Wednesday, September 13, 2017

Bill Mitchell — Paradigm shift – not from the CORE Econ Project – as mainstream as you will get

Next Friday (September 22, 2017), I will be presenting at a panel on developments associated with the proposed MMT University and our new MMT Macroeconomics textbook, which will be published by Macmillan in April 2018. The panel will present during the First International MMT Conference, to be held in Kansas City. In part, my contribution will be to discuss the general pedagogical concerns that we (Randy Wray, Martin Watts and myself) had as we wrote the textbook over what turned out to be several years. 
We were confronted with the situation that we want our textbook to be used as widely as possible in the first and second years of a typical undergraduate program, but also didn’t want to fall into the trap of compromising what we considered to be a unified body of theory based upon Modern Monetary Theory (MMMT) for what other colleagues (particularly, mainstream academics) would claim to be necessary material to prepare a student for the labour market. 
We now have what we believe is a very strong two-year sequence in macroeconomics, firmly founded on MMT principles, with a good balance between discursive narrative, historical context, empirical challenge, and formal (mathematical) reasoning. When one compares it to other post-GFC developments in the pedagogy of macroeconomics, some of which have received the headlines in the past week, I think the curriculum embodied in our text is progressive, consistent, and doesn’t fall into the typical neoliberal default regarding governments and the monetary system....
[Paragraphing added for online readibility]

Bill Mitchell – billy blog
Paradigm shift – not from the CORE Econ Project – as mainstream as you will get
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia


Matt Franko said...

"the CORE curriculum fails to incorporate the inherent labour-capital conflict that marks Capitalism from previous historical epochs "

That is because "labor" is not an identity todays students can recognize. All of the traditional labor roles have been outsourced to the turd world and illegal immigrants during the students lifetimes ...

Trump is trying to reestablish those roles... we'll see

Tom Hickey said...

Labor and capital are he factors of production in economics, with land now included in capital.

To the degree one is dependent on work for income one is a worker. To the degree that one gets income from ownership of assets one is a rentier, and to the degree that ownership is of the means of production one is a capitalist.

The trend is toward considering was formerly labor as being human capital, making a single factor of production. The idea is that persons are self-owners and rent out use of their capital.

It's unclear how much this has affected the narrative and consensus reality, but it is true that the narrative is no longer focused on capital vs. labor, even though the terms are still current in econ.

Matt Franko said...

Well if you are talking about students it's just a small cohort of the population.. millenials and nascent GenZers so it might still be current with other age groups ...

Imo today's millenial kids are just not as materialistic as my GenX age group ... we're going to have a very hard time offloading our McMansions onto them they are just not into all of the materialism....

The "labor-capital conflict" is a conflict over material... these kids are just not into all of that material stuff .... they are into identities and relationships, experiences...

I'm not sure if Trump/Bannon understands this about them...

AXEC / E.K-H said...

CORE: more lipstick on the dead economics pig
Comment on Bill Mitchell on ‘Paradigm shift ― not from the CORE Econ Project ― as mainstream as you will get’

This is the track record of economics: provably false
• profit theory, since 200+ years,
• Walrasian microfoundations (including equilibrium), since 140+ years,
• Keynesian macrofoundations (including I=S, IS-LM), since 80+ years.
The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concepts profit and income wrong.

In science, a distinct set of concepts or thought patterns, including theories, research methods, postulates, and standards for what constitutes legitimate contributions to a field is called a paradigm.#1 Because the four main approaches are provably false, that is, materially or/and formally inconsistent, a paradigm shift is an ABSOLUTE necessity.

Keynes put it thus 80 years ago: “The [neo-]classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight ― as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.”

In methodological terms, a paradigm shift is “a fundamental change in the basic concepts and experimental practices of a scientific discipline.” The Keynesian paradigm shift, though, failed because Keynes messed up the move from microfoundations to macrofoundations.#2 As a result, economics fell back on the Jevons/Walras/Menger paradigm. As Krugman so nicely put it “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point”.

The Neoclassical paradigm is defined by methodological individualism = microfoundations, which translates into the neo-Walrasian 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)

These axioms (or slight variations thereof) define the orthodox paradigm. These microfoundations are false in multiple dimensions. This is a methodological fact. By consequence, the necessary paradigm shift consists in fully replacing ALL variants of behavioral microfoundations by systemic macrofoundations.

As an answer to both fundamental and superficial refutation economists talk much about New Economic Thinking and a new paradigm and more social commitment.#3 The members of the CORE project are no exception.#4

Fact is, the new CORE textbook does NOT present the urgently needed new paradigm but the maximization-and-equilibrium world in a redesigned user-friendly format that has been worked out by the marketing and PR folks in order to satisfy the demands of the new generation of dull economics students. These students do not want economics as objective scientific truth but as an easy to understand narrative. The new target group does not care about the material and formal consistency of theoretical economics but about the political message of political economics.

Economics had the bad luck to start as Political Economy. This means that the political agenda had been given and the argumentation had to support the agenda. Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers).

See part 2

AXEC / E.K-H said...

Part 2

From this false start economics never recovered and it developed into what Feynman called cargo cult science, which he defined as: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

What is missing is the true theory, with scientific truth well-defined as material and formal consistency. Economics is a failed science. The claim as expressed in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a false claim. Both orthodox and heterodox economists are cargo cult scientists.#5

Economics does not need a new marketing thinking of opportunistic orthodox and heterodox proto-scientific losers#6 but a paradigm shift from false Walrasian microfoundations and false Keynesian macrofoundations to the true macrofoundations.#7 Nothing less will do. The first rule of the paradigm shift says: If it isn’t macro-axiomatized, it isn’t economics.

The CORE textbook is NOT economics, it is cargo cult economics in a new Zeitgeist outfit. The overdue replacement of the proto-scientific rubbish from Samuelson to Mankiw#8 lies still in the future.

Egmont Kakarot-Handtke

#1 Wikipedia Paradigm, Paradigm shift

#2 Post Keynesianism, too, is indefensible

#3 New Economic Thinking, or, let’s put lipstick on the dead pig

#4 See Samuel Bowles and Wendy Carlin ‘A new paradigm for the introductory course in economics’

#5 Fact of life: your econ prof is scientifically incompetent

#6 In search of new economists

#7 First Lecture in New Economic Thinking

#8 The father of modern economics and his imbecile kids