Category Archives: Science and the scientific method

Philip Mirowski: The Seekers, or How Mainstream Economists Have Defended Their Discipline Since 2008 – Part I

By Philip Mirowski, Carl Koch Professor of Economics and the History and Philosophy of Science University of Notre Dame. Professor Mirowski has written numerous books including More Heat than Light, Machine Dreams and, most recently Science-Mart

Edited and with an introduction by Philip Pilkington, a journalist and writer living in Dublin, Ireland

During a recent interview with the eminent historian of economic thought, Philip Mirowski, I raised a series of questions relating to how mainstream economists had dealt with the crisis on an intellectual level and what this might mean for the discipline in the coming years.

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Philip Pilkington: Libertarianism and the Leap of Faith – The Origins of a Political Cult

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

You wanted God’s ideas about what was best for you to coincide with your ideas, but you also wanted him to be the almighty Creator of heaven and earth so that he could properly fulfil your wish. And yet, if he were to share your ideas, he would cease to be the almighty Father.

– Søren Kierkegaard

Political cults often have the strangest and most obscure origins. Take Marxism, for example. Today it is well-known that Marxist doctrine essentially sprang out of the obscure 19th century economic debates over the source of ‘value’. By ‘proving’ – that is, lifting the assumption from classical political economy – that all ‘value’ came from labour, Karl Marx went on to show that it was therefore only logical to assume the existence of something called ‘surplus value’ that was sucked out of labourers by a parasitic capitalist class. From out of this obscure debate flowed an awesome political movement – and a tyranny to match.

What is less well-known is that today’s most popular political cult – that is, libertarianism – was born in very similar circumstances; it too, arrived into the world out of the obscure 19th century debates over economic ‘value’.

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Debunking Economics: An Interview with Steve Keen – Part II

Steve Keen is an Associate Professor in economics and finance at the University of Western Sydney. The second expanded edition of his popular book Debunking Economics is available now.

Interview conducted by Philip Pilkington, a journalist and writer based in Dublin, Ireland

Part I of the interview can be found here.

PP: Let’s move on to another interesting point about neoclassical economic theory. It’s my understanding that the whole system is assumed to be, at its very essence, one of ‘truck and barter’. In that I mean that they tend to ignore the fact that capitalist economies are, in reality, monetary economies and have nothing to do with barter-based economies. Yet, am I correct in saying that the neoclassicals abstract away from this in order to get away from all sorts of things that make their type of analysis more difficult? I’m thinking in particular of where profits come from and the role of credit in the capitalist system of production. Could you talk about this a little?

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Philip Pilkington: Debunking Economics – An Interview with Steve Keen – Part 1

Steve Keen is an Associate Professor in economics and finance at the University of Western Sydney. The second expanded edition of his popular book Debunking Economics is available now.

Interview conducted by Philip Pilkington, a journalist and writer based in Dublin, Ireland.

Philip Pilkington: One cannot help but be struck by the reaction of the economics profession to the recent financial crisis. In the first edition of your book, Debunking Economics, you warned that a crash was probably coming – and in this you weren’t the only one. And yet now, post-crash, neoclassical economists have simply buried their heads in the sand and pretended that rational criticism of their theories simply doesn’t exist. The crash discredits almost all these theories and yet they continue to insist that they remain valid.

They remind me of Christian fundamentalists rabidly arguing against evolution in face of what appears to be insurmountable evidence against their assertions. Could you talk a little about this? How can these people be so deluded? Why won’t they listen to reason?

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Steve Keen: Harvard Starts its Own PAECON Against Mankiw

By Steve Keen, Associate Professor of Economics & Finance at the University of Western Sydney, and author of the book Debunking Economics. Cross posted from Steve Keen’s Debtwatch.

Several correspondents have just told me that some of Greg Mankiw’s students at Harvard are staging a walkout from his first year class. They’ve written an open letter to Mankiw to explain why:

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The Natural Chaos of Markets

By Sell on News, a global macro equities analyst. Cross posted from MacroBusiness

Having just watched the second episode of All Watched Over By Machines of Loving Grace by my favourite documentary maker Adam Curtis, in which he tells the “story of how our modern scientific idea of nature, as a self-regulating ecosystem, is actually a machine fantasy”, I am once again struck by what an absurd body of ideas, or more accurately, self delusions, much of modern economic prejudice-masquerading-as-theory is.

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Philip Pilkington: Confessions of a Non-Utilitarian Shopper

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Store clerk in transsexual shop: “Oh, look who’s back… are you going to buy something this time, or are you just curious?”

Tobias Funke: “Well, I guess you could say that I’m buy-curious!”

– Tobias Funke, Arrested Development

Mitch Hurwitz, the creator of Arrested Development – possibly the best comedy show ever produced for television – once said that the funniest things about people are their blind spots. We all possess these psychological blind spots and yet we usually have no idea. Caught up in our own little worlds we see or hear one thing while just about everyone else sees or hears something else. Just like poor, confused Tobias Funke – except, hopefully, in most instances a little less extreme.

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New Zealand Science Minister Wayne Mapp Endorses Dubious “Miracle Cure” Multi-Level Marketing Company

My last pop at New Zealand’s regulatory set-up mentioned New Image International, the company that uses multi-level marketing techniques to sell Colostrum as a miracle cure. The New Image product pitch is a generic hoax, as explained last time out:

…major warning signs include:

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Economics Debunked: Chapter Two for Sixth Graders

Readers gave high marks to Andrew Dittmer’s summary of a dense but very important paper by Claudio Borio and Piti Disyatat of the BIS and asked if he could produce more of the same.

While Andrew, a recent PhD in mathematics, has assigned himself some truly unpleasant tasks, like reading every bank lobbying document he could get his hands on to see what their defenses of their privileged role amounted to, he has yet to produce any output from these endeavors that are ready for public consumption.

However, I thought readers might enjoy one of Andrew’s older works.

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David Graeber: On the Invention of Money – Notes on Sex, Adventure, Monomaniacal Sociopathy and the True Function of Economics

A Reply to Robert Murphy’s ‘Have Anthropologists Overturned Menger?

By David Graeber, who currently holds the position of Reader in Social Anthropology at Goldsmiths University London. Prior to this he was an associate professor of anthropology at Yale University. He is the author of ‘Debt: The First 5,000 Years’ which is available from Amazon

Last week, Robert F. Murphy published a piece on the webpage of the Von Mises Institute responding to some points I made in a recent interview on Naked Capitalism, where I mentioned that the standard economic accounts of the emergence of money from barter appears to be wildly wrong. Since this contradicted a position taken by one of the gods of the Austrian pantheon, the 19th century economist Carl Menger, Murphy apparently felt honor-bound to respond.

In a way, Murphy’s essay barely merits response. In the interview I’m simply referring to arguments made in my book, ‘Debt: The First 5000 Years’. In his response, Murphy didn’t even consult the book; in fact he later admitted he was responding at least in part not even to the interview but to an inaccurate summary of my position someone had made in another blog!

We are not, in other words, dealing with a work of scholarship. However, in the blogsphere, the quality or even intention of an argument often doesn’t matter. I have to assume Murphy was aware that all he had to do was to write something—anything really—and claim it rebutted me, and the piece would be instantly snatched up by a right-wing echo chamber, mirrored on half a dozen websites and that followers of those websites would then dutifully begin appearing across the web declaring to everyone willing to listen that my work had been rebutted. The fact that I instantly appeared on the Von Mises web page to offer a detailed response, and that Murphy has since effectively conceded, writing an elaborate climb-down saying that he had no intention to cast doubt on my argument as a whole at all, only to note that I had not definitively disproved Menger’s, has done nothing to change this. Indeed, on both US and UK Amazon, I have seen fans of Austrian economics appear to inform potential buyers that I am an economic ignoramus whose work has been entirely discredited.

I am posting this more detailed version of my reply not just to set the record straight, but because the whole question of the origins of money raises other interesting questions—not least, why any modern economist would get so worked up about the question

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Study Asserts World’s Stocks Controlled by “Select Few” (Bad Studies That Confirm Conventional Wisdom Refuse to Die Edition)

Wow, there is nothing like searching through your archives for an anecdote you want to recycle only to discover that the post you used it in pre-debunked the very same paper that you are now girding up to debunk.

A whole bunch of readers sent me either links to a paper “The Network for Global Control” by physicists Stefania Vitale, Stefano Battiston and James Glattfelder, or to reports on it (for instance, at PhysOrg, which I put on a black list because it has embarrassed me too many times before readers by reporting reverently on dubious studies). I pre-debunked a report on an earlier version of this paper, as reported in Inside Science, by Battiston and Glattfelder.

Let’s look at a breathless summary per PhysOrg:

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Cash Flow Discounting Leads to “Astronomically” Large Mistakes Over the Long Term

Your humble blogger is a vocal opponent of placing undue faith in single metrics and methodologies, like placing a lot of weight in total cholesterol as a measure of heart disease risk. One of the most troubling examples is the totemic status of discounted cash flow based analyses. It’s a weird defect of human wiring that reducing a story about the future to a spreadsheet and then discounting the resulting cash flows (which means you are now layering a second story, about what you think reasonable investment returns will be over that time period) is treated as having a solidity and weight that simply is not there, a reality of its own that manages to take precedence over the murky future it is meant to help understand.

An article by physicist Marc Buchanan in Bloomberg gives a layperson’s summary of an important paper by Yale economist John Geanakoplos, and Doyne Farmer, a physicist at the Santa Fe Institute. It shows that the conventional use of discounted cash flow models over long time periods, as is often the case when discussing environmental impacts, is fatally flawed.

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Philip Pilkington: Neoclassical Dogma – : How Economists Rationalise Their Hatred of Free Choice

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

What if all the world’s inside of your head
Just creations of your own?
Your devils and your gods
All the living and the dead
And you’re really all alone?
You can live in this illusion
You can choose to believe
You keep looking but you can’t find the woods
While you’re hiding in the trees
– Nine Inch Nails, Right Where it Belongs

Modern economics purports to be scientific. It is this that lends its practitioners ears all over the world; from the media, from policymakers and from the general public. Yet, at its very heart we find concepts that, having been carried over almost directly from the Christian tradition, are inherently theological. And these concepts have, in a sense, become congealed into an unquestionable dogma.

We’ve all heard it before of course: isn’t neoclassical economics a religion of sorts? I’ve argued here in the past that neoclassical economics is indeed a sort of moral system. But what if there are theological motifs right at the heart of contemporary economic theory? What does this say about its validity and what might this mean in relation to the social status of its practitioners?

Let us turn first to one of the most unusual and oft-cited pieces of contemporary economic doctrine: rational expectations theory.

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