July 7, 2017

Keynesianism ― the economists’ senile dementia

Comment on Lars Syll on ‘Why not even Paul Krugman is a real Keynesian’

Blog-Reference and Blog-Reference on Jul 10 adapted to context and Blog-Reference on Jul 18

Keynesianism is a failed approach, more precisely, Keynesianism is axiomatically false and materially/formally inconsistent. This is a provable fact. Because the theory is false Keynesian policy guidance has NO sound scientific foundation. So the question remains why are there still Keynesians around 80+ years after the General Theory? There are three reasons, (i) Walrasianism has been thoroughly falsified and is therefore no option to fall back on, and (ii), nobody has identified the critical methodological blunder of Keynesianism, and (iii), nobody has any serious ambition to get out of the mess. Fact is that economists are rather satisfied with the pluralism of false theories and the continued inconclusive ping pong of well-known arguments.

Here is the exact spot where Keynesianism went 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, in particular all variants of I=S and IS-LM models.#1, #2

While Keynes was right in rejecting the microfoundations (maximization-and-equilibrium) approach he simultaneously messed up the macrofoundations approach.#3 Because both Walrasianism and Keynesianism are materially/formally inconsistent any synthesis of the two must fail. Because of this all textbooks are logically incoherent since 70+ years.#4

So, Keynes messed up the pivotal issues profit theory#5 and employment theory#6 but After-Keynesians never realized it. As if 80+ years of inconclusive verbiage were not enough Lars Syll#7 and Paul Krugman#8 are mired in a senile debate about who is a real Keynesian which is much like a debate about who is a real Flat-Earther.

Time for a paradigm shift and a change of personnel.

Egmont Kakarot-Handtke

#1 See ‘Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#2 See ‘Why Post Keynesianism Is Not Yet a Science
#3 See ‘How Keynes got macro wrong and Allais got it right
#4 See ‘The father of modern economics and his imbecile kids
#5 See ‘Profit theory in less than 5 minutes
#6 See ‘Macrofounded labor market theory
#7 See ‘Say hello to Lars Syll, Keynes’s last parrot
#8 See ‘Just another wreck

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REPLY to Tom Hickey on Jul 10

(i) What Hayek said about Keynes and vice versa is irrelevant because both were scientifically incompetent agenda pushers.#1, #2, #3

(ii) What Tuchin said about math/economics/science misses the point entirely.#4

(iii) You say: “However, there are no accepted general theories in the social sciences, including economics, as there are in the natural and life sciences.” Take notice that economics is NOT a so-called social science but a system science.#5

(iv) The rest of your augment is one of the oldest excuses in economics: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort.’” (Bagehot, 1885)#6 Fact is that economists are abysmally incompetent and have achieved NOTHING of scientific value in the past 200+ years.

(v) Keynesianism is axiomatically false and materially/formally inconsistent.#7 Because the theory is false Keynesian policy guidance has NO sound scientific foundation. After-Keynesians are simply 80+ years behind the curve.

#1 See ‘Keynes and the logical brilliance of Bedlam
#2 See ‘Marshall and the Cambridge school of plain economic gibberish
#3 See ‘Hayek and other informationally retarded proto-economists
#4 See ‘We are not yet out of the wood; in fact, we are not yet in it
#5 See ‘The happy end of the social science delusion
#6 See also ‘Failed economics: The losers’ long list of lame excuses
#7 See ‘Keynes saw the problems but did not solve them

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REPLY to Six on Jul 11

Accounting is measurement. Measurement is the precondition for testing. Without testing NO real-world economics, only vacuous political blather and pointless psychological second-guessing.

Economists are too stupid for the elementary mathematics of accounting.*

* For more details of the bigger picture see cross-references Accounting