Home > Uncategorized > Mainstream economics — a case of explanatory disaster

Mainstream economics — a case of explanatory disaster

from Lars Syll

To achieve explanatory success, a theory should, minimally, satisfy two criteria: it should have determinate implications for behavior, and the implied behavior should be what we actually observe. These are necessary conditions, not sufficient ones. Rational-choice theory often fails on both counts. The theory may be indeterminate, and people may be irrational. e201ada1b6In what was perhaps the first sustained criticism of the theory, Keynes emphasized indeterminacy, notably because of the pervasive presence of uncertainty. His criticism applied especially to cases where agents have to form expectations about the behavior of other agents or about the development of the economy in the long run. In the wake of the current economic crisis, this objection has returned to the forefront. Before the crisis, going back to the 1970s, the main objections to the theory were based on pervasive irrational behavior. Experimental psychology and behavioral economics have uncovered many mechanisms that cause people to deviate from the behavior that rational-choice theory prescribes.

Disregarding some more technical sources of indeterminacy, the most basic one is embarrassingly simple: how can one impute to the social agents the capacity to make the calculations that occupy many pages of mathematical appendixes in the leading journals of economics and political science and that can be acquired only through years of professional training? …

I believe that much work in economics and political science that is inspired by rational-choice theory is devoid of any explanatory, aesthetic or mathematical interest, which means that it has no value at all. I cannot make a quantitative assessment of the proportion of work in leading journals that fall in this category, but I am confident that it represents waste on a staggering scale.

Jon Elster

Most mainstream economists want to explain social phenomena, structures and patterns, based on the assumption that the agents are acting in an optimizing (rational) way to satisfy given, stable and well-defined goals.

The procedure is analytical. The whole is broken down into its constituent parts so as to be able to explain (reduce) the aggregate (macro) as the result of the interaction of its parts (micro). Building their economic models, modern mainstream economists ground their models on a set of core assumptions describing the agents as ‘rational’ actors and a set of auxiliary assumptions. Together these assumptions make up the base model of all mainstream economic models. Based on these two sets of assumptions, they try to explain and predict both individual and social phenomena.

The core assumptions typically consist of completeness, transitivity, non-satiation, expected utility maximization, and consistent efficiency equilibria.

When describing the actors as rational in these models, the concept of rationality used is instrumental rationality – choosing consistently the preferred alternative, which is judged to have the best consequences for the actor given his in the model exogenously given interests and goals. How these preferences, interests, and goals are formed is not considered to be within the realm of rationality, and a fortiori not constituting part of economics proper.

The picture given by this set of core assumptions – ‘rational choice’ – is a rational agent with strong cognitive capacity that knows what alternatives she is facing, evaluates them carefully, calculates the consequences and chooses the one – given her preferences – that she believes has the best consequences according to her. Weighing the different alternatives against each other, the actor makes a consistent optimizing choice and acts accordingly.

Besides the core assumptions the model also typically has a set of auxiliary assumptions that spatio-temporally specify the kind of social interaction between ‘rational’ actors that take place in the model. These assumptions can be seen as giving answers to questions such as: who are the actors and where and when do they act; which specific goals do they have; what are their interests; what kind of expectations do they have; what are their feasible actions; what kind of agreements (contracts) can they enter into; how much and what kind of information do they possess; and how do the actions of the different individuals interact with each other.

So, the base model basically consists of a general specification of what (axiomatically) constitutes optimizing rational agents and a more specific description of the kind of situations in which these rational actors act (making the auxiliary assumptions serve as a kind of restriction of the intended domain of application for the core assumptions and the deductively derived theorems). The list of assumptions can never be complete since there will always be unspecified background assumptions and some (often) silent omissions (usually based on some negligibility and applicability considerations). The hope, however, is that the ‘thin’ list of assumptions shall be sufficient to explain and predict ‘thick’ phenomena in the real, complex, world.

These models are not primarily constructed for being able to analyze individuals and their aspirations, motivations, interests, etc., but typically for analyzing social phenomena as a kind of equilibrium that emerges through the interaction between individuals.

Now, of course, no one takes the base model (and the models that build on it) as a good (or, even less, true) representation of reality (which would demand a high degree of appropriate conformity with the essential characteristics of the real phenomena, that, even when weighing in pragmatic aspects such as ‘purpose’ and ‘adequacy,’ it is hard to see that this ‘thin’ model could deliver). The model is typically seen as a kind of thought experimental ‘as if’ bench- mark device for enabling a rigorous mathematically tractable illustration of social interaction in an ideal-type model world, and to be able to compare that ‘ideal’ with reality. The ‘interpreted’ model is supposed to supply analytical and explanatory power, enabling us to detect and understand mechanisms and tendencies in what happens around us in real economies.

Based on the model – and on interpreting it as something more than a deductive-axiomatic system – predictions and explanations can be made and confronted with empirical data and what we think we know. The base model and its more or less tightly knit axiomatic core assumptions are used to set up further ‘as if’ models from which consistent and precise inferences are made. If the axiomatic premises are true, the conclusions necessarily follow. But if the models are to be relevant, we also have to argue that their precision and rigour still holds when they are applied to real-world situations. They often do not. When addressing real economies, the idealizations and abstractions necessary for the deductivist machinery to work simply do not hold.

If the real world is fuzzy, vague and indeterminate, then why should our models build upon a desire to describe it as precise and predictable? The logic of idealization, that permeates the base model, is a marvellous tool in mathematics and axiomatic-deductivist systems, but a poor guide for action in real-world systems, where concepts and entities are without clear boundaries and continually interact and overlap.

Being told that the model is rigorous and amenable to ‘successive approximations’ to reality is of little avail, especially when the law-like (nomological) core assumptions are highly questionable and extremely difficult to test. Being able to construct ‘thought-experiments’ depicting logical possibilities does not take us very far. An obvious problem with the mainstream base model is that it is formulated in such a way that it realiter is extremely difficult to empirically test and decisively ‘corroborate’ or ‘falsify.’

As Elster writes, such models have — from an explanatory point of view — indeed “no value at all.” The ‘thinness’ is bought at too high a price, unless you decide to leave the intended area of application unspecified or immunize your model by interpreting it as nothing more than two sets of assumptions making up a content-less theoretical system with no connection whatsoever to reality.

  1. lobdillj
    June 17, 2019 at 8:30 pm

    Amen! This is a true fact, worthy of all men to be received.

  2. Helen Sakho
    June 18, 2019 at 12:22 am

    Amen indeed! Their theories are as deadly as the “e-junk” that they export to the poorest counties in the world so they can rebuild the metal contained therein from scratch in the hope of a better life for their children, neighbours, and families. That is to say, if the rising smoke allows them to live long enough.

  3. Ikonoclast
    June 18, 2019 at 1:27 am

    Humans use heuristics and act in extemporizing ways to satisfice variable, unstable and ill-defined goals. Even this statement grossly oversimplifies matters. Humans use not just heuristics but rather (and these may overlap) a complex of instincts, learned responses, inculcated values, enculturations, acculterations, heuristics and finally crude calculations of personal, or at best, local social rationality but certainly not full societal or global rationality.

    I think we need to understand that conventional (classical and neoclassical) economics does not describe, it prescribes. Thus it is not positive economics, it is normative economics. In turn, we must understand that positive (objective or scientific) economics is impossible outside of those quantities which can be measured by hard science.

    In hard science, real physical phenomena are measured in the seven SI base units. These are;

    s – second (time)
    m – metre (length)
    kg – kilogram (mass)
    A – ampere (electric current)
    K – kelvin (temperature)
    mol – mole (amount of substance)
    cd – candela (luminous intensity )

    Any discipline which attempts to measure, describe, prescribe, proscribe or simply explain socioeconomic reality outside the bounds of these measures is not objective and cannot be reduced to science. What is to done with such a subject? It must be returned to the domain of moral philosophy. More than anything, conventional economics functions to provide calculations which purport to obviate the need for ethical decisions. The so-called invisible hand of the given constructed market, constructed in one way when it could have been, and still could be, constructed in many different ways, is only invisible when the historical and institutional construction of the market is invisible (left unexamined and considered natural). When the constructed and institutionalized nature of the market is made visible by critique, its “invisible hand” is seen rather to be an auto-pilot system for ethical decisions. That is to say rational calculations in a base unit (money) which is a notional, not a scientific unit, are used to prescribe the allocations of resources for human needs (an essentially ethical set of decisions).

    That these “rational calculations” are arbitrary can be seen particularly in the split between the allocation-of-income “market” on the one hand (reward for work and for instituted ownership) and the consumption market on the other hand, the latter being a slightly truer market in some senses. These markets are qualitatively different in many ways.

    Let me give one example. One person can risk life and limb (as I did as a young man laboring in a sand, gravel and rock screening business with non-existent safety procedures) but another man only risks his capital. This capital most usually being inherited or “earned” circuitously from earlier capital or from speculation or windfall gains of some type. Yet, the rhetoric is that the capitalist requires return for his “risk”. The industrial worker generally receives no return for risk. The jobs are generally risky across the board so that it requires especial risk to life and limb to attract anything like “danger money”. There are some exceptions in large-scale, corporate extractive and heavy industry where super-profits plus government subsidies and tax holidays (which corporations so often receive) enable high wages to create a sub-set “aristocracy of labor”.

    The issues of the general arbitrariness of reward for work effort, for ownership of capital and for ownership of intellectual property are much wider than the example above but I need to keep this post reasonably short. Even if the consumption goods and services market can said to have some rationality (to work on a kind of rational calculation of utility by the consumer), the “personal incomes markets” can be seen to have no such rationality but to work as much or more on social and political power and on already accumulated capital power as on competitive market power so-called. In turn, participation in goods and services markets presumes a minimum wealth condition. If that minimum wealth condition cannot be met by a person then the formal goods and services market has little to offer to a person.

    A democratic and moral decision needs to be taken to institute minimum rights as access to paid work if desired, access to education, health care and so on. At first sight this just looks like a standard (perhaps Scandinavian) social democracy and mixed economy prescription. But looked at more radically, we can see that “churning” (taxing excess profits to redistribute as welfare) could be obsoleted by addressing the arbitrary inequalities of income arising in the first place from the current juridical structures, the instituted laws of ownership and rights to income in the first place.

  4. June 18, 2019 at 5:25 am

    We need more of this criticism of mainstream economics. It has a positively Evil results [even intentional] when converted to neo-liberal policy . For example; the scandal of having homeless people sleeping rough in a wealthy country. It is straight out scandalous and flies in the face of the legitimacy of any government who permits it. The overarching duty is to look after the safety and well being of every citizen

  5. Ikonoclast
    June 18, 2019 at 9:59 am

    John Doyle,

    I agree. I find it bizarre and disgraceful for a developed nation to have homeless people. There are easily adequate resources to house and care for all.

  6. Frank Salter
    June 18, 2019 at 10:33 am

    If there is to be any progress in economic analysis, it is necessary to actually make progress rather than keep reiterating the same mantra. It may be correct but ultimately pointless to keep on doing it. If the models talked about in generalities are examined, the all fail the quantity calculus test for theoretical validity, which leaves them as simple curve fitted relationships. This gives them an erroneous semblance of validity.

    Those of you in academia need to press this point relentlessly.

  7. Ken Zimmerman
    June 20, 2019 at 2:34 pm

    Again, allow me to offer an alternative. I will offer three important guidelines to keep in mind if empirical research is your goal, with theory to follow wherever that research leads. After all, even the famous, or is it infamous Isaac Newton first observed the apple fall and then wrote up the theory of gravity.

    Before I lay out the guidelines, however, I want to provide the first consideration in any research in the social sciences, and it can be argued, in the physical sciences as well. That consideration is detailed familiarity and understanding of the cultural-historical setting about which one is doing research and attempting to reach conclusions. Just in the past two weeks two respected journalists have been embarrassed by their failures to do their homework here. First, journalist Naomi Wolf discovered on live radio that she had misinterpreted key historical terms in her new book, “Outrage,” leading her to draw the wrong conclusions. A week later, journalist Cokie Roberts, too, got a quick smack down when she claimed on NPR that she couldn’t find any incidence of abortion advertised in 19th century newspapers, a claim quickly disproved by historians. Making a fool of yourself is not difficult when you really don’t understand what it is you are writing about.

    Now the three guidelines. Social is the name of a type of momentary association which is characterized by the way it gathers together into new shapes. Thus, we have what has already been assembled, and what is being assembled. A third movement is what is being disassembled we’ll not go into here. Humans are gathered into the social, but so are non-humans. Non-humans must be actors and not simply the hapless bearers of symbolic projection. But this activity should not be the type of agency associated up to now with matters of fact or natural objects. We cannot apply a symbolic or a naturalist type of causality to non-humans. Rather, we must give non-humans a type of agency that is more open than the traditional natural causality-but more efficient than the symbolic one. For example, most biologists and anthropologists give genes an active role in human evolution and cultural history.

    Second, which direction is the explanation going? Is the list of what is social in the end the same limited repertoire that has been used to explain (away) most of the other elements? If the social remains stable and is used to explain some situation, we’re moving in the wrong direction. For instance, historians and sociologists of technology provide dozens of social explanations for technology change, from revolutions to “the spirit of genius.” Treating the social as a fixed factor rather than a process of assembling the psychological, economic, geographical, biological, etc. to hold together the social, or at other times break it apart. The social is always provisional. There is no guarantee of durability, certainty, or even functionality. McNeill’s 1976 book ‘Plagues and Peoples’ is an example of this treatment of the social, since what is to be associated is being modified by the inclusion of rats, viruses, and microbes into the definition of what is to be `collected’ in an empire. Cronon’s ‘Nature’s Metropolis: Chicago and the Great West’ (1991) is a masterpiece in this regard because no hidden social force is added to explain the progressive composition of the metropolis itself. This is also what has made much of the history of science and technology and the sociology of art so important for the recent development of the social sciences.

    Finally, a more difficult guideline is whether a study aims at reassembling the social or still insists on dispersion and deconstruction. So much of social science today, and particularly economics are focused on dispersion, destruction, and deconstruction of the social. These are what we need to overcome. It’s much more important to check out what are the new institutions, procedures, and concepts able to collect and to reconnect the social. How are stability, change, reform, and durability, along with shareability and universality created in the assembled social? Nobody expresses this intent better that the followers of Actor-Network-Theory (ANT). It is no longer acceptable to limit actors to the role of informers offering cases of some well-known types. You must grant them back the ability to make up their own theories of what the social is made of. Your task is no longer to impose some order, to limit the range of acceptable entities, to teach actors what they are, or to add some reflexivity to their blind practice. You have `to follow the actors themselves’, that is try to catch up with their often wild innovations in order to learn from them what the collective existence has become in their hands, which methods they have elaborated to make it fit together, which accounts could best define the new associations that they have been forced to establish. We must be cautious here since we don’t want to become an active part of making these association for others. Something for which, unfortunately economists are well-known.

    • Robert Locke
      June 21, 2019 at 7:37 am

      Ken, I became interested in the transformation of higher education, in the period after WWII, of knowledge from the descriptive to the prescriptive policy mode, because this transformation was occurring in fields of knowledge in higher education rapidly in the university I attended during my time there (UCLA, 1954-65). There was an immense amount of enthusiasm about turning higher education into prescriptive social science in the structural transformation of educational institutions during the period. I got involved in the debate, as it influenced the study of history, in the late 1960s. I have participated in this debate ever since, with a growing realization that the attempt to turn management and economics into prescriptive science has failed, primarily in anglo-saxonia. Attempts to point this out in comparative evolution of knowledge systems in social contexts, have been met with stony silence. The establishment does not like the presumption that social sciences can be turned into useful prescriptive sciences, challenged. But Poincare was right, sociology has the most method and the least results of any science.

      • Ken Zimmerman
        June 21, 2019 at 2:02 pm

        Robert, I don’t agree that the effort to turn management and economics into prescriptive science has failed. Current mainstream economics is the major example of that non-failure. Economists (mainstream) oversee all the major elements of the economy, public and private, including the Fed and the stock markets. Economists are published in all the major media forms, from newspapers, internet, blogs, etc. Our entire economy in the west is based on the input and criteria provided by economics and economists. You may dislike and disagree with what these economists recommend and their prescriptions for a well-functioning nation and economy, but you simply can’t deny that these will be implemented in the “real world.” Even over objections of folks like you and me.

        About sociology. It has become shiny and locked into multiple theories that no longer debate one another. When I was in graduate school in the 70s, sociology was still just a bit radical and tied a lot of its work closely to field studies. That’s no longer the case today.

        Whether comparative studies of the evolution of knowledge and knowledge forms is a winner or a loser in the broader world depends, in my experience on how it’s presented. I present it simply, without such words as evolution or comparative. I also show it as a tool to avoid embarrassing public mistakes. This appeals to politicians and bureaucrats.

      • Robert Locke
        June 21, 2019 at 8:17 pm

        Ken, we sit in Europe today with a political crisis induced to a large extent by the academic study of economics. I’m talking about the people who have pushed the financialization of the world economy, largely educated in American financial-economics, and experienced in working for firms like Goldman Sachs, who have pushed policies of austerity to clean up the mess brought on by the collapse of investor capitalism, thereby destroying any enthusiasm that European peoples had for the European union. If you can’t see this connection, you and I are indeed on different tracks.

      • Ken Zimmerman
        June 22, 2019 at 2:40 am

        Robert, yes, the consequences of putting into practice the expert advice of economists have often not been positive. Often, they’ve been harmful. Particularly in terms of inequality, political stability, and the health of democracy. But most economists today are interested in these consequences. They’re interested in GDP, corporate earnings, and inflation. If you don’t like this picture, which it appears you do not, use the tools at your disposal to change it. Vote against it, lobby against it, picket, boycott if necessary, and urge others to do the same.

      • Rob
        June 21, 2019 at 9:00 pm

        I have participated in this debate ever since, with a growing realization that the attempt to turn management and economics into prescriptive science has failed, primarily in anglo-saxonia. Attempts to point this out in comparative evolution of knowledge systems in social contexts, have been met with stony silence. The establishment does not like the presumption that social sciences can be turned into useful prescriptive sciences, challenged. But Poincare was right, sociology has the most method and the least results of any science. ~ Robert Locke

        We can think of reality on meta-levels.

        we sit in Europe today with a political crisis induced to a large extent by the academic study of economics. I’m talking about the people who have pushed the financialization of the world economy, largely educated in American financial-economics, and experienced in working for firms like Goldman Sachs, who have pushed policies of austerity to clean up the mess brought on by the collapse of investor capitalism, thereby destroying any enthusiasm that European peoples had for the European union. If you can’t see this connection, you and I are indeed on different tracks. ~ Robert Locke

        First-person perspective trumps third-person perspective in some contexts, especially when aiming for the whole person in context. “Understanding is intimately tied to the individual’s being-in-time.” (Addelson 1995, 8):

        Economics is about how people organise and manage the production of goods and services, as well as the resources that are used in the process of production. The subject matter of economics covers enormous range of issues, problems, and questions, including questions about how production is organised; why particular activities are undertaken and whether they should be; the nature and functions of the institutions that are associated with organising and carrying out production activities – from banks and manufacturers to shipping and training; and the efficiency of the production process – what criteria should be used to evaluate them, what purposes they serve, and so on. It is the task of economic theory to elucidate these problems and issues which all have to do with people's activities and, at the root of their activities, their decisions and plans. (Addelson 1995, 3)

        Although it did not matter much at the time, from my earliest encounter with neoclassical economics I remember feeling uneasy about this portrayal of decision-making and choice. The 'theory of consumer choice', unfortunately, was the undergraduate's introduction both to economics and to a neoclassical model. Explaining the purpose of this model, our lecturer spoke about selecting an optimal shopping basket. In spite of the penchant that undergraduates are supposed to have for swallowing whole whatever they are told, the analogy of compiling an optimal basket when faced with an income constraint, while detailing a huge range of possible things on which one might spend money, seemed a long way from the experience of going shopping or from buying the things that family members want. I imagine that students still feel this way about the models, and in teaching economics to graduate management students (who are a critical bunch as the best of times) I used to try to make these models more palatable, arguing – using Hayak's terminology – that one could think of them as attempting to bring out the logic of what is involved in making effective (optimising) decisions, i.e., as a 'pure logic of choice'. (Addelson 1995, 3)

        I now think that this sort of rationalisation is specious. Part of the purpose of this book is to substantiate the assertion that neoclassical models of 'decision-making' and 'choice' will always be unpalatable, because they have nothing to contribute to our understanding of how people make decisions about managing resources. Orthodox or 'mainstream' economics is unable to explain choice and conduct because its methodology demands that the scholar look at problems in a way that makes it impossible to understand choice. What a person does and the choices that she makes – whether it is a spouse, a new car, or a career that she is choosing – depends on how she understands her social circumstances. This consideration is formally recognised in social theory in the tradition of Verstehem, or subjective understanding. A theory that purports to explain people’s conduct – what they do and why they do it, including the choices and decisions they make – which is certainly a central task of social science, must be based on a satisfactory explanation of how they themselves understand. Yet the ‘perspective’ of an agent that is embedded in neoclassical theory, as a determinate equilibrium theory, has no bearing on how an individual does ‘see’ things; nor could a person conceivably understand in the way that the rational agent is supposed to ‘know’ about the world. (Addelson 1995, 3-4)

      • Ken Zimmerman
        June 22, 2019 at 2:44 am

        Rob, look over my reply to Robert on these questions. As to my standard – do the most good, for the most people, as equitably as possible, doing as little harm as possible. Simple sounding but damn difficult to put into practice. In the US many don’t even attempt it anymore.

      • Robert Locke
        June 22, 2019 at 8:20 pm

        Ken, I got involved in this debate when the New Economic History (neo-classical economics, econometrics,) invaded the study of history in the late 1960s. I had been working in sources for years when the invasion took place; I was a great admirer of David Landes’ Unbound Prometheus, only to discover that the methodologies of the new economic history had reinterpreted our views of history. One of the leading people involved in this historical revisionism, was Donald McClosky, who used the methodologies of neoclassical economics as his instrument. I discussed him in my book, Introduction, the End of the Practical Man; another was Richard Roehl, who reinterpreted French economic history, to make France the most advanced economy in Europe, I discuss his view in “The Roehl Thesis Reconsidered” Explorations in Economic History.

        Then to my astonishment, Deidre McCloskey, in the Rhetoric of economics,”Journal of Economic Literature, 1983, 483-917, abandoned neo=classical economics as a science, with the comment about the methodologies upon which its methododies ARE

        “Prediction and control is the goal of science.”
        Only the observable implication of a theory matters to its truth
        Observability entails objective reproducible experiments.
        If and only if an experimental implication of a theory proves false is the theory proved false.
        objectivity is to be treasured: subjective observation (introspection) is not scientific knowledge.
        Kelvin’s Dictim, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.
        It is trhe business of methodology to demarcate scientiif from non-scientific reasoning.
        A scientific explanation of an event brings the event under a covering law.
        Scientists, for instance economic scientists, have nothing to say as scientists about values, whether of morality or art.

        Few in philosophy now believe as many as half of these proposoitions. A substantial, respectable, and growing minority believe none of them. But a large majority in economics believes them all.”

        I’m sorry Ken, I think McCloskey had the good sense to abandon this sinking ship.

      • Ken Zimmerman
        June 23, 2019 at 2:20 am

        Robert, I’m having a hard time accepting that neoclassical economics is on its road to doom. Economists still earn 6-figure salaries, have a hand in running most of the world’s economies, and are often the only adviser heads-of-state trust. Their methods and justifications may be junk, but they still define reality in most of the world. And the status and political power of economists is undiminished.

      • Robert Locke
        June 23, 2019 at 12:17 pm

        Your comment is correct, which is my point; when I went to the European Institute for Advanced Studies in Management, 1982-84, I discovered there were no “Europeans” there, other than myself, and danes, swedes, belgians, Brits, and Americans, and that it was an institute for the introduction of neoclassical economics and US management sciences into Europe by visiting Americans (business schools) and Europeans who had studied in Europe (the heads of eiasm were originally visiting Americans or Europeans who had studied in the US. When I was invited to the School of Management for a year (1999-90) I discovered that the people in the school were completely US oriented; my work on Germany, which was why I thought I was brought there, was completely ignored. The School of Management flew in an American expert, at great expense, to teach courses on finance (just a few years before the finance collapse); being in charge does not mean being correct; it could mean leading people to ruin.

        Where did I turn to learn about alternatives — to the writings, comments, and work of people immersed in the economy. We call it networking. When Denys Benoist wanted to learn how to mass manufacturing rails in the late 1830s, he started asking people where he could get the financing, collect the expertise, including workers, to suceed at his new factories; he asked Emile Martin, and Frederic Le Play, about who to asked; he contacted Charles Manby, and pretty soon I found his son Charles, who was to take over the factory, on study trips to the UK to learn about the technologies, etc. I collected the networking correspondence, published by Marcel Riviere & Cie in 1978, that covered this period.

        When I learned about the econometric studies that asserted France was the leading economy of the early 19th century, I knew that something was wrong, because the networking evidence I had from the original sources of men directly involved, invariably stated France was retarded in its industrialization. Peoples might cling to methodologies, but that does not make these methodolgies “scienticic” or even useful. I discovered that depends much more on how networking of knowledge is being done, whose involved. Its not being done at the Harvard Business School, but in the regional German universities networking with German business and industries, and institutes, like the Frauhnhofer.

      • Ken Zimmerman
        June 23, 2019 at 2:24 pm

        Robert, I think you’ll find if you look closely that clinging to methodological cultures is quite common in science, physical and social. After all, in an uncertain and sometimes threatening social environment for scientists, one’s methodology is often the only safe harbor. The only protection one has.

      • Robert Locke
        June 24, 2019 at 9:09 am

        The problem is that it isn’t a “safe harbor’ when economists cling to methodologies that cannot stand up to challenge. I have looked at the subject of neo-classical economics, from its inception with Walras, and at no time since has it stood the test of being a prescriptive science. That’s a conclusion I can document as an historian. So, the answer is, ignore historians


      • Robert Locke
        June 24, 2019 at 9:38 am

        Ken, instead of trying to shove economic theory down our throats in academiq, I discovered that practical men in German firms decided on a compromise with academics; let them develop their scientific theories and teach them (we’ll call that making students capable (faehig), but then, let the firms handle post-experience education in praxis, we’ll call that making them ready for work (fertig). It is a division of labor that is quite fruitful, but it requires making education firm not school centered.

      • Ken Zimmerman
        June 24, 2019 at 11:13 am

        Robert, depends on which challenge you mean. By all the standards for success in western, particularly American culture and history, economics of the neoliberal persuasion is successful. The ways they’ve dealt with challenges is upsetting to some of us, including it seems you. But in each case the challengers were vanquished. However, in terms of firms that excel at more than constantly increasing earnings, and societies that base relationships and decisions on wider criteria than “those with the gold make the rules,” neoliberal arrangements have failed and continue to fail. But how much time will pass before these failures cause a majority or even sizable minority of people living in neoliberal-dominated societies to reject neoliberalism? And how much more time before neoliberalism is replaced. Based on history, and barring revolution and/or catastrophic destruction of cultural fundamentals, I’d guess 40-50 years. Perhaps Germany and the Nordic nations will lead the way. But they’ve given that leadership since the 1950s and so far, neoliberalism in the USA and UK have become only stronger. And with Russia entering the fray, neoliberalism now has a new ally. The next 40 years, or so will see one hell of a fight. Too bad neither you nor I will get to fight.

      • Robert Locke
        June 25, 2019 at 12:59 am

        It’s been replaced, Ken, by making America great again, that’s great power rivalry, not market economics; which, incidentally, always was great power rivalry, not intellectual prowess; remember, in 1945, the US was in a unique position as a great power; it was the only region left standing (Asia and Europe were warn-torn shambles, Africa and South America underdeveloped), the US was in a unique hegemonic position; intellectually dominant, as well as economic and militarily. Military dominance disappeared long ago, the US hasn’t “won” a military venture since 1945; economic hegemony began to disappear with the post-industrialization myth about economic evolution, and the financialization of the economy, which the collapse of socialism fostered everywhere; it did not take long for the Anglo-saxons to spead the institutions of financialization in the 1990s, with a proliferation of stockmarkets, and the sinews of investor capitalism. Oddly, the triumph of neo-liberalism, which you call triumphant because of this spread, has produced the crisis of neo-liberalism we have been experiencing since 2006. Deleveraging economics has, then, already occurred, with Trump, He beats up on economists every day and free markets.

      • Ken Zimmerman
        June 25, 2019 at 1:55 am

        Robert, after the end of WWII, President Eisenhower said this, “This world of ours… must avoid becoming a community of dreadful fear and hate, and be, instead, a proud confederation of mutual trust and respect.” Obviously, many in the world did not agree with Eisenhower. You are correct in your history of the US following the end of WWII. But as brighter historians than Marx pointed out each civilization creates the means of its destruction. That could change only if the civilization did nothing, ever, about anything. Every action creates some push back, some hatreds. Despite Eisenhower’s wishes the US bullied much of the world after WWII right to the present day. Secretary of State Mike Pompeo is meeting with two of the most bloodthirsty regimes in the world, Saudi Arabia and UAE to gin up a war with Iran. In fact with only a few exceptions, the US started all the major wars since the end of WWII. Financialization is just another means for the US to make war. Yes, neoliberalism is now failing. Like almost all cultures in human history. But as I said that failure will take a decade or more to play out. And then another decade or more to replace neoliberalism. And we don’t know that the replacement will be any better than neoliberalism. My worry is that the friends of democracy are not smart enough and don’t have sufficient resources to prevail against the next well-funded elite con-game. And there will always be, in my view another con-game.

  8. Craig
    June 23, 2019 at 4:26 pm

    Of course economics is an explanatory disaster….because it hasn’t cognited on the fact that the money system and its monopolistic paradigm IS THE ECONOMIC PROBLEM.

    No, it’s not just interest like the monetary cranks fixate on because MATHEMATICALLY you can always inject a flow of credit/debt into the economy that MATHEMATICALLY palliates the fact that temporally the system/pattern never works out…MATHEMATICALLY. Well why doesn’t it turn out mathematically? BECAUSE THE SYSTEM AND ITS MONOPOLISTIC PATTERN-PARADIGM…..IS THE ACTUAL PROBLEM.



  9. Craig
    June 23, 2019 at 4:56 pm

    The economic problem is precisely like the Matrix. It’s not obsessive machine thinking ONLY, and it’s not human idiocy or even systematic thinking ONLY. It’s an integration of the two that creates a thirdness greater oneness out of the two THAT RAISES OUR CONSCIOUSNESS REGARDING THE PATTERN/PARADIGM.

    It’s when agent Smith realizes he’s not right. It’s when Neo realizes he must give himself/his consciousness to the machines….in order to bring grace/flow/raised consciousness/permanent but not final progress to the system….because there’s no end to history….but there is an infinity of up so far as paradigm perception/consciousness is concerned.

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