Home > Uncategorized > Seven things that economists could usefully do or call for over the next several years

Seven things that economists could usefully do or call for over the next several years

from Richard Parker

Without solving . . . Pikettyan meta-issues, the question arises: Are there other things we as economists can do if, like Piketty, we’re concerned (alarmed? appalled?) about current levels and trends of inequality? How – absent meta-solutions – should we or could we move an inequality-reduction agenda forward? What issues or strategies or agendas might help advance absorption of Piketty’s focus on distribution and reframe a mainstream professional and public discourse still fixed almost monocularly on aggregated, rather than a distributionally-differentiated, GDP?

As I contemplated that question in Athens this summer, several possible projects occurred to me as worth at least consideration and debate. Some readers will no doubt find these suggestions too small, too pallid, too technical, or too bureaucratic, but I’m motivated to raise them – rather than more sweeping or heroic responses to Capital – in part by my reading of the ways The General Theory’s lessons were absorbed, initially by academics, then policymakers, and then by elements of the press and wider public, during the first 25 years or so after its publication (about which more shortly).

What academic, government, and policy NGO economists could, in my opinion, usefully do or call for over the next several years includes, at very least, the following:

  1. Academic economists could begin teaching macro courses (undergraduate and graduate) as well as a research and publishing program focused on the big distributional questions, or at least the old growth questions reframed and disaggregated by distributional ones, in order to ground our students and our colleagues in the relationships between growth and inequality.
  2. Behavioral economists in particular could expand their own teaching and research on, for example, the field’s early findings about the effects of positional goods and relative incomes. As one example, David Moss at Harvard Business School and the Tobin Project are here already doing some pioneering work.[1]
  3. Cross-disciplinary teaching and research – in cooperation with political scientists, sociologists, social psychologists, historians, and moral philosophers – present a fertile range of opportunities for teaching and research. I’ve participated for several years, for example, in the multi-disciplinary Harvard Inequality and Social Policy program, just one model of how this could be done or approached.[2]
  4. Academic and policy NGO economists could start calling on government colleagues and statistical agencies to do (including spending) more to improve their collection and processing of income and wealth distribution data worldwide, given the myriad inherent limits of tax returns, social security files, and household survey data now in use. As we enter the era of Big Data – for better or worse – the sheer quantity of information available that could vastly supplement and enrich our attempts to measure and answer distributional questions – as well as the graphical means to make our findings more easily understood to audiences outside our profession – seem untapped.
  5. Organized calls from economists and other social scientists could press the IMF, OECD, Eurostat, the UN and the like to prioritize greater harmonization of the definitions and indices of inequality, to allow more meticulous comparison internationally. Mme. Lagarde has already publicly said that the IMF must “do more” about inequality (though without much precision about what it might do)[3]; one precedent here is the pioneering role the UN and IMF played in spreading national income accounting around the globe in the early 1950s.
  6. It seems important to me to find ways to elevate and “normalize” public reporting of the distribution issue in a super-condensed headline form, aimed not at economists but at the press, politicians, and the public. Let me call this simply the need, for want of a more elegant formulation, for “GDP-plus-Gini” – in lieu of GDP alone as the single-number metric of a nation’s economic performance.

    The Gini coefficient has numerous problems of which we’re all aware, of course, though in this it is no different than GDP. Its advantage lies, I would argue, in the power of that one number’s ability to reach a wider public and to shape policy and politics beyond our own limited world of classroom and peer journals. No president or prime minister runs on a platform promising to lower or even maintain current GDP.

    How might we best get a one-number summary of inequality before the public as GDP has done for aggregate growth? The World Bank, among others, already regularly ranks countries by their Gini coefficients – and its website allows users an easy choice of display as table, graph, or map.[4] There, one can quickly learn that the Bank ranks Sweden at 0.25 as the world’s most egalitarian nation, South Africa at 0.63, the most inegalitarian.[5] The United States, at 0.41, hunkers down among a host of developing economies such as Turkey, China, and several West African states – and, needless to say, far behind every other high-income developed country (Germany is at 0.28, France and Canada both at 0.33, the European Union as a whole, at 0.31).

    The merit of such rankings – if they were presented annually by national statistical authorities alongside GDP performance – is the way Gini’s simple single number translates rankings into performance that can, alongside traditional GDP, be reported on the evening news or Internet or debated in the halls of Congress. (Piketty himself has casually noted his own preference for calculation of two separate Gini coefficients – one based on labor income, one on capital income; on this, I’m for now agnostic though I take his important point.)A graphic supplement to such Gini ranking would be to disaggregate annual income and wealth changes by quintile or decile (with special attention to the top 1% and 0.1%, a la Piketty). There are already many variants of such presentations (see below); the point would be to elevate them to the prominence that reporting of GDP itself enjoys today.

     Parker1
  7.  Far more research and debate on the intersections of growth and equality is capable of leading in turn to our clearer understanding of what a band of “democratic growth” or “egalitarian growth” paths among the variety of growth paths might look like, calculated both in terms of private income and wealth distribution and the divide between public and private income and spending. Jonathan Ostrey and colleagues, to cite one example, have already published three quite solid IMF papers (“Redistribution, Inequality, and Growth”, “Inequality and Unsustainable Growth,” and “Efficiency and Equity”) that have begun opening up this sort of research, in a rich but preliminary way, to serious academics and policymakers. (I mention only these because fully enumerating the various strategies and sub-topics in this field would require its own separate paper.)

[1] On Moss and the Tobin Project, see “How Income Inequality Shapes Behavior” at

http://hbswk.hbs.edu/item/7283.html

[2] On the Harvard Inequality and Social Policy, see http://www.hks.harvard.edu/inequality/index.htm

[3] See Lagarde, “Economic Inclusion and Financial Integrity – an Address to the Conference on Inclusive Capitalism”, at https://www.imf.org/external/np/speeches/2014/052714.htm

[4] World Bank Gini rankings at

http://data.worldbank.org/indicator/SI.POV.GINI/countries/all?display=graph

[5] I omit here a number of micro-states.

Richard Parker, “Reading Piketty in Athens”, real-world economics review, issue no. 69, 7 Oct 2014, pp. 58-73, http://www.paecon.net/PAEReview/issue69/Parker69.pdf

 

  1. Macrocompassion
    October 14, 2014 at 9:49 am

    Item number 1 on this list strikes me as being so basic that without it the present day fumbling of badly expressed unscientific words in place of knowledge will continue to disturb and distort the macroeconomics scene. But the way that macroeconomics is presently being understood and taught leaves much to be desired. A better more logical presentation of our social system is badly needed rather than a continuation of the past inaccurate and somewhat bigoted, deliberately biased and unbalanced ways of the past.

    I have re-written this subject and the implications of it are fabulous! The direct results are fairly interesting too! I hope my book on it will come out soon. Meanwhile I wish to direct viewers to the model that I use for representing how our system works–an engineering form that logically follows, after our subject is logically treated as being a closed system. This model is available on: Wikimedia, commons, macroeconomics as: DiagFuncMacroSyst.pdf

    Your comments most welcome.

    • davetaylor1
      October 22, 2014 at 6:09 am

      Since you mean http://commons.wikimedia.org/wiki/File:DiagFuncMacroSyst.pdf, why didn’t you say so?

      Your model is a very interesting description of what we have now, but conflates distribution with households and ignores the non-waged, the contribution of nature and the recycling of resources. The “black box” block diagram approach leaves it descriptive and not indicatory of the internal dynamics of individuals, education, markets and insurance. May I suggest you study the arrangement of a Wheatstone’s Bridge and reflect on the need to recharge its battery.

      • Macrocompassion
        October 22, 2014 at 8:56 am

        Dave: thanks for your kind comment.

        This model is intended to be as simple as possible, whist covering the whole system in a general way. Non-waged work is included (in so far as homes are maintained, etc) but it has no direct economic effect on the rest. The contribution of nature is in the land, which can include the spectra of electromagnetic transmissions, etc. Recycled resources are part of the production process and are covered by the net sales of produce not being all of the direct production (some of which is subtracted). One important aspect of this model is to avoid microeconomic effects, which takes in the individual items that you mention. They are collected in a number of ways for the 6 idealized aggregate entities.

        Your remark about the Wheatstone Bridge is unclear and cryptic, as is the fact that it does not necessarily need to have a battery. The electrical use of it is to balance the relative magnitude of resistors.

    • davetaylor1
      October 22, 2014 at 7:15 pm

      Thanks, Mac. Looking at your diagram again, the issue is whether your Landlord and Financial Institutions are logically redundant and the roles of Government and Capitalists misconceived. Government can provide finance and the Householder be his own landlord.

      The role of Capitalist should be generalised to Firms (to include as special types the likes of not-for-profit Cooperatives, charities, schools, hospitals, ideas people and what are now called Local Governments). You haven’t defined what money is, but in a credit card economy, haven’t debit cards become redundant, leaving cash as simply a convenient token for debt accounted for in advance of spending? With incomes in the form of generous credit card limits, restored when debts incurred by spending have been accounted for by proper use and/or contribution, all the paraphernalia of wages, profits, taxes, rent, interest, theft, wealth display, insurance and gambling on others’ misfortunes become redundant, along with most of the need for security. Re your explanation, the Landlord is not the Land, which will soon cease to contribute necessities unless he (not absent Government) facilitates their regeneration.

      Hence the simpler arrangement of Wheatstone’s Bridge (the arrangement being a minimal form of topological completion rather than quantitative mathematics). The original did have a battery rather than a generator, and electric circuits were used in scientific instruments and railway telegraphy before generators made them useful for power supply. Think of its circulating negative-polarity electrons as credit money, the resistors as different kinds of markets, the flows through the wires as communicating information about all their market’s transactions, and the corners as roles which people usually perform at some time during their lives, e.g. as children (consumers), young men or women (producers or housekeepers), and the elderly (who, given a pension – have time to think and teach the youngsters about what to avoid and how to do things better).

      Look carefully and you will see the diamond can be decomposed into four triangles, each representing an effectively continuous type of process: each with an input and an output. That makes 12 channels rather than 19, but resources are input from and recycled to a physical diamond in the ecology, and innovations and costs are evaluated in a ‘virtual’ financial diamond as well as circulating both as ideas and trial objects before reproduction as capital goods. So that too adds up to 19, but the emphasis here is theoretical rather than practical: accounting for the increasingly significant levels of evolution to the present day in an arabic-style binary number, the digits of which represent dynamic four-phase complex numbers rather than simple quantities.

      • Macro-compassion
        October 23, 2014 at 5:13 pm

        The Landlord and Financial Institutions (banks) are necessary in this model because it is the functional activities of all 6 entities being modeled, and they are all individual and mostly different. For example when an actual householder is his own landlord (your suggestion), he fills two roles. This model being a functional one uses idealized and aggregated concepts for the 6 role-players and this householder’s activities are placed into two functions. When considering all the multiple tasks performed in our complete social system and then trying to understand how they work, it is necessary to make two assumptions about their functional properties. What I have done is to simplify it as much as possible without over-simplification (Occam’s Razor).

        I am afraid the Wheatstone Bridge analogy is inadequate for this model, even if what you explained makes any sense. The binary numbers are not Arabic, you are thinking of our regular cardinal numbering system based on ten digits. Binary numbers came later!

      • davetaylor1
        October 24, 2014 at 3:44 pm

        Your reply overtook me, Mac. Doubtless my “complex number” model of the levels and phases of evolution was a bit “cryptic”(one hopes by being so to provoke thought and even “ring bells”), and likewise my moving on from what I have already said was your very good analysis of the system “as it is” to what (as an SSADM systems analyst) would have been the point of my work: to simplify and improve it. I apologise for that, and have to accept that spelling out distinct physiological phases in the pattern of evolution pattern to ground economics in human thought patterns at the end of it is beyond the scope of a mere note. I hope you can see the cross-purposes between modelling what we have and what we logically ought to have. However, having worked with algorithmic language for decades (http://www.fh-jena.de/~kleine/history/languages/Algol68R-UserGuide.pdf) I was not “thinking” even of arabic-STYLE numbers, I was using them as a (hopefully familiar) reference point for the structure of an algorithm.

        We use the same algorithm to represent binary numbers as we do decimal, but with a smaller set of symbols to re-use. Imagine using the Wheatstone Bridge (or a compass, a clock face or the four phases of a complex number) interchange-ably with the numeric symbol ‘1’, each represents a whole consisting of four distinct phases, distinguishable as 0-3 as against 0-9 or 0-1. Minimally, distinguishing things and processes requires two symbols, but users of Occam’s Razor tend to use language ‘transparently’, forgetting that the symbols and their arrangements are neither things nor processes so require two more distinctions. The complete representation of number thus has the logical structure of a complex number, the quantitative commercial form being logically (as against historically) an abstraction from that. Likewise, from the point of view of processing rather than things, an evaluation ‘true’ strictly means “computes true, with no data errors indicated”, with of course three ways of not being true. That is important as the logical basis for ethics and morality.

        I’d come back here after re-reading No’s 6 and 7 of Richard Parker’s “seven things economists could do”. No. 6 looks for a single number to headline the inequality issue, and No. 7 for a band of egalitarian growth paths among the variety of growth paths (this of course without saying growth of what and equality in what way). On the first of these I’m seeing the need for the single number to be a complex one, and on the second, for the paths to be circular (requiring complex numbers to locate them) if growth of whatever is to be continuous, i.e. building algorithmically on what went before. Like most people, economists don’t seem to be very familiar with complex numbers and algorithms, so while No 6 and No 7 challenge them to define what they are talking about, my No 8 challenges them to do so in terms of algorithmic processes rather than linear outcomes, using complex number diagrams rather than quantitative graphs to try and imagine visually why I might be right.

  2. October 14, 2014 at 10:27 am

    Economists could start disentangling money-as-sustenance from money-as-numbers. People are familiar with money-as-sustenance, or lack of it. Everyday money is tokens of reciprocity that you need to live with dignity. You might also call this money in the small. People and policymakers tend to bean-count when they think of money in the small.

    To an investor or speculator the focus is on money-as-numbers. Getting more options at a better price before IPO, funding startups, ultimately having more net worth and maybe starting an endowment. Money-as-numbers or money in the large is more like a story with credibility and momentum than anything physical.

    Policymakers could do well by treating the two differently. We need much greater equality of sustenance: more equal housing, healthcare, transport, education, healthy food, and so on, and that’s a relatively easy policy target on its own.

    It’s money-as-numbers that generates spiralling inequality and it needs to be dealt with differently: With better isolation between real-world and speculative prices, different tax regime, seeing wealth as power, imposing rules that separate wealth (the power to invest) from luxury (exorbitant consumption).

    Best of all, that would be an easy sell. Wealthy people are probably more like Warren Buffett than Roman Abramovich and would welcome a social norm where lifestyles are more equal and investments are something separate. We can then talk about democratising investments more productively.

  3. José DeSouza
    October 14, 2014 at 11:07 am

    Or, in other words, economists should try to be political economists once again. Geez, mate, what a long and strange trip it′s been since mainstream economics massively embraced the neoclassical reaction to classical economics.

  4. Garrett Connelly
    October 14, 2014 at 4:08 pm

    Economists who do not have a quasi religious belief system involving free markets and equilibrium are few. Even fewer are those who will squarely face the facts of economic life; further quantitative growth is impossible, subsidies are a feature of the centrally planned totalitarian corporatism, income tax is as old-fashioned an idea as property tax, central banks are milking society, the flat income lines of everyone but the most ruthless and acquisitive pirates are evidence of the totalitarian state and Earth is being damaged so that it will not be able to support mammalian life.

    • John McDonald
      October 19, 2014 at 8:57 pm

      I don’t think you need to qualify the belief system of most mainstream economists as a “quasi religious belief system.” (Briefly, it is a common misconception that religious belief requires a belief in God or a supreme being. But that would exclude polytheistic religions that do not recognize a supreme being. Indeed, the concept of god or gods is absent from some religions, for example, Brahmin Hinduism, Theravada Buddhism, which are atheistic.)

      Mainstream economists, I would argue, practice the faith of Materialism (the doctrine that nothing exists except matter and its movements and modifications). Some that I know seem to try to practice both Christianity and Materialism as two entirely separate realities, which have nothing to say to each other. If I am correct then it is easy for me to see why they are hard to communicate with about either of their faiths.

      • davetaylor1
        October 20, 2014 at 3:47 pm

        It seems to me Garrett’s comments are spot on and his phraseology opportunistic rather than necessary. John seems to be conflating religion with unjustifiable faith (exactly what those made uncomfortable by religion would have him do) rather than recognising the meaning of the Latin word, i.e. recommitment [to a God who demonstrated his existence and loving forgiveness by the life, death and resurrection of Christ]; Garrett’s “quasi-religious” faith is a commitment to markets ironically supposed to free us from our mortgages!

        Which is not to say that all faiths are unjustifiable: they may be best guesses about the commitments needed given the available science. For example, I think the scientific interpretation Fred gives below is not so much wrong as missing a couple of key points (given ‘spirit’ means ‘wind’ – a particular form of energy) about matter being the wind localised by chasing its own tail, and our not being able to see ‘dark energy’ with no detectable variations in its force). Must one believe either in gravity or curved space? The theory of the Big Bang creating Hubble’s Bubble not only justifies both but ties in with an image of God the Father expressing his Love by blowing himself up to conceive a Son intended to be the human race: each of us cells with a specific type of purpose, dependent on each other for matter and energy (“bread and wine”) but independently minded and in contact only with near neighbours. …

        This thread is about what economists could usefully do over the next several years. I suggest they read up on Christian economics in the New Testament (following up references back to the Old) and in the developing Catholic rediscovery and articulation of it from Pope Leo XIII and Good Pope John to the latest, Francis: bearing in mind the Catholic roots of the EEC (as against today’s EU). At very least they will find challenging stories like that praising the steward caught with his hand in the till, who was praised for saving his skin by writing down his client’s debts. They will find the theology outlined above and advice on the teaching of it in St Paul’s letters to the Corinthians: 1 Cor 11.17-14.40.

      • Fred Zaman
        October 20, 2014 at 5:45 pm

        Dave misunderstands; wind is not spirit, the wind is wind. Spirit is the inner force of each molecule of air responding to external stimuli, which collectively in motion we call wind.

      • chdwr
        October 20, 2014 at 6:03 pm

        Fred,

        Actually,….its both. Wind is physical, Spirit is metaphorical-metaphysical . Wisdom is understanding…and acting with Wisdom. Solomon inherently and wisely knew that the true mother of the child would rather give up the child then see it die. Economists must see that when abstractions characterizing both equilibrium and dis-equilibrium SEEM to be true, the problem is there is not an integrated/wise third REALITY….that is being considered… and implemented.

      • John McDonald
        October 20, 2014 at 7:33 pm

        Just for the record, as a professing Christian, I certainly do not believe that religious faith is unjustifiable; although Christian apologetics is not my specialty.

        Perhaps I am overstating it when I assert that many (most?) mainstream economists practice a Materialist religion or materialistic religious worldview and it is not quasi.

        Their commitment to “free-market economics” (for lack of a better title) is a fundamental orientation of the heart and mind that is expressed as a story or a set of presuppositions (assumptions which may be true, partially true, or entirely false) which they hold (consistently or inconsistently) about the basic construction of reality, and that provides the foundation on which human beings live and move and have their being.

        To me, that sounds like a reasonable way to describe a religion or a religious worldview.

      • davetaylor1
        October 20, 2014 at 10:24 pm

        Thanks, guys, for your responses, and cwdwr for your supporting argument.

        Fred, I more or less agree with you about “Spirit is the inner force of each molecule”, but when the word was first used they didn’t know about molecules; I’m equating wind with [God’s] energy carrying his spirit of love, but chasing its own tail to form complementary subatomic particles rather than complex molecules.

        John, I think we are both of us quibbling about words. I am trying to highlight the meaning originally encoded in the sense and history of the compound Latin form “re-ligion”: a ligament being a bond between bone and muscle; so why re-tie it? You I think are doing what most people do and sensing its associations with modern (post-Christian) usage. I accept your argument, but the two interpretations are incompatible. Insofar as the first is grounded in the Christian religion, analogies to it in the second are, I think, well described as “quasi religion”.

        Looking back at my own comment, it seems I omitted to explain the relevance of the theology to the nature of Economic Man. Either he is a quasi-Darwinian animal seeking to survive at the expense of others, or he is a cell channelling or conveying the metaphorical equivalents of food, oxygen and energy to the parts of a Mystical Body (i.e. human community) in proportion to their need of it. Our bodies provide a standby level of sustenance, rather less when we sleep and more when parts of the body need it; so would a credit card economy with routine debts written off given proper use, and working credit (personal or corporate) written off insofar as jobs have been done and Nature enabled to regenerate its capital resources (not least the crucial flora recycling the oxygen used by us city-dwelling fauna).

  5. Fred Zaman
    October 17, 2014 at 4:14 pm

    On the spirit of Homo Economicus: Toward a scientific foundation in economics for morality and ethics

    A “neo-Newtonian metaphysics” can harmonize economic science and moral causality through a “spirit-matter identity principle” in which forces interior to matter are evoked by external stimulus fields. It is a truth unspoken in physics that the external forces of Newtonian mechanics are physically incompatible with the general theory of relativity, in which such forces simply don’t exist. It also is truth unspoken, however, that there are two very different, yet empirically identical, interpretations of Newton’s equations of motion and gravitation possible; the “unspoken one” of which provides a more relativistic-consistent, neo-Newtonian metaphysics of internally evoked forces, in which “force fields” are then external “stimulus fields.” This relativized metaphysics of force and field implicates a spirit-matter identity principle that has significance for science in general; but in particular there is one science for which this implication is profound—the science of economics. The above neo-Newtonian metaphysics, in which the identity of spirit and matter is in economics here dubbed the spirit of Homo Economicus, can provide an economic foundation for the morality and ethics of internal evoked forces and external stimulus fields in economics. This truly is another thing that economists could usefully do or call for over the next several years.

  6. Fred Zaman
    October 17, 2014 at 6:41 pm

    What will such an effort by economists entail? It will require a complete rethinking of the theory of economic actors in terms of the aforementioned neo-Newtonian metaphysics, in which macroeconomic forces are not “externally impressed” on economic actors, but rather economic actors, both individually and collectively, respond to external market “stimulus fields” by voluntarily invoking forces within that seek to maintain or increase the momenta of their various enterprises against the contrary forces of other enterprises in the marketplace voluntarily seeking to do the same regarding their own. All work of which in principle proceeds over time in accordance with Newton’s laws of motion metaphysically relativized as previously indicated. It seems quite possible to rethink and expand “neoclassical economics” within this framework, with the added benefit then obtained being that economic actors are fully responsible for the ethics and morality of their efforts in the marketplace. They cannot claim that they are subject to market forces beyond their control; but rather they are willing participants in the marketplace seeking their own interest alone, all the while being systematically indifferent to the interests of others. This is the spirit of Homo Economicus. However, the “marketplace” in which Homo Economicus operates isn’t solely economic, the marketplace of this spirit also — perhaps even primarily – is political and social; and must be understood as such. In America for example the marketplace of Homo Economicus, the economic, political, and social “spirit of the ages” truly, today includes Wall Street, Washington, and Main Street USA.

  7. Fred Zaman
    October 18, 2014 at 4:29 pm

    What real-world economists need to do is bite the bullet that Newtonian physics has shot into the heart of the life sciences and denounce the empirically unsustainable dogma of externally impressed forces, and embrace instead the more relativistic consistent alternative of internal forces evoked by external stimulus fields. The failure of neoclassic equilibrium theory to successfully predict what really happens in the marketplace is due to its treatment of marketplace forces as mechanistic, and externally impressed on macroeconomic “rational actors” whose sole collective objective is to maximize profit above all else. What is a far more real “model” of economics are the aforementioned non-mechanistic forces responding in diverse ways to marketplace stimuli in accordance with neo-Newtonian rules operating in markets that are neither mechanistic nor rational. This indeed is, in the words of Richard Parker, a “heroic response”; but one desperately needed by real-world economists neoclassical economic theory is to successfully overthrown. This will never happen unless the false assumptions on which their theory is based are successfully rebutted.

  8. Fred Zaman
    October 19, 2014 at 8:49 pm

    General relativity has proved true in science the sense datum experienced in free fall that gravitation, as an objective force of nature, simply does not exist. A “relativity-enhanced Newtonian dynamics” (REND) will objectively promote in science the sense datum of personal identity in life; which formulates, conducts, and evaluates experiments whether in the laboratory on in life. Applied to economics, REND will prove false the mechanistic “equilibrium forces” of “rational actor theory” in neoclassical economics. All economic forces, whether in equilibrium or not, are those of persons joined together subjectively in community efforts that are not only economic, but also political and social. REND economics, in which economic forces are internally evoked in response to external stimulus fields IAW neo-Newtonian principles of action-reaction, can provide a theoretical foundation in economics for all such endeavors.

  9. October 21, 2014 at 1:03 pm

    One thing economists must desperately do: their homework
    Comment on Richard Parker’s ‘Seven things that economists could usefully do or call for over the next several years’

    Economists love to give advice. Time to face reality: economists had no solutions, they have no solutions, they are the problem.

    “Late in life, moreover, he [Napoleon] claimed that he had always believed that if an empire were made of granite the ideas of economists, if listened to, would suffice to reduce it to dust.” (Viner, 1963, p. 1)

    There seems to be complete ignorance among both orthodox and heterodox economists that they have nothing to offer in the way of a scientifically founded advice.

    “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum, 1991, p. 30)

    What we currently have are the opinions of folks with political agendas but certainly with nothing resembling a true theory.

    It is a unique fact of the history of economic thought that neither Classicals, nor Walrasians, nor Marshallians, nor Keynesians, nor Marxians, nor Institutionialists, nor Monetary Economists, nor Austrians, nor Sraffaians, nor Evolutionists, nor Game theorists, nor Econophysicists, nor New Keynesians, nor New Classicals ever came to grips with profit (Desai, 2008, p. 10). Hence, ‘they fail to capture the essence of a capitalist market economy’ (Obrinsky, 1981, p. 495), see also (2013).

    Economists do not understand the two most important phenomena in their universe: profit and income (2014). This is like physics before the proper understanding of the elementary concepts force and mass.

    An economist stepping forward and explaining how a crisis could be fixed or how to make the world a better place is in the state of severe self-delusion (2013). And there is no remedy against this than doing one’s scientific homework.

    Stop talking, start thinking. This is a manageable agenda for the next several years.

    Egmont Kakarot-Handtke

    References
    Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave Macmillan, 2nd edition. URL http://www.dictionaryofeconomics.com/article?id=pde2008_P000213.

    Kakarot-Handtke, E. (2013a). Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series, 2207598: 1–16. URL http://ssrn.com/abstract=2207598.

    Kakarot-Handtke, E. (2013b). Debunking Squared. SSRN Working Paper Series, 2357902: 1–5. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2357902.

    Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489792.

    Obrinsky, M. (1981). The Profit Prophets. Journal of Post Keynesian Economics, 3(4): 491–502. URL http://www.jstor.org/stable/4537615.

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

    Viner, J. (1963). The Economist in History. American Economic Review, 53(2): pp. 1–22. URL http://www.jstor.org/stable/1823845.

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