June 22, 2017

Rethinking the Phillips curve

Comment on Nick Bunker on ‘Is the Fed being misguided by the Phillips curve?’

Blog-Reference

“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)

Fact is that economists do NOT have the true theory. This holds in particular for profit and employment theory which are provable false. The Phillips curve, for example, is misspecified since Samuelson.#1 So, yes, the Fed is constantly being misguided by provable false economic theory.

The correct employment equation is reproduced on Wikimedia.#2 From this objective-structural-systemic Phillips curve follows inter alia:
(i) An increase of the expenditure ratio rhoE leads to higher employment L (the Greek letter rho stands for ratio).
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase of the factor cost ratio rhoF=W/PR leads to higher employment.

The complete structural-systemic Phillips curve is a bit longer and contains in addition the public sector and the foreign trade sector.

Item (i) and (ii) cover the familiar arguments about how effective demand affects employment. Item (iii) embodies the price mechanism. It works such that overall employment L INCREASES if the average wage rate W INCREASES relative to average price P and productivity R and vice versa.

There is NOT much use in speculating if and when the wage rate rises if unemployment falls. There is NO law-like relationship between these variables. By consequence, wage rate and price have to be taken as parameters. The structural-systemic employment equation tells us how to exactly set the parameters in order to achieve the employment objective.

In the present situation, a theoretically enlightened and politically empowered FED (or some other competent institution) would set the parameters as follows: price increase zero and wage increase greater than productivity increase. This increases employment for a while. Afterwards: price increase zero and wage increase equal to productivity increase. This stabilizes the economy at full employment. Trying to steer price, wage rate and employment via the interest rate is a futile exercise that has NO sound theoretical foundation. To recall: economics is a failed science since 200+ years.

Egmont Kakarot-Handtke

#1 For details see ‘NAIRU, wage-led growth, and Samuelson’s Dyscalculia’ and ‘Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#2 Wikimedia


Related 'Attention: there are THREE types of inflation' and 'Naive arithmetic' and 'NAIRU: an exhaustive dancing-angels-on-a-pinpoint blather' and 'Reading the correct Phillips curve correctly' and 'Nine views are nine too much' and 'The end of storytelling' and 'NAIRU and economists’ lethal swampiness' and 'NAIRU ― letting one more nonentity go'

June 21, 2017

Attention: there are THREE types of inflation

Comment on Simon Wren-Lewis on ‘UK monetary policy: you cannot be serious?’

Blog-Reference and Blog-Reference on Jun 22

Simon Wren-Lewis clarifies: “When I recently wrote about increasing the inflation target, I knew I would get at least one comment saying wouldn’t this reduce real wages even further. As I always do, I explained that raising the inflation target should raise the rate of increase of all nominal quantities by the same amount, which is what economists mean by inflation. But it seems the same basic point has to be made to these three members of the MPC too: inflation is not just the rate of change of the consumer price index.”

What economists mean by inflation is false and this is relevant for the relationship between inflation and employment.

From the correct employment equation* follows that employment L depends (i) on aggregate demand, which is here given with the expenditure ratio rhoE and investment expenditures I, and (ii), on the price mechanism, which is formally embodied in the macro-ratio rhoF=W/PR with W = average wage rate, P = average price, and R = average productivity.

Let rhoE and I be fixed and the rate of change of productivity R for simplicity be zero, i.e. r=0, then there are THREE logical cases:
(i) The rate of change of the wage rate W is equal to the rate of change of the price P, i.e. w=p, then employment does NOT change NO MATTER how big or small the rates of change are.
(ii) The rate of change of the wage rate is greater than the rate of change of the price then employment INCREASES.
(iii) The rate of change of the wage rate is smaller than the rate of change of the price then employment DECREASES.

So, it is DIFFERENCES in the rates of change of wage rate and price and NOT the absolute magnitude of change that affect employment. Every PERFECTLY SYNCHRONOUS inflation/deflation is employment-neutral, that is, employment sticks indefinitely where it actually is.

Perfectly synchronous inflation/deflation is, according to Simon Wren-Lewis, “what economists mean by inflation”. Synchronous=employment neutral inflation, though, is a LIMITING case that occurs with a probability CLOSE TO ZERO.

In general terms, the neutrality condition reads w=p+r+pr. Therefore, it is a matter of indifference whether the wage rate falls or rises or whether wages are sticky or not. ALL depends on relative changes. Employment increases if w is greater than p+r+pr and decreases in the opposite case.

So, what is needed in the present situation is an asynchronous inflation, more specifically, w greater than r and p=0. This increases also the multiplier effect of expansive fiscal policy. The wage increase has to take the lead.

Egmont Kakarot-Handtke

* The elementary version of the correct (objective, systemic, behavior-free, macrofounded) employment equation is given on Wikimedia. For details see ‘Keynes saw the problems but did not solve them


Immediately preceding 'Economic bungee jumping without cord'

Morons on math

Comment on Lars Syll on ‘Simpson’s paradox’

Blog-Reference

A theory is the humanly best mental representation of reality. A theory is fundamentally different from a commonsensical description of reality.

A theory must satisfy two criteria in order to be accepted to the corpus of scientific knowledge: material and formal consistency. Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-the-art testing.

For the refutation of a theory it suffices to demonstrate that it is either logically or empirically inconsistent. We know by now that economics is both. The current state is this: the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit wrong. With the pluralism of provable false theories economics sits squarely at the proto-scientific level.

Economics is a failed science and this proves first of all that BOTH orthodox and heterodox economists are incompetent scientists. They do not even understand what science is all about. Feynman called these people cargo cult scientists.

Cargo cult scientists are easy to spot because they talk often about methodology, i.e. how to do science properly, and what they say is glaring nonsense. Paul Romer is a case in point: “Math cannot establish the truth value of a fact. Never has. Never will.”

No, because scientific truth is defined by material AND formal consistency, and math is supposed to guarantee formal consistency. And this is what it has done so admirably throughout history ― except in economics. This, though, is not the fault of math but of economists.

Scientists know that math works but they are not sure why: “At this point an enigma presents itself which in all ages has agitated inquiring minds. How can it be that mathematics, being after all a product of human thought which is independent of experience, is so admirably appropriate to the objects of reality?” (Einstein, 1921), see also (Wigner, 1979), (Velupillai, 2005)

“I find it quite amazing that it is possible to predict what will happen by mathematics, which is simply following rules which really have nothing to do with what is going on in the original thing. (Feynman, 1992)

“The method of reasoning by chains of syllogisms is nothing but a transformation mechanism, applicable just as well to one set of premises as to another; it could not serve therefore to characterize these premises. In other words, it is the external form which the mathematician gives to his thought, the vehicle which makes it accessible to others, in short, the language suited to mathematics; this is all, no further significance should be attached to it.” (Bourbaki, 2005)

Genuine scientists know how to use math to their advantage, economists=cargo cult scientists don’t. In very general terms it can be said that economists fail because of the Fallacy of Insufficient Abstraction. What economist have not yet understood is that the subject matter of economics is not Human Nature/behavior/action but the behavior of the economy. Economics is NOT a social science but a system science.

The economy, i.e. the subject matter of economics, is an abstraction that has to be clearly defined by a set of premises, a.k.a. foundational propositions, a.k.a. axioms. Without clear premises all conclusions are for the waste basket, the whole argument is scientifically worthless, and economic policy guidance has no sound scientific foundation.

When the premises are not correctly defined mathematics cannot work its magic and as a collateral damage econometrics become a senseless exercise. When utility maximization is put into the premises no testable proposition ever results. Economists do not understand this elementary methodological fact since 140+ years.

It is not so that mathematics or standard statistical methods are inapplicable in economics. The failure of economics is uniquely and exclusively caused by the scientific incompetence of economists. The ultimate reason why economics never rose above the proto-scientific level is that it is built upon false premises. As Aristotle put it: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

In the last 200+ years neither orthodox nor heterodox economists have produced scientific knowledge of their thing. They do not even understand the elementary mathematics of accounting.*

Egmont Kakarot-Handtke

* See for example ‘The final implosion of MMT’ and ‘How Keynes got macro wrong and Allais got it right


For details of the bigger picture see cross-references Math/Mathiness

June 20, 2017

The long genealogical tree of economic storytelling

Comment on Dániel Oláh on ‘The Amazing Arab Scholar Who Beat Adam Smith by Half a Millennium’

Blog-Reference

Dániel Oláh reports: “The biggest merit of Khaldun lies in his revolutionary methodological thinking. … Based on this it’s easy to understand that Ibn Khaldun presented very similar ideas as Adam Smith, but hundreds of years before the Western philosopher. But Khaldun said even more about the economy. He analyzed markets which arise based on the division of labor and examined market forces in a simple didactic way which is very similar to the attitude of Alfred Marshall. The invention of supply and demand analysis wasn’t invented in the 19th century …”

The fault of this argument lies in the fact that economics is, to begin with, NOT a social science.#1 Worse, to define economics as a social science has been the foundational blunder 200+ years ago. Worst, not to realize this until this day is the very proof of utter scientific incompetence of the representative economist.

Adam Smith was NOT a scientist but a storyteller: “… he had no such ambitions; in fact he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along. (Schumpeter)

Schumpeter had to argue against the plain fact that the supply and demand story is not much better than the commonsensical story of how the sun travels from east to west over the firmament: “The primitive apparatus of the theory of supply and demand is scientific. But the scientific achievement is so modest, and common sense and scientific knowledge are logically such close neighbors in this case, that any assertion about the precise point at which the one turned into the other must of necessity remain arbitrary.”

Neither Smith nor Marshall ever rose above the level of proto-scientific storytelling.#2 The same holds true for Ibn Khaldun. To put this in perspective is not to deny that Ibn Khaldun marked a progress in comparison to his precursors who limited themselves “to transmit knowledge without modifying, editing or adding any remarks to the tradition.”

Ibn Khaldun deserves credit as a forerunner of Adam Smith. But Smith was more a political blatherer than a scientist. So Ibn Khaldun is not the forerunner of economics as a science. The current state of economics is this: the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit wrong. With the pluralism of provable false theories economics sits squarely at the proto-scientific level.#3

It is, first of all, of utmost importance to distinguish between political and theoretical economics. The main differences are: (i) The goal of political economics is to push an agenda, the goal of theoretical economics is to 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 has to be judged according to the criteria true/false and nothing else. The history of political economics since Adam Smith can be summarized as perpetual violation of scientific standards. Theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. Smith and Ricardo fought for liberalism, Marx and Keynes were agenda pushers, so were Hayek and Friedman, and so are Krugman and Keen.

Political economics has produced NOTHING of scientific value since Adam Smith. This is not the fault of Ibn Khaldun, of course, but of scientifically incompetent economists who have not realized until this day that economics is NOT a social science but a system science.#4 What is required since Ibn Khaldun is to double down on revolutionary methodological thinking.

Egmont Kakarot-Handtke

#1 For details see ‘Economics is NOT a social science
#2 For details see ‘Marshall and the Cambridge school of plain economic gibberish
#3 See ‘Economics: 200+ years of scientific incompetence and fraud
#4 See ‘First Lecture in New Economic Thinking

June 16, 2017

Economic bungee jumping without cord

Comment on Simon Wren-Lewis on ‘Raising the inflation target’

Blog-Reference and Blog-Reference on Jun 17

You say: “The argument for a higher inflation target is straightforward, once you understand two things. First the most effective and reliable monetary policy instrument is to influence the real interest rate in the economy, which is the nominal interest rate less expected inflation. Second nominal short term interest rates have a floor near zero (the Zero Lower Bound, or ZLB).”

The argument for a higher inflation target is NOT straightforward, once you understand two things. First interest theory is axiomatically false.#1 Because of this monetary policy never had sound scientific foundations. Second the same holds for fiscal policy.#2

Let us assume for a moment that, for whatever reasons, neither monetary nor fiscal policy is applicable. So, given investment expenditures of the business sector and the expenditure ratio of the household sector, the only alternative left is to directly influence the macroeconomic price mechanism.#3

The argument AGAINST higher inflation is that it REDUCES employment. Given the overall situation, the ONLY sensible policy is to increase the average wage rate, such that the rate of change of the wage rate is greater than the rate of change of productivity, because this increases employment. This is a SYSTEMIC necessity and has NOTHING to do with social policy. Employment is co-determined by the relationship between average wage rate, price and productivity. This relationship should automatically produce full employment but does not.

Standard employment theory is false.#4 The proposal to get the economy going by increasing price inflation is the direct result of the complete lack of understanding how the market economy works.

Egmont Kakarot-Handtke

#1 See ‘The Emergence of Profit and Interest in the Monetary Circuit
#2 See ‘Austerity and the utter scientific ignorance of economists
#3 For more details see ‘Think deeper
#4 For details of the bigger picture see cross-references Employment

***
REPLY to Simon Wren-Lewis on Jun 19

You say: “For every borrower there is a saver.”

In this generality this is trivially true, nonetheless it is grossly misleading. To see this, let us take the pure consumption economy as the most elementary case as starting point (no investment, not government, no foreign trade). Wage income is denoted as Yw, consumption expenditures as C.#1

The sector balances (Sm≡Yw-C, Qm≡C-Yw) always add up to zero, i.e. Qm+Sm=0 or Qm=-Sm, that is, the business sector makes a monetary profit Qm which is equal to the household sector’s dissaving -Sm or a loss -Qm which is equal to monetary saving Sm. So, if the household sector dissaves it uno actu happens that the household sector becomes the borrower vis a vis the banking sector (including the central bank) and the business sector becomes the lender to the banking sector. When we cut the banking sector short the business sector becomes the ultimate lender to the household sector.

From this immediately follows that saving and investment is NEVER equal, neither ex ante nor ex post, and ALL Keynesian and Post Keynesian and New Keynesian and IS-LM models are provable false.#2

The same relationship holds when the private households are substituted by public households. Therefore, the period deficit of the public sector reappears one-to-one as profit of the business sector. When we cut the banking sector short the business sector becomes the ultimate lender to the public sector.

Needless to say that the business sector prefers the public sector as ultimate borrower. This explains the safe asset shortage if the monetary profits stem from private deficit spending.

The deficit spending of the private and public households together determine the overall profit of the business sector. This means that Keynesian deficit spending is the ultimate profit machine if the household sector’s budget is balanced. Increased private and public deficit spending in turn explains the falling labor share.#3

Whether public deficit spending helps employment depends on whether the average price increases or not. In any case, though, public deficit spending helps profit one-to-one. So, whoever wants the maximum employment effect from deficit spending has to see to it that the price increase is zero.#4

Now, you are in favor of expansive fiscal policy and propose to increase the inflation target. This is as counterproductive as can be. The combination of increasing public deficit spending and a rising price increases profit and leaves employment unaffected.

From the standpoint of the 1-percenters your policy mix is perfect. From the standpoint of the 99-percenters it is another instance of expert madness. The correct policy in the given situation is to put traditional=failed monetary and fiscal policy aside and to increase the average wage rate at ZERO inflation.

#1 For details see ‘First Lecture in New Economic Thinking
#2 For details see ‘Profit and the collective failure of economists
#3 See ‘Profit and distribution: a primer
#4 See ‘Unemployment is high because economics is false: period, full stop, end of story


Immediately following 'Attention: there are THREE types of inflation'

June 15, 2017

How Heterodoxy got lost in the methodological woods

Comment on Lars Syll on ‘What kind of realist am I?’

Blog-Reference

Lars Syll advertises his realist methodology: “Perhaps the most important contribution a researcher can make is reveal what this reality that is the object of science actually looks like.”

Translated into economics this means in concrete terms that the most important contribution an economist can make is to reveal how the actual economy works. This contribution takes the form of the true theory with truth well-defined as material and formal consistency.

Sometimes it is necessary to reflect about methodology, but only as a stepping stone on the way to the true economic theory. The economist who thinks he is in the possession of a superior methodology is supposed ― NOT to run around and give good methodological advice but ― to directly apply it and show the results. As J. S. Mill put it: “Doubtless, the most effectual mode of showing how the sciences of Ethics and Politics [and Economics] may be constructed, would be to construct them.”

Lars Syll rightly criticizes the methodology of Orthodoxy, which comes under the umbrella heading of methodological individualism, always implying that his realist methodology is superior, yet he has never produced a solid piece of economic theory. He has not even realized that Keynesianism, his prototype of a superior approach, is logically defective.#1

The repetitive blunder of Heterodoxy consists in getting stuck with methodology: “As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction.” (Nell)

Heterodoxy in general and Lars Syll in particular talk much about how ‘the science of economics may be constructed’ but never get started.

The crucial step on the way to the true theory is to move from the naive description of reality to abstraction: “Since, therefore, it is vain to hope that truth can be arrived at, either in Political Economy or in any other department of the social science, while we look at the facts in the concrete, clothed in all the complexity with which nature has surrounded them, and endeavour to elicit a general law by a process of induction from a comparison of details; there remains no other method than the à priori one, or that of ‘abstract speculation’.” (Mill)

Needless to emphasize that abstraction can go badly wrong. Starting with the realistic description ‘the earth stands still and the sun goes up’ Ptolemy constructed the Geo-centric theory. With this, Ptolemy committed the Fallacy of Insufficient Abstraction. The later paradigm shift from Geo-centrism to Helio-centrism delivered the best known example for successful abstraction: “I shall never be able to express strongly enough my admiration for the greatness of mind of these men who conceived this [Helio-centric] hypothesis and held it to be true. In violent opposition to the evidence of their own senses and by sheer force of intellect, they preferred what reason told them to that which sense experience plainly showed them ... I repeat, there is no limit to my astonishment when I reflect how Aristarchus and Copernicus were able to let conquer sense, and in defiance of sense make reason the mistress of their belief.” (Galileo)

The realists never got the point: “Bacon, the philosopher of science, was, quite consistently, an enemy of the Copernican hypothesis. Don’t theorize, he said, but open your eyes and observe without prejudice, and you cannot doubt that the Sun moves and that the Earth is at rest.” This is how realists became the laughing stock of science and the whole filibuster about realism/unrealism became pointless.

There are TWO pitfalls in the process of abstraction, (i) that the unkown ‘essential’ aspects of reality are unintentionally abstracted away, i.e. that reality gets lost, and (ii), that the ‘inessential’ aspects of reality are not abstracted away, i.e. that the analysis remains on the commonsensical surface. Accordingly, we have (i) the Fallacy of Lethal Abstraction, and (ii), the Fallacy of Insufficient Abstraction. Orthodox economics suffers from (i), heterodox economics from (ii). And this is why economics is a failed science and why economists never came to grips with reality.

Lars Syll’s realist methodology is good for criticism but worthless for the axiomatic reconstruction of economics and therefore prevents the necessary paradigm shift, i.e. genuine scientific progress.

The common blunder of Orthodoxy and Heterodoxy consists of defining economics as social science. While it is quite obvious that human behavior plays an important role in how the economy develops, this is NOT the subject matter of economics but of psychology, sociology, anthropology, history, political science, social philosophy, biology/Darwinism/evolution theory etcetera. Economics has to focus on the systemic aspect of the economy. That means, economics is NOT a social science but a system science. Put differently, the focus of the theory of flight is NOT on why crew and passengers are on a plane, what their ulterior motives are, how they behave, and whether they are happy or not. The focus is on what makes the plane fly, i.e. the laws of aerodynamics, thermodynamics and so on. The theory of flight abstracts from the concrete human beings and leaves all Human Nature issues to social scientists, that is, to people who will NEVER get a plane off the ground.

Lars Syll argues: “The overarching flaw with methodological individualism and rational choice theory is basically that they reduce social explanations to purportedly individual characteristics. But many of the characteristics and actions of the individual originate in and are made possible only through society and its relations.”

This is a true example of the Fallacy of Insufficient Abstraction. The overarching blunder of BOTH orthodox and heterodox economists is that they dabble in psychology and sociology, which is NOT their proper business, and have until this day NOT figured out how the price- and profit mechanism works. Walrasianism, Keynesianism, Marxianism, Austrianism is proto-scientific rubbish and the realist Lars Syll stands clueless right in the middle of it.#2

Egmont Kakarot-Handtke

#1 See ‘How Keynes got macro wrong and Allais got it right
#2 See ‘Economics: 200+ years of scientific incompetence and fraud


For details of the bigger picture see cross-references Heterodoxy

June 14, 2017

Economics: 200+ years of scientific incompetence and fraud

Comment on Noah Smith on ‘Is economics a science?’

Blog-Reference

“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)

The fact of the matter is that economists do NOT have the true theory. More precisely, economists do not know how the price- and profit mechanism works. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit wrong.#1 With the pluralism of provable false theories economics sits squarely at the proto-scientific level.

The representative economist either does not realize it or cannot officially admit it. In this dire situation, the Pavlovian reaction is always and everywhere to muddy the waters and to retreat deeper into the swamp. Noah Smith is no exception, he rhetorically asks: “What the heck is a ‘science’?” and answers “No one knows.”

This is patently false. Science is, since the ancient Greeks made the distinction between opinion (= doxa) and knowledge (= episteme), well-defined by material and 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)

First question to Noah Smith: if no one knows what science is how does it come that we have a prize with the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#2 And how does it come that economics is since Adam Smith/Karl Marx explicitly defined as science? And what does every economist learn in Econ 101?: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins)

Fact is that economics claims to be a science but is what Feynman called a cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

What is missing is the true theory. Economics is a failed science because none of the four main approaches satisfies the criteria of material and formal consistency. When this is pointed out economists immediately retract and fire their barrage of brain-dead excuses.#3 Noah Smith applies the same old defense maneuvers. Needless to emphasize that every single of these excuses has been refuted long ago.

Economists have found a way to deal with the problem of manifest failure: they simply ignore and violate scientific standards. Or, as Blaug put it, they are playing tennis with the net down. Morgenstern reminded his fellow economists back in 1941: “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.”

This is why Walrasianism is still around although it has already been dead in the cradle 140+ years ago. Standard economics has been based on provable false axioms but economists proudly cling to them until this day: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” (Krugman) Note in passing that maximization and equilibrium are NONENTITIES like angels or the Easter Bunny. Time for Krugman and the rest to end stubborn self-delusion: all equilibrium models are a priori false and this starts with textbook supply-demand-equilibrium.#4

Economics is a failed science because economists (i) are scientifically incompetent, and (ii), violate scientific standards/ethics on a daily basis. Since Adam Smith economic policy guidance never had sound scientific foundations. Both, orthodox and heterodox economists sell proto-scientific rubbish in the bluff package of science.

In order to become a science, economics needs a paradigm shift.#5 Nothing less will do.

Egmont Kakarot-Handtke

#1 See ‘First Lecture in New Economic Thinking
#2 See ‘The real problem with the economics Nobel
#3 See ‘Failed economics: The losers’ long list of lame excuses
#4 See also ‘The father of modern economics and his imbecile kids
#5 See also ‘The identification problem and the dumping of the old guard


For details of the bigger picture see cross-references Incompetence

***
REPLY to Jake Thompson on Jun 18

You argue: “It’s certainly, by a long shot, the most scientific of the social sciences.”

Your lethal methodological blunders are:
(i) The underlying binary code of science is true/false with NOTHING in between. Because of this, economics is either a science or not. The statement, economics is more scientific than X, is entirely devoid of meaning. (Just like the statement, Jake Thompson is by a long shot more innocent than Lee Harvey Oswald. Guilty/not guilty is also binary with NOTHING in between.)
(ii) Scientific truth is well-defined by material and formal consistency. It is not an easy task to establish scientific truth but from these practical difficulties cannot be concluded that it does not exist or that anything goes.
(iii) The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong.

Conclusion: Economics is NOT a science.

In order to rise above the proto-scientific level, economics needs a paradigm shift.#1 What failed economists first of all have to understand is that economics is NOT a social science but a system science. To define economics as a social science has been the foundational blunder 200+ years ago. Being scientifically incompetent, though, economists will not understand this. It’s Catch 22 and the representative economist is trapped in the scientific coal-pit.#2

#1 For details see ‘Redefining economics’ and cross-references Paradigm shift
#2 “... but when the road ends at a coal-pit, he [the traveler] doesn’t need much judgment to know that he has gone wrong, and perhaps to find out what has led him astray.” (Hume) Obviously, you lack even this tiny quantity of judgement.

***
REPLY to Anonymous on Jun 20

You argue: “Some parts of Econ are a science (game theory and I’d argue basic macro in simple markets) while the rest is more of an art (everything else).”

You are trying to evade a clear-cut conclusion and your argument is way beside the point.
(i) Economics is either a science or not. That parts of it are acceptable is irrelevant. Every false theory has acceptable parts. Even the flat earth theory has some content that is true. False theories are always partially and commonsensically true. This is exactly why they can survive.
(ii) Game theory is NOT economics because economics does not deal with human behavior but with the behavior of the economic system. Economics is a system science and all Human Nature/behavior issues belong to psychology, sociology, anthropology and so on. To define economics as a social science has been the foundational blunder 200+ years ago.
(iii) Basic macro is provable false.*
(iv) To call economics an art is simply an euphemism.

The conclusion is inescapable: Economics is NOT a science.

* For details see ‘Textbooks and the mental cloning of dumb economists’ and ‘Why Post Keynesianism Is Not Yet a Science