Blog-Reference and Blog-Reference on Jan 6 adapted to context and Blog-Reference and Blog-Reference on Jan 9 and Blog-Reference
Every economist can know from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words: the confused confusers of economics have NO idea what the pivot of their subject matter is.
It is pretty obvious that without the true profit theory there is no true distribution theory.#1 So everybody can know for sure, without bothering much about the insane behavioral assumptions of utility and profit maximization, that the marginal theory of income distribution must be dead wrong.
The trouble with distribution theory started with Ricardo who got the distinction between wage, profit, and rent wrong.#2 Then Marx got the class theory of profit wrong.#3 Neoclassical marginal distribution theory, of course, is unsurpassable idiocy, but Keynesianism did not perform much better, and Heterodoxy has actually multiple profit theories that do not fit together.#4
Distribution theory has always been the deepest point in the swamp of economics. Do not expect that orthodox or heterodox economists who spent their clueless lives there will find a way out any time soon. The profit theory is false since Adam Smith#5 and Quiggin still filibusters about market failure. These folks simply don’t get it.
#1 See ‘Essentials of Constructive Heterodoxy: Profit’
#2 See ‘When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism’
#3 See ‘Proﬁt for Marxists’
#4 See ‘Heterodoxy, too, is scientific junk’
#5 See ‘The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?’
The blahblah about opaque randomness is as enlightening as the blahblah about the Invisible Hand ever was and the shop talk about fat tails does not advance distribution theory one iota.
The observed income distribution PROVES that there is a POSITIVE feed-back built right into the core of the market economy.
Because a positive feedback is incompatible with equilibrium the observed distribution is an empirical refutation of equilibrium theory. From this follows that standard economics is false because it has equilibrium built right into the axiomatic foundations. From this is turn follows that about 90 percent of papers published in the AER is scientific rubbish because they are equilibrium models.
It is pretty obvious that neither Taleb nor Milanovic have any clue what the observed distributions really mean. They mean that economics of the last 140 or so years is as thoroughly refuted as the flat earth theory.