February 7, 2017

Economics, methodology, morals ― a creepy freak-show

Comment on Sheila Dow on ‘People Have Had Enough of Experts’


After 80 years, everybody can ― nay, must ― know that Keynes was an incompetent scientist and that his General Theory does not satisfy the well-defined scientific criteria of material and formal consistency.#1 Sheila Dow, though, does not seem to know this and advertises Keynes as exemplary master-economist. In Keynes’s own words: “[T]he master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher — in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.”

No, not at all, it suffices that the economist comes forward with the true theory of how the market economy works. Or, in Keynes’s own words: “If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!”

During his lifetime, Keynes’s hold every position and the very opposite of it and because of this he is eminently quotable but cannot be taken seriously.

Keynes’s self-description of the master-economist is as delusional as one can get because he never even understood what profit is: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Can there be anything more ridiculous than an economist who has no idea of the pivotal concept of his subject matter? Yes, worse than an incompetent economist is an incompetent methodologist who has not realized until this very day the lethal conceptual flaw of Keynesianism, or, for that matter, of Walrasianism, Marxianism, and Austrianism.#2

An economic methodologist whose first and last sentence is not ‘Economics is a failed science and urgently needs a paradigm shift’ is an unwitting but effective promoter of ignorance and confusion.

There is politics and there is economics and both must be strictly separated because politics cannot do other than to corrupt science. Accordingly, every methodological discussion has to start with the distinction 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. The criteria like/dislike or good/bad or good/evil or useful/useless do NOT apply. They apply in the political sphere but not in the scientific sphere.

The history of political economics from Adam Smith to Keynes and beyond can be summarized as utter scientific failure.#3 Economics had been hijacked from the very beginning by the agenda pushers of political economics. Can there be the slightest doubt that Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Lucas, and almost everybody in-between falls into the category of political economist or fake scientist?

However, in economics, too, newspeak prevails. Just like the former ministries of war have been all over the world renamed to ministries of defense, the Political Economy of the founding fathers has been renamed to economics with the understanding that economics is a science. The change of name, though, did not change the practice.

What should have happened was the strict separation of politics and science. In the words of John Stuart Mill: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”

Because the separation never happened, economics is still at the proto-scientific level of political economics. Political economics has produced NOTHING of scientific value in the last 200+ years. Neither Orthodoxy nor Heterodoxy has to offer anything in the way of a materially and formally consistent theory, only storytelling and agenda pushing. What we have is the pluralism of false theories.

What Sheila Dow has not realized is that not only orthodox economics is an abysmal scientific failure but Heterodoxy, too: “... 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)

Let us briefly address the worst of Sheila Dow’s red herrings.
― ‘Voters have become contemptuous of economic experts.’ This is absolutely irrelevant because, firstly, voters cannot tell the difference between a scientific expert and a doorpost. Secondly, there is NO such thing as an economic expert because the representative economist lacks the true theory.#4

― The prediction/forecast/prophesy-competition, which is the great attraction in the Circus Maximus, is pointless because all four political sects, that is, Walrasians, Keynesians, Marxians, Austrians, lack the true theory.#5 The problem with forecasts is not a lack of pluralist methodology but the lack of the true theory.

― Keynes’s and Friedman’s musings about methodology cannot be taken seriously because both were political economists, that is, scientifically incompetent.

― The problem of economic models is not that they are unduly mathematical but that they are axiomatically false. Economics has to move from false Walrasian microfoundations and false Keynesian macrofoundation to true macrofoundation.#6

― ‘There is no escaping the fact that economics continues to be a moral science.’ This is the self-delusion of political economists. Fact of the matter is: economics is neither a moral nor a social science but a system science.#7

― ‘Knowledge about the economy is uncertain, severely limiting the scope for classical logic.’ False. Lack of knowledge is due to the scientific incompetence of economists since 200+ years.#8

― Economists are not expected to utter their opinion about the Good Society and to dabble in psychology, sociology, history, political science, etcetera but to eventually come forward with the scientifically valid explanation of how the market economy works.

The current state of economics proves beyond any doubt that political economists have done a lousy job, and so have political methodologists. The representative economist cannot even tell the difference between profit and income until this very day. Hence, new economic thinking means in very concrete terms to leave political economists and methodologists like Sheila Dow where they have always been: behind the curve.#9 People have enough from scientifically incompetent agenda pushers.

Egmont Kakarot-Handtke

#1 See ‘How Keynes got macro wrong and Allais got it right
#2 See ‘Axiomatized nonentities and the failure of methodologists
#3 See cross-references Political economics
#4 See ‘There is NO such thing as an economic expert
#5 See ‘Science does NOT predict the future
#6 See cross-references Paradigm shift
#7 See ‘Lawson’s fundamental methodological error and the failure of Heterodoxy
#8 See ‘Failed economics: The losers’ long list of lame excuses
#9 See ‘New economic thinking, or, let’s put lipstick on the dead pig