Why neoclassical economics is not a science — the ultimate argument

13 Dec, 2013 at 17:44 | Posted in Economics | 6 Comments

ein[The problem] with analytic a priori systems in general is not only that they do not give us necessary and irrefutable truth about reality, but also that they may be completely irrelevant to the real world:
 
“Unlike technology, … science is a form of curiosity, tempered by the requirement that its investigative activities lead to an accurate picture of things. This aim distinguishes it from many other disciplines, such as pure mathematics. A mathematician may construct a conceptual scheme of great elegance that has no application to reality. Yet that it doesn’t may not affect its [sc. pure] mathematical significance. But science is different. If a scientific idea doesn’t fit the facts it will eventually be discarded despite its ingenuity.” (Stroll, Avrum. Informal Philosophy. Rowman & Littlefield Publishers, Lanham, Md. and Plymouth. 2009: 31).
 
Such is the nature of so many mathematical models in neoclassical economics: elegant models that have zero or virtually zero relevance to real world economies, because their assumptions – such as rational expectations, Ricardian equivalence, representative agents, neutral money, the quantity theory of money, the neutral rate of interest and tendencies to general equilibrium – are inapplicable to reality.

Lord Keynes

6 Comments

  1. As a mathematician, the argument seems muddled and the reference to mathematics a red-herring. Much science practice is actually quite poor, and I see no reason why economics couldn’t be conducted like a science. Of course, to be a ‘proper’ science it would have to have some regard for falsification, which it does not seem to. (Popper, Logic of Science.)

    As far as the last paragraph goes, it seems pretty obvious that the neoclassical assumptions are incompatible with observed crashes. But how would you prove this without using mathematics?

    Comment by Dave Marsay— 14 Dec, 2013 #

    • Swedish sociologist Joachim Israel once wrote:
      “Neoclassical theory is based on the assumptions that are a combination of mechanistic analogies of positivism, behaviorism, utilitarianism, and reductionalistic methodologic individualism, each one is contentious issues in the philosophy of science. Their combination is probably unmatched in terms of logical inconsistencies and unrealistic starting point in today’s social sciences.”

      He also made the case that you probarly not in any other “social science” could pass throw first exam with such view without been called out as something of a nut or outdated strange person, a reminscence from the past,but in the “social science of economics” you could easily build on such obvouis logical contradictions and outdated psychology and get a doctoral degree with no problem.I don´t think the case is about mathematics per se David and it´s use,it´s just tool in the kitbag in many areas of all sort of sciences. But as i see it the heavy use of mathematics especally in economics do a lot harm in the sence that it function of a shady veil a ideological justification for such outdated assumptions as J. Israel mention

      It give credit to a person like “Nobel-awarded” Euguene Fama,that rely on those basic outdated assumptions and with a mathematical apparatus as only justifacation to sit beside such Nobel winners like Prof Higgs and Englert and be treated like their equals as scientific innovator.

      Comment by Jan Milch— 14 Dec, 2013 #

  2. I agree. Econ is not a science because it involves many hidden (in most cases ideological) variable and its predictions cannot be verified since experiments are not reproducible. However, it is knowledge in the broad sense, and a useful one.

    Comment by Digital Cosmology (@DCosmology)— 14 Dec, 2013 #

  3. We have to be very careful here. An axiomatic system may rest on axioms that have no relation to reality but its deductions may be quite relevant. Example: Einstein’s theory of relativity itself. The axiom of a 4-dimensional space is in the best case a convention and cannot be verified experimentally because in that particular form spacetime is not directly observable. However, the predictions the theory makes are all verified. Thus, there is no direct relation between the verifiability of axioms and the predictions a theory makes. Therefore, this cannot be used as a claim against neo-classical econ and it a weak claim in the best case. A better claim against it is that it involves hidden ideological variables. http://t.co/oxpPuDVAlH

    Comment by Digital Cosmology (@DCosmology)— 14 Dec, 2013 #

  4. This argument applies not only to neoclassical economist but probably to any economic school of thought.

    Comment by Fernando— 13 Dec, 2013 #

  5. For a second I thought that was a quote from ‘the’ historical Keynes but I think not LOL…

    Comment by StreetEYE (@StreetEYE)— 13 Dec, 2013 #


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