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Why economics is an impossible science — Lars P. Syll

Summary:
The title might better read, Why orthodox economics is an impossible science. While so-called orthodox economics fits this bill, it doesn't necessarily apply to so-called heterodox schools like MMT.One of the characteristic criticisms of MMY economists by so-called orthodox economists (like Paul Krugman) is "Where's your model?" For neoclassical" economists, who assume formalization as a sine qua non of doing economics, required methodological assumptions include "equilibrium and maximization" as Krugman is fond of saying. The post linked to below objects that this not even possible given the attendant conditions, other than as a "toy model" serving as "a teaching tool." Such models cannot underlie a casual explanation of real change in the world of events that economists then assume

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 The title might better read, Why orthodox economics is an impossible science. While so-called orthodox economics fits this bill, it doesn't necessarily apply to so-called heterodox schools like MMT.

One of the characteristic criticisms of MMY economists by so-called orthodox economists (like Paul Krugman) is "Where's your model?" For neoclassical" economists, who assume formalization as a sine qua non of doing economics, required methodological assumptions include "equilibrium and maximization" as Krugman is fond of saying. 

The post linked to below objects that this not even possible given the attendant conditions, other than as a "toy model" serving as "a teaching tool." Such models cannot underlie a casual explanation of real change in the world of events that economists then assume themselves perfectly capable of not only explaining but also prescribing. Their results speak for themselves.

Instead, MMT adopts an historical and institutional approach which recognizes economics as a study of events from particular perspectives that are conditioned by both subjective and objective considerations instead of presuming that economics is based on invariant principles similar to the natural sciences.

Economics is unlike physics and chemistry as natural sciences but it partakes of the life sciences including their extensions as the social sciences. While these "science" qualify as "science" owing to their assumption of naturalism and use the scientific method, the application of method is determined by the type of subject matter. The life and social science differ from the natural sciences in approach in that they types of data they study and seek to explain are quite different from the phenomena studied by natural sciences. 

A good example of this is an unsourced quote widely attributed to Richard Feynman, "Imagine how much harder physics would be if electrons had feelings." However, the issue goes much deeper institutionally since economics and finance are joined at the hip, economic data being reported not only in real terms but also nominal with the nominal taking precedence since monetary value in exchange is the basis of reporting about economic data. As a result, conditions that affect this supervene in economics, as MMT economists recognize. These conditions are historical and institutional.

Lars P. Syll’s Blog
Why economics is an impossible science
Lars P. Syll | Professor, Malmo University

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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