October 26, 2016

Economics: a science without scientists

Comment on Lars Syll on ‘What it takes to make economics a real science’

Blog-Reference

There is the political realm and there is the scientific realm. Roughly speaking, the issue in the political realm is about the realization of the Good Society and the issue in the scientific realm is to gain knowledge about how the universe or one of its numerous subdomains works. Knowledge takes the form of a theory that fits the criteria of material/formal consistency. The true theory is a mental representation of reality.

In politics, open questions are decided by the legitimate sovereign, in science they are decided by proof/disproof. Who the legitimate sovereign is, is taken here as historically given as ‘We, the people’.

In the ideal case, the legitimate sovereign decides all political questions, that is, how society is organized and how the economy as a subsystem is organized/institutionalized. In the ideal case, the legitimate sovereign keeps entirely out of science because science works according to its own principles. Science is about the True Theory and not about the Good Society. These are two entirely different things. Therefore, the legitimate sovereign decides about war/peace or the size and composition of the national budget but has NO voice in deciding whether E=mc2 or the Law of Supply and Demand* is true or false. Vice versa, scientists do not dabble in politics.

It is obvious that what is historically given at the moment is far from the ideal state of a neat separation of politics and science. Economics is a case in point. There is political economics (= agenda pushing) and theoretical economics (= science). Political economics has hijacked theoretical economics since the founding fathers and has not produced much if anything of scientific value since then.

What it takes to make economics a real science is first and foremost the strict separation of politics and science. In practical terms, this means that political economists have to be expelled from economics. Note well that it does not matter at all what the political agenda is. More precisely, it does not matter whether the agenda is more rightist or more leftist. Agenda pushing AS SUCH is incompatible with science, no matter how the agenda pusher defines the Good Society. This definition has to be discussed and decided in the POLITICAL realm.

The goal of economics is the true theory about how the actual economy works. Not less, not more. Scientific truth is well-defined: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant, 1994). Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-the-art testing.

Science requires always BOTH, formal AND material consistency. There is NO such thing as a trade-off between rigor and relevance. The current state of economics is that neither Walrasianism, Keynesianism, Marxianism, Austrianism satisfies the criteria of formal/ material consistency. These approaches are PROVABLY false.

And at this point, scientific ethics kicks in. A scientist is supposed to abandon a falsified theory. Morgenstern reminded his fellow economists long ago: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (1941, p. 369)

Walrasianism, Keynesianism, Marxianism, Austrianism are provable false but they are still around. This, in turn, means that in economics scientific standards are violated on a daily basis. The essential ethical self-regulation of the scientific community is inoperative in economics.

So, it is pretty obvious what it takes to make economics a real science. It takes (i) competent scientists, (ii) a strict commitment to well-defined scientific standards, (iii) a paradigm shift, that is, the full replacement of scientifically indefensible Walrasianism, Keynesianism, Marxianism, Austrianism. There is no place in science for the proto-scientific rubbish that has hitherto been called economics.

Egmont Kakarot-Handtke

* Law of Supply and Demand


Related 'Economics and corruption' and 'FakeNews, FakeScience: economics in the information age' and 'There is NO such thing as an economic expert'.