Comment on Noah Smith on ‘Keynesian Economics Is Hot Again’
Blog-Reference and Blog-Reference on Apr 11
There is Orthodoxy with Walrasian microfoundations and it has been nicely defined by Krugman: “… most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”
There is Keynesianism with macrofoundations and they have been nicely defined by Keynes: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.”
Both, Walrasian microfoundations and Keynesian macrofoundations are provably false. Methodologically speaking, microeconomics and macroeconomics are axiomatically false. It holds when the premises/axioms/foundational propositions are false or contain NONENTITIES the whole theory/model/analytical superstructure is false. This includes all variants of IS-LM from Hicks to Krugman.#1
The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Because economists lack the true theory their economic policy guidance has NO sound scientific foundation since Adam Smith/Karl Marx.
There is NO use to combine axiomatically false approaches or periodically alternate between them. What Krugman or Christiano is doing is cargo cultic show biz.
Noah Smith maintains: “The right way forward for macro isn’t to go all-in on a hot new theory, or to passionately embrace old paradigms either. The best approach is to adopt more public humility and caution about their theories, while working to understand microeconomics better.”
In view of the fact that the profit theory is false for 200+ years, and microfoundations are false for 150+ years, and macrofoundations are false for 80+ years, the right way forward for Walrasians and Keynesians is to retire.
Egmont Kakarot-Handtke
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
Related 'Economists ― medics or barber surgeons?' and 'Keynes saw the problems but did not solve them' and 'The fundamental problem of economics: scientific incompetence aka stupidity' and 'Economic policy guidance NEVER had sound scientific foundations' and 'The non-existence of economics' and 'Economics: The pluralism of false theories is over' and 'The futile synthesis of neoclassical rubbish and Keynesian garbage' and 'Macroeconomics without Keynes' and cross-references Keynesianism