Home > Uncategorized > Paul Krugman — nothing but a die-hard neoclassical economist

Paul Krugman — nothing but a die-hard neoclassical economist

from Lars Syll

In his review of Mervyn King’s The End of Alchemy: Money, Banking, and the Future of the Global Economy Krugman writes:

Is this argument right, analytically? I’d like to see King lay out a specific model for his claims, because I suspect that this is exactly the kind of situation in which words alone can create an illusion of logical coherence that dissipates when you try to do the math. Also, it’s unclear what this has to do with radical uncertainty. But this is a topic that really should be hashed out in technical working papers.

This passage really says it all.

Despite all his radical rhetoric, Krugman is — where it really counts — nothing but a die-hard neoclassical economist. Just as people like Milton Friedman, Robert Lucas or Greg Mankiw.

The only economic analysis that Krugman and other mainstream economists accept is the one that takes place within the analytic-formalistic modeling strategy that makes up the core of mainstream economics. All models and theories that do not live up to the precepts of the mainstream methodological canon are pruned. You’re free to take your models — not using (mathematical) models at all is, as made clear by Krugman’s comment on King, totally unthinkable —  and apply them to whatever you want – as long as you do it within the mainstream approach and its modeling strategy. If you do not follow this particular mathematical-deductive analytical formalism you’re not even considered doing economics. ‘If it isn’t modeled, it isn’t economics.’  

That isn’t pluralism.

That’s a methodological reductionist straightjacket.

So, even though we have seen a proliferation of models, it has almost exclusively taken place as a kind of axiomatic variation within the standard ‘urmodel,’ which is always used as a self-evident bench-mark.

Applying closed analytical-formalist-mathematical-deductivist-axiomatic models, built on atomistic-reductionist assumptions to a world assumed to consist of atomistic-isolated entities, is a sure recipe for failure when the real world is known to be an open system where complex and relational structures and agents interact. Validly deducing things in models of that kind doesn’t much help us understanding or explaining what is taking place in the real world we happen to live in. Validly deducing things from patently unreal assumptions — that we all know are purely fictional — makes most of the modeling exercises pursued by mainstream economists rather pointless. It’s simply not the stuff that real understanding and explanation in science is made of. Just telling us that the plethora of mathematical models that make up modern economics  ‘expand the range of the discipline’s insights’ is nothing short of hand waving.

No matter how many thousands of ‘technical working papers’ or models mainstream economists come up with, as long as they are just ‘wildly inconsistent’ axiomatic variations of the same old mathematical-deductive ilk, they will not take us one single inch closer to giving us relevant and usable means to further our understanding and explanation of real economies.

King knows that. Krugman obviously not.

 

  1. jlegge
    July 13, 2016 at 2:37 pm

    Mathematics is much broader than you suggest here, work on chaos and complexity demonstrates ways in which an apparently coherent system can behave in a totally unexpected way. To assert that there is something called “radical uncertainty” that cannot be explained by a causal system turns science into religion. God didn’t cause the GFC: venal bankers and complicit governments did.

    The economic modellers the Krugman admires and Lars Syll criticizes restrict themselves to models limited to ordinary differential equation, mostly linear ones. Krugman makes the deep assumption that an economist can simultaneously admit and deny the complexity of the real world; denying it by assuming that individual interactions can be studied in isolation. In reality this is only approximately true for microscopic changes in weakly linked systems.

    Economists love their linear ordinary differential equations because they have analytic solutions from which they can deduce precise answers to every question. Unfortunately the universe, including a market economy can only be descried approximately, and then analysed using partial differential equations, mostly non-linear. “Radical uncertainty” cannot occur in a system of ordinary linear differential equations, but it pops up all over the place when systems are described with partial differential equations or even non linear ordinary ones.

    Bureaucrats and politicians choosing to take advice developed from simplistic models and ignoring complex reality created the preconditions for Brexit. They are now taking actions which will exacerbate similar anti EU sentiment in Spain and Portugal. http://www.johnmlegge.com/blog/driving-brexit-catastrophe/

  2. Alan
    July 13, 2016 at 3:59 pm

    Quite so. If only they followed Smith who stated: “I have no great faith in political arithmetic, computations”. For discussion see chapter 2 in Fleischacker.

  3. July 14, 2016 at 11:12 am

    Economics: The Battle of Frogs and Mice is over
    Comment on Lars Syll on ‘Paul Krugman — nothing but a die-hard neoclassical economist’ and on some beside-the-point comments on the parallel thread

    The Battle of Frogs and Mice,* a.k.a. Heterodoxy vs. Orthodoxy, has become rather stagnant, so let us shorten the agony with some clear cut arbitral awards.

    Syll: “Despite all his radical rhetoric, Krugman is — where it really counts — nothing but a die-hard neoclassical economist.”

    Krugman says on his blog “… most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”

    Judgment:* Krugman is a neoclassical economist, always was, and always said so, and everybody got it. However, the decisive point is not that Krugman is a bad person because he is a Neoclassical but that his starting point, i.e. the neoclassical axiom set, is FALSE. This invalidates the neoclassical approach as a whole. Not to realize the blatant blunder is the very fault of ALL neoclassical economists.

    Krugman: “… this is exactly the kind of situation in which words alone can create an illusion of logical coherence that dissipates when you try to do the math.” In other words, formalization and modeling can be helpful to clarify the issue.

    Georgescu-Roegen: “Lest this position is misinterpreted again by some casual reader, let me repeat that my point is not that arithmetization of science is undesirable. Whenever arithmetization can be worked out, its merits are above all words of praise. My point is that wholesale arithmetization is impossible, that there is valid knowledge even without arithmetization, and that mock arithmetization is dangerous if peddled as genuine.”

    Syll: “That’s a methodological reductionist straightjacket.”

    Judgment: Krugman and Georgescu-Roegen are right. Lars Syll is wrong. From the fact that formal neoclassical models are indeed false does NOT follow that formalization is wrong, only that economists in general and Neoclassicals in particular are incompetent formalizers and model builders.

    Syll: “The only economic analysis that Krugman and other mainstream economists accept is the one that takes place within the analytic-formalistic modeling strategy that makes up the core of mainstream economics.”

    Krugman on several occasions to Syll: “where’s your model?” and “what’s your alternative?”

    Judgment: Neither Heterodoxy in general nor Lars Syll in particular has ever presented a viable alternative, a.k.a. progressive research program, as replacement for the degenerated orthodox program. This is why economics is stuck in the proto-scientific swamp.

    Syll: “That isn’t pluralism.”

    Judgment: Science is about clear-cut true/false and the very opposite of the pluralism of false theories. Either Orthodoxy is true or Heterodoxy is true, then either Orthodoxy is thrown out of science or Heterodoxy. Except both are false, then both are thrown out of science.

    Syll: “Validly deducing things from patently unreal assumptions — that we all know are purely fictional — makes most of the modeling exercises pursued by mainstream economists rather pointless.”

    Aristotle: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

    Judgment: Lars Syll and Aristotle are right. Economics is currently based upon false axioms. Both Walrasian and Keynesian axioms have to be fully REPLACED in order to produce scientific knowledge of the economy. After more than 200 years of churning out scientific garbage this task has top priority. Concrete proposals are urgently needed. Lars Syll has none. Without sound heterodox axioms no paradigm shift can ever happen.

    Hickey: “There is nothing wrong with using a simple IS-LM approach in some cases as a gadget.”

    Judgment: IS-LM has been already dead in the cradle 85 years ago. I=S is false since Keynes but neither Krugman nor Post Keynesians have gotten it until this day (2014).

    Syll: “No matter how many thousands of ‘technical working papers’ or models mainstream economists come up with, … they will not take us one single inch closer to giving us relevant and usable means to further our understanding and explanation of real economies.”

    Judgment: True, but neither will repetitive heterodox critique of the Swedish ilk further our understanding of how the actual economy works.

    The Battle of Frogs and Mice is over. From the standpoint of science BOTH Krugman and Syll lost. So, forget them and start NOW doing REAL science.

    Egmont Kakarot-Handtke

    References
    Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2392856.

    * Wikipedia https://en.wikipedia.org/wiki/Batrachomyomachia
    ** All judgments are backed in greater detail. In case of doubt, see blog or working
    papers before jumping to silly conclusions/comments
    http://axecorg.blogspot.de/
    http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1210665

  4. michael.deyoung
    July 15, 2016 at 4:33 am

    I am not big on hatchet jobs but this is a good one.

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