Home > Uncategorized > Mainstream economics — an emperor turned out to be naked

Mainstream economics — an emperor turned out to be naked

from Lars Syll

The main reason why the teaching of microeconomics (or of “ micro foundations” of macroeconomics) has been called “autistic” is because it is increasingly impossible to discuss real-world economic questions with microeconomists – and with almost all neoclassical theorists. They are trapped in their system, and don’t in fact care about the outside world any more. If you consult any microeconomic textbook, it is full of maths (e.g. Kreps or Mas-Colell, Whinston and Green) or of “tales” (e.g. Varian or Schotter), without real data (occasionally you find “examples”, or “applications”, with numerical examples – but they are purely fictitious, invented by the authors).

an-inconvenient-truth1At first, French students got quite a lot of support from teachers and professors: hundreds of teachers signed petitions backing their movement – specially pleading for “pluralism” in teaching the different ways of approaching economics. But when the students proposed a precise program of studies … almost all teachers refused, considering that is was “too much” because “students must learn all these things, even with some mathematical details”. When you ask them “why?”, the answer usually goes something like this: “Well, even if we, personally, never use the kind of ‘theory’ or ‘tools’ taught in micoreconomics Courses … surely there are people who do ‘use’ and ‘apply’ them, even if it is in an ‘unrealistic’, or ‘excessive’ way”.

But when you ask those scholars who do “use these tools”, especially those who do a lot of econometrics with “representative agent” models, they answer (if you insist quite a bit): “OK, I agree with you that it is nonsense to represent the whole economy by the (intertemporal) choice of one agent –- consumer and producer — or by a unique household that owns a unique firm; but if you don’t do that, you don’t do anything !”

Bernard Guerrien

Yes indeed — “you don’t do anything!”  

Twenty years ago Phil Mirowski was invited to give a speech on themes from his book More Heat than Light at my economics department in Lund, Sweden. All the mainstream neoclassical professors were there. Their theories were totally mangled and no one — absolutely no one — had anything to say even remotely reminiscent of a defense. Being at a nonplus, one of them, in total desperation, finally asked “But what shall we do then?”

Yes indeed — what shall they do? The emperor turned out to be naked.

  1. Paul Davidson
    May 20, 2017 at 6:51 pm

    Two yeas ago I gave a talk to the University of Chicago’s graduate students in economics group [ this still can be seen on UTube] where I explained the difference between Keynes-Post Keynesian economics, and monetarism, Neoclassical synthesis Keynesianism and New Keynesianism. theories.
    Before my talk I was warned by Jim Hechman of the economics faculty [who had provided the invitation for me to talk] that the macroeconomists of the department were sharpening their blades to show me up before the students. However when at the end of my talk I asked for questions none of the macro faculty who were there spoke up at all.

    Says something about the Post Keynesian power!

    Paul Davidson

    • Mark Johnson
      May 21, 2017 at 12:31 am

      Paul, what is behind the fact that you were invited by Hechman?

  2. May 20, 2017 at 6:54 pm

    Naked it is.
    Actually, I believe that the entire neoclassical ideology is the wardrobe for predatory corporate capitalism, often the elephant in the room but rarely naked.
    Sorry for mixing metaphors, but we live in neometaland.

  3. Jeff
    May 24, 2017 at 1:31 am

    But what shall they do? Simple! Devise theories that can be tested exactly in economies of fewer than 10 people total and then do all the math from the ground up. This technique sounds under-powered at first, until you realize that you can calculate the exact error in common assumptions like the idea that economies live on the production possibilities frontier and that pareto-optimal outcomes describe an actual real thing.

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