Comment on Noah Smith on ‘Examining an MMT model in detail’
Blog-Reference and Blog-Reference and Blog-Reference
MMT claims that mainstream economics is defective. MMT is right. Noah Smith, in turn, claims that MMT is defective. Noah Smith is right. The scientific fact of the matter is that the major approaches ― Walrasianism, Keynesianism/MMT, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that all get the foundational concept of the subject matter ― profit ― wrong. Economics is a failed science. By consequence, any discussion between Mainstream and MMT never gets above the level of moronic blather.
Noah Smith becomes concrete and debunks an MMT model of Pavlina Tcherneva. However, he messes up the debunking. Generally speaking, the blunder of MMT lies in the macroeconomic foundations. Noah Smith, though, gets stuck with criticizing this assumption: “The economy produces one service only, fighting fires.”
To make matters short here: the lethal blunder of MMT lies in the macroeconomic accounting identity G+I=T+S (i). Written as sectoral balances equation this gives (I−S)+(G−T)=0 (ii) or I=S (iii) for the elementary case of G,T=0.
I=S is provably false since Keynes’ General Theory (p. 63) but neither MMTers nor Mainstreamers like Noah Smith have realized it to this day.#1, #2 The reason is that economists are too stupid for the elementary mathematics that underlies macroeconomics.
The correct sectoral balances equation reads (I−S)+(G−T)−(Q−Yd)=0 (iv) with Q as macroeconomic profit and Yd as distributed profit. Curiously, the word profit does NOT appear in MMT models. Curiously, Noah Smith does not realize this. Without realizing it, the whole MMT vs Mainstream discussion goes about a zero profit economy. As long as this planet exists there NEVER was a zero profit economy. Macroeconomics is false since Keynes.
When the theory is false the policy guidance is false. Equation (iv) can be reduced to the limiting case Q=(G−T) (v) which says in plain words Public Deficit = Private Profit. In even plainer words, the MMT policy of permanent deficit-spending/money-creation is a permanent free-lunch for the Oligarchy. The empirical result is the somewhat biased distribution of income and financial wealth that most people find somewhat irritating. MMTers, though, sell their proto-scientific garbage as a benefit for the ninety-nine-percenters.
It holds with mathematical certainty: MMT is a scientific/social/political fraud ― just like the Mainstream.
Egmont Kakarot-Handtke
#1 Wikipedia and the promotion of economists’ idiotism
#2 For the full-spectrum refutation of MMT see cross-references MMT
Related 'MMT vs WSJ: Another futile exercise in moron bashing' and 'Refuting MMT’s Macroeconomics Textbook' and ''MMT: fundamentally false' and 'Dear idiots, time to get saving and investment straight (II)' and 'Dear idiots, time to get saving and investment straight (I)' and 'Dear idiots, government deficits do NOT cause inflation' and 'Dear idiots, government deficits do NOT fund private savings'.
Immediately following The canonical macroeconomic model.
