What is wrong with modern economics?

25 Jun, 2019 at 10:28 | Posted in Economics | 2 Comments

It is simply that modern economists persist in insisting that a set of tools be everywhere adopted that are mostly inadequate to social analysis, given the nature of social phenomena …

wrong toolTo put the matter bluntly (the pun may be useful), it is like attempting to cut the grass with a hammer or a piece of paper. The latter objects have their uses, but mowing the lawn is not one of them. Methods of applied mathematics of the sort economists wield have their uses, but illuminating social reality is not one of them, or at best, is so only in exceptional circumstances. I hope that it is clear that this explanation, whether correct or not, reflects a stance that is not anti-mathematics but anti a mismatch of tool and object — and so, given the circumstances, anti the abuse of mathematics …

There is a good deal wrong with modern economics. There is much to be done to remedy matters at all levels of analysis. But little can improve at any level until we discard the widely-worn methodological blinkers which encourage the view that mathematical modelling is everywhere automatically relevant, even essential, so that paying explicit attention to matters of ontology is unnecessary.

Tony Lawson

Modern economics has become increasingly irrelevant to the understanding of the real world. In his seminal book Economics and Reality (1997), Tony Lawson traced this irrelevance to the failure of economists to match their deductive-axiomatic methods with their subject

largepreview It is — sad to say — as relevant today as it was twenty years ago.

It is still a fact that within mainstream economics internal validity is everything and external validity nothing. Why anyone should be interested in that kind of theories and models is beyond imagination. As long as mainstream economists do not come up with any export-licenses for their theories and models to the real world in which we live, they really should not be surprised if people say that this is not science, but autism!

Studying mathematics and logic is interesting and fun. It sharpens the mind. In pure mathematics and logic, we do not have to worry about external validity. But economics is not pure mathematics or logic. It’s about society. The real world.

Economics and Reality was a great inspiration to yours truly twenty years ago. It still is.


  1. They confuse beauty with truth, as Krugman said… But worse, in my opinion, is that they don’t understand that maths is nothing but a language. You can express truths with it, or lies, or misconceptions, or what you like.

    My friend the mathematician despised economists for it: “They come here for me to put the maths into their theses, and when I have done it they believe that I proved that their theses were true”, he said. “But maths is just a language. It doesn’t prove anything”.

    There are also other damning faults with mainstream economics: their premises often taken out of thin air. For example the premise that people’s main motive is “more”, while it can be easily proven that it is to keep their relations. Someone who sacrificed his relations to get “more” would be someone to shun, probably someone mentally ill.

    Perhaps one could live with that, but mainstream economics seem to be actively promoting that kind of behaviour. At least it has been shown in numerous studies that the longer someone is exposed to teaching in economics, the more he will cheat and deceive (look for example in the sources list at http://www.rothstein.dinstudio.se/files/Brev_till_KVA_Ekonomipriset_NC.pdf). The more one is exposed to theories of “the economical man”, the more one will think that it is good to pass the buck to somebody else, including with dishonest means.

    I would like a more complete list of scientific shortcomings of standard economics. Erik Reinert put together a long one in his How rich countries got rich and why poor countries stay poor, but it was not complete, I think.

  2. Asking “cui bono?”, for whom is it good or useful? it seems to me that the extremely dubious situation persists simpy because somebody is drawing profit from it – so just look at all the vested interests of some of the actors in the game, and unveil those.

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