July 31, 2017

After-Keynesian zombie interbreeding

Comment on Roger Farmer on ‘Post-Keynesians and New-Keynesians: A Lesson From Evolutionary Biology’

Blog-Reference and Blog-Reference

Roger Farmer waves the flag of hope: “Post-Keynesian finches and their New Keynesian cousins have avoided each other for far too long. Just as the arrival of El Niño in the Galapagos Islands allowed diverging species to once more merge, it is my hope that the shock of the Great Recession will catalyse interbreeding between New Keynesian and heterodox economists.”

This, of course, is a misleading metaphor. The fact on the economic Galapagos island is that the four sub-approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong. No amount of interbreeding will result in anything else than just another scientific zombie. The simple reason is that the genetic code = the set of axioms of the four sub-approaches is defective.

Keynes formulated the foundational syllogism of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment.” (GT, p. 63)

This elementary two-liner is conceptually and logically untenable.#1 Keynes did not come to grips with profit and therefore “discarded the draft chapter dealing with it.” (Tómasson et al.). As a result of this unidentified inheritable blunder, the whole After-Keynesian population is imbecile.

The Walrasian axioms are verbally given as follows: “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)

It should be pretty obvious that the Walrasian axiom set contains THREE NONENTITIES: (i) constrained optimization (HC2), (ii) rational expectations (HC4), (iii) equilibrium (HC5). As a result of this inheritable axiomatic blunder, the whole After-Walrasian population is imbecile.

In Samuelson’s interbreeding, a.k.a. synthesis, the defective Walrasian microfoundations, and the defective Keynesian macrofoundations were cobbled together. Needless to emphasize that both approaches did not logically fit together then and do not fit together now and will not in the future.

Roger Farmer’s attempt to combine the rotten genetic material of Keynesianism and Walrasianism is doomed to failure. Economics needs a paradigm shift, nothing less than an entirely new creation will do.#3

Egmont Kakarot-Handtke

#1 For details see ‘Post Keynesianism, science, and universal idiocy
#2 For detail see ‘The father of modern economics and his imbecile kids
#3 See ‘First Lecture in New Economic Thinking

For the big picture see cross-references Keynesianism