February 22, 2013

Settling the theory of saving {38}

Working paper at SSRN

Abstract  There is no way around it: each theory rests on a tiny set of foundational propositions. Standard economics rests on behavioral axioms. After a long intellectual detour, it should be clear by now that behavioral axioms are the wrong formal departure point. Being beyond repair, they have to be replaced by objective structural axioms. This paper deals with saving and its relation to investment and profit. It starts with the fact that there is no such thing as a 'real' economy. Hence economic phenomena are only explicable as the outcome of the interaction of real and nominal variables.