May 12, 2016

The great economic equations

Comment on Matias Vernengo on 'The great economic equations'


The First Economic Law is given here and it connects the integrated business sector, the market, and the income distribution (2014, eq. (12)). It is for economics what the Pythagorean theorem is for geometry. The Profit Law is implicit in this fundamental equation.

From the First Economic Law, which holds for one period, follows the economic ‘God Equation’ which embodies the open stochastic simulation of the elementary consumption economy from t=0 to infinity.

The Keynesian multiplier 1/1-c is provably false. For the correct employment multiplier see (2012, eq. (39)). In order to arrive at the correct economic key equations one has to move from false Walrasian microfoundations and false Keynesian macrofoundations to true = systemic macrofoundations.*

All models that are not formally compatible with systemic macrofoundations are provably false and therefore unacceptable.

Egmont Kakarot-Handtke

Kakarot-Handtke, E. (2012). Keynes’s Employment Function and the Gratuitous Phillips Curve Disaster. SSRN Working Paper Series, 2130421: 1–19. URL
Kakarot-Handtke, E. (2014). The Synthesis of Economic Law, Evolution, and History. SSRN Working Paper Series, 2500696: 1–22. URL

* See post ‘From microfoundations to macrofoundations’.

Immediately following 'The worst economic equation'.

First Economic Law  ®