Real-World Economics: The sanctuary of stupidity and corruption

Comment on Asad Zaman on ‘Quotes critical of economics’

Blog-References

Heterodox economists do not get tired of telling the world that orthodox economics ≈ mainstream economics ≈ textbook economics is false in all dimensions. But with this, they are already at the end of their wits: “As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction.” (Nell)

Orthodoxy has been deconstructed multiple times by now but traditional Heterodoxy has obviously failed at construction. Worse, the representative economist has not grasped what the state of his discipline is and what, by logical implication, his most urgent mission should be.#1, #2, #3

The fact is that economists have messed up
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

Because both orthodox and heterodox economics is a hopeless failure, the way forward requires, in methodological terms, a Paradigm Shift, that is, the full replacement of Walrasian microfoundations and Keynesian macrofoundations by an entirely new set of axioms.#4

Economists do NOT understand the full implications of the situation. Neither have they any idea how to get out of their self-created swamp. Just the opposite, they are hellbent on keeping everything as it is, i.e. to stage their zero-brain wrestling shows, to carry on with their vacuous palaver, and to hold on to the accustomed pluralism of false theories while telling the general public that New Economic Thinking is in overdrive and the breakthrough is just around the next corner.

The general public has the impression that economics consists of a pro-capitalist faction and an anti-capitalist faction and both claim to work/fight for the betterment/salvation of society/humanity. Nothing could be further from the truth. Both factions are in the propaganda and disinformation business. Both factions are scientifically incompetent, and both factions are stupid and corrupt. This becomes always plain when the discussion turns to methodology.#5, #6, #7

The editors and main contributors#8 and regular commentators#9 of the Real-World Economics Review Blog actively promote proto-scientific BS and actively hinder everything that makes even remotely the impression of leading out of the swamp. That much is plain, whatever the RWER Blog is set up to achieve, it is NOT a Paradigm Shift.

Egmont Kakarot-Handtke


#1 The present non-existence of economics
#2 What’s the use of economists?
#3 The miracle cure of economists’ micro-macro schizo
#4 For details of the big picture see Paradigm Shift
#5 Real-World Economics Review Blog, Radical paradigm shifts
#6 Real-World Economics Review Blog, What are axiomatizations good for?
7# Hooray! The formalization issue is finally settled
#8 Edward Fullbrook, Lars Syll, Asad Zaman, David Ruccio, Dean Baker, Maria Alejandra Madi, Mark Weisbrot, Merijn Knibbe, Norbert Häring, Peter Radford
#9 Prof Dr James Beckman Germany, Dave Marsay, Vladimir A. Masch, Edward K Ross, Frank Salter, Craig, Helen Sakho, John Vertegaal, Jan Milch, Calgacus alias Some Guy, dingo342014, Robert Locke, davetaylor1, Ken Zimmerman

Related 'How Heterodoxy became the venue for science’s scum' and 'Lying for money: a generalization' and 'Cryptoeconomics ― the best of Real-World Economics Review’s spam folder' and 'Cryptoeconomics ― the best of Lars Syll’s spam folder' and 'And the answer is NCND ― economics after 200+ years of Glomarization' and 'Trust in economics as a science?' and 'The inexorable paradigm shift in economics'. For details of the big picture see cross-references Heterodoxy.

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Wikimedia, AXEC123d

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#PointOfProof

The Magic Money Tree is real ― too bad that the magic is a fraud

Comment on Tom Hickey/Ben Wray on ‘The magic money tree is real: Treasury confirms taxes are not needed to fund government spending’

Blog-Reference

The often repeated argument goes as follows: “While it is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money, allowing governments to increase spending or reduce taxation, without raising the corresponding financing from the private sector, there is a risk that money financing could rapidly undermine the stability of inflation expectations.”

It is true and known since time immemorial that governments can do deficit-spending/ money creation. It is NOT true that this causes inflation.#1 However, it is true that deficit-spending/money creation causes a profit explosion and as a consequence an extremely unequal distribution of income/financial wealth.#2

Because of the Profit Law, which entails Public Deficit = Private Profit, the Magic Money Tree magically benefits the one-percenters but NOT the ninety-nine-percenters. As long as MMT academics use the Magic-Money-Tree metaphor in their seminars they are doing junk economics just like their Walrasian, Keynesian, Marxian, and Austrian colleagues. To the extent that MMTers use the Magic-Money-Tree-metaphor in discussions with the general public they are committing political fraud and scientific suicide.#3, #4. #5, #6

The magic of the Magic Money Tree consists of WeThePeople unintentionally sponsoring the Oligarchy which in turn sponsors WeTheAcademics which in turn communicates the Magic-Money-Tree-story to WeThePeople.

Egmont Kakarot-Handtke


#1 MMT and the inflation-red-herring
#2 Keynes, Lerner, MMT, Trump and exploding profit
#3 MMT is criminal economics
#4 The Kelton-Fraud
#5 Richard Murphy: the MMT fraudster dressed up as realist
#6 For the full-spectrum refutation of MMT see cross-references MMT

Related 'MMTers make capitalism work' and 'MMT: How mathematical incompetence helps the Kelton-Fraud' and 'MMT: A new myth for WeThePeople'.

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Switch to Blog-Reference Stalwart Thread

REPLY to Matt Franko on Jul 3

“Empirical/historical data demonstrates that future generations do not suffer higher taxes in order to pay back past deficits.”

A scientist realizes immediately that this statement is self-contradictory. There is no historical data for the future. It holds Public Debt = Deferred Taxes.

The relationship between economics and science is roughly the same as between a pit latrine and a cathedral. This holds, of course, for MMT in general and you personally.#1


#1 For the full-spectrum refutation of MMT see cross-references MMT

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REPLY to Matt Franko, Tom Hickey on Aug 3

From Adam Smith/Karl Marx onward, economics claims to be not only science but sciences: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

How many sciences is economics? Zero! Economics is what Feynman called a cargo cult science.

Science is knowledge about how the universe or some greater or smaller part of it works. Scientific knowledge takes the form of a consistent theory “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) A theory is the best mental representation of reality that is humanly possible. The rest of human communication is opinion, gossip, propaganda, and piffle, and cannot be taken seriously.

A theory is NOT about singular historical events but about invariances that apply always and everywhere. Example: The First Defenestration of Prague involved the killing of seven members of the city council by throwing them out of the window on 30 July 1419. The Law of Falling Bodies says d=½gt² and it applies to the members of the city council of Prague and to the moon and to the cannonballs that Galileo threw off the Leaning Tower of Pisa and to the falling feather in a vacuum and to the apple that hit Newton’s head. Scientists abstract from all historical and practical details which are so dear to the commonsenser.

The subject matter of economics is the monetary economy but economists have to this day not figured out how the price- and profit mechanism works and whether the system is inherently stable/unstable. This holds for Walrasianism, Keynesianism, Marxianism, Austrianism, and also for MMT. All these approaches are materially and formally inconsistent.

Inconsistency has been proven for the MMT balances equation.#1 This proof is sufficient to refute MMT as a whole. MMTers, of course, do not understand/accept this. To ignore refutation and simply continue talking BS is the standard operating procedure in economics. Because of this, it is NOT impolite but a statement of fact to summarize that MMTers in general, and Matt Franko/Tom Hickey, in particular, are stupid or corrupt or both. That both have a university degree casts a negative light on their respective universities.#2, #3


#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 Cryptoeconomics ― the best of Bill Mitchell’s spam folder
#3 The Kelton-Fraud

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REPLY to Tom Hickey, jrbarch, Matt Franko on Aug 4

Stop blathering about scientific methodology in general and answer one simple/real/ practical/concrete/relevant economic question.

This is the sectoral balances equation the MMT salesforce presents on any occasion (i) (X−M)+(G−T)+(I−S)=0.

This is the axiomatically correct balances equation (ii) (X−M)+(G−T)+(I−S)−(Q−Yd)=0.

Both equations consist of variables that are measurable with the precision of two decimal places.

Question: Which of the two macroeconomic equations is materially/formally consistent? Just answer with (i) or (ii).

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REPLY to Andrew Anderson on Aug 4

The Bible says: “But let your ‘Yes’ be ‘Yes,’ and your ‘No,’ ‘No.’ For whatever is more than these is from the evil one.”

So, stop blathering and answer with (i) or (ii) lest the evil one will get you as he has already gotten the blatherers Tom Hickey, jrbarch, and Matt Franko.

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REPLY to Tom Hickey on Aug 4

You say: “The first [equation] is an accounting identity. The second is an axiom. There’s a difference.”

Indeed, there is a vast difference. Unfortunately, you do not understand it. The often heard sentence ‘This is an accounting identity’ is one of the most idiotic assertions in economics. For proof see the comment on the Wikipedia entry Accounting Identity Wikipedia and the promotion of economists’ idiotism

The most elementary accounting identity is Q_m≡−S_m and from this follows immediately that the MMT balances equation is false and from this follows immediately that the whole of MMT is false and from this follows immediately that all MMTers are either stupid or corrupt or both.

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REPLY to Tom Hickey on Aug 4

The methodologically relevant quote from Aristotle reads: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Wikipedia)

The certain, true, and primary economic premises are given with the set of macroeconomic axioms.#1

From these premises formally follows the testable conclusion (X−M)+(G−T)+(I−S)−(Q−Yd)=0.

From this, in turn, follows immediately that the MMT balances equation is false. And from this finally follows that the whole of MMT is scientifically unacceptable.

To copy/paste Aristotle from the Stanford Encyclopedia is neither philosophy nor science. The point is how to apply Aristotle’s methodology to economics. And here the wannabe philosopher Tom Hickey fails badly.


#1 Wikimedia, New Foundations of Economics

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REPLY to Tom Hickey, Bob, jrbach on Aug 5

Your attempt to avoid the admission that the MMT balances equation has been conclusively proven to be materially/formally inconsistent is silly and futile.

The fact is that MMT is NOT a scientifically valid theory but academic snake oil.#1, #2, #3, #4

As a consequence, the actual task is NOT to convince any MMTer of anything but to throw these fake scientists and their social media sales trolls without further ado out of science and the econblogosphere.


#1 MMT: Academic snake oil for the people
#2 The Kelton-Fraud
#3 Richard Murphy: the MMT fraudster dressed up as realist
#4 MMT and grassroots movements

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REPLY to Tom Hickey, Bob, jrbach on Aug 6

This thread is about the economic implications of public deficits and how the conventional and the MMT view on this important issue differ.

Now, re-read your posts. They are consistently off-topic and entirely vacuous.

The main and direct effect of public deficit spending is, according to the macroeconomic Profit Law, on the business sector’s profit. There can be secondary effects on employment or prices but the primary and absolutely certain effect is on distribution.

So, people who argue for deficit-spending/money-creation argue ― whether they are aware of it or not does NOT matter ― for the agenda of the one-percenters.

To be sure, this is legitimate in the political realm. Free speech means practically also free speech for imbeciles, crooks, madmen, liars, detractors, warmongers, etcetera with the vague hope that in the course of the discussion error and fraud will be successively eliminated and that eventually, truth prevails. In the scientific realm, it is not sufficient to have an opinion, what is expected is a contribution to the growth of certain knowledge with certainty established by rigorous material and formal proof.

The observable unequal distribution of income and financial wealth is the empirical proof (i) of the Profit Law, and (ii), that the deficit-agenda-pushing from Keynes to Lerner to MMT to Trump has been successful beyond the wildest dreams.

What our discussion clearly shows is:

• your political/philosophical/religious blather does NOT contribute anything to the growth of scientific knowledge,
• MMT is refuted according to the criteria of material/formal consistency,
• the MMT sales crowd promotes a falsified theory on social media and the econblogosphere,
• MMT academics do NOT promote science but provide a cover for the agenda of the one-percenters,
• MMT academics suppress free speech on their blogs,
• neither universities nor institutions like the American Economic Association enforce well-defined scientific standards among their members as they are supposed to do but uphold the claim that economics is a science which is provably false for 200+ years.

The good thing that can be said about the Mike Norman Economics blog is that it does not directly block/suppress the refutation of MMT but only tries to bury it under a massive heap of philosophical shit. Compared to the rest of the politically corrupted econblogosphere, the Mike Norman Economics blog is a beacon of free speech.

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REPLY to Bob, Tom Hickey, jrbach, Andrew Anderson on Aug 7

Bob argues: “One argument in favor of welfare is that money given to individuals will end up as increased sales for businesses. The same would apply to a UBI or a JG that results in income for consumers who then distribute it to businesses. The purpose of these schemes is to help individuals; that it increases the business’s sector profit is secondary.”

You folks simply do not get it. Roughly speaking, if welfare is paid for by taxes, then, in the most elementary case, the spending of the taxed goes down and the spending of the welfare recipients goes up by the same amount. The effect on macroeconomic profit is ZERO.

If, on the other hand, the welfare is provided by deficit-spending/money-creation then macroeconomic profit goes UP by exactly the same amount. Because of this, MMT social programs are nothing but a cover for the self-alimentation of the oligarchy.

Bob argues: “The sum of spending on different programs for various purposes has precious little to do with economics, let alone science.”

Again false. There is a second way to increase welfare expenditures, that is, by changing the composition on the expenditure side and keeping the volume of the budget and taxes constant. It is well known that by reducing military spending one can finance any social program for any number of years. Reducing military spending and increasing welfare spending by the same amount leaves macroeconomic profit unchanged.

So, as a matter of principle, social spending can be increased without increasing macroeconomic profit. But that is NOT MMT policy. MMT social policy, i.e. deficit-spending/money-creation is designed to increase macroeconomic profit. Clearly, MMT's social policy is a fraud.

In fact, things are politically worse. The constant mockery of the simple-minded balanced-budget folks obscures the fact that the main argument against credit-financed government spending came from the philosopher Kant. Kant realized that there is a rather obvious connection between deficit-spending/growth of government debt and war. Therefore, in his essay Zum Ewigen Frieden. Ein philosophischer Entwurf = Perpetual Peace: A Philosophical Sketch under #4 Kant ruled out deficit-spending: “National debts shall not be contracted with a view to the external friction of states”.

Needless to emphasize that war/military spending has always been the main driver of public debt: “Adam Smith, when he wrote his Wealth of Nations, and Burke, when he produced his famous speech on economic reform, understood by ‘political economy’ a ‘branch of the science of the statesman or legislator’, a theory of practice, the science of the prudent management of the public finances. The growth of the huge debts which weighed on the great military nations would end in proving their ruin. This was especially true of England, which had become immensely in debt through the conquest of her colonial Empire.” (Halévy)

So, the classical balanced-budget hawks were NOT social sadists hell-bent on torturing the poor in the name of austerity. Kant’s prohibition of deficit spending was clearly aimed a the war mongers.

Whether you are aware of it or not does not matter: as promoters of MMT you are pushing the agenda of the oligarchy in general and of the war-mongers among them in particular. MMT is NOT a scientifically valid economy theory but a political bluff package. The philosopher Tom Hickey as MMT's chief ideologue is a living example of how degenerated and corrupt philosophy has become since Kant.

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REPLY to Andrew Anderson on Aug 7

You say: “Yet some fiat creation is needed to keep up with population growth since SOME risk-free savings are legitimate as needed liquidity and initial capital formation. The question then is how fiat shall be created in a way that does not deny citizens equal protection under the law …”

Yes, indeed. The correct way for the central bank to inject fiat money into the economy is by financing a growing wage bill. The incorrect way is the counterfeit-money printer's way.#1, #2


#1 The MMT-Yawner: Government is not a household
#2 MMT is criminal economics

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AXEC147

Whatever this is, it is NOT economics

Comment on Barkley Rosser on ‘Screenwriter Dies at Age 100, Of “Rashomon,” 1950, Greatest Film of Japan Ever’

Blog-Reference

The representative economics professor has not grasped what the state of current economics is#1 and what, by logical implication, his most urgent mission should be.

The fact is that economists have messed up
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

Instead of doing his proper job, the representative economist sooner or later turns to journalism, op-eding, propaganda, agenda-pushing, attention management, reputation management, social media trolling, and mystifying the history of economic thought through the erection of False-Hero Memorials.

Curiously, economists do not restrict their opinion management to economics proper but expand it to every walk of life.

How is it to explain that an economist who has not gotten the foundational concepts of his discipline straight, who has never grasped that utility-maximization and supply-demand-equilibrium is proto-scientific garbage, who does not understand how the actual economy works, who has not produced one iota of original scientific knowledge ― how, indeed, is it to explain ― that such a loser comments on the death of the screenwriter of a Japanese film and his trivial philosophy (“the human heart is impossible to understand”)?

Whatever Barkley Rosser and the other incompetent scientists are attempting to communicate ― it is NOT economics.

Egmont Kakarot-Handtke


#1 The miracle cure of economists’ micro-macro schizo

MMT is criminal economics

Comment on Tom Hickey/Tony Wikrent on ‘How are you going to pay for it? Why Understanding Monetary Theory and Policy Is Critical For the Left’

Blog-Reference

The journalist’s qualification consists of only one skill and that is how to write an emotion-catcher. First, the you-can-trust-me personality frame: I am from Racine, Wisconsin, then comes auntie with her heart-warming practical wisdom: “She [my aunt] used to say, ‘You know, during the Depression there wasn’t any money around. Then they decided to run a war, and there was all kinds of money around. Why can’t we do that when we want to do that?’” Gotcha, politicians, auntie from Wisconsin sees through your shenanigans!

The educated answer to the apparently dumb question How are you going to pay for it? is nobody pays because in a fiat money system WeThePeople/Government/Central Bank can easily produce money in any quantity. This MMT standard answer is, of course, true, but only technically.#1

Let us come back from journalism to reality. The correct answer is Dear questioner, it is WeThePeople who pays for it through stealth taxation, and economically it does not matter at all whether the government’s deficit-spending is for military or social purposes. The first thing to grasp is: YOU pay in real terms, either through open or stealth taxation.

But that’s not all. Because of the macroeconomic Profit Law, it holds always and everywhere: Public Deficit = Private Profit. So, it does not matter how the deficit money is spent, in any case, it increases macroeconomic profit by the same amount ― to the penny.#2 WeTheOligarchs say thank you to WeThePeople!

There is one correct way for the central bank to inject out-of-thin-air money into the economy and that is by financing a growing wage bill. The false way is the counterfeit-money-printer’s way, that is, to spend the additional money on current output. This leads to stealth taxation via the price mechanism or, as the euphemism goes, via the invisible hand.

Why do MMTers always laugh at the question How are you going to pay for it? Because they know that it is always the asking sucker who pays. Yes, it’s a rigged game, and journalists, economists, and MMTers are part of the plot.#3 That’s rather funny as any auntie from Wisconsin can tell you.

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 Keynes, Lerner, MMT, Trump and exploding profit
#3 The Kelton-Fraud

Related 'The Magic Money Tree is real ― too bad that the magic is fraud' and 'MMT: Academic snake oil for the people' and 'MMT and grassroots movements' and 'Criminals and the Monetary Order'.

The present non-existence of economics

Comment on Lars Syll/Kingsley Lewis on ‘The present state of economics’

Blog-Reference

You say: “While (S−I+T−G+M−X=0) is always necessarily true, it is merely a tautology based on accounting definitions.”

This is one of the oldest and most imbecilic slogans in the history of economics blather and proof that economists have produced NOTHING of scientific value for 200+ years. The equation is logically/mathematically false which is a testament to both orthodox AND heterodox economists’ abysmal stupidity.

Suggested links:

• Wikipedia and the promotion of economists’ idiotism
• What’s the use of economists?
• There is no soft science only soft brains
• All models are false because all economists are stupid
• Keynesians ― terminally stupid or worse?
• Why Post Keynesianism Is Not Yet a Science
• The profit theory is false since Adam Smith

For details of the big picture see:

• cross-references Failed/Fake Scientists
• cross-references Scientific Incompetence
• cross-references Keynesianism

Egmont Kakarot-Handtke

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Wikimedia AXEC143d Profit Law (with increasing complexity) and Balances Equation

What’s the use of economists?

Comment on Lars Syll on ‘What’s the use of economics?’

Blog-Reference and Blog-Reference and Blog-Reference on Jul 21

Lars Syll summarizes: “Much work done in mainstream theoretical economics is devoid of any explanatory interest. And not only that. Seen from a strictly scientific point of view, it has no value at all. It is a waste of time.”

True. The state of economics is this: 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.

Economics, though, is not alone orthodox economics but also heterodox economics. The fact is that Heterodoxy has been complicit in the failure. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong. As a result of the utter scientific incompetence of the representative economist, what has been achieved is the pluralism of provably false theories.#1, #2

The simple fact of the matter is that economists ― orthodox or heterodox do not matter ― are either stupid or corrupt or both. Take note:

(i) Economics is not a science but what Feynman called a cargo cult science.
(ii) To maintain that economics is a social science is the foundational blunder. Economics is a systems science.#3
(iii) Economists have not figured out to this day how the price- and profit mechanism works.#4
(iv) Economists have not even figured out what profit is.#5
(v) Economists are too stupid for the elementary mathematics of macroeconomic accounting.#6
(vi) Walrasian Micro and Keynesian Macro are both built upon false premises/axioms.#7 Because of this, the whole analytical superstructures are scientifically worthless. The same holds for Marxianism and Austrianism.
(vii) Economic policy guidance has no sound scientific foundations since Adam Smith/Karl Marx.
(viii) Economists have been political agenda pushers/useful political idiots from day one onward.

Economists are storytellers. Economics is a failed science. All microfounded (Walrasian) and macrofounded (Keynesian) models are provably false. Economists do not know how the economy works. Economics is a cargo cult science. The ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’ is a fraud. Heterodoxy has always been complicit in the fraud.

What’s the use of scientifically incompetent economists? Ask those who use them.

Egmont Kakarot-Handtke


#1 Economics: a science without scientists
#2 And the answer is NCND ― economics after 200+ years of Glomarization
#3 For details of the big picture see cross-references Not a Science of Behavior
#4 For details of the big picture see cross-references Failed/Fake Scientists
#5 Profit: after 200+ years, economists are still in the woods
#6 Wikipedia and the promotion of economists’ idiotism
#7 The miracle cure of economists’ micro-macro schizo

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REPLY to Andrew Anderson on Jul 20

You say: “I’d first ask what’s the use of the Fundamental Accounting Equation, Assets=Equity+Liabilities, with Liabilities that are largely a sham?”

The Fundamental Accounting Equation Assets=Equity+Liabilities is methodological garbage that proves only one thing: economists are too stupid for the elementary logic/ mathematics that underlies macroeconomic accounting. The formally correct equation reads Equity≡Assets−Liabilities.#1

For 200+ years, economists do not understand what science is all about and what the subject matter of economics is. This includes Orthodoxy, Heterodoxy, Walrasianism, Keynesianism, Marxianism, Austrianism, MMTers, Lars Syll, Tom Hickey, Matt Franko, and you.


#1 Wikipedia and the promotion of economists’ idiotism (II)

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REPLY to Matt Franko on Jul 20

What’s the use of economists?

It would certainly be a good thing if economists could increase scientific knowledge about how the monetary economy works. They have done nothing of the sort in the last 200+ years.

Does Tom Hickey’s and Matt Franko’s blather about methodology and the curriculum at Wharton and elsewhere contribute to anything that is of interest to anybody?

No, not at all, as far as scientific knowledge is concerned. But to filibuster about God, his wife, his poor qualification, and the rest of the world is a tried and tested method to distract from the point at issue. The point at issue is that MMTers are failed/fake scientists and that MMT is (i) proto-scientific garbage, and (ii), a political fraud.

While economists are useless for science, even the dumbest moron is useful as a sand sack in political warfare.

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REPLY to Matt Franko on Jul 20

Questions for Matt Franko and other certified cargo cult scientists.

From the axiomatically correct Profit Law for the open economy with government and profit distribution follows the AXEC balances equation (i) (I−S)+(G−T)+(X−M)−(Q−Yd)=0#1 which compares directly to the MMT balances equation (ii) (I−S)+(G−T)+(X−M)=0.#2

(a) Which of the equations satisfies the scientific criteria of material and formal consistency?
(b) Why do economists/mathematicians with university training not know the correct answer?#3
(c) How could it happen that academics propagate a provably false balances equation in their seminars and in public?


#1 Wikimedia AXEC143d Profit Law and Balances Equation
#2 Down with idiocy!
#3 Truth by definition? The Profit Theory is axiomatically false for 200+ years

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REPLY to Tom Hickey on Jul 21

The objective of economics is the true theory about how the economic system works, with truth well-defined as material/formal consistency. Instead of filibustering about the right methodology, it would be more effective to practically apply it and to report what new insights you have achieved. As J. S. Mill said: “Doubtless, the most effectual mode of showing how the sciences of Ethics and Politics may be constructed, would be to construct them . . . “

Instead of doing serious scientific work, you are promoting already falsified theories and scientifically incompetent economists.

A philosopher is supposed to contribute to the growth of scientific knowledge. As a soapbox philosopher (= Sophist in Plato’s terms) you are only heightening the already outsized heap of proto-scientific BS.

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Wikimedia AXEC144

The inexorable Paradigm Shift in economics

Comment on Asad Zaman on ‘Radical paradigm shifts’

Blog-Reference

If you can read this statement on the RWER blog
REAL-WORLD ECONOMICS REVIEW BLOG BLOCKS/DELETES ALL UNDESIRED COMMENTS
then it is NOT true.
However, if you CAN NOT read the statement on the RWER blog then it is true.#1

For further details related to the ongoing Paradigm Shift in economics see suggested links:

• Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need
• And the answer is NCND ― economics after 200+ years of Glomarization
• All models are false because all economists are stupid
• Throw them out! Orthodox and heterodox economists are unfit for science
• There is no soft science only soft brains
• Profit: after 200+ years, economists are still in the woods
• How the intelligent non-economist can refute every economist hands down
• Wikipedia and the promotion of economists’ idiotism (II)
• Hooray! The formalization issue is finally settled
• Enough! Economists, retire now!

For details of the big picture see:

• cross-references Failed/Fake Scientists
• cross-references Scientific Incompetence
• cross-references Heterodoxy
• cross-references Paradigm Shift

Egmont Kakarot-Handtke


#1 This is what one can actually read on the RWER blog of Jul 22 in case one is a researcher of economic methodology and needs a documented example of how traditional Heterodoxy finally hit the bottom of idiocy/corruption.

Related 'The present non-existence of economics' and 'What’s the use of economists?' and 'Heterodoxy ― an axiomatic failure just like Orthodoxy' and 'Lars Syll, fake scientist' and 'Demarcation works, but it takes longer in economics' and 'Economists ― blinded by political balloons' and 'Real-World Economics: The sanctuary of stupidity and corruption' and 'Asad Zaman marches with the Zeitgeist down a blind alley' and 'Does Asad Zaman fly with POL or SCI Airlines?' and 'Economics: Not a pretty story'.

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#PointOfProof

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REPLY to Jan Milch on Jul 22

You summarize: “With all that in mind I will leave the reader with a quote from Joan Robinson and John Eatwell’s excellent classroom book An Introduction to Modern Economics in which they clearly realise the problem that the idea of a static equilibrium between savings and investment has caused in the minds of economists since Keynes put it forward in his General Theory. What’s more, they also realise this problem in properly Myrdalian terms:

In the early days of the exposition of Keynes’ General Theory it was usual to argue as follows:
Y = C + I
Y = C + S
Therefore, I = S

But, since net investment and net saving are accounting identities, this was not a legitimate argument; it allowed hostile critics to create confusion. An ex-post accounting identity, which records what happened over, say, the past year, cannot explain causality; rather, it shows what has to be explained. Keynes’ theory did not demonstrate that the rate of saving is equal to the rate of investment, but explained through what mechanism this is brought about.”

The so-called “ex-post accounting identity” is provably false, to begin with.#1 The correct relationship reads Q≡I−S with Q signifying the monetary profit of the business sector as a whole. This axiomatically correct equation tells everyone:

• Keynes never understood what profit is, which is disqualifying for an economist.#2
• Keynes was too stupid for the elementary mathematics of National Accounting.#3
• Because the conceptual foundations of the General Theory are defective the whole analytical superstructure of Keynesianism is scientifically worthless. All this has NOTHING to do with the distinction ex-ante/ex-post or with equilibrium/disequilibrium.
• After-Keynesians, including the Stockholm School, Post-Keynesians, and other dim lights like G.L.S. Shackle, did not realize Keynes’ foundational blunder in the last 80+ years.#4

Keynes’ I=S, including all variants of IS-LM up to the present, is a harrowing testament to economists’ utter scientific incompetence.#5

Asad Zaman urges a radical Paradigm Shift. So be it. Walrasianism, Keynesianism, Marxianism, and Austrianism have to be buried at the Flat-Earth Cemetery.

First of all: Asad Zaman, Prof Dr. James Beckman, Dave Marsay, Vladimir A. Masch, Edward K Ross, Frank Salter, Craig, Helen Sakho, John Vertegaal, Jan Milch, Calgacus alias Some Guy, dingo342014, Robert Locke, and all others with a substandard IQ#6 simply get out of economics ― NOW.


#1 Wikipedia and the promotion of economists’ idiotism (II)
#2 Keynes’s Missing Axioms
#3 How Keynes got macro wrong and Allais got it right
#4 Why Post Keynesianism Is Not Yet a Science
#5 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#6 How the Intelligent Non-Economist Can Refute Every Economist Hands Down

This is what the RWER blog looks like on Jul 23: a black hole of idiocy.

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REPLY to Asad Zaman on Jul 24

Take notice: Economics is a failed science for 200+ years. Economists are storytellers. All microfounded (Walrasian) and macrofounded (Keynesian) models are provably false and that is the greater part of the peer-reviewed literature. All textbooks are false because economists got the foundational concept of profit wrong. To this day, economists do not know how the economy works. Economics is a cargo cult science. The ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’ is a fraud. Walrasians, Keynesians, Marxians, Austrians, and Pluralists are complicit in the failure/fake/fraud. Economic policy guidance has had no sound scientific foundations since Adam Smith. Economists are clowns/useful idiots in the political Circus Maximus.

Your whole discussion of methodology is proto-scientific garbage.#1 Science is about true/false and NOTHING else. And the truth is established by logical/empirical proof and NOT by faith, belief, tolerance, pluralism, love of paradox, moralizing, appeal to the masses, appeal to common sense, populism, prophesy of doom, scapegoating, folk psychology/ sociology, historical storytelling, appeal to emotion “I feel therefore I am”, outright blather and disinformation. These are the tools and tricks of political rhetoric since the Sophists.

Science is about what is materially/logically provable, all else is non-science. Non-science is 99 percent of human communication and it consists of vacuous gossip, silly propaganda, and senseless blather.

All of human civilization and material progress has been produced by scientists/engineers. Economic/mental/spiritual misery of the world is NOT and NEVER has been attributable to binary logic, science, rigorous proof, and the genuine scientist’s commitment to scientific ethics.

Your assertion: “Attempting to universalize application of logic to ALL domains of human knowledge has been truly catastrophic …” is, therefore, a smear of the worst sort. What is truly catastrophic is the stupidity/corruption of non- and anti-scientists.

Yes, mainstream economics is false and refuted on all counts. But, at some point, dead-horse-beating becomes itself counter-productive: “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)

A Paradigm Shift consists of moving from the set of axioms that constitutes the false paradigm to a new set of axioms.#2, #3 So, stop waffling about “the blood flowing in my veins, the tingling of my skin, and a thousand other bodily sensations” and simply show what you think the new economic axioms are.#4 Or, even better, get out of economics and focus on feeling the farts in your brain.


#1 Does Asad Zaman fly with POL or SCI Airlines?
#2 For details of the big picture see cross-references Paradigm Shift
#3 True macrofoundations: the reset of economics
#4 Show first your economic axioms or get out of the discussion

This is what the RWER blog looks like on Jul 24.

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REPLY to Asad Zaman on Jul 25

With regard to economics, the most important thing is to keep political and theoretical economics apart. The main differences are: (i) The goal of political economics is to successfully push an agenda, and 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.

The objective of theoretical economics is the TRUE theory: “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)

The most important thing is to realize that 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. Orthodox AND heterodox economics is proto-scientific garbage to this day.

Agenda pushers ― right-wing, left-wing, progressive, conservative, liberal, communist, fascist, socialist, Christian/Muslim/Hindu/others, LGBTQ+, etcetera ― are the very antithesis of scientists. Agenda pushers have a disturbed relationship with the truth, more specifically with scientific truth which is well-defined by material/formal consistency and established by rigorous proof.

Political agenda pushers are stupid and corrupt and they identify themselves with a typical set of slogans:#1

• “… there are no universal truths out there.” (Zaman)
• “… there is true-for-me and true-for-you because our subjective frameworks interact with the objective to produce the ‘facts’.” (Zaman)
• “Anything goes!” (Feyerabend)
• “… instead of displaying the truth … we have to think seriously about HOW we can create consensus on new ways of seeing reality. This is where the now forgotten and lost art of rhetoric is required.” (Zaman)
• “We can only create an illusion of certainty.” (Zaman)
• ‘… mathematical reasoning, i.e. quantifying the unquantifiable, results in completely absurd and ridiculous conclusions.’ (Zaman, paraphrase)
• Data are questionable, test results are open to interpretation.
• “BINARY logic is a catastrophe … [It] ignores the role of the subjective ― every empirical statement represents truth-to-me and if this can differ from truth-to-you than the role of logic becomes very limited.” (Zaman)
• “… we need to create converts to a new paradigm.” (Zaman)

The last sentence proves that Asad Zaman thinks that a new paradigm is something like a new belief system. For any belief system or cult, the indicator of its truth value consists of the number of adherents and NOT in the proof of material/formal consistency. Obviously, Asad Zaman has NO idea what a paradigm is. And he has NO idea what methodology is all about.

Aristotle put it in rather simple terms: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

The methodological term for the premises of a theory is axioms. Hence, a Paradigm Shift consists of moving from the set of axioms that constitutes the obsolete paradigm to a superior set of axioms.#2 The change of axioms changes the whole analytical superstructure. The critique of isolated assertions of the superstructure changes not much if anything. Heterodoxy criticizes Orthodoxy for 150+ years yet the methodological madness of constrained optimization and equilibrium is still around. The reason why economics is the worst failure in the history of modern science is that BOTH orthodox and heterodox economists are incompetent scientists.

The very characteristic of political economists is that they avoid clearly stating their axioms and instead apply all rhetorical tricks of the Sophist’s toolbox to keep the discourse in the swamp where “nothing is clear and everything is possible” (Keynes).

Vagueness/inconclusiveness/filibuster keeps the stupid and corrupt agenda pusher in his proto-scientific business because: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman)

This leaves us with the pluralism of false economic theories, i.e. Walrasianism, Keynesianism, Marxianism, and Austrianism. But not all hope is lost: “I have made substantial progress towards developing an alternative paradigm within an Islamic framework.” (Asad Zaman)

Orthodox economics has committed suicide with DSGE and Heterodoxy is currently setting a new record of idiocy.


#1 Failed economics: The losers’ long list of lame excuses
#2 For the correct set of axioms see Wikimedia

This is what the RWER blog looks like on Jul 25.

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REPLY to Asad Zaman on Jul 26

Economics started as Political Economy. Neither Adam Smith nor Karl Marx had any grasp of science but in accordance with the Zeitgeist, they had to dress their agenda-pushing up as science. Neither Adam Smith nor Karl Marx nor their respective followers figured out how the economy works. What Walrasians, Keynesians, Marxians, and Austrians have put forward as theories do not satisfy the scientific criteria of material and formal consistency.

For 200+ years, economists have made policy proposals that have no sound scientific foundations. They are too stupid for the elementary mathematics of National Accounting but claim to change society for the better or even to save humanity. The fact is that economists have always been a hazard to their fellow citizens.#1

Economics is a failed science and what is urgently needed is a Paradigm Shift. Being political agenda pushers, heterodox economists do not understand what a Paradigm Shift is and think that it is, in essence, the replacement of one political clique by another.

Accordingly, Asad Zaman makes it clear that the whole point of a Paradigm Shift is not developing the true theory but developing an effective marketing strategy: “Before investing time to understand the world-according-to-Salter or according-to-Shiozawa, I would want the answer to two questions: [1] is this easy to communicate to others and to persuade others? If NOT, then there is no point in investing time in it, because we will not be able to build consensus on it. Judging by Salter’s own statements, he has not been able to find many takers, which means that he does not have a good strategy for persuasion. If the creator of the truth cannot market it, it does not seem that I would be able to market it better, and if there is Salter-truth that is valuable, but we cannot create consensus for it, then it would be useless as an instrument to create social change.”

Clearly, Asad Zaman is not interested in the truth value of a theory but in its propaganda value. Clearly, the soapbox economist Asad Zaman as the methodological loudspeaker of Heterodoxy stands firmly in the tradition of the founding fathers whose business was political agenda pushing.

Just like Orthodoxy, Heterodoxy has ZERO scientific value. Asad Zaman’s claim to bring about a Paradigm Shift is laughable. Heterodox economists do not know how the economy works.#2 This Radical-Paradigm-Shifts-thread proves beyond all doubt that heterodox economists are as stupid and corrupt as orthodox economists.

Needless to emphasize that it is perfectly legitimate to push an agenda. The economists’ fraud consists NOT of spreading propaganda but of telling the general public that they are doing science. To throw both orthodox and heterodox economists out of science is not a restriction of free speech but the overdue implementation of well-defined scientific standards.

The mission of economics as a science is to produce the true theory ― not more, not less. What has been co-produced hitherto by Orthodoxy and Heterodoxy is nothing but proto-scientific garbage.


#1 Mass unemployment: The joint failure of orthodox and heterodox economics
#2 For details of the big picture see cross-references Heterodoxy

This is what the RWER blog looks like on Jul 26.

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REPLY to Asad Zaman on Jul 27

There are revolutions in the political realm and there are Paradigm Shifts in the scientific realm. Kuhn associated the two concepts in his book The Structure of Scientific Revolutions.#1

The analogy is a good one because it thrills the general reader. Needless to emphasize that the title The Structure of Paradigm Shifts would have turned off everybody except three specialists in the methodology field.

While the association revolution/Paradigm-Shift is good from the marketing standpoint it is bad from the methodological standpoint. Science and politics are entirely different realms and they run on incompatible principles. Both realms have to be kept strictly apart because politics always and everywhere corrupts science. This happened in economics.

Theoretical economics (= science) had been captured from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Walrasianism, Keynesianism, Marxianism, and Austrianism is nothing but thinly disguised propaganda.

You retain the modus operandi of Political Economy. What you are proposing is to gear up the propaganda and organize the necessary political revolution. I have NO qualms with this.

In order to make a revolution, though, nobody needs to study economics first, neither is a deeper knowledge of scientific methodology required, and least of all a critique of Positivism. All that is needed is a Manifesto (Craig has already produced the raw version), revolutionary furor, and a sufficient number of guillotines. What is NOT needed is the zillionst critique of homo oeconomicus.

What is not quite logical is that you want a revolution but work yourself up with a Paradigm Shift. This is curious because everyone understands that the last thing the masses need to get into revolutionary action is a revelation about the catastrophe of binary logic.

The ultimate cause of the indisputable scientific failure of orthodox AND heterodox economics is that it has been captured from the very beginning by political agenda pushers. These moronic trolls kept economics for 200+ years in the proto-scientific swamp.

In order to make progress in economics, politics, and science have to be strictly separated. So, the agenda pushers = fake scientists get out of economics and focus on the Revolution, and the genuine scientists get out of the useful-idiot-business and focus on the Paradigm Shift.

You try to be ironic: “Well Egmont Kakarot-Handtke — as far as I understand it, you have ALREADY produced a true theory, succeeding where everyone else, major thinkers as well as minor, has failed. So the job of finding the truth is done. Well done!! now we can all go home.”

Not quite. You have to decide here and now between Revolution or Paradigm Shift. If you chose the latter, stop filibustering about methodology and present what you think are the true axioms of the new economic Paradigm. Communicatively, this can easily be done on a quarter of a page.#2

#1See also the chapter How Kuhn Unwittingly Saved Social Science From A Radical Future, Fuller, S. (2000). Thomas Kuhn. University of Chicago Press, pp. 227 ff.
#2 For the benchmark see New Foundations of Economics on Wikimedia

This is what the RWER blog looks like on Jul 27

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For a SUMMARY of ‘Radical paradigm shifts’ on Jul 30 see
Real-World Economics: The sanctuary of stupidity and corruption

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REPLY to John Vertegaal, Calgacus, Craig on Jul 31

What neither orthodox nor heterodox economists have figured out since Keynes is that I=S is NEITHER an accounting identity#1 nor an equilibrium condition but proto-scientific garbage.#2

As a consequence, not only Keynesianism and Post-Keynesianism but also Walrasianism, Marxianism, Austrianism, and MMT have always been outside of science.

The correct equation reads Q≡I−S. Do NOT try to understand it because it will explode your fruit-fly brains.#3


#1 Wikipedia and the promotion of economists’ idiotism (II)
#2 For details of the big picture see cross-references Refutation of I=S and cross-references Accounting and cross-references MMT
#3 How Keynes got macro wrong and Allais got it right

This is what the RWER blog looks like on Aug 1

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Wikimedia AXEC144

MMTers make Capitalism work

Comment on John Atcheson on ‘Let’s Just Admit It: Capitalism Doesn’t Work’

Blog-Reference

John Atcheson summarizes: “In short, we are essentially creating debt for future generations and calling it wealth creation.”

That, of course, is true because Public Deficit = Private Profit. But who is “We”?

“We” that are the Deficit Owls on Twitter, that is Stephanie Kelton et al. in the yellow press,#1 Warren Mosler et al. in the financial community,#2 Bill Mitchell et al. in academia,#3 that is the philosopher Tom Hickey in the econblogosphere, one Konrad in the spiritual parallel universe, that are the deficit-spenders/money-creators from the history of economic thought,#4 and many others. “We” that is first and foremost the MMT agenda pushers.#5

Capitalism works because of the macroeconomic Profit Law Q_m≡Y_d+(I−S_m)+(G−T)+(X−M) which, oddly enough, economists do not understand since the founding fathers.#6, #7 The Profit Law tells “Us” also that Capitalism will eventually break down.#8

The MMTers’ assertion that debt does not matter and that the sovereign money creator cannot go bust is somewhat beside the point. Capitalism lives literally on borrowed time.

Egmont Kakarot-Handtke


#1 The Kelton-Fraud
#2 MMT: The one deadly error/fraud of Warren Mosler
#3 Bill Mitchell, MMT’s fake scientist
#4 Keynes, Lerner, MMT, Trump and exploding profit
#5 For the full-spectrum refutation of MMT see cross-references MMT
#6 Truth by definition? The Profit Theory is axiomatically false for 200+ years
#7 Wikipedia and the promotion of economists’ idiotism (II)
#8 Mathematical Proof of the Breakdown of Capitalism

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REPLY to Tom Hickey on Jul 19

“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)

The true theory states that macroeconomic profit is given by Q_m≡Y_d+(I−S_m)+(G−T)+(X−M).#1 Because all variables are measurable with the precision of two decimal places the Profit Law is testable.

The Profit Law is free of all Human-Nature factors.

The minimum condition for the monetary economy to work ― Capitalist, Socialist, Communist does NOT matter ― is that macroeconomic profit is greater than zero. Otherwise, the monetary economy breaks down.

According to the axiomatically correct Profit Law, one way to produce profit is deficit-spending/money-creation, i.e. Q_m=(G−T), i.e. Public Deficit = Private Profit.

• MMT’s economic policy guidance boils down to deficit-spending/money-creation.
• MMT agenda pushers promote the production of profit.
• Ultimately, MMT policy is causal for the unequal distribution of income/financial wealth.

It does not matter how MMTers see themselves or present themselves in public ― that’s all in the imagination ―, objectively they secure the perpetual self-financing of the Oligarchy.


#1 Wikimedia AXEC143d Profit Law and Sectoral Balances Equation

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Twitter/X Dec 15, 2024 Not bad, only six years behind the curve

There is no soft science only soft brains

Comment on Lars Syll on ‘Hard and soft science — a flawed dichotomy’

Blog-Reference and Blog-Reference

When economists are ridiculed for not having achieved anything of scientific value since Adam Smith they retort with the Cobden-Con: “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)

Nothing has changed since 1885, economics is still a failed science and the excuses are still the same: “The distinctions between hard and soft sciences are part of our culture … But the important distinction is really not between the hard and the soft sciences. Rather, it is between the hard and the easy sciences. Easy-to-do science is what those in physics, chemistry, geology, and some other fields do. Hard-to-do science is what the social scientists do and, in particular, it is what we educational researchers do. In my estimation, we have the hardest-to-do science of them all! We do our science under conditions that physical scientists find intolerable. We face particular problems and must deal with local conditions that limit generalizations and theory building-problems that are different from those faced by the easier-to-do sciences …” (Berliner)#1

The simple fact is that economists ― orthodox or heterodox do not matter ― are either stupid or corrupt or both. Take note:

(i) Economics is not a science but what Feynman called a cargo cult science.#2
(ii) To maintain that economics is a social science is a foundational blunder. Economics is a systems science.#3
(iii) Economists have not figured out to this day how the price- and profit mechanism works.#4
(iv) Economists have not figured out what profit is.#5
(v) Economists are too stupid for the elementary mathematics of macroeconomic accounting.#6
(vi) Walrasian Micro and Keynesian Macro are both built upon false premises/axioms. Because of this, the whole analytical superstructures are scientifically worthless. The same holds for Marxianism and Austrianism.
(vii) Economic policy guidance has no sound scientific foundations since Adam Smith/Karl Marx.
(viii) Economists have been political agenda pushers/useful political idiots from day one and nothing has changed since.

Soapbox economics is easy but science is hard. So, why should a utility-maximizing economist do science: “If the real world is fuzzy, vague and indeterminate, then why should our models build upon a desire to describe it as precise and predictable?” (Syll)

The first rule for soapbox economists is to never leave the swamp where “nothing is clear and everything is possible” (Keynes). Every half-witted agenda pusher knows that “With enough fog emitted, almost anything becomes possible.” (Mirowski) The foggy swamp of political economics is the natural habitat of confused confusers. And Lars Syll is obviously one of them.#7

Egmont Kakarot-Handtke


#1 Failed economics: The losers’ long list of lame excuses
#2 What is so great about cargo cult science? or, How economists learned to stop worrying about failure
#3 For details of the big picture see cross-references Not a Science of Behavior
#4 For details of the big picture see cross-references Failed/Fake Scientists
#5 Profit: after 200+ years, economists are still in the woods
#6 Wikipedia and the promotion of economists’ idiotism (II)
#7 Cryptoeconomics ― the best of Lars Syll’s spam folder

Related 'And the answer is NCND ― economics after 200+ years of Glomarization' and 'Econ 101: Economists flunk the intelligence test at the first hurdle' and 'Economics: The greatest scientific fraud in modern times' and 'The dirty secret of Capitalism: Economists have NO idea how the Capitalism works'.

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Wikimedia AXEC139c

Wikipedia and the promotion of economists’ idiotism (II)

Comment on Wikipedia’s ‘Accounting identity’#1

Own post, no external Blog-Reference

“In accounting, finance and economics, an accounting identity is an equality that must be true regardless of the value of its variables, or a statement that by definition (or construction) must be true.” and “The term accounting identity may be used to distinguish between propositions that are theories (which may or may not be true, or relationships that may or may not always hold) and statements that are by definition true.”

The first point to notice is that there is NO such thing as “true by definition”.#2 Truth has to be established by proof. Scientific truth is well-defined by 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 second point is that the term “accounting identity” shows that economists do not understand elementary mathematics that underlies accounting.

The third point is that identities that are incompatible are declared “true by definition”. Simple logic tells everyone that wildly different accounting identities cannot all be “true by definition”.

Economists have obviously a serious problem with methodology. More specifically, they suffer badly from the Humpty Dumpty Fallacy which is expressed in these familiar slogans:

• “You can define anything you want but as a sage once said ‘A rose by any other name will smell as sweet!’” (Davidson)
• “For, on principle, we may call things what we please.” (Schumpeter)
• “This is a tough question to adjudicate on scientific grounds since the issue is largely definitional and, as Lewis Carroll pointed out, everyone is entitled to his own definitions. (Blinder)
• “‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all’.”

The point is that a single definition is indeed arbitrary but one NEVER has only one definition. So, one has to make sure that the set of definitions that refer to one subject matter is internally consistent.

From methodology, it is known that “The often-heard rule that concepts are to be defined before they are used in a discussion is much too simple-minded pre-Hilbertian. The only way to arrive at coherent languages is to set up axiomatic systems implicitly defining the basic concepts.” (Schmiechen) The fact of the matter is that the foundational concepts of economic are ill-defined. And this is why economics never rose above the proto-scientific level.

For compelling methodological reasons, economics has to be built upon objective-systemic macrofoundations.#3, #4, #5

(A0) The objectively given and most elementary systemic configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. For a start, the elementary production-consumption economy is given by three macroeconomic axioms.
(A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L.
(A2) O=RL output O is equal to productivity R times working hours L.
(A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

From the macroeconomic axioms follow models by specification. The Ur-Model is given by two conditions (X=O, C=Yw) and two definitions (monetary profit/loss Qm≡C−Yw, monetary saving/dissaving Sm≡Yw−C).

It always holds Qm≡−Sm, in other words, at the heart of the monetary economy is an identity: the business sector’s deficit (surplus) equals the household sector’s surplus (deficit). Put bluntly, loss is the counterpart of saving and profit is the counterpart of dissaving. This is the most elementary form of the macroeconomic Profit Law.

The point to notice is that a definition is a one-way relation. The new term “monetary profit Qm” (= definiendum) is derived from the terms already given by the axioms, i.e. C and Yw (= definiens).

From the definition (≡) of the balance of the business sector Qm≡C−Yw, follows that to write down the identity Qm+Yw=C is INADMISSIBLE. So, one is NOT permitted to say that “total income” is the “sum of profits and wages” and that “total income” is equal to household sector spending C or that Income = Value of Output (Keynes). Economists, though, do not get it to this day.#6, #7

What should be quite clear is that profit Qm is a balance, i.e. a difference of flows, and wage income is a flow from the business to the household sector. So profit is NOT a sub-category of total income but a balance. A balance can either be positive or negative while a flow like wage income is always greater than zero.

So, Qm+Yw=C is NOT a balance identity that is “true by definition” but plain methodological garbage. From Qm≡−Sm, in turn, follows immediately that the Keynesian accounting identity I=S and the MMT balances equation (I−S)+(G−T)+(X−M)=0 are methodological garbage by logical implication.

What holds for the flows of the Profit-and-Loss-Account holds also for Wikipedia’s “most basic identity in accounting”, that is, Assets=Liabilities+Equity. The correct definition for the Asset-and-Liability-Account of the business sector is the one-way relation Equity≡Assets−Liabilities.

The economic Ur-Model above tells us two important things: (i) under the condition of market-clearing X=O and budget-balancing C=Yw, macroeconomic profit is zero and independent of employment, productivity, wage rate, etcetera, and (ii), because of Qm≡−Sm macroeconomic profit comes in the most elementary case from dissaving, i.e. the growth of household sector debt.#8

From the fact that the foundational concepts of economics ― profit and income ― are ill-defined follows (i) that the Wikipedia entry “Accounting identity” is proto-scientific garbage, and (ii), that all Wikipedia entries which directly or indirectly depend on the definition of profit/income are proto-scientific garbage by logical implication.#9, #10

Egmont Kakarot-Handtke


#1 Wikipedia Accounting identity
#2 Truth by definition? The Profit Theory is axiomatically false for 200+ years
#3 For details of the big picture see cross-references Axiomatization
#4 The Common Error of Common Sense: An Essential Rectification of the Accounting Approach
#5 Wikimedia AXEC137 Macrofoundations
#6 How the Intelligent Non-Economist Can Refute Every Economist Hands Down
#7 For details of the big picture see cross-references Profit
#8 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#9 Wikipedia and the promotion of economists’ idiotism (I)
#10 Hooray! The formalization issue is finally settled

Related 'Humpty Dumpty is back again' and 'The Humpty Dumpty methodology' and 'Economics: 200+ years of scientific incompetence and fraud' and 'Economists: just too stupid for counting' and 'Keynes and the logical brilliance of Bedlam' and 'Yes, economists are really that stupid' and 'Keynes ― the poster boy for the weakness of the economist’s mind' and 'MMT and the canonical macroeconomic model'.

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Wikimedia AXEC143d