November 15, 2018

Kalecki and Keynes: The double macroeconomic false start

Comment on Lars Syll on ‘Kalecki and Keynes on the loanable funds fallacy’

Blog-Reference and Blog-Reference and Blog-Reference on Nov 22

Like Keynes, Kalecki got the foundational concepts of profit/income/saving wrong. Lars Syll and the rest of retarded After-Keynesians, though, have not realized anything to this day.

Lars Syll quotes Kalecki: “It should be emphasized that the equality between savings and investment … will be valid under all circumstances. In particular, it will be independent of the level of the rate of interest which was customarily considered in economic theory to be the factor equilibrating the demand for and supply of new capital. In the present conception investment, once carried out, automatically provides the savings necessary to finance it. Indeed, in our simplified model, profits in a given period are the direct outcome of capitalists’ consumption and investment in that period. If investment increases by a certain amount, savings out of profits are pro tanto higher …”

There NEVER was and NEVER will be an equality of saving and investment of any sort. This is one of the greatest blunders in the history of the cargo cult science called economics.#1

Keynes defined the formal foundations of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This elementary two-liner is conceptually and logically defective because Keynes never came to grips with profit. (Tómasson et al.)

The elementary version of the axiomatically correct macroeconomic Profit Law 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.

Kalecki added profit and distributed profit to the macroeconomic equations. With profit distribution and the consumption/saving out of distributed profit, the expanded Profit Law reads Qm≡Yd+I−Sm.#2 Again, investment and saving are NEVER equal. There NEVER has been or will be such a thing as an equilibrium or an accounting identity I=S. Both Kalecki and Keynes were too stupid for the elementary mathematics that underlies macroeconomics.#3

Kalecki’s and Keynes’ macroeconomics is proto-scientific garbage. Because the profit theory is false, the whole analytical superstructure is false, including, of course, the theory of employment, interest, and money.

Because of this, both Kaleckian and Keynesian policy guidance NEVER has had sound scientific foundations.#4

Egmont Kakarot-Handtke


#1 For details of the big picture see cross-references Refutation of I=S
#2 For details see cross-references Kalecki
#3 Wikipedia and the promotion of economists’ idiotism (II)
#4 Keynes, Kalecki, MMT and the invention of the perpetual profit machine

Related 'Keynesians ― terminally stupid or worse?' and 'Keynes’s Missing Axioms' and 'Is Nick Rowe stupid or corrupt or both?' and 'I is never equal S and even Nick Rowe will eventually grasp it' and 'Truth by definition? The Profit Theory is axiomatically false for 200+ years'

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