Comment on Erwan Mahé on ‘The arrival of helicopter money’
Blog-Reference
Heterodoxy, understood as political economics, is in favor of all measures that benefit ‘the people’ and against all measures that benefit ‘the one-percenters’. Quite naturally, Heterodoxy is in favor of citizen helicopter money.
Unfortunately, most heterodox economists have not done their scientific homework and, by consequence, have merely a superficial idea of how the monetary economy works. This is what they have in common with most orthodox economists (2014; 2015). Because of this, the discussion about helicopter money lacks a sound theoretical foundation. More specifically, the profit theory of both Orthodoxy and Heterodoxy is provable false.*
This lack of understanding produces an unintended perverse effect because what seems at first sight to benefit ‘the people’ benefits ultimately ‘the one-percenters’. In the simplest case the additional nominal demand increases either the price at constant employment or employment at constant price or something in between, yet in ALL cases the profit of the business sector as a whole increases exactly by the amount of helicoptered money. In other words, if fully spent the money thrown from the helicopter reappears one-to-one as profit. This effect is not directly visible because total profit is distributed among many firms depending on what goods the households buy.
To this day, neither the Walrasian, nor the Keynesian, nor the Marxian, nor the Austrian sect can tell the difference between income and profit. As the Palgrave Dictionary sums up “A satisfactory theory of profits is still elusive.” (Desai, 2008, p. 10)
This has three consequences: (i) ALL opinion-input to the discussion about helicopter money lacks a sound scientific foundation, (ii) unenlightened good intentions backfire, i.e. in the course of time helicopter money leads to an extremely unequal distribution of financial wealth, (iii) heterodox economists become politically the useful idiots of the one-percenters.
Egmont Kakarot-Handtke
References
Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave Macmillan, 2nd edition. URL
Kakarot-Handtke, E. (2014). Economics for Economists. SSRN Working Paper Series, 2517242: 1–29. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
* For more details see cross-references Profit
Related 'Deficit spending, helicopter money, and profit' and 'Crisis, cranks, and scientists' and 'Profit and the collective failure of economists' and 'Keynesianism as ultimate profit machine'.