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The Crisis of Economists

by Ulrike Herrmann Wednesday, Dec. 16, 2015 at 4:29 AM

The mainstream economy doesn't know what an argument is any more. Claims or assertions are made. This neoclassicism is not a science but resembles a religion that proclaims dogmas. The economy is a social science that offers interpretations.


By Ulrike Herrmann

Debate over Capitalism. Many economic professors act like high-priests. They only make claims and completely lack arguments.

[This article published on 12/2/2015 is translated from the German on the Internet,!5252356/. Ulrike Herrmann is an economics editor for the taz daily newspaper and author of several important books including “Hurray! We Pay for the Crisis!” and “The Victory of the Economy over Life.” Occupy demonstrators often know the ins and outs of capitalism better than the economic wise men.]

Queen Elizabeth II has been governing for more than 60 years but rarely gives any memorable quotations. Only one question she raised after the 2008 financial crash remains in our memory: “Why did no one foresee this crisis?” The answer of British economists is just as legendary. In a three-page letter, they conclude: “To summarize, Your Majesty, this was a failure of the collective imagination of many intelligent persons.”

The Queen was not the only one who was surprised. German chancellor Merkel also couldn’t make heads or tails with much advice she received from economists. In the summer of 2014, she was invited to Lindau where the Nobel Prize winners for economics met. Courteously but clearly, she criticized them for their absurd claims of truth. Economists should “have the honesty to admit the error rate or haziness if they don’t know exactly.”

A little later the chancellor made fun of an expert opinion of the “five economic wise” because the experts wrote that the minimum wage was responsible for the shriveling of the economy. The minimum wage didn’t even exist at that time. With typical smugness, the chancellor remarked “it wasn’t completely trivial to understand how a resolution not yet in force could cause the economic downturn.”

Months later council chairperson Christoph Schmidt was shocked the chancellor dared question the wisdom of the “five economic wise men.” To confidants, he announced he would “prepare arguments” the next time. Unintentionally Schmidt identified the central problem. The mainstream economy doesn’t know what an argument is any more. Claims or assertions are made. This neoclassicism is not a science but resembles a religion that proclaims dogmas.


In a very readable article for the blog “Herd Instinct” (Herdentrieb), the economist Fabian Lindner recently described the trick with which the mainstream economy immunizes itself against every empirical test. In some of these strategies, neoclassicism resorts to tautologies and formulates in a blurry way under what condition s its predictions are valid. So its statements are seemingly always true and the ivory tower is user-friendly.

Many students suspect that economics only gives a caricature of reality. In a “Plural Economics Network,” they joined forces to reform the one-sided theory. Last weekend they organized a conference in Berlin titled “Teaching Economics in the 21st Century.”

Mainstream economics doesn’t know what an argument is any more.

The question is raised through many events: What should be emphasized in the textbooks? One of the wonders of mainstream economics is the same lessons are still taught although several financial crises have shown the models cannot be right.

Textbooks represent power. Whoever influences students in the first semesters doesn’t have to worry abou8t followers. The theoretical battle is won. Thus the question about textbooks is central and uneasiness remains. Plural economists only want to change the contents, not abolish the textbook as a principle.


However textbooks are not unproblematic. They suggest there is one “truth,” one content or subject matter that can be learned. Imitative understanding is promoted, not thinking. In textbooks, every chapter ends with a summary. Nearly all authors present projects for which there are “model solutions.” These exercises reinforce the impression that economics provides objective knowledge.

In their textbooks, many competitive Keynesians as well as mainstream economists act as though economics were a natural science resembling physics. Now and then models are constructed and mathematical formulas drafted that are calculated to the decimal point. Given these extremely meticulous numbers, that the economy is a social science that can only provide interpretations was quickly forgotten,

Mathematical models reduce reality. As everybody knows, the economy develops dynamically. At best, balances can be modeled. This opposition burdens reality and is not interpreted as a problem of theory. What cannot be modeled does not occur.


Lay persons immediately know what constitutes capitalism. Capitalism is a social system that produces growth. However most economists cannot explain how growth arises as strange as that may sound. Technical change simply happens and is ignored as an “exogenous factor.”

Economists must investigate empirical reality instead of building models. The economist Mariana Mazzucato shows how this can be done correctly. She analyzed concretely how technical inventions occurred that made possible Google, Smartphones and complex cancer therapies. Research always took place in state laboratories, she concluded. Private firms “only” tinker around marketable goods. Steve Jobs was very ingenious about transforming state knowledge into new products – and privatizing the profits.

With her empirical research, Mazzucato decries neoclassicism that dreams of the free market and holds the state as interfering or disruptive. By the way Mazzucato didn’t need a single formula to illustrate her path-breaking conclusions. She also hasn’t written a textbook.


Rana Foroohar, Why You Can Thank the Government for Your iPhone, Oct 27, 2015,

Ulrike Herrmann, Free Trade: Project of the Powerful, April 2014,

Mariana Mazzucato, Osborne is Eroding the Foundations, November 2015,

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