Why economics is an impossible science
from Lars Syll
In a word, Economics is an Impossible Science because by its own definition the determining conditions of the economy are not economic: they are “exogenous.” Supposedly a science of things, it is by definition without substance, being rather a mode of behavior: the application of scarce means to alternative ends so as to achieve the greatest possible satisfaction—neither means, ends, nor satisfaction substantially specified.
Exogenous, however, is the culture, all those meanings, values, institutions, and structures, from gender roles, race relations, food preferences, and ethnicities, to technical inventions, legal regulations, political parties, etc., etc. The effect is a never-ending series of new theoretical breakthroughs, each an Economics du jour worthy of a Nobel prize, consisting of the discovery that some relevant little bit of the culture has something to do with it. Only to be soon superseded and forgotten since the continuous development and transformation of the culture, hence of the economy, leaves the Science in its wake. An impossible Science, by its own premises.
The increasing mathematization of economics has made mainstream economists more or less obsessed with formal, deductive-axiomatic models. Confronted with the critique that they do not solve real problems, they often react as Saint-Exupéry’s Great Geographer, who, in response to the questions posed by The Little Prince, says that he is too occupied with his scientific work to be able to say anything about reality.
Confronting economic theory’s lack of relevance and ability to tackle real problems, one retreats into the wonderful world of economic models. One goes into the “shack of tools” — as my old mentor Erik Dahmén used to say — and stays there. While the economic problems in the world around us steadily increase, one is rather happily playing along with the latest toys in the mathematical toolbox.
Modern mainstream economics is sure very rigorous — but if it’s rigorously wrong, who cares?
Instead of making formal logical argumentation based on deductive-axiomatic models the message, we are better served by economists who more than anything else try to contribute to solving real problems. The motto of John Maynard Keynes is as valid as ever:
It is better to be vaguely right than precisely wrong
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Real-World Economics Review Blog 
Lars Syll,
I think many who read posts on this site are in furious agreement with you, post after post. The question is this. What is to be done?
Since “economics” is non-existent as a scientific, objective or descriptive discipline then we must face the fact that a real dilemma exists in, and is only solvable in, moral and political theory and praxis. This leaves two options for the masses; voting (where they have some kind of passable democracy) or revolution. We have to vote for change and if that does not work then there must be revolution. There are no other options.
“Economics” (really political economy) is not a science, it is a mode of power: pure and simple. The masses have ceded almost all of their power to the corporate, oligarchic and political elites. The false science of economics is the fig-leaf and lever for the exercise of power. Since true economics does not exist and cannot exist then only moral power, political power and violent power exist. In that case a power inversion is the only option, by ballot or revolution.
The question then becomes one of moral philosophical and political manifesto, with theoretical analysis and practical recommendations. To date, the only progressive political philosophy which has attempted this was and is Marxism. However, Marxism also labored/labors under the scientistic delusion that there could be an objective, materialist science of political economy. There cannot. That much is clear. That leaves moral philosophy as our starting point. What is our moral philosophy of a just and sustainable society and how do we implement it? The issue goes pragmatically right down to sustainable production and just distribution. Without a philosophical manifesto and a detailed political plan aimed at reforming everything from power relations and equity standards to practical production and distribution.
Under the current state structures, this means a democratic statist plan or revolution towards that end. Rejecting that path is a decision for anarchy, kleptocracy, kakistocracy and warlordism: which is exactly where neoliberal capitalism is headed.
Just as Jerry Maguire said “Show me the money” I say “Show me the plan”. Without a manifesto, a plan and a political organization to further these then “all words are wind” as George R.R, Martin wrote in another piece of low-brow culture.
Erratum: “There can be no progress in this arena without a philosophical/political manifesto, and a detailed political plan aimed at reforming everything from power relations and equity standards to practical production and distribution.
What is to be done?
Study history
1
start w The alternatives to Smith in the book version of “Friedrich List’s Heart, Wit and Will:
Mental Capital as the Productive Force of Progress
A dissertation presented by
Arno Mong Daastøl
Cand. Oecon. & Cand. Mag.
– in partial fulfilment of the requirements for the degree of
Doctor rerum politicarum (Dr. rer. pol.)
in the subject of Economics
to
Universität Erfurt,
Staatswissenschaftliche Fakultät
Erfurt, Germany
http://www.uni-erfurt.de
November 2011
Then read my book on the transformation of economics into the study of business economics in the 20th century, Elsever, The End of the Practical Man. 2006.
Admit the obvious: Economics is the science of profit. And above all, macroeconomics is the science of profit.
Better yet, study history….and wisdom.
What Algorithm Framework Theory delved into was just how to make economics scientifical, meanwhile reviving its humanistic style. The pivot is a desirable theory of bounded rationality, which bridges everything, justifying the real society as the theoretical benchmark or “prototype” that replaces the model of General Equilibrium, then everything will be put into its right position, and the all-in-one model (i.e. the real world) will be the common ground for all social sciences, and even humanities.
It would be most useful, and even revolutionary, I think, to develop an algorithmic, implementable approach to socialism. An advanced informational infrastructure for a post-capitalist economic and financial system could be the way that “a society of free and associated producers” (Marx) could be gradually introduced — by a simple app in your mobile phone. The informational infrastructure should organize production, exchange, employment, etc. — and also promote the “all-round development of individuals,” i.e. the condition for a successful abolition of private property (Marx).
Algorithmic Economics is a synthesis of capitalism and socialism, however, as the economy is constantly innovative and explosive, the free market shall be everlasting, where any organizational activity is only partial or temporary. It shall be the first time that we know essentially the market, freedom and democracy. Thanks!
I counted 5 ‘real’ or ‘reality’ in you post. Please name one or two real problems ignored by those regarded as leading economists today, and guide us.
Institute democratic socialism by vote or revolution as required. No need for fancy, scientistic bourgeois economic theory. A good start would be a legal earnings range where the highest salary cannot be more than 10 times the lowest wage. The minimum wage needs to be set at that wage which will keep four people, two adults and two children, in their own domicile. Implement a JG (Job Guarantee) with the Federal Government as employer as last resort. Implement a condition-free, livable benefit for those who cannot work.
Implement wealth limits: no one person permitted to own more than ten times the average net worth of all adults in the country. Confiscate and re-distribute the excess wealth of capitalists. Nationalize all essential, strategic and natural monopoly industries and infrastructures. For example, nationalize health, welfare, education, power, water and communications. Create national scientific research centers for R&D
The efficiency of capitalism is a myth. Capitalism is actually a highly inefficient system. Any system which destroys people and the environment cannot, by definition, be an efficient system. It is not making an efficient allocation of resources. It is astonishing that those against a statist command system are all in favor of an oligarchic, kleptocratic and corporate command system which is less efficient, less enlightened and less democratic.
Implement democratic socialism and nationalize, nationalize, nationalize. Forget all the false, scientistic drivel raised up around capitalism. The proof is in the empirical pudding. Privatized structures are FAILING all around the world during the COVID-19 challenge and under the privatized, neoliberal model. Here in Australia, privatized age care is failing as COVID-19 rages through parts of our for-profit aged care sector. States with the most privatized health systems and hospitals are experiencing by far the most problems in that arena.
Our state institutions are saving us. Private enterprise just wants to restart clubs, pubs, bars, restaurants, tourism and sport. All these are absurd and non-essential industries, in a crisis. These are all the enterprises that operated to restart a second pandemic wave in some states in Australia. The captains of private industry are a pack of selfish idiots who do not know how to run a modern, integrated nation. That is why some western nations, like the USA, are already disintegrating under the COVID-19 challenge. Why do we continue to permit these greedy fools to have undue power and influence in our society?
The economics of capitalism is complete and utter balderdash. Any attempts to rehabilitate it or scientise it are doomed to utter failure.The true subject is social and political economy with the emphasis on the social and the political plus the ethical and the scientific. Capitalism is doomed. Capitalist revisionism and reformism are doomed. Let us not doom ourselves by pursing the tripe of capitalism and its measuring of all values in the fallacious, social-fictive dimension of the numeraire as constructed and manipulated under capitalism.
Read Marx, read Veblen, read Bichler and Nitzan (Capital as Power). None of these has the perfect truth (I don’t think) but their insights are far more valuable and far closer to truth (as correspondence of models to reality) than anything in the entirety of the capitalist apologist, falsely scientising and mathematizing literature. Take all your books on and for capitalism and throw them out of the window, with the possible exception of Keynes and a few like thinkers for counterpoints. Don’t waste your brainpower on the rest of the fallacious, normative rubbish of capitalist prescription.
This crisis and the ones which will follow in rapid succession will constitute the empirical, complete and irreversible refutation of capitalism. That ship is sinking. Don’t be on it. Not just your intellectual and social reputation depends on this choice. Your life and the lives of your family and descendants depend on this choice. Any continued choice for any variant of capitalism is a choice for personal, civilizational and human extinction.
Revolutions very seldom lead to democracy. All the major ones have led to some form of dictatorship. Savile observed over three centuries ago : “when the people contend for their liberty they seldom get anything by their victory but new masters”. He was thinking of the English revolution and the military dictatorship of Cromwell. But history confirmed his hypothesis in France, Russia and elsewhere. The survival of capitalism has less to do with its efficiencies than with the even more grotesque failure of the Leninist alternative. That led to greater environmental destruction than most capitalist countries have managed, no greater fairness or equality, relative poverty and a huge constriction of personal liberty. That is why most conscientious people look at concrete problems in their societies and look for practical means to solve or alleviate them rather than fantasize about utopias. Given vested interests, a crisis is often necessary to force changes that are radical enough. Unfortunately that seems to be the case with the environmental problem which is increasingly grave but slow to alarm people sufficiently. Our state institutions are not saving us there because electorates have not got the message.
ghholtham,
So, the American Revolution was not a major revolution? I don’t think you can argue that plausibly. Either that or you are arguing that the USA is a dictatorship and has been so since the American Revolution. That is a little more plausible I must admit.
You speak of “the Leninist alternative” as if there is only one alternative to capitalism: a binary world where there is only “free” capitalism or dictatorial “communism”. Communism in Russia and China were actually state capitalisms. Capitalism was never actually thrown off by those nations. We have seen their natural reversion from state capitalism to crony capitalism, which is the standard state of capitalism.
I never argued that democratic socialism would be a utopia, only that it would be better and more survivable than what we have now. Utopianism is common imputation and strawman argument against the idea of democratic socialism.
I imagine defenders of the Ancien Regime argued it was unrealistic to ever have a society without an hereditary monarch. Such is the reasoning from what I call “extantism”: the inability to imagine anything but the currently extant.
please learn some history, historiography requires some reference to what actual historians say. you never refer here to their on-going debates,the ignorance is appalling.