February 26, 2018

Forget Keynes

Comment on Asad Zaman on ‘Understanding Macro: The Great Depression’

Blog-Reference and Blog-Reference on Feb 28 and Blog-Reference on Mar 5 adapted to context

There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Political economics has produced NOTHING of scientific value in the last 200+ years. This is the track record: provably false
• profit theory, for 200+ years,
• Walrasian microfoundations (in particular equilibrium), for 140+ years,
• Keynesian macrofoundations (in particular I=S/IS-LM), for 80+ years.

Heterodoxy claims that Orthodoxy from Walras/Marshall to DSGE is false. This, of course, is true. However, Heterodoxy claims also that Keynesian economics is a valid replacement for Orthodoxy. This is provably false. Keynesianism, too, is proto-scientific junk.#1

Asad Zaman argues: “Lord John Maynard Keynes invented the entire field of macroeconomics in response to the Great Depression in 1929, which could not be understood according to economic theories dominant until then.”

Keynes, too, was an incompetent scientist and if there ever was a political agenda pusher then he. Keynes saw the necessity of a paradigm shift but he messed up the move from microfoundations to macrofoundations.

Fact is: Walrasianism, Keynesianism, Marxianism, Austrianism is mutually contradictory, axiomatically false, materially/formally inconsistent and ALL approaches got profit theory, employment theory, and the theory of money wrong.

Asad Zaman argues: “It should be immediately obvious that active government involvement in creating full employment helps the bottom 90%. It is slightly less obvious that monetary expansion, which may create inflation, is also helpful to the poorer segment of society. This is because the poor are generally borrowers of money, so the value of their debt in real terms becomes reduced. Similarly, easy money makes it easier for them to borrow. At the same time, Keynesian policies hurt the top 1%.”

The claim that Keynes fought for the cause of ninety-nine-percenters and against the one-percenters is false. In effect, the opposite is true.#2

Heterodoxy’s repetitive critique of Orthodoxy has run into a dead end. Heterodoxy, too, is scientifically worthless political economics.#3 It is time to forget the whole proto-scientific blather and to move on: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

Time to bury failed/fake scientists for good and to leave the creepy intellectual graveyard of orthodox and heterodox economics behind.

Egmont Kakarot-Handtke


#1 For details see
Keynes’ intellectual nonexistence
How Keynes got macro wrong and Allais got it right
Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#2 For details see
Who or what exactly did Keynes save?
Keynes, Lerner, MMT, Trump and exploding profit
Fiscal policy and the Humpty Dumpty Fallacy
#3 Economics: communication without content

Related 'How Keynes messed macro up' and 'Keynesianism: The triumph of blathering over thinking' and  'Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need'. For details of the big picture see cross-references Keynesianism and cross-references Constructive Heterodoxy.