May 25, 2018

Additional proof of MMT’s inconsistency

Comment on Tom Hickey’s ‘Bill Mitchell — A surplus of trade discussions’

Blog-Reference and Blog-Reference

Bill Mitchell argues: “MMT economists are not unique in their focus on real things rather than nominal things, although we certainly differ from the mainstream in that there are situations where the nominal level is crucial to understanding the consequences of a change. … Giving some real thing away is a cost. Getting some real thing is a benefit. That doesn’t equate, as I have been reading the last few weeks, in a conclusion that MMT’s preference is for a nation to have a current account deficit. It just states the obvious fact that exports, by definition, involve sacrificing real resources and depriving a nation of their use. Imports on the other hand clearly involve receiving final goods and services where the real resource sacrifice has been made by the exporting nation.”

This is the real argument. Let us now turn to the nominal argument. MMT’s sectoral balances equation/national income identity is given with (X−M)+(G−T)+(I−S)=0 (i).#1

From equation (i) follows (G−T)=S (ii) for the simplified case X, M, I = 0.

This means: “Based on the national income identity, MMT states that it is possible for the non-government sector to accumulate a surplus [S] only if the government runs budget deficits [G−T greater 0]. As most private sectors want to accumulate a surplus, MMT economists usually advocate for government budget deficits.”#2

From equation (i) follows (X−M)=S (iii) for the simplified case G, T, I = 0.

In nominal terms, a foreign trade surplus [X−M greater 0] is absolutely equivalent to a government deficit. By logical consequence, MMT should not only advocate government deficits but also export surpluses. This is not the case, an export surplus means for MMTers that a “real resource sacrifice has been made by the exporting nation.”

Conclusion: The recent discussion about foreign trade#3 confirms that MMT is logically defective in all dimensions.#4 This means that MMTers do NOT understand how the monetary economy works. This confirms what has already been established elsewhere: MMT is proto-scientific garbage.#5

Egmont Kakarot-Handtke


#1 Down with idiocy!
#2 Wikipedia, Modern Monetary Theory
#3 Steve Keen, MMT’s ignorance of economic thought
#4 Rectification of MMT macro accounting
#5 How MMT enlightens Washington

Related 'Everything you know about MMT is wrong' and 'MMT is idiocy and fraud'.

***

Additional proof of MMT’s inconsistency (II)

Blog-Reference on May 26

The preceding post (I) concluded: “This means that MMTers do NOT understand how the monetary economy works.” More specifically, MMTers have no idea how the real and nominal variables of the monetary economy interact. This inevitably leads to the question, how, then, does the monetary economy work?

Economics is axiomatically false, therefore, it has to be reconstructed from scratch. As the correct analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X. Under the conditions of (C1) market clearing X=O and (C2) budget balancing C=Yw the price is given by P=W/R, i.e. the market clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. The axioms define the interaction between real and nominal variables. More details and a graphical representation have been given elsewhere.#1

In order to deal with foreign trade, two economies are needed. For a start, it is assumed that we have the USA and Europe. Both are described by the axioms (A1)/(A3) and the conditions (C1)/(C2). Both economies are identical, except for the currency. For a start, we have an exchange rate 1$ = 1€. So, both economies differ only in nominal terms.

Initially, the national accounting balance of the US household sector is balanced, i.e. C=Yw [$]. Now, the consumers decide that they want more stuff and that they want to buy it from Europe.

Things unfold now in the most elementary case as follows:
(i) The US household sector takes a credit at the US central bank of the amount EX $.
(ii) The balance sheet of the US central bank lengthens: household sector’s overdrafts EX are equal to household sector’s deposits.
(iii) The US central bank turns to the EU central bank in order to get Euros.
(iv) The balance sheet of the EU central bank lengthens: US central bank’s overdrafts in $ are equal to US central bank’s deposits at the EU central bank in €, i.e. = EX.
(v) The US central bank switches the US household sector’s $ deposits for € deposits at the EU central bank.
(vi) As a result, the US households have $ overdrafts at the US central bank and € deposits at the EU central bank. On the other hand, the EU central bank has $ deposits at the US central bank.
(vii) Finally, the US household sector spends the € deposits in Europe.

Initially, national accounting in Europe and the USA looked like this: Qm≡C−Yw and Sm≡Yw−C or Qm=−Sm, Legend Qm monetary profit, Sm monetary saving in € resp. $.#2 With the additional spending of the US households this gives for the European business sector Qm=C+EX−Yw or Qm=EX−Sm.

Initially, Qm in the EU has been 0 because of budget balancing, just as in the US. It is now assumed for a start that EU households spend less, i.e. save, thus that Sm exactly compensates the additional spending of US households, i.e. Sm=EX. As a result, business sector’s profit Qm is again zero, just as in the initial period.

At the end of the period, EU households have deposits at the EU central bank and US households have overdrafts at the US central bank. EU households have given up part of the real output O in Europe = Sm in nominal terms. As a mirror image, US households have increased real consumption and gone into debt vis-a-vis the EU households.

Economically, EU households have lent real stuff to US households. On the accounts of the central banks, the whole transaction comes down as an increase of $ assets at the EU central bank.

At some point in time, the whole transaction has to be reversed. That is, the US households have to return real stuff and to redeem their debt. In this case, the US runs an export surplus and EU a deficit. So, at the end of the whole process, all real and nominal balances are balanced. And this is exactly as it should be. The whole process comes down to a time shift of real consumption between two countries.

Needless to emphasize that a lot of practical problems arise if the US cannot, for whatever reasons, achieve an export surplus and finally redeem the debt. No problems arise, of course, as long as the EU central bank holds the debt = $-assets for an indefinite time.

In the case that the EU households do not exactly save the amount the US households spend, i.e. Sm less than EX, the profit of the EU business sector becomes greater than 0, i.e. Qm=EX−Sm is positive. In this case, the market clearing price in EU rises. The US business sector is neither affected in real nor in nominal terms. There is no loss of employment because of the trade balance deficit.

MMTers neither get the real nor the nominal nor the monetary side of the whole process right. To recall, the MMT balances equation is provably false because MMTers are too stupid to understand the elementary mathematics of national accounting.#3


#1 True macrofoundations: the reset of economics
#2 Rectification of MMT macro accounting
#3 For the full-spectrum refutation of MMT see cross-references MMT

May 22, 2018

Both orthodox and heterodox economists are cargo cult scientists

Comment on Lars Syll on ‘People having bad luck when trying to think’

Blog-Reference

Andrew Lilico wrote in The Telegraph: “But rationality is not an assumption of orthodox economic theory in that sense. Instead, it is what is called an ‘axiom’. No behaviour can prove that people aren’t, in fact, rational, because for an orthodox economist the only kind of explanation of any behaviour that counts as an economic explanation is an explanation that makes sense of that behaviour ― that shows why the behaviour is rational.”

Lars Syll comments on this: “Wooh! Who would have thought anything like that? Build your science on whatever foolish axioms you like ― and since they are axioms no one can really criticize them and show that you are wrong.”

Lars Syll clearly suffers from the methodological delusion that ‘axiom’ means ‘beyond critique’. This is sheer nonsense and every scientist worth his salt knows this.

Every scientific analysis needs a well-defined starting point: “The attempt is made to collect all the assumptions, which are needed, but no more, to form the apex of the system. They are usually called the ‘axioms’ (or ‘postulates’, or ‘primitive propositions’; no claim of truth is implied in the term ‘axiom’ as here used). The axioms are chosen in such a way that all the other statements belonging to the theoretical system can be derived from the axioms by purely logical or mathematical transformations. (Popper)

Or, as Aristotle put it 2000+ years ago: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

Or, as J. S. Mill put it: “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.”

No methodologist ever claimed that axioms cannot be criticized or changed. As a matter of fact, the move from one set of axioms to a new one is known as paradigm shift. Keynes famously advocated such a shift: “Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.”#1

Newton put his PHYSICAL axioms on the first pages of Principia. In methodological analogy ECONOMIC axioms have been laid down by economists. The core of orthodox economics is given with this verbalized set of 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)

It is pretty obvious that the neo-Walrasian axiom set contains THREE NONENTITIES: (i) constrained optimization (HC2), (ii) rational expectations (HC4), (iii) equilibrium (HC5). Every theory/model that contains just one NONENTITY is a priori false. And when the axioms are false the whole analytical superstructure is false.

The axioms of orthodox economics are NOT “certain, true, and primary” and because of this, the whole analytical superstructure is scientifically worthless.

Economists never grasped what science is all about: “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.” (Feynman)#2,

What economics is missing to this day is the formally and materially consistent set of axioms. Heterodox economists like Lars Syll are methodologically just as incompetent as orthodox economists.#3

Egmont Kakarot-Handtke


#1 Show first your economic axioms or get out of the discussion
#2 Why is economics a total scientific failure?
#3 True macrofoundations: the reset of economics

For details of the big picture see cross-references Scientific Incompetence and cross-references Failed/Fake Scientists.

May 21, 2018

How MMT enlightens Washington

Comment on Zach Carter’s ‘Stephanie Kelton Has The Biggest Idea In Washington’

Blog-Reference

Anybody with an IQ around room temperature counts as a genius in Washington. Against this benchmark, Stephanie Kelton’s MMT policy proposals look like a rather big idea.

MMT promises to reconcile “the trifecta of growth, employment and price stability”. Note, first of all, that distribution is not mentioned. For good reasons. Distribution is the lethal flaw of MMT.#1

“Adoption of policy based on MMT analysis should keep the economy operating close to optimal output and employment … with the JG playing the dual role of providing a price anchor, on one hand, and on the other, mopping up residual unemployment after the application of functional finance to fiscal policy based on stock-flow consistent macro modeling.”

And here exactly lies the problem. MMT analysis and macro modeling is anything but consistent. Because of this, MMT policy guidance never had valid scientific foundations. MMT is soapbox economics. MMT’s foundational macroeconomic balances equation is provably false and this settles the matter once and for all.#2

According to the axiomatically correct macroeconomic Profit Law, it always holds Public Deficit = Private Profit. Therefore, MMT is a program for the one-percenters and has never been anything else.

The Job Guarantee is the banner that Stephanie Kelton and the rest of the MMT sales team enthusiastically waves in order to cover the one-percenter-agenda. The Huffington Post’s attempt to sell Stephanie Kelton as the incarnation of the triumph of the working class/ninety-nine-percenters over Wall Street/one-percenters is a bad joke.#3

Egmont Kakarot-Handtke


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 Down with idiocy!
#3 MMT vs Neoliberalism: Just another clown show fight

Related 'MMT and the promotion of Wall Street socialism' and 'MMT: The one deadly error/fraud of Warren Mosler' and 'MMT = proto-scientific junk + deception of the 99-percenters' and 'MMT and grassroots movements' and 'Political economics: Who hijacks British Labour?' and 'Full employment through the price mechanism'. For the full-spectrum refutation of MMT see cross-references MMT.

***
REPLY to Konrad, Calgacus, Kristjan, Tom Hickey on May 21

Sandwichman has compiled the key statements of Zach Carter’s portrait of Stephanie Kelton over there at EconoSpeak. Here is the copy/paste:

“Everybody wants a piece of Kelton these days because a simple, radical idea she has been workshopping her entire career is the next big thing in Democratic Party politics. She calls it the job guarantee... “

“Once an outsider, her radical economic thinking won over Wall Street. Now she’s changing the Democratic Party.”

“A onetime college dropout at California State University in Sacramento, Kelton has managed to earn the esteem of both Sanders and an oddball clique of multimillionaire Wall Street traders.”

“If you listen to Kelton long enough, you notice that she never refers to “bankers” or “Wall Street” with the derisive tone common among her political allies. She talks instead about “the financial community.””

“After all, Wall Street took her under its wing before Democrats took her seriously.”

“Her career had changed tracks. She wasn’t just a clever economist with some quirky ideas anymore. Her credibility with Wall Street began to register as academic clout.”

“There are thousands of left-wing economists. But it’s hard for the economically inexpert to distinguish brilliant creativity from quackery. Kelton’s social credentials with Wall Street helped her stand out.”

In other words, MMT pushes the agenda of the one-percenters and Stephanie Kelton is the ideal person for emotional social marketing and hijacking the political grassroots movements. The Job Guarantee serves as a door opener for the MMT salespeople. Wall Street’s ultimate goal, though, is deficit spending and the perpetual growth of public debt. #1, #2, #3, #4, #5

Poor Bernie Sanders, his supposedly left-wing economic platform has been written by Wall Street operatives.


#1 MMT: Just another political fraud
#2 MMT: So-called progressives as trailblazers for Trumponomics
#3 Bill Mitchell, MMT’s fake scientist
#4 MMT: academic snake oil for the people
#5 MMT = proto-scientific junk + deception of the 99-percenters

***
REPLY to Tom Hickey on May 22

You seem to have lost orientation: “Trump syndrome? The crazy seem to be going over the top everywhere, and the news is all gaslighting.”

No, not at all, it’s economics as usual. The whole UBI-JG discussion is pointless because economists in general and MMTers, in particular, lack the true Employment Theory since Keynes wrote the General Theory of Employment, Interest, and Money.#1, #2

Keynes also messed up the Profit Theory.#3

So, neither MMT, nor Keynesianism, nor Walrasianism, nor Marxianism, nor Austrianism has any scientific merits.

This, though, does not matter much because in economics it is NOT the scientific truth value that counts but the political use value. To recall, economics started as Political Economy 200+ years ago and is a cargo cult science since then.

Economists are not scientists who try to figure out how the monetary economy works but agenda pushers. This is pretty obvious in the case of MMT and Stephanie Kelton. As Zach Carter plainly states: “After all, Wall Street took her under its wing before Democrats took her seriously.”

This is a good old tradition since Engels took Marx under his wing and Cowles took Koopmans, Arrow, Debreu, etcetera under his wing and it is kept alive by the Koch brothers, George Soros, and “an oddball clique of multimillionaire Wall Street traders” (Carter).

The stupid oligarchs spend their money more on porn stars, the smart oligarchs spend it more on economists. There is nothing to be confused about.


#1 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#2 Full employment through the price mechanism
#3 How Keynes got macro wrong and Allais got it right

***
REPLY to Tom Hickey, Andrew Anderson, Matt Franko, Noah Way, Carlitos, Calgacus

There is 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.

Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years.

Political economics is easy to identify. It applies emotionally charged keywords like democracy, freedom, liberty, slavery, serfdom, poverty, exploitation, inequality, happiness, alienation, capitalism, socialism, Nazi, Commie, WeThePeople, etcetera.

Political economics, clearly, is NOT science. The Original Sin of economics is that science and politics have never been kept properly apart. As a result, economics stagnates since 200+ years at the proto-scientific level. And this means, in turn, that economic policy guidance NEVER had sound scientific foundations.

This holds for Walrasianism, Keynesianism, Marxianism, Austrianism. This, of course, holds also for MMT. MMT is NOT a valid scientific theory, MMTers, like the rest of orthodox and heterodox economists, do not even understand what science is all about.#1 Worse, as the Huffington Post’s portrait of Stephanie Kelton clearly shows, MMT is Wall Street-sponsored agenda pushing for the one-percenters dressed up as progressive social policy.

“The basic idea is that the government can’t run out of money. It creates money just by spending.” (Stephanie Kelton) Because the macroeconomic Profit Law says Public Deficit = Private Profit, MMT’s social policy in effect co-creates the most unequal distribution of income and financial wealth in the history of mankind.

Since Adam Smith/Karl Marx, economics is a scientific fraud and MMT is an integral part of it.#2 Let’s face it, bloggers like you keep economics ― intentionally or unintentionally does not matter ― firmly in the bottomless swamp of political economics.#3 With your senseless blather, you do not contribute to the solution of any economic problem. As useful political idiots, you ARE the problem.#4


#1 Both orthodox and heterodox economists are cargo cult scientists
#2 MMT is idiocy and fraud
#3 Yes, economics is a bogus science
#4 For details of the big picture see cross-references Failed/Fake Scientists

***
REPLY to Konrad on May 23

This is the sectoral balances equation, Stephanie Kelton, Warren Mosler and the rest of the MMT salespeople present on any occasion (X−M)+(G−T)+(I−S)=0.#1, #2

This equation is provably false because the balance of the business sector = profit is missing. It is lethal for the foundational macroeconomic equation not to contain the pivotal economic magnitude profit.

This is the axiomatically correct balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0. As you can easily see it contains profit Q and distributed profit Yd.

Whoever does not understand the economic content of the two equations is out of economics.

To sum up the thread ‘Stephanie Kelton Has The Biggest Idea In Washington’:
  • Stephanie Kelton is an agenda pusher for the one-percenters.
  • MMT’s social policy proposals ― the Job Guarantee in particular ― are a political bluff package.
  • It is an unassailable scientific fact that Public Deficit = Private Profit.
As far as MMTers do not understand the Profit Law they are stupid. As far as they understand it and nonetheless claim to promote the cause of the ninety-nine percenters, they are corrupt.

Whatever counts in Washington as “biggest idea” is with absolute certainty both stupid and corrupt.


#1 Down with idiocy!
#2 MMT: The one deadly error/fraud of Warren Mosler

***
REPLY to Matt Franko on May 23

You say: “The academe has a major defect in this discipline... the undergraduate degree program is not rigorous enough in applied mathematics and scientific methods .... this is not a 'hijacking!' you are drifting into conspiracy theory.”

I said: “Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers).”

This is a historical fact.#1, #2, #3, #4 The current curriculum is an entirely different matter.#5

MMT is agenda pushing for the one-percenters. The T=Theory in MMT is a misnomer because it refers to science. Science, in turn, is defined by material and formal consistency. MMT’s sectoral balances equation, though, is inconsistent. So, MMT is storytelling cross-dressed as science. In other words, in the case of MMT, political economists (= agenda pushers) have hijacked theoretical economics (= science).#6

The task of theoretical economics is to figure out how the monetary economy works. MMTers have no idea how the price- and profit-mechanism works because they do not even know what profit is.#7


#1 Agenda pushers, hijackers, and scientists
#2 Scientific suicide in the revolving door
#3 Funny folks in the big omnibus
#4 Economics: a science without scientists
#5 See cross-references Econ 101/Old Curriculum/New Curriculum
#6 The end of political economics
#7 Rectification of MMT macro accounting

***
REPLY to Matt Franko on May 24

You say: “The MMT elites HATE the one-percenters...”

Hate/love are soap-opera criteria. They do NOT apply to science. The criteria that apply here are true/false with truth defined as material and formal consistency.

So, it is a matter of indifference what the MMT elites hate.

Fact is that the sectoral balances equation MMT is built upon is provably false.#1 Because of this, the whole analytical superstructure = theory is false. This is quite compatible with the observation that some MMT propositions are correct or trivially true, just as some propositions in Greek mythology or Grimms fairy tales are correct or trivially true. But the fact that Baker Street exists does not change the meta-fact that Sherlock Holmes is a NONENTITY.

MMT’s sectoral balances equation (X−M)+(G−T)+(I−S)=0 describes a zero-profit economy. Clearly, a zero-profit economy is a NONENTITY.

The MMT elites can tell exciting stories about who they hate or love. That is cheap sales talk. The economic fact of the matter is that according to the macroeconomic Profit Law it holds Public Deficit = Private Profit. Whether they are aware of it or not does not matter, MMTers de facto promote the cause of the one-percenters.#2

The MMT elites are either stupid or corrupt. In any case, they are NO scientists.


#1 Rectification of MMT macro accounting
#2 Keynes, Lerner, MMT, Trump and exploding profit

May 20, 2018

Progressive shell games

Comment on Sandwichman’s ‘Jobs, Jobs, Jobs ― GUARANTEED!’

Blog-Reference and Blog-Reference

Sandwichman reports what Kalecki, Keynes, Beveridge, Collins, and many others have said about full employment, unemployment, leisure, and the general strike. This historical review is pointless because it tells us only what people have hallucinated about the labor market. Never do we get the scientifically correct answer how overall employment is determined.

Neither Kalecki, nor Keynes, nor the rest of gossip economists ever understood how the price- and profit-mechanism works.#1, #2 Because of this, their policy guidance never had valid scientific foundations and never rose above the trivialities of common sense, folk psychology, and populism.

MMT is not different in this respect.#3

The noteworthy feature of the MMT Job Guarantee proposal is NOT that it is particularly innovative or institutionally superior but that it is financed by deficit spending. And exactly at this point, the political fraud comes in.

According to the axiomatically correct macroeconomic Profit Law, it always holds Public Deficit = Private Profit. Therefore, MMT is a program for the one-percenters and NOT for the ninety-nine-percenters, or the working class, or the proletariat. It is NOT the Job Guarantee that is specific to MMT but money creation/deficit spending.

Sandwichman does not get the point and his collection of dead arguments from the long history of economic blathering is at best good as a distraction from the original purpose of MMT, that is, to push overall profit.#4

Will Sandwichman ever understand the Employment Law?#5 This is what he fantasizes about his competence: “I have been on the full employment beat for over 20 years so I think I have a pretty good grasp of the terrain.” After 20 years in the deep woods, there is no hope left for the man.

Egmont Kakarot-Handtke


#1 The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 Full employment through the price mechanism
#4 Keynes, Lerner, MMT, Trump and exploding profit
#5 The set screws of overall and individual employment

***
REPLY to Ralph Musgrave on May 21

You ask: “Er ― what about if a deficit takes the form of handing out more to the unemployed or the elderly?”

The macroeconomic Profit Law reads Qm=Yd+I−Sm+(G−T)+(X−M) for an open economy (X−M) with a government sector (G−T), and with business investment I, household sector saving/dissaving Sm, and distributed profit Yd.

It does NOT MATTER AT ALL whether the budget deficit (G−T) is created by handing out more money to the military, the unemployed, the elderly, or for Stephanie Kelton’s program A Pony for Every American.

A budget deficit means ALWAYS a monetary profit of equal amount for the business sector and imperceptible taxation in real terms for the household sector. The social goodies MMT promises are in any case paid for in real terms by the ninety-nine-percenters themselves.#2

Nothing has enriched the rich more in the last decades than public deficit spending and MMT’s political fraud consists in keeping the public debt growing by producing a social smokescreen.#3

Only morons, retarded economists like Ralph Musgrave, and Marxist philosophers like Tom Hickey do not see the correlation between the growth of financial wealth on the one hand and the growth of public/private debt on the other.


#1 MMT, money printing, stealth taxation, and redistribution
#2 MMT is idiocy and fraud
#3 How MMT fools the ninety-nine-percenters

May 12, 2018

Marx’s bicentennial ― nothing to discuss, nothing to celebrate

Comment on Tom Hickey’s ‘Steve Keen — Karl Marx sacrificed logic on the altar of his desire for revolution’

Blog-Reference

What economists produce is not so much scientific knowledge but some mixture of propaganda, how-to-get-rich quackery, disinformation, and entertainment. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong. With the pluralism of provably false theories economics sits squarely at the proto-scientific level.

Economics is one of the most embarrassing scientific failures of all times. Economic policy guidance NEVER had sound scientific foundations. And it does not matter at all whether this guidance has been more rightist or more leftist, more capitalist or more communist. Because of this, the discussions of economists of different schools never had any scientific relevance and have roughly the same entertainment value as a wrestling show.

The irrelevance of Steve Keen’s critique of Marx consists in the fact that both so-called economists have no idea of the foundational economic concept of profit.#1, #2 Everybody knows from methodology that when the premises are false the whole analytical superstructure is false. Or in the words of Aristotle: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

Economics started as Political Economy. Marxianism is not so much economics as Sociology, Anthropology, History, Political Science, Philosophy, Psychology, and agenda pushing.#3 Marx got the pivotal concepts profit, exploitation, and class wrong.#4, #5 The axiomatically correct profit theory tells everybody that macroeconomic profit is determined in the most elementary case by dissaving = growth of household- and public sector debt#6 and NOT by exploitation and that there is NO antagonism between wages and profits for the economy as a whole.

Economists of ALL camps are cargo cult scientists and have not gotten their foundational concepts straight in the last 200 years. Nothing to celebrate on Marx’s bicentennial but the persistence of economists’ stupidity and fraud.#7, #8

Egmont Kakarot-Handtke


#1 Profit for Marxists
#2 How the Intelligent Non-Economist Can Refute Every Economist Hands Down
#3 It is not quite clear which agenda Marx was pushing. See Karl Marx, Prussian government agent
#4 Capitalism, poverty, exploitation, and cross-over exploitation
#5 Ricardo and the invention of class war
#6 Keynes, Lerner, MMT, Trump and exploding profit
#7 Economists: scientists or political clowns?
#8 The end of political economics

***


***
REPLY to Tom Hickey on May 19

Schopenhauer called Hegel “A flat-headed, insipid, nauseating, illiterate charlatan.” No wonder that Hegel appealed to Marx and later on to other flat-headed philosophers like Tom Hickey.

The bad luck of philosophers is that philosophy is entirely irrelevant for economics which means for the philosopher Tom Hickey that he is in the wrong place at an economics blog.

MMT, clearly, is a program for the one-percenters.#1 Why do MMTers like Bill Mitchell and Tom Hickey demonstrably wave the Marx flag? Something is wrong here.

Marx is known as a lousy economist#2 and political agenda pusher and, most of all, for his claim that the working class will one day fully replace the capitalist class due to the law of social dialectics. Quite naturally, this sociological/historical hypothesis appeals more to the ninety-nine-percenters than to the one-percenters.

Bill Mitchell, Tom Hickey, and the rest of the sales team use Marx in order to make MMT palatable to the ninety-nine-percenters.#3, #4

An intelligent Marxist/MMTer (who is indeed as rare as a unicorn) would simply create some extra money but NOT for deficit spending, which only boosts macroeconomic profit according to the axiomatically correct Profit Law Public Deficit = Private Profit, but for continuously buying shares on Wall Street and successively taking over the control of all big corporations. No social revolution is needed. In fact, nothing is easier than to abolish capitalism.#5 Why do MMTers waste so much time with the Job Guarantee and other social programs?


May 9, 2018

200 years in the dark ― how Marx got it wrong

Comment on Sandwichman’s ‘200 Years, 200 Dollars!’

Blog-Reference

Sandwichman asks: “In what passage of The Wealth of Nations did Adam Smith commit the lump-of-labor fallacy … and in what passage of Capital did Karl Marx disparage the assumption as dogma and prejudice?”

The Wealth of Nations passage is about the limitationality of the production factors labor and capital which was later on simply defined away with the well-behaved production function and full substitutionality.

The Marxian argument is inconsistent. The Labour Theory of Value says that the lengthening of labor time increases surplus value. By the same logic, it should be advantageous to employ workers to the point of full-employment because maximum labor time = maximum exploitation = maximum surplus value.

Confronted with persistent unemployment in the capitalist economy, Marxians came up with the reserve army argument, that is, unemployment is necessary to prevent wages from rising and profits from falling.

This argument is false because the axiomatically correct profit theory tells everybody that macroeconomic profit is determined in the most elementary case by dissaving = growth of household sector debt and NOT by exploitation and that there is NO antagonism between wages and profits for the economy as a whole.#1, #2, #3

Because profit theory is false, the whole analytical superstructure of Capital is false. Same for Smith’s Wealth of Nations. Economists in general and Marxians, in particular, did not realize this in the last 200 years. Nothing to celebrate on Marx’s bicentennial but the persistence of economists’ stupidity and fraud.#4

Egmont Kakarot-Handtke


#1 Profit for Marxists
#2 Capitalism, poverty, exploitation, and cross-over exploitation
#3 Ricardo and the invention of class war
#4 Economists: political trolls since 200+ years

Related 'Marx and the curious coexistence of provably false economic theories' and 'Confounding sociology and economics' and 'Note on Amy Willis ‘Can majoring in philosophy make you a better person?’ and 'Note on ‘Duncan Foley On Socialist Alternatives to Capitalism’' and 'Marx’s bicentennial ― nothing to discuss, nothing to celebrate'.

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REPLY to Sandwichman on May 10

Both, Smith’s and Marx’s employment theories were false. To incessantly recycle this dead stuff#1 and to make a quiz show out of it is an act of anti-scientific disinformation a.k.a. political economics.


#1 End of the Lump-of-Labor sitcom

May 7, 2018

Did economics fail? No! Yes, and everybody knows it!

Comment on Silvia Merler’s ‘Did Economics Fail?’

Blog-Reference and Blog-Reference on May 9

Silvia Merler reports: “The debate about rethinking economics keeps rambling.” True. And the wonderful thing is that we have heard all arguments already multiple times.

The Pavlovian answer to the question Did Economics Fail? goes as follows: “Economics is a strange sort of discipline. The booby traps I mentioned often make it sound as it is all just a matter of opinion. That is not so. Economics is not a Science with a capital S. It lacks the experimental method as a way of testing hypotheses. . . . There are always differences of opinion at the cutting edge of a science, . . . . But they last longer in economics . . . and there are reasons for that. As already mentioned, rival theories cannot be put to an experimental test. All there is to observe is history, and history does not conduct experiments: too many things are always happening at once. The inferences that can be made from history are always uncertain, always disputable, . . . You can’t even count on a long and undisturbed run of history, because the ‘laws’ of behavior change and evolve. Excuses, excuses. But the point is not to provide excuses.” (Solow, 1998)#1

Fact is: “… suppose they [the economists] did reject all theories that were empirically falsified … Nothing would be left standing; there would be no economics.” (Hands, 2001)

Fact is: the main approaches and their variants and derivatives ― Walrasianism, DSGE, Keynesianism, Post-Keynesianism, New Keynesianism, MMT, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong.#2 What we actually have is the pluralism of provably false theories.#3

There is 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.

Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years.#4 And this means, in turn, that economic policy guidance has NO sound scientific foundations since Adam Smith/Karl Marx. The gigantic intellectual battle about Capitalism and Socialism has never been more than a pygmy wrestling show.#5

Fact is that economists bear the intellectual responsibility for all economic crises and the resulting social devastation. This is known since Napoleon: “Late in life … he claimed that he had always believed that if an empire were made of granite the ideas of economists, if listened to, would suffice to reduce it to dust.” (Viner)

What failed economics needs is NOT another pointless critique, or one more silly discussions between scientifically incompetent orthodox and heterodox economists, or just another cosmetic reformation or breakthrough ― but a paradigm shift.

Needless to emphasize that the paradigm shift will NOT come from people who swallowed supply-demand-equilibrium hook line and sinker and never realized that what they are doing is cargo cult science.

Egmont Kakarot-Handtke


#1 For the comprehensive list of excuses see ‘Failed economics: The losers’ long list of lame excuses
#2 Why is economics a total scientific failure?
#3 Economics: 200+ years of scientific incompetence and fraud
#4 For details of the big picture see cross-references Political Economics
#5 Profit and the Private-Property-Irrelevance Theorem

Related 'The Law of Economists’ Increasing Stupidity' and 'Both orthodox and heterodox economists are cargo cult scientists' and 'Economics: a science without scientists'.