December 29, 2017

Down with idiocy!

Comments on DownWithTyranny! on ‘The Smartest Economist In America Explains What Deficits Really Mean’

Blog-Reference and Blog-Reference

This is what deficits really mean:
Egmont Kakarot-Handtke


#MMT #LearnMMT #DebunkMMT #NotDifficult #FailedScience #FakeScience #ScientificIncompetence #ProfitTheory #PrivateSectorSurplus

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COMMENT on Debtee Dec 30 and MNE on Dec 31

From macroeconomic analysis follows Public Deficit = Private Profit.#1

Either Stephanie Kelton does not understand this, then she is an incompetent scientist. Or, she understands it, then she sells a social bluff package for the benefit of the one-percenters.#2

If Stephanie Kelton is the “Smartest Economist In America” one trembles to contemplate how stupid the rest is.


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 MMT: The one deadly error/fraud of Warren Mosler

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This pivotal MMT sectoral balances equation is false.

Source: Google Images MMT

For the axiomatically correct equation see National Accounting: scientific incompetence or political fraud? and Wikipedia and the promotion of economists’ idiotism and MMT and the magical profit disappearance and The Profit Theory is False Since Adam Smith.

This is the correct equation   (I−S)+(G−T)+(X−M)−(Qm−YD)=0 with Qm monetary profit and YD distributed profit.

Sectoral Balances: False = MMT, True = AXEC

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There are four macroeconomic sectors (household sector, business sector, government sector, and the Rest of the world) but in the following charts one sector is missing, more specifically, the balance of the business sector = profit is nowhere to be seen. Why are two or more sectors lumped together? This obscures the crucial fact that Public Deficit = Private Profit given the balances of the household sector and the Rest of the world.

 Source: Google Images MMT











Exactly here, the rhetorical shell game starts because Domestic Private Balances is household sector's and business sector's balances lumped together. Thus profit becomes invisible.
  

The political fraud of MMT is in the false social solidarity of "We". Because Public Deficit = Private Profit "We" = ninety-nine percenters is actually "They" = one-percenters.

***

REPLY to Bill on Jan 2 and Blog-Reference MNE

You say: “Does Kelton understand that Public Deficit = Private Profit? She said as much: “the government’s −$10 is always matched by +$10 in some other part of the economy.”

Kelton’s incompetence is in these four words “in some other part”. The macroeconomic Profit Law says unequivocally Public Deficit = Private Profit and NOT in “in some other part”.#1

Either Stephanie Kelton does not know the Profit Law, which is fundamental to ALL of economics, or she obscures it for some reason.

There is NO need to speculate about Stephanie Kelton’s ulterior motives. What has been proven is that MMT is materially and formally inconsistent, that is, scientifically worthless.#2 Therefore, ALL economic policy proposals of MMTers, including Stephanie Kelton, have NO sound scientific foundations.

Contrary to the social appearance, MMT is de facto agenda-pushing for the one-percenters. MMTer, including Stephanie Kelton, are either stupid or corrupt or both.#3


#1 For the proof see here
#2 For the full-spectrum refutation of MMT see cross-references

The creation and value of money and near-monies

Comment on Clint Ballinger on ‘Of Bitcoins and balance sheets: the real lesson from Bitcoin’

Blog-Reference

Clint Ballinger argues: “The national government creates the numeraire for the system (the “Dollar” in the US, the “Pound” in the UK etc.) and in addition to spending directly in to the economy in that numeraire, the government allows a public/private system (publicly regulated private banking system) to operate with the same numeraire. This creates a single system for the public but in fact arises from two separate but linked balance sheet expansions.

But why do the tokens from either of these balance sheet expansions have and maintain value?

The government maintains the value of its balance sheet tokens by demanding that some of its tokens, once a year, must be paid back to the government. This guarantees that everyone in that nation will accept and value the tokens from the national balance-sheet expansion.

The tokens that arise from the public/private bank balance-sheet expansion maintain their value analogously ― by the obligation to repay bank loans.

Together, the obligation to pay taxes and the obligation to repay bank loans maintain the value of a currency. Note that both of these rest on the government/legal system of a nation.”

The claim that the value of money depends ultimately on the taxing power of the state is, of course, plain MMT nonsense.

Time to finally settle the theory of money. Because economics is a failed science it has to be reconstructed from scratch. Walrasian microfoundations and Keynesian macrofoundations have to be scrapped.

As the new analytical starting point, the pure 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 market clearing X=O and budget balancing C=Yw in each period the price is given by P=W/R (1), 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. For the graphical representation see Figure 1.#1


The price is determined by the wage rate, which takes the role of the nominal numéraire, and the productivity. The quantity of money is NOT among the price determinants. This puts the commonplace Quantity Theory to rest.

The real value of money is ultimately given by the productivity. From (1) follows W/P=R, i.e. real wage = productivity. The value of money has NOTHING AT ALL to do with the taxing power of the state. In the production-consumption economy with budget balancing and market clearing, the wage income receivers always get the whole output O=RL.

Monetary profit for the economy as a whole is defined as Qm≡C−Yw and monetary saving as Sm≡Yw−C. It always holds Qm+Sm=0 or Qm=−Sm, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing total monetary profit is zero.

What is needed for a start is two things (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii), a legal system which declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Yw per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e. if C=Yw.

Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. This time sequence is no problem for the central bank because the temporary overdrafts vanish with wage payments.

For the case of a balanced budget C=Yw, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown in Figure 2.#2


The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. The business sector’s transaction pattern is the exact mirror image. Money, that is, deposits at the central bank, is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an ACCOMMODATIVE role and simply supports the AUTONOMOUS market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=kYw, with k determined by the transaction pattern. In other words, the average stock of money M is determined by the AUTONOMOUS transactions of the household and business sector and created out of nothing by the central bank. The economy NEVER runs out of money if the central bank makes a good job.

The transaction equation reads M=kYw=kPX=kPRL in the case of budget balancing and market clearing and this yields the commonplace correlation between the average stock of money M and price P for a given employment level L, except for the fact that M is the DEPENDENT variable.

Money comes into existence on the balance sheet of the central bank as soon as the central bank enters an overdraft for the business sector on the asset side and a deposit of equal amount on the liability side (step 1). This deposit is then transferred to the household sector as wage payment (step 2) and returns in the form of consumption expenditures (step 3).#3

Now the commercial banks are introduced. They can create and destroy ‘money’ technically exactly in the same way as the central bank except for the fact that it is bank money and not central bank money. The crucial condition for the functioning of the two-monies system is that the business sector and household sector accepts bank money as practically identical to central bank money.

To be sure, in the strict sense bank deposits is NOT money, only central bank deposits is money. This becomes clear as soon as the households/firms try to exchange huge amounts of bank money for central bank money. This is known as a bank run. In this case, the central bank has to step in and help the banks out with the one and only genuine money. The best way to prevent bank runs from ever happening is the unconditional guarantee of the central bank to exchange bank money anytime and in any amount into central bank money.

So, the private sector = banks can create near-money that works under the appropriate institutional conditions just as central bank money. The real value of near-money is the same as central bank money. Acceptance and the real value of money and near-money do NOT depend on the state’s taxing power.

Problems arise if money is not in the right way brought into circulation. Roughly speaking, as long as the central bank or the private banks or whoever else finances the wage bill Yw, and the wage rate W moves exactly with the productivity, the price P remains according to (1) absolutely constant. The real value of money/near money rises and falls ultimately with the productivity.

However, if the money is brought into circulation at the demand side such that the household sector takes up credit and spends it on consumption goods things are radically different. The market clearing price rises and this reduces the real value of wage income. The output is now redistributed between income spenders and credit spenders, i.e. P1=(C+Ccr)/O > P=C/O with C=Yw and O=X.#4

Secondly, the business sector now makes a profit, i.e. Qm=Ccr. It holds: the household sector’s deficit (dissaving) is equal to the business sector’s surplus (profit). If the money is brought into circulation by the government’s deficit spending it holds Public Deficit = Private Profit. Hence, MMTers as champions of state money creation and deficit spending are ultimately ― knowingly or unknowingly does not matter ― agenda pushers for the one-percenters.#5

With regard to Bitcoin follows that it is not even remote-money, like a traveler’s check for example, because the issuer does not guarantee to exchange it back at any time one-to-one into bank money or central bank money. The value of Bitcoin depends alone on the expectation that another private person will eventually exchange it for money or near-money or a financial or real asset.#6

Egmont Kakarot-Handtke


#1 Wikimedia, Pure production-consumption economy
#2 Wikimedia, Idealized transaction pattern, household sector, balanced budget
#3 Basics of monetary theory: the two monies
#4 MMT, money printing, stealth taxation, and redistribution
#5 MMT is ALWAYS a bad deal for the 99-percenters
#6 Primary and Secondary Markets

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REPLY to Matt Franko, Tom Hickey Dec 30

In the political realm, there is rhetoric, storytelling, and obfuscation. In the scientific realm, there is axiomatization, consistency/proof, and clarity.

In the political realm, Humpty Dumpty rules: “’When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all’.”#1

In the scientific realm, Aristotle rules: “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.”

Economists never got above the level of proto-scientific storytelling and political agenda pushing.#2

Money is clearly defined and measurable with the accuracy of two decimal places. Money (liability side of the central bank’s balance sheet) is different from bank-money, near-money, remote-money, pseudo-money, quasi-money, fake-money, crypto-money, clay-tablets, bullion, IOU, etcetera.

Needless to emphasize that the representative economist in general, and the MMTer in particular, has until this very day NO clear idea of the basic concepts of his subject matter, e.g. profit, income, money and so on. But he has a lot to blather about democracy, the mob, and liberalism.


#1 Humpty Dumpty is back again
#2 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist

December 27, 2017

Silly criticism of economics: 11 signs that you are the imbecile

Comment on Chris Auld on ‘18 signs you’re reading bad criticism of economics’*

Blog-Reference

Mainstream economics/Orthodoxy faces a barrage of criticism. Most of the arguments, though, are rather silly and easy to refute by Orthodoxy. Accordingly, this type of criticism is quite welcome because in contrast to the imbecility of the criticism the absurdity of the maximization-and-equilibrium world appears in a better light. In a sense, Orthodoxy is still alive only because of silly criticism: “The enemies, on the other hand, have proved curiously ineffective and they have very often aimed their arrows at the wrong targets.” (Hahn)

The ineffective/false/silly/time-wasting arguments against Orthodoxy are:#1
1. cannot predict the future,#2
2. too much mathematics,#3
3. the assumptions/models are unrealistic,#4
4. not pluralistic,#5
5. not empirical enough,
6. justifies/encourages greed and exploitation,#6
7. should care more for the environment, We-the-People, our grandchildren,
8. should communicate better, especially with laypersons,
9. should take sides with the ninety-nine-percenters, and not with the one-percenters,#7
10. the proponents have unethical/selfish motives,
11. the proponents lack credibility.

Criticism ultimately cements only the status-quo: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug) Science is not about signs or second-guessing or interpretation or credibility or authority but alone about knowledge and material/formal proof. The only effective criticism is the paradigm shift.

The mission of economics is to figure out how the economic system works. Economics is a system science and neither a so-called social science nor political agenda pushing.

Egmont Kakarot-Handtke


#1 See also Failed economics: The losers’ long list of lame excuses
#2 Scientists do NOT predict the future
#3 Mathiness is NOT the problem — scientific incompetence is
#4 Lacking the Midas touch of science
#5 Economics: The pluralism of false theories is over
#6 The economist as moralist
#7 The end of political economics

*
18 signs you’re reading bad criticism of economics
18 signs you are not having a productive conversation about economics
18 Signs Economists Haven’t the Foggiest

Related 'Again and again: economists are incompetent scientists' and 'False models and true incompetence'.

Again and again: economists are incompetent scientists

Comment on Dani Rodrik on ‘The Economics Debate, again and again’

Blog-Reference and Blog-Reference

Economics is a failed science. What we actually have is the pluralism of false theories/ models. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.#1

The current state of economics is indefensible#2 but economists even praise it as something positive. Pluralism, to recall, is NOT the scientific ideal but merely the original state of ignorance and confusion: “There are always many different opinions and conventions concerning any one problem or subject-matter (such as the gods). This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides ... was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other ...” (Popper)

Science is committed to truth. The rest of human communication is blather, storytelling, propaganda, and disinformation. Economics never rose above the level of an unplausible myth.

So, no surprise, Dani Rodrik’s first two commands for economists are nothing but methodological nonsense: “1. Economics is a collection of models; cherish their diversity. 2. It’s a model, not the model.”

Since 200+ years, economists do not really understand what science is all about: “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) Because of this incurable lack of understanding, economics is what Feynman called a cargo cult science: “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.”

Economists lack the true theory. And this is rather bad because: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum) A heap of inconsistent models is no substitute for the true theory.

The lethal arguments against Orthodoxy and traditional Heterodoxy are:
• since Adam Smith/Karl Marx economics is political agenda pushing in the bluff package of science,
• the subject matter of economics is the economic system as a whole, economics is a system science and NOT a behavioral science,
• orthodox microfoundations, as well as Keynesian macrofoundations, are provably false,
• economics has no sound axiomatic foundations, because of this, the whole analytical superstructure is false, and because of this, economic policy guidance NEVER had sound scientific foundations.*

Economics is a cargo cult science and economists are fake scientists. Criticism of economics is a waste of time, nothing less than a paradigm shift will do.

Egmont Kakarot-Handtke


#1 Profit and the collective failure of economists
#2 Economics: Defending the indefensible
#3 For details of the big picture see cross-references Failed/Fake scientists

*

Related 'Cranks? What cranks? That’s economics!' and 'How the mainstream vanished in the gutter' and 'Dani Rodrik, fake scientist' and 'Silly criticism of economics: 11 signs that you are the imbecile' and 'New Economic Thinking: the 10 crucial points'. For details of the big picture see cross-references Paradigm shift.

False models and true incompetence

Comment on Chris Auld on ‘Derek Zoolander, spherical cows, the Guardian, and econophysics’

Blog-Reference and Blog-Reference

Economics is a failed science. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.

Quite naturally, there are a lot of explanations/lame excuses swirling around.#1 One of them relates to the use of models: “Pop critics such as John Rapley should at least understand why economists use models with obviously false assumptions, they should understand why such models can be useful even they are wrong, and they should be aware that all sciences, not just economics, routinely use models with false assumptions.” (Chris Auld)

This is true but the argument is nonetheless idiotic.

A chimpanzee can solve problems. For example, he can put chairs and boxes on top of another and use a stick in order to get the bananas which the experimenter has fixed on the ceiling. Other chimpanzees then imitate the problem-solving strategy. This works fine until the problem situation changes such that the hitherto successful strategy fails and a new solution is required.

Let us call the creative problem solver scientist. Economists, unfortunately, are only imitators/epigones/look-alikes: “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)

It is pretty obvious that economists fall into the category of cargo cult scientists, they lack genuine problem-solving capacity. The problem is NOT that they apply models and abstractions and simplifications and ‘unrealistic’ assumptions and mathematics, the problem is that they do not apply these scientific tools properly. They are incompetent imitators and do not really understand what science is all about.#2

One example suffices. Walrasian Orthodoxy is defined by these verbalized 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)

The Walrasian hardcore contains THREE NONENTITIES ― (HC2), (HC4), (HC5). To take equilibrium into the premises and then to establish the properties of general equilibrium is a methodological blunder that is known since antiquity as petitio principii.*

The basic question of economics is whether “the existing economic system is, in any significant sense, self-adjusting.” (Keynes) One simply cannot put the unknown answer into the premises. This is a primitive methodological blunder. Because of this, ALL equilibrium models are a priori false.

All this is known since more than 2000 years: “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.” (Aristotle)

But instead, this happened in economics: orthodox microfoundations, as well as Keynesian macrofoundations, are provably false. Economics has no sound axiomatic foundations, because of this, the whole analytical superstructure is false, and because of this, economic policy guidance NEVER had sound scientific foundations.

Economists are simply scientifically incompetent.#3 Their striking mental deficiency is the Fallacy of Insufficient Abstraction.#4

Egmont Kakarot-Handtke


#1 Failed economics: The losers’ long list of lame excuses
#2 All models are false because all economists are stupid
#3 Throw them out! Orthodox and heterodox economists are unfit for science
#4 “The highest ambition an economist can entertain who believes in the scientific character of economics would be fulfilled as soon as he succeeded in constructing a simple model displaying all the essential features of the economic process by means of a reasonably small number of equations connecting a reasonably small number of variables. (Schumpeter, 1946)

*

Related 'Economics and the Fallacy of Insufficient Abstraction' and 'Petitio principii — economists’ biggest methodological mistake' and 'Replacing the neoclassical axioms' and 'Economists’ slapstick methodology' and 'Cranks? What cranks? That’s economics!' and 'Toolism! A Critique of EconoPhysics' and 'Dilettantes at the end of the coal-pit' and 'Macro for dummies'. For details of the big picture see Incompetence.

December 23, 2017

Mr. Corbyn and the perils of political economics

Comment on Simon Wren-Lewis on ‘Voting Labour isn’t going to turn the UK into Venezuela’

Blog-Reference

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

After 200+ years, economists still do not have the true theory. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.#1

It holds: “If economics cannot aspire to any substantive knowledge of economic relationships, it cannot speak with authority about questions of economic policy.” (Blaug) Without sound scientific foundations, economics reduces to something between educated common sense and brain-dead political blather.

The situation is as follows: “The understandable wish of many heterodox economists to have an influence on Labour policy does mean there is a potential competition for influence. Will Labour policy be based on policies derived from mainstream analysis, or those favoured by some heterodox economists?” (Wren-Lewis)

Because both Orthodoxy and Heterodoxy is proto-scientific garbage there is no real choice. Economics across the full spectrum from DSGE to MMT is provably false.

There is no need to speculate about why it is important for “… economists not to arrive late to these battlefields, …” Since Adam Smith/Karl Marx economics is political agenda pushing in the bluff package of science.

Granted that economists are subjectively convinced that they help to bring about the Good Society, but due to their scientific incompetence their economic policy guidance, more often than not, makes matters worse.#2

Granted that MMTers are subjectively convinced that they help the ninety-nine percenters, but due to their scientific incompetence they are objectively promoting the cause of the one-percenters.#3

The non-separation of politics and science is the original sin of economics and the ultimate cause of its failure. What the general public needs to realize is that economics is a cargo cult science and that political economists are fake scientists.

From Labour’s Economic Advisory Council, Mr. Corbyn gets advice that is backed either by DSGE ≈ Walrasian economics or by MMT ≈ Keynesian economics. Both approaches are axiomatically false and therefore scientifically worthless.

Egmont Kakarot-Handtke


#1 Throw them out! Orthodox and heterodox economists are unfit for science
#2 How economists murdered the economy and got away with it
#3 Keynes, Lerner, MMT, Trump and exploding profit

Related 'The end of political economics' and 'Economists cannot do the simple math of profit — better keep them out of politics' and 'There is NO such thing as an economic expert' and 'Economics, methodology, morals ― a creepy freak-show' and 'This is New Economic Thinking? Give me a break!'. For details of the big picture see cross-references Political economics and cross-references Incompetence.

December 22, 2017

Keynes, Lerner, MMT, Trump and exploding profit

Comment on Lars Syll’s ‘If only Trump had read Abba Lerner!’

Blog-Reference and Blog-Reference Dec 23

Lars Syll quotes Abba Lerner approvingly: “The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce. If total spending is allowed to go above this there will be inflation, and if it is allowed to go below this there will be unemployment. The government can increase total spending by spending more itself or by reducing taxes so that taxpayers have more money left to spend. It can reduce total spending by spending less itself or by raising taxes so that taxpayers have less money left to spend …”

There are several errors/mistakes/blunders in this argument but the key point is that there is no such thing as the suggested symmetry of budget deficits and surpluses such that both cancel out over a reasonable time span. If this were the case nobody would worry about public deficits. But this, obviously, does not happen, public deficits increase incessantly and this, not deficits per se, makes people think that there must be something fundamentally wrong with the economy and with economics. And they are right.

Roughly speaking, the growing public debt has not eliminated unemployment and not increased inflation but has caused the explosion of profits and the huge changes in the distribution of income and financial wealth. No surprise, then, that Mr. Trump is an enthusiastic proponent of money printing and deficit spending.#1 More surprising is perhaps that the one-percenter Trump and the champions of the ninety-nine-percenters Keynes/Lerner/MMT are on the same page. The explanation of this weird coincidence is that Mr. Trump’s instinctive grasp of profit is better than that of economists.#2

In order to fully appreciate the proto-scientific state of both orthodox and heterodox economics, one needs the axiomatically correct theory. Because economics is a failed science it has to be reconstructed from scratch.

As the new analytical starting point, the pure 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 market clearing X=O and budget balancing C=Yw in each period 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. For the graphical representation see Wikimedia.#3

The price is determined by the wage rate, which takes the role of the nominal numéraire, and the productivity.

Monetary profit for the economy as a whole is defined as Qm≡C−Yw and monetary saving as Sm≡Yw−C. It always holds Qm+Sm=0, or Qm=−Sm, in other words, the business sector’s profit (loss) equals the household sector’s dissaving (saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing, total monetary profit is zero.

In order that profit comes into the world, the household sector must run a deficit. This means, first of all, that profit for the economy as a whole has NOTHING to do with productivity, exploitation, risk-taking, innovation, monopoly power, etcetera. The familiar profit theories are nothing but an embarrassing Fallacy of Composition.

The axiomatically correct Profit Law is given for the general case as Qm=Yd+(I−Sm)+(G−T)+(X−M). Legend: Qm total monetary profit, Yd distributed profit, I investment expenditures, Sm monetary saving, G government expenditures, T taxes, X exports, M imports. Neither Walrasians, nor Keynesians, nor Marxians, nor Austrians got profit right until this very day. This is why economics is a failed science.

From the general macroeconomic Profit Law follows Qm=G−T if Yd, I, Sm, X, M = 0, that is, Public Deficit = Private Profit.

From false economic theory follows false economic policy. What Keynes,#4 Lerner, MMT,#5 and the other proponents of public (and private) deficit spending have in effect achieved ― whether intentionally or unintentionally does not matter ― is the profit explosion of the last decennia. It is absurd that scientifically incompetent economists see themselves, or at least present themselves, as friends of the people.#6 Nothing could be farther away from fact or truth.

Egmont Kakarot-Handtke


#1 Source
Source: Twitter
#2 Austerity and the idiocy of political economists
#3 Wikimedia, Pure production-consumption economy
#4 Keynesianism as ultimate profit machine
#5 MMT: The one deadly error/fraud of Warren Mosler
#6 MMT is ALWAYS a bad deal for the 99-percenters

Related 'The true nature of economists' confusion' and 'Debt and other unsolved economic problems'.

***
REPLY to Matt Franko, Tom Hickey, Kaivey, Greg, Calgacus on Dec 25

Public Deficit = Private Profit. This is what the axiomatically correct Profit Law tells us. It is known that neither Keynes, nor Lerner, nor Mosler and the rest of MMTers ever understood how the profit- and price mechanism works. So, this bunch of retards who call themselves economists and propagate deficit-spending as the cure-all in effect pushes the agenda of the one-percenters and is responsible for the observable skewed distribution of income and wealth.

It is a nice try to obscure this fact with your silly blather about soap-making and Darwinism and Hitler and Mussolini and Venezuela and Zeitgeist and garbage collection and philosophy and spirituality and so on towards the infinite horizon of endless stupidity.

If you really want to do something to promote the Good Society or Science take the remote control and never stop again looking sitcoms.

***
REPLY to Kaivey on Dec 25

You say: “Are you able to write in a few paragraphs, either on your site or here, how your system will redistribute wealth to the poor and solve the problem of the One Percent …” and “I’ve looked at your site and I think you need to write a lay man’s explanation and if it takes more than a few paragraphs, that’s fine.”

Either you cannot read or have not looked at my site. See How the 99 percent can bring overall profit of the 1 percent legally down to zero in 2017

Your post convinces me that it would indeed be best for folks like you to take the remote control and never stop again looking sitcoms.

***
REPLY to Kaivey on Dec 26

You ask rhetorically: “Do we really want the most cold scientific economic system for mankind, which would produce the most inhumane working system ever?”

No, for heaven's sake, “we” want Stephanie Kelton’s Job Guarantee Program which is composed of Care for the Environment, Care for the Community, Care for the People.#1

Is Stephanie Kelton a politician who wants our votes? No, she is an economist. That’s excellent because I don’t trust politicians. She certainly has a plan how to finance the program? Yes, she is an MMT economist and says that the program is paid for by a government deficit financed by central bank money creation.

What kind of economics is this? Has she never heard of the Profit Law, i.e. Public Deficit = Private Profit, or stealth taxation?#2

No, she shows a graphic that proves that a government sector deficit increases the net-financial wealth of the non-government sector and assures that we are all better off.#3

Genial.

Yes, except for the fact that the sectoral balances have been tampered with.#4 Government deficits increase the net-financial wealth of the business sector and not of We-the-people.#5

This cannot be, Stephanie Kelton cares for the people and not for the one-percenters.

Of course, she does, she is only an abysmally incompetent economist.

Perhaps, but she cares for the environment, the community, and the people, and you care only for science.

This is what an economist is supposed to do: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)

MMTers are not scientists but political agenda pushers.#6


#1 Source

Source: Twitter

#2 MMT, money printing, stealth taxation, and redistribution
#3 MMT: The one deadly error/fraud of Warren Mosler
#4 MMT and the magical profit disappearance
#5 The profit effect of a Job Guarantee
#6 MMT and the promotion of Wall Street socialism

December 21, 2017

Economics: Defending the indefensible

Comment on Lars Syll on Paul Johnson/Prospect on ‘Dismal ignorance of the “dismal science” ― a response to Larry Elliot’

Blog-Reference

Mainstream economics/Orthodoxy is assaulted by Heterodoxy for a variety of reasons. Most of the arguments are rather silly and easy to refute by Orthodoxy. This fact has already been noticed by Hahn in the 1980s: “The enemies, on the other hand, have proved curiously ineffective and they have very often aimed their arrows at the wrong targets.” As a consequence, the discussion about ‘Economics is broken’ does not rise above the level of absurd blather and the outcome is in any case inconclusive. It is impossible to say whether orthodox or heterodox economists are more incompetent. So, all remains stuck in the swamp where “nothing is clear and everything is possible” (Keynes).#1

Since 200+ years, economists do not really understand what science is all about: “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) Because of this incurable lack of understanding, economics is what Feynman called a cargo cult science: “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.”

Economists lack the true theory, with scientific truth well-defined since the ancient Greeks as material/formal consistency.

The “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is, therefore, a plain fraud. And both Orthodoxy and Heterodoxy are guilty of the continuing violation of scientific standards.#2 Economics needs a paradigm shift because 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.#3

The brain-dead arguments against Orthodoxy are:
• cannot predict the future,#4
• too much mathematics,#5
• the assumptions/models are unrealistic,#6
• not pluralistic.#7

The lethal arguments against Orthodoxy ― and traditional Heterodoxy ― are:
• since Adam Smith/Karl Marx economics is political agenda pushing in the bluff package of science,#8
• the subject matter of economics is the economic system as a whole, economics is a system science and NOT a behavioral science,#9
• orthodox microfoundations, as well as Keynesian macrofoundations, are provably false,#10
• economics has no sound axiomatic foundations, because of this, the whole analytical superstructure is false, and because of this, economic policy guidance NEVER had sound scientific foundations,
• economists are scientifically incompetent and the proof is in the ineffective heterodox attacks on Orthodoxy and the ludicrous orthodox self-defense.

The current pluralism of false theories is indefensible. Reformation does not help, nothing less than a paradigm shift will do.

Egmont Kakarot-Handtke

#1 The stupidity of Heterodoxy is the life insurance of Orthodoxy
#2 Throw them out! Orthodox and heterodox economists are unfit for science
#3 Why does Heterodoxy not abolish the fake Nobel?
#4 Scientists do NOT predict the future
#5 Mathiness is NOT the problem — scientific incompetence is
#6 Lacking the Midas touch of science
#7 Economics: The pluralism of false theories is over
#8 The end of political economics
#9 Economics is NOT a social science
#10 From false microfoundations to true macrofoundations

December 19, 2017

Keynes’ intellectual nonexistence

Comment on Lars Syll on ‘Keynes’ intellectual revolution’

Blog-Reference and Blog-Reference Dec 21 adapted to context and Blog-Reference Dec 22 and Blog-Reference Dec 23

Keynesianism is a failed approach, more precisely, Keynesianism is axiomatically false and materially/formally inconsistent. This is a proven fact.#1 Because the underlying theory is false in all dimensions, Keynesian policy guidance NEVER had sound scientific foundations.

So, the question is why are there still Keynesians around 80 years after the General Theory and why have neither pro- nor anti-Keynesians spotted Keynes’ lethal error/mistake/ blunder until this very day?

Here is where Keynesianism went straight into the deep woods: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)

This two-liner is conceptually and logically defective because Keynes NEVER came to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Because profit is ill-defined the WHOLE analytical superstructure of Keynesianism is false.#2

While Keynes was right in rejecting the microfoundations approach, he simultaneously messed up the macrofoundations approach.#3* Because both Walrasianism and Keynesianism are materially/formally inconsistent any synthesis of the two is merely a bad joke.#4

So, Keynes messed up profit theory#5 and employment theory#6 but both pro- and anti-Keynesians never realized anything. After-Keynesians and Flat-earthers are intellectually at the same level.#7

Egmont Kakarot-Handtke


#1 How Keynes got macro wrong and Allais got it right
#2 For details see cross-references Keynesianism
#3 From false micro to true macro: the new economic paradigm
#4 The father of modern economics and his imbecile kids
#5 Profit theory in less than 5 minutes
#6 Demand-led and wage-led growth
#7 Throw them out! Orthodox and heterodox economists are unfit for science

*

***
COMMENT Dec 23

Economists claim to do science and communicate this every year to the general public with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. Whether the claim to be a science is self-delusion or fraud does not matter much. Fact is:
• the profit theory is false for 200+ years,
• Walrasian microfoundations (including equilibrium) are inconsistent since 140+ years,
• Keynesian macrofoundations (including I=S, IS-LM) are inconsistent since 80+ years.

Economics is a failed science or what Feynman called a cargo cult science. Fact No 1: There are opinion and brain-dead blather, this is called politics. There are knowledge and proof, this is called science. Economics is 99 percent politics. Fact No 2: Theoretical economics (= science) had been hijacked from the very beginning by political economists = agenda pushers like Smith and Marx. Fact No 3: Political economics has produced NOTHING of scientific value in 200+ years. Fact No 4: Walrasianism, Keynesianism/MMT, Marxianism, Austrianism is mutually contradictory, axiomatically false, and materially/formally inconsistent. Fact No 5: Both orthodox and heterodox economists are quite content with the pluralism of false theories, they do not have any real scientific ambitions.#1 Fact No 6: Economics never rose above the proto-scientific level. Fact No 7: Debates between orthodox and heterodox economists have zero scientific content and are if anything, pure propaganda/disinformation exercises.

Either economics gets now rid of its scientifically incompetent Walrasians, Keynesians/MMTers, Marxians, Austrians or science gets officially rid of economics.#2


#1 How Heterodoxy became the venue for science’s scum
#2 Throw them out! Orthodox and heterodox economists are unfit for science

December 17, 2017

Demand-led and wage-led growth

Comment on Peter Cooper on ‘A Notion of Demand-Led Growth’

Blog-Reference

Peter Cooper argues within the Keynesian framework: “The Keynesian or Kaleckian view is that normally the economy is operating inside the ultimate supply limit to a degree that is determined by demand. The economy is therefore regarded as demand constrained under normal circumstances.”

Peter Cooper has not realized that Keynesian and Kaleckian macro is already dead since 80 years.

Keynes defined the formal foundations of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment.” (p. 63) This elementary two-liner is conceptually and logically defective because Keynes never came to grips with profit. (Tómasson et al.) Kalecki’s profit theory is not any better.#1 Because neither pro- nor anti-Keynesians realized the lethal methodological blunder, After-Keynesian employment theory is false until this very day.#2

To cut the meticulous formal derivation short, an elementary version of the axiomatically correct systemic Employment Law is shown on Wikimedia.


From this equation follows:
(i) An increase of the expenditure ratio ρE leads to higher employment L (the Greek letter ρ stands for ratio). An expenditure ratio ρE>1 indicates credit expansion, a ratio ρE<1 indicates credit contraction of the household sector.
(ii) Increasing investment expenditures I exert a positive influence on employment, a slowdown in growth does the opposite.
(iii) An increase in the factor cost ratio ρF=W/PR leads to higher employment.

The complete employment equation is a bit longer and contains in addition profit distribution, public deficit spending, and import/export. The employment equation is composed of measurable real and nominal variables and is therefore testable.

Item (i) and (ii) is familiar since Keynes. But Keynesian macro is incomplete. The correct employment multiplier is composed of the expenditure ratio and the factor cost ratio. The ratio ρF as defined in (iii) embodies the price mechanism. It works such that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.

So, there are two policy levers and what has to be done is to combine demand-led and wage-led expansion in order to get out of unemployment. The post-Keynesian preoccupation with demand is ultimately ineffective because each increase in the expenditure ratio can be counteracted by a decrease in the factor cost ratio. Therefore, economic policy must control both ratios.

The bottom line is that Peter Cooper’s post is a senseless repetition of arguments that were already false 80 years ago.#3

Egmont Kakarot-Handtke

#1 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 For details see cross-references Employment


Related 'Robots, exploitation, and the reproducible economy' and 'Settling the Phillips Curve for good' and 'Full employment through the price mechanism'.

December 16, 2017

Robots, exploitation, and the reproducible economy

Comment on David Ruccio on ‘Don’t worry?!’

Blog-Reference

David Ruccio maintains “Sure, new forms of automation might lead to higher productivity and much else that Tyson and Lund find so alluring. But who’s going to benefit? If we go by the last few decades, large corporations and wealthy individuals are the ones who are going to capture most of the gains from the new technologies.” and “When it comes to separating fact from fiction, aside from the embarrassing epistemological positions liberals rely on, where are the statistics that might help us make sense of what is going on out there ― numbers like the Reserve Army of Unemployed, Underemployed, and Low-wage Workers or the rate of exploitation.”

This blather proves that heterodox economists, too, have no idea how the economy works.#1

In order to fully appreciate the proto-scientific state of both orthodox and heterodox economics one needs the axiomatically correct theory. Because economics is a failed science it has to be reconstructed from scratch.

As the new analytical starting point, the pure 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 market clearing X=O and budget balancing C=Yw in each period the price is given by P=W/R (1), 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. For the graphical representation see Figure 1.#2

The price is determined by the wage rate, which takes the role of the nominal numéraire, and the productivity.

From (1) follows W/P=R, i.e. the real wage is equal to the productivity. So, for a start, labor gets the whole product.

Monetary profit for the economy as a whole is defined as Qm≡C−Yw and monetary saving as Sm≡Yw−C. It always holds Qm+Sm=0, or Qm=−Sm, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing total monetary profit is zero.

In order that profit comes into the world, consumption expenditures C must be greater than wage income Yw, that is, the household sector must run a deficit. This means, first of all, that profit for the economy as a whole has NOTHING to do with productivity. From the fact, that an individual firm can increase profit by increasing productivity does NOT follow that this is true for the economy as a whole. What we have here is the built-in blunder of microfounded economics, i.e. the Fallacy of Composition.

The axiomatically correct Profit Law is given for the GENERAL case as Qm=Yd+(I−Sm)+(G−T)+(X−M). Legend: Qm total monetary profit, Yd distributed profit, I investment expenditures, Sm monetary saving, G government expenditures, T taxes, X exports, M imports. Neither Walrasians, nor Keynesians, nor Marxians, nor Austrians got profit right until this very day.#3 This is why economics is a failed science and why economists have always been such a threat to their fellow citizens.

Now, we let robots in the pure production-consumption economy. The immediate effect of improved organization/machinery/robots is an increase in productivity.

From (1) follows that if the productivity increases over time the market clearing price falls. So, in order to avoid deflation, the wage rate has to rise with the same rate as productivity. Output O increases according to axiom (A2) O=RL. The real situation of the household sector, measured in output, improves continuously with increasing productivity R and employment L. Let L here denote full employment. The workers get the whole product O and profit Qm is zero because the budget is balanced C=Yw. The bottom line for the elementary production-consumption economy is that robots need not pose any problems with regard to underemployment or exploitation.

The problems come from another direction. Increasing output O (i) requires more raw materials/energy, and (ii), may run against the point of satiation/bliss point. So, there are limits to growth.

At the bliss point O* the economy switches from ascent to gliding, that is, the implicit causality of O=RL has to be changed to L=O*/R, that is, total labor time L is reduced with increasing productivity. In other words, the productivity increase translates at the bliss point O* into an increase of leisure.

The challenge is, how to reduce total labor input L without creating unemployment for a part of the labor force. The sustainable economy behind the bliss point works as follows: with productivity R up, L goes down and L per worker goes down proportionally, the wage rate goes up with the rate of productivity increase, the price remains constant, the real wage is always equal to the increasing productivity, the budget is balanced C=Yw, the market is cleared X=O, leisure increases across the board, L goes asymptotically to zero.

In the end, it holds “… in the long run leisure is an economic summum bonum.” (Georgescu-Roegen) The growth of material consumption is only an interim phase.

Egmont Kakarot-Handtke

#1 Heterodoxy and Pluralism, too, is proto-scientific junk
#2 Wikimedia, Pure production-consumption economy
#3 Profit for Marxists

December 15, 2017

Austrian idiocy ― the case of Hayek

Comment on David Glasner on ‘Hayek’s Rapid Rise to Stardom’*

Blog-Reference and Blog-Reference on Dec 25

At some point in history, economics left science for good and became part of the entertainment industry. Perhaps this was in 1931 when Hayek became the star of the London School of Economics.

The economic problem then was the Great Depression. Economists were expected to come forward with diagnosis and therapy. This expectation, indeed, was delusional because economists had no idea how the monetary economy works. Hayek was one them.#1

In order to fully appreciate the proto-scientific state of Austrianism one needs the axiomatically correct theory. Because economics is a failed science it has to be reconstructed from scratch.

As the new analytical starting point, the pure 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 market clearing X=O and budget balancing C=Yw in each period the price is given by P=W/R (1), 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. For the graphical representation see Figure 1.#2


The price is determined by the wage rate, which takes the role of the nominal numéraire, and the productivity. The quantity of money is NOT among the price determinants. This puts the commonplace Quantity Theory forever to rest. The Quantity Theory, to recall, was one leg Hayek stood on.

From (1) follows that if the productivity increases over time the market clearing price falls. So, in order to avoid deflation, the wage rate has to rise with the same rate as productivity. The problem is that, when deflation and depression come together, the wage rate tends to fall, thus worsening the situation.

The critical insight at this point is that the market economy does NOT stabilize itself neither does it return to some acceptable equilibrium ― just the contrary. The price mechanism DESTABILIZES the economy. Needless to emphasize that Hayek and the other supply-demand-equilibrium storytellers never arrived at this insight. Hayek’s narrative of the market system as a superior information processor stands forever as a monument of utter scientific incompetence.

Monetary profit for the economy as a whole is defined as Qm≡C−Yw and monetary saving as Sm≡Yw−C. It always holds Qm+Sm=0, or Qm=−Sm, in other words, the business sector’s surplus = profit (deficit = loss) equals the household sector’s deficit = dissaving (surplus = saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing total monetary profit is zero.

The Profit Law makes it immediately clear that saving is NEVER equal to investment.#3 There is NO such thing, as Hayek argued, as an “equilibrium relationship between savings and investment, investments being financed entirely by voluntary savings, …”.

What is needed in a monetary economy is two things (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii), a legal system which declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Yw per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e. if C=Yw.

Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. This time sequence is no problem for the central bank because the temporary overdrafts vanish with wage payments.

For the case of a balanced budget C=Yw, the idealized transaction sequence of deposits/overdrafts of the household sector at the central bank over the course of one period is shown in Figure 2.#4


The household sector’s deposits/overdrafts are zero at the beginning and end of the period. The business sector’s transaction pattern is the exact mirror image. Money, that is, deposits at the central bank, is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an accommodative role and simply supports the AUTONOMOUS market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κYw, with κ determined by the transaction pattern. In other words, the average stock of money M is determined by the autonomous transactions of the household and business sector and created out of nothing by the central bank. There is NO such thing as a monetary policy.

The transaction equation reads M=κYw=κPX=κPRL in the case of budget balancing and market clearing and this yields the commonplace correlation between the average stock of money M and price P for a given employment level L, except for the fact that M is the DEPENDENT variable. If employment is doubled the average stock of transaction money M doubles. If the average wage rate rises with productivity the price remains constant, no matter how much the economy and the average stock of transaction money expands. Money is absolutely neutral in the elementary case of the production-consumption economy.

So much for the basics of the production-consumption economy and the basics of economics. With the investment economy things get a bit more complex.#5 The takeaway though remains the same: in order to get out of deflation and depression, the wage rate must rise faster than productivity. This does NOT happen spontaneously. The market system is NOT self-adjusting. Hayek’s fundamental premise is provably false. Because of this, the whole analytical superstructure of Austrianism is false.

Hayekian policy prescriptions lack sound scientific foundations and have only one effect: they worsen the situation. Hayek will be remembered as one of the imbeciles about which Napoleon spoke: “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)

Egmont Kakarot-Handtke


#1 For details see cross-references Failed/Fake scientists
#2 Wikimedia, Pure production-consumption economy
#3 For details see cross-references Refutation of I=S
#4 Wikimedia, Idealized transaction pattern, household sector, balanced budget
#5 Full employment through the price mechanism

* See also Brad DeLong 'Must-Read: Samuel Bowles, Alan Kirman, and Rajiv Sethi: Reflections on Hayek'

Related 'Forget Hayek' and 'The myth of economics knowledge' and 'Equilibrium and the violation of a fundamental principle of science' and 'Hayek and other informationally retarded proto-economists' and 'The Law of Economists’ Increasing Stupidity' and 'Proof of the inherent instability of the market economy' and 'Iatrogenic economics' and 'Forget Krugman, forget Keynes, forget economists' and 'What Keynes really meant but could not really prove' and 'How to overcome the manifest silliness of Econ 101 and save the economy' and 'Could we, please, all focus on the key question of economics?'.