by Modern economics is sick Modern economics is sick. Economics has increasingly become an intellectual game played for its own sake and not for its practical consequences for understanding the economic world. Economists have converted the subject into a sort of social mathematics in which analytical rigour is everything and practical relevance is nothing … If there is such a thing as “original sin” in economic methodology, it is the worship of the idol of the mathematical rigour invented by Arrow and Debreu in 1954 and then canonized by Debreu in his Theory of Value five years later, probably the most arid and pointless book in the entire literature of economics. The result of all this is that we now understand almost less of how actual markets work than
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Modern economics is sick
Modern economics is sick. Economics has increasingly become an intellectual game played for its own sake and not for its practical consequences for understanding the economic world. Economists have converted the subject into a sort of social mathematics in which analytical rigour is everything and practical relevance is nothing …
If there is such a thing as “original sin” in economic methodology, it is the worship of the idol of the mathematical rigour invented by Arrow and Debreu in 1954 and then canonized by Debreu in his Theory of Value five years later, probably the most arid and pointless book in the entire literature of economics.
The result of all this is that we now understand almost less of how actual markets work than did Adam Smith or even Léon Walras …
Indeed, much of modern microeconomics might be fairly described as a kind of geography that consists entirely of images of cities but providing no maps of how to reach a city either from any other city or from the countryside.
Mark Blaug (1927-2011) did more than any other single person to establish the philosophy and methodology of economics a respected subfield within economics. His path-breaking The methodology of economics (1980) is still a landmark (and the first textbook on economic methodology yours truly ever read).
Mainstream economics has become increasingly irrelevant to the understanding of the real world. The main reason for this irrelevance is the failure of economists to match their deductive-axiomatic methods with their subject.
It is — sad to say — 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 — 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 — is beyond comprehension. Stupid models are of no help in understanding the real world.