Tuesday, April 25, 2017

Jason Smith — Should the left engage with neoclassical economics?


Getting the left up to speed by understanding information. There's a lot of good stuff in this post.

Information Transfer Economics
Should the left engage with neoclassical economics?
Jason Smith

19 comments:

Neil Wilson said...

Short answer: no.

You may as well engage with Scientology.

We need to start again using spheres of actual knowledge.

AXEC / E.K-H said...

Hayek and other informationally retarded proto-economists
Comment on Jason Smith on ‘Should the left engage with neoclassical economics?’

Hayes characterizes the corpus of Hayek, Friedman and neoclassical economics as “incredibly powerful, really important, really influential, tremendous amount of incredible insight, helpful for understanding how capitalism works, etc.”

Fact is that Hayek et al. is plain proto-scientific rubbish. No amount of information theory make-up can change the fact that neoclassical economics had already been dead in the cradle 140+ years ago. Some retarded folks, though, have not realized this, among them Jason Smith. He maintains: “One thing that I think needs to be more widely understood is that Hayek did have some insight into prices having something to do with information, but got the details wrong.”

One thing that has to be clearly understood is that there in NO such thing as economics. There are TWO economixes and they are constantly confounded. Therefore, it is of utmost importance to distinguish 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 (= science) has to be judged according to the criteria true/false and NOTHING else. Hayekian economics is provable false. Neoclassical economics has no truth-value, merely political use-value.

Hayek et al. is false because it is based on microfoundations. Microfoundations are defined with this behavioral axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

From these axioms together with some auxiliary assumptions follows what Leijonhufvud called the Totem of Micro/Macro, that is, SS-curve―DD-curve―equilibrium, which is the representative economist’s all-purpose tool.

This approach is false on all methodological counts, that is, supply-demand-equilibrium is a NONENTITY or plain proto-scientific rubbish. Microfounded economics is what Feynman famously called cargo cult science.

Hayek et al. argued that the existing economic system is self-adjusting. He could never prove it in a way that satisfies the criteria of material and formal consistency. Worse, it can be rigorously proved that the market system is NOT self-adjusting.#1

Clearly, economics has to abandon microfoundations altogether and move forward to macrofoundations.

Macrofoundations do away with the brain-dead blather of supply-demand-equilibrium. From macrofoundations follows the correct objective/systemic/behavior-free/testable Law of Supply and Demand which is shown on Wikimedia:#2
https://commons.wikimedia.org/wiki/File:AXEC64.png

Conclusions:
― Hayek et al. NEVER understood how the price and profit mechanism works.
― The economic policy guidance of Hayek et al. NEVER had a sound scientific foundation.
― NOT ONE of the political economists and agenda pushers from Smith to Hayek et al. will ever be accepted as scientist.
― Hayek et al.’s approach cannot be improved only abandoned because it is axiomatically false.

Egmont Kakarot-Handtke

#1 See ‘Could we, please, all focus on the key question of economics?’ http://axecorg.blogspot.de/2016/05/could-we-please-all-focus-on-key.html
#2 For details see ‘Essentials of Constructive Heterodoxy: The Market’
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2547098

Bob Roddis said...

If you all want to cite an authority for the proposition that AXEC/E.K-H does not understand Hayek at all, I volunteer. If you want to send me a fee, I'll take it but it's not required.

http://consultingbyrpm.com/blog/2012/09/tom-woods-keeps-krugmans-feet-to-the-fire.html#comment-45198

Bob Roddis said...

Jason Smith really doesn't get Hayek either. The information imparted by prices is what is going on inside the heads of the people doing the exchanges and not necessarily all the newly discovered technical information that might be collected. That knowledge is not otherwise accessible or replaceable. The interventionists just cannot wrap their heads around the socialist calculation problem or that the crises that result from the price distortions of Keynesian interventionism are a variation on the socialist calculation problem.

Plus, Friedman is essentially a Keynesian and monetarism is a form of Keynesianism because they both support violent intervention in the area of the government providing fiat funny money. Lumping him with Hayek as "neo-classical" is more definitional garbage.

https://www.auburn.edu/~garriro/fm2friedman.htm

Tom Hickey said...

Bob, why not go over to Jason Smith's place an enlighten him on how it has Hayek all wrong. Or have you done that already?

Bob Roddis said...

Mr. Hickey:

A comment left by our pal AXEC/E.K-HA got zapped by Jason Smith for this reason: “This comment contains offensive language and will be removed.”

I am trying to find a nice, polite and respectful way to tell Jason Smith that neither he nor any of his other interventionist friends have any familiarity whatsoever with Austrian concepts or analysis and now he’s telling his compadres to be ever more vigilant in the pursuit of that level of total ignorance. Afraid of something?

Tom Hickey said...

Right. I confrontational approach won't get far with him. But being a scientist by profession, he is a person open to objections that are phrased in a way that is non-confrontational. However, it is possible he already has made up his mind about certain issues.

His position on Hayek is that Hayek was prescient for his time but didn't have the more rigorous tools that have been developed since Shannon. I think it would be advisable to pose an objection in terms of that.

Bob said...

Nothing stopping him from addressing AXEL and Bob Roddis over here.

Bob said...

^AXEC

AXEC / E.K-H said...

Bob

You say: “Nothing stopping him [Jason Smith] from addressing AXEC and Bob Roddis over here.”

No way. Jason Smith has removed/deleted not one but several comments that have been posted on his blog Information Transfer Economics. He has even retrofitted his own posts.*

Jason Smith violates basic scientific standards on a daily basis and therefore cannot be invited or admitted to any economics debate whatsoever.

Egmont Kakarot-Handtke

* For my original contributions see:
What genuine scientists believe about economics
http://axecorg.blogspot.de/2017/04/what-genuine-scientists-believe-about.html

Hayek and other informationally retarded proto-economists
http://axecorg.blogspot.de/2017/04/hayek-and-other-informationally.html

The key to macro and Keen’s debt-employment model
http://axecorg.blogspot.de/2017/02/the-key-to-macro-and-keens-debt.html

For Jason Smith’s original contributions you have to urge him to put them back on his blog. I cannot recommend this because the sooner his unqualified blather about economics and physics is forgotten the better.

Bob said...

http://axecorg.blogspot.de/2017/04/what-genuine-scientists-believe-about.html

This is a link to your blog, where one of your comments is deleted, followed by a comment by Jason Smith. To what he is referring?

AXEC / E.K-H said...

Bob

(i) There is political economics (= agenda pushing) and theoretical economics (= science).
(ii) Political economics is scientifically worthless since Adam Smith.
(iii) Hayek was a political economist (= fake scientist).
(iv) Hayek’s contribution to theoretical economics is proto-scientific rubbish.
(v) Jason Smith is putting lipstick (= Information Theory) on the dead pig.
(vi) By promoting Hayek, Jason Smith is promoting political economics (= fake science).

It is a curious fact that substandard physicists, mathematicians, and engineers turned in great number to economics. Mirowski has dealt with this phenomenon at great length in More Heat Than Light. It explains why economics is still at the proto-scientific stage.

Egmont Kakarot-Handtke

Bob Roddis said...

Apparently I caused great offense by referring to Mr. Smith in the third person.

It seems to me that an equation with all variables is not exactly physics. Who said something like that?

Mike Norman once said...

It's interesting how often we see the inflationista's haul out the QTM as their "proof" that money printing (money supply) causes inflation, YET NONE ACKNOWLEDGE THE SIMPLE FACT THAT ALL THE VARIABLES IN THAT EQUATION ARE JUST THAT...VARIABLES. So raising the money supply tells you NOTHING about the direction of prices.

November 16, 2012 at 12:49 PM

http://mikenormaneconomics.blogspot.com/2012/11/i-will-be-on-theblaze-today-at-430pm-et.html?showComment=1353088171542#c1964434325251905397

Tom Hickey said...

MV=PQ is an identity rather than an equation. It is a tautology, hence empty.

An identity can be all variables and it holds for all variables.

Identities can transformed into equations by adding assumptions.

An equation is true only for some variables under the assumptions. Some variables determine other variables in accordance with some rule. E. g., in y=f(x), the independent variable x determines the value of the dependent variable y in accordance with the rule specified by the function f(x).

Bob Roddis said...

Human action and thus economics is simply not like the physical sciences where the "actors" do not change their mind on a whim about whether to obey the laws of nature or not. Water can't change its mind about whether or not to freeze at 32 degrees F. A person can change their mind about whether or not they want ice in their drink.

This is so obvious, so basic and so undeniable that it is pointless to argue about it.

AXEC / E.K-H said...

Tom Hickey, Bob Roddis

The argument about identities/human action is one of the oldest clichés from the long list of lame excuses.#1

Obviously you lack any understanding about the vital difference between political economics (= agenda pushing) and theoretical economics (= science).

Economics is NOT about human behavior but about the behavior of the economic system.#2

Economists (including Hayekians) do until this very day NOT understand how the price and profit mechanism works. This is why they have NOTHING worthwhile to say.#3

Egmont Kakarot-Handtke

#1 See ‘Failed economics: The losers’ long list of lame excuses’
http://axecorg.blogspot.de/2017/01/failed-economics-losers-long-list-of.html

#2 See ‘The stupidity of Heterodoxy is the life insurance of Orthodoxy’
http://axecorg.blogspot.de/2017/04/the-stupidity-of-heterodoxy-is-life.html

#3 See ‘Economists and politics: Will you kindly shut up!’
http://axecorg.blogspot.de/2016/12/economists-and-politics-will-you-kindly.html

Bob Roddis said...

For future reference, I just searched the blog of Egmont Kakarot-Handtke for the word "Austrian". 99.99% of the time, the word appears in this clause: "Walrasian, Keynesian, Marxian, and Austrian". There is no actual demonstration of understanding regarding any of the four descriptions. These are examples:

Walrasian, Keynesian, Marxian, or Austrian economics is provable inconsistent.

It is a provable fact that neither Walrasianism, nor Keynesianism, nor Marxianism, nor Austrianism is materially/formally consistent.

Until this day neither Walrasians, nor Keynesians, nor Marxians, nor Austrians got profit right.

The fact of the matter is that Walrasianism, Keynesianism, Marxianism, Austrianism is axiomatically false and because of this ALL their policy guidance is worthless.

In methodological terms, rethinking macroeconomics requires the replacement of false axioms by true axioms and the dishonorable discharge of the Walrasian, Keynesian, Marxian, Austrian crowd from science.

Walrasian, Keynesian, Marxian and Austrian economists are groping in the dark with regard to the two most important features of the market economy, that is, the profit mechanism and the price mechanism.

AXEC / E.K-H said...

Bob Roddis

Thank you for the succinct compilation. More is not to say about Austrianism.

AXEC / E.K-H said...

Tom Hickey
on ‘Jason Smith — Should the left engage with neoclassical economics?’

You kicked off this thread with “Getting the left up to speed by understanding information. There’s a lot of good stuff in this post.”

It is a puzzle wrapped in a conundrum how you can recommend Jason Smith’s post. Take note of:
• Economics is a science and deals exclusively with true/false and NOT with left/right.
• Political economics is proto-scientific rubbish and Hayek is one of the better known examples for fake science. Jason Smith’s attempt to improve Hayek is a no-go.
• Jason Smith has NO idea of how the market economy works.
• Jason Smith has NOT realized that microfounded neoclassical economics is dead since 140+ years and macrofounded Keynesianism is dead since 80+ years.*
• Jason Smith practices censorship on his blog and therefore throws himself out of the econ blogsphere.
• There is NOT one iota of ‘good stuff’ in his post or on his blog.

Egmont Kakarot-Handtke

* See ‘IS-LM ― a crash course for EconoPhysicists’
http://axecorg.blogspot.de/2017/04/is-lm-crash-course-for-econophysicists.html