(the exact link is:
- Current (neo-classical) economics is based on false premises.
- These false premises include this important premise: That nature is irrelevant to economic growth (and that natural resources are boundless).
Because the irrelevance of nature is a premise of Economic Theory, it is not surprising that it pops up as an outcome of Economic Theory. Given the type of models they work with, economists have to claim that fighting global warming is economically inviable. And when they do so, it’s a tautology – what they are actually saying is: “since we assume that nature is irrelevant to Economics, no action to save natural reasorces could possibly be cost-beneficial”. A claim which is, of course, absurd.
Nadeau is, as they say, right on the money. But he goes on to claim that the bulk of the trouble is in the fact that economic thought has false premises – and here I disagree with him. Yes. You heard me right. I don’t think that false premises are a problem. Not at all. Of course Economics has false premises. Look at “Principles-of-economics-translated” (which I previously posted). The physical sciences, as well as engineering, after all, do marvels with false premises and over-simplified models. Most of physics is about finding false premises which are just good enough. They need to be as simple as possible – as long as they work.
A simple example from Data Analysis:
Suppose you are given a sequence of numbers:
Easy: it’s a linear series, each number is the former +1. Easily, we get:
<em>Use the simplest model that </em>gives meaningful results.<br />
1 2 3 5 7 11 13 17 19…
In my next post I will take a look at the fundamental theory of markets, and see what neo-classical economics got right, and what they got terribly wrong.