I somehow missed this piece by Robert Nadeau in Scientific American when it came out earlier this year, and I thought it made for good Sunday/holiday reading.
Nadeau’s criticisms are admittedly pretty broad and similar observations have been made elsewhere (although Nadeau does add some useful historical detail), and a short piece by a non-expert is always vulnerable to criticism. But that doesn’t mean that Nadeau isn’t on to something. The propensity of economics to start from abstraction is limiting, yet once certain constructs become codified via textbooks, they become part of the discipline’s world view.
For instance, around the time of the release of the IPCC report and the Stern report (which endeavored to assess the econonic cost of climate change), there was considerable discussion of how to properly characterize the costs and risks of inaction, and the failure of market-based approaches (Brad De Long had a fine post). There have been some debates within the profession about the neoclassical orthodoxy and heterodox economics (see here and here for examples).
Now if you want to read a fair minded yet in some ways devastating critique, and a well-written, entertaining and informative one at that, you must go immediately to Deidre McCloskey’s essay, The Secret Sins of Economics. McCloskey is a real economist, a Professor of Economics, History, English, and Communication. Some academics I know regard the article as fundamental, yet also note it hasn’t gotten the traction they think it deserves (it is because McCloskey is not only cross disciplinary, but transgendered to boot?).
From Scientific American:
The 19th-century creators of neoclassical economics—the theory that now serves as the basis for coordinating activities in the global market system—are credited with transforming their field into a scientific discipline. But what is not widely known is that these now legendary economists—William Stanley Jevons, Léon Walras, Maria Edgeworth and Vilfredo Pareto—developed their theories by adapting equations from 19th-century physics that eventually became obsolete. Unfortunately, it is clear that neoclassical economics has also become outdated. The theory is based on unscientific assumptions that are hindering the implementation of viable economic solutions for global warming and other menacing environmental problems.
The physical theory that the creators of neoclassical economics used as a template was conceived in response to the inability of Newtonian physics to account for the phenomena of heat, light and electricity. In 1847 German physicist Hermann von Helmholtz formulated the conservation of energy principle and postulated the existence of a field of conserved energy that fills all space and unifies these phenomena. Later in the century James Maxwell, Ludwig Boltzmann and other physicists devised better explanations for electromagnetism and thermodynamics, but in the meantime, the economists had borrowed and altered Helmholtz’s equations.
The strategy the economists used was as simple as it was absurd—they substituted economic variables for physical ones. Utility (a measure of economic well-being) took the place of energy; the sum of utility and expenditure replaced potential and kinetic energy. A number of well-known mathematicians and physicists told the economists that there was absolutely no basis for making these substitutions. But the economists ignored such criticisms and proceeded to claim that they had transformed their field of study into a rigorously mathematical scientific discipline.
Strangely enough, the origins of neoclassical economics in mid-19th century physics were forgotten. Subsequent generations of mainstream economists accepted the claim that this theory is scientific. These curious developments explain why the mathematical theories used by mainstream economists are predicated on the following unscientific assumptions:
The market system is a closed circular flow between production and consumption, with no inlets or outlets.
Natural resources exist in a domain that is separate and distinct from a closed market system, and the economic value of these resources can be determined only by the dynamics that operate within this system.
The costs of damage to the external natural environment by economic activities must be treated as costs that lie outside the closed market system or as costs that cannot be included in the pricing mechanisms that operate within the system.
The external resources of nature are largely inexhaustible, and those that are not can be replaced by other resources or by technologies that minimize the use of the exhaustible resources or that rely on other resources.
There are no biophysical limits to the growth of market systems.
Nadeau chose to focus on the assumptions that run afoul of environmental issues; others can be added (e.g., people act independently on the basis of full and relevant information).
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Nadeau’s article reminds me of the observation that the difference between physics and economics is that physics has 3 laws that explain 97% of everything while economics had 97 laws that explain 3% of everything.
Bravo to Nadeau! Just one reason economists are so naturally collaborators with right-wing ideologues arises from their shared commitment to closed systems. Of course, the small gripe that there is and never has been any system completely closed is why, after years of rule by closed systems non-thinkers, we see such phrases in the blogosphere as ‘reality based community’.
Yves,
The link to McCloskey’s article does not work. Also I think Deidra ends with an “e”.
Been there
A bodged science where everyone is pretty much aware that the assumptions are plainly false.
Neoclassical economics was a dogma that served neo-imperialism well.
It served the same purpose that Christianity did for classical imperialism–to give some sort of philisophical or moral justification for cheap raw materials (oil, metals, agricultural goods, etc.) and expensive manufactured goods.
But just as classical imperialism became philosophically indefesible and faded from the globe in the latter 18th and early 19th centuries, so now neo-imperialism has become indefensible and is seeing its philisophical underpinnings crumble away.
Neo classical economics rests on the misguided belief that the resources of the earth are infinite, or alternatively, that new technologies will replace the earth’s natural resources and allow BAU to continue.
Malthus, The Club of Rome, et al, will be proven right about their predictions in the near future as the ‘low hanging fruit’ of cheaply extracted oil diminishes while no attempt is made to curb population growth of the earth. There is no substitute for the 84~ million barrels of crude that are now being consumed daily by the world.
River
Excellent bit of context in that post, which becomes more interesting when viewed in an even broader context. Just after economists suffered their bought of “physics envy,” psychologists fell ill with the same affliction. The behaviorists imported a “stick and ball” model of reality, trying to bring rigor to the softest of the soft sciences (later still philosophy succumbed as well). It’s taken decades for these various disciplines to realize that “discarded” models of the physical universe are not necessarily useful in other sciences. Indeed, a good deal of innovative work in physics in recent decades has involved attempts to deal with the limits of quantitative methods — e.g. qualitative physics.
This is news? Come on folks, there are numerous fundamental critiques of neoclassical economics written by actual economists.
Debunking Economics by Keen
More Heat Than Light by Mirowski
Foundations of Economics by Varoufakis
Anything by Hyman Minsky
The entire Post-Autistic Economics movement (horrible name) that grew out of French graduate students’ dissatisfaction with the curricula they were being force fed.
The Cambridge Capital Controversy, in which the neoclassicals essentially admitted they lost but nevertheless decided to continue their program.
The list goes on and on.
McCloskey’s piece is indeed devastating and sobering. Political science, anthropology, etc. may be subject to the same sins, but at least trillion-dollar bets (not to mention the livelihoods and even lives of millions) are not placed on the basis of a system which has little interest in observed reality or predictive power.
The theory is based on unscientific assumptions that are hindering the implementation of viable economic solutions for global warming and other menacing environmental problems.
If a system exists that will substantiate the viability of proposed economic solutions to a problem that has not been substantiated to any degree of predictability then why the hell don’t we apply it to all economics?
Economics is all about predictability right? Then just how to we apply economics to a ‘problem’ that nobody has yet been able to accurately predict. Never mind that ‘viable’ is a value judgement.
It’s silly.
Anon of 9:06 AM,
The link to the article does work, I just checked it. On a Mac, it downloads the article which opens in Adobe Acrobat Reader. Did you not see the download? You need to click the article name itself. McClosky’s name is a separate link to her bio.
And I did correct the name spelling (eek). Another example of my problems with proofreading.
Maria Edgeworth?
Yves, the SciAm link doesn’t work. It’s pointing to http://www2.blogger.com/post-create.g?blogID=3782644139927778760
Minor nit: McCloskey is at U of Illinois Chicago, not U of Chicago.
Yves, if you like Deirdre’s article, check out this book:
http://www.amazon.com/Cult-Statistical-Significance-Economics-Cognition/dp/0472050079/ref=sr_1_1?ie=UTF8&s=books&qid=1211746986&sr=8-1
Anon of 3:36 PM,
Fixing link and nit. And sorry re nit. The essay itself said she was U of C, and she defends libertarianism so I misinterpreted her webpage. But her cross-disciplinary post is pretty unusual, and you tend not to find those at big name schools unless they are a named chair (ie, endowed by someone), so I should have thought twice.
> Some academics I know regard the article as fundamental, yet also note it hasn’t gotten the traction they think it deserves (it is because McCloskey is not only cross disciplinary, but transgendered to boot?).
Some academics are morons, or uninformed, or both. Is this a news?
FWIW I agree with her point 100%; I encounter these two “sins” in my work on a daily basis and it annoys me to no end. The second of her closely-coupled sins, concerning the (mis-?)use of statistical significance will, I believe, be eventually regarded as one piece of a great intellectual fraud concerning the practice and theory of statistics. I agree with her insinuation, too, that is the real damage to people through its harm to medical research that will finally be its undoing.
BUT: her article is rather badly written. It rambles on and on as it aspires to a literery tone in lieu of clarity (Tell me how long it takes for
you to find out what the secret sins are!). Fair-minded or informed argumentation takes a back seat
to cheap rhetorical tricks (e.g. the warning that economic insiders “simply can’t grasp arguments that are plain to people not socialized in economics” – don’t you, a presumed outsider, feel really special now?)
There are counterarguments and subleties worthy of some respect. A fairer – and at the end of the day a more convincing – argument either addresses these, with respect, or honestly ignores them; McCloskey throws up straw-men adversaries and arguments that are no more than caricatures playing into her rhetorical hands.
This is an argument of a type.
Her complaint is old and well known, to many economists but also in related fields where similar sins arise. There are strong social factors why it is rejected, ignored, or acknowledged with lip-service only – and that’s a desperate shame. But if an “academic” thinks she’s said something new and is being ignored because of cross-disciplinary (or other idiosycratic) reasons, said academic should do what academics are suppoed to do, and understand/research the questions more deeply before making silly comments.
It’s possible that the accounting profession has recently undergone a similar paradigm shift to what transpired in 19th century economics. Accountants have gone from preparing financial statements based upon historical cost to one based upon “fair value”. In theory this sounds great (i.e. reporting current real estate values will be more meaningful to financial statement users rather than a historical cost amount that’s twenty years old). My concern is with reliability. It seems to me that auditing a historical cost balance is much easier and more reliable than auditing “fair value”. You can trace a cost balance directly back to a specific source document (cancelled check, bank debit memo, etc.). Not so when auditing a “fair value” balance for something not traded in an open market. In many cases you need to bring in experts (appraisers, economists, etc.) who run calculations and comparisons and determine FMV based upon their professional judgment. Now, it seems that accountants have set themselves up for a fall because the experts, whose opinions they intend to rely upon, aren’t really expert at anything. (Also , while less sophisticated, historical cost basis probably provides for more scientific approach to auditing than one relying upon FMV). I’d like to hear others’ thoughts on this.
Anon of 5:59 PM,
First, the speculation about her observations being ignored due to her various boundary-crossings was mine, not the academic in question (now that I know she teaches at a school most regard as second-tier, that is probably an even bigger reason). And in fairness, I said he regards her work as fundamental, not this essay in particular. I can check and find out what he meant, but I suspect he meant her book “The Rhetoric of Economics” which does have a chapter on statistical significance.
The academic in question is not a lightweight; he’s co-authored papers with Noble Prize winners. And he has reason to sympathize with McCloskey’s view: he has written a fundamental attack on the one of the popular mathematical approaches used in the social sciences. Everyone who has seen the paper is very uncomfortable with it (since it implies that much of what has been done needs to be rethought) and is unable to contest his argument. Needless to say, he hasn’t been able to get the paper published. He’d putting it in as a chapter in a book that will come out later this year, and when the book is out I will discuss it at greater length.
I’ll grant her writing is self-indulgent. The bit about Cassandra at the end was toomuch, and after reading 2/3s I skipped forward to read what she thought the two big sins were. But in the humanities, some academics do aspire to a highbrow infotainment style when trying to reach a broader audience. Just looking at a few pages of her “Rhetoric of Economics” she hews to a more conventional style used when doing close readings of text, which if you don’t routinely read that sort of thing, is tiring.
And it turns out she did teach at the University of Chicago for quite a few years before she got tenure at U of Illinois.
Thanks Yves for your response to my comments.
I will read her books and other articles to see if there are better expositions. I am conflicted. I believe she is RIGHT. And that it _matters_, even if perhaps only marginally through the impact on economics then significantly through the impact on 20’th century science in general. I’d love someone to be able to make the case in a game-changing way. Yet as I read this article and put on my “if I didn’t have any prior knowledge” hat, I’d have little equivocation in filing her article in the “crank” category. I hope the books are better.
I am genuinely surprised that a senior economist, such as your friend the economist seems to be, finds this of interest. Perhaps – as you posit – it’s some other aspect in her writing beyond
this article? I would have wished someone senior to have been faced with this criticism – at least at this level, hopefully more careful – earlier in his or her career. Though, and I don’t mingle in the more distinguished company you keep, it’s clear to me a lot of practitioner have have neither had their basic statistical beliefs challenged or found any cause for to indulge in introspection.
But to repeat myself… if by chance her article IS the first introduction a reader has to her critiques … don’t be too credulous, but follow through: there’s something important there.
> It’s possible that the accounting profession has recently undergone a similar paradigm shift to what transpired in 19th century economics
Maybe, BUT: What are accountants supposed to be doing?
– preparing statements so that the right amount of tax is paid?
– preparing statements so that uninvolved/prospective investors know what is honestly going on?
– preparing statements to help management run the company?
Without saying which of these you mean or how the weight of needs has shifted through the years, how can you make any moral judgment about what is better or worse accounting? For sure (i.e. = my personal opinion), in third case I’d rather get the best informed opinion as to some current assets/inputs value rather than a reliable (and yes, it truly is reliable) 5-year old historical cost. Any rational businessman would, IMO, rightly fire an accountant who believed otherwise on the spot. (I.e. a hypothetical accountant who would rather me run my business on old – but indisputably, “reliable” for their vintage – numbers rather than current costs and value.s)
been there said: I’m also skeptical of fair value accounting. I’d like funds to value assets in privately held companies and other non-exchange traded securities at cost unless there’s been a fundamental, material, and permanent change.
yves: There’s lots of low hanging fruit in criticizing the use of stats by professors in the humanities and social sciences. A frequent pet peeve of mine is them assuming the distribution from which they sample is normally distributed. Papers based on sloppy/lazy assumptions like that are unreliable.
Anon of 8:01 PM,
The conundrum here is that someone can make observations that are important and still be a crank (or not care about convention enough to allow oneself to be perceived to be a crank. The fact that she adopts an academic humanities writing style to take on the social sciences probably does not help). If you are enough of a freethinker to tangle with the prevailing orthodoxy, you are going to get a ton of rejection, no matter how correct you are. I can imagine that leads one to more often than is good for one’s image to adopt an aggrieved or aggressive tone.
And good critiques from within the cathedral tend to go by the wayside. I came across a little book by Robert Heilbroner, Behind the Veil of Economics. Its arguments are pretty nuanced, but at a very crude level, he argues that economics finesses many of the questions is supposedly seeks to answer, definitionally, by choice of frame of reference, etc. And none of his arguments go to the sort of far more obvious issues that Nadeau raised.
I’m not a student of the economics literature, but I am pretty sure Heilbroner’s book was viewed as a nice intellectual exercise and had zero impact.
On a more mundane level, Minsky was considered a crank by serious economists of his day.
I wish I had time to read more books….I’d at least like to take a gander through hers. Do let me know what you think (if you click on my name under the Contributors tab, it takes you to a page with an e-mail address). My friend could be having a lapse of judgment, although he is generally sound.
Anon of 8:21 PM,
Fair points, but I think in the modern world for public (and private aspiring to be public) 2. is most important (tax books are different than the books prepared for financial reporting purposes). Managers use a whole host of reports (their management information system) beyond the public financials to operate the business.
One thing that always bothered me as a consultant was how the internal reports NEVER aggregated well to the official statements. As one manager told me, “What does that chair cost? I can make it cost whatever I want to depending on the assumptions I make.”
It’s particularly tough in places like banks or other large organizations with shared activities and overheads. If two departments work together on a deal, how do you account for the revenues? If you divide them (which seems logical), you provide disincentives for cooperation (everyone will give the deals internal to their department priority over joint business). If you double (or worse, triple) count, then you can have every department showing a profit when the division loses money (I’ve seen that happen). That’s a very simple minded example, but you get the point….
bobo 7874,
Agreed on both counts. And as you know, that sort of mistake is endemic in the financial literature. Computational convenience takes precedence over characterizing the data in the most accurate manner possible.
Anonymous of 8:21.
Thanks for your comments. To clarify based upon your 3 questions about what accountants should be doing.
1. Tax returns can be prepared on a basis different than what shows on the financial statements. While performing this function one tries to minimize tax liabilities to the greatest extent possible- you’re working solely in the client company’s interest.
2. Auditing financial statements requires that you balance the needs of the client with the needs of all potential users of the financial statements. Auditors must retain their independence when performing an audit of company’s financial statements.
3. Not sure if you’re referring to outsourcing of CFO duties rather than having audited financials prepared for third parties. If just performing CFO duties then you do whatever is necessary to provide information that will help the owner(s) manage the company in a more effective and efficient fashion.
My comments above were referring to situations involving audited financials. In that regard I am concerned whether the accounting profession, by choosing to focus upon fair value accounting, is hitching it’s wagon to a less scientific methodology. BTW how valuable were the stated “fair value” amounts for all those SIV’s, CDO’s, CDS’s, IRS’s, etc. that have been carried on company balance sheets over the past few years?
Around the end of WWII, Paul Samuelson applied Gibb’s work on equilibrium in chemical thermodynamics to economics. This is the background for the famous challenge Ulam made to Samuelson, to `name one proposition in all of social sciences which is both true and non-trivial’. Ulam was apparently not impressed with Samuelson’s use of Gibb’s work; by implication, Samuelson’s conclusions were trivial if true and the fancy borrowed math didn’t help. It took Samuelson a few years to reply to Ulam, and when he did, he had to reach back almost 150 years to Ricardo’s theory of comparative advantage (a non-quantitative
theory). Ulam’s response, if he needed to give one, isn’t recorded.
OOPS- SIV’s weren’t being carried on the IB balance sheets. (although we now know that most of them should have been)
To: been there said, 9:14pm.
I apologize.
You said “It’s possible that the accounting profession has recently undergone a similar paradigm shift to what transpired in 19th century economics…”
I read too fast, too casually.
My very limited (I’d like corrections!)
reading of the history of accounting over the 20’th century suggest a truly dramatic shift in emphasis from producing accounts useful to a business itself (what _did_ that chair cost relative to the profits it produced? Yes, it’s hard, but we need to decide whether to buy another!),
to “audited” statements that followed external rules and conventions but were of increasingly small management interest.
I re-read your message and it’s clear that while you are contrasting with century-old changes in economics, you are only asking about _recent_ changes in accounting – not changes over the last century as I somehow misread.
All my questions withdrawn.
Yes, now I read correctly, good comment!
I read the McCloskey piece in full and rather enjoyed it. I think she makes good points about economic theorizing that elides the real world and statistical work that has to do more with the statistical signficance of the measurement being made than the making of useful measurenments.
Having said that, I have just a little trouble with her core proposition, that free trade is neat because if two willing parties choose to trade both must be better off (or they wouldn’t do the deal). She then sets up an alternative, a straw man, really –the kind of really suffocating regulation that few people if any advocate in the United States. Free trade good, Communism bad. This misses Nadeau’s point.
If you want an economic literature that respects biophysical constraints, all you need do is, rethink what economists call, “the objective function.” Often conventional economic theory seeks to maximize the welfare of a single individual or country, or maximize the profits of a single firm. From such objectives flow all sorts of “greedy looking” results: general equilibria where economic agents who start with larger endowments of goods than others, end up with same, get to pollute (defecate where others eat), and finally, get to outbid others for the resources they want (finite or renewable). Your assumptions determine where you end up — and if they are similar to those in all the other US economic literature the American Economic Review might publish them.
To flip this over, all you need do is change your objective function, to maximizing the welfare of the species as a whole. At that point what you get is a book like “Steady State Economics” by Professor Herman Daly of the University of Maryland. Daly showed how an economics of Spaceship Earth might look, geared for longterm physical sustainability. Economic analysis works just fine; it’s just that when you apply it to unfashionable and deadly serious problems the mandarins at Chicago and Princeton may well praise your work and then marginalize it as McCloskey depicted in her closing parable.
Of course economics has devised useful sounding “remedies” for pollution, such as taxing the polluting product enough to make consumers pay the cost of environmental damage. I have no doubt such taxes would provide socially useful incentives, assuming the appropriate damages could be measured. “Cap and trade” is another scheme that tries to use economic incentives to control pollution (usually greenhouse gas production) without imposing red tape on business. Heavy taxes on finite resources might also, at least in theory, promote renewables.
As McClsokey notes, however, we are not exclusively economic creatures. We tend to like present comfort far too much for our longterm economic good and are less than eager to face the consequences of our behavior. Our very socitey is based on heedless exploitations of the “cheapest” resource and assumes that there is always a someone else to eat the effluent. As long as these are our core values, firms and countries will evade ecologically based strictures. You will notice that economists — even McCloskey — mainly enable destructive behavior on a mass scale, because they bless any and all transactions made by willing sellers and willing buyers. I buy my SUV and me and my car dealer both feel better off after the deal, but if 10 million people do so every year our habitat degrades towards the point where the species might be at risk. McCloskey could presumaby care less, because as she says, “free trade is neat.”
A society with our basic attitudes has little chance to survive, and most economists have blessed the destruction of our civilization. The economics profession has enabled and even extolled our worst tendencies, nothing more.
Finally I don’t pretend to know how to impliment Daly’s vision and certainly would not care for heavy bureaucracy; on the other hand I don’t see many serious economists (let alone politicians) even thinking about debating the pathway to a sustainable society. Which is why we will likely crash like the Easter Islanders or the Maya instead.
I have read, and own, McCloskey’s The Rhetoric of Economics. It has the same weaknesses and virtues raised here, i.e. a post-modern humanities voice which roundly set my teeth on edge, and a perspective on how value-laden rather than purportedly fact-laden most economic studies actually are which I agreed with in every word.
The base problem with statistical reasoning in economics and the humanities is that the kinds of analysis used and the kind of systems studied are a complete mismatch. To render complex relational systems into statistical form capable of interpretation requires _eliminating most of the information about the system from the outset_ to get neat enough data to run through a statistical test. GIGA really, truly does apply, but nobody would get tenure or fat corporate jobs if they fessed up to cooking answers to measure out of their data as a learned function and indeed sine qua non of their professional credential. Some of the best economists are those sufficiently shrewd as to define problems with data which needs minimal distortion so that their inappropriate statistical techniques do the least harm. I consider most economists as one would have considered theologians in Seventeenth Century Europe: there were scads and scads of them, many quite brilliant, and no government would think to ignore their study and cant in taking action; they provided precious little value added, however, and when they did it was largely because they dressed up common sense in professional jargon laced with technical analysis. Economists are high priests of money; it doesn’t matter if they don’ have a with of sense about it, they and their present perspective are institutionally tenured into public decision making.
As one further note, I question whether it is appropriate to include Vilfredo Pareto as a neoclassical economist. Moreover, he was himself a very talented engineer doing cutting edge work for his time in dynamics. His own work involved a significant study of actual monetary outcomes, and and was not primarily focused on utility. However, we know of Pareto’s work largely through Marshall’s co-optation of it, and Marshall’s reinterpretation is profoundly neoclassical. Indeed, I would see Marshall as the arch-neoclassicist to whom every criticism here applies in spades and cascades.
“I’ll grant her writing is self-indulgent. The bit about Cassandra at the end was too much, and after reading 2/3s I skipped forward to read what she thought the two big sins were. But in the humanities, some academics do aspire to a highbrow infotainment style when trying to reach a broader audience. Just looking at a few pages of her “Rhetoric of Economics” she hews to a more conventional style used when doing close readings of text, which if you don’t routinely read that sort of thing, is tiring.”
McCloskey is mimicing Samuelson’s writing style in this piece but comes off badly like something from a smug grad student. I felt like skipping to the end about 2/3 through myself. Given McCloskey’s tone she should have ended with something with herself as Thersites and Samuelson as Agamemnon. To me what was worse than tacking on the Cassendra thing at the end was the sneaky punch McCloskey threw at Chomsky as she finished up, preseumably because it bolsters the argument but it makes it look like because Samuelson would have kicked her ass.
“The fact that she adopts an academic humanities writing style to take on the social sciences probably does not help). If you are enough of a freethinker to tangle with the prevailing orthodoxy, you are going to get a ton of rejection, no matter how correct you are. I can imagine that leads one to more often than is good for one’s image to adopt an aggrieved or aggressive tone.”
McCloskey is taking a Nietzschean approach. She is here a critic despite her economic training. Her basic objection is based on an aesthetic/political appreciation ending with a call for reevaluation of values. This is why she does not present a hint or example of this new, old approach. It would be as pointless for an economist to address her points as it would be for a film director to take a film critic seriously, except a film critic has some influence on how well a film does so the director goes along but economists don’t have to.
Neoclassical economics is a joke. The methodology is entirely inappropriate to the study of economic phenomena. And yet neoclassical economists continue to use their meaningless models which have no resemblance to reality (exmpli gratia: atomic agents with perfect knowledge) never questioning that the foundation of their edifice is a bog.
Many who have realized the irreparable flaws of neoclassical economics and the fact that economics is fundamentally a human science, not an empirical one, have looked into Austrian economics, as most clearly explicated Carl Menger, Ludwig Von Mises and Murray Rothbard.
I hope, Yves, that you will look into it too.
So Vijay, Schumpeter came out of that milieu as well though he can’t be pigeonholed amongst them. I’ve gotten more out of Schumpeter than any three other famous names combined. Care to include him in your list?