economics is not a science, not a religion, but proto-scientific garbage

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REPLY to Barkley Rosser on Mar 1

Economics claims since Adam Smith/Karl Marx to be a science. Yet, everybody who has a rough idea of what science is all about and looks closer into the matter comes to the conclusion that economics is a failed science. Economics consists of four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― which are mutually contradictory, axiomatically false, and materially/formally inconsistent.

Economics has to this day produced NOTHING of scientific value. This is the track record: provably false

• profit theory, for 200+ years,

• Walrasian microfoundations (including equilibrium), for 150+ years,

• Keynesian macrofoundations (including I=S/IS-LM), for 80+ years.

Economics needs a Paradigm Shift because the pluralism of false theories is untenable. Heterodoxy is provably false, just as Orthodoxy.#1 Economists do not know to this day how the price- and profit mechanism works. Economic policy guidance has had no sound scientific foundation for 200+ years.

Economics is what Feynman called a cargo cult science, economists are failed/fake scientists, the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel is a deception of the public.  Economics is one of the worst cases of failure/fraud in the history of modern science.

Gresham’s Law says that bad money crowds good money out of circulation. Something similar holds for economics which has become over the years the venue of incompetent scientists, agenda pushers, cranks, scammers, and useful political idiots.

Two typical exemplars of this species are Barkley Rosser and Andres. Barkley Rosser does to this day not understand the difference between the foundational concepts of profit and income, has busily produced peer-reviewed papers but contributed nothing to the advancement of science, and now spreads idiocy/disinformation on economics blogs.#2 His Yusuf post is a case in point. This self-disqualifying post is a good indicator of the vast proportions the accumulated bullshit has grown into in the last 200+ years of “economic sciences”.

#1 The stupidity of Heterodoxy is the life insurance of Orthodoxy

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

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Wikimedia AXEC139d

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REPLY to Andres on Mar 2

You say: “6. Human beings are irritating creatures. If you make an argument for why they should behave consistently under a given system, they will find some situation to make their behavior inconsistent, if for no other reason than to annoy the economist.”

Obviously, you have not realized that economics is a systems science and that there are objective systemic laws. It is long known that there is NO such thing as behavioral laws. Exactly for this reason it is sheer madness to build economics on the behavioral assumption of constrained optimization.

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

For details see:

• Economics is NOT a social science
• Cross-references NOT a Science of Behavior
• The existence of economic laws and the nonexistence of behavioral laws

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REPLY to Andres on Mar 2

It is always a grand spectacle to observe a goldfish brain starting to work and getting into high gear. You just re-discovered behavioral uncertainty: “… we might say that the human factor is the ultimately uncertain and wayward element in social life and in all social institutions.” (Popper, 1960), and change: “Important revolutions have occurred before our time, and since the days of Heraclitus change has been discovered over and over again.” (Popper, 1960)#1

I wonder how long it takes you to discover that the story of “one hapless dude who was nailed to a cross” is fake news for 2000+ years.#2

The true mystery is why the alleged economist Barkley Rosser recycles scientifically long-refuted storytelling on an alleged economics blog. Even goldfishes know by now that the subject matter of economics is the economy and NOTHING else.

#1 The Synthesis of Economic Law, Evolution, and History

#2 YouTube Richard Carrier

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REPLY to Barkley Rosser, Andres, ANC Driver on Mar 3

SURGEON GENERAL'S GAGANOMICS WARNING

The continued production of verbal soap bubbles may result in a hazardous lack of oxygen in the brain and in para-scientific hallucinations which inevitably lead via the Yusuf-Syndrome to a total mental collapse and, in addition, cause incurable cognitive disturbances among unsuspecting economics students and explosive vomiting in the scientific community.

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.

Lars Syll, fake scientist

Comment on Lars Syll on ‘Is economics ― really ― a science?’

Blog-Reference and Blog-Reference

The state of economics is this: 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.

The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong. As a result of the utter scientific incompetence of the representative economist, what has been achieved is the pluralism of provably false theories.#1

It is rather comical when folks that have produced nothing but proto-scientific garbage talk about scientific methodology. Economic methodology is even more absurd than economics itself. Economic methodologists have not even spotted blatant methodological blunders like petitio principii or inconsistent definitions which are entirely sufficient to refute every approach on purely methodological grounds.#2, #3

The self-appointed methodologist Lars Syll is a case in point. He has one valid point, that is, Walrasian economics in the current incarnation of DSGE is false on all counts. That’s all. He never advanced to the insight that Keynesianism ― the approach he propagates ― is not significantly better. It cannot be said that he understands what science is all about and how this applies to economics.#4

To recall, the objective of economics is the true theory which, in turn, is the humanly best mental representation of reality: “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)

Walrasian economics is materially and formally inconsistent, true but this holds also for Keynesianism, Marxianism, Austrianism ― and this is why economics is a failed science.#5

Lars Syll’s arguments against Walrasian Orthodoxy are rather silly:

• “… manifest inability to foresee the latest financial and economic crises.” To predict the future is, as a matter of principle, not the business of science but of charlatans.#6

• “Neither the economist nor the deciding individual, can fully pre-specify how people will decide when facing uncertainties and ambiguities that are ontological facts of the way the world works.” Economics, properly understood, does NOT deal with the behavior of people but with the behavior of the economic system. Human Nature/motives/behavior/action is the business of Psychology/Sociology and other so-called social sciences. Economics is a systems science.#7

• “There are no universal laws in economics.” There are no universal behavioral laws in economics. This is true but irrelevant because economics is NOT a science of behavior but a systems science. To be sure, there are systemic laws but economists have not figured them out because they wasted 200+ years with folk psychology, i.e. with waffling about rationality, selfishness, utility maximization, rational expectations, or uncertainty.

• “We have to build our models on assumptions that are not so blatantly in contradiction to reality.” Trivially true, but if Lars Syll knows how to do it why don’t he apply his superior methodology and show the results? As J. S. Mill told the slyboots who never rose above the level of vacuous methodological blather “Doubtless, the most effectual mode of showing how the sciences of Ethics and Politics may be constructed, would be to construct them …”

At some point, though, orthodox and heterodox incompetence turns into self-deception and deception of the general public. This point is reached with the false claim that economics is a science as expressed in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

At present, economics is not a science but what Feynman called a cargo cult science. Make no mistake, BOTH orthodox AND heterodox economics is an integral part of the fake. One of the best examples is the scientific failure and methodological loudspeaker Lars Syll.#8

Egmont Kakarot-Handtke


#1 Economics: a science without scientists
#2 Economics, methodology, morals ― a creepy freak-show
#3 Axiomatized nonentities and the failure of methodologists
#4 The irrelevance of economics
#5 Economists, stupid or corrupt or both?
#6 Science does NOT predict the future
#7 If it isn’t macro-axiomatized, it isn’t economics
#8 Nothing to choose between Orthodoxy and traditional Heterodoxy

Related 'Shocking: methodology is a tricky business' and 'Addendum to ‘Musings on Whether We Consciously Know More or Less than What Is in Our Models’ and 'Economics is NOT a misunderstanding but cargo cultic crap' and 'No trade-off, Kant said' and 'Methodological wrong-way drivers' and 'Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need' and 'Why does Heterodoxy not abolish the fake Nobel?'. For details of the big picture see cross-references Failed/Fake scientists and cross-references Scientific Incompetence.

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NOTE on Lars Syll’s ‘Neoclassical economics is great — if it wasn’t for all the caveats!’ on Jan 15 and Blog-Reference LPS

Lars Syll is a one-trick pony. The sum of his insight is that Neoclassical economics is a failure and Keynesianism is superior because its core assumption is ontological uncertainty which reduces economic knowledge ultimately to I know that I know nothing and anything goes, or, as Keynes put it, to “nothing is clear and everything is possible.”

Lars Syll never understood that science is not about unknown and unknowable unknowns but about certain knowledge. His hero is not Archimedes who figured out the Law of the Lever or Euclid who figured out that a²+b²= c² but the waffling philosopher Socrates with his shallow wisdom and false humbleness of I know that I know nothing ― which, of course, is true of philosophers and heterodox economists.

For details see:
► Lars Syll, fake scientist
► Fact of life: your econ prof is scientifically incompetent
► Say hello to Lars Syll, Keynes’ last parrot
► Don Lars and the axiomatic windmill
► Economics — the fly that cannot see the glass
► Heterodoxy, too, is proto-scientific garbage
► Throw them out! Orthodox and heterodox economists are unfit for science

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REPLY to Kaivey on Jan 16

You say “Hi Egmont, what do you think of Single Payer and Britain’s National Health Service? … Do you think the government should renationalise the railways, and highly regulate or renationalise the energy industries?”

I think this is for the Legitimate Sovereign to decide. There is the political realm and the scientific realm and the economist qua scientist must uphold the strict separation of politics and science. This point has been made abundantly clear by J. S. Mill: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”#1

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. This applies also to MMT. MMT policy proposals have no sound scientific foundation.#2

I have no truck with the political program of MMT. National Health, clearly, is a matter for the UK population to discuss and to decide and no economist has any mandate to interfere in the political process. Political economists like Krugman, Varoufakis, or Kelton have not to be praised for taking political sides but condemned for corrupting science.

The issue with MMT is not about good/bad politics but about true/false economic theory. MMTers do either not understand how the monetary economy works or they deceive their fellow citizens about the fact that Public Deficit = Private Profit and that, therefore, MMT policy ultimately benefits the one-percenters, contrary to the political claim that MMT is the champion of the ninety-nine-percenters.#4

The political economist = fake scientist is one of the most disgusting creeps in the Circus Maximus.


#1 The end of political economics
#2 MMT: The one deadly error/fraud of Warren Mosler
#3 MMT = proto-scientific garbage + deception of the 99-percenters
#4 MMT and grassroots movements

For more about Lars Syll see AXECquery.

Economics is NOT about Human Nature but the economic system

Comment on Bill Mitchell on ‘Humans are intrinsically anti neo-liberal’

Blog-Reference and Blog-Reference

For little children, the primary layer of reality is the social here-and-now ― mom, pop, family, and neighborhood. The insight that the tiny social bubble is embedded in the non-social reality of region, earth, universe, and their past and future development comes later. Most people do not get far beyond the infantile layer of reality: “Perhaps it is because their horizons are limited in this way that some people are able to imagine that the centre of the universe is man.” (Feynman)

In the myopic human-centered worldview learning and knowledge relate primarily to the properties/motives/behavior/actions of other humans. In the universe-centered worldview learning and knowledge relate primarily to the properties/‘behavior’ of Non-human Nature. In very general terms, this gives us two fundamentally different realms: politics and science. It is of utmost importance to keep both realms separated because they are governed by mutually exclusive principles. The accepted currency in the political realm is opinion (= doxa), and the accepted currency in the scientific realm is knowledge (= episteme).

In economics, the proper separation never took place. There have always been two economixes, political economics, and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and the goal of theoretical economics is to successfully explain how the actual economy works (= true theory). (ii) In political economics anything goes; in theoretical economics, scientific standards are observed. The fact is that (i) theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers), and (ii), political economics has produced NOTHING of scientific value in the last 200+ years.

The underlying worldview of political economics is, of course, human-centered. Accordingly, the issues have been folk-psychological, folk-sociological, and folk-biological: self-interest, greed, utility maximization, profit maximization, rent-seeking, moral hazard, bounded rationality, animal spirits, honesty/trust/corruption, power/freedom/oppression, individualism/collectivism, competition/cooperation, the survival of the fittest and so on.

ALL definitions of economics implicitly or explicitly contain a Human-Nature core.

• “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)
• “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins)
• “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)

The common denominator of the different schools of economics is human-centric. This is the ultimate axiom of economics and defines it as a so-called social science. Where the schools differ is what true Human Nature is or should be.

It is also obvious that ALL definitions of economics contain the commitment to science.

The fact is, though, that economics is a failed science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and ALL got the foundational economic concept of profit wrong.#1 After 200+ years economics is still at the level of a proto-science or what Feynman called a cargo cult science.

What neither orthodox nor heterodox economists have realized is that their definition of the subject matter is methodologically unacceptable. All Human-Nature issues are the subject matter of other disciplines, that is, Psychology, Sociology, Political Science, Anthropology, History, Biology etcetera. The subject matter of economics is the structure/ behavior of the economic system, which is an objective non-human entity. The outstanding characteristic of the representative economist is that he dabbles for 200+ years in all Human-Nature disciplines but has NO idea how the economic system works. The fact is that the representative economist does not even know what profit is.#2

Because economic theory has NEVER been true, economic policy guidance NEVER had sound scientific foundations. The scientific incompetence of economists consists in the fact that they have defined economics as a so-called social science instead of systems science and that they have not realized their fundamental methodological blunder until this day.#3 Since Adam Smith/Karl Marx economics has been political economics and ALL political economics is scientifically worthless.

Egmont Kakarot-Handtke


#1 Including MMT see Where MMT got macro wrong
#2 Essentials of Constructive Heterodoxy: Profit
#3 The Science-of-Man fallacy

Related 'If we only had classes' and 'Economics is NOT about what Happiness is but about what Profit is' and 'MMTers: too much thought-reading, too little thinking' and 'From Keynes’ fatal blunder to the true economic model'. For details of the big picture see cross-references Not a Science of Behavior and cross-references Political Economics/Stupidity/Corruption.

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Wikimedia AXEC121g

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COMMENT on Tom Hickey on May 23

You say: “Training children in this is part of the socialization process, and those that don't get become life-long brats that are always taking and never give, or when they give it is not really reciprocating. They get a reputation for being assholes.”

This is a fine piece of folk psychology/sociology. The question is, is it relevant to economics? Not at all! The insight that there are assholes in the world ― to which everybody can readily agree from his own experience ― does NOT advance our understanding of how the actual economy works. Just the opposite. Psychology/sociology are NOT the subject matter of economics but a distraction from the real issues, which, as we all know by now, has led economics into the coal pit of cargo cult science.#1

Keynes, famously, gave a definition of what the centerpiece of economics is: the monetary theory of production. Note, that this definition of the subject matter eliminates a lot of garbage that has always been dear to mentally retarded economists. Barter, for example. But, more importantly, it eliminates ALL psychological and sociological issues. In contradistinction to the neoclassical utility maximizers, Keynes correctly defined economics as a systems science.

In order not to fall back behind Keynes, the PsySoc-Ban has to be issued as one of the Ten Commandments of Economics: Leave all psychological, sociological, anthropological, biological, etc. issues to psychology, sociology, anthropology, biology, etc.

The PsySoc-Ban has tremendous consequences because standard economics is built upon this set of behavioral 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)

The PsySoc-Ban bans the neoclassical approach from economics ― completely from supply-demand-equilibrium to DSGE. So, there is absolutely NO need to reenact Groundhog Day and to moralize again and again about constrained optimization, greed, or individualism.

The PsySoc-Ban, though, has one important methodological implication: “The problem is not just to say that something might be wrong, but to replace it by something ― and that is not so easy.” (Feynman)

So, the all-decisive question is: is MMT the replacement of obsolete neoclassical economics?

No! MMT, just like PsySoc standard economics, is axiomatically false.#2 This brings us to the question, why does Bill Mitchell waste so much time kicking a dead horse instead of correcting the provably false formal foundations of MMT?


#1 “... but when the road ends at a coal-pit, he [the traveler] doesn’t need much judgment to know that he has gone wrong, and perhaps to find out what has led him astray.” (Hume)
#2 See also Going beyond Wicksell, Keynes and MMT.

Making the economy the focus of the economists’ dialogue

Comment on Robert Locke on ‘Making firm governance part of the economists’ dialogue’

Blog-Reference

One way to explain the actual state of the world is the historico-genetic (K. Mannheim) approach. And this is how Robert Locke explains the differences between firm governance in different countries (US, Germany, Japan). I have no problem with this account except that it is not economics.

Let us make a thought experiment and imagine we have a country with direct democracy. So, the question who rules is already solved. Now comes the very practical question of how to organize the economy. Clearly, it is in the POLITICAL sphere where this question has to be addressed and decided. In the given framework of direct democracy one can expect that the majority decides that the firms should organize themselves. So, the dominant legal form of the firm would probably be something like a cooperative.

The crucial point is that the question who rules the firm is ultimately a political question and not an economic question. The two spheres should be strictly kept apart. Of course, everybody knows that in real life they are intimately entangled. Real life is muddle and confusion and compromise. The history of economic thought shows that economists have never properly separated the political and the economic sphere, neither in theory nor in practice.

Economics started as Political Economy. Political Economy is agenda pushing and economists from Smith, Ricardo, Marx, Keynes, Hayek, Friedman to the present were agenda pushers first and scientists second. As a matter of fact, they were lousy scientists because they never figured out how the actual monetary economy works. How do we know this? We know this for sure because the profit theory is provable false and without the correct profit theory the economist cannot rise above the level of proto-scientific storytelling.

Their scientific incompetence, though, could not stop economists from giving economic policy advice and telling people how to organize the economy and how to organize firms. The history of who pushed which agenda with what arguments is nicely summarized in Robert Locke’s intro.

As a matter of principle, though, political questions have to be answered in the political sphere and are the subject matter of political science and sociology. The economist has a voice in the political sphere like every other voter. But he is not allowed to bring his political preferences into economics and to make it the guiding principle of his scientific work. Science neither serves the one-percenters nor the ninety-nine-percenters. Science is strictly committed to true/false and NOTHING else. The primary task of the economist as scientist is to figure out how the monetary economy works. It is not his task to dabble in politics. J. S. Mill was very clear about this.

“A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (2006, p. 950)

It is the mixture of politics and science that is the root cause of the manifest scientific failure of economics. Political economics has not produced much, if anything, of scientific value in more than 200 years. What is first of all needed is a strict separation of politics and science. This means that economists have to leave all question about who rules whom to political science/sociology for analysis and to the legitimate sovereign for decision.

Heterodoxy has criticized Friedman that his theory of the firm is politically biased. Asad Zaman would call it a 1%er economic theory. Now, to put a 99%er theory of the firm against Friedman is a natural reaction but to correct one political bias with the opposite political bias is still politics. It is definitively not science. Science asks: is the mental construct called economic theory true or false, and NOT does it fit the agenda of the one-percenters or the ninety-nine-percenters.

Science tells us that the conflicting theories of the firm are based on a false premise. Since Ricardo and Marx, both orthodox and heterodox economist believe that there is a fundamental antagonism between the firm’s owners (= capitalists) and the employees/workers. Accordingly, firms should be regarded as battlefields of class war.

The idea that antagonism between classes is built into the economic system, though, rests on an optical illusion. And this optical illusion ultimately derives from the theory of the firm. It is obviously true that an individual firm can increase profit by lowering the wage rate. But this is NOT true for the (world-) economy as a whole. To generalize what is true for an isolated part of a system is known as Fallacy of Composition.

In the most elementary case, the interdependencies of the economic system have the unintended effect that if firm A makes a profit by lowering the wage rate, firm B (= the rest of the economy) makes a loss under the initial macroeconomic condition that total consumption expenditure is equal to total wage income (2014; 2015). And, by the same token, the real wage of the workers of firm A decreases and that of the workers of firm B increases. So, what happens is that a redistribution of profit between firms and a redistribution of output between households takes place. In political terms, this means that there are no classes with a common interest. Put differently, what appears as exploitation of the workers of firm A is only part of the complete picture of a REDISTRIBUTION of profits WITHIN the business sector and a REDISTRIBUTION of output WITHIN the household sector. In political terms: the exploitation of workers in firm A benefits the workers in firm B. And the profit increase of firm A’s capitalists comes from firm B’s capitalists. Taken all capitalists together their profit does not change. Taken all workers together their real share of output does not change.

Economists are supposed to be experts on the economy. So it is quite natural to think that they know how the profit mechanism works; after all, this is the pivotal phenomenon of their subject matter. Yet, this is definitely not the case. So economists have nothing to contribute to the discussion about how the economy or about how firms should be organized. This holds for Walrasians, Keynesians, Marxians, and Austrians.

The theory of the firm presupposes the correct macroeconomic theory. Heterodox economists are supposed to develop this objectively true theory and to replace false and scientifically worthless orthodox economics by true heterodox economics. This is a scientific task and has nothing in common with incompetent political agenda pushing.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). Profit for Marxists. SSRN Working Paper Series, 2414301: 1–25. URL
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Profit. SSRN Working Paper Series, 2575110: 1–18. 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, volume 8 of Collected Works of John Stuart Mill. Indianapolis, IN: Liberty Fund.

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REPLY to robert locke on Jul 21

You ask: “Whoever said economics is a science?”

Economics is even multiple sciences and it is in the news every year: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

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REPLY  to robert locke on Jul 21

You say: “... everybody knows that this prize is not a Nobel Prize.” That is not the point. The key word is NOT Nobel but science(s). And this claim has ALWAYS been a constitutive element of the definition of economics.

“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)

“That Political Economy is a science which teaches, or professes to teach, in what manner a nation may be made rich. This notion of what constitutes the science, is in some degree countenanced by the title and arrangement which Adam Smith gave to his invaluable work. A systematic treatise on Political Economy, he chose to call an Inquiry into the Nature and Causes of the Wealth of Nations; and the topics are introduced in an order suitable to that view of the purpose of his book.” (J. S. Mill, 1874, V.7)

“Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins, 1935, p. 16)

Needless to add that the psycho-social-behavioral definition of economics has been false from the very beginning because economics is a systems science.

Like all so-called social scientists, you are far, far behind the curve.

References
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
Robbins, L. (1935). An Essay on the Nature and Significance of Economic Science. London, Bombay, etc.: Macmillan, 2nd edition.

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REPLY to robert locke on Jul 22

You say: “I could cite many critics of economics that say it is not a science, ...” and then you quote von Neumann.

I agree with the quote, but not with your conclusion. Note what conclusion von Neumann drew from his diagnosis: “... von Neumann developed the conviction over time that economics stood badly in need of revision and reconceptualization; what changed over the course of his writings was the intended shape and contours of this revision.” (Mirowski, 2002, p. 97)

von Neumann urged what is called a paradigm shift. He saw clearly that the fundamental concepts of economics were hopelessly muddled and inadequate: “I think it is the lack of quite sharply defined concepts that the main difficulty lies, and not in any intrinsic difference between the fields of economics and other sciences.” (quoted in Mirowski, 2002, p. 146 fn. 49)

But note also that von Neumann accepted the claim that economics is a science. What he diagnosed was that economics was still at the proto-scientific level: “Economics is simply still a million miles away from the state in which an advanced science is, such as physics.” (quoted in Ingrao et al. 1990, p. 197)

So, von Neumann and I are on the same page: (i) economics is incoherent gibberish because its fundamental concepts (= axiomatic foundations) are defective (2013), (ii) economics does not live up to its claim to be a science (2011), (iii) economics is in need of a paradigm shift (2014).

From this follows, firstly, that the word ‘sciences’ has to be eliminated from the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. The general public has to be informed that the 200 year old claim and the actual state of economics still do not match. It follows, secondly, that incompetent scientists have to be thrown out of economics regardless of their affiliation to either Walrasianism, Keynesianism, Marxianism, Austrianism or any other failed approach. It follows, thirdly, that it is the very task of Heterodoxy to carry out the paradigm shift and to make economics a science.

What economics needs least is the skepticism of historians, the realism of engineers, the toolism of physicists, the Verstehen of psychologists, the anything-goes of methodologists, the nothing-goes of intellectual sclerotics, the machinations of agenda pushers, and the quick-and-dirty fixes of commonsensers and practical men. From all this economics had more than enough in the last 200 years.


References
Ingrao, B., and Israel, G. (1990). The Invisible Hand. Economic Equilibrium in the History of Science. Cambridge, MA, London: MIT Press.
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). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
Mirowski, P. (2002). Machine Dreams. Cambridge: Cambridge University Press.

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REPLY to robert locke on Jul 23

With regard to von Neumann, there are two things to be kept apart: diagnosis and therapy. His diagnosis was correct. The project of the proper formalization of economics, though, had one fatal drawback: von Neumann left the underlying theory untouched: “But this [establishing the analytic mother-structure] required one very crucial maneuver that was nowhere stated explicitly: namely, that the model of Walrasian general equilibrium was the root structure from which all further work in economics would eventuate.” (Weintraub, 2002)

This is the REAL mathiness problem. Formalization does not help if the conceptual root structure, a.k.a. axiom set, is defective.

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REPLY to Skiadas Stefanos on Jul 23

To say “the sun goes up” is a simple and immediately convincing statement. To explain this optical illusion with the Helio-centric theory is a bit complicated and abstract. Because of this, common sense beats science in a normal discussion hands down. Science is always counter-intuitive.

Likewise, the commonsensical theory of exploitation is simple and convincing and it is as old as Ricardo. What IN FACT happens is cross-over exploitation and this is a bit more involved than the seemingly obvious wage-profit antagonism that comes to mind immediately. Cross-over exploitation explodes the sociological/political concept of class.

The commonsensical profit and distribution theory is false. First of all, because the concepts profit, distributed profit, and income have been permanently confused. The conceptual confusion of economists with regard to the foundational concepts of their subject matter is unique in the history of scientific thought and it disqualifies economists from Adam Smith onward.#1

In my post I have dealt with the most elementary case. For the complete distribution theory see the working papers (2015; 2014b; 2014a; 2012). In a counter-intuitive and common sense defying soundbite: total monetary profit does not affect the workers’ share of total output.

References
Kakarot-Handtke, E. (2012). Income Distribution, Profit, and Real Shares. SSRN Working Paper Series, 2012793: 1–13. URL
Kakarot-Handtke, E. (2014a). Profit for Marxists. SSRN Working Paper Series, 2414301: 1–25. URL
Kakarot-Handtke, E. (2014b). The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? SSRN Working Paper Series, 2511741: 1–23. URL
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Profit. SSRN Working Paper Series, 2575110: 1–18. URL

#1 How the intelligent non-economist can refute every economist hands down.

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REPLY to robert locke on Jul 26

You ask me: “... how can you have a systems science that leaves morality out of the system?”

The Is/Ought difference is reasonably clear since Hume but, beginning with Adam Smith, it has been mostly ignored by economists. It is important to realize that Smith wrote The Theory of Moral Sentiments before The Wealth of Nations.

Science voluntarily restricts itself to the Is and leaves the Ought to philosophers/priests/ mythologists/politicians/storytellers. Why? Because Is-questions have a general objective answer (= true/false) while Ought-questions are in the last instance arbitrarily/politically/ historically decided within a space/time-restricted society. Good/bad were very different things in Athens and Sparta.

The voluntary self-restriction of science is not something to be criticized as deficiency and juxtaposed against the richness of philosophical/mythical/religious/historical storytelling. The tight focusing on questions that have an answer which satisfies the conditions of formal/material consistency is the very prerequisite of the growth of knowledge.

You say: “Any economic system that thrives must be rooted in some moral order. Conservative thinkers, great religious teachers, and philosophic thinkers recognize this when they talk about sustaining economic communities.” Yes, the great teachers have taught awesome things to their stupid pupils. On closer inspection, the greatness of the teachings consists of enormously inflated social trivialities (do not kill, steal, lie), vacuous talk about an almost infinite multitude of nonentities (= Pantheon), emotionally charged and neuroticizing dietary/behavioral rules, ridiculous claims of a truth monopoly, threat in the form of prophecy, and of the explanation of the principle of positive/negative feedback, that is, of self-caused reward/punishment in this and the other world.

Yes, indeed, every society has a moral order. This order, though, is NOT the subject matter of economics. The moral order is the subject matter of sociology and other so-called social sciences.

The trouble with the founding fathers is that they started off at the wrong foot. The subject matter of Political Economy has been society and not the economy. As enlightened moralist, Adam Smith began to replace the religion-based regulation of society by the principle of enlightened self-interest (which is NOT the same thing as greed or egoism) and mutually beneficial exchange. With Smith, the moral carrot/stick morphed into profit/loss.

The drawback of Smith’s approach is obvious by hindsight: he was so occupied with moral sentiment that he never figured out how the economy works. And neither did his successors until this day. Economics is a failed science, but NOT because it has nothing to say about the moral social order, just the contrary, economists messed up economics BECAUSE OF permanent pointless waffling about good/bad human nature/behavior/action.

Science keeps out of the Ought-issues and focuses on the Is-issues. Its very strength lies in focusing on tiny and seemingly insignificant segments of reality (lever, pendulum, falling apples, etcetera) and in leaving the infinite x-dimensional whole to the thinkers/ storytellers/agenda pushers of philosophy/religion/politics. What these folks have produced so far is provable false. Science does not explain everything, but non-science explains nothing.

Economics has to explain how the monetary economy works. The economist as scientist has NOTHING to say/blog about the moral order of society. This holds for Orthodoxy AND Heterodoxy. Economists have to fix economics. It is deeply immoral to maintain, defend, and disseminate theories that are known to be false (2014; 2011).

References
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. 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

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REPLY to Ken Zimmerman on Jul 27

Economist are privileged because one of their founding fathers was a noteworthy methodologist. Therefore, every economist knows that science is about Is and NOT about Ought: “Science is a collection of truths; art, a body of rules, or directions for conduct. The language of science is, This is, or, This is not; This does, or does not, happen. The language of art is, Do this; Avoid that. Science takes cognizance of a phenomenon, and endeavours to discover its law; art proposes to itself an end, and looks out for means to effect it.” (Mill, 1874, V.8)

Science is NOT about the biographies of scientists or how they arrived at the solution of a problem. Only the solution itself matters. The story of Archimedes jumping out of the bathtub and running naked through the streets shouting Eureka is stuff for the retarded audience of the History Channel. The same holds for your story about how scientists work and what goes on in their heads and how they make decisions. That is more or less entertaining mind-reading of a hobby psychologist who has never produced a single proposition that satisfies scientific criteria.

The problem of economics is this: “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, 1991, p. 30)

Every moron has an opinion. But, as a matter of plain historical fact, economists do not have the true theory of how the monetary economy works (2013). Neither have you. So neither your nor Robert Locke’s nor anybody else’s psycho-sociological storytelling can be made part of the economists’ dialogue. Economics is a systems science and what is welcome are testable propositions about how the economy works. Psychologists, historians, sociologists, and all other cargo cult scientists are requested to dump their rubbish elsewhere.


References
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
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
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge: MIT Press.