Key Issues: Sloppiness, multi-senseism, storytelling ― thriving in the thickness of confusion

... economics is a big omnibus which contains many passengers of incommensurable interests and abilities. (Schumpeter, 1994, p. 827)

***

... he [Adam Smith] disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along. (Schumpeter, 1994, p. 185)

But though the Wealth of Nations contained no really novel ideas and though it cannot rank with Newton's Principia or Darwin's Origin as an intellectual achievement, it is a great performance all the same .... (Schumpeter, 1994, p. 185)

With Adam Smith, economics had a clumsy start and, despite great performances of whatever sort, fell further back over the long haul in comparison to physics and biology.

***

A good principles of economics teacher is a good storyteller. (Colander, 1995, p. 169)

Another danger is that you may ‘precise everything away’ and be left with only a comparative poverty of meaning. ... Such a problem was avoided, said Keynes, by Marshall who used loose definitions but allowed the reader to infer his meaning from “the richness of context.” (Coates, 2007, p. 87)

What a tricky business this all is! In his Treatise on Money, Mr. Keynes told the world that savings and investment are only equal in conditions of equilibrium; that an excess of investment over saving means rising prices, and vice versa. In his General Theory, he told us that saving and investment are always equal, and that this is a mere identity or truism, without significance for the determination of prices. As far as I can make out, there are relevant and important senses in which all these statements are each of them right and each of them wrong. (Hicks, 1939, p. 184)

This is the articulate methodological commitment to inconclusiveness that, on a deeper level, unites economists of all camps: "... there are relevant and important senses in which all these statements are each of them right and each of them wrong. " Many senses make no sense at all. However, empirical and logical inconclusiveness quite effectively secured the ecological niche of Political Economy as a separate science. Demarcation does not work in the "thickness of confusion" (Suppes, 1968, p. 654).

Contradictory statements are reconciled routinely by relating them to one of the following distinctions: short run/long run, ex ante/ex post, identity/equality. Inconclusiveness helps passably against outright refutation. With regard to empirical testing, the commitment to inconclusiveness implies the — self-defeating — assertion that in economics no experimentum crucis is feasible. All questions that cannot possibly be decided by experiment are out of science in the first place.

... you cannot prove a vague theory wrong. (Feynman, 1992, p. 158)

With enough fog emitted, almost anything becomes possible. (Mirowski, 2013, p. 344)

... nothing is clear and everything is possible. (Keynes, 1973, p. 292)

You can define anything you want, but as a sage once said,  “A rose by any other name will smell as sweet!” (P. Davidson, RWER-Blog, July 2, 2013)

For, on principle, we may call things what we please. (Schumpeter, 1994, p. 598)

This is a tough question to adjudicate on scientific grounds since the issue is largely definitional and, as Lewis Carroll pointed out, everyone is entitled to his own definitions. (Blinder, 1987, p. 131)

Let us mean by current income the value of current output, ... (Keynes, 1933, p. 699)

... twentieth-century neoclassical theory resembles nothing so much as the child's game of Mr. Potatohead – the fun comes in mixing and matching components with little or no concern for the coherence of the final profile. (Mirowski, 1995, p. 294)

Trying to pin down the essential ideas is sometimes difficult because neoclassical economics always seems to be a moving target. (Boland, 1992, p. 213)

Since everybody is indeed free to define whatever appears to be appropriate, it seems that a definition could not pose any real problem. This, indeed, is not true because the full freedom of definition holds but for the first definition. The subsequent definitions must be consistent with their predecessors. This continuously restricts the freedom of definition. It is by no means the case that anything can be defined as desired. This is a methodological illusion that is rather widespread among economists. It explains, for the most part, the discipline's state of manifest confusion. A consistent and agreed-upon framework of concepts is indispensable. Keynes' aforementioned determination of income, for example, invalidates the General Theory and all its legitimate and illegitimate offshoots (IS–LM, AD–AS) in one sentence (see Keynes's Missing Axioms URL or Why Post Keynesianism is Not Yet a Science URL).

***

We know from the history of science that entrenched classificatory schemes and misleading descriptive vocabularies have impeded scientific advance as much or more than the complexities and observational inaccessibility of the subject matter. (Rosenberg, 1980, p. 114)

As was standard with Marshall, the narrative told one story, the mathematics another. (Mirowski, 1995, p. 299)

Is it not a fact, which stares at us from the histories of all sciences, that it is much more difficult for the human mind to forge the most elementary conceptual schemes than it is to elaborate the most complicated superstructure when those elements are well in hand? (Schumpeter, 1994, p. 602)

The only way to arrive at coherent languages is to set up axiomatic systems implicitly defining the basic concepts. (Schmiechen, 2009, p. 344)

The currently prevailing pattern of economic theorizing exhibits the following three characteristics: (1) a syncopated style of argument fluctuating back and forth between literary and symbolic modes of expression, (2) naive translation, or the loose paraphrasing of formulae into sentences, and (3) loose verbal reasoning for certain aspects of theoretical argumentation where explicit symbolic formulation is lacking. (Dennis, 1982, p. 698)

Thus, economics is apparently the study of the economy, the study of the coordination process, the study of the effects of scarcity, the science of choice, and the study of human behavior. One possible conclusion to draw from this lack of agreement is that the definition of economics does not really matter. (Backhouse and Medema, 2009, p. 221)

The truth is, most persons, not excepting professional economists, are satisfied with very hazy notions. (Fisher, quoted in Mirowski, 1995, p. 86)

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. (von Neumann, quoted in Mirowski, 2002, p. 146 fn. 49)

Precision and rigor in the statement of premises and proofs can be expected to have a sobering effect on our beliefs about the reach of the propositions we have developed. (Hutchison, 1960, p. xxiii)

There has been no rigor and precision in the definition of income and profit for more than two centuries. The reach of conventional propositions is zero. That is more than sobering.

***

To be sure, economics may perform a valuable social role without adding any significant understanding to knowledge of the economy – a “good myth,” economically speaking, can work not only in primitive tribal cultures but also in modern societies. ... Indeed, ... the religious function may have been the most important role throughout the history of modern economics since the Enlightenment. (Nelson, 2006, pp. 300-301)

Myth, well told, is still the most convincing way to explain how the world and humankind came to be in their present form. To recall, Zeus was the god of the sky and thunder. He oversaw the universe, assigned the various gods their roles, and was known for his erotic escapades. Zeus was emotional, spontaneous, and had a lot of trouble with other gods, goddesses, and humans. At Prometheus, for example, he was angry for three things: being tricked on sacrifices, stealing fire for man, and for refusing to tell him which of his children would dethrone him. To handle his problems, Zeus regularly fell back on chicanery, force, and violence (for an overview, see Wikipedia URL). Since antiquity, everybody "understands" Zeus, and he easily provokes like/dislike. Purified from all religious connotations, Greek myth is the stuff psychology, literature, soap operas, blogs, newspapers, and history are made of to this day. Let us call this all-embracing panorama of human motives and actions the gossip model of the world. It affords immediate access to subjective understanding, which, however, is barely distinguishable from a projection. With the gossip model, everything and its opposite can be explained. That makes it both popular and preposterous. Utility maximization is the economist's reduced version of the gossip model. Science started the very day when Greek philosophers threw the gossip model out of the window.

... observed acts of behavior allow an indefinite number of interpretations regarding the plans from which they are assumed to have sprung. (Morgenstern, 1941, p. 381)

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)

***

Economics as a discipline faces the following alternative. If it wants to be accepted as a science, it has to stick to the rules. The rules are quite simple: material and logical consistency. No excuses (complexity, Duhem-Quine, etc.). If economics cannot deliver on principle, it has to join the Geisteswissenschaften/Humanities and try its luck with Verstehen/understanding. Feynman defended the standards in quite certain terms: "You don't like it? Go somewhere else!" Since J. S. Mill spoke — excusatory — of Political Economy as an inexact and separate science, economists attempted to water down the rules and to tergiversate material or logical consistency or both. Lower standards or Verstehen can, by its very nature, not lead to much more than a gossip model of the world. Homo oeconomicus may be replaced by the far more realistic homo socialis; this improvement, though, still remains within the confines of the gossip model and is not sufficient for a better understanding of how the economy works. No behavioral approach, whatever, is adequate. It is not a question of realism; it is a question of methodology. There is no such thing as an inexact and separate science. There is no hiding behind complexity. There is only science and non-science. The Unity of Sciences does not mean unity of science and its look-alikes.

***

The solution consists of replacing behavioral assumptions, both the sloppy and the axiomatized ones, with structural axioms. Structural axiomatization has the accessory advantage of putting off muddleheads, commonsensers, wishwashers, smatterers, storytellers, and all those "whom any discovery that brought quietus to a vexed question would inevitably vex because it would end the fun of arguing around it and about it and over it" (Peirce, 1931, 5.520). Objective/structural/systemic axiomatization strictly excludes the explanation or prediction of human behavior. Hence, there is no empty talk about it.

Filibuster economics may indeed have performed a multitude of useful social roles, but this is of no consequence for its scientific status. Social utility is not a criterion for the assessment of a theory. Sloppiness, incoherent definition, green cheese assumptionism, and self-protecting inconclusiveness are detrimental to the growth of knowledge. Social utility cannot exculpate proto-scientific garbage.

A Supreme Being would have no need for axioms, but they are often found quite useful for mere men. (Strotz, 1953, p. 390)

More specific: The rigor and objectivity of structural/systemic axiomatization is needed in order to abandon the endemic sloppiness of economic argument and finally to advance from proto-science to science.


References
Backhouse, R. E., and Medema, S. G. (2009). On the Definition of Economics. Journal of Economic Perspectives, 23(1): 221–233.
Blinder, A. S. (1987). Keynes, Lucas, and Scientific Progress. American Economic Review, 77(2): 130–136. URL
Coates, J. (2007). The Claims of Common Sense. Moore, Wittgenstein, Keynes and the Social Sciences. Cambridge, New York, etc.: Cambridge University Press.
Boland, L. A. (1992). The Principles of Economics. Some Lies My Teacher Told Me. London, New York: Routledge.
Colander, D. (1995). The Stories We Tell: A Reconstruction of AS/AD Analysis. Journal of Economic Perspectives, 9(3): 169–188. URL
Dennis, K. (1982). Economic Theory and the Problem of Translation (I). Journal of Economic Issues, 16(3): 691–712. URL
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Hicks, J. R. (1939). Value and Capital. Oxford: Clarendon Press, 2nd edition.
Hutchison, T.W. (1960). The Significance and Basic Postulates of Economic Theory. New York: Kelley
Keynes, J. M. (1933). Mr. Robertson on "Saving and Hoarding". Economic Journal, 43(172): 699–712. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Mirowski, P. (2002). Machine Dreams. Cambridge: Cambridge University Press.
Mirowski, P. (2013). Never Let a Serious Crisis Go to Waste. London, New York: Verso.
Morgenstern, O. (1941). Professor Hicks on Value and Capital. Journal of Political Economy, 49(3): 361–393. URL
Nelson, R. H. (2006). Economics as Religion: From Samuelson to Chicago and Beyond. Pennsylvania, PA: Pennsylvania State University Press.
Peirce, C. S. (1931). Collected Papers of Charles Sanders Peirce, volume I. Cambridge: Harvard University Press. URL
Rosenberg, A. (1980). Sociobiology and the Preemption of Social Science. Oxford: Blackwell.
Rosenberg, A. (1992). Economics - Mathematical Politics or Science of Diminishing Returns? Chicago: University of Chicago Press.
Schmiechen, M. (2009). Newton’s Principia and Related ‘Principles’ Revisited, volume 1. Norderstedt: Books on Demand, 2nd edition.
Schumpeter, J. A. (1994). History of Economic Analysis. New York: Oxford University Press.
Strotz, R. H. (1953). Cardinal Utility. American Economic Review, 43(2): 384–397. URL
Suppes, P. (1968). The Desirability of Formalization in Science. Journal of Philosophy, 65(20): 651–664.

Related Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist URL


© 2013 EKH, except original quotes

John Hicks, fake scientist

Comment on Lars Syll on ‘Hicks on neoclassical ‘uncertainty laundering’’

Blog-Reference and Blog-Reference and Blog-Reference on Oct 3

After 200+ years it is obvious to even the dullest news consumer 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 pivotal economic concept of profit wrong.

What we have today is the pluralism of provably false theories.#1 This, of course, is no accident. Economists are fake scientists. The crucial point is this: the genuine scientist drives every problem he chooses to solve relentlessly to a clear-cut true/false answer, with truth defined as material and formal consistency. The fake scientist solves nothing but keeps everything in the swamp of inconclusiveness, where "nothing is clear and everything is possible" (Keynes). Inconclusiveness is what Popper called an immunizing stratagem because: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman) This, of course, is good news for fake scientists.

If it so happens that a theory has been proven wrong, the follow-up stratagem is ignorance and business as usual. This malpractice has been addressed by Morgenstern already 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.”

These two stratagems could produce nothing else than the observable pluralism of false theories which, in turn, brings another stratagem into play: excuses and rationalizations.#2

It is not too hard to identify a genuine scientist and a fake scientist. The genuine scientist speaks thus: “We must not believe those, who today, with philosophical bearing and deliberative tone, prophesy the fall of culture and accept the ignorabimus. For us, there is no ignorabimus, and in my opinion none whatever in natural science. In opposition to the foolish ignorabimus, our slogan shall be: We must know — we will know!” (Hilbert)

The fake scientist speaks thus: “As far as I can make out, there are relevant and important senses in which all these statements are each of them right and each of them wrong.” (Hicks) Feynman pointed out the benefit of inconclusiveness: “By having a vague theory it is possible to get either result.” Because of this, fake scientists subscribe to the methodology of anything-goes and the faux humility of ‘I know that I know nothing’.

The benefit of wish-wash and clueless filibuster is much appreciated by Post Keynesians: “It is better to be roughly right than precisely wrong.” This false dichotomy has its deep roots in the Cambridge School of Loose Verbal Reasoning: “Another danger is that you may ‘precise everything away’ and be left with only a comparative poverty of meaning. . . . Such a problem was avoided, said Keynes, by Marshall who used loose definitions but allowed the reader to infer his meaning from ‘the richness of context’.” (Coates)

This is good news, in economics everybody is entitled to his own multiple truths: “What a tricky business this all is! In his Treatise on Money, Mr. Keynes told the world that savings and investment are only equal in conditions of equilibrium; that an excess of investment over saving means rising prices, and vice versa. In his General Theory, he told us that saving and investment are always equal, and that this is a mere identity or truism, without significance for the determination of prices. As far as I can make out, there are relevant and important senses in which all these statements are each of them right and each of them wrong.” (Hicks)

In his utter scientific incompetence, Hicks did not realize the blunder in Keynes’ premises: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63) but incorporated I=S into IS-LM, which became one of the most extensively used silly constructs in the history of the failed science economics.#3

Egmont Kakarot-Handtke


#1 Getting out of the economics swamp
#2 Failed economics: The losers’ long list of lame excuses
#3 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It

For details of the big picture see cross-references Refutation of I=S

***

Wikimedia AXEC172

Tricky business

Comment on David Glasner on ‘JKH on the Keynesian Cross and Accounting Identities’

Blog-Reference

“What a tricky business this all is! In his Treatise on Money, Mr. Keynes told the world that savings and investment are only equal in conditions of equilibrium; that an excess of investment over saving means rising prices, and vice versa. In his General Theory, he told us that saving and investment are always equal, and that this is a mere identity or truism, without significance for the determination of prices. As far as I can make out, there are relevant and important senses in which all these statements are each of them right and each of them wrong.” (Hicks, 1939, p. 184)

Many senses make no sense at all, but inconclusiveness is the inevitable outcome of every economic discussion. This is no coincidence. Economists do not solve problems, they are the problem. Inconclusiveness and vagueness is the survival strategy of the scientifically incompetent.

“Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman, 1992, p. 158)

This conveniently prolongs the shelf-life of crappy theories. The I=S debate is a case in point.

Keynes messed up the basics of macro with this faulty syllogism: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, p. 63)

Since theories have an architectonic structure it is clear that if there is a fault in the formal foundations the whole superstructure is faulty. Actually, the defect in Keynes' syllogism is in the premise income = value of output. This equality holds — see the formal proof in (2011) — only in the case of zero profit in both the consumption and investment good industry. Is it necessary to add that zero profit models never had and never will have a counterpart in the real world?

Keynes' conceptual problems started 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 and Bezemer, 2010, p. 12)

This failure kicked off the chain reaction of errors/mistakes because when profit is not correctly defined, income is not correctly defined, and then saving is not correctly defined. By consequence, all I=S models, including IS-LM, are methodologically defective. The mistake has also been carried over to accounting (2012). Since the days when Keynes wrote down his faulty syllogism, the representative economist did not realize the elementary logical blunder.

“In fact, the history of every science, including that of economics, teaches us that the elementary is the hotbed of the errors that count most.” (Georgescu-Roegen, 1970, p. 9)

To sum up: All I=S models are false and absolutely unacceptable. This is not a matter of taste or choice or wish-washy but of conceptual logic. The correct relationship reads Qre≡I−S, that is, the business sector's investment expenditures are never equal to the household sector's saving and their difference is always equal to the business sector's retained profit. This has already been figured out by a very smart Frenchman, Nobel Laureate Maurice Allais: “Autrement dit l’investissement n’est pas égal à l’épargne spontanée, mais à l’épargne spontanée augmenté du revenue non distribué des entreprises ....” (Allais, 1993, p. 69), see also (2011, fn. 4)

Let there be no inconclusiveness and vagueness: the somewhat moronic I=S debate ended in 1993 at the latest. More than 75 years after the General Theory it is high time for a general intellectual upswing. After endless drivel perhaps JKH could give an example.

Egmont Kakarot-Handtke


References
Allais, M. (1993). Les Fondements Comptable de la Macro-Économie. Paris: Presses Universitaires de France, 2nd edition.
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Georgescu-Roegen, N. (1970). The Economics of Production. American Economic Review, Papers and Proceedings, 60(2): 1–9. URL
Hicks, J. R. (1939). Value and Capital. Oxford: Clarendon Press, 2nd edition.
Kakarot-Handtke, E. (2011a). Keynes’ Missing Axioms. SSRN Working Paper Series, 1841408: 1–33. URL
Kakarot-Handtke, E. (2011b). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2012). The Common Error of Common Sense: An Essential Rectification of the Accounting Approach. SSRN Working Paper Series, 2124415: 1–23. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL

Worthwhile Canadian filibuster?

Comment on Nick Rowe on ‘On defining "recession"’

Blog-Reference

Let us call the economist's bad habit to nudge any question to the point of inconclusiveness, overload, nausea, or inconsequential pluralism of manifest contradictions the Hicks drive.

“As far as I can make out, there are relevant and important senses in which all these statements are each of them right and each of them wrong.” (Hicks, 1939, p. 184)

To recall, real science is about true/false and not about multiple senses or anything-goes. Economists as would-be scientists are known to be sloppy: “The truth is, most persons, not excepting professional economists, are satisfied with very hazy notions.” (Fisher, quoted in Mirowski, 1995, p. 86)

This goes some way to explain the failure of economics. “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.” (von Neumann, quoted in Mirowski, 2002, p. 146 fn. 49)

Of course, in most everyday situations there is not much use to quarrel over exact definitions. It is a bit different in the scientific context. In economics, in particular, haziness has two tangible merits. First: “By having a vague theory it is possible to get either result.” (Feynman, 1992, p. 159) and second: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman, 1992, p. 158)

Because it brings one on the safe side, vagueness, inconclusiveness, wish-wash are all elements of a conscious/unconscious survival strategy. “With enough fog emitted, almost anything becomes possible.” (Mirowski, 2013, p. 344)

This is why all half-wits, dilettantes, and shell game players applaud the silly Post-Keynesian slogan: “It is better to be roughly right than precisely wrong” while scientists subscribe to “It is best to be precisely right than roughly wrong.”

In economics, habitual intellectual sloppiness had disastrous consequences. Neither orthodox nor heterodox economists understand the two most important phenomena in the economic universe: profit and income (2014b; 2014a). This is like medieval physics before the elementary concepts force and mass was clearly defined and understood.

There seems to be complete ignorance among economists that they have nothing to offer in the way of a scientifically founded advice.

“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)

Of opinion, there has been always more than enough in economics. Because they cannot tell the difference between profit and income neither the proponents of the Walrasian nor of the Keynesian approach have the true theory that could help to fix a crisis or recession. In view of humongous intellectual messiness, whether economists can define recession makes no difference at all.

Egmont Kakarot-Handtke


References
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Hicks, J. R. (1939). Value and Capital. Oxford: Clarendon Press, 2nd edition.
Kakarot-Handtke, E. (2014a). Economics for Economists. SSRN Working Paper Series, 2517242: 1–29. URL
Kakarot-Handtke, E. (2014b). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Mirowski, P. (2002). Machine Dreams. Cambridge: Cambridge University Press.
Mirowski, P. (2013). Never Let a Serious Crisis Go to Waste. London, New York, NY: Verso.
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.

It's all over — but for whom?

Comment on Dave Marsay on ‘It’s all over — Gödel’s incompleteness theorems’

Blog-Reference

Vagueness and inconclusiveness is a second-best strategy to avoid outright falsification. This helps to stay in business with a silly theory.

“Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman, 1992, p. 158)

For the same reason is Gödel, who shows another limit of proof, so often cited by the muddle heads of the so-called social sciences. Similarly with Duhem-Quine.

Already von Neumann identified fogginess as the root cause of substandard scientific performance. “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.” (von Neumann, quoted in Mirowski, 2002, p. 146 fn. 49)

Economists cannot afford to get out of the home zone of inconclusiveness between true and false. “... 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)

Egmont Kakarot-Handtke


References
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Hands, D.W. (2001). Reflection without Rules. Economic Methodology and Contemporary Science Theory. Cambridge, New York, NY, etc: Cambridge University Press.
Mirowski, P. (2002). Machine Dreams. Cambridge: Cambridge University Press.

For details about the significance of Gödel, axiomatization, and mathiness see here and here and here

Nine views are nine too much

Comment on Brad DeLong on ‘Forder: Nine View of the Phillips Curve’

Blog-Reference

The history of economic thought tells us that economic methodology consists of kicking the can down the road until all gets stuck in the swamp of multiplicity, inconclusiveness, and confusion.

The Phillips Curve debate is a case in point. Forder concludes his paper: “There was no clear meaning attaching to the expression ‘Phillips curve’ and consequently, nothing much could be said to be definitely true or false of it.” And “A further point is that anyone — very nearly anyone — could find some kind of ‘Phillips curve’ of which they approved, or could use in analysis, or could fit into a model.”

The compulsive drive to push every issue to the point of inconclusiveness and anything-goes is so characteristic of economics that it deserves its own label. Let us call it the Hicks drive: "As far as I can make out, there are relevant and important senses in which all these statements are each of them right and each of them wrong.” (Hicks, 1939, p. 184)

This is the natural end of every economic debate. For lack of the true theory, this is all economists have to offer. “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)

The Phillips curve is part and parcel of employment theory (2012). Conventional employment theory is a failure. To make a long argument short, the most elementary version of the correct Employment Law is given on Wikimedia AXEC62:

From this equation follows inter alia:
(i) An increase in the expenditure ratio ρ_E leads to higher employment. An expenditure ratio ρ_E>1 indicates credit expansion, a ratio ρ_E<1 indicates credit contraction/debt repayment.
(ii) Increasing investment expenditures I exert a positive influence on employment, a slowdown of growth does the opposite.
(iii) An increase of the factor cost ratio ρ_F≡W/PR leads to higher employment. This implies that a higher average wage rate W leads to higher employment. This explains the original Phillips curve.
(iv) A price increase lowers the factor cost ratio and is conducive to lower employment. This explains stagflation.
(v) The complete Employment Law is a bit longer and contains in addition profit distribution, public deficit spending, and the trade balance with the rest of the world. All variables are measurable, the structural Employment Law is testable.

Point (i) and (ii) are familiar Keynesian stuff. Let us focus here alone on the factor cost ratio as defined in (iii). This variable formally represents the price mechanism which, however, does not work as Orthodoxy hallucinates. As a matter of fact, overall employment increases if the average wage rate W increases relative to average price P and productivity R.

The core of the employment problem is that the price mechanism does not work as orthodox economics says and this has nothing to do with wage or price stickiness but only with scientific incompetence.

Forder’s Phillips curve summary can be generalized for all of economics: “None of those things is true. Indeed, it is a stretch to say that any of them has an element of truth. They are part of a widely believed fiction and certainly the story taken as a whole has no historical merit.”

Egmont Kakarot-Handtke


References
Hicks, J. R. (1939). Value and Capital. Oxford: Clarendon Press, 2nd edition.
Kakarot-Handtke, E. (2012). Keynes’s Employment Function and the Gratuitous Phillips Curve Disaster. SSRN Working Paper Series, 2130421: 1–19. URL
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.

Related 'The Hicks drive' and 'Mental messies and loose losers' and 'The Humpty Dumpty methodology'

Occasional Tweets: Why economists never got out of the swamp of inconclusiveness where 'nothing is clear and everything is possible'

 

#Econ#FailedFakeScience#Macro#Keynes got macroeconomic #Profit wrong bc he was too stupid for elementary #Algebra. As a consequence, the whole analytical superstructure of #Economics is scientifically worthless. #EconPolicyGuidance NEVER has had sound scientific foundations. pic.twitter.com/QpwvTXfWid

— E.K-H (@AXECorg) January 25, 2023

For more about inconclusiveness see AXECquery.

For more about 'nothing is clear and everything is possible' see AXECquery. 

The united tribe of the scientifically incompetent

Comment on Noah Smith on ‘Tribal Warfare in Economics Is a Thing of the Past’

Blog-Reference and Blog-Reference

Economics is a failed science, that is, the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory and axiomatically false. 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 never provided a valid alternative. What we actually have is the pluralism of well-established false theories.

As a consequence, the heap of scientific rubbish 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, a category error, inconsistent definitions, cross-talk, and inconclusiveness. Accordingly, the scientific content of economics 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 and they have no idea how to get out of the deadlock: “Yet most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992)

Because economists cannot explain the macroeconomic universe they have (i) regressed to the study of microeconomic molehills which are easy to understand by any half-wit, and (ii), they have formed one big tribe at the lowermost scientific level of anything-goes.

Egmont Kakarot-Handtke


Related ‘Failed economics: The losers’ long list of lame excuses’ and 'Economists’s real job problem' and 'Heterodoxy, too, is proto-scientific garbage' and 'Economics is indefensible' and 'The economic machine is broken? Don’t call the heterodox repairman!' and 'Economics: The pluralism of false theories is over' and 'Substandard reasoners'

Prediction/Forecasting

Comment on Lars Syll on ‘Why economists are useless at forecasting’

Blog-Reference

It is a naive misunderstanding that the purpose of science is to predict the future. This is not the case, see Science does NOT predict the future.

So, orthodox economics can be accused of many things but incorrect prognoses are not its worst defect. The lethal defect is that orthodox economics is materially and formally inconsistent, i.e., entirely outside of science.

What makes science special is that it figures out laws or, in a more general term, invariants. A popular example is E=mc². Obviously, this law does not predict the future. Neither does the Law of the Lever. Laws simply hold ALWAYS ― past, present, and future. See The Synthesis of Economic Law, Evolution, and History.

What economists can indeed be accused of is that they have failed at their PRIMARY task and not figured out the laws that govern the actual market system. See The general theory of scientific incompetence.

Some economists excuse their failure to explain how the economy works by asserting that there is no such thing as an economic law. See A heap of proto-scientific garbage.

These economic law deniers are political economists (in contradistinction to theoretical economists) who defend their natural habitat, that is, the intellectual swamp where “nothing is clear and everything is possible” (Keynes). Political economists are unable/ unwilling to leave the scientific no man’s land between true and false and to proceed from opinion to knowledge. See From Orthodoxy to Heterodoxy to Metadoxy.

In political economics, to know nothing is not a declaration of scientific bankruptcy but the very premise of the Laissez-faire philosophy. Just because we know nothing we better leave all to the invisible hand a.k.a. the market. Who knows nothing cannot do anything. Thus, naturally given ignorance implies the futility of economic policy. This has been Hayek’s core message. In the Hayekian world, knowledge is hubris, and science is denounced as scientism. In political economics, the arbitrariness and inevitable failure of prognoses is taken as indirect proof that Laissez-faire is the best policy. In Laissez-faire philosophy there is no need for scientific knowledge of how the system works. Because of this, political economics is not merely unscientific but anti-scientific.

Since the founding fathers, who identified themselves as political economists, the role of the economist has NOT been to produce provable scientific knowledge but to produce rhetorically effective opinion in the outer form of science. It is no accident that economic debates always end without a clear-cut true/false conclusion and that the four failed research programs Walrasianism, Keynesianism, Marxianism, and Austrianism coexist in the status quo of proven false theories and entire lack of scientific knowledge, see The Profit Theory is False Since Adam Smith.

Ambivalence, ignorance, and inconclusiveness are the original sin in science but a virtue in politics. Because of this, economists have always been quite comfortable with the running gag that they have forecast nine of the last five recessions or that they never saw a crisis coming. These forecasting mishaps do not count as a refutation of the underlying theory. After all, you know folks, ALL forecasts are a matter of luck and ALL models are false. In political economics, there is no truth and therefore no refutation, only the pluralism of false theories and false prophesy.

Economic forecasting is Circus Maximus and here scientifically failed economists are not entirely useless for the entertainment of the crowd.

Egmont Kakarot-Handtke

***

Twitter Dec 7, 2021

MMT: How mathematical incompetence helps the Kelton-Fraud

Comment on Brian Romanchuk on ‘Primer: The Kalecki Profit Equation (Part I, II)’

Blog-Reference and Blog-Reference

Under the title “Kalecki Profit Equation”, Brian Romanchuk, presents 5 equations of increasing complexity referring to monetary economies of increasing complexity. This approach is obviously based on two of my posts.#1, #2 Insofar it is correct, however, Brian Romanchuk still gets some essentials wrong.#3, #4 As a result, with his mathematical incompetence, he in effect helps the Kelton-Fraud.#5 Needless to emphasize that a mathematician is supposed to detect and correct logical errors/contradictions and to secure formal consistency by strictly applying the axiomatic-deductive method.

To make matters short, a concise formal summary of the main points, which have been elaborated at length elsewhere, is given on Wikimedia.#6

• Macroeconomic profit has to be derived from consistent macrofoundations. All microfounded profit theories are a priori false.#7

• First of all, the distinction between monetary profit (coll. money-in-the-cashbox/bank = tangible/measurable balance) and nonmonetary profit (coll. paper profit) is essential. Eq. (i)

• To speak of the “Kalecki Profit Equation” is utterly misleading. Kalecki’s equation is formally defective and this has been demonstrated already in a 2011 working paper.#8.

• Eq. (iv) refutes all Keynesian and After-Keynesian I=S/IS-LM models from Hicks to Krugman and beyond.#9

• From the axiomatically correct Profit Law for the open economy with government and profit distribution, eq. (vi), follows the AXEC balances equation, eq. (vii), (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which directly compares to the defective MMT balances equation (I−S)+(G−T)+(X−M)=0.

• The MMT balances equation features prominently in MMT presentations#10 for hiding the macroeconomic fact that Public Deficit = Private Profit.#11

Whether Brian Romanchuk does not realize that his Model 5 equation is inconsistent with the MMT balances equation or whether he intentionally obfuscates the issue is a matter of indifference. What counts at the end of the day is that he is in effect promoting the scientific and political fraud of MMT.#5

Egmont Kakarot-Handtke


#1 DSGE and profit―forget it! MMT and profit―forget it!
#2 Rectification of MMT macro accounting
#3 Profit: after 200+ years, economists are still in the woods
#4 The first to leave the sinking MMT ship?
#5 The Kelton-Fraud
#6 Wikimedia AXEC143d Profit Law and Balances Equation
#7 The Profit Theory is False Since Adam Smith
#8 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
#9 Keynes’s Missing Axioms
#10 Down with idiocy!
#11 MMT and the magical profit disappearance

Related 'Bill Mitchell, MMT’s fake scientist' and 'MMT: Academic snake oil for the people' and 'Cryptoeconomics ― the best of Bill Mitchell’s spam folder' and 'Political economics: Who hijacks British Labour?' and 'MMT: another case of inverted economics'.

Immediately following Truth by definition? The Profit Theory has been axiomatically false for 200+ years.

***

REPLY to Joe Leote on Jul 7

You say: “Applying a national accounting model with specified ‘heroic’ assumptions Minsky uses the Kalecki profit identity to conclude that profits = investment.”

Yes, Kalecki came up with his profit definition and Minsky with his and Keen with his and anybody else with theirs.#1

As the ancient Greeks already observed: “There are always many different opinions and conventions concerning any one problem or subject-matter…. This shows that they are not all true. For if they conflict, then at best only one of them can be true.” (Popper)

The fact is that NONE of them is true. To this day, economists do not get the foundational concept of their subject matter straight.


#1 Heterodoxy, too, is proto-scientific garbage

***

REPLY Joe Leote on Jul 7

You say “The majority of statements are neither true nor false.” True, indeed, 99.9 percent of statements are just brain-dead blather. The 0.1 percent is science.

Every layperson who is confronted with the statement: Mr. A has been murdered and you are the murderer, understands immediately the concept of scientific truth. Truth is (i) a binary concept, i.e. there is only true/false with NOTHING in between, and (ii), truth is objective, that is provable in principle, and (iii), that it is worth every effort to find out the truth even if we cannot be absolutely sure that we will be successful.

Scientific truth is well-defined for 2300+ years by formal and material consistency. However, there is the large swamp of cargo cult science (Feynman) where, as Keynes said, “nothing is clear and everything is possible.”

In the swamp, vagueness, indeterminacy, inconclusiveness, confusion dressed up as complexity, unresolved contradictions, storytelling, filibuster, gossip, finicky scholasticism (Popper), known/unknown unknowns, nonentities, vacuous doubt, silly beliefs, and the Humpty Dumpty Fallacy are the prevailing components of communication.

Economists are swampies.#1, #2 Economics is a failed science. To this day, economists have NOT gotten the foundational concept of their subject matter ― profit ― right. All microfounded (Walrasian) and macrofounded (Keynesian) models are provably false. Economists do not know how the economy works. Economics is a cargo cult science. The “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud.

To claim that there is no truth is an immunizing stratagem (Popper) of failed/fake/ stupid/corrupt proto-scientific blatherers.#3

You are on the wrong side of the demarcation line between science and non-science.


#1 Lousy scientists
#2 Economists ― medics or barber-surgeons?
#3 Failed economics: The losers’ long list of lame excuses

***

REPLY to Joe Leote on Jul 7

Kalecki’s profit equation is formally defective and this has been demonstrated already in a 2011 working paper.#1 The correct “Kalecki” equation is given with eq. (v) in the Wikimedia compilation.#2

The compilation settles the profit issue.#3


#1 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
#2 Wikimedia AXEC143c Profit Law and Balances Equation
#3 For details see cross-references Profit

***

REPLY to Brian Romanchuk on Jul 8 and Blog-Reference MNE on Jul 9

You say: “From my perspective, the issue is straightforward: do we want to model the operation of the industrial capitalist system that we have? If so, we need to stick with the definition of profit that capitalists use, …”

False! Capitalists know as much about capitalism as fishes know about water ― nothing. This is long known: “… these people who live and move among the facts often, or mostly, cannot of themselves put together any precise reasonings about them.” (Bagehot, 1885)#1

This is why scientists redefine everyday concepts rigorously: “The only way to arrive at coherent languages is to set up axiomatic systems implicitly defining the basic concepts.” (Schmiechen)#2

The elementary production-consumption economy is, for a start, defined by three macro axioms (Y_w=WL, O=RL, C=PX), two conditions (X=O, C=Y_w), and two definitions (monetary profit/loss Q_m≡C−Y_w, monetary saving/dissaving S_m≡Y_w−C). From this follows Q_m≡−S_m, that is, macroeconomic profit comes in the most elementary case from the growth of household sector debt.#3

Capitalists don’t know this. Like goldfishes, they know only how to swim in their little pond but have no idea where the water comes from.


#1 Bagehot’s wisdom and the silliness of modern economists
#2 How to get out of the swamp of ignorance
#3 Profit theory in less than 5 minutes

***

REPLY Roger Sparks on Jul 10 and Blog-Reference MNE

You say: “It is hard to distinguish whether owner income comes from investment, hours worked, skill, or some other feature associated with ownership.”

This is entirely beside the point. Obviously, you do not understand how macroeconomic profit and microeconomic profit are related.#1, #2

Profit for the economy as a WHOLE has NOTHING to do with productivity, the wage rate, the working hours, exploitation, competition, innovation, capital, power, monopoly, risk, greed, choice, etcetera. These factors affect only the DISTRIBUTION of profit between firms. Macroeconomic profit is in the most elementary case given with Qm≡−Sm, that is, profit comes from the growth of the household sector’s debt.

The crucial point is this: Brian Romanchuk’s Model 5 equation can immediately be transformed into this balances equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which directly compares to the MMT balances equation (I−S)+(G−T)+(X−M)=0.

Brian Romanchuk argues: “Now I have no idea what he’s going on about the MMT equation. If I am not mistaken, the MMT equation is a sectoral balances equation, and does not tell us about profit. People who care about accounting identities argue that the ‘senior MMTers’ are pulling some technical legerdemain with the definition of saving used. However, I do not deeply care about accounting identitities, so I really never looked into this alleged controversy.”

So-called accounting identities are elementary algebra. If Brian Romanchuk does not see that his profit equation ⇒ balances equation directly contradicts the MMT balances equation he is an incompetent mathematician.

Worse, the MMT balances equation obscures the fact that Public Deficit = Private Profit and is used to politically deceive the ninety-nine-percenters.#3 Either Brian Romanchuk is an incompetent mathematician or he is complicit in the MMT fraud.

Either way, his two posts about the “Kalecki Profit Equation” go down the scientific drain.


#1 Zero-sum capitalism
#2 Capitalism, poverty, exploitation, and cross-over exploitation
#3 Down with idiocy!

Dialectic: the swampies’ methodology of choice

Comment on Matt Franko on ‘Dialectic Method’

Blog-Reference

Matt Franko observes: “Probably 99.99% of the Economics discipline is operating under the Dialectic Method and accordingly the material result is the manifest shit-show we are watching every day … a moron-fest goat rodeo … Its NOT the discipline of Economics that is the problem, we often can see the discipline taking a lot of heat … imo its unfair criticism of a discipline … its rather the dominant dialectic methodology commonly used within that discipline that is fucking everything all up.”

Matt Franko is not the first to realize that economics has a methodology problem. What he does not realize, though, is that this is not a bug but a feature. Economics has firmly established itself in the dialectical impasse of 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. The fact 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. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, and materially/formally inconsistent.

The dialectical impasse consists of the manifest contradiction between the claim that economics is a science and the fact that it is political agenda pushing.

Science is digital=binary=true/false and NOTHING in between. There is NO such thing in science as roughly right or roughly wrong, it is only materially/formally true/false. The swamp between true/false where “nothing is clear and everything is possible” (Keynes) is the natural habitat of morons, agenda pushers, confused confusers, blatherers, fraudsters, trolls, and incompetent scientists.#1, #2, #3, #4

Swampies euphemize their inability/unwillingness to resolve inconsistencies as dialectic method: “According to Kant … the ancient Greeks used the word ‘dialectic’ to signify the logic of false appearance or semblance. To the Ancients, ‘it was nothing but the logic of illusion. It was a sophistic art of giving to one’s ignorance, indeed even to one’s intentional tricks, the outward appearance of truth, by imitating the thorough, accurate method which logic always requires, and by using its topic as a cloak for every empty assertion’.”#5

The philosophical father of modern dialectic is Hegel. Schopenhauer had not much good to say about him: “If I were to say that the so-called philosophy of this fellow Hegel is a colossal piece of mystification which will yet provide posterity with an inexhaustible theme for laughter at our times, that it is a pseudo-philosophy paralyzing all mental powers, stifling all real thinking, and, by the most outrageous misuse of language, putting in its place the hollowest, most senseless, thoughtless, and, as is confirmed by its success, most stupefying verbiage, I should be quite right.”#6

In marked contrast to swampies, scientists drive the question under discussion to the point of a clear-cut decision between true and false: “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)

Formal consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-art testing.

The profession of useful political idiots has no genuine interest in a clear-cut true/false outcome of research and debate but seeks to keep everything and everybody in the status-quo swamp. Swampies subscribe to dialectical inconclusiveness, i.e. anything goes, truth is subjective and relative, reality is a social construct, nobody has the truth with a big T, everybody has some truth with a small t, and to the pluralism and peaceful coexistence of provably false theories.

As Popper summarized it: “Hegel’s intention is to operate freely with all contradictions. ‘All things are contradictory in themselves’, he insists, in order to defend a position which means the end not only of all science, but of all rational argument. And the reason why he wishes to admit contradictions is that he wants to stop rational argument, and with it scientific and intellectual progress.”#7

Political economists prevent scientific progress to this day. Economics is still at the proto-scientific stage which is characterized by material/formal inconsistency.

Egmont Kakarot-Handtke


#1 It is better to be precisely right than roughly wrong
#2 Marshall and the Cambridge School of plain economic gibberish
#3 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist
#4 Finally, the embarrassment of economics is over
#5 Wikipedia
#6 Goodreads
#7 A Free Left Blog

Related 'Profit: after 200+ years, economists are still in the woods' and 'A new curriculum for swampies?' and 'Getting out of the economics swamp' and 'Economics: The greatest scientific fraud in modern times' and 'Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems' and 'Economics, too, is pre-truth' and 'Links on capital-T Truth, stupidity, corruption' and 'Economics is locked in idiocy: How could this happen?' and 'Economists: scientists or political clowns?' and 'Economics as storytelling and entertainment for the masses' and 'And the answer is NCND ― economics after 200+ years of Glomarization'.

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Wikimedia AXEC176b  Economics, Communication, Disinfotainment

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 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 mistake, 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 are 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 his 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 his 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, 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 are 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'.

***

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?

***

Wikimedia AXEC136g

Prophets of Preemptive Vanitization (II)

Comment on Lars Syll on 'On abstraction and idealization in economics'

Blog-Reference

Paul Davidson has already given the resume “To throw up one’s hand and say we can not know what will happen — is to surrender to fools!”

Of, course, science does not explain everything. Of course, there are different modes of explanation. Of course, they are legitimate. Why? Because we are in a trial-and-error process. That means, we have a distinct feeling that known answers are unsatisfactory or false. And we have a distinct feeling that there must be better answers. This, in a nutshell, is the scientific stance.

Not all people share this stance. They need not! The curious thing is: Why do these people climb on a soapbox and do not get tired of telling everyone that the real world is fuzzy, vague, indeterminate, complex, that there is no absolute knowledge, that there are undecidable questions, that something cannot be done, that something other cannot be known in principle, that nobody can predict the path of a flying feather, and — finally — that they have no clue either.

I leave it to anybody’s guess why these people climb on a soapbox. Suffice it to say that they contribute nothing to science because science is concerned with questions that — with a positive probability — do have a definite answer that satisfies the criteria of material and formal consistency. The rest is for the birds.

The crucial point is: Science does not explain everything, but non-science explains nothing.

Trivially true, we cannot know everything, but from this does not follow that we cannot know something. It is this Something that science is all about, and it this Something that theoretical economics is all about.

In economics, we face a specific problem: there is theoretical and political economics. The goal of political economics is to push an agenda, the goal of theoretical economics is to explain how the actual economy works. From the viewpoint of science political economics as a whole is a no-go. The first problem of economics is that many economists are not scientists but agenda pushers of one sort or another.

Because of this, the argument of complexity, inconclusiveness, incompleteness, or futility means something different in economics than Socrates's 'I know that I know nothing' or Newton's 'playing on the sea-shore ... whilst the great ocean of truth lay all undiscovered before me'.

It is worth recalling that Hayek has recruited Socrates for his own agenda with the well-known argument that because the market system is so complex and we cannot know much about it all government action is futile and therefore all should be left to the invisible hand of the market. And it is quite consequent indeed that Hayek dismissed science as scientism. He simply let the key vanish from sight. If you know nothing, you cannot do anything.

All this is perfectly legitimate in the context of political economics. What has to be emphasized, though, is that political economics is scientifically worthless.

And at this juncture, things become a bit absurd. A heterodox economist simply cannot say all is so complex and we cannot be sure of anything and that empirical tests are inconclusive and that the axiomatic-deductive method is inapplicable in economics. Because in this case, all he has to say is: I do not like orthodox economics. This may be politically relevant but it is of no scientific consequence.

From the fact that abstraction, idealization, or the axiomatic-deductive method have been misapplied by Orthodoxy follows only that the representative economist is scientifically incompetent. It does not follow that abstraction, idealization, or the axiomatic-deductive method cannot or should not be applied by heterodox economists.

Just the contrary, or, in Paul Davidson's words: not to apply them is to surrender to fools.


Egmont Kakarot-Handtke

Key Issues: Critique of legacy economics

Logical inconsistency:

... Keynes was simply arguing that microeconomic theory is false! Presumably, it is false because it is not logically consistent with all macrophenomena – such as persistent disequilibria – and thus, by modus tollens, at least one of the assumptions of microtheory is false and hence microtheory as a whole is false. (Boland, 2003, p. 143)

Shoddy argumentation:

The currently prevailing pattern of economic theorizing exhibits the following three characteristics: (1) a syncopated style of argument fluctuating back and forth between literary and symbolic modes of expression, (2) naive translation, or the loose paraphrasing of formulae into sentences, and (3) loose verbal reasoning for certain aspects of theoretical argumentation where explicit symbolic formulation is lacking. (Dennis, 1982, p. 698)

 Inappropriate copying of physics:

Thus many are inclined to blame inappropriate copying of physics for the willingness of neoclassicals to tolerate bizarrely unrealistic assumptions and to place everything historical, cultural, institutional, and even psychological outside the framework of economic analysis. (Porter, 1994, p. 128)

The drive to incorporate the formalism of Hamiltonian dynamics is one pertinent example of the triumph of technique over theoretical insight. (Mirowski, 1995, p. 376)  

Borrowing the wrong concepts from mathematics:

The discipline of economics has so far successfully resisted all efforts to alter its character as an exercise in how to reason deductively from axiomatic principles. That is, it has insisted on remaining the Euclidean geometry of the social sciences. (Eichner, 1979, p. 172)

Overemphasis of the mathematical method:

It is thus not at all surprising that mainstream contributions are found continually to be so unrealistic and explanatorily limited. The (mathematical) method, or rather the emphasis placed upon it in the modern economics academy, is the overriding problem.  (Lawson, 2012, p. 3)

Misapplication of mathematics:

A second class of economists contain those who have abundantly employed mathematical apparatus, but, misunderstanding its true use, or being otherwise diverted from a true theory, have built upon the sand. (Jevons, 1911, p. xxv)

Mock precision:

Much economic theorising to-day suffers, I think, because it attempts to apply highly precise and mathematical methods to material which is itself much too vague to support such treatment. (Keynes, quoted in Chick, 1998, p. 1864)

Lack of facts:

Next, the empirical background of economic science is definitely inadequate. Our knowledge of the relevant facts of economics is incomparably smaller than that commanded in physics at the time when the mathematization of that subject was achieved. ... It is due to the combination of the above-mentioned circumstances that mathematical economics has not achieved very much. (von Neumann and Morgenstern, 2007, p. 4)

Inconclusiveness of facts:

Even econometricians using identical, or almost identical, data sets are regularly found to produce quite contrasting conclusions, usually with little attempt at explanation. The systematic result here, as the econometrician Edward Leamer observes, is that: "hardly anyone takes anyone else's data analysis seriously". (Lawson, 2012, p. 9)

Denial of empirical refutation:

... 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)

Misleading principles:

Now the rationality principle, which in the social sciences plays a role somewhat analogous to the universal laws of the natural sciences, is false, and if in addition the situational models are also false, then both the constituent elements of social theory are false. (Popper, 1994, p. 173)

Mistaken beliefs:

The notion that microeconomics is a branch of applied mathematics does economists more credit than several possible alternative explanations for its empirical weakness. ... It isolates the limitations of the theory in a factual supposition about the determinants of human behavior, one that economists share with all of us. But the supposition we all share is false, and so economics rests on a purely contingent, though nevertheless central, mistaken belief .... (Rosenberg, 1992, p. 247)

Lack of realism:

Upon leaving office, each new president of the American Economic Association gives the expected speech, showing that he knows full well it is all just a game, and chastises his colleagues for not being more realistic. (Hudson, 2010, p. 9)

Assumptionism:

Cunningham in 1891 remarked that in the choice of premises, “it is not always easy to tell when a professor of the dismal science is making a joke” and I suspect that Cunningham meant that if the professor was not joking, then he was making a fool of himself. (Viner, 1963, p. 12)

And no economist, if I may say so, has ever been helped toward its solution by starting his investigation on the basis of some general theory of value, particularly any theory of value which rested upon marginal utility or upon marginal disutility or upon some combination of the two. (Parry, 1921, p. 128)

Ignorance of time and history dependence:

The notion of time is so primitive and basic an element in man’s experience that its neglect by much economic theory constitutes an incredible puzzle. This puzzle is attributable, perhaps, to the almost irresistible lure of formalism – particularly one that cannot adequately handle time. (Rizzo, 1979, p. 1)

History dependence stares us in the face ..., but it is not the stuff of pure theory. (Hahn, 1991, p. 48)

Ignorance of institutions:

In the earlier part of the century there were major conflicts between institutional economists, who saw the particular arrangements by which particular economies conducted their economic affairs as essential, and neoclassical economists, who sought to see through these inessential details to the underlying fundamental forces - the forces of demand and supply. (Stiglitz, 1991, p. 136)

Counterfactual equilibrium and zero profits:

The Walrasian prices correspond to the Marshallian long-run equilibrium prices where every producer is making zero excess profits. ... But, from the macro perspective of of Walrasian general equilibrium, the total   profits in this case cannot be other that zero (otherwise, we would need a Santa Claus to provide the aggregated positive profit) ... (Boland, 2003, p. 150)

Questionable foundational assumptions and unjustifiable policy advice:

Much of economic theory is based on three questionable assumptions: (1) the world is deterministic; (2) decision makers act as if they know the values of all relevant parameters; and (3) consumers and firms respectively, act as if they were maximizing utility and profit. ... 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. Economists derive theorems, make predictions, and (!) suggest economic policies using arguments which explicitly or implicitly postulate the validity of the first two assumptions mentioned above. Such endeavors are unjustifiable unless it can be demonstrated that the most important doctrines of economics are insensitive to a relaxation of these two assumptions. (Stigum, 1991, pp. 29-30)

Wrong methodology:

The essence of contemporary mainstream economics does not lie at the level of substantive theory as most of its critics suggest, but at the level of methodology. (Lawson, 1997, p. 282)

Evasion of reality:

The modern history of economic theory is a tale of evasion of reality. Faced with the challenge of these vast changes and vital problems for over a century, it reacted by denying their existence in order to be able to produce a scientific system, a smoothly-functioning self-balancing model. (Balogh, 1982, p. 32)

No predictive capacity:

Economic theory seems permanently stuck at the level of generic predictions – predictions that some change will happen some time and some place, without ever telling us when and where and how much of a change will occur. (Rosenberg, 1994, p. 217)

An unfinished task:

It is good to have [the technically best study of equilibria], but perhaps the time has now come to see whether it can serve in an analysis of how economies behave. The most intellectually exciting question of our subject remains: is it true that the pursuit of private interest produces not chaos but coherence, and if so, how is it done? (Hahn, 1984, p. 102)

Lack of imagination:

Thousands upon thousands of scholars, as well as thousands of statesmen and men of affairs, have contributed their efforts to the attempt to understand the course of events of the economic world. And today this field of investigation is being cultivated more extensively, than ever before. How is it, then, that in all these years, and with all the undoubted talent that has been lavished upon it, the subject of economics has advanced so little? (Schoeffler, 1955, p. 2)

In other words, the main developments in economics of the twentieth century ... had been more a matter of form than of substance. ... Little new of any great significance has been learned about the workings of markets since Adam Smith and ... Smith added much less to the discussion than most economists have commonly supposed. (Nelson, 2006, p. 298)

Yet most economists neither seek alternative theories nor believe that they can be found. (Hausman, 1992, p. 248)

Lack of convincing alternatives:

If one calls those individuals working in the field of microeconomic foundations of Keynesian economics Keynesian-economic theorist, then, as Hahn has said, these Keynesians were not much better. (Morishima, 1984, p. 57)

For as I said at the outset, the citadel is not at all secure and the fact that it is safe from a bombardement of soap bubbles does not mean that it is safe. (Hahn, 1984, p. 78)

No future:

There seems to be a quiet confidence in the profession that we are moving, if only slowly, towards a more scientific basis for economics. ... Paradoxically many of those who have contributed much to the development of general equilibrium theory are less complacent. (Kirman, 1989, p. 126)

... anything based on this mock-up is unlikely to fly. (Hahn, 1981, p. 1036)

Neoclassical economics is metaphorically boxed in, and cannot extricate itself. (Mirowski, 1995, p. 389)

The disciplines that we currently call “social sciences” may accumulate gossip or spot correlations, but Rosenberg believes they will never succeed in formulating laws and theories with the force and fruitfulness of those in the natural sciences. (Hausman, 1992, p. 326)

What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work ... (McCauley, 2006, p. 17)

Ideological bias:

Evidently, the tools are not strong enough to discriminate among fundamentally different hypotheses, or at least not strong enough to overcome differences in prior beliefs, beliefs which are often influenced by ideological concerns. (Stiglitz, 1991, p. 134)

Political bias:

Broadly speaking, policies fall into two categories: laissez-faire or interventionist public regulation. Each set of advocates has its own preferred mode of mathematical treatment, choosing the approach that best bolsters their own conclusions. (Hudson, 2010, p. 6)

Lack of public assurance:

... it is clear that the public's lack of faith in the scientific nature of economic knowledge is a fact, past and present. (Benetti and Cartelier, 1997, pp. 211-212)

Pseudo-science:

Suffice it to say that, in my opinion, what we presently possess by way of so-called pure economic theory is objectively indistinguishable from what the physicist Richard Feynman, in an unflattering sketch of nonsense "science," called "cargo cult science". (Clower, 1994, p. 809)

Pre-science:

The position I now favor is that economics is a pre-science, rather like astronomy before Copernicus, Brahe and Galileo. I still hold out hope of better behavior in the future, but given the travesties of logic and anti-empiricism that have been committed in its name, it would be an insult to the other sciences to give economics even a tentative membership of that field. (Keen, 2011, p. 158)

Economics is a peculiar subject. It looks like a science both in its formal structure and its basic concern with observable reality. And yet economics does not reveal the sort of cumulative progress in the practical manipulation of reality that is one of the abiding characteristics of physics, chemistry, geology and parts of biology. (Blaug, 1990, p. 233)

Within the whole of his [the economist's] science, or what he insists on calling science, no generally recognised result is to be found, as is also the case for theology and for roughly the same reasons; there is no single doctrine taken to be a scientific truth without the diametrically opposed view being similarly upheld by authors of high repute. (Wicksell, quoted in Deane, 1983, p. 8)

We are merely at the threshold of an economic science. (Morgenstern, 1941, p. 374)

Sloppiness:

Few people, and least of all we economists ourselves, are prone to offer us congratulations on our intellectual achievements. Moreover our performance is, and always was, not only modest but also disorganized. Methods of fact-finding and analysis that are and were considered substandard or wrong on principle by some of us do prevail and have prevailed widely with others. (Schumpeter, 1994, p. 6)

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. (von Neumann, quoted in Mirowski, 2002, p. 146 fn. 49)

Hubris:

... the economists, like the theoretical sociologists of old, only more so, tried to solve the largest possible problems from the least possible knowledge. (Postan, quoted in Viner, 1963, p. 12)

Counterproductive organization:

It could be argued, moreover, that the present organization of the profession is itself a negative factor to the extent that the requirement of rapidly obtained results discourages researchers from entering the domains that are most uncertain (even if they are essential). (Benetti und Cartelier, 1997, p. 215)

We are in danger of losing our grip on the concepts of truth, evidence, objectivity, disinterested inquiry. The preposterous environment in which academic work is presently conducted is inhospitable to genuine inquiry, hospitable to the sham and the fake.  (Haack, 1997, p. 1)

Increasing incompetence:

The last thirty years seem to this observer to have been downhill almost all the way. So much of the literature ... I see as silly beyond all expectation and unscholarly beyond all endurance. (Leijonhufvud, 1998, p. 234)

 Reluctance to scrap obsolete intellectual capital:

Gary Becker has suggested that a substantial resistance to the acceptance of new ideas by scientists can be explained by two familiar economic concepts. One is the concept of specific human capital: the established scholar possesses a valuable capital asset in his command over a particular body of knowledge. That capital would be reduced if his knowledge were made obsolete by the general acceptance of a new theory. Hence, established scholars should, in their own self-interest, attack new theories, possibly even more than they do in the absence of joint action. The second concept is risk aversion, which leads young scholars to prefer mastery of established theories to seeking radically different theories. Scientific innovators, like adventurers in general, are probably not averse to risk, but for the mass of scholars in a discipline, risk aversion is a strong basis for scientific conservatism. (Stigler, 1983, p. 538), see also (Sy, 2012, pp. 71-73)

Failed axiomatization:

The formal foundations of legacy economics are indefensible. (AXEC)

 

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