Why economists can’t reason

19 Jul, 2016 at 17:01 | Posted in Economics | 3 Comments

reasoning-9780070558823Reasoning is the process whereby we get from old truths to new truths, from the known to the unknown, from the accepted to the debatable … If the reasoning starts on firm ground, and if it is itself sound, then it will lead to a conclusion which we must accept, though previously, perhaps, we had not thought we should. And those are the conditions that a good argument must meet; true premises and a good inference. If either of those conditions is not met, you can’t say whether you’ve got a true conclusion or not.

Neoclassical economic theory today is in the story-telling business whereby economic theorists create make-believe analogue models of the target system – usually conceived as the real economic system. This modeling activity is considered useful and essential. Since fully-fledged experiments on a societal scale as a rule are prohibitively expensive, ethically indefensible or unmanageable, economic theorists have to substitute experimenting with something else. To understand and explain relations between different entities in the real economy the predominant strategy is to build models and make things happen in these “analogue-economy models” rather than engineering things happening in real economies.

Neoclassical economics has since long given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence only plays a minor role in economic theory, where models largely function as a substitute for empirical evidence. The one-sided, almost religious, insistence on axiomatic-deductivist modeling as the only scientific activity worthy of pursuing in economics, is a scientific cul-de-sac. To have valid evidence is not enough. What economics needs is sound evidence.

Avoiding logical inconsistencies is crucial in all science. But it is not enough. Just as important is avoiding factual inconsistencies. And without showing — or at least warrantedly arguing — that the assumptions and premises of their models are in fact true, mainstream economists aren’t really reasoning, but only playing games. Formalistic deductive “Glasperlenspiel” can be very impressive and seductive. But in the realm of science it ought to be considered of little or no value to simply make claims about the model and lose sight of reality.


  1. So in developing economics theories we should be as logical as possible and that means differentiation between fixed axioms, hypothetical assumptions and definitions of variables before beginning to assemble models for use in the process of reasoning and subsequent analysis. So many “experts” think that this is not needed and as a result, what should be a true science has become a shambles or a pseudo one.

  2. PS but it doesn’t say WHY the economists can’t reason. Are they lazy thinkers or out to get into print as fast as possible? Or maybe their indoctrination about their subject has succeeded in removing from then the normal way people should think. Its a bit about how their students seek to pass examination and not to learn about the subject properly.

  3. Substandard reasoners
    Comment on Lars Syll on ‘Why economists can’t reason’
    The simple fact is that about one percent of a population can reason. The rest merely recycles stories of different degrees of absurdity according to Tertullian’s motto ‘Credo quia absurdum est’.* Unfortunately, economics has been done since Adam Smith by the ninety-nine-percenters. This happened because “… we can never make sure that the right man will be attracted to scientific research.” (Popper, 1960, p. 157)
    The failure of economics proves that it has been particularly attractive for substandard reasoners.
    Science is special because it is the systematic attempt to establish truth which in turn is well-defined by material AND formal consistency. Scientific truth is double-checked, everything else is storytelling.
    About the logical part Scriven says: “Reasoning is the process whereby we get from old truths to new truths, from the known to the unknown, from the accepted to the debatable … If the reasoning starts on firm ground, and if it is itself sound, then it will lead to a conclusion which we must accept, though previously, perhaps, we had not thought we should.” (See intro)
    The key term is “firm ground” or, as Aristotle put it: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”
    Scientific methodology is old stuff since more than 2000 years but economists never could get their heads around it.
    What does the “firm ground” of economics look like? Standard economics is built upon this set of foundational propositions, a.k.a. axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub, 1985, p. 147)
    With this “firm ground” sound logical thinking with iron necessity arrives eventually in a parallel universe. Clearly, with manifest NONENTITIES in the premises the inevitable outcome is a bubbling angels-on-a-pinpoint discourse. The real question is why so many economists could ever accept HC1 to HC5. Obviously, the motto ‘Credo quia absurdum est’ applies as ever and has only to be translated into modern English as ‘You can sell any crap to an economist’.***
    The curious thing is that there is no difference between orthodox and heterodox economists in this respect. What is in fact different between them is the color of their methodological tinfoil hats. Orthodoxy says HC1 to HC5 is firm ground, Heterodoxy subscribes to anything goes or optionally to nothing goes.
    Scientists have always known one crucial thing about firm ground: “We are lost in a swamp, the morass of our ignorance. … We have to find the roots and get ourselves out! … Braids or bootstraps are necessary for two purposes: to pull ourselves out of the swamp and, afterwards, to keep our bits an pieces together in an orderly fashion.” (Schmiechen, 2009, p. 11)
    In order to pull themselves out of the swamp economists have to replace the microfoundations HC1 to HC5 by macrofoundations. There is no hope at all that the old swampies can do the trick.
    Egmont Kakarot-Handtke
    Popper, K. R. (1960). The Poverty of Historicism. London, Henley: Routledge and
    Kegan Paul.
    Schmiechen, M. (2009). Newton’s Principia and Related ‘Principles’ Revisited,
    volume 1. Norderstedt: Books on Demand, 2nd edition.
    Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal.
    American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

    * Wikipedia https://en.wikipedia.org/wiki/Credo_quia_absurdum
    ** Wikipedia http://en.wikipedia.org/wiki/Posterior_Analytics
    *** See also ‘Mental messies and loose losers’

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