March 23, 2017

Heterodoxy’s chronic thinking incapacity

Comment on Lars Syll on ‘Analogue economies and reality’

Blog-Reference

Heterodox economists say that orthodox economics is false and they are right. Heterodox economists have written tomes about methodology. This, though, has not enabled them to work out a superior alternative to orthodox economics. This is a clear indication that Heterodoxy is methodologically just as deep in the woods as Orthodoxy.

This is obviously the case with Nancy Cartwright. She wonders: “How then do these analogue economies relate to the real economies that we are supposed to be theorizing about? … My overall suspicion is that the way deductivity is achieved in economic models may undermine the possibility to teach genuine truths about empirical reality.”

The problem of Nancy Cartwright and Lars Syll and the rest of Heterodoxy is that they do not understand how science or scientific thinking proceeds.

Peirce put it thus: “The object of reasoning is to find out, from the consideration of what we already know, something else which we do not know.” and “Inference, which is the machinery of logic, is the process by which one belief determines another belief, habit or action. A successful inference is one that leads from true premises to true conclusions.”

Because science tells us something about what has hitherto been unknown the new knowledge cannot come from naive empiricism (except in the case of expeditions).

A fine example for the application of deductivity is how Eratosthenes calculated the circumference of the earth. He applied geometry, which had been axiomatized by Euclid, and the known distance between Syene and Alexandria and his result “may have varied by 0.5 to 17 percent from the value accepted by modern astronomers, but it was certainly in the right range.”#1

It is pretty obvious that deductivity helps to achieve “genuine truths about empirical reality.” These truths cannot be achieved by naive empiricism, common sense, or naked-eye observation.

In an analogous way, physicists determined that the gravity of the moon is 1/6 of earth’s gravity. Physicists did not observe this value but deduced it from the theory of gravity or, more specifically, from the Helio-centric model of the solar system.

The reason why deductivity has not worked in economics is simply because economics is based on false premises, more specifically, because both the Walrasian microfoundations and the Keynesian macrofoundations are false.

Heterodox methodologists do not know what already Aristotle knew: “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.”

Because heterodox economists, too, are scientifically incompetent they never rose above the level of debunking, loose verbal reasoning, and “overall suspicion”. This is NOT the way to successfully replace failed orthodox economics.#2

Egmont Kakarot-Handtke

#1 Encyclopedia Britannica
#2 For details see cross-references Heterodoxy

March 22, 2017

Pre-truth and post-truth in economics

Comment on Peter Dorman on ‘Fifty Shades of Yellow? Post-Truth Then and Now’

Blog-Reference and Blog-Reference

The economist Peter Dorman complains about post-truth spasms that “have characterized media outlets in the English-speaking world ever since the advent of the printing press.” This critique is correct but misplaced. The business of the press has always been storytelling, opinion, entertainment, propaganda, and providing a suitable environment for advertising, but NOT truth. Truth is the mission of science. For the economist this means: “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)

Peter Dorman’s critique of the media distracts from the fact that economics lacks the true theory. Scientific truth is well-defined as material and formal consistency since the ancient Greeks introduced the distinction between opinion (= doxa) and knowledge (= episteme).

Economics claims since Adam Smith/Karl Marx to be a science. Yet, it is pretty obvious ― except to economists ― that the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent, and all got the pivotal concept of the subject matter, i.e. profit, wrong.

As a cargo cult science economics is since 200+ years at the pre-truth stage but economists tell the general public the post-truth that what they are doing is science. The truth is that the representative economist is a political agenda pusher just like the representative journalist.*

Egmont Kakarot-Handtke

* See also ‘When fake scientists call out on fake politicians


***

REPLY to Barkley Rosser on Mar 23

“A satisfactory theory of profits is still elusive.” (Palgrave Dictionary, Desai, 2008)

From this incontrovertible fact follows:
(i) Economists lack the true theory. Because the foundational economic concept profit is not properly defined and understood the whole analytical superstructure of economics falls apart.

(ii) Neither Walrasianism, Keynesianism, Marxianism, Austrianism satisfies the scientific criteria of material and formal consistency.

(iii) Neither the defense nor the critique of the market economy ever had sound scientific foundations.

(iv) No economic policy advice ever had sound scientific foundations.

(v) Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Lucas, Dorman, Rosser and almost everybody in-between falls into the category of fake scientist.

(vi) Economics is NOT part of science but of the entertainment industry. The iconic sitcom economist is Krugman who has not realized that IS-LM is false in every methodological dimension but has an opinion on any topic between unemployment, pop music, Joseph Stalin and Donald Trump.

(vii) Economics is what Feynman called cargo cult science or what we today call fake science. In order that economics finally becomes a science, political clowns  have to be thrown out.

March 21, 2017

How economists shoot themselves non-stop in the methodological foot

Comment on Lars Syll on ‘The man who crushed the mathematical dream’

Blog-Reference and Blog-Reference on Mar 24

Heterodoxy tells the world that Orthodoxy is unacceptable. In this general sense, Heterodoxy is absolutely right. What is annoying about Heterodoxy is that it rejects Orthodoxy mostly for the wrong reasons and, worst of all, that it has never developed a superior alternative: “… we may say that … the omnipresence of a certain point of view is not a sign of excellence or an indication that the truth or part of the truth has at last been found. It is, rather, the indication of a failure of reason to find suitable alternatives which might be used to transcend an accidental intermediate stage of our knowledge.” (Feyerabend)

One of the most idiotic arguments against Orthodoxy is that it applies the axiomatic-deductive method. The fault in this argument consists in the fact that not the method is false but that the orthodox axioms are false. Standard economics is built upon this set of hard core 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)

This set of behavioral axioms consists of three NONENTITIES (HC2, HC4, HC5) and the simple fact of the matter is that a theory/model that is based on a nonentity is a priori false. So, Orthodoxy is axiomatically false, which is the death sentence for a paradigm.

Now, Lars Syll argues “any such deductive-axiomatic economics will always consist of some undecidable statements. When not even being able to fulfill the dream of a complete and consistent axiomatic foundation for mathematics, it’s totally incomprehensible that some people still think that could be achieved for economics.”

Gödel tells us something about the limits of mathematical axiom sets. These limits are irrelevant for economics just as it is irrelevant for a snail to learn that it cannot surpass the speed of light. The problem of economists is that they cannot apply elementary mathematics correctly. And it is an absurdity of sorts when people who cannot put 2 and 2 together invoke Gödel’s theorem.#1

Economists need elementary arithmetic and algebra and for these bread-and-butter applications Gödel’s theorem is absolutely irrelevant.

From the indisputable fact that both orthodox and heterodox economists do not apply the axiomatic-deductive method correctly does NOT follow that the method is defective but that both orthodox and heterodox economists are scientifically incompetent.

The situation in economics is this: the false Walrasian microfoundations and the false Keynesians macrofoundations have to be replaced by true macrofoundations.#2 The first methodological rule of economics says: If it isn’t macro-axiomatized, it isn’t economics.

Egmont Kakarot-Handtke

#1 See also ‘Economics, Gödel, and a would-be field day for math-Luddites’ and ‘The insignificance of Gödel’s theorem for economics’ and ‘It's all over — but for whom?’ and ‘Still in the woods
#2 See cross-references Axiomatization


Related 'From Hilbert’s hotel to Hilbert’s method' and 'The irrelevance of economics' and 'Switching into constructive gear' and 'What engine?' and 'At the Robinson Line' and 'The father of modern economics and his imbecile kids' and 'Where economics went wrong' and 'The end of traditional Heterodoxy in the Malmö coal pit'

New economic thinking = old political fake

Comment on Douglass Carmichael on ‘The Mechanical Turn in Economics and Its Consequences’

Blog-Reference

“With Adam Smith, and hints before in Ricardo and others, economics took the path of treating the economy as a natural object that should not be interfered with by the state. This fit the Newtonian ethos of the age: science was great, science was mathematics; science was true, right and good.” (See intro)

This is as brain dead a summary as can be. First of all, Newton’s philosophy was NOT mechanical at all, just the opposite: “According to one widely held viewpoint in the history of ideas, eighteenth-century thought was dominated by the concept of the ‘Newtonian world-machine.’ God had been assigned the role of master clockmaker who designed a universe so perfect that it could run indefinitely without any need for divine tinkering. Closer inspection of Newton’s own writings shows that he was actually quite firmly opposed to this concept which had been popularized by earlier writers such as Robert Boyle. Newton’s objections were both physical and moral: he pointed to the existence of irreversible processes tending to dissipate motion and gravitational perturbations that seemed to threaten the stability of the solar system, and he warned that restricting God to the creation and design of the world while denying His continual supervision was a step on the road to atheism.” (Brush, 1976, p. 605)

The problem of the philosophical/political/moral wafflers of Adam Smith’s time was that after Newton’s Principia they were no longer taken seriously but had to repackage their loose verbal reasoning as science: “Like most of his fellow moral philosophers, Hume thought it was worth a try to make all sciences as rigorous as Newtonian physics.” (Redman, 1997, p. 111)

Adam Smith, though, correctly recognized that the last thing the general public wants is science: “But he had no such ambitions; in fact he 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)

Adam Smith was a storyteller and soap box economist and the founder of what Feynman called cargo cult science or what we today call fake science. The classical economists presented themselves as an advanced (= scientific) version of Alchemists and goldmakers: “That Political Economy is a science which teaches, or professes to teach, in what manner a nation may be made rich. This notion of what constitutes the science, is in some degree countenanced by the title and arrangement which Adam Smith gave to his invaluable work. A systematic treatise on Political Economy, he chose to call an Inquiry into the Nature and Causes of the Wealth of Nations; and the topics are introduced in an order suitable to that view of the purpose of his book.” (Mill, 1874, V.7)

The classical economists had many faults but it was NONE of their faults that they had a mechanical world view. Their worst fault was that they were NOT scientists but political agenda pushers. Instead of eternal bliss, as their pre-enlightment predecessors did, they promissed material wealth here and now.

The difference between the classics and the neoclassics is that the latter replaced the sociological concept of class by methodological individualism: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” (Arrow, 1994, p. 1)

Economics was NEVER mechanical but always psychological/sociological/political: “The foundation of political economy and, in general, of every social science, is evidently psychology. A day will come when we shall be able to deduce the laws of social science from the principles of psychology …” (Pareto, 2014, p. 20)

Economists NEVER understood what science is all about. The most annoying trait of the run-of-the-mill economist is that he dabbles in sociology, psychology, political science, social philosophy, history, theology, ethics, pedagogy, anthropology, biology, Darwinism/evolution theory, etcetera but has NO idea what profit is. The visible result of manifest scientific incompetence over 200+ years is that the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL got the pivotal concept of the subject matter, i.e. profit, wrong.

Economists do NOT understand until this day how the price and profit mechanism works. They are like engineers who constantly assert that their aircraft is the best and all passengers realize maximal wellness but who have NO idea about the laws of aerodynamics and thermodynamics, i.e. the OBJECTIVE conditions of flight.

What economists as agenda pushers and incompetent scientists never realized is that economics is NOT a social science but a system science and that there is no such thing as a behavioral/social/historical law but that there are systemic laws and that it is their very task to figure these out.

Economists have not figured out how the price and profit mechanism works because they were too much occupied with blathering and agenda pushing. NO economic policy advice EVER had a sound scientific foundation.

Economics needs a paradigm shift. There can be no doubt about this. But to sell Douglass Carmichael’s repackaging of old political economics as new thinking is a bad joke.

Egmont Kakarot-Handtke


References
Arrow, K. J. (1994). Methodological Individualism and Social Knowledge. American Economic Review, Papers and Proceedings, 84(2): 1–9. URL
Brush, S. G. (1976). Irreversibility and Indeterminism: Fourier to Heisenberg. Journal of the History of Ideas, 37(4): 603–630. 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
Pareto, V. (2014). Manual of Policical Economy. Oxford: Oxford University Press. URL
Redman, D. A. (1997). The Rise of Political Economy as Science. Methodology and the Classical Economists. Cambridge, MA, London: MIT Press.
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford University Press.

March 20, 2017

Bad economics, futile critique, and illusive new thinking

Comment on Peter Dorman on ‘Review of Economism: Bad Economics and the Rise of Inequality by James Kwak’

Blog-Reference

Economics claims since Adam Smith/Karl Marx to be a science. Yet, everybody who looks closer into the matter comes to the conclusion that economics is a failed science. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the pivotal concept of the subject matter, i.e. profit, wrong.

In this hopeless situation, critique is futile: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990)

James Kwak, too, has not the slightest idea what a paradigm shift means: “To wrap up, Kwak points out that, whatever its faults, economism delivers by having a simple, all-purpose, easy-to-grasp message and then asks, ‘What’s our message?’ His answer is that wealthy economies don’t need economic growth or even economic efficiency as they used to, and we should all turn away from economic concerns and embrace happiness instead.”*

Instead of coming up with a ‘completely new research program and conceptual approach’ as replacement for the standard approach, which is known to be false on all methodological counts, Kwak dishes out cheap advice from the self-help workshop: don’t worry, be happy. To top it all, this abortive pseudo-critical exercise is advertised as new economic thinking.

Egmont Kakarot-Handtke

* See also ‘The economist’s pick: liar, moron or what?

March 19, 2017

Endtime for soap box economists

Comment on Simon Wren-Lewis on ‘Labour MPs are keeping Corbyn in power’

Blog-Reference

Most people have no proper understanding of what economics is all about. Therefore, it is of utmost importance to distinguish between political 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 has to be judged according to the criteria true/false and NOTHING else. A closer look at the history of economic thought shows that theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Lucas, Wren-Lewis and almost everybody in-between falls into the category of political economist or fake scientist.

Political economics has produced NOTHING of scientific value in the last 200+ years. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the pivotal concept of the subject matter, i.e. profit, wrong. Economics is a failed science.

Economists cannot be taken seriously with regard to their own subject matter, much less so with regard to politics. From economists knowledge about how the market system works is expected and NOT a journalistic opinion piece about Trump or Corbyn or May or the internal problems of the Labour Party or the GOP or whatever the current political issue may be.

It is NOT decisive what the political agenda is, ALL of political economics is what Feynman called cargo cult science or what we call today fake science. In order that economics finally becomes a science, soap box economists have to be thrown out.

Egmont Kakarot-Handtke


Related 'The economist as standup comedian' and 'Krugman and the scientific implosion of economics' and cross-references Political economics

March 17, 2017

The thinking economist

Comment on Noah Smith on ‘Beware of "thinking like an economist"’

Blog-Reference

What it means to think like an economist is well-defined: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” (Arrow)

The definition of the subject matter translates into the following hard core propositions, a.k.a. axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

So, thinking like an economist boils down to: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” (Krugman)

The problem with the maximum-and-equilibrium world is that it consists of NONENTITIES: constrained optimization, rational expectations, equilibrium. One must be a rather feeble thinker to accept these green cheese assumptions as premises of economic analysis. Economists do this since 140+ years.

Those economists who do not subscribe to HC1/HC5 are called heterodox economists. Unfortunately, Heterodoxy is good at debunking but failed to replace the neoclassical starting point with something better. As a result, the current state of economics is this: the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, materially/formally inconsistent, axiomatically false, and ALL got profit, which is the pivotal magnitude of economics, wrong.

No economic advice ever had sound scientific foundations. Obviously, “thinking like an economist” does not yield acceptable results. Noah Smith tries to save the situation and to put some lipstick on the dead pig: “So while “thinking like an economist” is in principle a good thing, beware of people who claim to know how to do it.”

The fact of the matter is that “thinking like an economist” amounts to accepting proto-scientific cargo cultic rubbish as science. No thinking being will ever do this.*

Egmont Kakarot-Handtke

* See ‘Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist

Related 'How Arrow pushed economics over the cliff' and 'In economics, the scientific breakthrough is always just around the next corner' and 'Where economics went wrong' and 'Economics is NOT a misunderstanding but cargo cultic crap' and 'There is no scientific elite in economics' and 'The economist as standup comedian'