Why economics is rubbish, episode 324.

By David James.

The inadequacies of economics as it is commonly practiced are obvious enough to any thoughtful observer. The question is: why do so few smell the odour? This was the question that occurred to me when reading an analysis of economic academia by Deidre McClosky, called “The Secret Sins of Economics” (which a reader kindly referenced). McClosky starts by arguing that many of the things that economics is criticised for are not vices but virtues, such as quantification (not a virtue, just a practice) libertarianism (well, if you are a libertarian). She then lists a few venal sins, such as focusing on a model of human behaviour that emphasises prudence, which is fine except that it completely ignores reality.  Then there are some more serious sins, such as total historical ignorance, but she says they are far from peculiar to economics, which is fair enough.

Then she gets to the point, detailing the true sins of economics, of which there are two. She starts outlining what a science should strive to do:

“I am sure you will agree: An inquiry into the world must think and it must look. It must theorize and must observe. Formalize and record. Both. That’s obvious and elementary. Not everyone involved in a collective intelligent inquiry into the world need do both: the detective can assign his dim-witted assistant to just observe. But the inquiry as a whole must reflect and must listen. Both. Of course.”

She then says there is nothing wrong with pure mathematics or abstract thinking, which is also true. But there is a problem:

Economics in its most prestigious and academically published versions engages in two activities, qualitative theorems and statis- tical significance, which look like theorizing and observing, and have (apparently) the same tough math and tough statistics that actual theorizing and actual observing would have. But neither of them is what it claims to be. Qualitative theorems are not theorizing in a sense that would have to do with a double-virtued inquiry into the world. In the same sense, statistical significance is not observing.

She goes on:

It is not difficult to explain to outsiders what is so dramatically, insanely, sinfully wrong with the two leading methods in high-level economics, qualitative theorems and statistical significance. It is very difficult to explain it to insiders, because the insiders cannot believe that methods in which they have been elaborately trained and which are used by the people they admire most are simply unscientific nonsense, having literally nothing to do with whatever actual scientific contribution (and I repeat, it is considerable) that economics makes to the understanding of society. So they simply can’t grasp arguments that are plain to people not socialized in economics.

She describes a confusion between what is qualitative and quantitative:

Hear, oh outsiders. I’ve told you how popular qualita- tive, Why Whether reasoning is in economics. It takes this form: A implies C. Got it? Simple, huh? The crucial point is that the A and the C are indeed qualita- tive. They are not of the form “A is ‘4.8798’.” They are of the qualitative form, “A is ‘everyone is motivated by P-Only considerations’,” say, which implies “free trade is neat.” No numbers. You realize your lover will be annoyed by the neglected birthday to some degree, but we’re not talking about magnitudes.

This explains something that has puzzled me for a while. How is it that many economic theories are so often circular arguments that go unnoticed by those who prosecute them. Are they really so incapable of defining their terms properly and examining their assumptions? For example the theory of comparative advantage, the so called “badge of honour” (as described by Krugman) is a circular argument. It says that if countries transact more by specialising, then the transactions per head will rise. That is, the more transactions there are, the more transactions there are. Unarguable, but not especially illuminating. But it is pure theory that need never be troubled by observations of what is actually happening in the real world (lots of lovely obscure mathematical formulae can be attached to the the circle, and perhaps there will even be a Nobel Prize at the end of it).

At one level it is highly comic, a glorious ship of fools. You get the sense that McClosky sees some humour:

“It is all nonsense, which future generations of economists are going to have to do all over again. Most of what appears in the best journals of economics is unscientific rubbish. I find this unspeakably sad. All my friends, my dear, dear friends in economics, have been wasting their time.”

But it is also a dreadful misuse of science, which, for the most part, completely stands or falls on how accurately it analyses the real world.

Which leads to why such nonsense gets such traction, something McClosky does not look into. It is an especially extreme example of scientism. It leads to a sort of homogenous nonsense. As the historian of science Stanley Jaki commented, such confusions are deadly to science itself. “By assigning unlimited relevance and competence to the scientific method, scientism rules out precisely that test. By setting quantitative exactitude as the only and supreme test of truth, scientism robs of meaning the world of qualities and values. By the same stroke it makes science meaningless as well. He then quotes GK Chesterton:

“Science, which means exactitude, has become the mother of inexactitude. This kind of vagueness in the primary phenomena of the study is an absolutely final blow to anything in the nature of science. man can construct science with very few instruments .. a man might measure heaven and earth with a reed, but not a growing reed.”

That latter point is crucial. The metrics used to “measure” economic and financial behaviour are growing reeds, they do not stand still. They grow in the minds of those who use them, used for trading strategies, to formulate polices, for the basis of consumer sentiment. Even if the quasi-scientific economic abstractions worked, they would not work.

But what McClosky is describing does not even have the veneer of quantitative exactitude, it is just circular arguments or banalities dressed up as abstract science. Of course, pointing this out will not make any difference, the intellectual edifice economics is too calcified to change and far too many careers depend on it. The best that can be hoped is that it sorts of fades away, doomed by its irrelevance. But while it is convenient for use in the political arena this is unlikely. The abstractions and circular arguments can be used to justify neo-liberal tactics: “You just don’t understand, we have to liberate markets” and too bad about any social or human consequences — here are some equations to prove it.

McClosky sums it up thus, with a quote from Milton’s Paradise Lost (you know, that weirdly uneconomic activity called poetry):

Until economics stops believing, contrary to its own principles, that an intellectual free lunch is to be gotten from qualitative theorems and statistical significance it will be stuck on the ground waiting at the cargo-cult airport, at any rate in its high-end activities uninterested in (Really) How Much. High-end theoretical and econometric papers will be published. Careers will be made, thank you very much. Many outstanding fellows (and no women) will get chairs at Princeton and Chicago. But our understanding of the economic world will continue to be crippled by the spreading, ramifying, hideous sins.
Woe, woe is me. Oy vey ist mir. Pity the poor econo- mists. The sins of economics come from pride in formalization, the making of great machines and monsters:
…and called me Sin, and for a sign
Portentous held me; but familiar grown,
I pleased, and with attractive graces won
The most averse.
And pity, I repeat, poor old Deirdre, who appears to be doomed to keep making these arguments, showing more and more plainly that the two main methods of academic economics are nonsense, without being believed.


Have a good festive season, I’m off for a few weeks.










  1. This has cast more light on the subject of economics than I thought possible.

    Deap down I’m sure a lot of lay people felt there was all together too much spin, smoke and mirrors.

  2. “..insiders cannot believe that methods in which they have been elaborately trained, and which are used by the people they admire most, are simply unscientific nonsense”. The Flat Earth Society was similar, I suggest, until another option was formulated that geographers embraced. I suspect something similar is needed for economists.

    • Well, I think Buffett and Soros know better than these failed economists, for sure.

      But the problem is that those who know better would have little incentive to disclose their Copernican theory.

    • The Flat Earth Society, however, made up the ruling elite during the feudal era.

      In 1633 Galileo was found “vehemently suspect of heresy”, namely of having held the opinions that the Sun lies motionless at the centre of the universe, that the Earth is not at its centre and moves, and that one may hold and defend an opinion as probable after it has been declared contrary to Holy Scripture. He was required to “abjure, curse and detest” those opinions. He was sentenced to formal imprisonment at the pleasure of the Inquisition. On the following day this was commuted to house arrest, which he remained under for the rest of his life. His offending Dialogue was banned; and in an action not announced at the trial, publication of any of his works was forbidden, including any he might write in the future.

      Giordano Bruno (1548 – February 17, 1600) formulated cosmological theories which went beyond the Copernican model in proposing that the Sun was essentially a star, and moreover, that the universe contained an infinite number of inhabited worlds populated by other intelligent beings. After the Roman Inquisition found him guilty of heresy, he was burned at the stake.

      The Guardian did a great podcast on classical economics. The philospher John Gray calls it “the reigning mythology” of our time, just like flat earth cosmology and Christianity was the reigning mythology of the feudal era. Gray says that mythology is kept in place by power, and will not change until there is a change in power, and only then will the mythology change. Here’s a link to the podcast:


      • I suppose it should be pointed out, however, that some argue just the opposite of Gray, such as Francois Haas:

        Leo Alexander, in his 1949 article “Medical Science Under Dictatorship” (NEJM), suggested that, “Science under dictatorship becomes subordinated to the guiding philosophy of the dictatorship (28)⇓ .” I am proposing the inverse, that Politics under Science becomes subordinated to the guiding philosophy of that Science.

        — FRANCOIS HAAS, “German science and black racism — roots of the Nazi Holocaust”

      • There is much more to the Galileo story – like Galileo insulting the Pope and moving to a more conservative diocese. Galileo loved controversy – and stirring it up – he was miles away from a disintered scientist seeking only the truth.

        And the medievals probably believed in a flat earth the way you believe that the sun moves across the earth – because you almost certainly do: every time you speak of sunrise and sunset and don’t say ‘earthspin’.

      • You seem to be a slightly mad victim of Anglo-American brainwashing.

        In The Power Principle the filmmaker Scott Noble explores the phenomenon: Propaganda that is so effective that people are not even aware they are brainwashed. He cites the case of when a Soviet team of propagandists came to the United States and were awestruck by how complete the success of the science of “engineering consent” had been in the US.

        As Noble explains:

        The United States does not have a free press.

        I use the term “free press” not in the legalistic sense, ie freedom from state oppression (though occasionally that applies in the US as well) but in the manner of Orwell. In the preface to Animal Farm he wrote — “The sinister fact about literary censorship in England is that it is largely voluntary…Things are kept right out of the British press, not because the Government intervenes but because of a general tacit agreement that ‘it wouldn’t do’ to mention that particular fact.”

        Peter Phillips from Project Censored argues that the primary difference between corporate media in the US and state media in the Soviet Union is that in the latter case the public understood that they were being propagandized. Many Americans continue to suffer under the delusion that the programming on CNN or ABC or PBS or even Fox is something akin to hard-hitting journalism.

        The United States once had a very strong and vibrant labor press. During the Cold War, anti-Communist hysteria and government repression severely marginalized dissident voices, paving the way for the neo-liberal counter-revolution.

        The segment of The Power Principle that deals with propaganda can be seen on the internet here:


  3. It’s not really too surprising is it? We live in a world where pseudo-science is rife. Look at the growth and value of the supplements industry world wide, staggering, despite the fact the product does nothing for almost everybody past a placebo effect.

    The same for alternative medicines. Useless. But these days I can even get my private health fund to chip in for my naturopathy/aromatherapy/homeopathy/acupuncture visit.

    It does appear that once a person is invested in a set of ideas, it takes a very long time and a lot of constant information, and re-education, to undo that investment.

    For most people who are invested in something to the level of an expensive education, and most of their career, it is probably not going to be possible to undo this in a lifetime. Even if the constant information and re-education was present. Which in the case of economics appears to be minimal, but perhaps growing, at this point?

    • Some good points J. Pseudoscience is also driving me nuts, particularly in regards to vaccinating kids. I’d really like to introduce a few people to a bloke I know that had polio as a kid.

      • Evan,

        You seem to have managed to get it exactly upside down. It is the orthodox economists who are the high priests, who inhabit the stratosphere of government, business and academe, and who are thus most able to unleash attacks upon the powerless heretics.

        In “Hip Heterodoxy,” Christopher Hayes goes to great lengths to elucidate how the mafia dons of mainstream economics operate, inflicting punishment on anyone who doesn’t march in lockstep with their dogma:


        The Notre Dame example was most telling, how the commisars of mainstream economics purged the heterodox economists from Notre Dame’s economics department.

  4. I think this article is a little unfair on economists.

    For example, engineers can NOW design water supply and power systems with millions of customers, tens of millions of switches and loads and thousands of generators of various sizes. However, engineers started way back in the early 1600s with Galileo – and even then, they had the ruined water supplies of the Romans to give them a big hint. Economists really only got going with Adam Smith in the late 1700s. That is a bit of a head start in my book.

    So to be fair, one should consider economists today as being a bit like the scientists of the nineteenth century arguing about phlogiston or whether or not light is a wave or a particle. Indeed, many of the arguments-to-the-death today may, in fifty years, be seen to be quite compatible with each other. For example, maybe one school of thought might be right under certain economic conditions, and another school correct in a different set of conditions.

    Just as engineering and science had to work past its astrologers and alchemists, so too will economics.

    Having said that, economists would do well to lift their sights a little. Aim for the stars, so to speak. Words like ‘creative destruction’ and acceptance of market instability as a norm, blinds one to the possibility that economics as a profession can do better.

    Imagine if an engineer in charge of a power plant got in front of a television crew stating that if a few people got electrocuted, it was merely creative destruction whereby eventually the right size of power transmission main was being worked out. Or that one should let the market sort out the correct voltage to use on a daily basis.

    • emess,

      I think the problems with economics today are much deeper than immaturity in the development of the discipline. Steve Keen’s Debunking Economics describe some of the pseudo-math and wrongheaded theories that the dominant neo-classical economists employ.

      An even deeper problem is that many of the insights of the classical economists and their successors have been lost or distorted. SoN offers an example of this issue in his post. He writes here discussing the theory of comparative advantage:

      “Are they really so incapable of defining their terms properly and examining their assumptions? For example the theory of comparative advantage, the so called “badge of honour” (as described by Krugman) is a circular argument.

      It says that if countries transact more by specialising, then the transactions per head will rise. That is, the more transactions there are, the more transactions there are. Unarguable, but not especially illuminating.”

      And quite wrong if Ludwig Von Mises’ explanation of Ricardo’s theory is correct. The following extracts are from page 161 of the Liberty Fund edition of Volume 1 of Human Action:

      “Current Errors Concerning The Law Of Association”

      People cavil much about Ricardo’s law of association, better known under the name of law of comparative cost….

      Ricardo’s first aim in expounding this law was to refute an objection raised against freedom of international trade….

      Ricardo deals with a world whose conditions are determined by settlement in earlier days, a world in which capital goods and labour are bound to the soil by definite institutions….

      Here the law of comparative cost comes into operation. Each country turns toward those branches of production for which its conditions offer comparatively, although not absolutely, the most favorable opportunities…”

      Von Mises goes onto to argue that “the classical theory of interregional trade … enable us to study the problems involved under any imaginable assumptions.”

    • Abstract thinking is required to solve real world problems and come up with theories people haven’t thought of. Physics wouldn’t be where it is without abstract thinking.

      This needs to be balanced however with testing and proof that the concept actually works and that your theory explains adequately what you are trying to explain. Proven theories are powerful; they reveal properties that may surprise and may open new technologies and methods. But they need to be proven not with circular arguments and correlations but cause and effect.

      With economics this is harder because it is a social science.

      • While it is true that economics has a social aspect, it is also true that it concerns itself with economic system control. The ability to avoid damaging system instability is already acknowledged in such terms as ‘sutomatic stabilisers’ or ‘circuit breakers’ and various analogies for flow and storage of money. However crudely and with limited understanding these might be used at present.

        Much of the so-called ‘hard sciences’ started off as ‘natural philosophy’, so at this stage in the evolution of economics, I am not surprised that there is more a ‘black box’ empiricism combined with a furious debate on theory and imprecision in discourse.

        Just as physics, chemistry and maths evolved from the descriptive, so will economics, I predict.

        How long it will be before economists can prevent system instability, model macro financial system performance, and apply sophisticated ‘switching/load management/overcurrent and surge protection’ is anybody’s guess. However, to characterise economics as useless would mean that we would never make the attempt to be able to master those essential elements of system design. That would be sad, because I believe that eventually, economists will be able to achieve these fundamental system operations.

      • I would go further and assert that the current theories are promoted even though with common sense observations put into their maths they would be proven wrong. I think even the theorists/abstract thinkers are laughing at some of the theories promoted in economics. If they are ludicrous to any common joe I can’t see why more educated people can’t see this either.

        I would say that economic theory is looking more and more like propaganda rather than true empirically verified analysis. The theories that only work with so many bad assumptions are used in order to assert control rather than benefit the population as a whole in allocating resources efficiently. After all economics is supposed to be all about the problem of dealing with scarcity. I don’t think the current school deals with this all too well.

    • You make it sound as if the entirety of our reigning omnipotence-of-science credo is not in crisis.

      Science’s cachet is attributable almost entirely to the triumph of the doctrine of utilitarianism. Scientific-technical information has hegemony over other modes of knowing in our society because this type of knowledge is believed to have contributed so much to our successes in extending longevity, creating affluence, and using technology to make life more comfortable, convenient, and stimulating. The trend is to entrust the scientific experts with even more power and influence, and in ever more realms of human existence. Economists, for instance, lay claim to the above mentioned achievements, asserting that their ideology is what made them possible.

      Now, all of a sudden, the scientists are telling us it isn’t true. Man must curtail his usage of fossil fuels! And make no mistake about it, despite all the fantasies being evangelized by the energy Utopians from both sides of the political spectrum, there is no replacement for fossil fuels on the drawing board. All the energy alternatives currently available are either more expensive (less efficient) or lack portability. Thus the promise of making human life ever more affluent, comfortable and convenient is being called into question.

      What is at stake then is the reigning progressivist or modernist vision: the linear, constantly upward trajectory of history or, in Marxist and market fundamentalist (Fukuyama and neoliberal) thought, the ‘end of history’ culminating in some workers’ Shangri La or a free market paradise-on-earth.

      The incoherence in the omnipotence-of-science credo is made explicit in Naomi Oreskes’ talk at a conference hosted by The Science Network:


      Speaking of the premises of the conference, she identifies it as “a belief in science and a conviction that science has the power to change the world.” She goes on to state that “that’s a conviction that I share” and whose veracity is “amply demonstrated by the empirical evidence of history.”

      However, she then immediately launches into a discourse, the subject of which is what science is currently telling us. And what science is currently telling us? That “AGW is real.”

      The argument I am making is not to dispute what science is telling us regarding the reality of AGW. The argument I’m making is that this collides head-on with the progressivist and utilitarian philosophy of science which Oreskes opens her talk with.

      Layered on top of this is the fact that the Science Network provides not only a platform for the highly emotional, anti-religious bigotry of folks like Harry Koto, Richard Dawkins, Sam Harris and Daniel Dennett (which reeks to high heaven of pseudo-science), but also Dawkins’ and Dennett’s “Darwinian fundamentalism,” as Stephen Jay Gould called it. And people are just now awakening to the fact that Darwinian fundamentalism is nothing more than market fundamentalism for biologists, with just as meager of a basis in reality.

      The Science Netowrk’s “Beyond Belief” series showcases scientists who are aware that they are losing the battle to win the hearts and minds of the masses. But, as the “Beyond Belief” conferences also demonstrate, they just can’t figure out why. From my point of view, it’s quite obvious why they’re losing.

      • Interesting discussion g5 – I haven’t really ever seen the conflict point put so clearly. Particularly on the paradox science now finds itself in.

        It wasn’t until many years after completing my initial science degree that I really saw it for what it was as a form of philosophy (or even counter religion). Certainly during my degree there was never any attempt to explore the strength of the overarching philosophy and there was a dogmatic approach to the supremacy of this knowledge that was heavily reinforced.

      • “And people are just now awakening to the fact that Darwinian fundamentalism is nothing more than market fundamentalism for biologists, with just as meager of a basis in reality.”

        Glen, this is a poor analogy. While I agree the current economic paradigms are simply propaganda bankrolled by vested interests to maintain the status quo, there is far more ‘controversy’ around economics than evolution, because the evidence is simply over-whelming for natural selection and other theories put forward in biology.

        Those who don’t believe in the primary tenets of evolution simply haven’t read enough or have a closed mind due to religious dogma or other pre-conceived notions.

        It is beyond dispute based on the convergence of evidence from multiple sources e.g. palaeontology, embryology, anatomy, genetics, artificial breeding and geography.

        If you read Dawkins “The Greatest Show on Earth”, you would be left in no doubt that there is OVERWHELMING evidence for evolution.

      • BF – it’s not to doubt the effectiveness of science in understanding and explaining the natural world, it’s more about questioning the utilitarian utopian model of living that science is used as a prop for.

  5. In The Strange Non-Death of Neo-Liberalism Crouch asserts that neo-liberalism hasn’t died because it serves the interests of a group with power.

    The strictures on scientism are well made I think.

    I also think that quantitative is only bad qualitative.

  6. Unfortunately again someone tries to explain in a very pretentious way and language something very simple and obvious for many well educated people, e.g.:

    1. In economy more than anywhere else different quantities for the same phenomena has very different qualitative form and economic significance, because the economy is like a living organism.

    2. In economics more than any other subject politics means almost everything. Politicians don’t care much about the positive economic analysis. Economics can’t be a politically detached science, because politics is all about the economy and distribution of wealth.

    The greatest sin of economics is exactly the ideological detachment from politics and lack of dialectical approach to economic phenomena. One of the most significant example about the lack of qualitative assessment of quantitative data is the lack of scientific qualification of individuals owning different quantities of money or wealth. Rich and poor is not an scientific definition.

    Behind the different quantities there is specific quality and great economic and political significance and position in economy of individuals with different money power (quantity). This crucial reality has been always ignored, which is shame. It is obvious for many people that owing $100 or $100,000,000 is not just a quantitative/statistical difference, but very strong qualitative properties of two totally different individual with different power and position in economy and politics. Any analysis which ignores their different qualities is bad economics far from reality.

    At the end it is the ideology, which poisoned economics.

  7. I got disillusioned with economics during the first year of my Economics degree. Changed to Economics and Economic History for a bit of light relief and facts, but I still found it difficult to be enthusiastic about learning theories that seemed based on ridiculous assumptions. Too much pseudo-maths and too little reality.

    • But are they really? Savings, measured in property price terms, have been massively negative for decades – you couldn’t save fast enough to keep up with property price price inflation. So in property price terms, with property prices falling, the deflationary effect of debtors paying off their loans; reducing the money supply and forcing prices lower, savings are the best they’ve been in 20 years or more!

      • I often wondered why savings should get a positive return at all. It is a philosophical question. I concluded that savings rate can only be positive if the savings were invested to generate more economic output. Otherwise it would be unjust usury. In fact a fee ought be charged for safe keeping instead, which results in a negative rate.

  8. From my experience, any successful small business owner can destroy 300 years of economic theory in less than 10 minutes. Given twenty minutes they could convince most Economics professors to explore more worthwhile undertakings and within a half an hour they’d convince even the most ardent economists that Seppuku was their only honorable recourse.

    So why are small business owners ignored by economists? The answer seems rather obvious, Small business owners do not employee economists.

    Economists of course argue that their theories are best applied at a Macro rather than Micro level, whatever that means! Yet somewhere in the discussion the macro stops being the sum of the micro parts and takes on its own life form, which interestingly delivers value to their big business / political employers.

    What I find truly amazing is that this statement remains true (indeed invariant) across a wide spectrum of economic theories and political systems.

    • China-Bob,

      “Economists of course argue that their theories are best applied at a Macro rather than Micro level, whatever that means!”

      The dominant school of economics argues the opposite. They assert that the micro can simply be extrapolated to a macro level and therefore macro economics is not a specific area of study for economists.

      Clearly there are big differences between macro and micro but people like Bernanke, Krugman et al don’t see this. It’s only non-mainstream economists such as Steve Keen who argue that there are substantial differences.

      • “Clearly there are big differences between macro and micro”

        I’d have thought Krugman et al were devotees of this particular belief.
        There are massive differences between building a dog-house and an office tower. However the laws of gravity don’t go into suspension just because the office tower is different. Krugman et al believe it does.

    • China-Bon you make some great concise observations.

      “Given twenty minutes they could convince most Economics professors to explore more worthwhile undertakings and within a half an hour they’d convince even the most ardent economists that Seppuku was their only honorable recourse. ”

      I suppose you think these characters are going to see ‘common sense’ It doesn’t and won’t happen. The said professors build their academic credentials on some ‘new’ theory and it seems it doesn’t matter how whacky it is as long as it is ‘different’ thinking. Then as SON points out ” the intellectual edifice economics is too calcified to change and far too many careers depend on it. ” There are one or two very obvious modern theories that fit this characteristic.

  9. “For example the theory of comparative advantage, the so called “badge of honour” (as described by Krugman) is a circular argument. It says that if countries transact more by specialising, then the transactions per head will rise. That is, the more transactions there are, the more transactions there are. Unarguable, but not especially illuminating.”

    Was it by Krugman? I thought it was by Yogi Berra.

      • He he, you got me, flawse.

        Who knows, maybe Krugman is a big fan of Yogi and learned his art from him.

        The grilling of Krugman, and his followers, on this site is perhaps not the finest hour for him. But then again, didn’t Yogi say “Even Napoleon had his Watergate”?

  10. This is all about thinking clearly, or not, as the case may be. Science is many things, but above all it is an adapted or guided form of thinking that relies on abstraction and the conscious (not unconscious) use of reason to develop and measure certainty about knowledge: to generate “proof” that what we think we know (we believe) is actually knowledge.

    This is not controversial. Science is about knowledge. It is about satisfying our minds that what we want to know is knowable in the first place, can be arrived at by the use of reasoning, and furthermore can be expressed in a form or forms that are comprehensible to others.

    There are various reasoning procedures available to us, and while they have their limitations, they can be used to generate what we call knowledge.

    By reasoning we can learn more about the knowledge we have – or “suppose” we have. We can critique our knowledge and the reasoning used to derive it. By the use of further reasoning – by using iterative thinking – we can revise our knowledge and the methods used to both acquire and express it.

    From this point of view, both the body of knowledge that is called economics and the criticisms of this knowledge constitute reasoning about a common subject matter. The criticisms arise in the first place not because economics is “scientific” or “unscientific”, but because our knowledge is incomplete.

    Within polemics (which may studied within linguistics and psychology), it is possible to fault economics for being “too scientific” – for being dry, statistically bound, non-descriptive and too removed from daily reality. It is equally popular to condemn economics for being “unscientific” – for not permitting the construction of knowledge that is in any way worth having and for being logically defective.

    The latter remark is self-contradictory, of course. By concerning itself with the internal logic and conclusions of economic theory, such an argument is one that must occur within economic thinking and which must refer to the subject matter of economic inquiry – human bahaviour. In other words, it accepts that economics is about acquiring knowledge, but also asserts that it has not been properly carried out. Such a claim can only be made within economics itself or else is not really about economics. That is, it is a claim made for “effect”.

    It is obvious to me, and I hope as a result of my statements here that it is obvious to others, that the relevant claim to make is not whether economics is or is not scientific. Who cares about the polemics. No-one really takes this to be an informative observation that discloses new learning about the content and subject matter of economics.

    Such statements are either merely polemics, or they are raised within the discourse of economics and are about the incompleteness of our knowledge, per se.

    Of course, there is a further conundrum to explore. Economics is about choice. It is about preference. Therefore, it is perfectly possible for economics to explore the choice to be made between inquiry that is either “scientific” or alternatively is “falsely scientific”. Economics tells us that one will ALWAYS be preferred against the other. Perhaps those who describe economics as “false” might like to figure out how come they suppose it is that by choosing first, economics has arrived at the second.

    • briefly said:

      …it is perfectly possible for economics to explore the choice to be made between inquiry that is either “scientific” or alternatively is “falsely scientific”. Economics tells us that one will ALWAYS be preferred against the other. Perhaps those who describe economics as “false” might like to figure out how come they suppose it is that by choosing first, economics has arrived at the second.

      That’s easy enough.

      One has to begin with the gradual philosophical changes that began with the advent of Modernism in the 17th century and that have continued progressively up until today. These culminated in the triumph of a new ruling metaphysics, with consensus that the new metaphysics came to dominate the old in the 18th century, as Robert H. Nelson explains in Economics as Religion:

      Since the eighteenth century, however, the authority of God as a source of absolute truths of the world — the essence of the historic claim to authority of Jewish and Christian religion — has been superseded in many areas of society by the rise of science.

      So if the imprimatur of science is what is needed to lend one’s agenda moral and intellectual legitimacy, so be it. The era of purpose-driven science was upon us.

      • Ironically enough, it was the Catholic theologians and the Church, and not Adam Smith and the economics discipline that he founded, who first mastered the art of pseudo-science. Stephen Toulmin explains in Cosmopolis: The Hidden Agenda of Modernity. The Catholic Church, Toulmin writes, was not happy about the implications of Descartes’ natural philosophy.

        One thing about his ideas, however, was to their taste: his insistence on the need for certainty. Once rationalism raised the intellectual stakes, Catholics could not go on playing by the older, more relaxed rules: if formal rigor were the order of the day in physics and ethics, theology must follow suit. Confronting Protestant heretics on the one side, and skeptical deists on the other, the theologians decided: “If we can’t join them, let us beat them at their own game.”

      • Toulmin continues:

        In the Library of the Convent of Ste. Genevieve, near the Pantheon in Paris, is a manuscript entitled “Traitté de la réception et l’autorité du concile de Trente en France.” It…paints a revealing picture of the intellectual position of the Catholic Church in early 18th-century France… Looking back, the author credits the Council with…the principles of philosophical rationalism that was invented in the 1630s. The ambition of the Counter-Reformation, it tells us, was “to prove invincibly our most fundamental belief.”

      • So there you have it, the original pseudo-scientists were not the economists but the Catholic theolgians. They beat Adam Smith to the punch by over half a century.

        Sorry about the multiple posts, but I was trying to weave my way through the blog software.

  11. The pretensions of “economic science” were long ago neatly captured by Hayek’s Nobel acceptance speech.

  12. Just Dismal 2…..This is not economics. It is polemics. What is pretentious is adopting a position from which it possible to sneer at attempts to develop learning.

    • But it is important to understand the limitations. Knowing that economics is not science and never will be, we should treat it with greater caution, not with blind faith.

  13. SoN bit of a dispiriting post ( or timely ) on which to end the year. Nice to see McClosky exposed to a wider audience – her writings on other subjects are also slightly adrift from the norm – which I like.

    Can’t really add much other than economics is not a science, perhaps one day it will achieve such status, perhaps not. At present economics is tribal, supporters vociferously ‘supporting’ their ‘school’. Like all human disciplines that set out to achieve status via the ‘scientivation’ deeply desired, however assume exceptions, flaws and the inexplicable by the boatload.

    Glen above makes a good point in current society’s kneeling at the altar of science, I think he is wrong in assuming it due to utilitarianism – science after many mishaps and discredited theories has provided the world with much that we take for granted – little wonder all disciplines want to claim a scientific basis (economics, psychology, social science (?), climate theory.

    I wonder if it all it due to the post modern tecnocratic adoration of the ‘expert’ – in any field. Have we lost out innate ability to trust our own judgement – it would seem so – deferment to ‘expert’ opinion makes us prisoner of the views of others.

    ps I qualify this by adding that ‘expert’ opinion in the region of some medical procedures, engineering realities and the laws of physics and chemistry (exceptions permitted!) may likely qualify as expert.

    Cheers. Happy Xmas.

  14. There is the perfect example of the sort of grotesque, pseudo-scientific nonsense that emanates from the Vatican of neoclassical economics — the Chicago School of Economics — in this months Harvard Business Review. It is written by the Nobel laureate Ronald Coase:

    “Saving Economics from the Economists”

    • Ronald Coase said:

    Today, production is marginalized in economics, and the paradigmatic question is a rather static one of resource allocation. The tools used by economists to analyze business firms are too abstract and speculative to offer any guidance to entrepreneurs and managers in their constant struggle to bring novel products to consumers at low cost.

    That’s because of the triumph of finance capitalism over industrial capitalism. Classical economics was the stealth religion that gave the industrial capitalists moral and intellectual legitimacy, and neoclassical economics is the stealth religion that gives finance capitalists moral and intellectual legitimacy.

    • Ronald Coase said:

    Since [contemporary] economics offers little in the way of practical insight, managers and entrepreneurs depend on their own business acumen, personal judgment, and rules of thumb in making decisions. In times of crisis, when business leaders lose their self-confidence, they often look to political power to fill the void. Government is increasingly seen as the ultimate solution to tough economic problems, from innovation to employment.

    Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for enlightenment about how the economy operates.

    Laissez faire, from the very moment that Adam Smith articulated the notion, has never meant anything but anarchy for the capitalists and the jack boot of the state against the neck of labor.

    • Ronald Coase said:

    But because it [contemporary economics] is no longer firmly grounded in systematic empirical investigation of the working of the economy, it is hardly up to the task.

    The discipline of economics, from its very inception in the 18th century, was never about anything but magical thinking. It was never anything but cosmology, as defined by Stephen Toulmin in Cosmopolis:

    The function of cosmopolitical arguments is to show members of the lower orders that their dreams of democracy are against nature; or conversely to reassure the upper class that they are superior citizens by nature.

    • Ronald Coase said:

    During most of human history, households and tribes largely lived on their own subsistence economy; their connections to one another and the outside world were tenuous and intermittent.

    I think that would be news to anthropologists who have actually undertaken to study primitive societies. Within-group connections between households are extremely strong in these societies:

    Moreover, there is a great deal of variance among men in both family size and productivity (note the size of the standard deviations for this age profile). Family size is inherently stochastic, due to both infant and child mortality and to individual differences in fecundity (see Hill and Hurtado 1996). There are also large differences in hunting ability among men. For example, there is a five-fold difference in the long term average hunting returns between the best and worst hunter in the sample of Ache men (Hill et al. 1987). Similar discrepancies in hunting ability across men have been found among the !Kung (Lee 1979), Hadza (Hawkes et al. 2001), Hiwi (Gurven et al. 2000a), Gunwinggu (Altman 1987), Agta (Bion Griffin 1984), and Machiguenga (Kaplan unpublished data)4. Therefore, even among men of the same age, there must be net transfers over the long-term from families producing a surplus to families producing a deficit…

    If families had to ‘balance their budget’ at every period, they would either have had to lower their fertility or force their older children to fend for themselves. This would most likely increase childhood and adolescent mortality and lower rates of skills acquisition. Adolescent males could not afford to hunt, because their returns are so low during the learning period. Moreover, there would be no way to buffer the risks associated with the stochasticity of family size and child demands. If families needed to support all of their individual food needs, regardless of whether few or many children survived, they would be forced to lower fertility or reduce child subsidies.


    • Ronald Coase said:

    Market economies springing up in China, India, Africa, and elsewhere herald a new era of entrepreneurship, and with it unprecedented opportunities for economists to study how the market economy gains its resilience in societies with cultural, institutional, and organizational diversities.

    Yep, the free market Utopia envisioned by the 18th-century industrial capitalists is still alive and well. The lords of capital dreamed of authoritarian regimes where the long arm of the state is used in the most violent, brutal and arbitrary way to smash labor and browbeat it into submission, and maybe with global labor arbitrage they’ve finally found their Shangri La in today’s developing world.

    • Ronald Coase said:

    But knowledge will come only if economics can be reoriented to the study of man as he is and the economic system as it actually exists.

    If only. Could the pseudo-scientific, special interest pleadings by Nobel laureates like Ronald Coase have something to do with the following statements from the Nobel family?

    The yawning gap between the real world and the discipline and profession of economics has never been wider. The ever-increasing abstractions in finance and its models based on “efficient markets” and “rational actors”: capital asset pricing, Value-at-Risk, Black-Scholes Options Pricing, have been awarded most of the Bank of Sweden prizes since they were founded in the 1960s and foisted onto the Nobel Prize Committee. Most of these abstract models, based on misuse of mathematics, contributed to the financial crises of 2007-2008. Now, the family of Alfred Nobel, led by lawyer Peter Nobel, has disassociated itself from the Bank of Sweden Prize in Economics In Memory of Alfred Nobel.[1] They point out that Nobel never would have approved of a prize in economics since it is not a science – and would have disapproved even more that most of the prizes were given to Western, neoclassical economists using mathematized, abstract models – far from Nobel’s wider concerns.

    ANOTHER QUOTE (from Peter Nobel):

    I can imagine Alfred Nobel’s sarcastic comments if he were able to hear about these prize winners. Above all else, he wanted his prizes to go to those who have been most beneficial to humankind, all of humankind!


      • I found a short 1:33 minute clip the other day that served as a great metaphor for the transmogrification from industrial capitalism to finance capitalism:

        “Park Avenue – Money, Power and the American Dream”

        As it explains, forty or fifty years ago Manhattan’s most prestigious address was inhabited by the industrial capitalists, the oil tycoons.

        Today it is inhabited by the finance capitalists, the hedge fund guys.

        I know we all love to hate the miners, but at least they actually played a role in producing something. The finance capitalists produce nothing, their only activity being playing zero sums games.

  15. Surely the issue with economics is practical? Planes mostly do not fall out of the sky, economies do blow up.

    Economics pretends to be a science but refuses to revise its theories in the face of empirical evidence, quantitative or otherwise.

    Science is by no means pristine. The last time there was serious disagreement in the field of physics about the fundamental nature of the world, Max Planck was moved to quip that “science advances one funeral at a time”. Thus it will be with economics.