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Jean Tirole Proves Why Heterodox Economists are Essential to Save the Field

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By William K. BlackFebruary 12, 2017     Bloomington, MN (Part 3 in my Tirole series) I discussed Jean Tirole’s 2001 article (“Corporate Governance”) and this remarkable admission about orthodox economists in my second article in this series. The economists’ implicit assumption is that employees, suppliers, customers, and other natural stakeholders are protected by very powerful contracts or laws that force controlling investors to perfectly internalize their welfare…. [The] details of the argument have not yet been worked out.”  [p. 4] I explained that this was a particularly pernicious example of “group think” that furthered the dominant ideology of orthodox economists (laissez faire) and served their self-interest in getting hired, published, honored, and advanced.  I explained that it was anti-scientific and failed Tirole’s test of what it took to be a scientist.  I noted that Tirole’s admissions also demonstrate the dishonest nature of his and his disciples’ attacks on heterodox economists and promised to discuss that point in this subsequent article. Tirole’s attack on heterodox French economists consisted of the pure ad hominem description of them as a “motley crew” and the assertion that they represented academic failures because they had not published in the top orthodox journals.

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By William K. Black
February 12, 2017     Bloomington, MN (Part 3 in my Tirole series)

I discussed Jean Tirole’s 2001 article (“Corporate Governance”) and this remarkable admission about orthodox economists in my second article in this series.

The economists’ implicit assumption is that employees, suppliers, customers, and other natural stakeholders are protected by very powerful contracts or laws that force controlling investors to perfectly internalize their welfare…. [The] details of the argument have not yet been worked out.”  [p. 4]

I explained that this was a particularly pernicious example of “group think” that furthered the dominant ideology of orthodox economists (laissez faire) and served their self-interest in getting hired, published, honored, and advanced.  I explained that it was anti-scientific and failed Tirole’s test of what it took to be a scientist.  I noted that Tirole’s admissions also demonstrate the dishonest nature of his and his disciples’ attacks on heterodox economists and promised to discuss that point in this subsequent article.

Tirole’s attack on heterodox French economists consisted of the pure ad hominem description of them as a “motley crew” and the assertion that they represented academic failures because they had not published in the top orthodox journals.  The use of the phrase “motley crew” proves Tirole’s personal animus and the fact that he used the ad hominem attack as his first “argument” shows that he recognizes the weakness of his substantive arguments.

Tirole’s critique that heterodox scholars virtually never publish in the most elite orthodox journals is a devastating critique of orthodox scholars, not heterodox scholars.  The passage I quoted from Tirole demonstrates that he knows this to be true.  Orthodox economists believe so fervently in a utopian myth – refuted constantly by reality, but never rejected by these orthodox economists – that they:

  1. do not need feel any need to state their myth as an explicit assumption,
  2. have never demonstrated that their utopian myth comports with reality, and
  3. have never bothered to “work out the details” of their myths.

Heterodox economists do not believe these foundational myths of the orthodox canon and publish research demonstrating its falsity and the refusal of orthodox economists to “abandon” their foundational beliefs despite the fact that they “fail the test of reality.”  Tirole stressed in the same letter that denounced heterodox economists to the French educational minister that an economist who refused to abandon theories that fail the test of reality was not a scientist.  The heterodox critique is so threatening to orthodox economists because in addition to proving that their theories prove the fail the test of reality we prove that these orthodox economists are not scientists because they refuse to abandon their failed dogmas.

A top orthodox journal will not publish an article by a heterodox scholar making these points – for the reasons Tirole makes about their utopian myths.  The editors and the referees of the top orthodox journals will never approve the publication.  For Tirole to take this fact and pervert it into an attack on heterodox scholars is disingenuous.

The Tirole passage that I quoted to begin this article also refutes the efforts of Tirole’s supporters to define heterodox economists as science deniers.

The term “economic negationism” does not caricature the debate. We chose it because the notion of “scientific negationism” is an expression used in debates about science, and we are talking about science here.

We note that scientific negationism is a strategy based on four pillars:

  • Throw doubt on and castigate “la pensée unique” [doctrinaire, dogmatic “group think”];
  • Denounce moneyed and ideological interests;
  • Condemn science because it can’t explain everything;
  • Promote “alternative” learned societies.

This strategy aims to discredit researchers who are getting what are considered disturbing results.

In my first column in this series, I explained the obvious logical failure of Tirole’s acolytes.  Orthodox economists do not get to define themselves as a “science” and then define those who refute their utopian myths as science deniers.  Under Tirole’s own definition of what it takes for an economist to be a scientist, orthodox economists are not scientists.

Scientists, not science-deniers, criticize “doctrinaire, dogmatic ‘group think.’”  The opening quotation from Tirole in this article is a classic example of doctrinaire, dogmatic ‘group think.’  Economists believe incentives, including personal ideology and self-interest (pleasing wealthy sponsors), affect behavior.  Virtually all scientists “denounce” the corrupting influence of ideology and economic self-interest on research.  Scientists are heavily skeptical of research supported by firms or ideologues.  Scientists mandate disclosure of research funding that could pose any risk of bias.  Science deniers ignore these conflicts of interest.

Heterodox economists do not denounce science because it cannot explain everything.  The fourth pillar is equally farcical.  There are dozens of learned societies among economists.  Orthodox economists created the vast majority of these societies.  No orthodox economist ever claimed that having multiple learned economics societies constituted science denial.

Orthodox economists are determined to purge heterodox economists from the journals and the academy because heterodox economists keep documenting what orthodox economists consider “disturbing results.”  To return to my opening quotation from Tirole, the problem with orthodox economics is not that it produces “disturbing results.”  The problem is that orthodox economists rely on utopian assumptions, often implicit, that produce nonsense results that fail the test of reality.  The “results” have nothing to do with reality.  Mythical assumptions, not data, drive the orthodox results that purport to test their most fundamental theories.  Tirole’s acolytes aimed their “science deniers” label at heterodox economists, but they ended up demonstrating that orthodox economists are not only non-scientists, but also science deniers desperate to prevent the publication of heterodox scholarship in their top journals.

William Black
William Kurt Black (born September 6, 1951) is an American lawyer, academic, author, and a former bank regulator. Black's expertise is in white-collar crime, public finance, regulation, and other topics in law and economics. He developed the concept of "control fraud", in which a business or national executive uses the entity he or she controls as a "weapon" to commit fraud.

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