Hicks on the lack of scientific progress in economics

20 Aug, 2019 at 19:08 | Posted in Economics | 11 Comments

Economics, also, is prone to revolutions; but they are mostly, I believe, of a different character … They are not clear advances in the scientific sense.

This is not the fault of economists. It is a consequence of the nature of the facts which we study. Our facts are not permanent, or repeatable, like the facts of the natural sciences; they change incessantly, and change without repetition … Our practical concern is with the facts of the present world; but before we can study the present, it is already past …

Hicks2Our theories … are rays of light, which illuminate a part of the target, leaving the rest in darkness. As we use them, we avert our eyes from things which may be relevant, in order that we should see more clearly what we do see … It is obvious that a theory which is to perform this function satisfactorily must be well chosen; otherwise it will illumine the wrong things. Further, since it is a changing world that we are studying, a theory which illumines the right things at one time may illumine the wrong things at another. This may happen because of changes in the world (the things neglected may have gained in importance relatively to the things considered) or because of changes in ourselves (the things in which we are interested may have changed). There is, there can be, no economic theory which will do for us everything we want all the time …

So the ‘revolutions’ of economics are only sometimes similar to the ‘revolutions’ of science; most of them are of another character; they are changes of attention.

John Hicks


  1. “I accordingly conclude that the only way in which IS-LM analysis usefully survives — as anything more than a classroom gadget, to be superseded, later on, by something better – is in application to a particular kind of causal analysis, where the use of equilibrium methods, even a drastic use of equilibrium methods, is not inappropriate.

    I have deliberately interpreted the equilibrium concept, to be used in such analysis, in a very stringent manner (some would say a pedantic manner) not because

    I want to tell the applied economist, who uses such methods, that he is in fact committing himself to anything which must appear to him to be so ridiculous, but because I want to ask him to try to assure himself that the divergences between reality and the theoretical model, which he is using to explain it, are no more than divergences which he is entitled to overlook.”
    John Hicks in Journal of Post Keynesian Economics,1980

  2. Of course animal spirits and psychological factors are the spark of the crisis. But underneath were all sorts of seemingly contradictory factors going on. Similarly, the cause of WWI was not the shooting of the archduke – it was problems building up over a long time, one being big geopolitical ‘tchanges. Similarly the cause of the GD was not a single factor – including Friedman’s sudden drop in the money supply.

    You can’t isolate these factors; you have to look at the whole picture and face the whole mess head on. Something economists and their models can’t do.

  3. Read history!
    “The country was dying by inches. It was dying because trade and commerce had declined to dangerously low levels; prices for basic commodities were such as to destroy the value of the assets of national institutions such as banks, savings banks, insurance companies, and others. These institutions, because of their great needs, were foreclosing mortgages, calling loans, refusing credit. Thus there was actually in process of destruction the property of millions of people who had borrowed money on that property in terms of dollars which had had an entirely different value from the level of March, 1933. That situation in that crisis did not call for any complicated consideration of economic panaceas or fancy plans. We were faced by a condition and not a theory.”
    FDR’s Second Fireside Chat. There was a purely psychological banking crisis leading to overproduction and deflation. Nowhere does FDR mention energy in that speech.

  4. My experience with college economists is this: The great majority of them enter their career with one thing in their mind: MONEY. When they cant get the jobs they want out of college-mostly established Wall Street firms or banks-they stick around their universities to add more letters to their title, MA/PHD and so forth. All the while sending CV’s everywhere. If they do get that job or in a “second best” institution like the IMF or the World Bank they quickly drop-kick their studies out the window, but if they don’t they receive their titles and became professors and “consultants”. This is of course a respectable job, but their income depends on how smart they are perceived by their clients. I.E. how high is their level of “expertise”. Two things emerge from this:
    A) Senseless caliber math, when they churn out incomprehensible equations to confuse clients into thinking they are geniuses; not unlike what magicians do with a rabbit and a hat (convince clients something is true when they know it isn’t).
    B) What I call “The Harry Truman Trap”. Yes, the 33rd president of the United States said: “An expert is a fella who is afraid to learn anything new because he wouldn’t be an expert anymore”

    “Expert” Economist don’t want to be caught off guard, and when something happens that they didn’t anticipate they call it “aberration”; like the junk bond and LTCM crisis of the 1980’s (these were quickly resolved with no lasting damage). But when something big happens like the OPEC crisis of the 1970’s, the Asian crisis of 1997 and the Great Recession of 2008 they find themselves with broken prestige and a lot of explaining to do. What are they missing?

    Economist could do with more knowledge of science; specifically, energy science. None of them take courses on energy science, so they are ignorant of the key role hydrocarbons played, and still plays, in the industrial revolution. It happens that Energy is a factor of production on the same level as capital, land and labor. If it becomes expensive and unavailable all the other factors suffer. The fact that oil prices had been climbing since 2003. brushed $140 per barrel in 2008 and stayed over $100 until 2014 had everything to do with that recession and the lingering GDP growth afterwards. The few of us with decades of experience in the oil business predicted this to deaf ears. Concern about oil’s present and future affordable availability has OECD nations growing at snails pace, affecting inequality and politics too. There are books that try to close this gap. I of course recommend one of my own: The Energy Within Economics and the Bubble Envelope Theory of Human Prosperity (Nova Science Publishers 2012). In that book me and my peer-reviewer and recognizes energy scientist himself, Charles Hall, wrote the phrase:

    “Energy is the lien of money. The production of wealth of all nations depends much on the affordable supply of energy. Thereby all elements that constitute prosperity including production, consumption, transport and money ride on the back of energy”

    • The problem is energy prices are unconnected to physical supply. Supply is throttled as needed to implement political and profit goals. There was no physical scarcity of oil in the 1970s or in 2007. There was arbitrary throttling of supply (arbitrary meaning it could easily go another way, depending on personalities).

      • Thanks for your post Carlos, this pretty much reflects what I have seen in the economics profession.

        “An expert is a fella who is afraid to learn anything new because he wouldn’t be an expert anymore”

        This is why Krugman bangs on about ISLM and his liquidity trap paper, and the rest of the profession hangs on to DSGE and classical theory to dear life.

        Of course everyone knows these things don’t tell us anything interesting at all and are a massive distraction to understanding capitalism and the real problems that face us. But crises and policy failures are not going to change things. (And no, unconventional monetary policies that followed the GFC were not thanks to ‘advances’ in macro-economic theory or Krugman’s article.),

        • “Thereby all elements that constitute prosperity including production, consumption, transport and money ride on the back of energy”

          It played a role in the Great Depression, something understood by historians. And behind this was geopolitical factors. Britain was no longer an hegemonic power that could guarantee trade routes and the safe and reliable supply of commodities.

          It’s interesting how the macro-economic profession has played down the role of energy since about the 1980s.

  5. This is basically the “choosing the right model” argument.

    It should be very clear now that this is not the way you get a proper understanding of capitalism or solutions to its problems. If we are to address the problems that led to the Financial crisis, or inequality, we need to have a good idea as we can of the actual causes involved. This naturally involves proper historical investigation. Then the appropriate solutions can be found. But first we must understand how and why.

    Good economics is basically good history.

  6. Dear Lars, could you please also include the source; where Hicks said this. Best

    • @ Anis Chowdhury
      The source can be found by clicking on “John Hicks”, at the end of the quotation.
      It is: “The Scope and Status of Welfare Economics“, OEP, Nov. 1975.
      This is a very nice article. A free can be obtained from:
      Prof. Syll’s post omits several important points made by Hicks, e.g:
      (1) Econometrics and linear programming are scientific advances:
      “there are fields in which economics, like the natural sciences, advances. Techniques, like econometrics and linear programming, are invented; and their invention is a permanent gain.”
      (2) Despite obvious simplifying assumptions, there are no useful alternatives to Classical Political Economy
      “Classical Political Economy, like the Keynesian theory, was a concentration of attention. It gained strength by its omissions, by the things which it put on one side. Some of the things it put on one side were rather obvious. Thus throughout the years in which it was dominant, there had been numerous writers who had refused to put on the classical ‘blinkers’; they had been unwilling to think in the way in which that system of thought required them to think. But they had been unable to develop any system of thought with comparable potency.”

      • Many thanks for giving the source.

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