Blog-Reference and Blog-Reference
“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
Fact is that economists do NOT have the true theory. This holds in particular for employment theory, and the Lump-of-Labor theory is a case in point. The lethal methodological blunder of employment theory consists in the Fallacy of Composition, i.e. the illegitimate transfer of truths that hold for one firm/market onto the economy as a whole. What the representative micro-brained economist never understood is that what is true for the molehill is not true for the universe.
Methodological conclusion: the traditional microfoundations approach is as false as one can get and has to be fully replaced by the macrofoundations approach.
The axiomatically correct macroeconomic Law of Employment/Unemployment#1 is reproduced on Wikimedia.#2
From this objective-structural-systemic relationship follows inter alia:
(i) An increase in the expenditure ratio ρE leads to higher employment L or lower unemployment u (the Greek letter ρ stands for ratio).
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase in the factor cost ratio ρF=W/PR leads to higher employment.
The complete Employment Law is a bit longer and contains, in addition, the public sector and the foreign trade sector.
Item (i) and (ii) cover the familiar arguments about how aggregate demand affects employment. Item (iii) embodies the macroeconomic price mechanism. It works such that overall employment L INCREASES if the average wage rate W INCREASES relative to average price P and productivity R and vice versa.
From this follow the rules of effective employment policy. In the unemployment situation (with ρE and I given), the scientifically enlightened Legitimate Sovereign sets the parameters as follows: price increase zero and wage increase greater than productivity increase. This increases employment for a while. Afterward: price increase zero and wage increase equal to productivity increase. This stabilizes the economy at full employment.
Mentally retarded economists do after 200+ years still not know how the price- and profit mechanism works. The one thing that they have brought to perfection in all this time is the trick of blowing bigger and bigger communicative soap bubbles.#4 Not to forget, economists reward themselves with the Nobel Prize for Proto-Scientific Soapbubbling a.k.a. Economic Sciences.
#1 NAIRU, wage-led growth, and Samuelson’s Dyscalculia
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 Wikimedia, Structural-systemic Phillips Curve
#4 Economics: communication without content
For details of the big picture see cross-references Employment.
The Walrasian Auctioneer is not unemployed but dead. But Sandwichman is still soapbubbling.
I wonder if you ever realize that the employment theory is false for 200+ years and that the only worthwhile issue in economics is how to abandon soapbubbling and to start with serious scientific work.
For a beginning, you could try to empirically refute the axiomatically correct Law of Employment/Unemployment.
Your dialogue about the Walrasian Auctioneer is a wonderful demonstration of soapbubbling.
The Walrasian Auctioneer is known since his invention as one of the most idiotic constructions in the history of cargo cult science. You are the last persons who remember him.
The empirical refutation of the axiomatically correct Law of Employment/Unemployment means the application of econometrics which in turn means: “the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference.” (Wikipedia)
The Employment Law defines the set screws for policymakers#1 who are institutionalized differently in different national monetary economies and here lumped together under the heading of Legitimate Sovereign.
Stop soapbubbling, try to empirically refute the Employment Law. You are in for a big surprise.
#1 The set screws of overall and individual employment
REPLY to Sandwichman, Barkley Rosser on Jun 13
The London gold market is micro/partial, the Auctioneer refers to general equilibrium and overall simultaneous market coordination. The Auctioneer has been a construct of breathtaking idiocy from the very first moment and this means a lot in view of the hereditary delirium of the representative economist who did not get out of the silly Lump-of-Labor Fallacy in 200+ years.
Why do Sandwichman and you not simply quit economics and soapbubble amicably about real-world facts like cow flatulence, or the assassination of JFK, or the death of Yeshua bin Yusuf?
Stop soapbubbling about the Auctioneer and cow flatulence and simply try to empirically refute the axiomatically correct Employment Law. It is never too late to do serious scientific work.
REPLY to Barkley Rosser on Jun 13
Of course, soapbubblers cannot test the Employment Law. But since it consists exclusively of measurable variables, every econometrician who has tested the Phillips Curve has already a good part of the data for testing the macroeconomic Employment Law.#1
Looking forward to the grand showdown.
#1 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
REPLY to ANC Driver, Tom Hickey, Calgacus on Jun 13
The Legitimate Sovereign can realize any employment level by applying the Employment Law. This is NOT AT ALL a question of left-wing/right-wing. The Employment Law defines exactly the set screws for policymakers.#1 It is much like taking an aircraft off the ground.
Needless to emphasize that soapbubbling economists have never taken anything off the ground. Just the opposite.#2
#1 The set screws of overall and individual employment
#2 Mass unemployment: The joint failure of orthodox and heterodox economics
You say: “Institutionalization is an issue involving political economy and politics.”
No, not at all. Institutionalization involves two things: the Legitimate Sovereign and Science. The actual problem with regard to economic institutions is that there is neither.
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.
Economics claims to be a science but is NOT. Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years.#1 Employment Theory is provably false, Profit Theory is provably false, Monetary Theory is provably false, and so on.
MMT, too, is proto-scientific garbage. And it is too obvious that it has been hijacked by political agenda pushers.#2
Economics, understood as science, is supposed to develop the true theory. The true economic theory tells one how the economic system works. This knowledge is needed to realize the goals that have been set in the political sphere by the Legitimate Sovereign.
Imagine this situation: The Legitimate Sovereign ― in current understanding = We The People ― has extensively discussed whether to fly to the paradise on Christmas Island or to the paradise on Easter Island. The decision has been Christmas Island and in order to make things happen, a group of people has been tasked to build the aircraft. Obviously, these scientists and engineers need a lot of knowledge about materials and physical laws. What these folks need not at all is an opinion whether the Christmas or the Easter Island is the better destination. What these folks need indeed is scientific competence.
What has happened in economics is that economists have since Adam Smith/Karl Marx been permanently involved in the political discussion and have spent neither time, nor talent, nor brains to figure out how the monetary economy works. What we now have is incompetent scientists from Krugman to Varoufakis to Kelton to Mitchell and so on from the right-wing to the left-wing and back who are fully occupied to push some agenda.
The vast majority of economists has entirely lost any scientific instincts, which would tell them to keep science and politics strictly apart, and has joined the crowd of clowns and useful idiots in the political Circus Maximus.#3
MMTers are no exception. The whole discussion about the Job Guarantee is just political soapbubbling that lacks sound scientific foundations. It is only good as a smokescreen to obscure the political agenda of money making for the one-percenters. Economics has degenerated to plain political fraud.
Make science great again! Throw all economists out! Start with MMTers! Take Tom Hickey first!
#1 Economics has arrived at the bottom of the proto-scientific shithole
#2 Richard Murphy: the MMT fraudster dressed up as realist
#3 For details of the big picture see cross-references Political Economics
You say: “I am not an economist. My PhD is in philosophy. If I were an economist, I would argue economics with you, but I don’t operate outside my field.”
As a philosopher, you have studied The Republic and what Plato has said about stories “… which are now in use [but] must be discarded.”
“Of what tales are you speaking? he said. …
Those, I said, which are narrated by Homer and Hesiod, and the rest of the poets, who have ever been the great story-tellers of mankind.
But which stories do you mean, he said; and what fault do you find with them?
A fault which is most serious, I said; the fault of telling a lie, and, what is more, a bad lie.”
Philosophers are known since 2000+ years to be committed to truth. They introduced the distinction between doxa=opinion and episteme=knowledge. You say you are a philosopher who operates strictly within his field.
How does it come, then, that you promote on this blog economists who are political story-tellers, incompetent scientists, and who violate scientific standards/ethics on a daily basis?
Here are five political story-tellers/agenda-pushers who pose as scientists and censor and manipulate their blogs/Twitter accounts:
You know quite well that the foundational MMT balances equation is provably false. This is sufficient for the refutation of MMT. Refutation means that MMT has no sound scientific basis. It’s just story-telling and political agenda pushing. That is NOT what scientists are supposed to do.
What kind of philosopher are you? Who awarded you a degree? Trump University? And why do you so evidently operate outside your field?
#1 For details/proofs see cross-references MMT
You need not study philosophy, what the absolute novice in every marketing- and PR-department and every half-witted journalist can tell you even in the state of near-coma is the mantra: Whoever Controls The Narrative Controls The World.
After all, already Plato was aware of “the great story-tellers of mankind”. The point is, though, that Plato was not directly enthusiastic about “telling a lie” or “a bad lie” or what we today call fake news or propaganda or disinformation or cargo cult science.#1, #2, #3
Yes: “He [Shackle] could see that this [marginalist economics] was, in fact, a form of pseudo-secular religion… and that struck him, as it strikes others, as absurd.”
Yes, and because it IS absurd marginalist economics will now be thrown out of science together with Keynesianism, Marxianism, Austrianism, Pluralism, MMT, and the fake philosopher Tom Hickey.
Note that economists award themselves with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” which is a deception of the general public. Economics has never been more than story-telling. Economics is the worst embarrassment in the history of modern science. And MMT and Tom Hickey are part of it.
#1 Economics is not a science, not a religion, but proto-scientific rubbish
#2 Economics: communication without content
#3 Economics: stories, narratives, and disinformation
You say: “I just reread your supposed ‘Employment Law’.”
Fine, but obviously you still do not understand how things work. There are TWO uses of the equation.
(i) For testing, one simply feeds the historical data in and looks how the Law fits. Needless to say that inflation has not been zero in the past but if the Law is true it fits perfectly with the historically given rates of inflation/deflation and employment and all the other variables.
(ii) For achieving his employment goal, the policymaker uses the equation as a tool which tells him how to set the independent variables on the right-hand side while the target value of employment is entered at the left-hand side.
Testing the Employment Law is in principle not different from testing the Phillips Curve. The beauty of the test is that the Employment Law (= structural Phillips Curve) is confirmed and the silly behavioral Phillips Curve is refuted.
Testing can be done and will be done ― not by soapbubblers, though, that much has always been clear but by scientists. In the meantime, you can tell me more about your fields of expertise ― cow flatulence and proto-scientific methodology.
You say: “What many if not most that think they understand this but have not studied a relevant discipline don’t understand is that ‘the world’ is based on a narrative aka story and myth.”
Everybody understands this and knows that people are born, told some idiotic stories in the kindergarten, are later on guided in their neurotic behavior by it, eventually become philosophers/journalists/bloggers and earn a living by pushing narratives, tell their children the updated idiotic stories, and then go as stupid out of ‘the world’ as they have come in. This is how culture and communication work in Plato’s Cave.
The scientific realm is different. Science is about true/false with truth well-defined as material and formal consistency: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)
The political realm and the scientific realm run on fundamentally different principles. And this is why they have to be kept strictly apart. The mixing of politics and science inevitably ruins science as everybody can know from the history of political economics which has produced NOTHING of scientific value in the last 200+ years.#1
Political economics was and is in the best case brain-dead soapbubbling and in the worst case outright fraud.
MMT falls into the latter category: it pushes the narrative of the benefits of MMT policy for the ninety-nine percenters through all media. Scientific fact is that the MMT selling proposition ‘print, spend, and don’t worry about public debt’ with the same necessity as the First Law of Thermodynamics translates into Public Deficit = Private Profit and therefore benefits the one-percenters.
So, MMT is clearly what the philosopher Plato called a “bad lie” and what the philosopher Tom Hickey euphemizes as narrative, covers with folk-psychological soapbubbling, and actively promotes by applying the old Huxley/Orwell recipes of political brain-washing.
#1 The irrelevance of economics
#2 Economists: political trolls since 200+ years
You say: “You are now arguing outside your field unless you are credentialed in philosophy, especially logic and epistemology.”
Before pestering the world with your good advice and talking nonsense about credentials, take first a basic methodology course on YouTube.#1 Note, in particular, that science is NOT about credentials but about logical/empirical proof.
You seem to have an extremely short attention span. You present yourself as a philosopher who does not operate outside his field and then blathers about theoretical economics and political economics and political science and sociology and mass psychology.
You say: “In political science and politics, a fundamental problem is that even when the ‘true theory’ is known, it is not automatically adopted but must be passed into policy (law) and that involves politics.”
Wake up, this is NOT the problem, for the simple reason that economists do not have the true theory. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong. Economic policy guidance has NO sound scientific foundations for 200+ years. Nothing to adopt, neither automatically nor otherwise.
Get it, there is NO true theory in economics, economists are NOT scientists but agenda pushers and useful political idiots.
Here is a good advice for you: read what the great methodologist and economists J. S. Mill has said about the separation of science and politics: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”
Repeat: NO part of his business. The political decisions are made in the political sphere by the Legitimate Sovereign and they are NOT AT ALL the business of folks who should have figured out in the last 200+ years how the monetary economy works but failed to do so.
As a philosopher, you have NO credentials to dabble in economic policy or to promote MMT. All the more so, as you have obviously NOT realized some basics about what you are promoting:
(i) MMT is proto-scientific garbage, i.e. provably false, i.e. materially/formally inconsistent.
(ii) MMT is a political fraud, i.e. it pretends to promote the cause of the ninety-nine-percenters but de facto promotes the cause of the one-percenters.
(iii) MMTers are scientifically incompetent.
(iv) MMTers constantly violate scientific standards/ethics.
You say you are a philosopher who does not operate outside his field. Very good! Get out of economics, we have already an oversupply of soapbubblers or what Joan Robinson called the ‘throng of superfluous economists’.
#1 YouTube, Feynman on Scientific Method
You recommend Collingwood’s Economics as a Philosophical Science as follows: “Seeing as we are talking of economics, science, and philosophy all in the same cave I thought I’d share probably one of the best ‘short’… pieces I have ever read and which for its comparative size has probably had the greatest impact on me personally in understanding first and foremost, what an economic activity actually is, second, that we take the ability to engage in economic activities for granted, and third, that we cannot mix morals with economics.”
- You are putting economics, science, and philosophy into one hat.
- This is illegitimate because economics and philosophy are what Feynman called cargo cult science.
- The fundamental blunder of economics is that it defines itself as social science.
- The subject matter of economics is the economic system, i.e. the interaction of economic variables like employment, price, profit, productivity, income, output, and so on.
- Human Nature/motives/behavior/action is the subject matter of Psychology, Sociology, Anthropology, History, Political Science, Biology, Social Philosophy, Ethics and so on.
- As far as economics deals with Human Nature/motives/behavior/action it is Political Economics.
- Political Economics has achieved nothing of scientific value in the last 200+ years.
- Political Economists are failed/fake scientists.
- Political Economics is since Adam Smith/Karl Marx a smokescreen for agenda pushing.
- Political agenda pushers, no matter how they present themselves, are either stupid or corrupt or both and will therefore never be accepted in the community of scientists.
- Economics had been hijacked from the very beginning by agenda pushers. This aberration has to be reversed. In methodological terms: economics needs a paradigm shift.
No, this exactly is the Social Science Fallacy. Economics as a science is NOT concerned with how people behave but how the economic system behaves. There are systemic laws which can be objectively determined, but economists have to this day failed to figure them out. Instead, they were very successful in producing a breathtaking heap of peer-reviewed proto-scientific garbage.
Time to acknowledge that political economists had much support from retarded social philosophers like Collingwood and Tom Hickey. Time also to properly separate science/theoretical economics from politics, soapbox economics, agenda pushing, philosophy and all the other cargo cult sciences.
Politics has to be determined in the political sphere by the Legitimate Sovereign. The political sphere and the scientific sphere have to be separated. After 200+ years of failure, economists are supposed to figure out now how the economic system works. Only then can they credibly claim to be of assistance in the realization of the Legitimate Sovereign’s objective, that is, the Good Society.
You say: “Given contemporary conditions, that would seem to involve instituting full employment now, since it is not only possible but simple by following MMT analysis, theory, and policy based on it. In fact, as Calgacus has pointed out, the MMT JG would begin breaking the back of modern capitalism by increasing labor power. … What needs to happen is that the capital/labor share ratio has to be shifted in favor of workers.”
Take notice that there is Xmas economics where everybody writes down a list of his wishes. Your priorities go roughly as follows: full employment, technological innovation, increasing productivity, increasing leisure, a more equitable distribution.
This list makes you a very likable philosopher. Not many people will contradict you but probably add such things as environmental protection and affordable health care.
In order to realize this program, you need to know how the monetary economy works. Your problem is that you don’t. For example, you recommend MMT/JG without realizing that MMT’s money-creation/deficit-spending makes distribution progressively more unequal.#1 You say that you want to better the distributional situation of the ninety-nine-percenters but your recommendations make matters worse.
The economist’s business is NOT to write down a wish list but to realize the goals that have been authorized by the Legitimate Sovereign. This requires scientific knowledge about how the monetary economy works. This knowledge is embodied in the systemic laws of the monetary economy. You cannot achieve full employment (however defined) if you don’t know the Employment Law.#2
To soapbubble about flying above the clouds is futile. It is the folks that have figured out the laws of aerodynamics and thermodynamics who get things off the ground. Analogous in economics.
As Marx said: “Philosophers and politicians have hitherto only popularized various wish lists; the point is to know how to realize them.”
#1 MMT: So-called progressives as trailblazers for Trumponomics
#2 This brings us back to the first post.
Tom Hickey summarizes: “I have said that new vision is needed and proposed a framework in terms of one of the enduring questions of Western intellectual history, which I believe can only be dealt with holistically by incorporating non-Western traditions. That question is the one that occupied the ancient Greeks, what does it mean to live a good life as an individual in a good society. That has a long tradition in terms of ethics, action theory and social and political thought.”
Yes, the political/philosophical discussion about the Good Society goes back to the beginning of civilization.
Tom Hickey tells the story how he came after a spiritual quest through Western and non-Western history to see that the society we live in is mentally deranged and institutionally dysfunctional and that MMT offers a solution, at least for the economic causes of the malaise.
“Realistically, that is where we need to start strategically. What MMT proposes is feasible politically.” Tom Hickey’s narrative explains how he became an MMT agenda pusher.
When one takes the political glasses off and puts the scientific glasses on one sees a quite different reality:
• Tom Hickey never did serious science.
• It is the MMT social goals that appeal to him.
• He never realized that the economic theory that underlies MMT policy guidance is provably false.
• He promotes MMT for political reasons and does not really care about its scientific validity.
So, Tom Hickey stands firmly in the tradition of Political Economy which abuses ‘science’ from Adam Smith onward as credibility/authority-enhancer. For agenda pushers, the political narrative comes always first: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. ... A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack)
Tom Hickey recounts MMT history: “Warren Mosler has set forth a range of proposals for implementing a policy based on MMT principles. The range is not complete and many other issues need to be addressed that MMT doesn’t as yet. As the MMT have said, there are less than a dozen of us, which is an improvement on the original 3 + 1 twenty years ago ― Warren Mosler, Bill Mitchell and Randy Wray, along with grad student Pavlina Tcherneva.”
This is what MMT looks like for me. The trained economist and hedge fund founder Warren Mosler stumbled one day upon Post-Keynesianism/MMT and found that it contained a lot of sound arguments against mainstream monetary theory and some good social planks for a political platform. Warren Mosler developed the narrative of how the fiat money system can be used to solve most socio-economic problems. As a marketing buff, he realized that Wall Street types have a credibility problem with selling social policy. And this resulted in strengthening the sales team with caring Stephanie Kelton and the spiritually enlightened philosopher Tom Hickey.
I have no problem with agenda pushers promoting their stuff in the political Circus Maximus. And I have no problem with Wall Street’s Warren Mosler running for Virgin Islands' governor. The lethal flaws of MMT are:
• The scientific part of MMT is provably false.
• MMT policy guidance has no sound scientific foundations.
• MMT is a political fraud, not substantially different from Neoclassics, Keynesianism, Marxianism, Austrianism.
The mixing of politics and science always corrupts science. This starts with Smith/Marx and continues over the whole right/left spectrum from Hayek, Keynes, Friedman, Krugman, Keen, Mosler to Tom Hickey.
Let’s get rid of all of them.
You say: “Not seeing fallacies in some reasoning that MMT is welfare for the rich is not the same as there not being a fallacy, and there is. A really easy way for anyone to quickly see that the reasoning must be fallacious (formally inconsistent) is the historical fact that applied MMT has everywhere led to progressively more equal distributions of wealth and income, not the opposite. … (By applied MMT I mean the New Deal, WWII in the US & UK, the postwar era practically everywhere & for a few countries even afterward. Pretty much the closer to MMT / genuine Keynes ― the better for income/ wealth distribution.)”
Note that there are two issues here (i) the classical macroeconomic issue of the relative magnitudes of profits and wages [To determine the laws which regulate this distribution, is the principal problem in Political Economy (Ricardo)] and (ii), the issue of the distribution of wages among workers and of profits among firms. I have dealt with both issues in working papers#1, #2 and in blog posts.#3, #4
It is pretty obvious that economists from Smith/Ricardo via Keynes to MMT never understood what macroeconomic profit is and by consequence thoroughly messed up Distribution Theory.
I know for sure that you don’t understand what macroeconomic profit is. Therefore it is beyond your means to say anything sensible about distribution.
The axiomatically correct Profit Law for the economy as a whole is given as Qm=Yd+(I−Sm)+(G−T)+(X−M) which reduces to Qm=G−T for Yd, I, Sm, X, M = 0. The reduced Profit Law says that the monetary profit of the business sector Qm is equal to the deficit G−T of the public sector, in a nutshell: Public Deficit = Private Profit.
Now, MMT is essentially money-creation/deficit spending. Because of this, it is correct to say that MMT progressively worsens the distribution.#5
However, for anyone who can read an equation, it is obvious that the positive effect of a government deficit G−T on macroeconomic profit Qm can at any time be counteracted by negative effects of the other variables, i.e. Yd, I, Sm, X, M.
Whether this has been the case during the “New Deal, WWII in the US & UK, the postwar era practically everywhere” can be established only by testing the complete equation.
There is no way around it, in order to make progress with Distribution Theory, the Profit Law must be tested with the data for the historical time periods you mentioned.
As far as I know, the axiomatically correct Profit Law has never been tested. Your assertion: “Pretty much the closer to MMT / genuine Keynes ― the better for income/ wealth distribution.” is pretty much hanging in midair.#6
#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#2 Essentials of Constructive Heterodoxy: Profit
#3 Profit and the decline of labor’s nominal share
#4 Profit and distribution: a primer
#5 Keynes, Lerner, MMT, Trump and exploding profit
#6 Keynesianism as ultimate profit machine