October 30, 2018

What comes first: eco-self-destruction or oeco-self-destruction?

Comment on Sandwichman on ‘Business As Usual: Running on Empty’


Ecological self-destruction is the subject-matter of physics, biology, climatology, etcetera. Economists have nothing to say about these scientific issues because they are simply too incompetent for science. Economics is, after 200+ years, still at the proto-scientific level.

To make matters short, the central economic question is: Is the monetary economy sustainable on its own terms, that is, even if it faces no physical limits? The answer is NO.

Let us agree that, roughly speaking, the monetary economy as we know it can only exist if macroeconomic profit is positive and that the economy will break down if macroeconomic profit turns to loss. So, the question is, can it happen? and in case of yes, when will it happen?

Now, the axiomatically correct macroeconomic Profit Law says Q≡Qm+Qn (i) with Qm≡Yd+(X−M)+(G−T)+(I−Sm) (ii) which simplifies to Qm≡I−Sm (iii) if Qn, Yd, X, M, G, T is set to zero.#1 Eq. (iii) says that monetary profit Qm is positive as long as the business sector’s investment expenditures are greater than the household sector’s saving. Or, if the household sector’s budget is balanced in each period, i.e. Sm=0 ⇒ Qm=I (iv), and this means that monetary profit Qm is positive as long as investment expenditures are positive (depreciation is a sub-item of Qn). In other words, the economy must grow or it drops dead. This may happen before the economy reaches the physical limits of growth.

The basic message of the Profit Law is that the monetary economy gets in trouble as soon as economic growth, expressed by I, slows down. The critical point is in the most elementary case at I=0.

However, the economically critical point may be reached earlier or later. The axiomatically correct macroeconomic Profit Law tells everyone that the point is reached earlier if, for example, the household sector’s saving Sm is greater than zero. The point is reached later if the government runs a deficit, i.e. if G−T is greater than zero.

The task of economic policy is to end economic growth before the physical limits are reached without destroying the economy by unknowingly switching from macroeconomic profit to loss. Needless to emphasize that economists have NO idea how to accomplish this feat. Walrasian, Keynesian, Marxian, and Austrian economics is proto-scientific garbage and therefore absolutely useless for economic policy.

The sad fate of humanity is: the (world-)economy will NOT break down for physical/ ecological reasons but because of the scientific incompetence a.k.a. stupidity of economists. How shabby an end compared to flood or fire.

Egmont Kakarot-Handtke

#1 For details of the big picture see cross-references Profit

Related 'Which breakdown?' and 'Mathematical Proof of the Breakdown of Capitalism' and 'Zero-sum capitalism' and 'Major Defects of the Market Economy' and 'Squaring the Investment Cycle'.

REPLY to Anonymous on Nov 1

Obviously, you lack basic knowledge of the history of economic thought: “Late in life, moreover, he [Napoleon] claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner, 1963)

Nothing has changed since Napoleon. The stupidity of economists is as destructive as it ever was.#1, #2

#1 As Napoleon said: don’t listen to economists
#2 Economists and the destructive power of stupidity

REPLY to Sandwichman on Nov 1

You complain: “GDP and GDP growth has become the increasingly opaque lens through which we view society and ‘the economy.’ It is a cracked, scratched, smudged, distorting lens that may not even enable us to tell whether what we view through it is upside up or upside down.”

Fact is that economists have never gotten their foundational concepts straight and are too stupid for the elementary mathematics that underlies macroeconomics. The concept of GDP is a case in point.

For the axiomatically correct relationship between aggregate demand, investment, depreciation, productivity, price, income, and profit see Squaring the Investment Cycle.


REPLY to Barkley Rosser, Sandwichman on Nov 2

Thank you for the information, the improved sentence reads: “The axiomatically correct macroeconomic Profit Law tells everyone that the [critical] point is reached earlier if, for example, the household sector’s saving Sm is greater than zero. The point is reached later if the government runs a deficit, i.e. if (G−T) is greater than zero.”

The beauty of this summary consists of answering the fundamental economic question: “... is the existing economic system in any significant sense self-adjusting.” (Keynes)

So, macrofounded economics tells everyone that microfounded equilibrium or steady-state models are a priori false and that the market system will eventually break down because of its built-in positive feedback mechanisms and NOT for sociological reasons, i.e. the revolution of the proletariat, or for ecological reasons, i.e. the limitedness of resources or the overabundance of pollution.

At the moment, the US economy runs already on life-support, i.e. on government deficit spending. Take it away and macroeconomic profit turns into macroeconomic loss and the economy breaks down. There is really no need for economists to calculate the “ … costs of abating carbon dioxide emissions and the long term future climate impacts from climate change.” (Newbold, Summary of the DICE model) because the economy as we know it has NO long-term future.#1

Economists should know how the economic system works but they don’t. For 150+ years, they waffle about supply-demand-equilibrium implying that the system regulates itself. This tenet is either self-deception or fraud or both. In any case, it catapults economists out of science.

#1 Mathematical Proof of the Breakdown of Capitalism

REPLY to Blissex on Nov 4

You say: “Dear Sandwichman welcome to the branch of Rabbit Hole Studies that is national statistics. :-)”

Economists know that science is about formal and material 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) Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-art testing.

Economists know also that their proper business is political agenda pushing and NOT science. So, they deliberately try to keep everything in the swamp of vagueness and inconclusiveness because they know also: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman) This, of course, is the life insurance of failed/fake scientists.#1, #2

It is not an accident that economists apply concepts like utility, rational expectations, aggregate real capital, which are obviously not measurable. And when the discussion comes to empirical testing, economists vanish through the jib-door like the would-be gold makers of earlier times. The door bears the inscription ‘Measurement Problems’.

Political agenda pushers have learned this trick from priests.#3 The subject-matter of priests is NONENTITIES. As J. S. Mill put it: “Mankind in all ages have had a strong propensity to conclude that wherever there is a name, there must be a distinguishable separate entity corresponding to the name; ...” This is the Fallacy of Reification.

The characteristic of economists is that they avoid well-defined concepts like the plague. Note that income, monetary profit, aggregate demand, GDP can, in principle, be defined and measured with the precision of two decimal places but economists have managed to make a veritable mess of these foundational concepts.#4, #5

Economists advertise their stuff as science, well knowing that their theories/models are built upon NONENTITIES and that they will break down as soon as it comes to testing: “… suppose they did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.” (Hands)

National Statistics is NOT a Rabbit Hole but has been deliberately made a jib-door through which failed/fake economists vanish when their proto-scientific fool’s gold is put to the acid test.#6, #7

#1 Postmodernism — the philosophy of scientific write-offs
#2 For details see cross-references Failed/Fake Scientists
#3 Wikipedia, Priest
#4 The Common Error of Common Sense: An Essential Rectification of the Accounting Approach
#5 Wikipedia and the promotion of economists’ idiotism
#6 Go! ― test the Profit and Employment Law
#7 Failed economics: The losers’ long list of lame excuses

REPLY to Blissex on Nov 6

You say: “… unfortunately I very strongly disagree that studies of the political economy can be a ‘science’ as in proper accuracy and falsification, in large part because experiments are difficult and repeatability is pretty rare, and never mind with the measurement problems, because the ‘Laws of Economics’ are not immutable, unless they are kept in ‘the swamp of vagueness and inconclusiveness’.”

Of course, you disagree. Take notice that your worn-out excuses have been refuted long ago.#1

According to its self-definition, economics is a science since Adam Smith/Karl Marx and this is celebrated once a year with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#2 So, economics has to be judged according to the well-known scientific standards of material/formal consistency.

Your fatal blunder is to maintain that economics is a social science while, in fact, it is a systems science.#3 And while there are no behavioral laws there are systemic laws.

Economists did not figure out these laws to this day. In fact, they are too stupid for the elementary mathematics that underlies macroeconomics.

Keynes’ scientific incompetence can be exactly located in the GT: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

Keynes got macroeconomic profit wrong: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Let this sink in: the economist Keynes NEVER understood the foundational concept of his subject matter. Because profit is ill-defined the complete theoretical superstructure of Keynesianism is false. Keynesian policy guidance NEVER had valid scientific foundations. It has NEVER been anything else than political blather.

The elementary version of the axiomatically correct Profit Law, which is measurable with the precision of two decimal places, reads Qm≡I−Sm with Qm as monetary profit and Sm as monetary saving. And this means that since Keynes/Hicks ALL I=S/IS-LM models are false.#4 Macroeconomics is proto-scientific garbage. Microeconomics is even worse.

So after 80+ years of storytelling/blather, Keynesians, Post-Keynesians, Anti-Keynesians, New Keynesians, MMTers, Sandwichman, Blissex, and the rest of stupid/corrupt political agenda pushers together with all their peer-reviewed articles/textbooks/blog posts have finally to be flushed down the scientific toilet.

#1 Failed economics: The losers’ long list of lame excuses
#2 The real problem with the economics Nobel
#3 Economics is NOT a social science
#4 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It

Nov 7