Wednesday, December 13, 2017

Jason Smith — On these 33 theses

The other day, Rethinking Economics and the New Weather Institute published "33 theses" and metaphorically nailed them to the doors of the London School of Economics. They're re-published here. I think the "Protestant Reformation" metaphor they're going for is definitely appropriate: they're aiming to replace "neoclassical economics" — the Roman Catholic dogma in this metaphor — with a a pluralistic set of different dogmas — the various dogmas of the Protestant denominations (Lutheran, Anabaptist, Calvinist, Presbyterian, etc). For example, Thesis 2 says:
2. The distribution of wealth and income are fundamental to economic reality and should be so in economic theory.
This may well be true, but a scientific approach does not assert this and instead collects empirical evidence that we find to be in favor of hypotheses about observables that are affected by the distribution of wealth. A dogmatic approach just assumes this. It is just as dogmatic as neoclassical economics assuming the market distribution is efficient.
In fact, several of the theses are dogmatic assertions of things that either have tenuous empirical evidence in their favor or are simply untested hypotheses. These theses are not things you dogmatically assert, but rather should show with evidence:
I wonder whether economics should be taught as a science, especially since conventional economists seem to think that economics is more like physics than the social sciences.

There are problems with assuming that, which I won't repeat. But to my mind, the most obvious difficulty is well-known among the public. Perhaps the most powerful argument for "science" is demonstrated not in words, or through experiment, but rather in the success of technology that everyone uses all the time to change the world.

Is there anything like this with respect to economics? Not only no, but also the opposite in many cases.

The study economics is not even a required in most business schools, because business schools have discovered that time is better spent in getting results. If it got results, business schools would be hiring the top economists. They are not.

The teaching of economics needs to be rethought in light not only of the failure of economists to deliver results but also in their making bad situations worse. The dismal handling of the aftermath of the global financial crisis is a case in point. In addition, conventional economists and policymakers have literally laid waste entire European countries and their economies.

A lot of people are likely thinking, if this science we want none of it. Monkeys throwing darts could probably do better.

And ironically, Western economists and policymakers were put to shame by the positive result that China showed using a command economy to address the issues promptly and avoid contraction. But Western economists explain this by "cheating."

Information Transfer Economics
Jason Smith

16 comments:

AXEC / E.K-H said...

Throw them out! Orthodox and heterodox economists are unfit for science
Comment on Rethink Economics on ‘33 Theses for an economics reformation’

“Economics is broken.” The first three words of the heterodox Declaration are absolutely right. The fact to note is, though, that ‘economics’ includes BOTH orthodox AND heterodox economics. So, more to the point, both orthodox and heterodox economics is broken, and both orthodox and heterodox economists have to be speedily expelled from the sciences because of proven incompetence. There is nothing to reform in economics but all to replace. The call for a Reformation itself is proof of a hallucinatory mindset. In economics, nothing less than a Scientific Revolution will do.#1

The state of economics

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.

Economics claims to be a science but is NOT. 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.#2

From Adam Smith/Karl Marx onward, economists claim that their economic policy guidance has scientific foundations. This claim is untenable because economists lack the true theory: “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) Scientific truth is well-defined since 2000+ years by material and formal consistency. There is NO such thing as a materially/formally consistent economic theory.

Only one way out: the paradigm shift

Fact is that there is NO greater embarrassment in the history of modern science than economics. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational concept of the subject matter ― profit ― wrong.

What we actually have is the pluralism of provably false theories. What is needed is the true economic theory. In methodological terms, this means that economics needs a paradigm shift. Both failed orthodox and failed heterodox economics has to be buried in the wastebasket, and both incompetent orthodox and heterodox economists have to be expelled from the sciences.

Heterodoxy’s failure consists in being content with critique and trivial suggestions for improvement and in being unable to develop the true economic theory. Traditional Heterodoxy is a futile dog and pony act: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

See part 2

AXEC / E.K-H said...

Part 2

Pluralism of false theories = the great coalition of scientific failures

Fact is that economics has by now degenerated to pure political agenda pushing. Both, Orthodoxy and traditional Heterodoxy violate the principle of the separation of science and politics. A short glance at the 33 Theses suffices to realize that the aim of Heterodoxy is NOT to fully replace the already debunked Orthodoxy with the true theory but to get more academic sales space for the already debunked self-made proto-scientific stuff.

Scientific ethics and political corruption

The strict separation of the scientific realm and the political realm is necessary because politics always and everywhere corrupts science. This point has been made abundantly clear by 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.”

Retarded busybodies and political agenda pushers, of course, have done just the opposite and that is why economics is proto-scientific junk over the whole spectrum from DSGE to MMT. Economics is what Feynman called a cargo cult science.#3

The subject matter of economics

The mission of economists is (i) to figure out how the economic system works, and (ii), to figure out how the goals that have been set in the political realm by the legitimate sovereign can be achieved. The agenda pushing economist has to be expelled from the sciences. Agenda-pushing has to take place in the political realm. Economics has to get rid of political economics. Political economics in all variants from right-wing to left-wing is scientifically unacceptable. Economics is a systems science.#4

See part 3

AXEC / E.K-H said...

Part 3

The 33 Theses do not advance science:

(i) Heterodoxy’s main complaint is the “unhealthy intellectual monopoly of mainstream economics.” This is true, of course, but beside the point. The point is that mainstream economics is provably false, i.e. materially and formally inconsistent, i.e scientifically forever unacceptable. Mainstream economics has to be fully replaced because it is axiomatically false.

(ii) Heterodoxy maintains that a “more pluralist approach can help economics to become both more effective and more democratic.” No, the goal of economics is the true theory and not the pluralism of false theories.#5

(iii) The subject matter of economics is the economic system as a whole. Psychology, Sociology, Behaviorism, Political Science, Geopolitics, History, Anthropology, Biology/Darwinism, Institutionalism, Law, Ethics, Philosophy are NOT economics. The valid results of these independent disciplines are taken into economics by way of multidisciplinary cooperation if needed. For 200+ years, economists have dabbled in almost all disciplines but have until this very day not figured out what profit is. Thus, both orthodox and heterodox dilettantes have become a scientific laughingstock.#6

(iv) Economics is NOT about Human Nature/motives/behavior/action. NO way leads from the second-guessing of individual/social behavior to the understanding of how the economic system works. The microfoundations approach had been doomed to failure from the very beginning. Heterodoxy has never supplied a valid alternative to Walrasian microfoundations. Keynesian macrofoundations, too, are provably false.

(v) Heterodoxy has not the capacity/ambition for developing the true economic theory but seeks ― for whatever reason ― to uphold the existing plurality of false theories: “A good economics education must offer a plurality of theoretical approaches to its students. This should include not only the history and philosophy of economic thought, but also a wide range of current perspectives – such as institutional, Austrian, Marxian, post-Keynesian, feminist, ecological, and complexity.” A good economics education has to offer the true economic theory and NOTHING else.

Traditional Heterodoxy is a scientific failure just like Orthodoxy. The much-hyped New Economic Thinking of Walrasians, Keynesians, Marxians, Austrians is nothing but the old proto-scientific junk in a new fancy format which is supposed to be more to the taste of the next generation of scientifically unfit economists.

The inevitable paradigm shift in economics consists in the replacement of false Walrasian microfoundations and false Keynesian macrofoundations by true macrofoundations.#7 Both orthodox and heterodox economists have to start a new full-time career as propagandists/trolls in the econoblogosphere or clowns in the political Circus Maximus.#8

Egmont Kakarot-Handtke

#1 Why is economics such a scientific embarrassment?
https://axecorg.blogspot.de/2017/09/why-is-economics-such-scientific.html

#2 For details see cross-references Political economics
http://axecorg.blogspot.de/2015/07/incompetence-cross-references.html

#3 What is so great about cargo cult science? or, How economists learned to stop worrying about failure
https://axecorg.blogspot.de/2017/05/what-is-so-great-about-cargo-cult.html

#4 Economics is NOT a social science
http://axecorg.blogspot.de/2016/08/economics-is-not-social-science.html

#5 For details see cross-references Pluralism
http://axecorg.blogspot.de/2014/12/pluralism-cross-references.html

#6 For details see cross-references Scientific incompetence
http://axecorg.blogspot.de/2015/07/incompetence-cross-references.html

#7 From false microfoundations to true macrofoundations
https://axecorg.blogspot.de/2017/11/from-false-microfoundations-to-true.html

#8 For details see cross-references The representative economist
http://axecorg.blogspot.de/2017/12/the-representative-economist-cross.html

Matt Franko said...

"especially since conventional economists seem to think that economics is more like physics"

Well then they dont understand what Physics is either....

Tom they dont get the reps in APPLIED MATH in an Economics education... just look at the BA degree requirements for a BA in Economics ... Basketweaving 101...

Matt Franko said...

"I think the "Protestant Reformation" metaphor they're going for is definitely appropriate: they're aiming to replace "neoclassical economics" — the Roman Catholic dogma in this metaphor — with a a pluralistic set of different dogmas — the various dogmas of the Protestant denominations"

This is a pretty good analogy from Jason here... the new Reformation sects kept the Hell/Trinity/Freewill dogmas and maintained sole use of Kinesthetic teaching processes so what has really changed from the original Roman Catholicism? Just some aesthetics...

Heterodox econ just substitutes new dogmas for the old ones and maintains the sole use of the rote or read/write teaching process so what really changes? not much...

Brian Romanchuk said...

His argument assumes that economic data just magically appears, and that we can study it. In fact, the raw data generally consists of large surveys of data, that is aggregated. He blindly works with the aggregates, and does not question the fact that the aggregation has to be based on a priori theory.

If you do not collect useful data on the distribution of income and wealth, you have no way to do empirical studies. Roughly speaking, the decision was made to not collect such data. (Some exists, but is collected at such a low frequency that is not useful for business cycle analysis.) We need theory to structure how to get useful dats.

And if we go back to the days of political economy, that was the subject of primary interest.

Matt Franko said...

Well Brian that gets back to.whether to approach an issue from a systemic or a localized aspect...

Say like in medicine...

Unemployment should be approached from a more localized aspect... they lower interest rates for the whole USD system and think that is going to reduce UE in Detroit due to exit of auto industry from that localized area... not ideal...

Matt Franko said...

If you misapply the systemic aspect your data set is going to always be too large and over aggregated...

Look at smallpox you have the disease (systemic) and the skin pustules (localized) which then are what do you in thru skin infections....

You have to treat the localized skin infections perhaps more importantly than the systemic disease...

These people are just stupid sorry.... these people are not the A Team... not even close... we just need to get better people in the discipline...

Andrew Anderson said...

One might think an ethical economy would sustainably outperform a command economy given that flawed as Western economies are, they still have been relatively ethical compared to others.

Tom Hickey said...

I see the issue (problem and challenge) as being chiefly ideological but also technical in part.

It is telling how liberal and conservative economists always come up with results that fit their respective ideologies. One should obviously expect tailored assumptions and selective measurement — seeing faces in clouds, on one hand, and curve-fitting, on the other.

Economics and other social sciences have a scope problem. The models assume more universality and invariance than exists. Business school figure this out already and went to the case method, for example.

The degree that social studies, including economics, can be called sciences, they deal mostly with special cases and stochastic methods using models that practitioners often claim or imply to be general case, in imitation of the natural sciences. But the context of natural and social science is completely different owing to the subject matter.

This is especially true as the scale increases and aggregation enters the picture. As Keynes observed, micro scaled up to macro risks the fallacy of composition.

Economics and social studies in general face two challenges, the first being model construction and the second, measurement. For example, homogeneity is high in the natural sciences (atoms are "fungible") but low in the social sciences (individuals are not fungible). This should be a death sentence to methodological individualism and modeling based on assuming maximization based on also assuming homogenous preferences and representative agents. The assumptions are much to strong when compared to reality.

Then, there are all the measurement issues when subjectivity enters the picture and aggregation is involved. Moreover, the different approaches used historically that make it difficult to impossible to compare data and change meaningfully over time without adjustments that are difficult to make and often impossible.

So a lot of this study involves "educated guessing" by ideologues rather than "adherence to rigorous methodology" as is represented.

This isn't to say that social studies are worthless and can never be productive of useful knowledge. It's just to say that it is a minefield and those that enter it need to beware of the cognitive-affective traps, some planted by ideologues and other through inadvertence and ignorance.

For example, it is telling that institutional arrangements are often ignored when data about them is readily available historically in terms of laws and customs prevailing at different times, and this data is not only relevant but also crucial to correct understanding. MMT is based on beginning with the institutional arrangements around "money," accounting and finance, whereas many if not most other economists presume (hidden assumptions) things that are demonstrably wrong.

So when the economic "science" is applied in "technology" (policy, the result can be disastrous, instead of being highly beneficial as it is when scientific theory is applied in natural and life sciences to technology through engineering and medicine.

Comparing the natural and life science is also revealing. Humans have managed to put men on the moon and reach Mars, but have not yet cured cancer. When social studies are added to the comparison, do the social science have any technology that is worthwhile to speak of at all?

NeilW said...

"He blindly works with the aggregates, and does not question the fact that the aggregation has to be based on a priori theory."

That that the economic theory that is in place at the time affects the data. That taints and constrains the data generated. And as Brian points out even decides that data is collected and what is not.

Andrew Anderson said...

So a lot of this study involves "educated guessing" by ideologues rather than "adherence to rigorous methodology" as is represented. Tom Hickey

As far as I know, no one has rigorously proved that "honesty is the best policy" or the "Golden Rule" yet who but the stupid and/or criminal believes otherwise?

Matt Franko said...

“Honesty is the best policy”

It doesn’t have to be proven if you commit perjury or fraud it’s a criminal act... the people have spoken and it’s in OUR laws... you either comply or go to jail...

AXEC / E.K-H said...

Tom Hickey

You say: “I see the issue (problem and challenge) as being chiefly ideological but also technical in part.”

You see it wrong. The point is that economics claims to be a science but is NOT. All explanations of failure are lame excuses.#1 Obviously, the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a case of intended/unintended deception/fraud.

The general public has to be informed that economic policy guidance has no sound scientific foundations, and never had since Adam Smith/Karl Marx.

The problem is that Heterodoxy is not a real alternative to long falsified Orthodoxy. With their yearning for pluralism, heterodox economists are de facto the junior partners of intended/unintended deception/fraud.#2

This also holds for MMT. As a propagandist of MMT you are de facto accomplice of intended/unintended deception/fraud.#3

“Economics is broken” yes, this applies to DSGE and MMT and everything in between. Now the time has come to expel all the incompetent scientists and brain-dead agenda pushers from economics and to move, after 200+ years of confused blather and silly propaganda, from cargo cult science to science.

Egmont Kakarot-Handtke

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

#2 Why does Heterodoxy not abolish the fake Nobel?
https://axecorg.blogspot.de/2017/10/why-does-heterodoxy-not-abolish-fake.html

#3 MMT: Money-making for the one-percenters
http://axecorg.blogspot.de/2017/09/mmt-money-making-for-one-percenters.html

Noah Way said...

'Economics' is not science. It is a system of competing ideologies.

'Economic science' is an oxymoron.

'Economics' does not obey natural laws.

Economics has never been a science - and it is even less now than a few years ago.
-- Paul Samuelson, Nobel Prize winner, Economic Sciences

AXEC / E.K-H said...

Noah Way

Economics each year officially celebrates the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

You say “'Economics' is not science. It is a system of competing ideologies. … Economics has never been a science ― and it is even less now than a few years ago. ― Paul Samuelson, Nobel Prize winner, Economic Sciences”

You are right, economics is the biggest blunder/fraud in the history of the sciences and Walrasianism, Keynesianism, Marxianism, Austrianism, Pluralism are part of it ― not to forget MMT.#1, #2, #3

Egmont Kakarot-Handtke

#1 The real problem with the economics Nobel
https://axecorg.blogspot.de/2016/09/the-real-problem-with-economics-nobel.html

#2 The father of modern economics and his imbecile kids
http://axecorg.blogspot.de/2016/11/the-father-of-modern-economics-and-his.html

#3 MMT: The one deadly error/fraud of Warren Mosler
https://axecorg.blogspot.de/2017/11/mmt-one-deadly-errorfraud-of-warren.html