My paper is a survey of the huge amount of solid empirical evidence against the utility maximization hypothesis that is at the core of all microeconomics currently being taught today in Economics textbooks at universities all over the world. It is obviously important, because if what it says is true, the entire field of microeconomics needs to be re-constructed from scratch. Nonetheless, it was summarily rejected by a large number of top journals, before being eventually published by Jack Reardon as: ” The Empirical Evidence Against Neoclassical Utility Theory: A Review of the Literature,” in International Journal of Pluralism and Economics Education, Vol. 3, No. 4, 2012, pp. 366-414. Speaking metaphorically, my paper documents the solid evidence that the earth is a round sphere in world where educational institutions teach the widely held belief that the earth is flat. Readers of RWER blog will recall that when challenged on the failure of macroeconomics after the Global Financial Crisis, economists retreated to the position that while macro theory may be in a bad shape, at least Microeconomics is solidly grounded. My paper blows this claim out of the water. As a result, nothing is left of Micro and Micro, and of economics as whole. This supports my earlier claim that a Radical Paradigm Shift is required to make progress — patching up existing theories cannot work...
The central question remains of what is to be done. A complex response which requires coordination on multiple fronts is required. The first step has to be the development of a coherent alternative. I have developed a two semester micro coursewhich starts with the Anti-Textbook of Hill & Myatt, and follows up by using two main tools OPPOSED to maximization and equilbrium. Maximization is replaced by behavioral heuristics, which allow operation in environments with genuine uncertainty. Maximization is actually IMPOSSIBLE in uncertain environments. If I have to choose between actions a and b but the outcome to me depends on unknown state of natures and unknown acts of other agents then maximization is not possible. I cannot calculate which of the two actions will yield greater utility because the outcome depends on many thing I do not know, and cannot learn. SIMILARLY, if we equip all agents with heuristic behavior and try to compute what will happen, this can only be done within an Agent Based Model using computer simulations — which will generally lead to disequilibrium outcomes. Using these two tools to replace the central micro tools, one can go quite far in replacing standard micro with sensible alternatives....WEA Pedagogy Blog
Methodology of Modern Economics
Asad Zaman | Vice Chancellor, Pakistan Institute of Development Economics and former Director General, International Institute of Islamic Economics, International Islamic University Islamabad
This comment has been removed by the author.
ReplyDelete“The first step has to be the development of a coherent alternative.“
ReplyDeleteLOL... liberal arts methodology 101, ie start with a theory first....
The Art methodology normally used to teach Econ is the problem if there is any problem related to a methodology...
For the REFUTATION of Asad Zaman’s ‘Methodology of Modern Economics’ see
ReplyDeleteThe inexorable paradigm shift in economics
https://axecorg.blogspot.com/2018/07/the-inexorable-paradigm-shift-in.html
Real-World Economics: The sanctuary of stupidity and corruption
https://axecorg.blogspot.com/2018/07/real-world-economics-sanctuary-of.html
Stop beating mainstream economics ― it is long dead
https://axecorg.blogspot.com/2018/04/stop-beating-mainstream-economics-it-is.html
The end of political economics
https://axecorg.blogspot.com/2017/06/the-end-of-political-economics.html
Egmont Kakarot-Handtke
Matt, you are conflating the well-known distinction between rationalism and empiricism, which was previously to that Paltonism and Aristotelianism, with science and art.
ReplyDeleteThe rationalistic approach mored into formalism and the mathematical approach aka axiomatic approach or deductive approach.
The empiricist approach morphed into the inductive approach, on one hand and the phenomenological approach on the other.
The pure sciences tend toward the former and the applied science toward the latter.
Economics has both a pure and applied aspect. Nothing wrong with doing pure theoretical work based on formal models expressed quantitatively. This is the kind of model building that Samuelson brought to MIT (Massachusetts Institute of Technology), one the top tech universities in the US and world. That approach is now dominant in economics.
There are plenty of applied economists that do heavily empirical work, too, but you don't fear much about them. For one thing, a lot of them are employed in the private sector and their work is proprietary. You don't see Jan Haztius writing econ papers or making many public statements as the Chief Economist for Goldman, even though he is reputed to be the most advanced and accurate forecaster. He uses Godley's SFC macro modeling, btw. He also doesn't make policy recommendations, and most people outside finance have probably never even heard of him.
“Paltonism”
ReplyDeleteSb Platoism?
“Nothing wrong with doing pure theoretical work based on formal models expressed quantitatively“
ReplyDeleteSeems there would be something wrong with it if it doesn’t work?
“Paltonism”
ReplyDeletePlatonism as in Plato.
Seems there would be something wrong with it if it doesn’t work?
ReplyDeleteTheory is developed based on "reasonable assumptions" and then tested by generating hypotheses as theorems deductively. Then the hypothesis are tested against data.
SOP (standard operating procedure) in doing theoretical and experimental science.
Classical physics works fine at the meso level in which human senses operate but there were questions at the macro and micro level of cosmology and subatomic level that came to be called the quantum level after the theory gained traction. Einstein developed his theory to resolve anomalies in classical physics at the macro margin and QM was developed was a theory to address issues at the micro margin. Classical physics works fine at the meso level in which human senses operate. Experimental testing came afterward.
“Platonism as in Plato.”
ReplyDelete10-4....
“you are conflating the well-known distinction between rationalism and empiricism, which was previously to that Paltonism and Aristotelianism, with science and art.“
ReplyDeleteI can’t be doing that because I have never studied the Plato v Aristotle thing... you have so you’re biased and say I am conflating something ...
You can’t conflate something you don’t know anything about...
Today, this inequality is being created in the academe via the 2 different methods being imposed in the 2 Degree programs ie Art and Science....
I don’t know what was going on 2000 years ago and maybe I don’t care as it doesn’t matter to what is going on TODAY....
Tom, whenever we start examining contemporaneous events you have a tendency to start to bring up events and people from long times ago... as opposed to what is going on in the here and the now...
ReplyDeleteI’ve never taken a class in philosophy, not even philosophy of science... just straight into STEM things without context... I would rather of had my finger nails pulled out one at a time with a needle nose pliers than take a class in a discipline like that...
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.
ReplyDelete― John Maynard Keynes, General Theory, Ch. 24 "Concluding Notes" p. 383-384
Keynes might as well have extended this to everyone. We are all operating in terms of world views that are grounded in idea from the past and our differences are largely arguing about those ideas now, with most people unaware of where they came from or what the debates over them involve. Many people "discover" these ideas on their own and they assumed "independently" when there are just picking out of the cultural "air" that they learned to breathe without critical awareness of the history.
#DeleteKeynes #ExpellAllKeynesians
ReplyDeleteComment on Asad Zaman on ‘Methodology of Modern Economics’
• The formal basis of the General Theory is given with “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)
• This proposition is conceptually/logically false because Keynes NEVER came to grips with profit.
• Because the foundational economic concepts profit/income/saving are miss-specified, the whole theoretical superstructure of Keynesianism in all its variants is false.
• Keynes messed up the inexorable paradigm shift from microfoundations to macrofoundations.
• Keynes was an agenda pusher, NOT a scientist. Keynesian policy guidance has NO sound scientific foundations and in effect enables the self-alimentation of the oligarchy.
• The extremely unequal distribution of income and financial wealth is the direct result of public deficit spending. It holds Public Deficit = Private Profit.
• After-Keynesians have not detected/rectified Keynes’ blunders to this day. Macroeconomics ― profit and employment theory, in particular ― is materially/formally inconsistent.
• Keynesianism is scientifically worthless. All Keynesians have to be expelled from the sciences.
• The same holds for Walrasians, Marxians, Austrians, and Pluralists.
For details of the big picture see cross-references Keynesianism
http://axecorg.blogspot.com/2016/09/keynesianism-cross-references.html
Egmont Kakarot-Handtke