Published on Real-World Economics Review Blog, by Lars Syll, August 10. 2013.
Real business cycles theory (RBC) basically says that economic cycles are caused by technology-induced changes in productivity. It says that employment goes up or down because people choose to work more when productivity is high and less when it’s low. This is of course nothing but pure nonsense – and how on earth those guys that promoted this theory could be awarded The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is really beyond comprehension … //
… Neoclassical economic theory today is in the story-telling business whereby economic theorists create make-believe analogue models of the target system – usually conceived as the real economic system. This modeling activity is considered useful and essential. Since fully-fledged experiments on a societal scale as a rule are prohibitively expensive, ethically indefensible or unmanageable, economic theorists have to substitute experimenting with something else. To understand and explain relations between different entities in the real economy the predominant strategy is to build models and make things happen in these “analogue-economy models” rather than engineering things happening in real economies.
Formalistic deductive “Glasperlenspiel” can be very impressive and seductive. But in the realm of science it ought to be considered of little or no value to simply make claims about the model and lose sight of reality.
Neoclassical economics has since long given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence only plays a minor role in economic theory, where models largely function as a substitute for empirical evidence. But “facts kick”, as Gunnar Myrdal used to say. Hopefully humbled by the manifest failure of its theoretical pretences, the one-sided, almost religious, insistence on axiomatic-deductivist modeling as the only scientific activity worthy of pursuing in economics will give way to methodological pluralism based on ontological considerations rather than formalistic tractability.
When that day comes The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel will hopefully be awarded a real macroeconomist and not axiomatic-deductivist modellers like Thomas Sargent and economists of that ilk in the efficient-market-rational-expectations camp.
What Is Neoclassical Economics? on post-autistic economics review, by Christian Arnsperger and Yanis Varoufakis, July 1, 2006:
The three axioms responsible for its theoretical oeuvre, practical irrelevance and, thus, discursive power …;
Green capitalism: the god that failed, on post-autistic economics review, by Richard Smith [Institute for Policy Research & Development, London], 2001;
Historian exposes secret wartime refugees, on SwissInfo.ch, April 23, 2008: Some 500 Nazis, Italian fascists and supporters of the French Vichy regime found shelter in Switzerland at the end of the Second World War, says a Swiss historian. swissinfo talked to Luc van Dongen who has opened the Pandora’s box of the 1943-1954 period, throwing light on Swiss asylum policy and uncovering the traces of numerous highly controversial political and economic refugees …;
Reviewing some Project Censored`s Top 25 Censored Stories, on Mathaba, by Stephen Lendman, Oct. 6, 2009;
The Great Rift: Capitalism and the Metabolism of Nature and Production, on MrZine.Monthly Review, by John Bellamy Foster, July 2013;