Standard economics is a failed approach and the root cause can be located with unsurpassable precision here: “As with any Lakatosian research program, the neo-Walrasian program is characterized by its hard core, heuristics, and protective belts. Without asserting that the following characterization is definitive, I have argued that the program is organized around the following 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.
By definition, the hard-core propositions are taken to be true and irrefutable by those who adhere to the program. ‘Taken to be true’ means that the hard-core functions like axioms for a geometry, maintained for the duration of study of that geometry.” (Weintraub, 1985, p. 147)
Essentially the same assertion in Krugman’s scant blog post: “So, what is neoclassical economics? … I think we mean in practice economics based on maximization-with-equilibrium.”*
Both, constrained optimization and equilibrium are nonentities like Superman and the Easter Bunny. And this is the reason why standard economics is a cartoon science.
Because economic theory cannot be based on nonentities the propositions HC1 to HC5 have to be thrown out of economics and replaced by something better. In Joan Robinson’s words: "Scrap the lot and start again".
Habermas, Albert, Robinson, and Syll have to be criticized for elaborating endlessly on model Platonism and not taking the all-decisive second step, that is, to put economics on new and rock-solid axiomatic foundations.**
There are huge rewards: the world will assuredly become a better place when Krugman retires with his sorta-kinda maximization-with-equilibrium mumbonomics.
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal.
American Economic Review, Papers and Proceedings, 75(2): 146–149. URL
* See here
** For more traction see cross-references Paradigm Shift
ICYMI Paradigm lost: from incompetent economics to psycho-sociological agenda pushing.
Comment on 'Paul Krugman: Despair, American Style'
Related 'PsySoc — the scourge of economics' and 'From PsySoc to SysHum' and 'The Science-of-Man fallacy'
Immediately following post 'There is no like/dislike button in science'