April 11, 2015

Angels-on-a-pinpoint scholasticism

Comment on ‘The Bernanke-Summers imbroglio’

Blog-Reference

What is science?
“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, 1994, p. 31)

Everybody who looks at economics can convince himself that over more than 200 years economists have failed to produce a formally and materially consistent theory.

Currently, neither orthodox nor heterodox economists understand how the economy works. Worst of all, they cannot even tell the difference between income and profit. This, of course, is the very condition for a any meaningful discussion about any economic problem. What we have instead is a lively debate about nonentities like equilibrium or utility or rational expectation.

Scientifically, economics is in the Dark Ages and the Bernanke-Summers imbroglio is just another case of vacuous scholasticism.

Constructive Heterodoxy gets out of the intellectual Circus Maximus and comes to grips with the real world.

The correct relationship between profit, saving, investment and distributed profit is given with this formula.

The formula says that there is no such thing as an identity or equality or equilibrium of saving and investment, that is, the loanable funds story and all variants of IS-LM are untenable (for details see 2014).

The correct relationship between employment, saving and investment is given with this formula.

This testable formula explains secular stagnation (for details, including the monetary / financial side, see 2015a; 2015b).

It is not too late for Bernanke and Summers to become scientists.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Kakarot-Handtke, E. (2015a). Essentials of Constructive Heterodoxy: Employment. SSRN Working Paper Series, 2576867: 1–11. URL
Kakarot-Handtke, E. (2015b). Essentials of Constructive Heterodoxy: Money, Credit, Interest. SSRN Working Paper Series, 2569663: 1–19. URL
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.