William K. Black

Dublin, Ireland April 4, 2017

I presented a talk today at the Trinity Economic Forum in Dublin. The Forum is a wonderful annual event run by the students that brings together thoughtful and forceful economic speakers from diverse viewpoints. Steve Keen also gave a talk at the Forum and I thank him for bringing the subject of this column to my attention. France is the home of some of the most theoclassical economists in the world.

Orthodox French economists, a bastion of laissez faire, are enraged that theoclassical economics is in increasing disrepute and heterodox economists are leading powerful challenges to the doyen of French economic orthodoxy, Jean Tirole. Tirole received the Nobel Prize in economics in 2014 for his work on “regulating” oligopolies. Tirole denounced all heterodox economists as a “motley crew” and claimed that they had failed to meet “internationally recognized norms of evaluation” for science. Triole stated that it would be a “catastrophe” if heterodox economists taught French students.

Orthodox French economists recently became aghast that the “motley crew” had become so degenerate, so déclassé, that they forgot their lowly status and dared to commit the crime French elites most detest and fear — lèse–majesté. Heterodox economist rebutted Tirole’s denunciations of them and pointed out his and his followers’ failure to observe the scientific method.

Jean Tirole was recently the victim of this kind of discrediting by some self-proclaimed “heterodox” economists.

Two Tirole supporters took up arms, or at least pens, to avenge their martyred “victim,” the high priest of French orthodoxy. Tirole’s avengers, however, faced an inescapable trap in attempting to refute the heterodox critique of Tirole – Tirole’s letter denouncing heterodox economists. Tirole’s letter constructed a trap meant for the “motley crew” that instead ensnared him and his acolytes. Tirole’s trap came from describing the test that economists must pass to qualify as scientists.

Secondly, like the other great scientific disciplines, modern economic science relies on the continuous questioning of its hypotheses, testing its models against the facts, and abandoning theories that fail the test of reality.

I note in passing the spectacular dishonesty and arrogance of Tirole’s simile claiming that “modern economic science” is just “like” “the other great scientific disciplines” such as chemistry. Orthodox economics characteristically fail Tirole’s test. French orthodox economists have followed Tirole’s lead and refused to “abandon theories that fail the test of reality.” By Tirole’s test, they (and he) are not scientists. The pillars of orthodox economics – “modern macro,” the efficient market hypothesis, the efficient contract hypothesis, the capital assets pricing model (CAPM), the claim that consumers and investors are rational, optimizing actors who cannot be defrauded or predated on – the core principles of “modern” microeconomics and “modern finance” – have all failed “the test of reality.” Only a small number of orthodox economists have passed Tirole’s test and abandoned these failed theories. Tirole continues to favor austerity, which is a policy that stems from what Paul Romer explains is the “pseudoscience” of “modern macro.”

This means that Tirole and his acolytes are not “victims” of the heterodox scholars pointing out their failure to meet the Tirole test of real scientists. The victims are the people harmed by the pseudoscientists’ horrific policies. Heterodox economists, who Tirole has sought to purge and marginalize, are his victims. Paul Romer has recently emphasized in a related context that economists who are pseudoscientists harm economists of all approaches who do follow the scientific method..

The larger concern is that macroeconomic pseudoscience is undermining the norms of science throughout economics. If so, all of the policy domains that economics touches could lose the accumulation of useful knowledge that characteristic of true science, the greatest human invention.

Steve Keen and the “Reality” Virus

la vérité est en marche et rien ne l’arrêtera (Zola 1898)

The reason the heterodox critiques, which have been made for decades, are finally proving more persuasive is that prominent economists are gradually succumbing after three decades of failure to what Keen aptly names the “Reality” virus. Reality and the recurrent failure of his theories and predictions over the last 30 years are finally discrediting Tirole and other orthodox economists who doggedly refuse to adhere to the scientific method. Tirole’s avengers are correct that heterodox economists led the critique of orthodox economists’ refusal to follow the scientific method for decades. Tirole and his acolytes’ real terror is that orthodox economists are increasingly adopting and expanding those heterodox critiques and calling modern macroeconomics a “pseudoscience” (Romer 2016). I caution, however, that orthodox economists have defeated the truth for decades, so heterodox economists cannot share Zola’s certainty that victory is certain simply because the truth is (finally) on the march. Tirole and his acolytes have proven resistant to the Reality virus. They are vectors spreading what Laurent Mauduit dubbed “the Tirole virus” – the anti-reality virus that is epidemic among elite French economists.

Tirole’s Avengers Cannot Escape the Trap Created by the Tirole Test

Tirole’s test for whether an economist is a “scientist” poses an insuperable problem for his avengers. The heterodox critique is that Tirole and his avengers fail the Tirole test and are not scientists under their chosen test. Conversely, the heterodox critique exemplifies the Tirole test and therefore exemplifies science. Both conclusions are inconvenient to Tirole’s avengers. They have no answer to the insuperable logical problem so they ignore their masters’ own test of whether an economist is a scientist.

Tirole’s Avengers Try to Win by Defining Heterodox Economists as Science Deniers

Tirole’s avengers became Tirole’s trolls when they spread a claim they know is dishonest that heterodox economists are, by definition, “science” deniers. The reality is that the heterodox economists are far more likely than orthodox economists to pass the Tirole test. If heterodox economists rejected reality and science, we would pose no threat to theoclassical dogmas. The reason that Tirole and his acolytes are so keen to purge heterodox economists is that we do follow the scientific method and have been demonstrating for decades that the core pillars of orthodox economics fail the Tirole test. Tirole’s trolls rely on the crudest of logical errors – we win because we define ourselves as the winners.

The term “economic negationism” does not caricature the debate. We chose it because the notion of “scientific negationism” is an expression used in debates about science, and we are talking about science here.

Tirole’s trolls “proved” their thesis by declaring their thesis to be true – by definition. The logic error is taking as proven their declaration “we are talking about science here.” In context, they are defining orthodox economic theory as “science.” Anyone who disagrees with “science” is a science denier. This is the crudest of logic errors. Consider the outrage that Tirole’s trolls would exhibit if we reversed the definition. I define heterodox economics to be “science.” Orthodox economists disagrees with “science,” so they are by definition science deniers.

To be gentle, Tirole’s trolls have just proved that they have no respect for either the scientific method or logic. Things get worst from there, as the trolls go down a series of rabbit holes.

We note that scientific negationism is a strategy based on four pillars:

Throw doubt on and castigate “la pensée unique” [doctrinaire, dogmatic “group think”];

Denounce moneyed and ideological interests;

Condemn science because it can’t explain everything;

Promote “alternative” learned societies.

This strategy aims to discredit researchers who are getting what are considered disturbing results. It affects all disciplines to one extent or another, as is shown by the works of Robert Proctor[1] ….. And this is precisely the strategy adopted both by the Economistes Atterrés[3]….

First, one prays that the trolls also “throw doubt on and castigate” “doctrinaire, dogmatic ‘group think.’” Doctrinaire, dogmatic ‘group think’ is the great enemy of science. The trolls have just praised heterodox economists for having a trait essential to successfully employing the scientific method – we “throw doubt on and castigate” “doctrinaire, dogmatic ‘group think.’” The trolls are claiming that a scientist becomes a science denier if he or she criticizes “doctrinaire, dogmatic ‘group think.’” That apparently did not even cause a warning bell to go off that they had lost the plot.

Second, one prays that the trolls also “denounce moneyed and ideological interests.” What that means is that if a party with an economic interest in the results of the pseudoscientist’s research findings provides the researcher with funding, we should be exceptionally skeptical of his findings. That is a “conflict of interest” and research demonstrates the high effectiveness of creating conflicts of interest in currying favor. It is bizarre for theoclassical economists like the trolls to claim that scholars are science deniers if they think financial incentives affect behavior, the driving assumption of orthodox economic work. (The reader might also like to know that Tirole is infamous for raising money from private firms that oppose effective regulation and putting their CEOs on the board that oversees the academy.)

Similarly, we need to be skeptical when researchers are highly ideological and their findings routinely support their ideology. Indeed, in his Nobel address, Tirole made that point about Chicago school professors who wrote about antitrust. Tirole is a science denier under the “test” proposed by his trolls.

The trolls’ citation of Proctor’s work is bizarre. Proctor documents the massive, successful effort by “moneyed … interests” – tobacco companies – to suborn researchers (including doctors and historians) to hide the truth about the tobacco companies marketing a product they knew was one of the leading causes of preventable deaths. The tobacco companies suborned so many historians that Proctor’s work, when he began, was heterodox. The tobacco companies continue to harass Proctor and try to denigrate his work. Again, the trolls have unintentionally supported the work of heterodox economists and indicted Tirole’s eagerness to create endemic conflicts of interest at his research institute.

The heterodox French economists do not rely on the orthodox economists’ financial conflicts of interest and the theoclassical economists’ commitment to laissez faire as their basis for their substantive critiques of orthodox economic theories, models, and policies. Instead, like any good scientist, the heterodox French scholars explain that orthodox and theoclassical theories have failed the most fundamental scientific tests – they cannot predict successfully and they fail the Tirole test. Further, heterodox scholars explain that there are other economic theories with superior predictive ability.

Third, the trolls made up claim that heterodox scholars meet the “third pillar” of scientific denial because they “Condemn science because it can’t explain everything.” The trolls have unintentionally illustrated the accuracy of another of Romer’s reasons for calling orthodox macro a “pseudoscience.” I have never heard a heterodox economists “condemn science because it can’t explain everything” and the trolls present no support for their assertion.

What heterodox economists do point out, thousands of times every year, is that the orthodox and theoclassical models fail to predict economic and non-economic behavior and the policy recommendations made by these economists fail to produce the predicted results and often cause catastrophic failures. We also emphasize that the orthodox researchers violate Tirole’s test – they routinely refuse to abandon theories and policies that have failed the test of reality. The typical response we get is the one Romer condemned.

More recently, “all models are false” seems to have become the universal hand-wave for dismissing any fact that does not conform to a favorite model. The noncommittal relationship with the truth revealed by these methodological evasions and the “less than totally convinced …” dismissal of fact goes so far beyond post-modern irony that it deserves its own label. I suggest “post-real.”

The fourth pillar also proves the opposite of what the trolls seek to convey. The problem that heterodox economists have with orthodox economics and the societies they control occurs when neither follows the scientific method. Orthodox economists control economic departments almost everywhere and they exclude heterodox economists because we support normal scientific methods. Worse, we use scientific methods to show that their models are false and that there are superior models with better predictive power that they refuse to evaluate. Even worse, we keep calling them on their failure to follow the scientific method and abandon their theories, models, and policies when they fail the test of reality. If we did not follow the scientific method, we would pose no threat and Tirole would not bother attacking a “motley crew.”