October 27, 2018

Oxford economics — still at the proto-scientific level

Comment on Simon Wren-Lewis on ‘Why should someone who is anti-austerity care about debt’


Simon Wren-Lewis summarizes: “This is not the only reason why raising government debt to GDP in the long run can be detrimental, but this one is simple because it depends only on some basic economics, algebra and logic.”

The fact of the matter is that to this day economists do not get basic economics, algebra and logic right. Simon-Wren Lewis is no exception. He is too stupid for the elementary algebra that underlies macroeconomics.

To make matters short: The central problem of the MMT policy of permanent deficit-spending/money-creation and a permanently growing debt is NOT inflation but distribution. In political terms, MMT policy benefits the Oligarchy and NOT WeThePeople.

The macroeconomic Profit Law, which is unknown to the Oxford economist Simon Wren-Lewis, says Public Deficit = Private Profit and this follows straight from the TRUE sectoral balances equation (X−M)+(G−T)+(I−Sm)−(Qm−Yd)=0 which compares to the FALSE Post-Keynesian/MMT balances equation (X−M)+(G−T)+(I−S)=0.#1, #2, #3

Neither MMTers nor Mainstreamers ever got profit right. As Mirowski put it: “... one of the most convoluted and muddled areas in economic theory: the theory of profit.”#4 This is why economics never rose above the proto-scientific level and why the debate about austerity and budget-balancing is so utterly absurd.

Oxford economics, in particular, is a scientific failure.#5

Simon Wren-Lewis argues: “However there is another reason to demand a higher nominal interest rate on debt, and that is if you think there will be additional inflation in the country. Spending more without raising taxes will tends to increase inflation.”

This is the standard argument against MMT and it is patently false. Deficit-spending/ money-creation causes a small one-off price hike but NO inflation.#6, #7 So, as a matter of principle, public debt can grow steadily for an indefinite time without ever causing inflation.

Economically, the permanent growth of public debt is a program for the self-alimentation of the Oligarchy. Whether they are aware of it or not does not matter, but de facto MMTers are the agenda-pushers of Wall Street.#8, #9

Egmont Kakarot-Handtke

#1 Wikipedia and the promotion of economists’ idiotism (II)
#2 Truth by definition? The Profit Theory is axiomatically false for 200+ years
#3 Back-of-the-envelope proof:
If the total wage income of the household sector is 100 in a given period and the household sector spends all on consumption, then the macroeconomic profit of the business sector is zero.
If the total wage income of the household sector is 100 and the household sector spends all on consumption and the government sector applies deficit-spending/money-creation of 10, then the profit of the business sector is 10.
Generalization: Public Deficit = Private Profit.
#4 For details of the big picture see cross-references Profit
#5 Where economics went wrong (II)
#6 MMT was right all along: Gov-Deficits do NOT cause inflation
#7 Economics as tireless production of proto-scientific garbage: inflation theory as an example
#8 MMT and the overall political corruption of economics
#9 Mission impossible: economists join WeThePeople

Related 'Legitimacy lost' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'The economist as useful political idiot' and 'The demise of phony experts: macroeconomics is provably false' and 'Why is economics a total scientific failure?' and 'Macroeconomics: self-delusion and empty promises' and 'Economics has arrived at the bottom of the proto-scientific shithole' and 'How MMT fools the ninety-nine percenters' and 'Political economics: Who hijacks British Labour?' and 'Deficits matter for distribution' and 'How some MMTers got inflation wrong' and 'Inflation: back to basics'.


TWITTER on Oct 29

The interest effect of public debt is deflationary because the propensity to consume of the interest receivers is lower than that of the average taxpayer.

TWITTER on Oct 29

MMT's permanent deficit-spending/money-creation is lethal because of the distribution effect and NOT of the inflation effect.

TWITTER on Oct 29