Home > Uncategorized > What is wrong with economic theory

What is wrong with economic theory

from Lars Syll

wea-ebookcover-syll-225x300“A wonderful set of clearly written and highly informative essays by a scholar who is knowledgeable, critical and sharp enough to see how things really are in the discipline, and honest and brave enough to say how things are. A must read especially for those truly concerned and/or puzzled about the state of modern economics.”
Tony Lawson

Table of Contents
Introduction
What is (wrong with) economic theory?
Capturing causality in economics and the limits of statistical inference
Microfoundations – spectacularly useless and positively harmful
Economics textbooks – anomalies and transmogrification of truth
Rational expectations – a fallacious foundation for macroeconomics
Neoliberalism and neoclassical economics
The limits of marginal productivity theory

About the author
Lars Pålsson Syll received a PhD in economic history in 1991 and a PhD in economics in 1997, both at Lund University, Sweden. Since 2004 he has been a professor of social science at Malmö University, Sweden. His primary research areas have been in the philosophy and methodology of economics, theories of distributive justice, and critical realist social science. As philosopher of science and methodologist, ​he is a critical realist and an outspoken opponent of all kinds of social constructivism and postmodern relativism. As a ​social scientist and economist, ​he is strongly influenced by John Maynard Keynes and Hyman Minsky. He is the author of Social Choice, Value and Exploitation: an Economic-Philosophical Critique (in Swedish, 1991), Utility Theory and Structural Analysis(1997), Economic Theory and Method: A Critical Realist Perspective (in Swedish, 2001), The Dismal Science (in Swedish, 2001), The History of Economic Theories(in Swedish, 4th ed., 2007), John Maynard Keynes (in Swedish, 2007), An Outline of the History of Economics (in Swedish, 2011), as well as numerous articles in scientific journals.

World Economics Association Books

  1. September 3, 2017 at 11:35 pm

    Felicitations!

  2. Rob Reno
    September 22, 2017 at 5:14 pm

    This was the first books I read from the WEA Paperbacks and highly informative. I’m on my second read now. I found your comments on libertarianism spot on. I was wondering if you were familiar with Robert H. Nelson’s “Economics as Religion” and what you thought about it?

    It seems to me that it is not just mainstream economics that is in crisis, but global civilization and culture that is entering into a crisis that capitalism (and other factors, such as the loss of civil discourse of any meaningful depth here in the US) has largely created in the evolution globalization. You address this in the opening paragraph “On use and misuse” noting “Modern economics is sick.” Excuse the hyperbole, but I think this is prophetic in the best sense of the scholarly meaning of the term:

    “A society where we allow the inequality of incomes and wealth to increase without bounds, sooner or later implodes. A society that promotes unfettered selfishness as the one and only virtue, erodes the cement that keeps us together, and in the end we are only left with people in the ice cold water of egoism and greed.” (Lars Pålsson Syll 2016, 163)

    Here in the US, Donald Trump is a symptom of this civilizational and cultural crisis brought about in part (perhaps mainly) by mainstream economics and the rise of another incarnation of predatory capitalism that seems to periodically gain ascendency in world history. Thomas C. Leonard in his Illiberal Reformers — which I’m reading now — covers this early period and the professionalization of the field of economics in what he calls the “Progressive Era crusade to dismantle laissez-faire and remake American economic life through the agency of the Administrative state.” (Leonard 2016, 10)

    It seems the Progressive Era idea of leaving economics to the experts didn’t work out here in the US as they envisioned, and the institutions became captured by secular materialist culture after shedding their original religious (i.e., social gospel movement) idealism. What we are left with here in the US is an impoverished market fundamentalism wedded to fundamentalist religious zealots and/or secular materialists motivated by narrow libertarianism or a confused mixture of both. Many so-called religionists are unwittingly secular materialists whose true religion is market fundamentalism and whose god is money — hence the popularity of the “prosperity gospel.”

    I think it is critical to understand the philosophy of science and its application to economics and the underlying reasons mainstream economics fails as “science.” But there are some that think that science alone has the answer — secular materialists — and either refuse or are unable to understand the limits of science as a human endeavor dismissing philosophy and religion as having nothing to offer in terms of insight regarding ideas/ideals contributing to the path forward out of this current global crisis. We some of this in the drive to make economics into a “true science” by incorporating modern evolutionary theory as the new foundation for thinking and theorizing about economics. While I think economic models certainly can be improved by ideas such as cooperation vs. competition and dynamic complex systems modeling and viewing the economy from a systems biology perspective, I also think if we reify these ideas we run the risk of ending up once again having economics coopted by the basic human nature of unmitigated “self-interest” — greed is good — ideology but with a new form of ideological superstructure justifying the same old predatory capitalism.

  3. September 24, 2017 at 7:24 am

    Rob Reno> We some of this in the drive to make economics into a “true science” by incorporating modern evolutionary theory as the new foundation for thinking and theorizing about economics.

    I do not know Reno’s background and this may be an useless information. There is a rather strong strand of economics among heterodox economics. It is evolutionary economics. The origin of the school is quite old, because it can go back to an article of Thorstein Veblen more than one hundred years. Unfortunately, there is no good book which covers many fields of evolutionary economics as long as I know. Someone can give better information.

    • September 24, 2017 at 11:08 pm

      Yoshinori, I know Jason Potts, who has specialised in Evolutionary Economics (see https://en.wikipedia.org/wiki/Jason_Potts), but let me caution you on this. His interest is in evolution of economic species, whereas mine is in the logic of the evolution of genus, i.e. an ordering in time which explains the transition from one level (e.g. atoms) to another (e.g life), and by the same argument those from a functional economy via a social economy monetarily controlled to uncontrolled chrematism interfering with social and ecological self-control. I can’t offer you a book on this because I can’t even find anyone brave enough to even discuss it, let alone publish it. Poor me! but really, poor world.

      • September 25, 2017 at 7:52 am

        I am also an evolutionary economist in a wide sense. I am one of founding members of Japanese Association for Evolutionary Economics and its second president. But, as you hinted, there are many species and varieties in evolutionary economics and it is even now difficult to find a book which explains the common framework for majority of these varieties. The best hope we can make for the moment is that this state of coexisting varieties may result in fruitful crossovers and may create a new good economics.

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