No go: Issues that have been decided
In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened. (Morgenstern, 1941, pp. 369-370)
I was delighted to find in a dictionary the word mumpsismus, which means stubborn persistence in an error after it has been exposed. (Joan Robinson, quoted in Arouh, 1987, p. 395)
It is a thoughtlessness of Heterodoxy to make fun of stubborn persistence because excactly this persistence indicates that the falsification mechanism does not work properly. In any science this is cause for alarm.
Much of economic theory is based on three questionable assumptions: (1) the world is deterministic; (2) decision makers act as if they know the values of all relevant parameters; and (3) consumers and firms respectively, act as if they were maximizing utility and profit. (Stigum, 1991, p. 29)
When Phil Anderson first heard about the theory of Rational Expectations in the famous 1987 Santa Fe meeting [of physicists and economists], his befuddled reaction was: You guys really believe that? (Bouchaud, 2009, pp. 7-8), original emphasis
Pure economics has a remarkable way of producing rabbits out of a hat — apparently a priori propositions which apparently refer to reality. (Hicks, 1939, p. 23)
Direct empirical evidence on individual behavior is difficult — some would say impossible — to come by. ... The von Neumann-Morgenstern axioms are routinely violated. It is remarkable how little impact this evidence has had on modern economics. (Blinder, 1987, p. 135)
... a science of political economy would need to have measurable quantities of its conceptual building blocks, and ways of measuring its “results.” (Weintraub, 2002, p. 26)
Political Economy ... presupposes all the physical sciences; it takes for granted all such of the truths of those sciences as are concerned in the production of the objects demanded by the wants of mankind; or at least it takes for granted that the physical part of the process takes place somehow. (Mill, 2004, p. 102)
Indeed, here [with the production function] we find the neoclassical economist dictating the laws of physics to the physicist! (Mirowski, 1995, p. 328)
It is not at a question of realism/unrealism but of true/false. Physicists, for example, do not reject unrealistic abstractions and idealizations as long as these do not distort the object of inquiry beyond recognition and there is perfect unanimity that a construct like a perpetual motion machine is impossible in principle and not merely infeasible in practice. General equilibrium is the economic counterpart of a perpetual motion machine. A number of premises contradict known physical laws, hence they are not unrealistic but inadmissible. General equilibrium is, in the first place, a physical nonentity. That is why physicists are regularly befuddled at their first encounter with conventional economics. They spontaneously recognize green cheese assumptionism and wonder how anyone can take it seriously.
... theories of each ontological level must be consistent with all other theories pertaining to that reality, including those at other levels. Although each theory and mode of theorizing is different, no theory can overturn an acceptable theory at another ontological level. For example, reigning socio-economic principles cannot overturn the known and received laws of biology or physics. ... This meta-theoretical principle ... is required to avoid contradictions within a theoretical structure. (Hodgson, 2001, p. 328)
Neo-classical economics has been falsified. (McCauley, 2006, p. 15)
Let us mean by current income the value of current output, .... If we define Savings as the excess of income during a period over expenditure on consumption during that period, it follows that Savings are exactly equal to the value of output added to accumulated wealth, i.e. to Investment. (Keynes, 1933, p. 699), original emphasis
Much confusion is dispelled if one notes that the putative equation of the concept of income and the concept of output is the font of most of the theoretical novelty of the General Theory . (Mirowski, 1995, p. 307)
The putative equation has been falsified. (Kakarot-Handtke, 2013)
Instead what uniquely characterizes a scientific approach is a certain epistemology, or way of validating ideas. ... The set of rules for eschewing what is false is the epistemology of science, and it involves applying a series of tests to what anyone may assert to be true. (Eichner, 1983, p. 508)
However, falsification is not always deemed to be sufficient.
The main reason for the considerable acceptance of the [orthodox] approach is that fundamental rule of scientific combat: it takes a theory to beat a theory. No amount of skepticism about the fertility of a theory can deter its use unless the skeptic can point to another route by which the scientific problem ... can be studied successfully. (Stigler, 1983, p. 541)
But until a viable competitor is created, the neoclassical economists will be uninterested in a priori discussion of the realism of assumptions which cannot be independently tested as is the case with the maximization assumption. (Boland, 1992, p. 19)
There is no alternative that is so obviously superior that it would justify everyone abandoning the current orthodoxy. (Hausman, 1992, p. 255)
There is no evidence to suggest that economists abandon degenerating programs in the absence of a progressive alternative. (Weintraub, 1985, p. 148)
There is indeed abundant evidence of intellectual inertia. Moreover, the logic of Stigler's justification is thoroughly flawed: no one is entitled to further promote a falsified solution just because the correct solution has not yet been found by someone else. This can only happen because the falsification mechanism does not work properly, which is the characteristic of a proto-science. When the acceptance of Orthodoxy is not justified by solid scientific merits but by pointing out that a better alternative is not available, which may even be the case, something went wrong. When a hypothesis has been falsified the options are: develop an alternative, help somebody else to develop an alternative, or get out of the way.
Yet most economists neither seek alternative theories nor believe that they can be found. (Hausman, 1992, p. 248)
Measured in terms of innovative performance, most econonomists lack scientific acumen. To them it may therefore come as a surprise that the subjective-behavioral approach has been finally beaten — according to Stigler's rule of scientific combat — because its conception of profit is untenable and a superior alternative is in place.
Profit theory has long been regarded as one of the more unsatisfactory branches of economics. ... One reason for this is that economists have not asked the right questions about profit. (Murad, 1953, p. 1)
The structural axiomatic Profit Law replaces orthodox and heterodox profit theories. To discuss Walrasian or Keynesian models as if they had not already been refuted violates scientific standards. At long last, the profit issue has been decided. Only one question remains: how fast can conventional economics get out of the proto-scientific embarrassment? Who gets out first: the students, the teachers, the referees? Much depends on the actual distribution of sagacity/dullness in the respective populations. In the past it has not been favorable.
... suppose they [the economists] did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics. (Hands, 2001, p. 404), original emphasis
Actually, there is no economics.
All there is are economists with various personal opinions gathering around various flagpoles. To be sure, there is no fundamental rule of combat and no mumpsismus in science. Yet there is conjecture and refutation and the acceptance of refutation and the development of something better. All the rest is a no go.
Walrasian as well as Keynesian economics has been falsified. Both are out of science. This defines the zero-point of economic research.
It is not much, but knowing that you know nothing is the beginning of wisdom. (Buiter, 2009)
Arouh, A. (1987). The Mumpsismus of Economics and the Role of Time and Uncertainty in the Progress of Economic Kowledge. Journal of Post Keynesian Economics, 9(3): 395–423. URL
Blinder, A. S. (1987). Keynes, Lucas, and Scientific Progress. American Economic Review, 77(2): 130–136. URL
Boland, L. A. (1992). The Principles of Economics. Some Lies my Teacher Told Me. London, New York, Ny: Routledge.
Bouchaud, J. P. (2009). The (Unfortunate) Complexity of the Economy. EconoPhysics Forum, 0904.0805: 1–9. URL
Buiter, W. H. (2009). The Unfortunate Uselessness of Most ’State of the Art’ Academic Monetary Economics. Financial Times, March 3rd. URL
Eichner, A. S. (1983). Why Economics Is Not Yet a Science. Journal of Economic Issues, 17(2): 507–520. URL
Hands, D.W. (2001). Reflection without Rules. Economic Methodology and Contemporary Science Theory. Cambridge, New York, NY, etc: Cambridge University Press.
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Hicks, J. R. (1939). Value and Capital. Oxford: Clarendon Press, 2nd edition.
Hodgson, G. M. (2001). How Economics Forgot History. The Problem of Historical Specificity in Social Science. London, New York, Ny: Routledge.
Kakarot-Handtke, E. (2013). Why Post Keynesianism is Not Yet a Science. Economic Analysis and Policy, 43(1): 97–106. URL
Keynes, J. M. (1933). Mr. Robertson on "Saving and Hoarding". Economic Journal, 43(172): 699–712. URL
McCauley, J. L. (2006). Response to "Worrying Trends in Econophysics". EconoPhysics Forum, 0601001: 1–26. URL
Mill, J. S. (2004). Essays on Some Unsettled Questions of Political Economy, chapter On the Definition of Political Economy; and the Method of Investigation Proper to It., pages 93–125. Electronic Classic Series PA 18202: Pennsylvania State University. (1844). URL
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Morgenstern, O. (1941). Professor Hicks on Value and Capital. Journal of Political Economy, 49(3): 361–393. URL
Murad, A. (1953). Questions for Profit Theory. American Journal of Economics and Sociology, 13(1): 1–14. URL
Stigler, G. J. (1983). The Process and Progress of Economics. Journal of Political Economy, 91(4): 529–545. URL
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.
Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL
Weintraub, E. R. (2002). How Economics Became a Mathematical Science. Durham, NC, London: Duke University Press.
© 2013 EKH, except original quotations up