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No doubt, with regard to the theory of money Wicksell, Keynes, and MMT are superior to DSGE/RBC/New Keynesianism. However, Wicksell, Keynes, and MMT failed to integrate the theory of money into a consistent macroeconomic framework.
MMTers are right: mainstream economics is a failed approach and irrecoverably lost in the parallel universe of error, inconsistency, feeblemindedness, and aberration. But MMTers are wrong in believing that MMT is firmly on the right track.#1,#2
MMT is still caught in the PsySoc trap by maintaining that economics is about human behavior. The first point to realize is that economics is about the behavior of the economic system. Economics is NOT a social science but a system science. To derive the theory of money from the history of money is therefore doomed to failure.
The second point to realize is that all variants of Keynesianism suffer from methodological self-delusion. Paul Davidson maintains: “Post Keynesian models are designed specifically to deal with real-world problems.” And Bill Mitchell adds: “In this tradition, MMT ... is not an imaginary approach that deals with imaginary problems. It is about the real world and starts with some basic macroeconomic principles like ― spending equals income.”
Time to wake up to the fact that this ‘principle’ is provable false since Keynes applied it in the General Theory.#3 Because of this, the whole analytical superstructure of Keynesianism, Post Keynesianism, and MMT breaks apart. From this, in turn, follows that policy guidance with regard to monetary and fiscal policy has no sound scientific foundation.#4
Monetary theory has to be based on axiomatically true macrofoundations.#5, #6
#1 See ‘The final implosion of MMT’
#2 See ‘Rethinking MMT’
#3 See ‘Why Post Keynesianism Is Not Yet a Science’
#4 See ‘Rethinking deficit spending’
#5 See ‘Reconstructing the Quantity Theory’
#6 First Economic Law, derived from the correct macrofoundations
|First Economic Law|
Keynesianism, Post Keynesianism and MMT is provably false in the same sense as 2+2=5 is false. The fact of the matter is that the MMT folks do not even get the elementary mathematics of accounting right.
The economy is a complex system and a system is subject to systemic laws.#1 The obvious analogy is an aircraft which is subject to the laws of aerodynamics, thermodynamics, etcetera. Only the retarded folks from the economics department believe that utility maximization or animal spirits make an aircraft fly.
Keynesianism, Post Keynesianism and MMT is provably false and because of this Keynesians, Post Keynesians and MMTers are forever unacceptable in the scientific community.#2
The good thing in economics is that morons have always an alternative career path open as political soap box blatherers in the Circus Maximus.#3
#1 For details see ‘From PsySoc to SysHum’ and ‘Complexity and stupidity’
#2 See ‘Why Post Keynesianism Is Not Yet a Science’
#3 See ‘Political economics: a deadhead sitcom’
The theory of money has to be embedded in a consistent macroeconomic framework or in what Keynes called the ‘monetary theory of production’. MMT gives a historical account of how money came into existence as a creation of the state. This historical account is not false but methodologically it is NO substitute for the theory of money, just as the history of the burning of Rome, London, and San Francisco is no substitute for the theory of thermodynamics.
There is NO way around the macrofoundations of the theory of money. And this, indeed, is the route Keynes took.
The formal foundation of the General Theory is given with: “Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment.” (p. 63)
This two-liner is conceptually and logically defective because Keynes did not come 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 theoretical superstructure of Keynesianism is false. The foundational mistake/error/blunder carries over to Post Keynesianism and MMT. As Bill Mitchell says: “It [MMT] is about the real world and starts with some basic macroeconomic principles like ― spending equals income.”
It is pretty obvious that an economist who cannot tell the difference between the fundamental economic magnitudes profit and income is a laughing stock. This applies to Walrasians and Keynesians of all colors. It applies, of course, to the MMT folks in general and more specifically to Auburn Parks and Ralph Musgrave.
Neither Keynesians nor Post Keynesians nor MMTers will make it into the future of economics because of proven logical incompetence.
In the political sphere we have freedom of speech, so everybody can climb on a soap box and make an economic policy proposal: “A sure sign of a crisis is the prevalence of cranks. It is characteristic of a crisis in theory that cranks get a hearing from the public which orthodoxy is failing to satisfy. In the thirties we had Major Douglas, and social credit ― it can all be done with a fountain pen ― and Warren and Pearson who convinced President Roosevelt that raising the dollar price of gold would raise the price of everything else and bring the slump to an end. The cranks are to be preferred to the orthodox because they see that there is a problem. Nowadays we have plenty of cranks taking up the problems that the economists overlook.” (Joan Robinson)
Everybody can make a soap box economic policy proposal EXCEPT an economist 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)
The big, big, big problem is that economists do NOT have the true theory. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and ALL got profit wrong.
Because economists lack the true theory there is no significant difference between a crank and an economist.#1 The general public, of course, does not know that the profit theory is false since 200+ years, marginalism and supply-demand-equilibrium is false since 140+ years and Keynesianism is false since 80+ years. False means scientifically false, that is, materially and formally inconsistent.
From this follows that economic policy guidance with regard to monetary, fiscal and employment policy has NO sound scientific foundation.#2 In the political sphere, this is a matter of indifference, because here only political beliefs matter. But the fact that false theories are politically useful does not make them scientifically acceptable.
The MMT folks make policy proposals that are commonsensically acceptable but this does not change the fact that MMT is false because it is based on faulty macrofoundations. It is of utmost importance to keep politics and science apart and this implies that political agenda pushers have to be thrown out of science.#3
Political economics has produced NOTHING of scientific value in the last 200+ years. This includes MMT. The way forward is: “Scrap the lot and start again.” (Joan Robinson)
#1 See ‘There is NO such thing as an economic expert’
#2 See ‘Unemployment is high because economics is false: period, full stop, end of story’
#3 See ‘Scientific suicide in the revolving door’
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