In fact,
economists perform a sleight of hand here. While granting that assumptions are
not realistic, and are made only ‘as if’, economists next give excuses why
predictions cannot be rigorously tested, and then fall back on the theoretical
assumptions anyway, no longer only ‘as if’ they apply, but also in deriving policy
implications, claiming that markets should be left alone because they are
efficient. But that remains to be demonstrated. The snake bites its tail. At
first, markets are taken only ‘as if’ they are efficient, this is never
convincingly corroborated, and then for policy implications they are taken to
be efficient. It is admitted that the
model is a Utopia but since it cannot be falsified it is taken to be real.
Traditionally,
science aimed to ‘save the phenomena’: a theory should be able to explain
accepted observations or facts. In economics the principle is ‘save the
theory’. If things claimed by the theory cannot be observed, occult,
unobservable entities are posited by which they exist anyway.
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