July 14, 2016

Economics: The Battle of Frogs and Mice is over

Comment on Lars Syll on ‘Paul Krugman — nothing but a die-hard neoclassical economist’ and on some beside-the-point comments on the parallel thread

Blog-Reference

The Battle of Frogs and Mice,* a.k.a. Heterodoxy vs. Orthodoxy, has become rather stagnant, so let us shorten the agony with some clear cut arbitral awards.

Syll: “Despite all his radical rhetoric, Krugman is — where it really counts — nothing but a die-hard neoclassical economist.”

Krugman says on his blog “... most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”

Judgment:* Krugman is a neoclassical economist, always was, and always said so, and everybody got it. However, the decisive point is not that Krugman is a bad person because he is a Neoclassical but that his starting point, i.e. the neoclassical axiom set, is FALSE. This invalidates the neoclassical approach as a whole. Not to realize the blatant blunder is the very fault of ALL neoclassical economists.

Krugman: “... this is exactly the kind of situation in which words alone can create an illusion of logical coherence that dissipates when you try to do the math.” In other words, formalization and modeling can be helpful to clarify the issue.

Georgescu-Roegen: “Lest this position is misinterpreted again by some casual reader, let me repeat that my point is not that arithmetization of science is undesirable. Whenever arithmetization can be worked out, its merits are above all words of praise. My point is that wholesale arithmetization is impossible, that there is valid knowledge even without arithmetization, and that mock arithmetization is dangerous if peddled as genuine.”

Syll: “That’s a methodological reductionist straightjacket.”

Judgment: Krugman and Georgescu-Roegen are right. Lars Syll is wrong. From the fact that formal neoclassical models are indeed false does NOT follow that formalization is wrong, only that economists in general and Neoclassicals in particular are incompetent formalizers and model builders.

Syll: “The only economic analysis that Krugman and other mainstream economists accept is the one that takes place within the analytic-formalistic modeling strategy that makes up the core of mainstream economics.”

Krugman on several occasions to Syll: “where’s your model?” and “what’s your alternative?”

Judgment: Neither Heterodoxy in general nor Lars Syll in particular has ever presented a viable alternative, a.k.a. progressive research program, as replacement for the degenerated orthodox program. This is why economics is stuck in the proto-scientific swamp.

Syll: “That isn’t pluralism.”

Judgment: Science is about clear-cut true/false and the very opposite of the pluralism of false theories. Either Orthodoxy is true or Heterodoxy is true, then either Orthodoxy is thrown out of science or Heterodoxy. Except both are false, then both are thrown out of science.

Syll: “Validly deducing things from patently unreal assumptions — that we all know are purely fictional — makes most of the modeling exercises pursued by mainstream economists rather pointless.”

Aristotle: “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.”

Judgment: Lars Syll and Aristotle are right. Economics is currently based upon false axioms. Both Walrasian and Keynesian axioms have to be fully REPLACED in order to produce scientific knowledge of the economy. After more than 200 years of churning out scientific garbage this task has top priority. Concrete proposals are urgently needed. Lars Syll has none. Without sound heterodox axioms no paradigm shift can ever happen.

Hickey: “There is nothing wrong with using a simple IS-LM approach in some cases as a gadget.”

Judgment: IS-LM has been already dead in the cradle 80 years ago. I=S is false since Keynes but neither Krugman nor Post Keynesians have gotten it until this day (2014).

Syll: “No matter how many thousands of ‘technical working papers’ or models mainstream economists come up with, ... they will not take us one single inch closer to giving us relevant and usable means to further our understanding and explanation of real economies.”

Judgment: True, but neither will repetitive heterodox critique of the Swedish ilk further our understanding of how the actual economy works.

The Battle of Frogs and Mice is over. From the standpoint of science BOTH Krugman and Syll lost. So, forget them and start NOW doing REAL science.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL

* Wikipedia
** All judgments are backed in greater detail. In case of doubt, see blog or working papers before jumping to silly conclusions/comments