Comment on Anonymous on ‘Why is MMT so popular?’
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Yous say “the real story is savings equals investment plus net production.”
THIS is the real story: Keynes got the paradigm shift from microfoundations to macrofoundations wrong. His methodological blunder can be exactly located in the GT: “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.)#1, #2
The axiomatically correct macro relationships are:
Qm≡−Sm in the case of the elementary production-consumption economy,
Qm≡I−Sm in the case of the investment economy,
Qm≡(I−Sm)+Yd+(G−T)+(X−M) in the general case.
Legend: Qm monetary profit, Sm monetary saving, I investment expenditures, Yd distributed profit, G government expenditures, T taxes, X export, M import.
All I=S and IS-LM models are provably false.#3
Egmont Kakarot-Handtke
#1 How Keynes got macro wrong and Allais got it right
#2 The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
#3 For the details of the big picture see cross-references Refutation of I=S
Immediately preceding Why is MMT so false?.