What Do Economists Mean When They Talk About “Capital Accumulation”? — Shimshon Bichler and Jonathan Nitzan

In every other science, this inability to measure the key category of the theory would be devastating. But not in the science of economics.

Maybe because economics is not a science but rather pseudoscience? I have long argued that economics is philosophy dressed up with some numbers. Shimshon Bichler and Jonathan Nitzan flesh the argument out. And this is just one area. A lot of this confusion results from lack of clarity about value.

The basic dualities of subject and object, idea and thing, nomos and physis have preoccupied philosophers since antiquity. They have also provided an ideal leverage for organized religions and other dogmas specializing in salvation from alienation. And more recently, they have come to form the basic foundation of modern economics....

This paper is a bit longish but here is the conclusion if you don't plan to read it (although I regard it as a must-read).

The modern disciplines of economics and finance overflow with highly complex models, complete with the most up-to-date statistical methods, computer software and loads of data – yet their ability to explain, let alone justify, the world of capital is now limited at best. Their basic categories are often logically unsound and empirically unworkable, and even after being massively patched up with ad hoc assumptions and circular inversions, they still manage to generate huge “residuals” and unobservable “measures of ignorance”.

In this sense, humanity today finds itself in a situation not unlike the one prevailing in sixteenth-century Europe, when feudalism was finally giving way to capitalism and the closed, geocentric world of the Church was just about to succumb to the secular, open-ended universe of science. The contemporary doctrine of capitalism, increasingly out of tune with reality, is now risking a fate similar to that of its feudal-Christian predecessor.

Mounting global challenges – from overpopulation and environmental destruction, through climate change and peak energy, to the loss of autonomy and the risk of social disintegration – cannot be handled by a pseudo-science that cannot define its main categories and whose principal explanatory tool is “distortions”. You cannot build an entire social cosmology on the assumptions of individual rationality, equilibrium and perfect markets – and then blame the failures of this cosmology on irrationality, disequilibrium and imperfections. In science, these excuses and blame-shifting are tantamount to self-refutation.

What we need now are not better tools, more accurate modelling and improved data, but a different way of thinking altogether, a totally new cosmology for the post-capitalist age.

Evonomics

What Do Economists Mean When They Talk About “Capital Accumulation”?
Shimshon Bichler and Jonathan Nitzan