February 26, 2016

Scientists do not predict

Comment on Lars Syll on ‘Macroeconomic machine dreams’

Blog-Reference and Blog-Reference on Feb 27

A theory cannot be dismissed because it cannot predict the future. Therefore, as a matter of principle, economics from Jevons/Walras/Menger to DSGE cannot be dismissed because it has not predicted crises. Neoclassics is unacceptable because it is logically and empirically inconsistent. In more colloquial terms, all models that have been built and are still being built upon the maximization-and-equilibrium axioms have to be rejected straightforwardly as scientific garbage and not for any other reason.

Who in all history has been preoccupied with prediction? Mainly two groups, (i) prophets, doomsters, apocalyptics, fear mongers, gurus, utopians, astrologers, Pythia and other oracles, rise-and-fall historians/sociologists, politicians, and (ii), people who want to make a killing in the casino of Monte Carlo or on the stock-market.

No scientist is occupied with the prediction of historical events because it is long known that “The future is unpredictable.” (Feynman, 1992, p. 147)

The point is that scientists use the word prediction in a quite different sense from everyday usage. For example, Einstein deduced gravity waves from his theory in 1916 and in our days, 100 years later, they are observed. Only in the very specific sense of ‘testable hypothesis’ scientists make a ‘prediction’.

All this is well-known among methodologists: “We are very far from being able to predict, even in physics, the precise results of a concrete situation, such as a thunderstorm, or a fire.” (Popper, 1960, p. 139)

So Arrow’s argument that long-run weather forecasts are pointless is not a great revelation but an additional proof that neoclassical economists never understood what science is all about. And just because of this, economics has never been anything else than a cargo cult science. This, too, is well known: “Suffice it to say that, in my opinion, what we presently possess by way of so-called pure economic theory is objectively indistinguishable from what the physicist Richard Feynman, in an unflattering sketch of nonsense ‘science,’ called ‘cargo cult science’.” (Clower, 1994, p. 809)

In the sense of a self-description, the Keynesian “we simply do not know” applies to economists since more than 200 years. That economists are incompetent scientists that much we know for sure — and it holds with absolute certainty for both orthodox and heterodox economists.

So we can predict that nothing of real scientific value will ever come from these folks, in perfect analogy to the prediction of physics that pigs will never fly.

Egmont Kakarot-Handtke

Clower, R. W. (1994). Economics as an Inductive Science. Southern Economic Journal, 60(4): 805–814.
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Popper, K. R. (1960). The Poverty of Historicism. London, Henley: Routledge and Kegan Paul.

Related 'Prediction does not work? Try retrodiction first' and 'What is dead certain in an uncertain world: economists’ abysmal incompetence' and 'ICYMI Prediction/Forecasting'