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Francesco Sylos Labini, chercheur au centre Enrico Fermi (Rome) et chercheur associe a l’Institut de Recherche des Systèmes Complexes (CNR)
The economic crisis is changing the structure of our society, introducing insurmountable inequalities, marginalizing younger energies, stifling scientific research and so inhibiting the possibility to develop the new ideas and innovations that could help to guide us out of the crisis. Science can provide crucial tools that could be instrumental both in comprehending the problems of our time and in outlining perspectives that might constitute a solid and viable alternative to the rampant jungle law—a misconstrued Social Darwinism—that is currently very widespread. The present work ponders the interface between science dissemination and scientific policy and it aims to show how the ideas developed over the past century in natural sciences actually play a major role in understanding the seemingly diverse and unrelated problems lying at the heart of the current crisis and thus suggesting plausible and original solutions.
In my book “Science and the Economic Crisis” I dedicate a chapter to discuss the roots of neoclassical economics and the comparison of its predictions against reality. In summary my thesis is the following :
1. Predictions in science are used to test theories, that is, the hypotheses and the assumptions underlying these theories;
2. There has been a failure in the prediction of all recessions that occurred from 1989 to 2012 (see here and here). But the most spectacular failure occurred for the 2008 crisis (which was instead predicted by some economists belonging to different schools than the neoclassical).
3. Models used to make predictions are based on the neoclassical theory;
4. Neoclassical economics rests therefore on hypotheses and assumptions that are not consistent with reality and for this reason it is a pseudo-science;
5. Indeed neoclassical economics has given support to the idea that free markets should naturally finds an equilibrium state and by deregulating and liberalizing the markets would increase the efficiency of the economic system. On the contrary, by doing so one has created the conditions for the unstable regime that gave rise to the crisis. Continue reading Neoclassical economics and the failure of predictions →
From Social Europe 10.5.2016
The debate on the sustainability of the European single currency seems to have focused exclusively on the requirement that EU member states comply with the macro-economic financial parameters established by the dictates of austerity policies. The absence of any collective reflection on how to boost structural economic development is astonishing at a time when many European countries – particularly around the Mediterranean – are dismantling the physical and human infrastructure of basic research and academia. It instead reflects the belief, grounded in neoclassical economic theory, whereby markets alone should govern economic development. Continue reading EU Austerity And The Brain Drain From The South →
From the blog of Lars P. Syll
“From the times of Galileo and Newton, physicists have learned not to confuse what is happening in the model with what instead is happening in reality. Physical models are compared with observations to prove if they are able to provide precise explanations … Can one argue that the use of mathematics in neoclassical economics serves similar purposes? … Gillies‘s conclusion is that, while in physics mathematics was used to obtain precise explanations and successful predictions, one cannot draw the same conclusion about the use of mathematics in neoclassical economics in the last half century. This analysis reinforces the conclusion about the pseudo-scientific nature of neoclassical economics … given the systematic failure of predictions of neoclassical economics.”
Francesco Sylos Labini is a researcher in physics. His book is to be highly recommended reading to anyone with an interest in understanding the pseudo-scientific character of modern mainstream economics. Turning economics into a ‘pseudo-natural-science’ is — as Keynes made very clear in a letter to Roy Harrod already back in 1938 — something that has to be firmly ‘repelled.’
Chapter 1 of Science and the Economic Crisis
We introduce the concept of prediction in natural sciences to illustrate the foundation of the scientific method. The way to understand a scientific prediction has changed over time, as more complex systems composed of a growing number of bodies have been considered. While predicting the positions of heavenly bodies represented the most popular verification of nature fundamental law, that of gravity, for the weather forecast the situation is somewhat different. We will thus see how the concept of chaos has introduced one of the most important changes in the modern view of nature, surpassing the dream of the nineteenth century deterministic physics together with the introduction of a probabilistic approach for understanding of the physical systems consisting of many elements. The difference between open and closed systems, illustrated by considering examples from meteorology, climatology, epidemiology and in particular seismology will allow us to explain the different role of forecasts in science and those aimed at guiding decisions in social and political level. #ScienceEconomicCrisis