November 17, 2016

The economist as standup comedian

Comment on David Ruccio on ‘Blame globalization?’

Blog-Reference and Blog-Reference on Nov 18

There is the political realm where, in principle, everybody is admitted. The currency in the political realm is opinion. Opinion is different from knowledge and the fact of the matter is that it is most of the time false or merely commonsensically true.

“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. Thus it appears that Parmenides ... was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other ...” (Popper)

The discourse in the political realm has not much to do with truth or reality but with myth, storytelling, gossip, second-guessing, propaganda, belief, paranoia, and entertainment. From this discourse, though, follow decisions that affect reality either in the intended or an unintended way.

Not all participants in the political discourse are equal with regard to opinion/knowledge about the issue under discussion. Some consider themselves or/and are considered by others as experts. There are two types of experts: practical and scientific. Scientists are supposed to have the most profound general knowledge which comes in the form of a materially and formally consistent theory. Theory is the best humanly possible mental representation of reality. Practical knowledge, on the other hand, is partial and limited.

So it may happen that knowledge is injected into the discourse and that it crowds out opinion to a greater or lesser degree. The underlying idea is that more knowledge improves the final decision and thereby the chance of success, i.e. the realization of the intended outcome.

The very characteristic of economics is that there is no clear-cut separation between politics and science. The founding fathers called themselves political economists, that is, they left no doubt that their main business was agenda pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda pushing). And this is how economics became a failed science.

The current state is this: economics is NOT a science and the representative economist is NOT a scientist. The claim as expressed in this title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is false.

What the general public cannot see is that economists do not have the true theory. That is rather bad because: “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)

An economist who rises to speak in the political arena does not add objective scientific knowledge ― he has none ― but merely his opinion, educated common sense and some specific institutional/practical knowledge. Specific knowledge is helpful for small scale issues (e.g. employment in a firm) but of little use for large scale issues (e.g. full employment in the world economy). Small scale knowledge is always subject to the fallacy of composition, that is, it is true for a tiny part of the whole but false for the whole.

Economics in the proper sense is the science that figures out how the monetary economy works. The representative economist does not know how the economy works. There are four approaches: Walrasianism, Keynesianism, Marxianism, Austrianism and all are axiomatically false. Economics has not lived up to well-defined scientific standards in the last 200+ years. Whatever an economist argues for or against has NO sound scientific foundation.

What the general public cannot see is that ALL economists who rise to speak in the political realm are incompetent scientists. What economists communicate is NOT scientific knowledge but opinion. It does not matter whether the opinion is more rightist or more leftist, the loudspeaker of the economics profession from Krugman to Keen are stand up comedians in the Circus Maximus, not scientists. Neither orthodox nor heterodox economists can rightfully claim to speak in the name of science. What they actually do is to abuse the aura of science to push an agenda. Therefore, all have to be expelled from the scientific community.

The general public judges political economists by their expressed opinion. Opinion, though, is worthless, we have more than enough of it. The general public cannot and does not judge economists by their scientific competence but assumes that it is guaranteed somehow. But this is not the case.

What the general public cannot see is that economics is still at the proto-scientific level. Until this day, the representative economist cannot tell the difference between profit and income, which are indisputably the most important concepts of his subject matter.* Because economists never captured the essence of the market economy, they can neither diagnose systemic crises correctly nor solve them. Because there is no true economic theory ALL economic policy guidance is scientifically unfounded since Adam Smith. Whatever economists have said for or against capitalism, communism or socialism has been based upon provable false theories about how the monetary economy works.

Egmont Kakarot-Handtke

* For details see cross-references Profit

Related 'There is NO such thing as an economic expert' and 'Political economics: a deadhead sitcom' and 'Economists: Jacks of all trades ― except economics' and 'Scientific suicide in the revolving door' and 'Economists ― medics or barber surgeons?'

REPLY to Sandwichman on Nov 21

You say: “... have I ever mentioned to you that I am NOT an economist? As a self-proclaimed ‘scientist’ have you never heard of the concept of category error?”

I would like to come to a common understanding of what we are trying to achieve here on the EconoSpeak blog.

First of all, the only interesting thing is the economic content of a post. The author’s person or CV is of NO interest at all. Obviously, one cannot and does not make an identity check before one comments on a post.

This is a GOOD thing because the author’s personality and motives are only of interest in the realm of politics/entertainment but not in science. As Schumpeter put it: “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.”

The only question in a scientific discourse is whether a statement is true or false. As Popper put it: “And a critical discussion is well-conducted if it is entirely devoted to one aim: to find a flaw in the claim that a certain theory presents a solution to a certain problem.”

The moment a second criterion is introduced all is lost. More specifically, the moment economics is mixed with politics the discourse goes down the drain. The reason is simple, a scientific discourse has a solution: true or false. A political discourse has no solution but is decided by majority vote or authority or throwing a coin.

It is well known from history that politics habitually tries to overrule science: “As some one has said, it would seem that even the theorems of Euclid would be challenged and doubted if they should be appealed to by one political party as against another.” (Fisher)

It is also well known that this happened in economics with the result that political economics has produced nothing of scientific value in the last 200+ years.

What economics needs first of all is the strict separation of science and politics because politics de-focuses research: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. ... A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack)

At the moment we have no true economic theory, i.e. a theory of how the monetary economy works that satisfies the well-defined scientific criteria of formal and material consistency. Economists are well advised to bring their own house in order before they dabble in other disciplines like sociology, history, philosophy or political sciences.*

Whether you are an economist or not does not matter. Only the economic content of your post matters. If you contribute to the necessary paradigm shift you are welcome to the economics discourse, if you try to push a political agenda you are not. To flip between economics and politics is the worst category error/mistake/blunder ever.

* See also:
Economists: the Trumps of science
Economists are a menace to their fellow citizens
Politics or Science? Decide and act accordingly

REPLY to Sandwichman

It seems that you pick quotes out of your nose: “Egmont: But the Bible is NOT SCIENCE!”

Egmont never mentioned the Bible. What I said was “Economics is NOT a science and the representative economist is NOT a scientist.”

Bloomberg writes today: “Paul Romer says he really hadn’t planned to trash macroeconomics as a math-obsessed pseudoscience. ... It just sort of happened.”

Bloomberg hails Romer as “The rebel who blew up macroeconomics” and tells the soap story of how the naive hero Romer almost unintentionally slaughtered the three-headed dragon of Orthodoxy. Bloomberg knows that economists swallow every junk. After all, they swallow supply-demand-equilibrium since 140+ years.

Where Romer is right is that economics is a pseudoscience. What is curious, though, is this: “His name is often raised during Nobel season ― this year, much to his chagrin, by his last academic home. In early October, New York University announced a press conference to congratulate Romer for winning the prize, then apologized for mistakenly posting a document it had prepared just in case he won. Which he didn’t.”

Of course not! Don’t they know in New York University the full title of the Prize? It is: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel.” Sciences (plural) and NOT pseudoscience.

There seems to be widespread confusion about the scientific status of economics nowadays.#2 One thing, though, is certain, Romer is NOT a scientist but just another standup comedian in the Circus Maximus.

By the way, I really hadn’t planned to trash Sandwichman. . . . It just sort of happened.

#1 Source
#2 For details of the big picture see cross-references Scientific Incompetence