Blog-Reference and Blog-Reference and Blog-Reference on Sep 8
Charles Adams correctly states: “There are few things in economics that are true so when we find one we should cling on to that. Something that is true is that the sum of all sectors is zero. This is a simple accounting identity. Basically, someone (or sector) can only be in surplus because someone else (or another sector) has lent them the money.” and “If we aggregate all the sectors into only just two, public and private, then it follows summing to zero means that when we plot their respective surpluses or deficits they will be a mirror image of one another. In words, the public sector's deficit is the private sector's surplus or vice versa, or as Stephanie Kelton puts it succinctly in this video, the government's red ink is our black ink.”
The physicist Charles Adams is obviously just as stupid or corrupt or both as MMT's Stephanie Kelton.#1, #2 In fact, he is even worse because he has not realized that the MMT accounting identity/sectoral balances equation has already been refuted.#3, #4
To make matters short, here is the gist of the proof:
• 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.
• The elementary production-consumption economy is given with three axioms, two conditions, and two definitions, i.e. monetary profit/loss Qm≡Ec−Yw, monetary saving/dissaving Sm≡Yw−Ec. Legend: Ec consumption expenditures, Yw wage income.
• It always holds Qm≡−Sm, in other words, the business sector’s monetary profit/loss Qm equals the household sector’s monetary dissaving/saving −Sm.
• For the more complex economy follows the axiomatically correct balances equation (X−M)+(G−T)+(I−Sm)−(Qm−Yd)=0, which reduces to Qm=G−T, that is Public Deficit = Private Profit.#6
• In marked contrast, the false MMT balances equation reads (X−M)+(G−T)+(I−S)=0, which reduces to S=G−T.
It is a curious fact that in Charles Adams’ ‘The single most important piece of economics that everyone should know’ the word profit does not appear once despite the fact that profit is the single most important variable in economics.#7
This tells one that Charles Adams has NO idea of what he is talking about.
Egmont Kakarot-Handtke
#1 Down with idiocy!
#2 The Kelton-Fraud
#3 Wikipedia and the promotion of economists’ idiotism (II)
#4 For the full-spectrum refutation of MMT see cross-references MMT
#5 MMT: How mathematical incompetence helps the Kelton-Fraud
#6 DSGE and profit―forget it! MMT and profit―forget it!
#7 MMT and the magical profit disappearance
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REPLY to Ed Zimmer on Sep 9You say: “E.K-H’s so-called axioms don’t even hold up to elementary common sense.”
In the meantime, even the most retarded folks should have realized that common sense never has been and never will be a valid argument in a scientific debate.
About the relationship between common sense and science all has been said by the great methodologist J. S. Mill 150+ years ago: “People fancied they saw the sun rise and set, the stars revolve in circles round the pole. We now know that they saw no such thing; what they really saw was a set of appearances, equally reconcileable with the theory they held and with a totally different one. It seems strange that such an instance as this, ..., should not have opened the eyes of the bigots of common sense, and inspired them with a more modest distrust of the competency of mere ignorance to judge the conclusions of cultivated thought.” #1, #2, #3
#1 Why J. S. Mill had no friendly word for the bigots and votaries of common sense
#2 The bigots of common sense
#3 Misled by ordinary intuition and common sense
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REPLY to Matt Franko on Sep 9Charles Adams states: “There are few things in economics that are true so when we find one we should cling on to that. Something that is true is that the sum of all sectors is zero. This is a simple accounting identity.”
You say: “Anyone can regurgitate an accounting identity.”
I say: “The axiomatically correct accounting identity reads in the most elementary case Qm+Sm=0 and the MMT identity is provably false.”#1, #2
Can you now write down your accounting identity? This is the precondition for determining which one is true.
After all, we are dealing with ‘The single most important piece of economics that everyone should know.’
#1 Wikipedia and the promotion of economists’ idiotism (I)
#2 Wikipedia and the promotion of economists’ idiotism (II)
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REPLY to Ed Zimmer, Tom Hickey on Sep 10The axiomatically correct accounting identity reads in the most elementary case Qm≡−Sm, in words, macroeconomic profit/loss is the complementary of dissaving/saving, or, as Charles Adams put it in general terms “the sum of all sectors is zero”. The number of sectors is two, to begin with. This is the irreducible minimalist configuration. Analytically, this is the correct starting point.
The 3-bar symbol indicates a definition. A definition introduces a new variable that is composed of the axiomatically given variables which are connected by mathematical operators. This technicality has been explained elsewhere and is of no importance in the present context.
The decisive point is that monetary profit for the business sector as a whole Qm depends alone on the dissaving of the household sector as a whole −Sm and NOT on productivity, the wage rate, exploitation, monopoly, market power, union strength, greed, profit maximization, etcetera which, in turn, means that the familiar microeconomic explanations of profit are false for 200+ years. And this, in turn, means that Distribution Theory is false. And this, in turn, means that economics is proto-scientific garbage from the founding fathers onward to MMT.#1
For the complex economy with more than two sectors follows the axiomatically correct balances equation (X−M)+(G−T)+(I−Sm)−(Qm−Yd)=0#2 which is obviously different from the false MMT balances equation (X−M)+(G−T)+(I−S)=0.#3
The bottom line is that MMTers got the macroeconomic accounting identity wrong. This is a mathematical fact.#4 It tells the world that economists in general and MMTers, in particular, are too stupid for the elementary mathematics that underlies macroeconomic accounting.#5 It is a grave state of affairs when the elementary equation Qm+Sm=0 is beyond the understanding of academics.
#1 Ricardo, too, got profit theory wrong
#2 Go! ― test the Profit and Employment Law
#3 Rectification of MMT macro accounting
#4 Wikipedia and the promotion of economists’ idiotism (II)
#5 For details of the big picture see cross-references Accounting
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REPLY to Tom Hickey, Matt Franko on Sep 10Charles Adams deals with ‘The single most important piece of economics that everyone should know.’
Charles Adams correctly states: “There are few things in economics that are true so when we find one we should cling on to that. Something that is true is that the sum of all sectors is zero. This is a simple accounting identity. Basically, someone (or sector) can only be in surplus because someone else (or another sector) has lent them the money.”
Up to this point, all is fine in general terms.
In concrete terms, it holds for the two-sector economy (business, household) Qm≡−Sm (i).
For the three-sector economy (business, household, government) holds Qm+Sm−(G−T)=0 or Qm+Sm=(G−T) (ii), i.e. business sector’s profit Qm plus household sector’s saving Sm is equal to government sector’s deficit (G−T).#1
Up to this point, all is fine in accounting terms. But now comes the MMT blunder/fraud. Charles Adams says: “If we aggregate all the sectors into only just two, public and private, then it follows summing to zero means that when we plot their respective surpluses or deficits they will be a mirror image of one another. In other words, the public sector's deficit is the private sector's surplus or as vice versa, or as Stephanie Kelton puts it succinctly in this video, the government's red ink is our black ink.”
The sleight of hand consists of the tacit introduction of an additional/redundant definition S≡Qm+Sm, i.e. private sector surplus S is the sum of the business sector’s profit Qm and the household sector’s saving Sm.
So, eq. (ii) Qm+Sm=(G−T) becomes S=(G−T) (iii), i.e. “our” black ink S is the government’s red ink (G−T). The MMT fraud consists of lumping “their” profit Qm and “our” saving Sm together to “our” black ink.#2 Hokuspokus Simsalabim, profit is gone and then is heard no more when MMTers climb on a soapbox or advise Bernie Sanders and straightforwardly push their Wall Street/City of London agenda of deficit spending (G−T)>0, which results in “their” profit Qm for any given amount of “our” saving Sm, i.e. Public Deficit = Private Profit.
Outside academic economics, to let profit disappear is called accounting fraud, and accountants are sent to jail for it. This is ‘The single most important piece of economics that everyone should know.’
#1 Rectification of MMT macro accounting
#2 The Kelton-Fraud
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REPLY to Ed Zimmer on Sep 10You say: “E.K-H’s basic error is believing an ‘identity’ (3-bar symbol) is different than an ‘equality’ (2-bar symbol), which is simply not the case for numerical variables …”
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) Ec=PX consumption expenditure Ec is equal to price P times quantity bought/sold X.
The axiom set consists of 4 real variables L, R, O, X, and 4 nominal variables Yw, W, Ec, P.
From these variables, only a subset reappears in macroeconomic accounting, viz. the nominal flows Ec and Yw.
Now, two new variables are introduced. Monetary profit of the business sector Qm is defined as Qm≡Ec−Yw (i) and monetary saving of the household sector Sm as Sm≡Yw−Ec (ii).
The 3-bar symbol ≡ means in the given context “is defined as”.#1
It obviously holds Qm+Sm=0 when (i) and (ii) are inserted. In the words of Charles Adams, “Something that is true is that the sum of all sectors is zero.”#2
This statement follows logically from the axioms (A1) to (A3) and the definitions (i) and (ii).
#1 Wikipedia List of mathematical symbols
#2 In the comment section, Adams refers explicitly back to Stützel, see also Keenonomics, aggregate demand/change of debt, and some misleading critique.
For more about the balance mechanics of Stützel see AXECquery.
