A valid ontology for economics?

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from Ikonoclast (originally a comment)

The challenge is to develop a valid ontology for economics. In medicine, early theories of disease failed to yield efficacious treatments because their ontology (a theory of basic real existents and how they interact) was wrong. A few of the more common ideas founded on false ontologies were that diseases were caused by evil spirits, miasma and imbalances of the four humors. It was not until the advent of the germ theory of disease that real progress was made. More basic and real biological existents were found, microscopic “germs” or pathogens, and the pathogenic theory of disease was founded. With continued research, further causes of disease were found, namely deficiency disease, hereditary disease and physiological disease. Again, this progress was made possible by basic empirical research into real existents via the disciplines of physics, chemistry, biochemistry, genetics, physiology (a complex system discipline) and neurology (another complex system discipline).

Since conventional economics has made a total mess of things, and it is founded on a demonstrably false ontology, the discipline must be torn down and rebuilt from scratch. The conventional economists are the modern world’s equivalent of the medieval school-men. Their arguments are those of the syllogism and mathematico-deductive logic while being based on a false ontology of economic objects. When the premises are false, all ensuing deductions are false. Conventional economists still talk about “spirits” only they call them sentiment, optimism, pessimism and so on. Instead of the homunculus to explain human reproduction they have homo economicus to explain economic reproduction.

The problem with conventional economics is that it commences with prescriptions and then using the prescriptions as axioms, develops its theorems. However, to study the real we cannot begin with prescriptions. We must begin with empirical investigation and accurate descriptions of the real and the interactions of real existents. This is why, at the first level, economics must begin with thermoeconomics, also referred to as biophysical economics. At this level we must seek to equate production and production possibilities only with the empirically measurable and empirically sustainable.

At the same time, we cannot ignore our current cultural norms, in particular the prescriptive norms of private property and (supposedly) free markets. This is where contemporary economics is prescriptive and normative, prescribing these norms as absolutely necessary and non-negotiable. With these norms taken as axiomatic givens, the “laws” of economics are sought. But the results of axioms (when derived) are theorems or pre-determined outcomes, not laws. The normative rules of conventional economics create behaviors but these behaviors are in no way law governed (in the sense of fundamental scientific laws). Rather, they are axiomatically guaranteed outcomes within the limits of what is empirically possible. This is a fundamental point. Human rules (as opposed to fundamental laws of nature) create specific results within the bounds of the possible.

If conventional economics will not own up to its prescriptive foundations, as it in fact does not, then it is revealed as dishonest and merely an ideology dressed up in the trappings of false mathematico-deductivist justifications. Can a non-mathematician critique complex mathematical models in economics or other disciplines? No, not in their own terms. However, the empirical evidence for or against a mathematical model set (in a discipline arena) can be assessed by a basically science-literate person. I am neither an aeronautical engineer nor am I an atmospheric physicist. I cannot critique their mathematical models. Yet, I can see that planes fly and that modern climate models also “fly” while still being granular and imperfect. In the second case, “fly” means that word summaries, diagrams and basic formulae of climate models make scientific explanatory sense (cause and effect sense) to a science-literate person and the models also make predictions which are being borne out empirically by real-world developments.

It’s difficult, for me at least, to see any way that mathematico-deductivist economic models fly outside of the theoretical spaces in which they are constructed. That is, it is difficult to see that they fly in real spaces in the real world). That’s fine up to a point. Theory, be it sociological or scientific, is the next step after inductive and adbductive reasoning from empirical hints and instances. But eventually the theory must be taken back to the empirical realm for testing. Much of “conventional” economics seems to me to be unclear about whether it is descriptive or a prescriptive discipline. I’m not alone in thinking this. These debates are now generations old and objective conclusions are not just rare but seemingly non-existent. The state of micro and macro in “conventional” economics seems as deplorable as ever.

“Of several major theoretical problems, the most basic is that economic theory reasons deductively, from axioms. An axiom, said the English economist Peter Wiles, is “only a premise one is not allowed to question, dressed up as something grand.” … By reasoning deductively from axioms, economics confuses the normative with the descriptive.” – Robert Kuttner.

My central question is this. Does economics need to go back to basic ontology (in philosophical and scientific terms) in an attempt to correct and properly found its ontology of economic objects and processes? I contend it does need to do this. If you can’t get the base ontology right (what really exists at the most basic observable levels) then you cannot get anything else right. Medicine, fas I said, could make no real progress until it abandoned the humors theory for the germ theory et. al.