Economists and their silly excuses

Comment on Lars Syll on ‘The search for heavy balls in economics’

Blog-Reference and Blog-Reference on Feb 3, 2017

Economics is a failed science. Walrasianism, Keynesianism, Marxianism, and Austrianism are mutually contradictory and provably false, i.e., materially and formally inconsistent. #1

Economists cannot explain how the economy works, but they can explain why economics does not work. Here is the comprehensive list of excuses: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow)

With these silly excuses, economists unwittingly kick themselves out of science because science consists of two essential elements: “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)

If empirical consistency cannot be established in economics, then it is a priori outside of science and in the same category as religion, philosophy, storytelling, and sitcom gossip. This, though, contradicts the claim of economics, which is upheld since Adam Smith and Karl Marx, and encapsulated in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

An economist who claims that economics is a science that, unfortunately, lacks the experimental method simply does not understand what science is all about.

Accordingly, the current state of economics is that of a fake science or what Feynman famously called cargo cult science. This intolerable state is due to the scientific incompetence of economists and NOT to the alleged fact that there are no testable economics laws. These laws, though, refer to the economy as a system and NOT to human behavior. A theory that is built upon axioms like constrained optimization, rational expectations, equilibrium, and other NONENTITIES is NOT testable, just like the hypothesis that seven angels can dance on a pinpoint is NOT testable.

The failure of economics has been programmed with the false definition of the subject matter: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals.” (Arrow)

To get out of the cul-de-sac, economics has to be redefined by switching from behavioral axioms to systemic axioms, that is, from microfoundations to macrofoundations: “Economics is the science which studies how the monetary economy works.” and NOT “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” The study of human behavior is the subject matter of psychology, sociology, history, biology/evolution, political science, anthropology, etcetera.

The Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true systemic macrofoundations yields testable propositions which have the same status as physical laws. #2

Economics is not a proto-science because it lacks “the experimental method as a way of testing hypotheses” but because economists are too stupid to formulate logically consistent and testable propositions. This incompetence has persisted for more than 200 years, and it holds for Walrasians, Keynesians, Marxians, Austrians, and their derivatives in equal measure.

There should not be the slightest doubt that these four approaches will never make it into the history of scientific thought except perhaps as a cautionary example for the idiocy of fake scientists and the persistence of evident intellectual garbage.

Egmont Kakarot-Handtke


#1 Economic policy advice has never had sound scientific foundations
#2 The one stone that kills orthodox and heterodox employment theory

Related 'Failed economics: The losers’ long list of lame excuses'

From anything goes to nothing goes right ― economists' silly excuses

Comment on Lars Syll on 'Mainstream macroeconomics distorts our understanding of economic reality'

Blog-Reference

Economists owe the world the true economic theory, that is, a theory that satisfies the scientific standards of material and formal consistency and that explains how the economy works.

Economists have not delivered. But they have delivered a lot of reasons why they have not delivered. Complexity is number one. Hypotheses-testing-is-not-possible is number two. Duhem-Quine comes next. Very popular is also the solidarity of ignorance: “There is no objective truth in economics,” “Nobody understands the whole picture. Everybody gets a piece of it.” (Roosevelt)

Here is the mother of all excuses: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as if it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the “laws” of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998, pp. x-xi)

Indeed.

When we turn to Heterodoxy things seem to get better at first, but then they become abysmal.

Tony Lawson has properly identified the methodological blunder of green cheese assumptionism. In short, it is inadmissible to put assumptions like optimization, equilibrium, decreasing returns, perfect competition etcetera into the premises. This mistake is known as petitio principii and J. S. Mill, the founder of economic methodology, dealt with it at length in his System of Logic (see also 2014).

The crucial point is that standard economics is based on behavioral axioms (McKenzie, 2008) and this is not a solid enough foundation: “. . . if we wish to place economic science upon a solid basis, we must make it completely independent of psychological assumptions and philosophical hypotheses.” (Slutzky, cited in Mirowski, 1995, p. 362)

Axel Leijonhufvud sees this quite clearly: “Our axioms are, after all, a good deal shakier than Euclid’s.” Indeed, but then comes the Great Heterodox Methodological Horror.

Instead of replacing the shaky behavioral axioms with something objective and solid, Heterodoxy rejects the axiomatic-deductive method (2012). Does it really come as a surprise that since Lawson has written about open systems Heterodoxy has not produced much scientific value? Instead, it has become the most outspoken proponent of the pluralism of wish-wash.

Note that the profit theory of Keynes, Kalecki, or Keen, for example, is as far away from reality as any mainstream profit theory, “... surely, therefore, they fail to capture the essence of a capitalist market economy.” (Obrinsky, 1981, p. 495)

Each paradigm stands or falls with its premises. For the scientific beginners among economists it is all in Wikipedia: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle, Analytica)

For the correct axiomatic foundations of the open market system see (2014). Seventeen years of methodological distortion are over for Lars Syll ― thank Heaven and Euclid.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2012). Crisis and Methodology: Some Heterodox Misunderstandings. SSRN Working Paper Series, 2083519: 1–22. URL
Kakarot-Handtke, E. (2014a). Economics for Economists. SSRN Working Paper Series, 2517242: 1–29. URL
Kakarot-Handtke, E. (2014b). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
McKenzie, L. W. (2008). General Equilibrium. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, 1–18. Palgrave Macmillan, 2nd edition. URL
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Obrinsky, M. (1981). The Profit Prophets. Journal of Post Keynesian Economics, 3(4): 491–502. URL
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton: Princeton University Press, 3rd edition.

For more about excuses see AXECquery.

For more about science see AXECquery.

Economic recommendations out of the swamp between true and false

Comment on Anonymous on Noah Smith on ‘Policy recommendations and wishful thinking’

Blog-Reference

The swamp between the hard rocks of true and false is the natural habitat of quacking frogs, of which there are four species: Walrasians, Keynesians, Marxians, Austrians. These approaches contradict each other. As a matter of logic, only one can be true, but all four can be false. The latter is actually the case. This leaves economists with (i) the scientific alternative, i.e., to initiate the necessary paradigm shift, and (ii) the political alternative, i.e., to be content with the pluralism of false theories and to continue fooling around in the swamp between true and false where “nothing is clear and everything is possible.” (Keynes)

Because economics, as represented by the four failed sects, has never risen above the level of a proto-science, it has become popular among economists to question the standards, to lower them or, as Blaug aptly put it, ‘to play tennis with the net down’. When this is pointed out, economists make the Pavlovian salto mortale backward. Here is the complete list of silly excuses.

“Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow)

The bottom line of this verbiage is that economists are incompetent scientists and that economics is what Feynman called a cargo cult science. But having no idea about how the actual economy works means that economists are in NO position to give policy recommendations.

This is not a problem, though. Economists need only give up the claim that what they do is science, as explicitly expressed in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”, to bring public perception in line with reality.

Science is about true/false; all else is sitcom claptrap. After more than 200 years of scientific failure, the world has had enough of brain-dead economic blather, worthless policy recommendations, and silly excuses.

Egmont Kakarot-Handtke


Related 'Why don’t economists simply shut up for a while?'

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REPLY to Kain on Apr 29

You say: ‘Of course they [profit theories] can be different and correct at the same time.’ Only in the intellectual swamp of economics, which is the preferred habitat of confused confusers and compulsive blatherers.

(i) Take notice that The Profit Theory is False Since Adam Smith.

(ii) As a consequence of (i), the concept of GDP is false, see ‘The Common Error of Common Sense: An Essential Rectification of the Accounting Approach’ and 'The GDP-death-blow for the economics profession'.

(iii) As a consequence of (i)/(ii) Walrasianism, Keynesianism, Marxianism, and Austrianism are provably false. Because profit is the pivotal concept in economics, it holds without exception: when profit is ill-defined, the whole theoretical superstructure falls apart.

(iv) Because economists do not understand profit, they do not understand how the actual monetary economy works.

(v) Because of the abysmal logical incompetence of economists since Adam Smith, economics is a failed science. There is nothing to choose between Orthodoxy and Heterodoxy. See The nothing-to-choose dilemma.

(vi) Because the axiomatic foundations of economics are provably false, economists are in NO position to give any economic policy advice. Instead, they have to do some scientific homework: “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)

Conclusion: Because the axiomatic foundations of economic theory are provably false, economic policy guidance is worthless or even counter-productive. Economists are a menace to their fellow citizens.

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REPLY to Anonymous on Apr 29

You say “... spare me the true/false bullshit.”

(i) Science is about true/false and nothing else. Scientific criteria are well-defined as formal and material consistency.

(ii) Science was there before economics was there. Economists either accept the rules/ethics of science or are not accepted as scientists.

(iii) Economics is a failed science. For the main approaches, proof of either logical or material inconsistency has already been provided.

(iv) Economists are proof-deniers: “... suppose they did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.” (Hands)

(iv) Proof-denial violates scientific standards. Economists violate them on a daily basis at least since the 1940s: “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)

(v) Economic policy proposals have no sound scientific foundations. Thus, policy disputes resemble nothing so much as a quarrel between poultry entrails readers. Krugman’s application of IS-LM is a case in point.

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REPLY to Kain on Apr 30

(i) You insist that there are multiple ways to define profit/income. This widespread methodological hallucination is the hallmark of confused confusers and explains why economists regularly fall over their own conceptual feet. See The Humpty Dumpty Methodology.

(ii) Your advocacy of Post Keynesianism is futile because the formal foundations of Post Keynesianism are provably false. See Why Post Keynesianism Is Not Yet a Science.

(iii) Godley/Lavoie have moved farthest in the right direction, but they, too, got profit wrong. See proof in The Emergence of Profit and Interest in the Monetary Circuit.

(iv) Post-Keynesians have not realized in more than 70 years that Keynes messed up macrofoundations. See Finalizing the Keynesian Revolution.

(v) For the overdue Paradigm Shift from microfoundations to macrofoundations, see The problem with macro in two words.

(vi) Post-Keynesianism is over just like Walrasianism. Time to catch up to speed.

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REPLY to Kain on May 2

You say: “So basically you would have to refute Kalecki’s profit equation and claim your own is better than his, if you want to truly debunk the Post Keynesians.”

High time for you to catch up to speed, see What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example and 'The Levy/Kalecki Profit Equation is false'.

The refutation of Keynes, Marx, and Keen you could also find on SSRN if you were not too much occupied with giving silly advice.

Failed economics: The losers’ long list of lame excuses

Comment on Lars Syll on ‘Relevance is not irrelevant’

Blog-Reference and Blog-Reference on Jan 12 and Blog-Reference on Jan 14

Economics is a failed science, that is, the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, and materially/formally inconsistent. More specifically, it is not only so that orthodox/ standard/mainstream economics is false as Heterodoxy ritually asserts, but traditional Heterodoxy, too, is false and has never provided a valid alternative. What we actually have is the pluralism of provably false theories.

As a consequence, the heap of proto-scientific garbage grows with every peer-reviewed issue of ranked quality journals. All grand debates end where they started, that is, in the swamp of conceptual confusion, undecidability, impenetrable mishmash, category mistakes, inconsistent definitions, cross-talk, and inconclusiveness. Accordingly, the scientific content of economic textbooks from Samuelson to Mankiw and Rodrik is below the level of a Donald Duck cartoon.

Neither orthodox nor heterodox economists can explain how the economy works, but they can indeed explain why economics does not work. Tell the representative economist that his approach is a scientific failure, i.e., materially/formally inconsistent #1, and you will get one of the standard excuses immediately back like a ping-pong ball. After all, economists have been playing their fruitless blame/deny game for 200+ years. It has become a Pavlovian reflex. This is the list of false/thoroughly refuted/beside-the-point answers

1. We know this. Nothing is perfect. The best and brightest are already working on the problem.
2. All theories/models are unrealistic/‘wrong’.
3. Economics is not a Science with a capital S.
4. Economics is an inexact and separate science.
5. Economics lacks the experimental method as a way of testing hypotheses.
6. The economy is extremely complex. Too many things are always happening at once.
7. Economics is more like meteorology than physics.
8. The economy is too messy to be fitted into the mold of a well-behaved, complete model.
9. The problem of model selection is that the embedded tests are inconclusive.
10. Novelty/emergence is unpredictable in principle.
11. The inferences that can be made from history are always uncertain, always disputable.
12. The ‘laws’ of behavior change and evolve.
13. Economics neither is nor can be a science and has always operated more like a church.
14. The subject matter of economics is not ergodic.
15. The assumptions are reasonable. The assumptions don’t matter. The assumptions are conservative. You can’t prove the assumptions are wrong. You have to make assumptions in order to make progress.
16. There are always differences of opinion at the cutting edge of science.
17. The critique is justified for the past, but now we use more sophisticated techniques/powerful tools or We-were-a-bit-wrong-then-but-now-we-are-vibrantly-on-the-right-track.
18. It is trivially true because it is an accounting identity; it is a vacuous accounting identity of little interest; it is just an ex-post accounting identity that has to be true by definition and has no real economic importance.
19. This is not a contradiction; it is like Schrödinger's cat, which can be both dead and alive.
20. There is no such thing as absolute truth.
21. Truth is subjective; everyone has only their own little piece of it.
22. Truth is what the majority of experts agree upon.
23. Reality is a social construct.
24. In economics, there is a pluralism of truths.
25. In economics, ‘nothing is clear, and everything is possible.’ (Keynes)
26. It is better to be roughly right than precisely wrong.
27. The issue is largely definitional and, as Lewis Carroll pointed out, everyone is entitled to their own definitions. (Blinder)
28. The axiomatic-deductive method for establishing material/logical consistency is not applicable to economics.
29. There is a trade-off between rigor and relevance.
30. Economics is more about understanding, pattern-/gestalt-recognition, quality, and nonlinearity than simple quantitative relationships.
31. Econometrics is inconclusive because its epistemological and ontological presuppositions do not apply.
32. The models aren’t totally useless. You have to do the best you can with the data.
33. Disagreement/contradiction is only on the surface. Economists do not differ with respect to fundamental principles, e.g., the effects of minimum wages, but only with regard to policy implications.
34. Economics is faced with ontological uncertainty: “We simply do not know.” (Keynes)
35. 'Nobody knows anything.' Hollywood adage
36. Economists have hitherto not sufficiently distinguished between known knowns, unknown knowns, known unknowns, and unknown unknowns.
37. Heisenberg and Gödel have proved that certain knowledge is physically and mathematically impossible.
38. Max Planck considered studying economics in his youth, but had found it “too difficult.”
39. You have to give the models the benefit of the doubt.
40. The mainstream consensus is the default, and not recognizing the mainstream consensus or mainstream definitions is failing to lean over backward and show Feynman Integrity.
41. The mainstream is superior; otherwise, it would not be the mainstream. So, by default, mainstreamers do not suffer from Dunning-Kruger, but those who say that economics is a failed/fake science.
42. Not a single one of the bright young minds that are the future of economics writes the papers that the critics claim are what all of the economic research is like today. Most critics of economics are stuck in the past.
43. The criticisms that academic economists face have little or no academic grounding. Most of the criticism is fake economics.
44. The critics should read more because, however well-intended, generalized attacks on a discipline that are not based on familiarity are pointless.
45. As the physicist Richard Wheeler put it: "Reality is defined by the questions you put to it".
46. Historically, economics has been very insular, but now it is more pluralistic.
47. The globally eminent economists are too close to G20 policymakers.
48. Economic science cannot be blamed if politicians don’t learn.
49. The public is demanding too much.
50. Economics has not failed and, as long as one does not expect soothsaying, it is remarkably successful.
51. We’re only doing what everybody else does. If we don’t do it, someone else will.
52. Credo quia absurdum = I believe because it is absurd.
53. Our approach has to be appreciated as work-in-progress; the results are promising but not yet fully established and demand further studies.
54. All models are wrong; some models are useful.
55. Whether economics is a science depends on how we define “science” in the first place.
56. So many (well-meaning/honorable/brilliant) people have put a lot of work into economics.
57. If there were a fundamental defect in economics, it would have long been detected.
58. Glomar response: the point in question can neither be confirmed nor denied. (Wikipedia)
59. All economics is woo-woo and unscientific. That's why it's an art degree. (S. Bach, Twitter)

The clear-cut answer to this rhetorical question is: (i) No longer accept silly excuses. (ii) Retire the throng of superfluous economists. The crass scientific incompetence of economists is the ultimate cause of mass unemployment, deflation, depression, stagnation, and no state/society can afford the intellectual dead-weight of its economists. #2 (iii) Do the Paradigm Shift from provably false Walrasian microfoundations and provably false Keynesian macrofoundations to true systemic macrofoundations. #3 (iv) Forget the last 200+ years of proto-scientific garbage.

Egmont Kakarot-Handtke


#1 For more details and references, see
► All models are false because all economists are stupid
► Complexity and stupidity
► Economists and their silly excuses
► Methodology 101, economic filibuster, and the mother of all excuses
► Why economics is a failed science ― 24 excuses and 1 explanation
► Equilibrium is stone dead — and now?
► Heterodoxy and the re-invention of science
► A heap of scientific garbage

► Economic recommendations out of the swamp between true and false
► Postmodernism — the philosophy of scientific write-offs
► Are economists methodological retards?
► Either stupid or duplicitous
► End of confusion
► Economics: The pluralism of false theories is over
► The economist as stand-up comedian
► Economics is NOT a social science
► Economics is not a science, not a religion, but proto-scientific rubbish
► Critique of conventional economics: The well-nigh complete list
#2 As Napoleon said: don’t listen to economists
#3 From Orthodoxy to Heterodoxy to Metadoxy and True macrofoundations: the reset of economics

Related 'New Economic Thinking: the 10 crucial points' and 'How economists habitually mess it up' and 'Macro for dummies' and '10 steps to leave cargo cult economics behind for good' and 'Why is economics a total scientific failure?' and 'Do first your macroeconomic homework!' and 'The canonical macroeconomic model' and 'Your economics is refuted on all counts: here is the real thing'.

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Source Teflon economics Lars Syll/David Freedman

Source: Lars P. Syll blog

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For a comprehensive heterodox collection of lame excuses, see real-world economics review: Andri W. Stahel Is economics a science?

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Graphic AXEC136g

Methodology 101, economic filibuster, and the mother of all excuses

Comment on Noah Smith on ‘More about the Econ 101 theory of labor markets’

Blog-Reference

The ancient Greeks started science with the distinction between doxa (= opinion) and episteme (= knowledge). And scientific knowledge is well-defined by material and formal consistency.

Obviously, economics is a failed science, that is, there is NO knowledge that satisfies scientific criteria. This means economists are forced to backpedal methodologically or in Blaug’s words ‘to play tennis with the net down.’

How this is done? Watch Noah Smith: “What falsification really means ― or should mean, anyway ― is that a theory is shown to not work as well as we’d like it to under a well-known set of conditions. So since people have different expectations for a theory ― some demand that theories work with high degrees of quantitative precision, while others only want them to be loose qualitative guides ― whether a theory has been falsified will often be a matter of opinion.”

Here you have it, we are back at opinion and all scientific retards happily agree because opinion means nothing other than (i) anything goes, and (ii), the coexistence of false theories. And this is what we actually have: the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory and axiomatically false.

A scientist is supposed to abandon a falsified theory. This does not happen in economics. Morgenstern reminded his fellow economists long ago: “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.”

Walrasianism, Keynesianism, Marxianism, Austrianism, MMT is provably false, i.e. materially and formally inconsistent, but they are still around ‘as if nothing had happened’.

Because falsification in the original sense does not happen, the heap of scientific garbage grows with every peer-reviewed issue of ranked quality journals. All grand debates end where they started, that is, in the swamp of conceptual confusion, undecidability, impenetrable mishmash, category error, and inconclusiveness. As Clower put it: “... we know little more now about ‘how the economy works,’ ... than we knew in 1790 after Adam Smith completed the last revision of The Wealth of Nations.”

Economists cannot explain how the economy works but they can explain why economics does not work. Here is the mother of all excuses: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow)

Or: “We know all that. Nothing is perfect … The assumptions are reasonable. The assumptions don’t matter. The assumptions are conservative. You can’t prove the assumptions are wrong. The biases will cancel. We can model the biases. We’re only doing what everybody else does. Now we use more sophisticated techniques. If we don’t do it, someone else will. What would you do? The decision-maker has to be better off with us than without us … The models aren’t totally useless. You have to do the best you can with the data. You have to make assumptions in order to make progress. You have to give the models the benefit of the doubt. Where’s the harm?” (Freedman)

Economics could be ignored as Circus Maximus were it not for the fact that the scientific incompetence of economists is the ultimate cause of mass unemployment, deflation, depression, stagnation. No state/society can afford the intellectual deadweight of its economists.

Let us come to the methodological key point. Standard economics is built upon this set of foundational hardcore propositions: “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 representative economist has not realized it, but methodologically these premises are forever unacceptable. It should be pretty obvious that the neo-Walrasian hardcore contains THREE NONENTITIES: (i) constrained optimization HC2, (ii) rational expectations HC4, (iii) equilibrium HC5. Every model that contains a NONENTITY is A PRIORI false. In practical terms: as soon as the word equilibrium/disequilibrium appears in an economic paper it can be thrown into the wastebasket. The same holds for all other NONENTITIES.

Conclusion: The labor market theory is false in the incarnation as partial supply-demand-equilibrium (S-D-E) and a fortiori in the incarnation as general equilibrium.#1 Methodology 101 tells us: Every economist who accepts supply-demand-equilibrium as an explanation of how the market system works disqualifies himself as a scientist.

Egmont Kakarot-Handtke


#1 Unemployment is high because economics is false

Immediately preceding Econ 101 is dead ― and now?

Austrian blather

Reply to Major.Freedom on 'Fiscal multiplier studies — it's far worse than I thought'

Blog-Reference

(i) I did not ask you for a “good piece of advice”, so do not pester me with it.

(ii) My pivotal point is that there is no such thing as a specific BEHAVIORAL axiom in economics because axioms have to be ‘certain, true, and primary’. This is definitively not the case with the maximization axiom HC3 of Neoclassics and the action axiom of Praxeology.

Strictly speaking, a ‘behavioral axiom’ is an oxymoron. This has been known to scientists of all ages: “The bifurcation of motion into two fundamentally different types, one for natural motions of non-living objects and another for acts of human volition ... is obviously related to the issue of free will, and demonstrates the strong tendency of scientists in all ages to exempt human behavior from the natural laws of physics, and to regard motions resulting from human actions as original, in the sense that they need not be attributed to other motions.” (Brown, 2011, p. 211)

From the general proposition that human action is original or, alternatively, target-oriented with any number of possible targets NOTHING specific follows. So, after the first step, one is already at the end of the road.

This, in turn, explains why Praxeology is a failed approach: “Now, at any rate, we have an explanation for why the assumptions of economic theory about individual action have not been improved, corrected, sharpened, specified, or conditioned in ways that would improve the predictive power of the theory. None of these things have been done by economists because they cannot be done. The intentional nature of the fundamental explanatory variables of economic theory prohibits such improvement.” (Rosenberg, 1992, p. 149)

For cogent methodological reasons: (1) economic theory cannot be built upon a behavioral assumption like the maximization axiom or the action axiom or any other, for that matter, and (2), as a matter of principle, NO way leads from the explanation of individual human behavior to the explanation of how the monetary economy works. Because of this, ALL subjective-behavioral approaches are bound to fail.

(iii) You say about the action axiom “It is IMPOSSIBLE for it to be proven false.” Obviously, you did not realize that this is NOT a strong point but, just the contrary, the very antithesis of science: “But a method that can explain everything that might happen explains nothing.” (Popper, 1960, p. 154)

To recall, when the ancient Greek thinkers, who invented science, heard a man saying “I can explain everything, Zeus did it, and you cannot prove me wrong” they showed him the way to the temple and threw him out of the academy.

(iv) This thread is about testing. As long as Austrians cannot produce a testable proposition about the overall profit of the monetary economy they have nothing worthwhile to say. Who does not understand profit understands nothing. Folk psychology is not economics.

(v) I do not engage in criticizing Praxeology or Austrianism. I understand that there must be something like economics for the scientifically retarded and I am quite content that you faithfully stick to it.

(vi) If you wish to prove the structural-axiomatic approach wrong it suffices to empirically refute the Profit Law. All else is obsolete Austrian blather.


References
Brown, K. (2011). Reflections on Relativity. Raleigh: Lulu.com.
Popper, K. R. (1960). The Poverty of Historicism. London, Henley: Routledge and Kegan Paul.
Rosenberg, A. (1992). Economics ― Mathematical Politics or Science of Diminishing Returns? Chicago: University of Chicago Press.

Related 'The futility of testing economics blather' and 'Hayek was not an economist' and 'Both Austrianism and MMT are proto-scientific garbage' and 'Austrians, too, are either stupid or corrupt or both'.

For more about Austrianism see AXECquery.

***

REPLY to Major.Freedom on Apr 2

You say: “It [Praxeology] is strictly a theory of human action.” It is obviously beyond your horizon that human action is the realm of the so-called social sciences (psychology, sociology, anthropology, political science, history, etc.). Economics is about the behavior of the monetary economy. So, economics is a system science (2014). The so-called social sciences have been accurately characterized by Feynman as cargo cult sciences (see Wikipedia). Praxeology is a case in point.

So there is no need at all to clarify the finer points of Praxeology just as there is no need to quarrel about whether geocentrism worked with 20 or 25 epicycles because geocentrism has been buried long ago and everybody — except Flat-Earthers and Austrians — understands by now that epicycles are NONENTITIES like angels and the Easter Bunny.

You say: “But we are not God, and we are not superhuman. We are human.” Trivially true, but not much follows from brain-dead tautologies.

Folk psychology and the "subtle and sophisticated process of self-reflection" are not economics. Praxeology is proto-scientific garbage and more is not to say about it.

Science is well-defined as formal and empirical consistency (Klant, 1994, p. 31). No genuine scientist ever had a problem with this definition. Curiously, those who are known not to have produced one tiny piece of science can exactly explain why the scientific method does not work.

Here is the collection of the most ridiculous excuses: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as if it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses. (Solow, 1998, x-xi)

The obvious explanation is missing: the scientific incompetence of economists. The first thing to understand is that there are no ‘laws of behavior’ but that there are objective and testable systemic laws.

After more than 200 years economists can still not tell the difference between profit and income. Economics is at the level of medieval physics before the concept of potential and kinetic energy was properly understood. Austrians, too, cannot explain how the economy works but they have any number of excuses for why they have achieved nothing of scientific value.

You say: “We’re pigeons playing chess, pooping on the board, and flying away.” Again trivially true, dear Austrians, but now take your poop and play somewhere else. As Shaw put it "People who say it cannot be done should not interrupt those who are doing it."


References
Kakarot-Handtke, E. (2014). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield: Edward Elgar.
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton: Princeton University Press, 3rd edition.

Related 'The zombie wars are over'.

Heterodoxy’s scientific self-burial

Comment on Paul Spicker on ‘On economics as a science’

Blog-Reference

Since Adam Smith and Karl Marx, economics claims to be a science. And this claim is officially enshrined in the title: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

Now Paul Spicker tells us that economics is not a science as everybody thought until now but practical wisdom, an exercise in what Aristotle called phronesis: “It is all about judgment ― reading the situation, identifying patterns, applying conflicting principles, anticipating problems, spying opportunities. There are no certainties; there are tendencies, warnings, prescriptions and the recognition of trends or patterns, all subject to many reservations.”#1 This sounds sensible but, obviously, phronesis is very different from what Aristotle called episteme=knowledge=science.

The fact of the matter is that economics is a failed science and after more than 200 years there is proof enough that both orthodox AND heterodox economists are incompetent scientists (2013). Science is well-defined by formal and material 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, 1994, p. 31). Clearly, economics does NOT satisfy the criteria of formal and material consistency. Walrasianism, Keynesianism, Marxianism, Austrianism are mutually contradictory and each one is provably false. Strictly speaking, there is no economics only a heap of scientific garbage. The question is how to proceed from this incontrovertible fact? Phronesis has always been an attractive option and an easy way out of the calamity for the representative economist, but let us look at the bigger picture.

(i) First of all, the word sciences has to be eliminated from the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. The general public has to be promptly informed of the actual state of economics. Actually, economics is a failed science.

(ii) All attempts to redefine science and to soften the criteria so that a proto-science like economics fits in have to stop immediately. Science is well-defined and one is either in or out. There is nothing to negotiate, neither for economics in particular nor for the so-called social sciences in general.

(iii) There is no point in explaining again and again why economics is not and cannot be a science. Here is, once and for all, the exhaustive tick-box list of excuses: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998, pp. x-xi). Note well, that NONE of these arguments holds water, except for “Economics is not a Science with a capital S” which translates into the correct short variant “Economics is not a Science” which in turn contradicts all claims from Adam Smith onward.

(iv) With regard to the future, economists have to make up their minds whether they intend to comply with the immutable standards of science. If so they have to put forward an idea of how to perform the necessary Paradigm Shift. Otherwise, voluntary/involuntary retirement from academia/science is inevitable. What has been produced so far is scientifically forever unacceptable.

(v) All those who know at their hearts that they will never rise above the level of agenda-pushing and storytelling have only the option to follow the lead of Paul Spicker and to busy themselves with space/time specific practical problems without any understanding of the big picture. Their proper business is phronesis or what nowadays is called consultancy. Peirce nicely defined the difference between the scientist and the consultant: “True science is distinctively the study of useless things. For the useful things will get studied without the aid of scientific men.” (1931, 1.76)

The spirit of science is very different from the utilitarianism of the commonsensical and practical man. In a nutshell, the following anecdote highlights the clash of cultures: “At one point in that 100 years, Lord Ernest Rutherford was visited by a minister of the Queen. He proudly and busily demonstrated what he had learned about radio. The minister said, that’s all very good, but what is it good for. Lord Rutherford replied that he did not know, but he guaranteed that at some point the government would tax it.”#2

Accordingly, the task of the economist as a scientist is to figure out how the monetary economy works. Not more, not less. It is not his task to figure out how people behave (Hudík, 2011). This, indeed, is the subject matter of psychology, sociology, political science, and other so-called social sciences. Economics is NOT a social science but a systems science. A system is subject to objective systemic laws while human nature/behavior/action is contingent. Strictly speaking, for deeper methodological reasons there is no such thing as ― what Hume called ― a Science of Man.

Economics started as Political Economy and what economists never understood is that NO way leads from the understanding of human nature/behavior/action to the understanding of how the economic system works. The feeble thinkers and strong blatherers that call themselves economists have to this day not figured out how the monetary economy works, more specifically, how the price and profit mechanism works. This is not to say, of course, that economists know nothing. In fact, they know some easy to grasp practical, institutional, or historical details. This, though, is phronesis, as Aristotle made clear, but NOT episteme/science.

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 monetary economy works. How do we know this? We know this for sure because the Profit Theory is provably false and without the correct profit theory, the economist cannot rise above the level of storytelling.

Economics is a failed science. The very task of Heterodoxy is to make economics a science. To this day, Heterodoxy did not succeed. What is needed is a Paradigm Shift, that is, a full replacement of the ridiculous behavioral axioms of standard economics. Phronesis, as proposed by Paul Spicker, is not a Paradigm Shift but scientific suicide and self-burial.

Egmont Kakarot-Handtke


References
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
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
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield: Edward Elgar.
Peirce, C. S. (1931). Collected Papers of Charles Sanders Peirce, volume I. Cambridge: Harvard University Press. URL
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton: Princeton University Press, 3rd edition.

#1 See his RWER paper.
#2 Source PSW.

All economists together now: Solow’s Swan Song

Comment on Bruce Edmond on ‘Economic Value is NOT Price’

Blog-Reference

The wonderful thing about economists of all shades is that the only fact they can convincingly explain is why they know nothing.

“Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the “laws” of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998, pp. x-xi)

Those who hallucinate being at the cutting edge of science, please take notice: “... suppose they [the economists] did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.” (Hands, 2001, p. 404)

By the way, the exchange value in the pure production/consumption economy is fully determined by the objective factors market clearing, budget balancing, and zero profit (2011). Utility drops completely out of the equation. All subjective approaches since Jevons have predictably ended in folk-psychological blather.

Pace Solow: there is no such thing as ‘laws of behavior.’ Orthodoxy started on the wrong foot. “But the point is not to provide excuses.” Yes, and today is the perfect day to start with it.

Egmont Kakarot-Handtke


References
Hands, D.W. (2001). Reflection without Rules. Economic Methodology and Contemporary
Science Theory. Cambridge, New York, NY, etc: Cambridge University Press.
Kakarot-Handtke, E. (2011). The Pure Logic of Value, Profit, Interest. SSRN Working Paper Series, 1838203: 1–27. URL
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton, NJ: Princeton University Press, 3rd edition.

Did economics fail? No! Yes, and everybody knows it!

Comment on Silvia Merler’s ‘Did Economics Fail?’

Blog-Reference and Blog-Reference on May 9

Silvia Merler reports: “The debate about rethinking economics keeps rambling.” True. And the wonderful thing is that we have heard all the arguments already multiple times.

The Pavlovian answer to the question Did Economics Fail? goes as follows: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998)#1

Fact is: “… suppose they [the economists] did reject all theories that were empirically falsified … Nothing would be left standing; there would be no economics.” (Hands, 2001)

Fact is: the main approaches and their variants and derivatives ― Walrasianism, DSGE, Keynesianism, Post-Keynesianism, New Keynesianism, MMT, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong.#2 What we actually have is the pluralism of provably false theories.#3

There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

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.#4 And this means, in turn, that economic policy guidance has NO sound scientific foundations since Adam Smith/Karl Marx. The gigantic intellectual battle about Capitalism and Socialism has never been more than a Zombie wrestling show.#5

The fact is that economists bear the intellectual responsibility for all economic crises and the resulting social devastation. This is known since Napoleon: “Late in life … he claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner)

What failed economics needs is NOT another pointless critique, or one more silly discussions between scientifically incompetent orthodox and heterodox economists, or just another cosmetic reformation or breakthrough ― but a Paradigm Shift.

Needless to emphasize that the paradigm shift will NOT come from people who swallowed supply-demand-equilibrium hook line and sinker and never realized that what they are doing is cargo cult science.

Egmont Kakarot-Handtke


#1 Failed economics: The losers’ long list of lame excuses
#2 Why is economics a total scientific failure?
#3 Economics: 200+ years of scientific incompetence and fraud
#4 For details of the big picture see cross-references Political Economics
#5 Profit and the Private-Property-Irrelevance Theorem

Related 'The Law of Economists’ Increasing Stupidity' and 'Both orthodox and heterodox economists are cargo cult scientists' and 'Economics: a science without scientists'.

When substandard thinkers dabble in science it is called economics

Comment on Lars Syll on ‘Solow and Damon Runyon’s Law’

Blog-Reference

Tell an economist that economics is a failed science and he will come up with a barrage of excuses: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998, pp. x-xi)

So, there are no behavioral laws in economics? No, but there is a law that there is no law: “Unfortunately, however, economics is a social science. It is subject to Damon Runyon’s Law that nothing between human beings is more than three to one. To express the point more formally, much of what we observe cannot be treated as the realization of a stationary stochastic process without straining credulity.” (See intro)

This raises two questions: (i) Why are obviously false propositions like “agents individually optimize subject to constraints; agents have full relevant knowledge; observable outcomes ... must be discussed with reference to equilibrium states” given the status of axioms? (Weintraub, 1985, p. 147). And (ii), why do members of a “strange sort of discipline” insist on the term “Economic Sciences” in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”?

The ontological error of economics lies in this sentence: “Unfortunately, however, economics is a social science.” Not at all, economics is a systems science. Yet, most economists have not realized that economics is NOT a science of human nature/behavior/ action — not of individual behavior, not of social behavior, not of rational behavior, not of irrational behavior, not of sincerity, not of corruption. All these issues belong entirely to the realms of Psychology, Sociology, Anthropology, Political Science, History, Criminology, Philosophy, etcetera.

So let us replace Damon Runyon’s Law by the Ontological Impossibility Law: NO way leads from the explanation of individual/social human behavior to the explanation of how the monetary economy works. In other words, the microfoundations approach has already been dead in the cradle.

There is no such thing as a behavioral/social/historical law but there are systemic laws (2014). Economists are digging since Jevons/Walras/Menger in the wrong place. Neither Orthodoxy nor Heterodoxy has figured out until this day what profit is, that is, economists have no idea of the pivotal phenomenon of their subject matter since Adam Smith. Unfortunately, they have been too much occupied with making fools of themselves with folk psychology, folk sociology, and folk politics.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). The Synthesis of Economic Law, Evolution, and History. SSRN Working Paper Series, 2500696: 1–22. URL
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton: Princeton University Press, 3rd edition.
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

Related 'The consistent ancients and the confused moderns' and 'The stupidity of Heterodoxy is the life insurance of Orthodoxy'. For details of the big picture see cross-references Methodology.

***

COMMENT on The Arthurian on May 29

You say: “Because you cannot understand the present if you misunderstand the past.”

This assertion holds perhaps for politics but certainly not for science: “The next scheme, the new discovery, is going to be made in a completely different way. So history does not help much.” (Feynman)

Could it be that you have not yet grasped the difference between storytelling and theory? The history of falling apples is one thing and the Law of Falling Bodies is quite another thing.

Science is about general and invariant features of reality (= deep structure), history/ evolution is about unique event configurations on the surface that never repeat themselves. This is known since Heraclitus and “That is why Descartes said that history was not a science — because there were no general laws which could be applied to history.” (Berlin)

Economics is about the underlying structural laws of the economic system. If you do not understand these (e.g. the Profit Law) you neither understand the past nor the present.

A heap of proto-scientific garbage

Comment on J. W. Mason on ‘There Isn’t Really a ‘Mainstream’ at All’

Blog-Reference

Since Smith and Marx, economics claims to be a science. And this claim is officially enshrined in the title: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

In fact, Walrasianism, Keynesianism, Marxianism, and Austrianism are provably false, i.e. materially/formally inconsistent. When this is pointed out economics simply turns into an optical illusion: “Economics is not the study of the economy. Economics is just what economists do.” (See intro)

Economists know that what they do is NOT science: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. . . . Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998, pp. x-xi)

Note well, that none of these arguments holds water, except for “Economics is not a Science with a capital S” which translates into the correct short variant “Economics is not a science” which in turn contradicts all claims from Adam Smith onward.

More than 2300 years ago science had been defined as episteme = knowledge in contradistinction to doxa = opinion and it was well-understood that opinion is worthless: “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)

Economists do not have the true theory. Their economic policy advice never has had sound scientific foundations. Worse, economists feel quite comfortable behind their heap of scientific rubbish: “I think there is a mix of common-sense opinions, political prejudices, conventional business practice, and pragmatic rules of thumb, supported in an ad hoc, opportunistic way by bits and pieces of economic theory. It’s not possible to knock over the whole tottering pile by pulling out a few foundational texts.”

This, though, is a gross error. All variants of Orthodoxy are built upon this set of hardcore propositions, a.k.a. axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub, 1985, p. 147)

Methodologically, this axiom set is false, and therefore the whole analytical superstructure is false, yet the representative economist has always swallowed this garbage with a straight face. It should be obvious that economics cannot be built upon green cheese behavioral assumptions and NONENTITIES like constrained optimization and equilibrium. All models that contain these concepts are a priori false.

The failure of the microfoundations approach is indisputable. Keynes’ macrofoundations approach suffers from other inconsistencies. The same holds for Marxianism and Austrianism.

After more than 200 years there is proof enough that economists are incompetent scientists. From Smith, Ricardo, Marx, Keynes, Hayek, Samuelson to the present economists have not figured out how the monetary economy works. We know this for sure because the profit theory is provably false until this day, and without the correct profit theory, the economist has no clue of how the market economy works (2014).

Economics is a failed science or, in Mason’s words: there isn’t really a ‘mainstream’. What we have instead is a heap of proto-scientific garbage and a bunch of scientifically retarded blatherers.

Egmont Kakarot-Handtke


References
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
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton, NJ: Princeton University Press, 3rd edition.
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge: MIT Press.
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

Related 'Failed economics: The losers’ long list of lame excuses' and 'Economics and Project Augean Stable' and 'Economists’ full-scale retreat' and  'Economics: The chief demerit is inconsistency' and 'Feeble minds, shaky assumptions, and the inevitable failure of economics' and 'Enough! Economists, retire now!' and 'New Economic Thinking: the 10 crucial points'. For details of the big picture see cross-references Failed/Fake Scientists and cross-references The Representative Economist.

How incompetent are economic methodologists? Very!

Comment on Nancy Cartwright/Lars Syll on ‘The logic of economic models’

Blog-Reference and Blog-Reference

Economics is a failed science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational economic concept profit wrong. This raises the question where the methodologists were all the time? Did they not see what went wrong? Did they not spot the methodological blunders? And did they never have any idea how to fix matters?

No, economic methodologists are an integral part of the failure. What holds for the representative economist holds also for the representative methodologist: both have no idea what science is all about. From the Classicals onward, both the first tier economists and the second tier methodologists simply tried to emulate the triumphant sciences: “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.” (Feynman)#1, #2, #3

Accordingly, the failure of economics and the triumph of science was always explained with the unfair advantages of the latter. Basically, the same argument is repeated for 200+ years now.

• “There is a property common to almost all the moral sciences, and by which they are distinguished from many of the physical; this is, that it is seldom in our power to make experiments in them. In chemistry and natural philosophy, we can not only observe what happens under all the combinations of circumstances which nature brings together, but we may also try an indefinite number of new combinations. This we can seldom do in ethical, and scarcely ever in political science. … We therefore study nature under circumstances of great disadvantage in these sciences; being confined to the limited number of experiments which take place (if we may so speak) of their own accord, without any preparation or management of ours; in circumstances, moreover, of great complexity, and never perfectly known to us; and with the far greater part of the processes concealed from our observation.” (J. S. Mill, 1874)

• “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort’.” (Bagehot)

• “Human psychology is not available for inductive study, because of the differences between individual minds, the immense multitude of the influencing circumstances, the practical difficulty of experiment upon human beings.” (Viner)

• Economists have taken physics as the model for science. Physicists use two basic tools: laboratory experiments and mathematics. But as laboratory experiments have a very limited application in economics, this leaves mathematics as the main tool for economists to try to mimic physics. So, economists hugely borrowed the mathematical instruments used by physicists. They did it to such an extent that, for instance, for the philosopher of science Alexander Rosenberg, economics is not an empirical science at all; for him, it is a branch of applied mathematics.” (Beker)

• “Direct empirical evidence on individual behavior is difficult ― some would say impossible ― to come by. But what little we know from experiments by psychologists like Daniel Kahneman and Amos Tversky and others does not suggest that homo sapiens behaves like homo economicus ... It is remarkable how little impact this evidence has had on modern economics.” (Blinder)

• “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test.” (Solow)

• “One of the limitations with economics is the restricted possibility to perform experiments, forcing it to mainly rely on observational studies for knowledge of real-world economies. But still ― the idea of performing laboratory experiments holds a firm grip of our wish to discover (causal) relationships between economic ‘variables.’ If we only could isolate and manipulate variables in controlled environments, we would probably find ourselves in a situation where we with greater ‘rigour’ and ‘precision’ could describe, predict, or explain economic happenings in terms of ‘structural’ causes, ‘parameter’ values of relevant variables, and economic ‘laws’.” (Nancy Cartwright)

All these excuses are trivially true, of course, and good enough for not-so-smart economics students but do not hold methodological water. The fact is that the failure of economics is due to the scientific incompetence of economists. Here is the proof that economists AND methodologists like Nancy Cartwright are too stupid for the elementary mathematics that underlies macroeconomics.

Keynes famously stated in the General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This syllogism is conceptually and logically defective because Keynes NEVER came 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.)

Let this sink in, the economist Keynes NEVER understood profit, i.e. the fundamental concept of economics. So, Keynes’ I=S is false and by consequence the multiplier and all I=S/IS-LM models. Instead, Q≡I−S is true with Q as macroeconomic profit.#4, #5, #6

So, Keynes got it wrong 80+ years ago, yet neither Keynesians nor Post-Keynesians nor New Keynesians nor Anti-Keynesians nor methodologists nor Nany Cartwright nor Lars Syll spotted the logical inconsistency in Keynes’ macrofoundations to this day.#7

The complete macroeconomic Profit Law is given as Q≡Yd+(I−S)+(G−T)+(X−M). It consists of variables that are measurable with the precision of two decimal places and it is testable at any time.

What Nancy Cartwright and Lars Syll tell their academic and non-academic audiences about methodology is provably false. The problem of economics is NOT that the subject matter is of insurmountable difficulty but that economists are either scientifically incompetent or politically corrupt or both.

Egmont Kakarot-Handtke


#1 What is so great about cargo cult science? or, How economists learned to stop worrying about failure
#2 Social science is NOT a science but a sitcom
#3 Economics: The chief demerit is inconsistency
#4 Are economics professors really that incompetent? Yes!
#5 Controlled demolition of MMT ― an exercise in elementary logic
#6 The canonical macroeconomic model
#7 Macroeconomics: Economists are too stupid for science

Related 'Economists and their silly excuses' and 'Axiomatized NONENTITIES and the failure of methodologists' and 'Shocking: methodology is a tricky business' and 'Methodology 101, economic filibuster, and the mother of all excuses' and 'Economic recommendations out of the swamp between true and false' and 'Failed economics: The losers’ long list of lame excuses' and 'Did economics fail? No! Yes, and everybody knows it!' and 'Heterodoxy’s scientific self-burial' and 'When substandard thinkers dabble in science it is called economics' and 'Economics, methodology, morals ― a creepy freak-show' and 'The inexorable Paradigm Shift in economics'. For details of the big picture see cross-references Methodology.

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#PointOfProof

Jul 2

before

after

Complexity and stupidity

Comment on Asad Zaman on ‘Keynesian Complexity’

Blog-Reference and Blog-Reference on May 2, adapted to context

When economists are at the end of their wits, they invoke complexity: “Economies are devilishly complicated things. They are full of obstreperous and notoriously difficult subject matter. Notably people. And people, as we all know, do the darnedest things. They, for instance, change their minds and sometimes even contradict themselves ― with a straight face too. This makes plotting and explaining their activity very hard.” #1

Since Newton’s and Adam Smith’s days, when economists ask themselves why they have failed in both relative and absolute terms one invariably hears the same complexity-uncertainty-hard-stuff refrain: “There is a property common to almost all the moral sciences, and by which they are distinguished from many of the physical; this is, that it is seldom in our power to make experiments in them. ... We therefore study nature under circumstances of great disadvantage in these sciences; being confined to the limited number of experiments which take place (if we may so speak) of their own accord, without any preparation or management of ours; in circumstances, moreover, of great complexity, and never perfectly known to us; and with the far greater part of the processes concealed from our observation.” (J. S. Mill, 1874, V.51)

Or: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort.’” (Bagehot, 1885, PE. 13)

Or: “The motives and conditions are so numerous and complicated that the resulting actions have the appearance of caprice, and are beyond the analytic powers of science.” (Jevons, 1911, p. 15)

Or: “Knight accuses the positivists of overlooking the complexity and uncertainty of testing in all sciences and argues at length that positivist views of science are particularly inappropriate to economics, which, like all sciences of human action, must concern itself with reasons, motives, values and errors, not just causes and regularities.” (Hausman, 1989, p. 118)

Or: “Economics is a strange sort of discipline. ... too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998, pp. x-xi)

We know from the history of science that Ptolemy’s theory of planetary motion was very complex ― in the end, he dealt with more than 20 epicycles ― and that the complexity vanished into thin air by changing the vantage point. Could it be that complexity is not in the subject matter but in the observer’s mind? Could it be that economists observe and argue, like Ptolemy, from the wrong vantage point?

“Others, the inexperienced students, make guesses that are very complicated, and it sort of looks as if it is all right, but I know it is not true because the truth always turns out to be simpler than you thought.” (Feynman, 1992, p. 171)

Could complexity be an indicator of dilettantism, confusion, or scientific incompetence?

Imagine for a moment an aircraft flying from, say, New York to Paris. Now we can ask why? One way to answer the question is to speculate about the motives and reasons of the passengers, the pilot, the crew, the flight controllers, and the managers and stockholders of the airline. The other way to look at flight is to think about the laws of aerodynamics, thermodynamics, and so forth.

We could know in advance that there is no such thing as ‘laws’ of human behavior that could explain flying, not to speak of a particular flight. Real scientists have always been well aware of this.

“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, 2011, p. 211)

Hume and Adam Smith, though, missed this crucial methodological point and subscribed to the primacy of what was called the Science of Man.

“It is evident, that all the sciences have a relation, greater or less, to human nature: and that however wide any of them may seem to run from it, they still return back by one passage or another. Even. Mathematics, Natural Philosophy, and Natural Religion, are in some measure dependent on the science of MAN; since they lie under the cognizance of men, and are judged of by their powers and faculties.” (Hume, 2012, Introduction)

By anchoring economics firmly in the social sciences, Hume and Smith set the discipline on the wrong track and programmed failure: “...there has been no progress in developing laws of human behavior for the last twenty-five hundred years.” (Hausman, 1992, p. 320), see also (Rosenberg, 1980, pp. 2-3)

Economics is NOT a science of behavior (Hudík, 2011); economists have to change their vantage point; economics has to be redefined. Economics is NOT a social science but a systems science:
OLD definition, subjective-behavioral: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”
NEW definition, objective-systemic: “Economics is the science which studies how the monetary economy works.”

In non-technical terms, this is what a Paradigm Shift, a.k.a. new economic thinking, is all about. #2 Because they are unable to perform the Paradigm Shift, economists are stuck in a cul-de-sac. To complain about the complexity of reality has always been a ridiculous excuse for incompetent scientists. #3 Asad Zaman, the heterodox muddle head, is no exception. Keynesianism is inconsistent for 80+ years, and Post Keynesians have not rectified the foundational error/mistake/blunder until this very day. #4 This has NOTHING to do with complexity but with stupidity.

Egmont Kakarot-Handtke


References
Bagehot, W. (1885). The Postulates of English Political Economy. Library of Economics and Liberty. URL
Brown, K. (2011). Reflections on Relativity. Raleigh: Lulu.com.
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Hausman, D. M. (1989). Economic Methodology in a Nutshell. Journal of Economic Perspectives, 3(2): 115–127. URL
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Hume, D. (2012). A Treatise of Human Nature. Project Gutenberg EBook. URL
Jevons, W. S. (1911). The Theory of Political Economy. London, Bombay, etc.: Macmillan, 4th edition. 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
Rosenberg, A. (1980). Sociobiology and the Preemption of Social Science. Oxford: Blackwell.
Solow, R. M. (1998). Foreword, volume William Breit and Roger L. Ranson: The Academic Scribblers. Princeton: Princeton University Press, 3rd edition.

#1 Source
#2 From Orthodoxy to Heterodoxy to Metadoxy
#3 Methodology 101, economic filibuster, and the mother of all excuses
#4 How Keynes got macro wrong and Allais got it right

Related 'Failed critique of failed economics' and 'There is no soft science only soft brains' and 'And the answer is NCND ― economics after 200+ years of Glomarization' and 'The miracle cure of economists’ micro-macro schizo' and 'Do first your macroeconomic homework!' and 'Complexity, scientific incompetence, and the art of asking the right questions'.

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REPLY to jrbarch on May 3

Complexity is an issue where one can clearly see the difference between substandard thinkers like economists and genuine scientists. Here is how complexity is properly dealt with.

“The Principia begins with an idealized world, a simple mental construct, a ‘system’ of a single mathematical particle and a centrally directed force in a mathematical space. Under these idealized conditions, Newton freely develops the mathematical consequences of the laws of motion that are the axioms of the Principia. At a later stage, after contrasting this ideal world with the world of physics, he will add further conditions to his intellectual construct ― for example, by introducing a second body that will interact with the first one and then exploring further mathematical consequences. ... In this way he can approach by stages nearer and nearer to the condition of the world of experiment and observation, introducing bodies of different shapes and composition and finally bodies moving in variant types of resistant mediums rather than in free space.” (Cohen, 1994, p. 77)

Economics, too, starts with an idealized world, but then it does NOT move nearer and nearer to the world of experiment and observation, but in the OPPOSITE direction in order to rationalize an unsuccessful initial idealization. Thus, idealization, which is indispensable, becomes counterproductive. There is only a thin line between fruitful abstraction and barren absurdity. To assume that the moon is a mass point is unrealistic but fruitful; to assume that it is made of green cheese is unrealistic but nothing else. Most assumptions/abstractions/idealizations/simplifications of standard economics fall into the green cheese category. This is how economics has become so gaga.

The crucial point of scientific methodology is the undissolvable combination of axiomatics and empiricism. Despite many imitations, this point never got across to the storytellers of the so-called social sciences: “Did anyone ever attempt to found a system of social science or economics on the level of identity with Newtonian rational mechanics or the Newtonian system of the world? In my research, I have never found such an example.” (Cohen, 1994, p. 61)

The task of Heterodoxy in general and the methodological loudspeakers Radford, Syll, and Zaman, in particular, is NOT to wax so lyrical about complexity but to successfully deal with it.


Reference
Cohen, I. B. (1994). Natural Images in Economic Thought, chapter Newton and the Social Sciences, With Special Reference to Economics, or, the Case of the Missing Paradigm, 55–90. Cambridge: Cambridge University Press.

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Graphic AXEC112c Some elementary economic laws