Home > Uncategorized > Doctor X, “pure shit” and the Royal Society’s motto

Doctor X, “pure shit” and the Royal Society’s motto

from Edward Fullbrook

Recently at a large party I found myself sitting next to a very likable young middle-aged academic tenured at an elite British university, whom henceforth I will refer to as Doctor X and whose field is closely associated with this blog.

Doctor X was unfamiliar with both the Real-World Economics Review and the World Economics Association.  But when I described the purposes of the latter, in particular the fostering of a professional ethos that prioritized the advancement of knowledge rather than the preservation of orthodoxies and the promotion of vested interests, there was an instantaneous recognition of a central relevance to his/her intellectual and career situation.

“Every year I publish papers in the top journals and they’re pure shit.”  Doctor X, who by now had had a glass or two, felt bad about this, not least because “students these days are so idealistic and eager to learn; they’re really wonderful.”  Furthermore Doctor X could and would like “to write serious papers but what would be the point?”

I then listened to an explanation of Doctor X’s predicament that went roughly like this.

One naturally feels loyalty to one’s immediate colleagues.  The amount of funding Doctor X’s department receives depends not on how many papers or their quality its members publish, but instead on in which journals they are published.   The journals in Doctor X’s field in which publication results in substantial funding will not publish “serious papers” but instead only “pure shit” papers, meaning ones that merely elaborate old theories that nearly everyone knows are false.   Moreover, even to publish a “serious paper” in addition to the “pure shit” ones could taint the department’s reputation, resulting in a reduction of its funding.   In any case, no one at a top university would read a “serious paper” because they only read “top journals.”

Memory of this little encounter came rushing back to me a few minutes ago when reading in today’s The Observer an opinion piece by Paul Nurse, the president of the Royal Society.  In a few words he nicely spells out how real science operates and how Doctor X, perhaps no less than me, wishes economics would operate.

Good science is a reliable way of generating knowledge because of the way it is done.  It is based on reproducible observation and experiment, taking account of all evidence and not cherry-picking data.  Scientific issues are settled by the overall strength of that evidence combined with rational, consistent and objective argument.  Central to science is the ability to prove that something is not true, an attribute which distinguishes science from beliefs based on religions and ideologies, which place more emphasis on faith, tradition and opinion.

A good scientist is inherently sceptical – the Royal Society’s motto, in Latin of course, roughly translates as “take nobody’s word for it”.

Doctor X, although clearly desirous of a regime like the one described by Nurse, seems resigned to the unhappy and morally troubling situation in which career ambition and intellectual ambition are mutually exclusive.  But there was also a hopeful side to this conversation.  When I asked if perhaps there were other privileged practitioners in the field who also found the situation lamentable and who if the institutional setup, meaning funding and promotion procedures, were changed, might have a go at writing “serious papers”, “Oh yes, loads!” replied Doctor X.

  1. paul davidson
    June 30, 2013 at 6:28 pm

    Unfortunately at the top of the economics profession — and other academic disciplines I am sure as I once taught biochemistry at the medical school at the University of Pennsylvania and saw there — make Papal decisions as to the right and wrong in “scientific ” discussions.

    In economics, for example, John Kenneth Galbraith wrote a lot about the industrial structure of the US economy and its implications for both micro and macroeconomics. Although his writings attracted some attention, his later writings were often characterized as “popularized” pulp fiction by many of the establishment in economics including especially those who were the “experts” in the industrial organization field teaching at some great educational institutions.

    Ken was lucky enough to be an excellent writer who could communicate to the general public and had a literary agent who could advance his books to many important publishing houses!
    The public loved his writings and many of his books became nonfiction best sellers.

    In my early writings I was lucky enough to get articles published in the Economic Journal, the Review of Economics and Statistics — and even twice in a matter of 9 months in the American Economic Review. But as I started to write more explicitly about the more obvious holes in mainstream neoclassical Keynesian economics.– I suddenly found the doors at these journals closed to me.[but I even once had an article published in the JPE.]

    An interesting story is that when I applied to the NSF for a research grant to make more elaborate my Keynesian analysis for a globalized economy. I had been encourage to submit a grant application by the head of the economics section of NSF at the time –he knew of my closed economy macrowritngs. One of the peer evaluators for NSF gave my project request the lowest possible rating and he wrote “Davidson has had an amazing success for his analysis over the last few years, but he marches to a different drummer and therefore should get his own research money an not ask for ours!’ [ This report from NSF is deposited in my papers archived at the Duke University library !
    Needless to say my grant request was denied– and I had to write my book INTERNATIONAL MONEY AND THE REAL WORLD by getting my own money to finance my work!.

    My mentor, Sidney Weintraub, also had an early success with his writings in some mainstream journals such as the AER and EJ, but as his research turned more to suggesting the errors of the neoclassical synthesis Keynesian’s theory of MIT, Harvard, and Yale he quickly found out how hard it was now to publish in mainstream journals.

    Accordingly when in the 1970s Sidney and I decided to start a new journal –the JOURNAL OF POST KEYNESIAN ECONOMICS — as a publication outlet for those young professionals who had some new innovative analysis — we found that Ken Galbraith was vey supportive –not only morally but also financially in providing seed money.

    Another supporter was Albert Hirschman who strongly encouraged us to create a , professional journal that would provide an outlet for nonmainstream ideas and analysis!

    But the mainstream continues to pump out what Doctor X calls —– and the subscription roles among libraries for the Journal of Post Keynesian Economics — continues to be reduced as, apparently, librarians face difficult financial times and therefore are cutting back on their journal subscripts. [Have you checked whether your library still subscribes to the Journal of Post Keynesian Economics?]

  2. BFWR
    June 30, 2013 at 7:12 pm

    Unfortunately (or rather fortunately) the individual is not a scientific notation. The most essential problem with the system is it provides adequate ways for businesses to compensate for the the scarcity of individual incomes created by the system….but does not extend that courtesy…to the individual.

    In most presentations of economic solutions one can hear complex strategies for dealing with problems, and yet seldom are the effects of the economy on the individual even heard. This is mirrored in the historical fact that when things get tough or a crisis occurs the general answer is a governmental resort to saving the major actors in the system at the expense of the individual and the top down enforcement of such “saving”. Hence fascism and other totalitarian “functionings” of the system are imminently doable while the individual is ground to dust in the meantime. I would suggest that we adapt the system to the individual instead of the other way around. That places Man in his proper place as the end of consideration instead of merely a means.

  3. June 30, 2013 at 9:31 pm

    One cannot buy what is not for sale and that includes paid, superannuated apologists and spin meisters of neoclassical/neoliberal economics that are to serious political economy what painting-by-numbers is to art. Mainstream economics and the academia that pushes it are pure fraud; even a lot of the “heterodox” or “progressive” stuff (for the math phobic and envious) is also pure sophistry and publish-or-perish in a lot of worthless journals that caused a lot of dead trees.

    As long as the topics of research are the pet theories and projects of elite academics detached from the real-word issues and conditions that should guide and prioritize research, as long as academics practice their own varieties of anti-intellectualism and scholar depotism, as long as academics are first and foremost petit-bourgeois and careerist in their orientation, the “research” and “teaching” in “mainstream economics” will be as irrelevant and worthless as many of its practitioners.


  4. Strategist
    June 30, 2013 at 10:27 pm

    I’m sorry but I don’t feel any sympathy for Doctor X. He’s got tenure at an elite UK university, for chrissakes!
    We’re not asking him to mount the barricades in Cairo or take on the NSA or something. We’re just asking him to bang a few pots & pans, and show a bit of leadership to his students. It’s a perfectly viable project to take down the old guard. When credibility is shot, it’s shot.

  5. originalsandwichman
    June 30, 2013 at 11:27 pm

    There is an intimate and incestuous connection between the “pure shit” of top-economic-journal-ism and “corrupt journalism” in the more prosaic sense of what Glenn Greenwald describes as “TV actors who play the role of journalists on TV.” Scratch beneath the shoddy veneer of mathematical idolatry and what you will find is incessant word-for-word parroting of 19th century upper-class house organ polemics against workers. That is to say, the supposedly “top economic” journalism of today hearkens back to the “servants and appendages to political power” from a century and a half ago.

    That is why it is crucial to pay attention to what the Snowden affair reveals about the corruption of the “political and media culture.” Economics is an integral part of that corrupt political and media culture; it is not some ethereal realm of disinterested science.

    Dean Baker:

    “Greenwald is doing as much to expose corrupt journalism as to expose government spying.”

    Glenn Greenwald:

    “So the last point I want to make is that one of the things I set out to do and I think that Mr. Snowden set out to do and that I know the people at The Guardian set out to do was not simply to publish some stories about the NSA. It was to really shake up the foundations of the corrupted and rotted roots of America’s political and media culture. And the reason I say that is that there is an economist Dean Baker, who yesterday on Twitter wrote that he thinks the stories that we’re doing are shining as much light on the corruption of American journalism as they are on the corruption of the National Security Agency.

    “I think that is true for several different reasons. Number one is if you look at the ‘debate’ over—the charming, very endearing debate over whether or not I should be arrested, prosecuted and then imprisoned under Espionage Act statutes for doing journalism—What you find is that debate is being led by other people who are TV actors who play the role of journalists on TV. They’re ones who are actually leading the debate and the reason they are doing that is they purport to be adversaries of political power or watchdogs of political power but what they really are servants to political power. They’re appendages to political power.”

  6. Robert Locke
    July 1, 2013 at 6:18 am

    “a professional ethos that prioritized the advancement of knowledge rather than the preservation of orthodoxies and the promotion of vested interests.”

    Advancement of knowledge is the issue if we do not try to make this advancement of knowledge in economics, the advancement of science. Economics is not a science and (based on 150 years of trying) never will be. The analysis of the economy is and always has been deeply involved in the promotion of invested interests — economics is about politics and its study in higher education should be as well. With this inclusion we will have the advancement of knowledge.

  7. July 1, 2013 at 8:25 am

    I appreciate your trust in “real science” but unfortunately, questioning mainstream paradigms, challenging the powers-that-be, or properly evaluating existing theories is not encouraged and supported in other fields either.

    Whether it’s John Ioannidis who pointed this out about medical research (http://www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.0020124), Peter Woit who never tires of making clear that it is problematic how string theory, without a single accurate prediction since its inception and in many cases no falsifiable predictions at at, continues to attract money and take up publication space (http://www.math.columbia.edu/~woit/wordpress/), or simply my own (more anecdotal) experience in Machine Learning and Data Mining research, where proposing new algorithmic techniques is much more valued than evaluating the efficacy of existing ones (and potentially showing that they aren’t), or finding applications for those techniques.

    This all starts, of course, with inadequate research funding, and this is where economics comes back in: if getting permanent employment in academia is exceedingly hard and the surest way consists of publishing papers that don’t challenge the status quo, then academics will do this. Which, btw, has nothing to do “petit-bourgeois and careerist” but simply with the desire for financial security in a society in which one still needs this.

    As to Mr Locke’s remark: that a research discipline has been abused for justifying power structures does not make it “not a science”. History, sociology, political science share many same problems, which are not limited to being abused, yet have been explored scientifically and continue to do so.

    • Robert Locke
      July 1, 2013 at 8:27 pm

      “As to Mr Locke’s remark: that a research discipline has been abused for justifying power structures does not make it “not a science”. History, sociology, political science share many same problems, ” Right, the issue is not whether or not research disciplines are involved in power structures but whether they are “sciences.” I assure you history is not because it deals with specificities peculiar to time and place. History is a craft, with rules of how to go about research and exposition, but it is not science. Nor is economics, despite efforts in recent time to claim otherwise. That’s my point, and that economics speaks for vested interests, which its advocates, in the guise of neo-classical economics and econometricians, as self-proclaimed truth seeking scientists, do not acknowledge.

      • July 14, 2013 at 3:46 pm

        Indeed macroeconomics is a science. My research into it has shown that it is even more scientific than what was assumed in the past, due to the model that I use having certain designed features that make it capable to covering the whole of the social system in a way that causes the various features of its functioning to be represented only once (or as nearly so as is possible to get). This means that it follows Occams Razor criterion and the result is something that one can better understand. Most models today are either over-simplifications, or are so complicated as to be unuseful for finding out about what is REALLY going on.

        My attempts to introduce this approach and the resulting model to more agust bodies in particular the Royal Society have failed–it would seem that the way our society is organized and how it adjusts automatically and by governmental influence etc., are of no interest nor concern.

        I seems to me that until we are able to properly understand how our social system (of macroeconomics) actually works, we stand no chance of getting the necessary and correct responses by government to correct the present and future messes into which our country is likely to arrive due to non-scientific fiddling by politicians.

        The model which I use requires only 6 agents or entities to play a total of 19 different roles. The represent all the possible ways that the motley of real people and organizations in our society can possibly act. This model can be seen on Wikipedia Commons Macroeconomics as: DiagFuncMacroSyst.pdf which needs some enlargement in order to read all of the flows of money, materials, services, documents etc. With one recent exception (which is unsatisfactory from this viewpoint) no other model from 1767 (Adam Smith Wealthy of Nations) includes all of his 3 factors of production and the resulting returns for use of these factors, ground-rent, wages and interest (dividends). So it is with little wonder that the various complaints to be found here have full justification.

      • July 14, 2013 at 8:35 pm

        @ Macrocompassion Post #9 I like the idea that you have 6 players – My model also 4 :- the same as is used in the Blue Book National Accounts so I can back it up with published numbers (fits like a glove) : Consumers/Government/Business/Foreigners. You can drill down to expand Business into Financial & Non Financial Business etc – is this how you get to your basic 6 ? – something like that.? In terms of ‘flows of money’ do you have the flows of money as X and the flows of prices = X + Profit to show the shortfall ? : This is my model : http://www.youtube.com/watch?v=RcpNqF5WyFg

    • davetaylor1
      July 15, 2013 at 11:43 am

      Microcompassion @ #9: “It seems to me that until we are able to properly understand how our social system (of macroeconomics) actually works, we stand no chance of getting the necessary and correct responses by government”.

      Absolutely. Governments understand no more and (due to their atypically privileged backgrounds) probably less than the rest of us. You and Damien – you looking for a macro model which expands to a micro, and Damien for a practical alternative based on honestly interpreted money – are more nearly looking in the right direction than economists busy repainting pieces of a jig-saw puzzle they can’t picture or, like Egmont refusing to rethink Keynes, claiming “the situation is hopeless but not serious”. (If he thinks that, he’s nuts). The problem, of course, is that the present chaotic theory doesn’t work in the sense that governments hope and act as if it does, when the situation of the real world is not only serious but not far off catastrophic: certainly for millions of humans and possibly for life on earth.

      So let’s pursue the number of entities/players argument by reverse engineering the evolution of the universe back to the Big Bang, where invisible energy explodes as a three-dimensional sphere in a fourth dimension of time.

      Given that as the primary axiom Egmont demands, the energy will become visible by the formation of electromagnetic waves at the discontinuity at its surface of the space being swept out. This polarisation of some of the energy permits the secondary axiom, that energy has been localised as particulate “spray”, from which, via atomic structure, molecular binding, cell formation etc we can reconstruct a coherent model of evolution not only up to our bodies with brains having four types of logic, any three of which are needed to provide the input, program and output of thought, so there are four types of thought object (things, representations, activities and procedures) as well as four types of logic, four types of specialist in the human economy supplying our ecological household needs, and likewise in the fictitious economy of money-making (chrematistics) evolved by the same type of human animal as evolved economy from ecology. What is true of all is true of any, as in any (complete) family involving men, women, girls and boys, who in a natural family have different roles as consumers, producers, distributers and experienced advisers. So this way round, everything (in the “macro” view of economics) can be reduced to 4 “players” (things) and – taken two at a time – 6 communication channels (transaction procedures) between them. A “generalised” macro view doesn’t have to be worked up from the accounts; the accounts already provide the micro view.

      What’s missing from this is the ECOLOGY as input (last year’s surplus output stored in barns) and CHREMATISTICS as monetary surplus output. (This was originally banks storing barter money like an expansion tank stores excess water in a hot water central heating system). What’s gone wrong has been localisation of about 97% of the money by capture in the “money making cycle” of printing money as IOU’s, lending these for purchasing legal entitlements to existing real assets, insuring them (originally by charging interest to cover risk) to make IOUs look safe, and defrauding the insured with junk derivatives, unfair contracts and unjust foreclosures. This all restarted with Henry VIII losing his flagship, then William of Orange joining the bankers of England in “ripping off Britain” in exchange for an easy life, ostentatious palaces and “stately homes”.

      Be encouraged, both of you: Microcompassion with your 6 player game (4 plus input and output) and Damien with your 4-player chrematistics circulating IOU money. What Egmont asserts – that “The heterodox camp has unearthed many flaws of standard economics but failed to develop an alternative that satisfies scientific standards, i.e. material and formal consistency” – simply isn’t true. What is true is that we need a Keynes able to re-educate government officials behind the scenes and a Roosevelt with the political nous to enlist the support of protesters. Mighty acorns from little acorns grow, but only where they are planted.

  8. jayarava
    July 1, 2013 at 9:38 am

    Surely what Dr X is describing is a paradigm a la Thomas Kuhn in The Structure of Scientific Revolutions. Niels Bohr said something like, the only way to change a discipline is to wait for the old guard to die. Therefore it seems to me that economics is not alone in this dilemma.

    However there are heterodox researchers and in particular heterodox economists. Though notably Steve Keen has just been squeezed out of his discipline. But what about Ha-joon Chang of Cambridge University. Part of the elite, but certainly publishing interesting and challenging views. If Dr X is not Dr Chang then maybe the two of them ought to hook up.

    • BFWR
      July 1, 2013 at 1:34 pm

      Science is really just the reductionistic counterpart to philosophy. What the world needs is a new natural philosophy….or rather a new natural version of an old one.

    • Martin Vermeer
      July 1, 2013 at 4:54 pm

      > Niels Bohr said something like, the only way to change a discipline is to wait for the old guard to die

      Max Planck

      • jayarava
        July 1, 2013 at 7:29 pm

        Of course. Thanks

    • Newtownian
      July 2, 2013 at 7:36 am

      Over the long term the paradigm shift appears to work for science but has been pointed out (neo classical) Economics behaves more like a religion or ideology. These latter as evidenced by numerous religions and cults tend to be inherently (dysfunctionally) much more resilient to change. The old soviet union didn’t by in large reform itself, rather it became complete unworkable.

      Separately paradigm shifts are often not a complete overthrow. Newtonian mechanics was not ‘overthrown’ by Young and wave theory, Maxwell and Electromagnetism, Einstein and relativity or Bohr and quantum mechanics to mention only a few proponents. Rather it proved incomplete because there was so much it could not explain. But it still has great merit and use.

      What will most likely work is some serious conceptual insights being combined with probably already existing arithmetic and models (in the broad sense) allowing some malcontents to make a lot of money reliably by ignoring standard economics and thumbing their noses at the economics academy. Arguably this already happens with the swine in the merchant banks who game the financial system. Its just a pity a few more don’t elaborate their experience into new theories e.g. of the role of financial institutions.

      • Lucy Honeychurch
        July 2, 2013 at 3:16 pm

        Newtonian’s comment makes me wish we had a ‘Like’ function on WordPress.

  9. pe
    July 1, 2013 at 3:14 pm

    I agree with the points tokugawa98 is making. Economics research may be bad, but it is a mistake to idealize science, or for that matter to assume that the methods employed by scientists are uniform across all the disciplines. Are good scientists inherently skeptical ? [Paul Nurse above]. Then why did Max Plank observe that: ‘Science advances one funeral at a time’. That comment suggests he thought scientists would stick to their views even when faced with contrary evidence. And why is there such a resistance amongst scientists to sharing their data.?

    • Paul Schächterle
      July 1, 2013 at 9:17 pm

      I guess some of the mechanisms in academia (will it hurt my reputation if I admit an error or write something that my boss does not like?) or maybe even part of human nature (vanity?) make it difficult to accept results that contradict one’s own opinion.
      I really think that unscientific tendencies in Economics are of another dimension than those in other academic disciplines. In Economics the mainstream teaches theories that are clearly and obviously false. In Economics theories are built upon elementary mathematical and logical errors. In Economics even the basics of scientific thinking and logical deduction are not understood (think of Milton Friedman’s “F-Twist”: “assumptions do not matter”).
      What is worst is that mainstream economists seem to have some sort of “mission”. Students have to learn the way an economist is supposed to think. Questions and criticisms by students are not welcome. I know this by personal experience.
      A friend of mine – with a degree in economics – told me once a story: he attended a written test and answered all the questions in the way they were expected to be answered by the professors and textbooks. But he also added to that officially “correct” answers a personal critique and his own opinion. The result: he got points subtracted for his impudent additional remarks.
      So I am not too surprised to hear stories like that of “Doctor X”.
      The quantity and severity of the flaws in Economics make it a very special part of academia and separate Economics from the other disciplines, IMHO.

  10. Lucy Honeychurch
    July 1, 2013 at 5:02 pm

    Same thing applies in real-life Finance. If you don’t make the numbers look like everything at your bank is hunkey-dorey – you’re FIRED. Sad but true, our world is still run by a confederacy of dunces. I’m really afraid that true change will require ‘A Theory of Pitchforks’ to overturn the status quo.

  11. July 1, 2013 at 8:01 pm

    Despite all the “sour grapes”, potty-mouth, and lament for economics as “science-manqué”,
    displayed above, I sense the “sound and the fury” of the CRITIQUE syndrome,and too little dedication to developing improved explanations of what makes the world tick. I’m just restating Keynes’ shattering thunderbolt, hurled at the explanatory “value” of Marx’s “dreary-out-of-date academic [critique-style of] controversializing” .
    “But if you tell me that they have discovered a clue to the economic riddle…Still I am beaten !”
    Authentic explanatory systems in any subject must ultimately start from Immanuel Kant’s principle: [With some latitude for translation issues] “Observations without a conceptual [theoretical] framework have no direction. A Theoretical framework without observations is hollow”.
    Even the most lucid and learned of critiques, such as Philip Mirowski’s MORE HEAT THAN LIGHT [from which I learned much] and cited in “TELOS & TECHNOS,The TELEOLOGY of ECONOMIC ACTIVITY & The ORIGINS of MARKETS”, left me with a feeling of: “If the neoclassical paradigm can be reformulated as a “reductio ad absurdam”,
    what do you suggest as a Kantian start-up for “discovering the clue to the economic riddle” ?
    All the great economic thinkers thought in terms of “explanation” that allowed opportunities for debate & falsification. Crackpot determinists and conspiracy theorists [e.g. The “progressives” faith in Marx’s “scientific socialism”,The missing income syndrome of Social Credit, The “energy credits as currency” schemes of Technocracy, The “Scientific Racial Anthropology” of Gobineau & Houston Stewart Chamberlain,etc.] are all “take-it-or-leave- it” manifestos offering the lethal utopias of frustrated & dangerous control freaks.

    Norman L. Roth, Toronto Canada. Please GOOGLE, [1] Norman Roth, Technos [2] Norman Roth, Origins of Markets [3] Telos & Technos, Roth

    • BFWR
      July 1, 2013 at 10:29 pm

      You’ve basically “unthought” yourself with orthodoxy. There is clearly a “fly in the ointment” somewhere and somehow….and yet your cry is…don’t change anything…at least until you can scientifically prove it…or maybe not at all.

      In the first place science, being the reductionistic counterpart to philosophy is probably an inadequate tool for discovering a true solution. Its plodding style and entire psychology is a stumbling block to ACTUALLY new thinking and instead re-inforces adherence to caution, regugitative orthodoxy and all of its historically “behind the curve” verifiability.

      Social Credit is empirically focused and based, contextually inclusive and technologically relevant all of which the mass of current theory is NOT. Finally, its predictions about the inevitable build up of debt is historically accurate both for the first great depression as well as what is now euphemistically referred to as “the great financial crisis”. Furthermore aspects of current orthodoxy like velocity theory are flawed and yet are again regurgitated over and over and over as if they are sacrosanct.

      Finally, even if one chooses not to confront the empirical data for Social Credit hiding in plain sight in the cost accounting statistics of every business, the increasing pace of technological innovation wed to profit making systems will insure the absolute need for Social Credit’s monetary and economic mechanisms….anyway. No, you say? Well which one of technological progress or profit are you going to dispense with then? The logic of both is efficiency, profit of human labor and technology of human effort and even human input.

      Economists need to break up your intellectual fallow ground. Such is way over due.

      • BFWR
        July 1, 2013 at 11:05 pm

        The truly great scientists usually come up with their breakthrough insights as a result of some gestated hunch, leap of intuition or synchronistic happenstance. It is surprising that we don’t attempt to follow THAT example instead of such an over reliance upon SUPPOSED scientific verifiability.

    • July 1, 2013 at 10:59 pm

      “All the great economic thinkers thought in terms of “explanation” that allowed opportunities for debate & falsification. ”

      Well Norman, I provided one such opportunity above, the one with the cartoon.

      I have presented these proofs countless times on this blog and invited refutation every single time. Consider yourself invited.

    • originalsandwichman
      July 1, 2013 at 11:42 pm

      “I’m just restating Keynes’ shattering thunderbolt”:

      Now I range myself with the heretics. I believe their flair and their instinct move them towards the right conclusion. But I was brought up in the citadel and I recognize its power and might. A large part of the established body of economic doctrine I cannot but accept as broadly correct. I do not doubt it. For me, therefore, it is impossible to rest satisfied until I can put my finger on the flaw in the part of the orthodox reasoning that leads to the conclusions that for various reasons seem to me to be inacceptable. I believe that I am on my way to do so. There is, I am convinced, a fatal flaw in that part of the orthodox reasoning that deals with the theory of what determines the level of effective demand and the volume of aggregate employment; the flaw being largely due to the failure of the classical doctrine to develop a satisfactory and realistic theory of the rate of interest.

      “…hurled at the explanatory ‘value” of Marx’s “dreary-out-of-date academic [critique-style of] controversializing.”

      Keynes could not have realized it at the time (because his familiarity with Marx was only second-hand) but his criticism of “the school that believes in self-adjustment” echoed the main points of Marx’s much earlier critique of “the theory of compensation as regards the workpeople displaced by machinery.” Keynes thought that the essential elements of the self-adjusting argument were “fervently accepted” by Marxists.


    • davetaylor1
      July 2, 2013 at 6:49 am

      “I sense the “sound and the fury” of the CRITIQUE syndrome, and too little dedication to developing improved explanations of what makes the world tick … ‘take-it-or-leave- it’ manifestos offering the lethal utopias of frustrated & dangerous control freaks”.

      “what do you suggest as a Kantian start-up for “discovering the clue to the economic riddle” ?

      Norman, I’ve dedicated thirty years of my mature life to developing improved explanations of what makes the world tick, but none of the answers have come from economics: they are all so much more fundamental that no-one interested in economics seems to know enough about them to debate them. And they don’t CALL FOR falsification: they are about “economics” BEING falsification, the problem being how to get back to trustworthiness and the truth, and the answer being a CHOICE of theoretical framework from a variety of them (none currently under consideration) which deliver conclusions truer in practice. To use Kant’s term, lead observation in the right “direction”.

      What I suggest for a Kantian start-up is a study of Shannon’s information science, starting with series and parallel configurations of electric circuits, the carrying of phone signals by modulation of electric currents, how switching circuits can perform conventional logic and feedback circuits carrying information representing the past, present and future can perform error-correcting logic. The fact that different ships go different places doesn’t affect the way navigation works, but if one doesn’t understands physically how such a PID servo works, one won’t understand the argument that Keynes developed Smith’s “invisible hand” (operating on “P” feedback) into a “PI” system, how entrepreneurs add the “D” when loss of profits is looming, and how financiers reconnected Keynes’s “I” the wrong way round: replacing public taxes with private interest payments.

  12. originalsandwichman
    July 1, 2013 at 11:27 pm

    But… but… according to Frances Woolley at Worthwhile Canadian Initiative, “Economics is better (in some ways) than it used to be”: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/06/economics-is-better-in-some-ways-than-it-used-to-be.html

  13. July 2, 2013 at 6:46 am

    this is an interesting thread—especially the 1st post by paul davidson. (i used to read ej, jpe, aer, r stat $ econ, etc) .i noticed in my own studies part of the issue is ‘what questions do you ask’ . i was into mathematical biology and brought in concepts from statistical physics and chaos/nonlinear dynamics theory. i was shut down except by one person (who happened to be at sfi).

    paradigms and shifts (in the group theoretic sense—eg bernoulli shifts—-ergodic theory)

  14. Egmont Kakarot-Handtke
    July 2, 2013 at 12:15 pm

    The Dr. X story is reminiscent of Joan Robinson:

    “Indeed, in the higher reaches of the profession there was something of the atmosphere of the augurs touching their noses behind the altar. Amongst themselves, they admitted it was not really like that. But their pupils took it all literally. They formed an official opinion deeply influenced by the conception of equilibrium which could be relied upon to establish itself provided that no one tried to interfere.” (Robinson, 1972, p. 3)

    Why are stories like these told and retold again? We know from history that conspiracy-theories are stupid in the best case and harmful in all others. There is no excuse in the political realm to bring these kind of arguments into circulation, much less so in a scientific discourse. As Schumpeter put it:

    “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.” (Schumpeter, 1994, p. 11)

    Yes, neoclassical economics is a failure. How can we be sure of it? Because neoclassicals themselves told us.

    “The enemies, on the other hand, have proved curiously ineffective and they have very often aimed their arrows at the wrong targets. Indeed if it is the case that today General Equilibrium Theory is in some disarray, this is largely due to the work of General Equilibrium theorists, and not to any successful assault from outside.” (Hahn, 1980, p. 127)

    Hence, neoclassicals stick to the scientific code of ‘conjecture and refutation.’ They have explicitly put forth hypotheses and followed their logic through until the final conclusion of Sonnenschein-Mantel-Debreu.

    It is well known that science is a trial-and-error process. Therefore it is quite “legitimate” to put forth and defend a “wrong” theory because we cannot know in advance whether a theory is true or false.

    The problem in economics is peculiar because we know that the standard theory as codified in the textbooks is wrong, but we had until now no alternative. Heterodoxy is since Veblen mainly occupied with debunking. There is nothing wrong with this but, obviously, from this has not emerged a convincing alternative.

    “… we may say that the long-lasting success of our categories and the omnipresence of a certain point of view is not a sign of excellence or an indication that the truth or part of the truth has at last been found. It is, rather, the indication of a failure of reason to find suitable alternatives which might be used to transcend an accidental intermediate stage of our knowledge.” (Feyerabend, 2004, p. 72)

    The provisional predominance of neoclassics in the classroom is neither due to scientific superiority nor to a conspiracy, but to a failure of reason to find a convincing alternative.

    Feyerabend, P. K. (2004). Problems of Empiricism. Cambridge: Cambridge
    University Press.

    Hahn, F. H. (1980). General Equilibrium Theory. Public Interest. Special Issue:
    The Crisis in Economic Theory, pages 123–138.

    Robinson, J. (1972). The Second Crisis of Economic Theory. American Economic
    Review, 62(1/2): 1–10. URL http://www.jstor.org/stable/1821517.

    Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford
    University Press.

    • paul davidson
      July 2, 2013 at 12:42 pm

      Egmont #25

      If you had read my textbook POST KEYNESIAN :MACROECONOMIC THEORY, 2ND EDITION you would have seen I put forth an analysis [ based on the General Theory] that not only EXPLAINS [rather than merely debunks] why mainstream theory is not applicable to the world of experience — but I also put forward a theory that is applicable to the world we live in. It can easily explain why there was a financial global collapse after the sub prime mortgage derivate market failed and why people use nominal money contracts for all market transaction and production exchanges!
      So some of us heterodox people have put forward an alternative that works to explain the real world!

      Why can’t you read instead of just complaining???

      • Egmont Kakarot-Handtke
        July 2, 2013 at 1:24 pm

        Paul #26

        I have read your publications and quoted them extensively in my working papers which are available on SSRN. Yes, heterodoxy has put forward alternatives. The trouble with regard to Post Keynesianism in particular is that it can be shown that it is formally deficient and for this reason alone does not qualify. See my recent article in Economic Analysis and Policy:

        Click to access v43_i1_06-Kakarot-Handtke.pdf

      • paul davidson
        July 2, 2013 at 1:48 pm

        I have just read your paper and feel like the 19th American sailor coming out of a moiddle east harem –when his shipmates asked him “How was it?” His response was “There was so many things to do there that I did not know where to start”

        First of ;all you talk about Post Keynesian theory but start with attacking Alfred Eichner. If you read my textbook , as you suggest you did in your response above, you would have noted that Eichner never is cited in my book. Eichner’s claim to be a Post Keynesian does not necessarily making him one — any more than Samuelson’s claim to be a “Keynesian” make Samuelson a follower of Keynes. In fact if you read my book, you would have seen that Samuelson EXPLICITLY declared that the ergodic axiom was part of his scientific analysis while Keynes’s concept of uncertainty and his criticism of Tinbergen’s method required Keynes to overthrow the ergodic axiom.

        Secondly you write “The fact that retained profit is different from zero in the real world can be taken as an empirical proof of the logically equivalent inequality of household saving and businessinvestment. Allais has definitively settled the IS-debate of the 1930s in 1993. Since then, allmodels (including IS – IM) that have been built and are still being built on the arguments of Hicks (1939, pp. 181-184), Ohlin (1937), Lutz (1938), Lerner (1938), Keynes (1973, p. 63),Kalecki (1987, p. 138), Minsky (2008, pp. 162-164) and others have to be regarded either as limiting cases or as formally deficient.”

        Again if you read my book you would note that the ISLM is not Post Keynesian and as I have indicated here and elsewhere , I convinced John Hicks to renounce the ISLM analysis as not a reflection of Keynes in an article entitled “ISLM: An Explanation ” by Hicks that I published in the JOURNAL OF POST KEYNESIAN ECONOMICS.

        Your attack seems mainly to rely on definitions to hollow out accounting concepts.

        You can define anything you want but as a sage once said “A rose by any other name will smell as sweet!

    • merijnknibbe
      July 2, 2013 at 6:59 pm


      there are in fact scores of alternatives to neo-classical economics. There is a whole field of consumer science which developed totally independent of neo-classical economics (mainly because companies needed a theory which actually enabled them to sell something: http://www.amazon.com/Consumer-Behavior-Marketing-Strategy-Mcgraw-Hill/dp/0071111778), the same is true for industrial organisation, monetary theory, macro economics and whatever. Generally, economic statistics are non-neo classical in nature, implicitly rejecting things like the loanable funds theory, the idea of one unique price level (and therewith one unique natural rate of interest) – one can go on.

      • Nathanael
        July 21, 2013 at 4:14 am

        Consumer Science is the basis of the actual theory of the firm. As opposed to the fake theory of the firm presented in conventional microeconomics, which is rotten.

    • Paul Schächterle
      July 3, 2013 at 3:29 am

      I don’t get it. Neoclassical economists teach wrong theories as if they were true. And they even require economic models to be based on their false framework. (“Micro-foundation”) And that I shall consider to be scientific “conjecture and refutation”? Where is the acknowledgement of the refutation?
      Btw. it is not only the aggregation problem (Sonnenschein-Mantel-Debreu). Neoclassical theory is riddled with surreal axioms and/or logical errors.
      Also the argument “we have no better” is just not admissible. In a criminal case you would not sentence a person proven innocent to jail just because you have no other suspect, would you?
      That reminds me of the joke of the person who searches something under a street lantern. Asked by a passer-by what he is looking for he replies: “I lost my key in the park.”. “But this is not the park”, says the passer-by, “why do you look here if you have lost the key elsewhere?” “Well,” says the man, “in the park there is no light.”

      • Robert Locke
        July 3, 2013 at 4:30 pm

        In the study of history, secondary sources are never considered to be superior to primary sources. But in this economics blog all people seem to discuss is secondary sources, (the economists and their interpretations) and not the primary sources (the economy). It won’t do to justify this emphasis on the grounds that “economics” is a science. It isn’t — its only history- so look at the primary sources, the economy, when developing interpretations.

      • July 3, 2013 at 8:06 pm

        And the mechanical basis of the exchange economy is the banking system.

        The math inherent in banking is impossible and is the ROOT of the supposedly “mysterious” problems with the economy. But you all appear to be eager to look everywhere else but at the IMPOSSIBLE MATH of banking. (and I DO NOT mean interest, I mean Principal)

        The Banking System, Itself, is the ROOT CAUSE of Money System Instability

      • July 4, 2013 at 7:33 am

        Hi Paul, If you re-do the animation you have but show the full double entry bookkeeping, you’ll see a different picture emerging : if a business takes a loan out it is different from a consumer taking a loan out. Business loans get paid out in wages etc and so people – consumers – get money to buy business goods – the price of those goods is higher than the loan – which becomes costs on the business P&L. A loan to a consumer does not re-appear in prices as it does not go into costs. – just looking at the banking system in isolation makes no sense. Put it into the whole system including prices and a clearer picture emerges the Sisyphus Equation : http://www.youtube.com/watch?v=RcpNqF5WyFg – PS your animations are loads better than mine how do you do yours ?

      • July 4, 2013 at 3:38 pm

        I think it makes total sense to examine the banking system in isolation if it is the design of the banking system that creates the situation… all by itself.

        Can you refute the simple logic and grade school math I present in this proof?


        Can you prove banks don’t operate this way?


        Thus it should be little wonder that whenever the growth of money-creation debt slows down
        even a little, people lose their homes through mathematical certainty not by any fault of their own. And every acceleration of debt-money creation must be followed by a crash and a wave of defaults.

        The problem is created simply by the design of the banking system that creates money as one debt and then lends that created money deposited as savings a second time.

        P < 2P

      • BFWR
        July 4, 2013 at 7:21 pm

        That’s because the REAL problem is not the lending or the banking system, but the scarcity of INDIVIDUAL incomes in comparison to prices. Consequently the system can only “remain in the air” so long as you continually inject debt into it, but INDIVIDUAL incomes never equate with prices no matter how much you inject…because the act of production itself creates the scarcity ratio of total individual incomes to total prices. Hence Damien’s Sisyphus effect,
        C. H. Douglas’s A + B theorem and my P = In < Pr (The act of production itself equals less total individual incomes than total prices.) These latter 3 ways of expressing the underlying problem are a priori to "twice lent money" and are the actual cause of the problem and anything that occurs subsequently….is an effect.

      • July 4, 2013 at 3:47 pm

        In your animation about the Sisyphus Equation you manufacture 5 cars at one Euro apiece making total costs 5 Euros. You then give us the scenario where two of these cars are “given away” for worthless “foreigner” debt obligations. In this scenario the costs billed for the 5 cars is only 3 Euros and yet the purchasing power provided the customers is still 5 Euros. Please explain how you have now manufactured the same 5 cars for 3 Euros that previously cost 5 and end up with 5 Euros in the customer’s pockets. Giving things away has never reduced my costs for producing them and 3 ≠ 5.

      • July 4, 2013 at 11:03 pm

        @ Paul Grignon, Hi Paul,
        Re “In this scenario the costs billed for the 5 cars is only 3 Euros” no the cost for the 3 remaining cars in the domestic market is 3 Euros … the cost for all 5 cars is 5 Euros.
        “and yet the purchasing power provided the customers is still 5 Euros” – yes because they got paid 5 Euros to make 5 cars so they have 5 Euros to spend but they can spend it on only the remaining 3 non-exported cars.
        “Giving things away has never reduced my costs for producing them” no, in accountancy there is the concept of ‘Cost of Goods Sold’ – the 3 cars sold domestically cost 3 Euros, the Cost of goods sold” for theses is 3 Euros and the sale price 3.6 so the book a real profit of 0.6 Euro for these 3 cars.
        The 2 cars they Net Export, they have a Cost of sale of 2 Euro, they ‘sell’ them for 2.4 Euro and they post a profit of 0.4 Euro but, as it is a Net Export, they will never be paid this 2.4 Euro so it is a false profit on their P&L of 0.4 and a false asset in their debtors of 2.4

      • July 5, 2013 at 3:57 pm

        Then how did the domestic customers acquire 5 Euros of purchasing power? By your arithmetic it can only have come from the “uncollectible debt” of the foreigners.

      • July 8, 2013 at 9:32 am

        @ Paul Grignon re #39 “how did the domestic customers acquire 5 Euros of purchasing power?” – they were paid 5 Euros in wages to make 5 cars, 2 of which were exported so they have 3 cars left which they can afford to buy at a profit to the business. It’s the false accounting entry of showing money owed from foreigners for the 2 Net exported cars they don’t want them to pay that I want to focus on to use to our advantage

        @ Paul Grignon re your link in #40
        There are a lot of words in your link, if you replace
        these with small balance sheets showing
        Business balance sheets
        Bank balance sheets and debit and credit your transactions
        I think you’ll find that ‘Principal Debt’ and the like don’t really
        matter much.

      • July 5, 2013 at 4:05 pm

        Are you going to reply to my challenge?

        Can you refute the simple logic and grade school math I present in this proof?
        Can you prove banks don’t operate this way?

        I notice whoever runs this blog initially approved my comment in which I challenged Edward Fullbrook to refute the same argument. But now someone has REMOVED IT in an act of outright censorship.

  15. BFWR
    July 2, 2013 at 4:29 pm

    Sonnenschein-Mantel-Debreu and the ergodic axiom are only problems because man craves and clings to certainty, and also gives in to apparencies instead of looking for deeper causes. This is orthodoxy and refusal to remain in present time in order to honestly perceive… defined. The real problems with economics are philosophic not scientific…and that in no way is any discouragement to science whatsoever, but rather only recognizing that philosophy is actually higher in the holistic hierarchy of human experience than science….and consequently more inclusive and necessary….if one wants to understand.

    This is precisely why amongst all of this debate I chose Social Credit because it is “the policy of a philosophy” and yet deals with real systemic problems on a continuing basis while making its deepest intentions the freedom of the individual.

  16. originalsandwichman
    July 2, 2013 at 6:07 pm

    Here’s how the Diggers explained it, back in 1649:

    Even so now, Professors do rest upon the bare observation of Forms and Customs, and pretend to the Spirit; and as it was then, so it is now: All places stink with the abomination of Self-seeking Teachers and Rulers: For do not I see that every one Preacheth for money, Counsels for money, and fights for money to maintain particular Interests? And none of these three that pretend to give liberty to the Creation, do give liberty to the Creation; neither can they, for they are enemies to universal liberty; So that the earth stinks with their Hypocrisie, Covetousness, Envie, sottish Ignorance, and Pride.

    • BFWR
      July 2, 2013 at 6:32 pm

      Ah, indeed. There is “nothing new under the sun” in economics….except perhaps “the policy of a philosophy” whose strongest and most basic intention is the freedom of the individual.

  17. July 2, 2013 at 9:06 pm

    You know the Henry Ford thing : “If you always do what you’ve always done, you’ll always get what you’ve always got” well universities are medieval institutions designed to produce works of intricate nonsense – Well argued nonsense, beautifully argued nonsense, impeccably referenced from prior sources nonsense, peer reviewed nonsense… but none the less utter nonsense, so it is not much of a surprise to find that these same institutions are still producing exactly what they were well designed to produce.
    Plan B on Economics try this : http://www.youtube.com/watch?v=RcpNqF5WyFg – This was not created in a University.

    • July 3, 2013 at 12:16 am

      One of my favorite movies that shows the pretentiousness, hypocrisy, social Darwinism, sniping, treachery, scholar despotism, hubris and just plain fraud of “Western” capitalist driven academia is Educating Rita. The old joke was that ” academic politics are so vicious because the stakes are so small” has some truth to it yet not. But because of “opportunity costs”, what is lost for the students and society as a whole through incompetence, sycophancy, toadying, ideological cloning and worse on the research, pedagogy and administration ends of academia, is not only direct costs, but there is all that is lost because the best qualified and motivated were not hired and allowed to do what they do.

      Go to any conference whether “mainstream” or “heterodox” it is the same stuff: posturing, networking, idol worship, gotcha and one-up, single-issues, turfs and turf protection, carving out some academic market niche and the lot. It is the difference between those who define themselves by their academic titles and niches versus those who define themselves in terms of their core values that lead them to do economics among other things. It is like the difference between a “Marxian Scholar” and a Marxist.

      Here is an exercise I do in class to illustrate both the “rigor” and potential “mortis” in the uses and misuses of math in economics. This illustrates how, if I can get you right off the bat to accept my “First Principles” (e.g. see Krugman and Wells Economics) and get you to accept or stipulate these as “universal axioms” that are self-evidence and for which no empirical support is necessary, if I can get you to step inside the box or go down the neoclassical/neoliberal rabbit hole, I got you.

      Here is an exercise I do in class:

      1. Have three different students pick three different single-digit integers 0 to 9 (X1, X2, X3) and write down the numbers in order they are given by three different persons e.g. 1-2-3

      2. now reverse them X3 X2 X1 or 321

      3. Where the three-digit numver X1 X2 X3 > X3 X2 X1 subtract the smaller three-digit number from the larger; 321 – 123 = abc

      4. X1 X2 X3 – X3 X2 X1 = integers a b c

      5. Now add integers a + b + c = Y

      You have already written the number 18 on a sheet of paper before the exercise;

      As them what they get for Y when they have plugged actual numbers into this exercise (but you have not yet shown them this proof but you have already written the number 18 which you show them when they come up with that number. Then ask them why? They will maybe say try another 3 numbers and you can do it and show it is again 18 or always 18


      1 X1 cannot equal X2 cannot equal X3 (must be three different single-digit integers)

      2. Format X1 X2 X3 – X3 X2 X1 where X1 > X3

      3. X1 X2 X3 – X3 X2 X1 = a b c

      4. a + b + c = Y

      Since X1 > X3 then c = X3 – X1 = X3 + 10 – X1

      Then b = X2 -1 – X2 = X2 – 1 + 10 – X2

      Then a = X1 -1 – X3

      Then Y = a + b + c = X1 – 1 – X3 + X2 -1 + 10 – X2 + X3 + 10 – X1 = 18

      Next I ask what is the lesson learned?

      A there is no magic only illusion and that if I can get you to play my game, step inside my paradigm, accept my core assumptions and rules of my game uncritically and as axiomatic, then I got you in terms of luring you inside my game and paradigm. And that is how what sometimes passes for “education” works. It is more indoctrination not education which is the opening of the mind to possibilities (but then one must know them, how many of our neoclassical “colleagues” know the “Heterodox world” as well as many “Heterodoxers” know and even teach Neoclassical economics which I also teach as part of the mainstream and body of economics that must be taught and economists know?)

      • BFWR
        July 3, 2013 at 1:14 am

        Yes, the open and receptive mind. With a few exceptions, the truly disturbing thing about academia is that the ideas and options they would ever even give thought to are all so derivative that actual change…is a complete impossibility.

        Economic and financial theory are both so ingrained, so regurgitative and consequently so banal that there is no ACTUAL thinking going on there….AT ALL. The best thing economists and financiers could do would be to go to some zen monastery and gaze at some walls for 6 months or a decade until they were in present time enough to understand….that they haven’t been there in more than a tenuous fashion since about the age of 2….and then apply that insight to their economic thinking.

  18. Egmont Kakarot-Handtke
    July 3, 2013 at 10:24 am

    Paul Schächterle #31

    Here is the acknowledgment:

    “… theorists all over the world have become aware that anything based on this mock-up is unlikely to fly, since it neglects some crucial aspects of the world, the recognition of which will force some drastic re-designing.” (Hahn, 1981, p. 1036)

    This acknowledgment, however, does not help much:

    “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, 1998, p. 703)

    There is no way around it, what is needed is a convincing alternative.

    Heterodoxy makes a good and indispensable job at debunking. However, there are two forms of debunking:
    (a) debunking a theory
    (b) debunking a person or a group.

    We certainly agree that (b) is inadmissible (and pointless) in a scientific discourse. With conspiracy-theories and moralizing (post #33, #35 and others) heterodoxy debunks itself.

    merijnknibbe # 30

    Theory as I understand it entails the ambition to explain how the economy works including all phenomena like price, real wage, distribution, employment, growth, depression, inflation/deflation, financial meltdown, etc. In this sense we speak of Classical, Marxian, Walrasian or Keynesian theory. To explain correctly why the consumer buys strawberry yogurt instead of raspberry yogurt is certainly desirable but no alternative to neoclassical theory. A heap of correct partial models is not yet a theory.

    Neoclassics has run its course and that is the question our mystery-man Dr. X now has to answer:

    “The most intellectually exciting question of our subject remains: is it true that the pursuit of private interest produces not chaos but coherence, and if so, how is it done?” (Hahn, 1984, p. 102)

    • BFWR
      July 3, 2013 at 5:17 pm


      I’m in agreement with your #38 post. However, what we require is a grand theoretical AND philosophical synthesis. Economic theory will always be incomplete until it gives due and holistic consideration…to Man, that is the individual, himself. This is why current theoretics are so oppressive and inadequate. Homo economicus is an evolutionary backwater no different than is Creationism. Science, albeit a wonderful and necessary tool is an inadequate philosophy. Economics is Humanity’s most compartmentalized, alienated, abstract and hence most inadequately integrated discipline….from the human point of view.

      Man experiences himself and the world from a SELF conscious point of view. There is no avoiding, ignoring or abstracting out of this fact….without dire consequences. And this is why we MUST integrate the NATURALIZED ideas, purposes and experiences of Man’s religions into a new NATURAL philosophy…..and apply the lessons learned from that…to economic POLICY. In other words our thinking and our actions must not only be holistic they must actually be aligned with each other. This is what “the policy of a philosophy” actually would do.

  19. Paul Schächterle
    July 3, 2013 at 11:11 am

    A recognition by single, critical and open minded researchers does not help as long as the mainstream continues as if nothing happened. Which is exactly what is going on. Neoclassical theory is still – in this very moment – taught as if it were true in universities. That is outrageous and unscientific. And I see no fault in calling it so.
    And the public needs to know that all those recommendations by mainstream economist have no valid theoretical foundation and are therefore nothing more than political punditry.

    • Egmont Kakarot-Handtke
      July 3, 2013 at 4:43 pm

      Paul Schächterle #40

      I completely agree with you, neoclassical economics has no mandate to speak in the name of science. As Stigum put it:

      “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.” (1991, p. 30)

      My point is, that heterodoxy too lacks the true theory. What would you think of an astrophysicist who tells the world that astrology is “pure shit” and nothing else?

      Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic
      Method in Economics and Econometrics. Cambridge, MA: MIT Press.

      • Paul Schächterle
        July 3, 2013 at 5:04 pm

        I agree that we need a better model of the economy to understand it more fully. But from the errors in neoclassical economics we can already learn in some cases.
        E.g. we can deduce that if a lot of workers supply more labour as the wagerate falls, because they need more hours to earn the same income – which is of course the opposite of what neoclassical theory predicts –, we probably need some sort of stabilisation in the form of minimum wage legislation and/or social security.
        If we know that the comparative advantage is only relevant if there is no unemployment, we can deduce that international trade may be not so beneficial if there is unemployment.
        And the like, and the like.
        The fact that there is no “rigorous” alternative model does not mean that we can’t say anything about economic relations.
        To say it with a Keynes’ quip:
        “It is better to be vaguely right that precisely wrong.”

      • paul davidson
        July 3, 2013 at 5:12 pm

        Keyes wrote that except for natural resources and clinmate affected industries, conmparative advantage was irrelevant — since the same productive technique can be used anywhere in the world !

      • paul davidson
        July 3, 2013 at 5:12 pm

        Keyes wrote that except for natural resources and climate affected industries, conmparative advantage was irrelevant — since the same productive technique can be used anywhere in the world !

      • paul davidson
        July 3, 2013 at 5:22 pm

        there are three axioms of neoclassica theory that Keynes specifically rejected — namely the (1) ergodic axiom, (2) the neutrality of money axiom, and (3) the gross substitution axiom [[e.g., between liquid financial assets and nonliquid real capital assetd.].

        Once these three axioms are dropped one can still assume that households behave in what they think is their best interests and enterprises believe that they are making the most profits possible when they enter into production and exchange contracts. And in a world where money contracts are the main source of organizing all market production and exchange transactions — both spot and forward– then the demand for liquidity is part of people’s and firms’ needs to maximize their incomes and protect their self-interests..

        This axiomatic approach can explain economic actions in the real world in which we live!!

  20. sergio
    July 3, 2013 at 7:00 pm

    Natural resources are irrelevant too. Look at Japan.

  21. Egmont Kakarot-Handtke
    July 3, 2013 at 10:54 pm

    Paul Schächterle #43

    Paul Davidson #44, #45, #46 and #29

    What a coincidence! You sum up: To say it with a Keynes’ quip: “It is better to be vaguely right that precisely wrong.” In #26 I referred Paul Davidson to a paper of mine which starts on p. 96 with the quote: “For Keynes as for Post Keynesians the guiding motto is ‘it is better to be roughly right than precisely wrong!’ (Davidson, 1984, p. 574).” The title of the paper is: Why Post Keynesianism is Not Yet a Science.

    Let us start with a point that is beyond the slightest doubt. Keynes’s formal groundwork consisted in the main of two equations, i.e. Y=C+I, S=Y-C (1973, p. 63). From this follows immediately I=S, and later the multiplier.

    The first question is: Where is profit? How can Keynes present a formalization of the economy we happen to live in without mentioning profit? Keynes, of course, was fully aware that profit is the pivotal magnitude in the market system and he has defined on p. 23 that total income is the sum of factor costs and profit. The problem is that this definition does not harmonize with the formal groundwork above. Keynes knew this.

    “His [Keynes’s] 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 und Bezemer, 2010, pp. 12-13, 16)

    My paper is a formal demonstration that the correct relation reads Q:=I-S+Yd, i.e. total monetary profit in period t is given by the difference of business sector’s investment expenditures and household sector’s monetary saving plus distributed profits of the business sector. This implies that Keynes’s I=S or I:=S or the ex ante/ex post rationalization are untenable.

    In sum: Keynes profit theory is wrong and because of this the investment-equals-saving proposition is false. Now, there is no need to go any further, because

    “Even if we cannot prove a theory or model is true, at the very minimum to be true it must be logically consistent.” (Boland, 2003, p. 24).

    The General Theory is inconsistent and Keynes’s intellectual heirs never rectified it. Therefore, neither original Keynesianism nor its modern reincarnations or bastardizations can be accepted as successor to neoclassics which has debunked itself recently.

    How does Davidson comment this fatal situation in #29? “You can define anything you want but as a sage once said ‘A rose by any other name will smell as sweet!’”

    Economics could be a real science if economists were real scientists.

    Boland, L. A. (2003). The Foundations of Economic Method. A Popperian Perspective.
    London, New York, NY: Routledge, 2nd edition.

    Davidson, P. (1984). Reviving Keynes’s Revolution. Journal of Post Keynesian Economics, 6(4): 561–575. URL http://www.jstor.org/stable/4537848.

    Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.

    Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and
    Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34.
    URL http://mpra.ub.uni-muenchen.de/20557/.

    • July 4, 2013 at 7:18 am

      Hi Egmont, The Profit Equation is solved in the Sisyphus Equation :
      Retained Profit = Business Fixed Assets (inc Stock) + Net Debt of (Consumers + Gov + Foreigners) – http://www.youtube.com/watch?v=RcpNqF5WyFg

      The S=I formulae uses linguistic tricks by getting people to think that S – Savings – money people have in my savings account (this is only a small part of the S in the formula) the S is actually the “Bottom half a business Balance Sheets”; the I “the Top of Business Balance Sheets” so all S=I says is that Balance Sheets Balance

      • Egmont Kakarot-Handtke
        July 4, 2013 at 3:01 pm

        Damien Mearns #51

        From the profit equation in #50 follows for retained profit Qre:=I-S, i.e. retained profit is in the most elementary case equal to the difference of business sector’s investment expenditures and household sector’s saving. This relationship is known since (Allais, 1993, p. 69). Retained profit is a difference of flows and changes a stock. In your equation you have a change of stock on the left hand side and stocks on the right hand side, that is, both sides are incommensurable. Therefore it is formally inadmissible to apply the equal sign.

        In order to arrive from retained profit at a stock you have to carry out a numerical integration first.

        Hope I could help.

        Allais, M. (1993). Les Fondements Comptable de la Macro-Économie. Paris: Presses Universitaires de France, 2nd edition.

  22. July 4, 2013 at 10:45 pm

    Hi Egmont,
    Re : “retained profit is in the most elementary case equal to the difference of business sector’s investment expenditures and household sector’s saving” – why go basic ? – that just complicates things. The full ‘complex’ thing only needs to add on the Gov, Foreigners & Business Fixed Assets – this might be too much for ‘Les Fondements Comptable de la Macro-Économie’ in the French Universities, but us lot over here with maths O levels can cope with equations that have 5 items in them !- Surely its so much more ‘elementary’ to see the whole picture ? – It does not make it easier to show half a balance sheet.

    re : “In your equation you have a change of stock on the left hand side and stocks on the right hand side” – No This equation can be read as Cumulative – Retained Profit to Date, Total debt as at… etc or as a ‘flow’ – change in a period – both sides need to be talking about the same thing though.
    No You don’t “need to carry out numerical integration”… to work out retained profit other than basic addition :
    – References National Accounts (Blue Book) any country, any year.
    http://www.youtube.com/watch?v=RcpNqF5WyFg – it’s basic bookkeeping

  23. davetaylor1
    July 5, 2013 at 11:38 am

    While Paul Nurse’s summary of the Royal Society’s Locke-Hume era scientific method is admirably succinct, if everyone “took nobody’s word for it”, nothing would get done. And why should anyone believe the evidence even of their own eyes? This leads paradoxically to the “scientific” Economic tradition of Laissez Faire and the “scientific” democracy of Representative Governments: both, in the language of this blog, “autistic”; both, in a phrase made famous by Mrs Thatcher, “economical with the truth”.

    The previous Christian tradition had been just as suspicious of taking any One’s word for anything going against Everyone’s experience of traditions thought to be based on God’s word, but its suspicion of the motives of dissidents led to ad hominem Inquisition of discoverers like Galileo as well as a discipline of self-correction via the method of confession, reparation and starting again. Humean academic administrators now sideline would-be innovators rather than imprison them. However, they have also sidelined the discipline of self-correction to the extent of being afraid to change their minds about the nature of science, and so have failed to recognise Heaviside’s electric circuit dynamics and Shannon’s discovery of logic circuits, information communication systems and error-correcting logics as having created a new branch of Science as well as incredibly fruitful technology. Arguably, this 1950’s Science of Information Systems (with its topological mathematics) is far more relevant to Human Economics than was 1850’s Darwinian Physics, though given the traditions of the Royal Society’s scientific method I don’t expect anyone here to accept that “rational, consistent and objective” argument needs also to be logically “complete”(as in “the truth, the WHOLE truth and nothing but the truth”).

    • Robert Locke
      July 5, 2013 at 1:29 pm

      I appreciate your point, Dave. I would recommend that readers of this blog go back and read Wolfgang Drechsler’s article in the RWER (2011, issue 56), too: “Understanding the problems of mathematical economics: A “continental” perspective.”

  24. Egmont Kakarot-Handtke
    July 5, 2013 at 5:24 pm

    Robert Locke #58

    Myth, well told, is still the most convincing way to explain how the world and humankind came to be in their present form. To recall, Zeus was the god of sky and thunder. He oversaw the universe, assigned the various gods their roles, and was known for his erotic escapades. Zeus was emotional, spontaneous and had a lot of trouble with other gods, goddesses and humans. At Prometheus, for example, he was angry for three things: being tricked on sacrifices, stealing fire for man, and for refusing to tell him which of his children would dethrone him. To handle his problems, Zeus regularly fell back to chicanery, force and violence (for details see Wikipedia). Purified from all religious connotations this is the stuff soap-operas are made of until today. Let us call this the yellow-press model of the world.

    The ancient Greeks regarded myths as ‘true stories’ and distinguished them from fables as ‘false stories’. Xenophanes made his contemporaries aware that their ‘true stories’ were what is now called a projection (Popper, 1994, p. 39).

    With this, the problem of demarcation arose for the first time. And it was easily solved. The Pre-Socratics rejected any mythological explanations of the world because they saw that everything could be explained by the actions of gods which meant on closer inspection: nothing. This methodological insight set science on its track.

    Popper, for one, put the demarcation criterion to work. He rejected psychoanalysis because it could explain everything even why it did not work as intended. He rejected Marxism because it could explain post factum why the Revolution happened in the less advanced country instead in the most advanced, which should have happened according to Marx’s best-known prediction.

    It might seem that the original demarcation is a matter of history. This is not so. When Dawkins refuses to discuss with the creationists, we are back at the fundamental methodological decision that constituted science. Demarcation is a question that reappears continuously in new settings.

    Economics faces the following alternative. If it wants to be accepted as a science it has to stick to the rules. The rules are quite simple: material and logical consistency (Klant, 1994, p. 31). No excuses (complexity, Duhem-Quine, etcetera). If economics cannot deliver on principle, as Robert Locke maintains, it has to join the Geisteswissenschaften and try its luck with Verstehen (see Drechsler’s article). Verstehen, however, cannot lead to much more than to a yellow-press model of the world. People like this kind of stuff, but that’s not science.

    Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT:
    Edward Elgar.

    Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and
    Rationality. London, New York, NY: Routledge.

    • BFWR
      July 5, 2013 at 7:12 pm

      Economics will never be even a soft a science until it confronts the empirical monetary realities underlying its most basic actions, namely individuals purchasing products and services by liquidating prices with their incomes. If there is an inherent and continual scarcity of total individual incomes in ratio to total prices, and I assert this is the case, then the economy and production itself is fundamentally unstable and requires fixing. By fixing I do not mean any kind of palliation, “can kicking” or “foot dragging” strategy and I particularly do not mean any distraction from or non-confrontation of this most basic, actual, powerful and consequential reality.

      People REQUIRE a supplement to their incomes, GIVEN to them in a way that does not immediately re-create the scarcity of incomes to prices which again is the inherent and continual problem to be solved.

      This is NECESSARY if we want to have free market reality instead of just free market theory. No one’s self interested agenda, dominant position of power or opinion be it erudite or otherwise has any bearing on this necessity.

      Confront the actual reality. Confront the actual solution. Then act in the only way that can actually resolve the problem. GIVE, emphasis GIVE, not loan the individual a supplementary income….and then let he/she spend it into the economy. Then we will have an economy that will be able to stably fly because its most basic problem has been resolved. No more delays. No more distractions. No more non-confrontations. No more domination by various and sundry powerful entities. Do it. Do it now. And do not think that it can or should be delayed. Your own progeny’s existence may very well depend upon the courage and honesty such action requires. Surely they deserve your best effort.

  25. sergio
    July 5, 2013 at 7:35 pm

    Lets compare economy with one of thousands human activities – making a cake.
    For example there is a book with recipes of different cakes, with numerous tips and advice. Many nice photos.This book will help you to make delicious cake of your personal taste.
    And suppose there is more scientific approach to “how to make a cake”. And there is a scientific textbook “Cake: introductory (or advanced) course” This textbook teaches you how make “an efficient cake”. The textbook has theories explaining relation between quality of ingredients, speed of mixing, temperature of oven, etc. Numerous graphs and equations to support that efficient cake is the best one. Who cares if it is delicious or not.
    So the second book is science because its approach is scientific because of mathematics.
    Which cake would you enjoy, “scientifically efficient” or just delicious?
    Obviously, scientific approach to making a cake is a nonsense. Economy is just a cake.

  26. davetaylor1
    July 6, 2013 at 12:36 pm

    Egmont, in view of this blog’s title, I was tempted to describe your #59 as beautifully written “crap”, but I’m indebted to you for the Popper reference, which explains why, and your para 3 on the significance of the pre-Socratic methodological decision, which is certainly not “crap”, although Dawkins’ Humean interpretation of it is. (Cf. Bacon’s version: “Knowing God is not enough, since He asked us to love our neighbours; we ALSO need more KNOW-HOW to help us do so”. Consequences matter in methodological decisions).

    Historically, science clearly already existed by the time of Aristotle. Not so obviously, it already existed by the time of Plato, who was a different kind of scientist with a different literary style – the intuitive generator of the hypotheses, the asker of questions – who is cut out of the picture by Popper’s [1933] demarcation of [the activity of scientists] as “falsification”. By the sound of his [1994] “frameworks are a myth”, Descartes’ coordinate systems, Kant’s type of category, Poincare’s [mathematical] symbols (“hooks to hang ideas on”) and Shannon’s bits of information [capacity] and their systematic encoding are (despite DNA decoding) still being glossed over as “unscientific”.

    What is a myth is that logic is constituted by its rules and people by their behaviour. They are not. They are demonstrably constituted by dynamic logic and memory circuits physically interconnected by an architectural framework of communications channels, via which different rules and behaviour (in science: observation, classification, verification and evaluation) are manifest by individuals sequentially using different parts of the brain, though habitually using their best parts to the neglect of others: hence the development of specialisation in [scientific] communities and the fear of the Left by the Right – i.e. of far-seeing [mature] intuition by rationalist language-manipulators.

    Kuhn and Lakatos both saw further than verification-inverting Popper. The one saw there are revolutionary as well as normal scientists; the other that science works not by falsifying theories but by extending understanding of the context – with revolutionary change needed when the dominant theory ceases to extend that understanding.

    Such a change was made possible by the reinterpretation of Russell’s logical types in Algol68, implying Complex Truth and the four levels of material (MELD) and four phases in the logical process of science (DREI(c)) recognised in Bhaskar [1993]. The revolutionary change is not of the facts of the case, but of their interpretation.

    Eonomics, then, doesn’t face a simple alternative. It has to grasp that the interpretation of logic and its material has changed, i.e from rules to circuitry and from meanings to indexes and information encodings. It thus needs to “scrap the lot and start again”, reinterpreting the facts with this new, deeper understanding of their logical context. It also has two communication problems. Baconian (as against Humean) science is intended to be “applied”, with the “engineer” [in a quote I have used before] needing to understand the language both of “philosophers” and “working men”. But few economists or their managerial clientele understand science, so the only way of communicating with them is likely to be by “stories” they CAN understand. Two stories: one to re-educate economists in philosophical choice, elementary mathematics and the state of multi-level science; the other to re-educate governments in the “know-how” of control, i.e. the choice between promoting information-based self-control of logical errors and legal enforcement of error-prone and even mischievous policies.

  27. PTGE
    July 6, 2013 at 7:15 pm

    Sonnenschein-Mantel-Debreu assumes that economists have discovered the most basic destabilizing factor for the economy. The only problem is….they haven’t. The economy/productive system/production itself is radically unstable. It requires a change, that is, an addition to the consumer paradigms of loan ONLY and of financing for production ONLY. These additions not only would make the economy workable in an ongoing fashion they would in fact transform the system itself. This only goes to show that the real problem with economics and finance is….their difficulties in recognizing the necessity of their own transformation….and transcendence of their current limited paradigms.

  28. Robert Locke
    July 7, 2013 at 12:28 pm

    As an historian, I frequently find myself ill at ease when dealing with economists and social scientists commenting on this blog. Let me state my reason as an historical problem. In RWER, issue 56, 2011, Drechsler writes

    “I would like to focus here on that particularly German tradition which we can call understanding-oriented (verstehensorientiert) or, more professionally and contemporarily, hermeneutical. In economics and the social sciences, this approach is part of the German Historical School of Economics (GHS), especially the younger (headed by Gustav von Schmoller). … The GHS dominated economics in Germany and well beyond for the last few decades of the 19th and the first one or two of the 20th centuries, both academically and, since the 1890s, also in policy. In 1897, Gustav von Schmoller served as Rector of the University of Berlin, then arguably the best university in existence. In his inaugural address, he narrated the story of how the GHS has become standard (and textbook) economics, conscious of his school’s accomplishments, but in hindsight, we know that these words were almost the epitaph of the GHS.”

    In 1965 Stigler wrote:

    “’Whereas in 1892-93, forty percent of the references cited in American economics journals were in foreign languages and half of these in German, total foreign language citations have fallen to less than four percent in recent times and German has almost vanished as a foreign language from American economics.” Stigler went on: “If references to Schmoller are now rare, references to differentials and matrices have made some sort of compensation.” The transformation of the content of economics explains the dramatic decline in German influence; econometricians found little inspiration in the publications of the historical school. (Quoted in Locke, RWER 64)

    These are two historical statements, that is, they are specific to time and place. My problem, as an historian, is to explain, how the transformation they describe can be explained within the timeframe.

    First of all, in this task I don’t get much help from economists and social scientists; they are “ideas” people, who wear seven league boots that avoid historical contexts. Take the usual “idea” that social scientists rely upon, that of Kuhn’s paradigm shift.
    “A scientific revolution occurs, according to Kuhn, when scientists encounter anomalies that cannot be explained by the universally accepted paradigm within which scientific progress has thereto been made.” (Wikipedia) Kuhn’s view, is not simply the current theory, but the entire worldview in which it exists, and all of the implications which come with it. There are anomalies for all paradigms, Kuhn maintained, that are brushed away as acceptable levels of error, or simply ignored and not dealt with… When enough significant anomalies have accrued against a current paradigm, the scientific discipline is thrown into a state of crisis, according Kuhn. During this crisis, new ideas, perhaps ones previously discarded, are tried. Eventually a new paradigm is formed, which gains its own new followers, and an intellectual “battle” takes place between the followers of the new paradigm and the hold-outs of the old paradigm.”
    In this case would the paradigm shift be the GHS being replaced by the neoclassical paradigm? It’s an odd argument, quite anachronistic, because both explanations co-existed in the 19th century, although their rate of acceptance differed according to place (Germany & USA), which for historical argument is a very important point, but for science not.
    Let’s leave aside the subject of whether neo-classical economics is a scientific paradigm (which I don’t think it is, its appearance and disappearance is just history) Let’s also assume that the GHS was a paradigm (at least in Germany), could its disappearance after WWII be explained by the accumulation of anomalies that led to replacing it with the new paradigm Stigler talks about.
    Seligman stated the leading principles of the GHS in 1925:
    1. It discards the exclusive use of the deductive method, and stresses the necessity of historical and statistical treatment. 2.It denies the existence of immutable laws in economics, calling attention to the interdependence of theories and institutions, and showing that different epochs or countries require different systems. 3. It disclaims belief in the beneficence of the
    absolute laissez-faire system; it maintains the close interrelation of law, ethics and
    economics; and it refuses to acknowledge the adequacy of a scientific explanation,
    based on the assumption of self-interest as the sole regulator of economic action.
    (Seligman 1925, 15-16 quoted in Drechsler)

    Granted that for neoclassical economists the leading principles of the GHS are anomalies (deviations from the rules of neo-classical economics) but for people working in the GHS tradition neoclassical economics is full of anomalies as well because it deviates from the GHS leading principles. Let’s call it an intellectual standoff.

    But what historians want to know is how it came about that between 1900-1965 neoclassical economics became the common rule. And, after decades of studying educational systems in Germany, Europe, and the USA I’m convinced that the transition from GHS to neo-classical economics had little to do with the power of ideas and scientific paradigms, but it had a lot to do within the historical period covered, with politics, power, and the outcomes of struggles for national supremacy.

    Germans did not give up GHS because people there recognized the superiority of neoclassical economics. The thirty years war of the 20th century that left Germany a crushed nation, its universities closed (not reopened until 1950) and its intellectual heritage questioned as the source of the German catastrophe, explains so much more. And the victorious Americans, who did not defeat Germany in WWII (the Russians did that) but were in a unique historical situation in 1945 to organize the free world, accomplished the rest. Economists need to learn more about this “rest.,” and that historical situations are not only unique but perforce do not last.

    • Egmont Kakarot-Handtke
      July 8, 2013 at 11:06 am

      Robert Locke #68 (the reference numbers are, unfortunately, not stable)

      As a historian and defender of the idiographic method you actually face this trouble:

      “… the Dutch historian Peter Geyl … wrote a brilliant book about Napoleon, amounting to the result that there are a dozen or so different interpretations — we may safely say, models — of Napoleon’s character and career within academic history, all based upon “fact” (the Napoleonic period happens to be one of the best documented) and all flatly contradicting each other. Roughly speaking, they range from Napoleon as the brutal tyrant and egoistic enemy of human freedom to Napoleon the wise planer of a unified Europe; …” (von Bertalanffy, 1969, pp. 110-111)

      As I put it in #62: “Verstehen [understanding] cannot lead to much more than to a yellow-press model of the world.”

      At this point we can borrow something really helpful from the natural sciences.

      The flying autumn leaf and the falling canon ball both belong to the physical realm. The physicists completely ignore the leaf. Why? You can watch as many leafs as you please but you will at best arrive at the “historical law” that all leafs sooner or latter fall to the ground. That’s not wrong, of course. It is realistic, it is inductive, it has been tested and we all can agree upon it. Very complex, hmhm, we need further research. We know that Galileo found the law of the falling bodies by throwing canon balls from the tower of Pisa (he may actually have performed this as a pure thought experiment).

      By focusing on the rather boring canon ball and ignoring the wonderful trajectory of the red leaf in the autumn sunshine Galileo came closer to reality than the realists who never forget to bemoan the poverty of quantities and to praise the richness of qualities. Ignorance/Modesty is a good research strategy. This does not entail that one denies the existence of flying autumn leafs, it entails only that one cannot expect to learn much from them.

      Historians who claim that, on principle, one cannot find something like laws in the economy may be right. We cannot know in advance. What we know is that there are no behavioral laws like utility maximization. But this does not exclude other types that can be discovered. G. B. Shaw may have had historians at the back of his mind when he quipped: “People who say it cannot be done should not interrupt those who are doing it.”

      von Bertalanffy, L. (1969). General Systems Theory. New York, NY: Braziller.

      • Robert Locke
        July 8, 2013 at 3:31 pm

        Thread #69

        I read Napoleon For and Against when I prepared for my PhD qualifying examination in 1960: it is part of the standard knowledge about methodology and historiography that people studying for a doctorate in history at American universities learn. We historians are not naive about the behavior of human beings, including the motives of professors who defend neoclassical economics in the institutional-in-fighting of academia, which doesn’t have much to do with science.

        I’m sorry that you do not appreciate the importance of the ideographic method. The Prussian educational reformer Wilhelm von Humboldt, who appreciated mathematics, nonetheless thought much more about the educational value of language than you apparently do. He wrote his wife Caroline: “It is only through the study of language that there comes into the soul, out of the source of all thoughts and feelings, the entire expanse of ideas, everything that concerns man, above all and beyond everything else, even beauty and art.” (Quoted in Marianna Wertz, “Education and Character: The Classical Curriculum of Wilhelm von Humboldt, p. 1) Humboldt wished to use classical languages as media for the cultivation of the “inner self” because he felt character building more important than cognitive knowledge. He expected a classical education to help instill in the youth of the directing classes a sense of honor, honesty, duty, and patriotism as well as a deep appreciation of culture. The leadership class, which we run through our economics departments and business schools, need more “character building” in their education than cognitive knowledge, and the leading principles of the GHS do more to cultivate this than the principles of neoclassical economics.

      • Egmont Kakarot-Handtke
        July 9, 2013 at 8:33 am

        Robert Locke #70

        If you think that standard economics produces “pure shit” (this thread’s implicit consensus) then you are at a loss to explain why the German Historical School did not do better in the last 100 years than it actually did. Humboldt would not have approved of this performance.

        As a matter of fact, it is quite simple to get the neoclassicals out of academia:

        “There is no evidence to suggest that economists abandon degenerating programs in the absence of a progressive alternative. We do not, in the face of falsified theories in the belt of a program, abandon that program until there is an alternative program with theories that are themselves corroborated.” (Weintraub, 1985, p. 148)

        “… if you think you can do better with a non-neoclassical model …, then you are quite welcome to try.” (Boland, 1992, p. 19)

        GHT has its merits but it is not the progressive alternative.

        Boland, L. A. (1992). The Principles of Economics. Some Lies my Teacher Told Me.
        London: Routledge.

        Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal.
        American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

      • Robert Locke
        July 10, 2013 at 7:54 am

        “… if you think you can do better with a non-neoclassical model …, then you are quite welcome to try.” (Boland, 1992, p. 19

        How about this. To understand the economic downturn and soaring budget deficits, look not to neoclassical economics but to systems of tax avoidance and regressive taxation, both legal and illegal. We have very good historical examples of the consequence of tax avoidance, e.g. The outbreak of the French Revolution, when the government faced a fiscal crisis because the privileged orders were exempt from taxation. Because the GHS discards “the exclusive use of the deductive method, and stresses the necessity of historical and statistical treatment” following its investigative principles allows institutional and legal forms of argumentation that are necessary to understanding the economy, i.e, tax-havens, nonpayment of taxes, writing of tax-legislation by lobbyists to favor the rich and privileged, etc.

      • Egmont Kakarot-Handtke
        July 10, 2013 at 10:32 am

        Robert Locke #74

        Scientific communication is guided by the code true/false, moral communication by good/bad, and social communication by like/dislike.

        You are against tax evasion. Good! (applause from all frustrated taxpayers)

        You are for character building in the the sense of Humboldt and not in the sense of Wall Street. Good! (applause from the rest of the world)

        You are for honor, honesty, duty and patriotism. Good! (applause from your fellow parrots [this is a good one from the spelling checker] patriots, of course)

        You are against people like Dr. X who produce “pure shit” for the top journals. Good! (applause from the scientific community)

        You detest people who resist being evicted, albeit they evicted others before. Good! (applause from the defenders of fairness and justice)

        You are for motherhood and apple pie. Full agreement with the rest of the world!

        You like the lively story-telling of historians and you dislike the bloodless shifting of empty mathematical symbols. Yeah, yeah! (full support of the entertainment industry)

        You are contributing more to the progress of theoretical economics than Dr. X? True or false? Think again.

      • davetaylor1
        July 10, 2013 at 2:20 pm

        So how would YOU make the connection between all the economic facts Robert mentioned and neo-classical economic theories which exclude them?

      • Robert Locke
        July 10, 2013 at 5:11 pm

        Egmont # 76
        “Scientific communication is guided by the code true/false, moral communication by good/bad”

        At bottom a well-functioning market is based on trust. Trust implies that we have to rely on a certain moral order in society (legalism doesn’t work). Where does moral order come from? You’ll never find out from neoclassical economics guided by the code true/false. You might get some idea by looking at how institutions function, e.g., religious, civic, in communities. Or malfunction. In other words, if natural science is guided by the code true/false, social “science,” which deals with human beings cannot ignore moral communication or the “science” is false.

  29. Robert Locke
    July 9, 2013 at 1:38 pm

    It is difficult to refute forms of argument with forms of argument that the people who are being refuted do not accept. I am arguing about the historicity of neoclassical economics. The great ambition of Post World War 2 rationalism was not just to use cognition to describe the world but to use it for prescriptions to improve it. Neoclassical economics formed part of this ambition, primarily by importing mathematics into its bailiwick. The first attempt, Walras, had not accomplish very much, or the renowned mathematician Neumann could not have written in 1944: “So far, Mathematical economics has not achieved very much.” But in decision theory his book with Morgenstern, Game Theory, was meant to remedy this deficit. And in 1947, the work of Danzig on decision theory (Linear Programming) that economists working for the Rand Corporation imbibed from Operation Research scientists working for DOD seemed to solve the problem. This is history, as is the institutional takeover of these new economists in Departments of Economics and US Business Schools (see Rakesh Khurana, on US Business Schools, PUP 2007). All this would have been justified if the prescriptions had worked or were working, but they haven’t. You and I are arguing about the consequences. My argument is historical, how ambitious well-intentioned, and arrogant people, transformed our institutions in the US, in Europe, and elsewhere in the world (1960-1980) and resist being evicted when people wish to evict them just like they evicted the GHS before. The people in the GHS would accept my kind of argument that the specificities of history refute neoclassical economics as prescriptive science. Neoclassical economists are not much interested in the specificities of history including the fact that they themselves in the citadels of academia and government are hindering us from finding a better kind of economics. We are at an impasse. Not surprising to an historian.

  30. davetaylor1
    July 10, 2013 at 8:31 am

    Robert @ #68, thank you very much indeed for this lucid and extremely helpful explanation of what you wanted us to learn to see from Drechsler, and why you appreciated my comment #61, on logical completeness. Egmont @ #70, I’m sad that you apparently didn’t. Editor: if you are going to remove comments, might I suggest noting that where you have done so to keep the reference numbers unchanged?

    I loved that phrase about mathematically-oriented social scientists wearing “seven league boots that avoid historical contexts”, for it captures the issue completely. It is not (I will show) the “seven league boots”, but that Humean scientists “avoid contexts”.

    To evade the issues of creation and purpose, Hume (using static Aristotelian deductive logic with premises now demonstrably false) portrayed the brain as isolated from reality. Using the same logic, Anglophile scientists similarly see their sub-systems and mathematics as (in Tony Lawson’s term) “closed”, i.e. as not interacting with any context other than as parts of a larger sub-system, and thus treatable as abstractions, in isolation. The point, then, is that the retroductive-historical and deductive-mathematical methods are logically complementary rather than rival paradigms. Egmont @ #70, will you please take this on board, too.

    G K Chesterton was saying it in “G F Watts” way back in 1904, contrasting visual and verbal arts as “like two angles in the calculation of a distance … an approximate attempt to convey, by snatching up the tool of another craftsman, the direction attempted in the writers’ own craft”. Don’t imagine this irrelevant here, for the pictures he is talking about contrast Hope (“a dim canvas with a bowed and stricken and secretive figure cowering over a broken lyre in the twilight”) with Mammon: “a throned figure clad in heavy scarlet and gold … with closed eyes and fat, sightless face … by one final, fantastic and triumphal touch this all-destroying god and king were adorned with the ears of an ass … This is commerce … not a symbol of commerce: commerce is a symbol of this”. Earlier he had compared artistic and mathematical minds. For the former, “every unit in a million, every fact in a cosmos, must be of equal value. The latter can have “as wide a view of life as he likes, the wider the better .. but still a view and not a map. The one thing he cannot attempt in his version of the universe is to draw things to scale”.

    The historian’s perspective in time is in principle like the artist’s in space: not leaving out reality but overlaying and shrinking what is not the immediate focus. Even in the mathematician’s objective but empty view of the real world as a 3-dimensional sphere, it turns out that Chesterton’s two angles (latitude and longitude) cannot both be reduced to 1-dimensional scalar of the earth’s diameter: one has remain 2-dimensionally angular, so (except locally) surface distances cannot be simply scaled off a flat map. Post-Einstein, the ‘universe’ of physics is an expanding sphere with a history of internal interactions evolving objects which at all scales have dynamic internal structure. Its three degrees of freedom can be captured in the four-dimensional algebra of quaternions and the “rubber” geometry of topological circuit closure, but not in the orthogonal n-ary matrices modern economists use, the rigid coordinates of which are not free to change.

    Thus, Egmont, I am not saying your differential equations are wrong, I am saying they are like taking logarithms to a variable base: the solution of which is not a logarithm but an antilog dependent on the history of the base. My applied mathematician’s view of what Lakatos (not Kuhn) says, Robert, is that the solid [human and contractual] atoms assumed in 1860’s economic theory need to be replaced by a dynamic structural theory (at a deeper level than economics) which, like spherical latitude and longitude, accounts at all scales (be they atomic, human, economic, cosmic) for all the degrees of freedom in the starting conditions of the universe. Sounds difficult, but my “artist’s views” of it are, in the circumstances, remarkably simple.


    G K Chesterton, “G F Watts”, 1904, Duckworth. http://gutenberg.net.au/ebooks12/1201851h.html

    I Lakatos, in Lakatos and Musgrave, eds, “Criticism and the Growth of Knowledge”, 1970, Cambridge [draft at http://www.csun.edu/~vcsoc00i/classes/s680f11/Lakatos.pdf%5D

    [C.f. Arthur M Young, “The Geometry of Meaning”, 1976, Robert Briggs Associates].

  31. davetaylor1
    July 10, 2013 at 8:37 am

    For goodness sake! How did my new comment get slotted in as #70 when it was posted below what is now #74?

  32. Egmont Kakarot-Handtke
    July 10, 2013 at 8:40 pm

    Robert Locke #78

    You say that trust is important for the functioning of the market system. I agree. So does standard economics. To verify this, please go to Google Scholar and enter ‘trust’ and ‘transaction costs.’

    Standard economics will tell you that trust lowers transaction costs and therefore makes a significant contribution to profit maximization. You and neoclassical economics are in full harmony.

    It is not the task of theoretical economics to see how religious or civic communities function. This is the task of sociology and psychology. It is the task of theoretical economics to explain how the economic system works. This is something quite different. As Hudik put it:

    “The purpose of this paper is to criticise the notion that economics is a science of behaviour or that a science of behaviour is fundamental to economics. This plausible and, as I believe, mistaken idea has sometimes been called (methodological) psychologism, and I follow here this terminology. In opposition to psychologism I put forward the notion of economics as a study of spontaneous order independent of any behavioural science. My argument is based on the important contributions of Hayek and Popper. If it is correct, then all the attempts to derive an adequate model of economic behaviour (as practised, for example, by the representatives of ‘behavioural’ or ‘psychological economics’) are misconceived.” (2011, p. 147)

    Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of
    Economic Methodology, 18(2): 147–162.

  33. Egmont Kakarot-Handtke
    July 10, 2013 at 8:50 pm

    Robert Locke #78, now #79, (software seems not to insert properly)

    You say that trust is important for the functioning of the market system. I agree. So does standard economics. To verify this, please go to Google Scholar and enter ‘trust’ and ‘transaction costs.’

    Standard economics will tell you that trust lowers transaction costs and therefore makes a significant contribution to profit maximization. You and neoclassical economics are in full harmony.

    It is not the task of theoretical economics to see how religious or civic communities function. This is the task of sociology and psychology. It is the task of theoretical economics to explain how the economic system works. This is something quite different. As Hudik put it:

    “The purpose of this paper is to criticise the notion that economics is a science of behaviour or that a science of behaviour is fundamental to economics. This plausible and, as I believe, mistaken idea has sometimes been called (methodological) psychologism, and I follow here this terminology. In opposition to psychologism I put forward the notion of economics as a study of spontaneous order independent of any behavioural science. My argument is based on the important contributions of Hayek and Popper. If it is correct, then all the attempts to derive an adequate model of economic behaviour (as practised, for example, by the representatives of ‘behavioural’ or ‘psychological economics’) are misconceived.” (2011, p. 147)

    Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of
    Economic Methodology, 18(2): 147–162.

    • Robert Locke
      July 11, 2013 at 9:28 am

      Egmont, 72, 73, Dave, 74
      Of course, definitions of economics are important because they determine direction and outcomes in the discussion that been going on a long time. Right after WWI, German professors of business economics (Betriebswirtschaftslehre) got into a prolonged discussion about firm efficiency. Professor Wilhelm Rieger (HHS Nuremberg) defined efficiency in terms of profit maximization (or as Dave says, Standard Chrematistics), Professor Heinrich Nicklisch (HHS Berin) defined efficiency in terms of the firm’s social utility (how it served the firm community, Gemeinschaft), and Eugen Schmalenbach (University of Cologne) tried unsuccessfully to compromise: he liked Nicklisch’s idea, but realizing the difficult of establishing metrics to measure return to the community, seemed to settle for Rieger’s idea of the firm as a Geldfabrik.
      These definitions of firm efficiency entail conflicting definitions of the firm. Rieger had a proprietary conception; Nicklisch and Schmalenbach an entity conception, i.e., several legitimate interests compose the firm including owners (stockholders), employees, and customers.
      Nobody “won” the theoretical debate among the Betriebswirte between the wars, but the Americans won the Second World War and have pushed their chematistic views of the firm, which is enshrined in neoclassical economics. The “other” view has not disappeared. We find it in organic conceptions of the firm still extant on the Continent, especially in Germany, in Mitbestimmung (co-determination), of which Frau Merkel approves, the Papacy, and the trade unions. Proprietary conceptions of the firm or worse, director primacy, stresses short-term profit maximization (the firm as a Geldfabrik), and the maldistribution of the money, because those at the top legally control the distribution of emoluments, to upper management. Because neoclassical economists are silent about such matters, their science amounts to what Julien Benda called “The Betrayal of the Intellectual.”

  34. davetaylor1
    July 11, 2013 at 6:05 am

    Egmont #73

    “Standard economics will tell you that trust lowers transaction costs and therefore makes a significant contribution to profit maximization”.

    What it won’t tell you, Egmont, is how profit maximisation makes a signficant contribution to trust. Nor what connection it has with economics (the management of mankind’s household) as against chrematistics (the “science” of money making). What you are calling “standard economics” and I call “standard chrematistics” cannot be trusted even to name itself honestly, let alone enable its followers “to see themselves as others see them”. That’s why it’s shit.

  35. davetaylor1
    July 11, 2013 at 6:45 am

    Back in Edward Fullbrook’s posting:

    “Good science is a reliable way of generating knowledge because of the way it is done. It is based on reproducible observation and experiment, taking account of all evidence and not cherry-picking data”.

    Though neither Robert not Egmont has even acknowledged an attempted mediation between them (#70?) it took me three days to complete, I can highlight the issue here. If “science” bases itself only on reproducible observation, surely that IS cherry-picking when “all the evidence” includes much else that is reliably fruitful?

    The misrepresentation of “science”, of course, comes from the same source as the misrepresentatiton of “economics”: the “epistemic fallacy” of David Hume. Cf. Tony Lawson’s “Economics and Reality”, 1997, Routledge, pp.33-4.

  36. davetaylor1
    July 11, 2013 at 11:19 am

    Egmont (#74?)

    von Bertalanffy, L. (1969). General Systems Theory. New York, NY: Braziller”. [My edn. Penguin University Books 1973]

    So read it! Bear in mind it is 1968 stuff, attributes information theory to Weaver and fails to comprehend that for Shannon it was a means to the end of error-correcting circuit logic and could be represented by channels as well as codes piggy-backing on signal power.

    On Kuhn , Bertalanffy’s introduction is nearer my position than Weintraub’s. “Following Kuhn, a scientific revolution is defined by the appearance of new conceptual schemes of ‘paradigms’ … comparable to the switch in perceptual gestalten in psychological experiments … Understandably, in such critical phases emphasis is laid on philosophical analysis which is not felt necessary during the periods of growth of normal science”.

    Table 1.1 points out that systems of non-linear equations are mathematically insoluble, so it is followed up with graph theory and cybenetics. “Graph theory, especially the theory of directed graphs (digraphs) elaborates relational structures by representing them in a topological [non-metric, i.e. non-quantifiable] space”. “Cybernetics … proved its impact not only in technology but in basic sciences, yeilding models for concrete phenomena and bringing teleological phenomena – previously tabooed – into the range of scientifically legitimate problems; but [in Bertalanffy’s judgement, not understanding Shannon] it did not yield an all-embracing explanation or world view”.

    Table 1.2 is good: like my “iconic” diagramming, inspired by Boulding’s “The Image”, and rather like Bacon’s “Advancement of Learning”, shows up gaps in the theory – though with chaos theory and 4-level language (logic/grammar) theory conspicuous only by their absense.

    Chapter 1 acknowledges “[The] mathematical approach followed in [his] general system theory is not the only possible or most general one”. Chapter 4 “sees the main function if theoretical models in the explanation, prediction and control of hitherto unexplored phenomena. Others may, with equal right, emphasise the importance of axiomatic approach [as in] the theory of probability, non-Euclidian geometries … The danger, in both approaches, is to consider too early the theoretical model as being closed and definitive – a danger particularly important in a field like general systems which is still groping to find its correct foundations [and in a failed field like economics, which ought to be].

  37. Egmont Kakarot-Handtke
    July 12, 2013 at 6:27 am


    Campaigning for a good cause, WHATEVER it is, is politics. Politics is the opposite of science. As one can glean from the history of Political Economy, the good/bad-discussion has achieved nothing of scientific value and only hampered the true/false discussion of theoretical economics. This is why economics is still at the pre-scientific stage:

    “The position I now favor is that economics is a pre-science, rather like astronomy before Copernicus, Brahe and Galileo. I still hold out hope of better behavior in the future, but given the travesties of logic and anti-empiricism that have been committed in its name, it would be an insult to the other sciences to give economics even a tentative membership of that field.” (Keen, 2011, p. 158)

    The bad scientists cranks out opinions, the good scientist contributes to knowledge.

    Keen, S. (2011). Debunking Economics. London, New York, NY: Zed Books, rev.

    • BFWR
      July 12, 2013 at 6:56 am

      The great scientist utilizes hunch, intuition and creativity in order to expand knowledge and transcend former orthodoxy. Scientific Truth is as often re-discovered, as discovered because orthodoxy is a powerful and blinding mental force.

  38. BFWR
    July 12, 2013 at 7:02 am

    Economic equilibrium is exactly like flight. It’s not possible unless you discover the principle which enables it and then actively apply it and adjust it….continuously. Flight seen from the perspective of orbit enables one to see that flight is actually controlled falling, and an impossibility unless you provide air pressure to the bottom of an airfoil in a continuous fashion. Economic equilibrium will be exactly the same way….after enough economists recognize the what and where that needs to be applied. This exposes the fallacy of market worship. Auto-pilot and the “Invisible hand” will not be possible until you’ve actually and actively created the possibility of economic equilibrium first. This also exposes the blindness enforced by orthodoxy incompletely examined. Before Bernoulli’s Principle was discovered and applied flight was “impossible”, “laughable”, “silly” and “absurd”. After enough people become aware that they’ve been continuously short changed for the last century or so and insist the solution to economic instability be implemented there will be a lot of economists with “egg on their face.”

    We can wait for another 20+ years of economics Japanese style, slow frog boiling of the individual, or worse, war in an era of modern weaponry. If we’re stupid enough to risk the latter and yet dodge that bullet, the inexorable force of technological innovation will make even the stupidest among us utterly aware of what the problem actually is….not enough…never enough money in the hands of individuals.

    P = In < Pr The Productive process/the Economy results in a scarcity of total individual incomes in ratio to total prices.

  39. davetaylor1
    July 12, 2013 at 12:17 pm

    Egmont @ “Afterthought” (#78?)

    “The bad scientists cranks out opinions, the good scientist contributes to knowledge”.

    Says Egmont, cranking out the opinion that “the good/bad-discussion has achieved nothing of scientific value and only hampered the true/false discussion of theoretical economics.”

    As a matter of fact, it was Bacon’s judgement that the focus of Scholastic science on God to the exclusion of love of Neighbour was bad by omission that led to modern science, one of the first fruits of which was discovery of the circulation of the blood. It was Hume, taking the appearance of Newton’s method of studying orbits for the whole of science, who cranked out Egmont’s opinion that “Scientific communication is guided by the code true/false, moral communication by good/bad, and social communication by like/dislike”.

    Smith barely noticed that money circulated; in the 1920’s Whitehead still though of “process” as open-ended and in physics string theorists still do. Whether or not noticing the elephant in the room makes one a good scientist, the blatently obvious in retrospect is beneath the dignity of clever professors, who still don’t see the significance of what Euclid demonstrated a couple of thousand years ago: that three points (which can be traversed in either direction) are necessary and sufficient to define a circle and hence to characterise circular, on-going, local processes. Like physical particles formed by electro-magnetic energy chasing its own tail as in a superconducting electrical circuit; thought; algorithmic computing; economies. A fourth point is necessary to construct and locate the circle; move that and its a different circle. [C.f. Young, op. cit above].

    What Egmont is failing or refusing to see is that science is generated and communicated to the public via both physical and linguistic technology, in a process which not only relies on true theory, can be used for good or bad, liked in anticipation and disliked retrospect, but also – at points like carrying a digit when adding numbers – changes the world and hence the meaning of what is being communicated. That is fundamental to what has happened in economics, as the process of financialisation of what WAS economics has progressed through savings banks, marketing of capital, insurance and derivatives to a point where it no longer is “economics and good” but “chrematistics and evil”.

    The alternative to circulating money parasitically in finance is not to circulate it but to recognise it for what it is – token credit – and write it off when its intended use has been accounted for.

    “GHT has its merits but it is not the progressive alternative”. This is.

    • Robert Locke
      July 12, 2013 at 4:45 pm

      Thread 78 & 81

      In thread 69 I said “The great ambition of Post World War 2 rationalism was not just to use cognition to describe the world but to use it for prescriptions to improve it.”

      In a book published in 1989 I wrote: “the most famous management technique [in government] was P.P.B.S, installed first in the Department of Defense by Rand Corporation economists, after Robert McNamara left the Ford Motor Company for Defense in 1961, and extended, after 1965, to other government agencies. ‘…But,’ as Wadevesky, observed, ‘P.P.B.S has failed everywhere and at all times. Nowhere has [it] been established and influenced governmental decisions according to its own principles. The program structures did not make sense to anyone. They are not, in fact, used to make decisions of any importance (stated in 1982)’
      This judgment is just. No groups of men so fundamentally misread reality as those who implemented P.P.B.S in the Pentagon during the Vietnam War. The complaint, moreover, is more than political. It is technical, for P.P.B.S. did not fail just because the Americans who implemented it were discredited by the Vietnamese defeat; they lost the war because they did not understand the limitations of management methods like P.P.B.S. …OR models (from which neoclassical economists borrowed heavily in order to make theirs a prescriptive science), Russell Ackoff observed ‘leave out the human dimension, the motivational one. … The successful treatment of managerial problems requires the application not only of science with a capital S but also all the arts and humanities we can command.’” (Locke pp.33-34, Ackoff, 102.)
      In 1996, I wrote: “The American elite is a meritocracy based on individual talent; it is broad based, including government, military, business and industrial leaders in its ranks. All, moreover, share common values that are deeply rooted in that nation, and among them is an instrumental view of education, that knowledge can be applied to problem-solving in a variety of situations. …Nothing illustrates this better than the interaction between business and the military. General Westmoreland had an advanced management course at the Harvard Business School in 1954. … Throughout his career Westmoreland indicated a passion for efficiency and a fondness for percentages. This meant that he and McNamara, who had not only taught at Harvard but also emphasized charts and statistics when he was president of Ford, had many of the same instincts and spoke the same languages.” (Locke, 1996, p. 24)
      In 2011 Spender and I wrote about the Finance Crisis: “Finance mathematicians rarely blame themselves for crises. Mathematics is a formal science. Nonetheless, financial mathematicians have naively sent misleading signals to non-mathematicians in the investment community, which has induced the belief that everything can be modeled. They have glorified simplistic modeling as state-of-the-art; they have thought about risk measures and forgot about risk management
      These admissions have broad implications, because they question once again the wisdom of the Ford Foundation project that introduced unbounded rationality in the form of neo-classical economics into business and economic curricula in the 1960s. Already in the late 1970s OR scientist Russell Ackoff, head of Operations Research at the Wharton School, drew negative conclusions about the suitability of mathematical models for management decision making. This, however, did not stop quantitative analysts in finance, many of whom came from Operations Research and should, therefore, have known better, from following the same mathematical will of the wisp that the previous generation of OR enthusiasts had done postwar – and experiencing the same disillusionment twenty-five years after Ackoff, for the shortcomings now recognized in mathematical models for decision-making in financial markets, are similar to those often acknowledged in the operations research community decades before.” Locke & Spender, 171)”
      After seventy-five years of prescription, the big problem with rational models does not seem to be that they do not apply to reality but that they are misapplied in the real world – often with devastating consequences – and that neoclassical economists don’t care.
      Ackoff, R. (1979), “The Future of Operational Research is Past, JORS 30, 93-104.
      Locke, R. R. (1989), Management and Higher Education Since 1940. Cambridge: CUP.
      Locke, R. R. (1996), The Collapse of the American Management Mystique (Oxford: OUP)
      Locke, R. R. & Spender, J-C (2011). Confronting Managerialism. London: Zedbooks.

  40. Nathanael
    July 21, 2013 at 4:10 am

    The most likely way this changes, *long term*, is for a newly named department (“political economy”?) to arise at universities, organized by the people doing good work, the JK Galbraiths. Or possibly for the good guys to find a friendly department to move to — does political science or sociology want you? Or perhaps history? Or “business”?

    Step two: conventional economics departments and their journals become a dead backwater which everyone ignores.

    Logic moved from the philosophy department to the math department in the 50s. There are still logicians in the philo department, but they’re irrelevant.

    Science moved from the philosophy department to… well, a lot of its own departments… during the Enlightenment. The people doing wooly-headed expositions of Aristotle are *still there* in the philo department, they just got left behind.

    The same story has happened with physics very recently: the real work is done in the so-called “materials science” departments, while the “physics” departments talk about wooly mush like string theory.

    A vaguely similar story happened to psych, uh, I mean, “neurobiology”, except that the “neurobiologists” re-infiltrated the psych department….

    Unfortunately, linguistics departments have suffered the degeneration *without* having a replacement department arise: the historical linguists have been crowded out (except at a few places like U of Indiana-Bloomington) by idiot Chomskyists; and there is no replacement department for them to go to. I’m not sure when that will be resolved.

    For a more dramatic example of the “good guys just go somewhere else, old organization becomes irrelevant” phenomenon, most of the “universities” of the Middle Ages died when they failed to adapt to the Enlightenment: their focus on recieved wisdom and religion killed them. But they are, in fact, *still there*, they’re just not what we consider universities any more.

    • davetaylor1
      July 21, 2013 at 8:37 am

      Nathanial @ #87

      Very thought-provoking and helpful post, coming after mine and Robert’s. The only point where I lost you was at your reference to “idiot Chomskyists”; perhaps you could explain what you intended by that. As I see it, Shannon having differentiated information capacity from meaning, Chomsky explained children’s ability to pick up any language before they knew its meaning by focussing on syntax and grammar rather than sound forms and etymology. The practical value of this lay in construction of adequate artificial [programming] languages, but Information Science having become confused with technology by idiot Humeists, library scientists did it the honour of taking over its name. With some justification, because that was the context in which Shannon left semantics.

    • Paul Schächterle
      July 21, 2013 at 11:28 am

      I agree that an own department or moving to a different department is the most likely way. I don’t see economics mainstream changing. They have proven over 150 years+ that they are willing to protect their core ideologic beliefs against anything with all means necessary.

      The problem I see is that universities may not be willing to introduce new departments as that costs money. And economists will always say that there is already an economics department “working on the subject”.

      So we would need to somehow create one or more fields of study that can be harboured in another department to keep the good people working.

      “Unemployment studies”, “Inequality studies” could go to Sociology or History departments.
      “Labour market regulation”, “Credit and money regulation” could go to the Law or Political Science departments.

      The people still working in the economics departments should keep fighting for their projects and positions. But it is wise to have a plan B.

    • Paul Schächterle
      July 21, 2013 at 11:35 am

      “History of economic thought” could obviously go to the History dept.

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