Monday, August 2, 2021

What is economics? A policy discipline for the real world — James K. Galbraith


Economics is a policy discipline. It is engaged with the problems, large and small, of social organization and the general good. As such it co-evolves with circumstances. It is historically contingent. The application of economic ideas to specific problems under specific circumstances may succeed or fail, and in the latter case, people with different ideas normally rise to prominence. Capitalism is an economic system whose characteristics and problems have preoccupied economists since the 18th century. It is not the only such system; there were economists before capitalism going back to Aristotle. And there have been economists under competing systems: socialism and communism had economists of their own. Today it is common to speak of “varieties of capitalism”; these too foster economists of differing views and perspectives. Economists and economic theories are a byproduct of the social order that spawns them. The world to which economic policies are ultimately addressed is a complex system. Yet economists seeking to develop appropriate policies are necessarily guided by simplifications and heuristics. The question before the discipline is to decide what sort of simplification is best suited to the task. In the spirit of modern science, this paper argues that appropriate generalizations, simplifications, heuristics and principles are to be derived from a study of the actual world. While these may deploy mathematical tools and draw on insights from the behavior of mathematical systems, the latter by themselves are inadequate, especially where they start from the dead dogmas of the neoclassical mainstream: ex nihilo nihil fit.
“Kepler undertook to draw a curve through the places of Mars, and his greatest service to science was in impressing on men’s minds that this was the thing to be done if they wished to improve astronomy; that they were not to content themselves with inquiring whether one system of epicycles was better than another, but that they were to sit down to the figures and find out what the curve, in truth was” (Charles Sanders Peirce, 1877).
real-world economics review, issue no. 96
What is economics? A policy discipline for the real world
James K. Galbraith | Lloyd M. Bentsen Jr. Chair in Government/Business Relations and Professor of Government at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin


Peter Pan said...

In the real world, economists are paid to bamboozle the public.

AXEC / E.K-H said...

What is economics?
Comment on James Galbraith on ‘What is economics?’

James Galbraith's first sentence reads: “Economics is a policy discipline” and it is false. Because the premise is false the rest of his argument is false.

Economics is a science. The first thing to know about science is that it is ontologically different from politics. The strict separation of science and politics is imperative because politics corrupts everything. This happened to economics.#1

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.

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. Economics is a failed science, or, in Feynman's term a cargo cult science. The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel is a fraud because there is NO such thing as economic sciences.

Right policy depends on true theory. Economists do NOT have the true theory. So, economic policy guidance (left/center/right does not matter) NEVER has had sound scientific foundations. Economists are NOT scientists but clowns/useful idiots in the political Circus Maximus.#2 James Galbraith is no exception.

Science is defined by material/formal consistency: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)#3

The fact is: the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, Pluralism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and ALL got the foundational economic concepts of profit/income/value wrong.#4, #5, #6

The fact that economists have in 200+ years not gotten their foundational concepts right is disqualifying. To this day, economics is proto-scientific garbage, economic policy has no sound scientific foundations, and in their utter incompetence economists are a hazard to their fellow citizens.#7

Economists are stupid or corrupt or both. Stupid because Walrasian microfoundations and Keynesian macrofoundations are provably false. And when the foundations are false the whole analytical superstructure is scientifically worthless. Corrupt, because economists push a political agenda under the guise of science.#8 Of all moral evils, this is the worst.

Egmont Kakarot-Handtke

* RWER blog


AXEC / E.K-H said...


#1 For details of the big picture see cross-references Political Economics/Stupidity/Corruption

#2 For details of the big picture see cross-references Failed/Fake Scientists

#3 For details of the big picture see cross-references Proto-Science/Cargo Cult Science/Science

#4 Wikipedia, economics, scientific knowledge, or political agenda pushing?

#5 The GDP-death-blow for the economics profession

#6 For details of the big picture see cross-references Profit/Distribution

#7 Econogenics: economists pose a hazard to their fellow citizens

#8 Political fraud and the silence of academia

AXEC / E.K-H said...

What is economics? (II)
Comment on James Galbraith on ‘What is economics?’*

James Galbraith claims that
• economics is a policy discipline,
• economics co-evolves with circumstances, and is historically contingent,
• economic theories are a byproduct of the social order that spawns them,
• the economy is a complex system, appropriate generalizations, simplifications, heuristics and principles are to be derived from a study of the actual world,
• mathematical systems are inadequate when they start from the dead dogmas of the neoclassical mainstream: ex nihilo nihil fit,

• the history of economic thought/hallucination crashed against the wall of reality with the Great Financial Crisis 2007-09 and the Pandemic of 2020.

Without going into details the sum is: economics as a policy discipline is scientifically worthless from the founding fathers onward to this day. The problem is this: “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)

Lacking sound scientific foundations, economic policy guidance has never been more than personal opinion.#1

However, these things, “… even the dimmest observer of real-existing capitalism already knew.” The point is, again and again: “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)

Even the dimmest economist knows by now that it takes a Paradigm Shift to get out of the swamp of cargo cult science. However, this is beyond the means of the representative economist. To this day, neither orthodox nor heterodox economists got the foundational concept of economics ― profit ― right.

Here is the unassailable proof: in his General Theory, Keynes asserted: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This syllogism is conceptually and logically defective because Keynes never came to grips with profit. “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end, he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)#2, #3

So, Keynes never got macroeconomic profit right and neither did pro- or anti-Keynesians to this day. Folks who cannot do the elementary algebra of macrofoundations cannot do the Paradigm Shift. Their contribution to human welfare/progress consists of burying themselves in a dark corner of the Flat-Earth-Cemetery.

James Galbraith maintains: “The purpose of economic reasoning is to inform and buttress political and social choices.” That sounds plausible but is false. It is the credo of the agenda pusher.#4 The credo of the scientist is: “The purpose of economic reasoning is to figure out how the economy works.”

The criterion for the scientist is truth, i.e. material/formal consistency, and NOT usefulness. The scientist produces new knowledge and nobody can know in advance whether and for whom it is “useful”.

Economists never understood this, but genuine scientists did: “At one point in that 100 years, Lord Ernest Rutherford was visited by a minister of the Queen. He proudly and busily demonstrated what he had learned about radio. The minister said, that’s all very good, but what is it good for. Lord Rutherford replied that he did not know, but he guaranteed that at some point the government would tax it.”#5

To this day, economists are not scientists but useful idiots for the Oligarchy. This is what “economics is a policy discipline” means. All these fake scientists have to be expelled from the sciences.#6

Egmont Kakarot-Handtke


AXEC / E.K-H said...


#1 Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems

#2 Finalizing the Keynesian Revolution

#3 Profit: The most powerful formula of economics

#4 Economics ― the science that never was

#5 The scientist and the minister

#6 A rough business plan for science