October 14, 2019

Scrap the EconNobel

Comment on Alex Tabarrok on ‘The Nobel Prize in Economic Science Goes to Banerjee, Duflo, and Kremer’

Blog-Reference

Economists are NOT scientists but clowns and useful idiots in the political Circus Maximus. The EconNobel is a fraud. For details see here.

Egmont Kakarot-Handtke

October 10, 2019

Tribalism is NOT the problem of economics

Comment on Blair Fix on ‘Tribalism in Science (and Economics)’

Blog-Reference

Blair Fix summarizes: “If you ask the average person what ‘science’ is, they’ll probably answer something like ‘it’s what we know about the world’. To the lay person, ‘science’ is a body of facts. To the trained scientist, however, ‘science’ means something different. It’s not a body of knowledge. It’s a method for determining what’s true and what’s not. To determine the way the world works, science appeals to evidence. The ideal of science is beautifully summarized by the motto of the Royal Society: nullius in verba. It means ‘take nobody’s word for it’. In science, there is no authority. There are no gods, no kings, and no masters. Only evidence.”

In more technical terms: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

Economics claims to be science#1 but is merely what Feynman called a cargo cult science. As always and everywhere, there is the genuine thing and the look-alike: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

The general public cannot spontaneously tell the difference between the genuine thing and the look-alike and this provides a comfortable ecological niche for the look-alikes in all walks of life from the ordinary impostor to the fake scientist.#2

Strictly speaking, there is no such thing as economics. There are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Political economics has produced NOTHING of scientific value in the last 200+ years. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong.

Theoretical economics has to be judged according to the criteria true/false and NOTHING else. Theoretical economics, though, had been hijacked from the very beginning by the agenda pushers of political economics.

Blair Fix thinks this is due to our evolutionary heritage: “When we do science, we have to fight against this tribal instinct. Not surprisingly, we often fail. Rational skepticism gets overpowered by the instinct to trust members of our group. If the group happens to be powerful — say it dominates academia in a particular discipline — then false ideas get entrenched as ‘facts’. This is a problem in all areas of science. But it’s a rampant problem in economics. The teaching of economics is dominated by the neoclassical sect, which has managed to entrench itself in academia. Among this sect, I believe, tribal instincts trump the rational appeal to evidence.”

This evolutionary explanation is a bit silly. Economics is not science but the propaganda arm of the Oligarchy. The heap of inconsistent economic approaches has no truth-value, however, this does not matter much in the political realm where all that counts is propagandistic use-value. More has not been expected by the founders and funders of economics departments, chairs, and institutions. And this has always been delivered. Rockefeller called the university ‘the best investment’ he ever made.

This ― and NOT biologically entrenched tribalism ― is the built-in bias of economics. Economics is controlled with the usual incentives of prestige and money and publicity. Economists are  the useful idiots of the Oligarchy which selects their agenda pushers systematically and rewards them handsomely.#3 Arrow, Debreu and other members of the Cowles “tribe” were awarded the “Nobel” for the “proof” of the superiority of the market economy, i.e. for a political PR stunt and not for a genuine scientific achievement.#4

Tribalism is NOT the problem of economics, scientific incompetence is.

Egmont Kakarot-Handtke


#1 About the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” see here.
#2 The economist as storyteller
#3 How to spot economics trolls
#4 Economics, math, pluralism, and corruption

Related 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion' and 'Economics ― not science, not ideology, just useful idiocy' and 'Economics, too, is pre-truth' and 'There is NO such thing as “smart, honest, honorable economists”' and 'Economists’ silly kindergarten games' and 'Links on capital-T Truth, stupidity, corruption' and 'Links on the Economics Nobel'.

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REPLY to Yoshinori Shiozawa on Oct 11

You say: “What do you propose as theoretical economics that challenges to explain how the actual economy works? This is the most important point. Criticizing neoclassical economics alone does not bring a new economics i.e. theoretical economics that explains how the actual economy works.”

True indeed and basic methodological stuff: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

So, a Paradigm Shift is indispensable. Economics has to move from false Walrasian microfoundations and false Keynesian macrofoundations and false heterodox Pluralism to true macrofoundations.

For details of the big picture see cross-references Paradigm Shift.

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REPLY to Ken Zimmerman on Oct 13

The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong. Economics is a failed science.

The axiomatically correct macroeconomic Profit Law is given by Q=Yd+(I−S)+(G−T)+(X−M) and boils down to Public Deficit (G−T>0) = Private Profit Q which means that the Oligarchy’s financial wealth and public debt grow in lockstep. It is the very characteristic of the free-market economy that it is already for a long time on the life support of the State. Profit is produced mainly by the government through deficit-spending/money-creation.#1 The Oligarchy, in turn, uses the opulent free lunches to corrupt what remains of the State’s legislative, executive, judiciary institutions, including academia.#2

All this happens openly before the authors and commentators of the RWER blog. These folks, though, in their bottomless stupidity realize NOTHING but instead blather about biology/evolution, god/religion, astronomy, and the invention of human sociality about 20,000-30,000 years ago.

This senseless blather, of course, distracts from the biggest deficit-coup of all times that the Oligarchy is currently pulling off with the help of a bunch of MMT academics.#3

Economics has NEVER been a science but a smokescreen for political agenda pushing. BOTH orthodox and heterodox economists are stupid or corrupt or both. And the whole pile of scientific and human crap is tomorrow crowned for the 50th time with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 For a meeting-photo of billionaire Jeffrey Epstein and economist Larry Summers see Twitter and New York Times

Source: Twitter
#3 Dear idiots, MMTers are Wall Street’s agenda pushers

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#PointOfProof
Oct 15

October 7, 2019

The state of MMT? Stone-dead!

Comment on Brian Romanchuk/Tom Hickey on ‘The State Of MMT?’*

Blog-Reference and Blog-Reference and Blog-Reference and Blog-Reference

Tom Hickey maintains: “MMT is ‘winning’ because it cuts to the chase instead of wandering in the weeds. People wanting change are provided with direct answers in terms they can understand and relate too. Nor do MMT economists shy from debate about the weeds if it is seriously informed.”

Brian Romanchuk maintains: “The relationship between MMT and Post-Keynesian thinking is currently the largest area of awkwardness I see with respect to MMT. The special issue of the RWER seems to provide evidence for that assessment.”

The scientific fact of the matter is that Post-Keynesianism is proto-scientific garbage#1 and MMT is proto-scientific garbage.#2 The relationship between the two is NOT AT ALL awkward, though, because both approaches share the same foundational blunder. Together with Keynes’ faulty approach, both end up in the same wastebasket.#3

The blunder that brings macroeconomics in general and Post-Keynesianism and MMT, in particular, down is to be found in Randall Wray’s contribution Alternative paths to modern money theory, section The theoretical path to MMT.*

Here it is: “Government spending, like private investment, is an injection that raises income. More specifically, as Kalecki showed, government spending creates profits because it is a source of business revenue but not a cost of production. Taxes are a leakage, reducing household net income and business net revenue. If government spends more than it taxes, this is a net spending surplus ― increasing profits dollar-for-dollar. A net spending surplus by government cannot ‘crowd-out’ private investment ― it creates profits that are likely to boost the desire to invest. A net spending surplus by the US government cannot absorb global savings ― instead it creates net income for the US private domestic sector as well as for the rest of the world.” and “Now, it is true that government spending is not the only injection. Private investment and exports (or, net exports) also create income that can be leaked. Wynne Godley’s sectoral balance approach ― long incorporated within MMT ― shows that the sum of the balances of the government, domestic private, and foreign sectors is identically zero.”

Accordingly, MMT boils formally down to the sectoral balances equation (I−S)+(G−T)+(X−M)=0. This equation is provably false.#4, #5 The mistake lies in the sentence: “Government spending … is an injection that raises income.” No! Government spending … is an injection that raises profit. And profit is a balance, i.e. the difference of flows, and NOT a flow like wage income. So, profit is NOT income. Economists not only confuse stocks and flows but also balances and flows.

In the elementary case, the monetary saving/dissaving of the household sector is defined as S≡Yw−C. The monetary profit/loss of the business sector is defined as Q≡C−Yw. Ergo Q+S=0, that is, the balances of the household and business sector ad up to zero.

Only when profit is distributed it becomes income of the household sector. So, total income Y is wage income Yw plus distributed profit Yd and NOT wages Yw plus profits Q. The difference between profit Q and distributed profit Yd is retained profit Qre.

Neither profit Q, i.e. the balance of the business sector, nor distributed profit Yd appear in the MMT sectoral balances equation. Because it lacks the balance of the business sector the MMT balances equation is false.#6 By consequence the whole analytical superstructure of MMT is false. By the ultimate consequence, MMT policy guidance is false.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

So, all one needs to know about MMT is: MMT is NOT the true theory. Scientifically, it is stone-dead.

Egmont Kakarot-Handtke


* Refers to RWER, real-world economics review, Issue no. 89, Modern monetary theory and its critics
#1 Why Post Keynesianism Is Not Yet a Science
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 Keynes ― the poster boy for the weakness of the economist’s mind
#4 Controlled demolition of MMT ― an exercise in elementary logic
#5 Wikipedia and the promotion of economists’ idiotism (I)
#6 The axiomatically correct sectoral balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.

Related 'The Levy/Kalecki Profit Equation is false' and 'Truth by definition? The Profit Theory is axiomatically false for 200+ years'.

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REPLY to Brian Romanchuk on Oct 8 and Blog-Reference

You say: “Given that one of the defining characteristics of the scientific method is that theories need to be convincing to other people, said isolated individual(s) are operating outside scientific practice.”

NO! To convince “other people” is the goal of political agenda pushing. Science is about true/false and nothing else: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

The fact of the matter is that the MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is provably false.#1 Randall Wray argues: “Government spending … is an injection that raises income. More specifically, as Kalecki showed, government spending creates profits because it is a source of business revenue but not a cost of production.” However, profit ― the balance of the business sector and the pivotal magnitude of economics ― does NOT appear in the MMT balances equation.

Either MMTers are too stupid for the elementary math that underlies macroeconomics or they are intentionally hiding macroeconomic profit. It is the latter as I have shown elsewhere.

In his post, MMT: REPORT FROM THE FRONT Randall Wray reports “Fifth front: the blogs. I was skeptical of their usefulness ― but Bill and Stephanie recognized that they were the future. They were right. You’re reading this one, created by Stephanie and then taken over by Bill Black. Blogs spread MMT outside academia and official policy circles. And then came videos and tweets. There are tens of thousands of followers now. This helped to foam the runways to the seats of power. No one can afford to ignore MMT any longer. The viral movement, as well as a few fearless candidates ― Bernie and AOC ― brought MMT out of the shadows.”#2

“Tens of thousands of followers” is a respectable propaganda success. So, the money of Wall Street funders was well-spent. This, however, does not change the fact that MMT is proto-scientific garbage. Science is NOT about “convincing other people”, i.e. brainwashing imbeciles. The number of followers is absolutely irrelevant to the question of whether a theory is true or false.

The macroeconomic Profit Law says Public Deficit = Private Profit. So MMT deficit-spending/money-creation is for the benefit of the Oligarchy and NOT of WeThePeople. Scientifically MMT is crap and politically it is a fraud.


#1 The axiomatically correct sectoral balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.
#2 New Economic Perspectives

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Wikimedia AXEC118d


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#PointOfProof
Oct 8

October 5, 2019

Keynes ― the poster boy for the weakness of the economist’s mind

Comment on David Glasner on ‘Jack Schwartz on the Weaknesses of the Mathematical Mind’

Blog-Reference

David Glasner quotes Jack Schwartz approvingly: “In a psychological description of the computer intelligence, three related adjectives push themselves forward: single-mindedness, literal-mindedness, simple-mindedness. Recognizing this, we should at the same time recognize that this single-mindedness, literal-mindedness, simple-mindedness also characterizes theoretical mathematics, though to a lesser extent.”

This worn-off cliche of the small-minded mathematician is contrasted with the flamboyant artistic scientist: “Part of what goes into the making of a good scientist is a kind of artistic feeling for how to adjust or interpret a mathematical model to take into account what the bare mathematics cannot describe in a manageable way.”

This echoes Keynes’ hallucinatory self-description of the master-economist: “The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher ― in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.”

Never has scientific incompetence advertised itself better. Fact is that Keynes was too stupid for the elementary algebra that underlies macroeconomics.#1

Keynes ― the trained mathematician ― stated in his General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This is provably false. The mathematically correct relationship reads Q=I−S with Q as macroeconomic profit.#2, #3

Let this sink in: the master-economist Keynes had NO idea of profit “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.) Now it holds: when the foundational concepts are false the whole analytical superstructure is false. In other words, Keynes’ General Theory is scientifically worthless.#4

That is bad enough but it gets worse: After-Keynesians did NOT spot Keynes’ blunder to this day. For example, Paul Krugman still applies IS-LM. So, not only Keynes but Post- and Anti-Keynesians alike have been too stupid for the elementary algebra that underlies macroeconomics.

Economics (Walrasian, Keynesian, Marxian, Austrian) is mathematically flawed. As Georgescu-Roegen put it: “It is difficult to contemplate the evolution of the economic science over the last hundred years without reaching the conclusion that its mathematization was a rather hurried job.” This means that economic policy guidance NEVER had valid scientific foundations. Note that the fault lies NOT with mathematics but with economists. Their proven mathematical/scientific incompetence notwithstanding, the pathetic master-economists award themselves the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#5

Egmont Kakarot-Handtke


#1 Economics, math, pluralism, and corruption
#2 How Keynes got macro wrong and Allais got it right
#3 Wikimedia AXEC143 Macroeconomic Profit Law
#4 For details of the big picture see cross-references Keynesianism
#5 Economics: The greatest scientific hoax in modern times

Related 'What it takes to become a great economist' and 'Who or what exactly did Keynes save?' and 'The unfinished Keynes' and 'Keynes, the methodologist' and 'Hooray! The formalization issue is finally settled' and 'Marshall and the Cambridge School of plain economic gibberish' and 'Links on ‘Keynes: socialist, liberal or conservative?’' and 'Forget Keynes' and 'Why Post Keynesianism Is Not Yet a Science' and 'From Keynes’ fatal blunder to the true economic model' and 'Economics as storytelling and entertainment for the masses' and 'The economist as storyteller' and 'The real problem with the economics Nobel' and 'The canonical macroeconomic model'.

September 30, 2019

Homo oeconomicus: the never-ending folk-psychological shitshow

Comment on Jonathan Rowe on ‘Why Economics Is Really Psychology on Steroids’*

Blog-Reference

Jonathan Rowe has important news: “What is called ‘economics’ is really psychology on steroids. It starts with a model of human nature and extrapolates an entire scenario for how the world works from that. The model is homo economicus, the myopic protoganist of the economics texts. This hypothetical person has no social affinities, no lapses of judgment or hang-ups, no capacity even for thinking about anyone besides him or herself.” and “Today, psychologists can only roll their eyes at this naïve portrayal. People who have to deal with actual humans in market settings ― such as advertisers and corporate managers ― find it borderline irrelevant.”

This may be news for the retarded trolls of the econoblogosphere. Actually, it is worn off stuff for 200+ years.

• “No science has been criticized by its own servants as openly and constantly as economics. The motives of dissatisfaction are many, but the most important pertains to the fiction of homo oeconomicus.” (Georgescu-Roegen, 1971)

• “The reason for the Austrian failure seems to lie in a faulty conception of human nature … The hedonistic conception of man is that of a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area but leave him intact …” (Veblen, 1898)

• “The science then proceeds to investigate the laws which govern these several operations, under the supposition that man is a being who is determined, by the necessity of his nature, to prefer a greater portion of wealth to a smaller in all cases, without any other exception than that constituted by the two counter-motives already specified. Not that any political economist was ever so absurd as to suppose that mankind are really thus constituted, but because this is the mode in which science must necessarily proceed. (Mill, 1874)

• “Political Economy, therefore, reasons from assumed premises ― from premises which might be totally without foundation in fact, and which are not pretended to be universally in accordance with it. The conclusions of Political Economy, consequently, like those of geometry, are only true, as the common phrase is, in the abstract; that is, they are only true under certain suppositions, in which none but general causes ― causes common to the whole class of cases under consideration ― are taken into the account.” (Mill, 1874)

The founding fathers were fully aware that their behavioral assumptions were NOT “realistic” from the psychological standpoint. Homo oeconomicus has always been justified with methodological considerations, i.e. as a necessary abstraction that serves as an analytical starting point.

Homo oeconomicus was meant to solve the starting problem: “What are the propositions which may reasonably be received without proof? That there must be some such propositions all are agreed, since there cannot be an infinite series of proof, a chain suspended from nothing. But to determine what these propositions are, is the opus magnum of the more recondite mental philosophy.” (Mill)

Eventually, the starting point was defined with these hardcore propositions, a.k.a. neo-Walrasian axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub) This is the foundation of standard economics on which the analytical superstructure of General Equilibrium Theory rests.

The fault of the axiom set HC1 to HC5 is NOT that it is bad psychology but that it is bad science. Economics is NOT about human behavior but about the behavior of the economic system. Human Nature/motives/behavior/action is the subject matter of Psychology, Sociology, Political Science, Anthropology, Biology, etcetera. The subject matter of economics is the behavior of the economic system, which is an objective non-human entity. Because of this, economics has NOT to start from subjective-behavioral microfoundations but from objective-structural macrofoundations.#2, #3

The outstanding characteristic of the representative economist is that he dabbles for 200+ years now in all Human-Nature disciplines but has NO idea of how the economic system works. Because of this, economic policy guidance NEVER had valid scientific foundations.

However: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

Economists do not have the true theory. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are axiomatically false. To this day, economics is not more than folk-psychological blather, proto-scientific garbage, and concealed political agenda-pushing. Economics is NOT psychology on steroids but rather scientific incompetence on steroids.

New Economic Thinkings consists NOT of folk-psychological “realism” but of a Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.

Egmont Kakarot-Handtke


* evonomics Why Economics Is Really Psychology on Steroids
#1 Economics is NOT about Human Nature but the economic system
#2 From false micro to true macro: the new economic paradigm
#3 For details of the big picture see cross-references Axiomatization

Related 'PsySoc — the scourge of economics' and 'What is so great about cargo cult science? or, How economists learned to stop worrying about failure' and 'The ethics of science is consistency ― economics is inconsistent' and 'Economics is NOT a social science' and 'How to get out of the Econ 101 PsySoc woods' and 'The happy end of the social science delusion'. For details of the big picture see cross-references Not a Science of Behavior and cross-references Methodology.

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Wikimedia AXEC139c

September 29, 2019

Economics, math, pluralism, and corruption

Comment on Barkley Rosser on ‘Computable economics’

Blog-Reference and Blog-Reference

Barkley Rosser summarizes: “Regarding the Horgan piece on pluralistic math, he is not up on the deeper aspects of this, which have been around for a long time, ….” and “This actually has spilled over into economics with the group calling themselves ‘computable economists’ …, whose leader has long been Kumaraswamy Vela Velupillai. He and his followers think basic economics theorems should be proven using constructicist methods, …” and “This is certainly very esoteric theoretical stuff without obvious direct implications for current policy disputes. It is also true that even within the world of pure economic theory, it may well be that this constructivist computable program may simply lead to the theory being harder to do or prove.”

The simple fact of the matter is that science is about true/false but about 99 percent of any population are not scientists but live in the swamp between true/false where “nothing is clear and everything is possible.” (Keynes) This applies, in particular, to economists. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL got the foundational concept of the subject matter ― profit ― wrong. What we actually have is the pluralism of provably false theories.

This, of course, is absolutely at odds with the very essence of science: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

Economists do not have the true theory to this day. Because of this, the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is plain fraud.

Economists, of course, do not admit that they are stupid or corrupt or both but simply try to redefine science: “The first distinction you draw is that the old paradigm (OPE) is anti-pluralist (as in classical physics), while the new paradigm (NPE) is pluralist (as in modern physics).” (Fullbrook)#1, #2, #3

In order to cover their scientific failure and to justify swampiness, economists love to cite stuff they do not understand like Heisenberg’s Uncertainty Principle, Gödel’s Incompleteness Theorems or the alleged pluralism of mathematics.#4

The point to grasp is that pluralism is a political principle that can be traced back to the Peace of Westphalia which ended the European wars of religion in 1648. The guiding idea is since then the peaceful coexistence of incompatible religious beliefs and the end of attempts to prove hallucinatory religious truths by victory in battle.

This laudable political principle, though, does not carry over to science where truth comes in the singular and NOT as pluralism of provably false theories. The very characteristic of science is to replace the pluralism of opinions by certain knowledge.#6 Scientific truth is well-defined: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

According to this criterion, economics is a failed science. Economists, of course, try to evade this conclusion. Since Adam Smith/Karl Marx they insist on doing science. What they have been doing, though, is political agenda-pushing in the garb of science.

The dismal scientific fact of the “dismal science” is that economists are too stupid for the elementary algebra that underlies macroeconomics. Logical consistency, as it is embodied in the corpus of mathematics, has always been the weak point of economics.

This weakness did not escape mathematicians: “Walras approached Poincaré for his approval. ... But Poincaré was devoutly committed to applied mathematics and did not fail to notice that utility is a nonmeasurable magnitude. ... He also wondered about the premises of Walras’s mathematics: It might be reasonable, as a first approximation, to regard men as completely self-interested, but the assumption of perfect foreknowledge ‘perhaps requires a certain reserve’.” (Porter)

Later on, von Neumann started in earnest to rectify the formalism of Walrasian economics: “You know, Oskar, if those books are unearthed sometime a few hundred years hence, people will not believe they were written in our time. Rather, they will think that they are about contemporary with Newton, so primitive is their mathematics. Economics is simply still a million miles away from the state in which an advanced science is, such as physics.” (quoted in Ingrao et al.) The final result of von Neumann’s intervention was General Equilibrium Theory. Von Neumann and others rectified the mathematical formalism, however, they retained the Walrasian axioms (methodological individualism, constrained optimization, equilibrium, etcetera).#6

Moreover, GE has been established by an existence proof. The fixpoint theorem, though, does not tell the coordinates of equilibrium nor whether and how it can be reached. This is where the critique of Kumaraswamy Velupillai and the concept of computable economics kicks in. However, as the ToC of Computable Economics shows (e.g. Computable Rationality, Adaptive Behavior, Learning in a Computable Setting, etcetera), Velupillai sticks to the old Walrasian behavioral concepts. What Velupillai does NOT realize is that economics cannot be based on behavioral microfoundations.

Standard economics is false because it is based on false microeconomic axioms. Keynesian economics is false because it is based on false macroeconomic axioms. Velupillai’s shift from set theory to recursion theory is pointless because he makes the same mistake as von Neumann, i.e. he does not realize that economics is axiomatically defective. A computable equilibrium is pointless, to begin with because equilibrium is a petitio principii since Jevons/Walras/Menger.

What is straightforwardly computable in economics is, for example, profit. Curiously, the promoter of computable economics has never computed the key variable macroeconomic profit. Worse, he has not even realized that Keynesian macroeconomics is utter algebraic garbage.

Proof: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (Keynes, GT, p. 63) is false. Instead of I=S, Q=I−S holds in the most elementary case with Q as macroeconomic profit.#7, #8

The balance of the business sector, i.e. macroeconomic profit, is computable, however, the champion of computable economics failed to this day to compute the pivotal variable of all of economics. The mathematical incompetence of economists is the ultimate reason why economics is nothing more than the forever unacceptable pluralism of false theories. This, in turn, means that economic policy guidance NEVER had sound scientific foundations.#9 Computable economics has NOT rectified this lethal defect and, given scientifically incompetent promoters like Kumaraswamy Velupillai, never will.

Egmont Kakarot-Handtke


#1 How Heterodoxy became the venue for science’s scum
#2 Failed economics: The losers’ long list of lame excuses
#3 A political stench is in the air
#4 Scientific American, Is Mathematics, like Science, Pluralistic? Mathematicians disagree over whether their fundamental assumptions, or axioms, are true
#5 “There are always many different opinions and conventions concerning any one problem or subject-matter... This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides ... was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other ...” (Popper)
#6 “But this [establishing the analytic mother-structure] required one very crucial maneuver that was nowhere stated explicitly: namely, that the model of Walrasian general equilibrium was the root structure from which all further work in economics would eventuate.” (Weintraub)
#7 How Keynes got macro wrong and Allais got it right
#8 Knowledge is attainable ― even in economics
#9 For details see cross-references Methodology

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REPLY to Barkley Rosser, anne on Oct 1

Since Sonnenschein/Mantel/Debreu it is generally known that General Equilibrium Theory = mainstream economics is a failed approach. This means (i) that economic policy guidance has NO valid scientific foundations, (ii) that economics needs a Paradigm Shift: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990)

Obviously, there is to this very day ‘no indication of what it might mean’ to perform the indispensable Paradigm Shift.

In his formal rectification of Walrasian economics, von Neumann applied set theory. This was state-of-art with regard to mathematics but was not such a good idea with regard to economics: “Thus not all axiomatic theories need to be phrased in terms of set theory but much more conveniently and intelligibly rather in terms of some advanced mathematical structures.” (Schmiechen)

Therefore, Velupillai’s shift from set theory to recursion theory is certainly a promising move to get out of von Neumann’s set-theoretical dead end. The irony is that economists fail to this day already at the simple algebra of macroeconomic accounting.#1

The remark: “At the end of his life von Neumann eseentially sided with Velupillai in pointing to greater use of computers, …” shows that you are still deep in the woods. Computable economics is a methodological issue for economists, the greater use of computers is a practical issue for all walks of life.

Right policy depends on true theory. Because economic theory is axiomatically false, economic policy can only make matters worse.


#1 For details of the big picture see cross-references Accounting

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REPLY to Barkley Rosser, anne on Oct 2

Brouwer, Gödel, et al. and all the questions about the foundations of mathematics are irrelevant for economics. Economics needs only elementary algebra for a start. And neither Brouwer nor Gödel contested the validity of algebra. The fact of the matter is that the representative economist is too stupid for algebra.

Von Neumann’s lethal blunder was to adopt the concept of utility/preferences from Neoclassics (see The Notion of Utility, ToG, p. 15ff). For deeper methodological reasons, which have been given elsewhere, economics cannot be built upon the behavioral assumption of (cardinal/ordinal) utility maximization.

Von Neumann axiomatized game theory which is absolutely irrelevant for economics. Game theory deals with zero-sum games and “payouts” and it should be obvious to every economist that the economy is NOT a zero-sum game and that profit is NOT a “payout”. Macroeconomic profit is for 200+ years now greater than zero which tells one that von Neumann had NO idea what profit ― the foundational magnitude of economics ― is.

Neither has the applause-troll Barkley Rosser ― whose main business is the self-congratulation of failed economics, the erection of false-hero-memorials, the bestowal of fake Nobels, and the deception of the general public about the proto-scientific state of economics ― and the rest of scientifically incompetent economists. Fact is: the Profit Theory is false from Adam Smith to von Neumann to Barkley Rosser and this has NOTHING to do with constructive or intuitionist math.

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REPLY to Barkley Rosser, anne on Oct 3

Barkley Rosser claims “… but these days one cannot even get into a grad econ program without having a near perfect score on the quant GRE, at least in the US. Pretty much everybody going through econ grad school has a reasonably decent knowledge of algebra.”

EK-H claims: The representative economist is too stupid for the elementary algebra that underlies macroeconomics.

Proof: Keynes was a trained mathematician. He stated in his General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This is provably false. The mathematically correct relationship reads Q=I−S with Q as macroeconomic profit.

After-Keynesians who have allegedly “a reasonably decent knowledge of algebra” did NOT spot Keynes’ blunder to this day. For example, Paul Krugman still applies IS-LM.

Conclusion: Mathematically trained economists are too stupid for the elementary algebra that underlies macroeconomics. Their utter scientific incompetence notwithstanding, they are awarded “Nobels”.

Political implication: Economics is mathematically flawed to this day. Economic policy guidance NEVER had valid scientific foundations. Economists (left-center-right does NOT matter) are either stupid or corrupt or both and a hazard to their fellow citizens.

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REPLY to Barkley Rosser, anne on Oct 4

Barkley Rosser re-frames the point at issue: “Most of what he [Mark Thoma] links to are things with policy implications. But occasionally he posts oddball stuff that he thinks has some intellectual interest that is not directly policy related. This was one of those links, about ‘pluralistic math,’ something not many people know anything about.”

Nothing could be further from the truth. Mathematics, like economics long before, is now also politically weaponized. To recall, Walrasian General Equilibrium Theory claims that the market economy is a spontaneous self-optimizing stable system. Walras knew quite well that in the Age of Science he had to prove this claim. He failed, and the mathematicians von Neumann/Wald kicked off the formal rectification which ended with Arrow/Debreu/ McKenzie/Nash’s existence theorem. This theorem amounts politically to the scientific legitimization of Capitalism. Arrow/Debreu et al. were on the payroll of the Cowles Commission which is named after its founder and funder the “businessman and economist Alfred Cowles” (Wikipedia).

As it became increasingly clear that GET is proto-scientific garbage and the existence proof had been a contract job on behalf of the Oligarchy, Walrasian economics had to give up its claim to scientific truth. Strictly speaking, it had to bury itself at the Flat-Earth-Cemetery#1 but instead, it remained firmly in academic place and merely performed an orderly withdrawal. This move comes under the euphemism of Pluralism or Anything-Goes. People love Pluralism because it gives them the license to choose their subjective truth and to ignore the taxing demand for material/formal consistency that defines science for 2400+ years. Pluralism/Anything-Goes is anti-scientific but has some political merits. Economists busily produce many “truths” and the Oligarchy picks the one that fits the actual circumstances best. Thus, academic economists add some scientific legitimacy to economic policy. For their valuable propaganda services, economists are rewarded with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. Pluralism is nothing but the methodological smoke screen of richly rewarded useful political idiots.

Remains one problem. Mathematics is binary true/false. Political creatures, though, thrive in the swampy zone of the excluded middle between true/false where “nothing is clear and everything is possible” (Keynes). Political agenda pushers try to keep everything open to interpretation and negotiation.#2 In the eyes of political agenda pushers, science/ mathematics with its insistence on consistency and proof is just a nuisance.

What Mark Thoma tells his fellow economists is NOT some oddball stuff about some remote “intellectual frisson” but that mathematics, too, is in the process of Pluralization. This is good news for all fake scientists and, contrary to the assertions of Barkley Rosser, it has enormous policy implications.

To replace the idea of scientific/mathematical truth with Pluralism is nothing else than the ultimate political corruption of science.


#1 “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern)
#2 And the answer is NCND ― economics after 200+ years of Glomarization

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Wikimedia AXEC121e

September 25, 2019

MMT/GND: Another case of bad people capturing a good cause

Comment on Nathan Tankus/Andrés Bernal/Raúl Carrillo on ‘The Green New Deal will be tremendously expensive. Every penny should go on the government’s tab.’*

Blog-Reference and Blog-Reference on Sep 26

It cannot be otherwise, bad people always and everywhere claim to promote the good cause. This is rather old stuff: “Everyone sees what you seem to be, few know what you really are; and those few do not dare take a stand against the general opinion.” (Machiavelli) This is why corruption comes in the garb of philanthropy and ruin comes in the garb of salvation. As a rule of thumb, public opinion is upside down: “Fair is foul, foul is fair.” (Shakespeare)

A new version of political deception is MMT’s promotion of environmental protection. The communicative fact of the matter is that nobody can argue against environmental protection just as nobody can argue against peace, freedom, wealth, love, solidarity, motherhood, equity, and the welfare of humankind.

The economic fact of the matter is that MMT is a program for the permanent enrichment of the Oligarchy. This is impossible to sell to the general public, therefore, MMT has to be repackaged as a program for the benefit of WeThePeople. Luckily, this is not very hard: “The vulgar crowd always is taken by appearances, and the world consists chiefly of the vulgar.” (Machiavelli)

Accordingly, Nathan Tankus/Andrés Bernal/Raúl Carrillo argue: “The Green New Deal is a vital way to address the social threat of climate change. Some GND advocates want to make the idea more palatable by relying on indirect financing like public-private partnerships or loans to private companies. While the ideas are designed to make the Green New Deal more politically palatable, indirect financing will also blunt the changes made by the GND. … Accordingly, people who truly want to see a GND in our time should fully embrace the power of the public purse.”

Economically, the “power of the public purse” works via the macroeconomic Profit Law which says Q=Yd+(I−S)+(G−T)+(X−M) with Q as macroeconomic profit. The Law boils down to Public Deficit (G−T>0) = Private Profit Q which means that the Oligarchy’s financial wealth and public debt grow in lockstep. It is the very characteristic of the free-market economy that it is already for a long time on the life support of the State. Profit is produced mainly by the government through deficit-spending/money-creation. The Oligarchy, in turn, uses the opulent free lunches to corrupt what remains of the State’s legislative, executive, judiciary institutions, including academia.

As a matter of principle, any GND measure can be realized with a balanced budget. NO MMTer will ever propose that. The message of the MMT do-gooders is deficit-spending/ money-creation.

MMT is not only bad science and bad policy but MMTers are also bad people. How can we know this? Quite easy, Nathan Tankus/Andrés Bernal/Raúl Carrillo is an #EconBlocker.#1 Genuine scientists do NOT block their critics but try to refute them yet for stupid/corrupt agenda pushers blocking/suppression is second nature.

Egmont Kakarot-Handtke


* Business Insider
#1 Economists/MMTers: agenda pushers, distractors, blockers, muters, censors

Related 'Fraud comes always in the garb of charity, salvation, or imminent doom' and 'Is MMT good for WeThePeople or for the Oligarchy?' and 'Links on MMT-Progressives push Wall Street’s agenda' and 'No MMT illusions! YOU are going to pay for it' and 'How counterfeiters save America with an extra profit and make WeThePeople pay for it' and 'The half-truths and half-falsehoods of MMT' and 'MMTers are NOT Friends-of-the-People' and 'MMT: The fusion of Wall Street and Academia' and 'MMT and the Green New Deal: Where is the snag? (I)' and 'MMT and the Green New Deal: Where is the snag? (II)' and 'How MMT enlightens Washington' and 'Very busy these days: Wall Street’s agents' and 'How to spot economics trolls'.

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Cast of #EconBlockers

“Raúl Carrillo is the director of the Modern Money Network.

Andrés Bernal is a lecturer at CUNY Queens College Department of Urban Studies and an advisor to Rep. Alexandria Ocasio Cortez.

Nathan Tankus is a research fellow at the Clarke Business Law Institute's Program on the Law and Regulation of Financial Institutions and Markets at Cornell Law School and is the research director at the Modern Money Network.”

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REPLY to Andrew Anderson on Sep 26

With regard to the realization of environmental protection, you ask: “With or without increases in the money supply? If ‘with’ how do you propose to increase the money supply in an ethical manner?”

This is a secondary question. If you want to reduce CO2, for example, the first logical question to ask is who is the biggest polluter? The simple answer is the military. So, real Progressives would radically reduce the military and redirect its humongous budget to environmental-friendly measures. This budgetary/monetary neutrality, of course, is anathema for the deficit-spending/money-creating false Progressives of MMT.

MMT/GND deficit-spending/money-creation as environmental policy is fully in line with the ethics of Pentagon and Wall Street. It is NOT for the benefit of WeThePeople.