August 5, 2017

The irrelevance of populism for economics

Comment on Jonathan Schlefer on ‘Market Parables and the Economics of Populism’

Source-Reference Foreign Affairs, no external Blog-Reference

There is the political sphere and there is the scientific sphere. It is quite obvious that both are ontologically different and because of this, it is of utmost importance to radically separate the two. As a matter of principle, political questions have to be answered in the political sphere and are the subject matter of Political Science. The economist has a voice in the political sphere like every other voter. But it is NOT his task to climb on a soapbox and to push a political agenda.

Economics is a science and the economist has to satisfy scientific standards and NOTHING else. Scientific standards are well-defined since antiquity: “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)

Scientific knowledge is embodied in the true theory. The true theory is the humanly best mental representation of reality. This defines the economist’s task: “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)

In very general terms, science is about invariances: “An objective fact is one that is invariant under all admissible transformations.” (Nozick) Translated into economics this means that economists have to figure out the economic laws that underlay the ever-changing historical surface.

Fact is that economics is a failed science. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong. How could this happen?

A closer look reveals that there are TWO economixes: political economics 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.

Fact is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Political economists are NOT scientists but voluntary useful idiots for one fraction of the political spectrum or the other. Fact is that economics is virtually non-existent as a science but merely in the cargo cultic incarnation of the thinly disguised political sects of Walrasianism, Keynesianism, Marxianism, Austrianism. All four approaches are proto-scientific rubbish.

The proof is in the reaction to populism. The idea that physicists rewrite their science when the head of state changes or when people vote in a referendum Leave or Remain is absolutely ridiculous. Curiously, the idea appears NOT ridiculous with regard to economics. Science does NOT react to populism but politics must, and so must political economics. Somehow, people seem to recognize that economics is NOT a science and that economists are NOT scientists but agenda pushers. And while everybody is well aware that it is impossible to change the Law of Gravity by popular vote, it is known from experience that it is relatively easy to replace one agenda pusher with another one.

Economics has to change because it is provably false, i.e. materially and formally inconsistent. Methodologically, such a change is called a paradigm shift. Economics has NOT to change because populists demand a change of economic policy. The change of economic policy has to be realized in the political sphere with political means.

Fact is that the economist qua scientist has NOTHING at all to say about policy or the realization of the Good Society, as is well-known since J. S. 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.”

From this follows (i) that all agenda pushers who have abused economics in the form of political economics for more than 200 years have to be expelled from the sciences, and (ii), that economics has to perform the paradigm shift, that is, to move from Walrasian microfoundations and false Keynesian macrofoundations to the true macrofoundations.

The task of the economist is to figure out how the economy works. Neither right-wing nor left-wing political economists were successful at this task. The proper place of both orthodox and heterodox economics of the past 200+ years is ― NOT the political soapbox but ― the wastebasket.

Egmont Kakarot-Handtke


Related 'From false microfoundations to true macrofoundations'. For more details see cross-references Failed/Fake scientists and cross-references Political economics and cross-references Paradigm shift.