Comment on Bill Mitchell on ‘Impending British Labour loss may reflect their ambiguous Brexit position’
Blog-Reference
The macroeconomic Profit Law implies with regard to the government sector Public Deficit = Private Profit. As a consequence, the MMT policy of deficit spending/money-creation ultimately benefits the Oligarchy and NOT WeThePeople. However, this is not obvious because it happens in an indirect manner via the price mechanism.#1 Running budget surpluses hits the ninety-nine-percenters directly by increasing unemployment and the one-percenters indirectly by reducing macroeconomic profit.
The political consequence is this: The one-percenters and their useful academic/ journalistic spokespersons should consistently argue FOR deficit spending and the ninety-nine-percenters and their academic/journalistic spokespersons should consistently argue AGAINST it. In the political debate, though, logical consistency is not the primary concern, but propagandistic success is. So we see representatives of the one-percenters arguing for budget-balancing and representatives of the ninety-nine-percenters arguing for deficit-spending.#2
MMTers claim to be the real Progressives and fighters for the interests of WeThePeople. The economic fact of the matter, though, is that the MMT policy of deficit-spending/money-creation is for the benefit of the Oligarchy.
One of the most aggressive agenda pushers is Bill Mitchell. In the run-up to the election, he first denounced the Labour leadership as crypto-neoliberals for their Fiscal Credibility Rule, i.e. the commitment to balance the budget over the business cycle and their intention to reduce the public debt in the longer term.#3, #4 In their new Manifesto, Labour announces massive deficit spending on infrastructure. This is in line with MMT policy guidance but does not end Bill Mitchell’s fight against British Labour.
• “As I have noted many times in the past, there was always a problem with the statements that British Labour were making prior to the election in terms of its spending promises and maintaining that it would be also be bound by its Fiscal Credibility Rule. I was vilified by Labour apparatchiks a the related academic hacks for maintaining this position but as time has past it is obvious I was correct.”
• “Apparently the ‘Rule’ has been changed. You don’t change a ‘Rule’ that is seen to be workable. The point that have made often is that, by tying themselves into this neoliberal straitjacket, the British Labour Party limited the political space they would have to operate in.”
• “We have seen many times in history, how fortuitous fiscal interventions … are stopped in their tracks with damaging consequences, because of media and political pressure over the rising deficits, all because the public have been conditioned by these neoliberal fiscal rules to think the deficits signal an impending catastrophe. In the British case, the ‘Rule’ is unnecessary. It reflects an irrational paranoia among the Left in Britain about the relative strength of the financial markets vis-a-vis the legislative and regulative capacity of the elected government.”
In conclusion, the elected Labour leadership still does not satisfy the demands of the self-declared progressive academic Friends-of-the-People: “There is a lot to like about that Manifesto from a progressive perspective. However, in my mind, there were two unresolved tensions that I think damage the Party’s credibility. The first, is its, yes, continued embrace of neoliberal macroeconomic frames, epitomised by its so-called Fiscal Credibility Rule that has already had to be changed because so-called independent analysts agreed with my assessment that the manifesto and the ‘Rule’ were inconsistent.”
The economic fact of the matter is that public deficit-spending/money-creation is a free lunch program for the Oligarchy. The market economy is already for a long time on the life support of the State.#5 Profit is in the main produced by public deficits, financial wealth roughly equals public debt. The Oligarchy, in turn, uses the opulent free lunches to corrupt the State’s legislative, executive, judiciary institutions and ― not to forget ― academia.
The political world is upside down: the legitimate representatives of WeThePeople are smeared as crypto-neoliberals by fake Progressives who push the agenda of the Oligarchy.#6
Egmont Kakarot-Handtke
#1 Q: How are you going to pay for it? MMT: By stealth taxation!
#2 Links on Austerity
#3 Bill Mitchell’s pure MMT teachings for British Labour
#4 How MMT disgraces itself
#5 Keynes, Lerner, MMT, Trump, etc. and exploding profit
#6 How Randall Wray takes the piss out of the House Budget Committee
Related 'Swabian housewife vs Wall Street loan shark' and 'Is MMT Alt-Right? No, it is fake science' and 'Bill Mitchell’s dishonorable discharge from the sciences' and 'MMT, voodoo, and dead horse beating' and 'Bill Mitchell ― Wall Street’s hitman keeps an eye on MMT defeatists' and 'Bill Mitchell’s pure MMT teachings for British Labour'.
November 29, 2019
November 28, 2019
Ending the pluralism of provably false economic theories with the long-overdue Paradigm Shift
Comment on Geoff Davies on ‘Starting again, and relating the schools’
Blog-Reference
Geoff Davies summarizes: “The need for a new start in economics arises regularly on this blog site.” and “Many of the ideas presented here have been around for some time but the subject has been in some confusion, with a tendency still, among dissenting economists, to think of ‘schools’ of thought and to promote a ‘pluralist’ approach. Whereas it is laudable to consider a wide range of ideas, rather than the sterile monoculture of mainstream neoclassical economics, the result has still lacked coherence. For example, the recently issued book Rethinking Economics has chapters on Post-Keynesian, Marxist, Austrian, Institutional, Feminist, Behavioural, Complexity, Co-operative and Ecological Economics but little about how the various conceptions might relate to each other.”
Indeed, economics is a heap of proto-scientific garbage. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Economics is a failed science. It has not even gotten its foundational concepts profit/income/saving etcetera right and therefore stands where physics stood in the Middle Ages before the foundational concept of energy was properly defined and clearly understood. What we actually have after 200+ years is the pluralism of provably false theories.
Scientific standards are well-defined for 2300+ years: “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)
Both Orthodoxy and traditional Heterodoxy are outside of science. Because of this, economics needs a Paradigm Shift. This is long known: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990, p. 362)
Economists know quite well that they are outside of science. However, they have no scruples to award themselves the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. Because there is no such thing as scientifically valid economics, the EconNobel is a fraud.
Worse, because economists do not have the true theory but only a heap of proto-scientific garbage, economic policy guidance is on one level with the poultry entrails-reading of the ancient Roman haruspex.#1
Economists are not smart enough to realize that, in science, pluralism is a sign of failure: “For if they [opinions] conflict, then at best only one of them can be true.” (Popper) Being stupid and corrupt for 200+ years, though, economists propagate more of the same: “Economics commentator Martin Wolf, in his Foreword to Rethinking Economics, puts it in more homely terms: ‘The economics that humanity will need will surely display the vigour of the mongrel, not the neuroses of the pure-bred.’”
The New Economic Thinking of folks who have not gotten the foundational concepts of economics right to this day and who have no idea where exactly economics went wrong is as brain-dead as the old economic thinking has been for over 200 years.
Keynes, at least, spotted the crucial methodological point: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.” and “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight — as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.”
Unfortunately, Keynes messed up the Paradigm Shift from microfoundations to macrofoundations. Here is the precise location in the General Theory where macroeconomics went wrong: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)
This syllogism is conceptually and logically defective because Keynes NEVER came to grips with profit: “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.)
Keynes, the economist and political busybody, had no idea what profit, the foundational concept of economics, is. Worse, neither pro-Keynesians nor anti-Keynesians spotted Keynes’ lethal blunder in the last 80+ years.#2-#4 All of them are too stupid for the elementary algebra that underlies macroeconomics. So, in effect since the founding fathers, economists get away with plain scientific garbage. The fact of the matter is that neither the general public nor the representative economist is able to spot a scientific blunder even when it is done in slow motion in front of their faces. They cannot spot fake science even when all the traditional warning signs are present and when they have been warned in no uncertain terms about cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.” (Feynman)
Those who tell the world that economics is failed/fake science are right. However, to state the obvious is scientifically not good enough: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)
In other words, it takes a Paradigm Shift. The problem with economists is that they have no idea what a Paradigm Shift is all about. Paradigm Shift does NOT mean exponentially increasing the pluralism of false theories. Given the state of economics, Paradigm Shift means to move from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.#5-#8 Needless to emphasize that this is absolutely beyond both orthodox and heterodox economists, i.e. of folks with an intellectual capacity that is just sufficient for an assignment as a clown and useful idiot in the political Circus Maximus.
The new start in economics, i.e. the Paradigm Shift, presupposes that all these folks, the ‘throng of superfluous economists’ as Joan Robinson called them, are expelled from the scientific community.
Next time, when somebody waffles about New Economic Thinking, ask her/him to show their set of axioms, i.e. their foundational propositions. If this set is not macroeconomic and not precise and not consistent and not testable in its logical implications but consists of critique, moralizing, and policy proposals that have no valid scientific foundations you know you have just another stupid/corrupt agenda pusher before you.
Time to bury these folks at the Flat-Earth-Cemetery.
Egmont Kakarot-Handtke
#1 Econogenics: economists pose a hazard to their fellow citizens
#2 Modern macro moronism
#3 Macroeconomics: Drain the scientific swamp
#4 Macroeconomics and the fake History of Economic Thought
#5 From false microfoundations to true macrofoundations (II)
#6 The canonical macroeconomic model
#7 Swimming naked: economists and the Paradigm Shift
#8 For details of the big picture see cross-references Paradigm Shift and cross-references Axiomatization.
Related 'Economics: The greatest scientific fraud in modern times' 'Eclecticism, anything goes, and the pluralism of false theories' and 'The inexorable Paradigm Shift in economics' and 'Both orthodox and heterodox economists are cargo cult scientists' and 'How Keynes got macro wrong and Allais got it right' and 'Show first your economic axioms or get out of the discussion' and 'If it isn’t macro-axiomatized, it isn’t economics'.
You say: “Economics, as any historian or anthropologist can tell you instantly, is hopelessly intertwined with politics and culture. Perhaps the lesson is obvious, but many had to learn it the hard way. Everything is interlocked, and no piece of the puzzle can be considered in isolation from the others. Thus, the basic question we need to ask and work to answer is: how does society work? In this work it became quickly clear that instead of looking for the simplest pieces possible, as social scientists do now, we needed to look at how those pieces go together into complex wholes. Complexity enters our work.”
First, economics is NOT a social science but a systems science. The question is NOT how society works but how the economy works. Second, you forgot to mention that the whole complexity thing was an Oligarchy-sponsored project. Not much different from the General Equilibrium thing that went before.
“By the way, he said, he'd recently been up in New York at a meeting of the board of the Russell Sage Foundation, which gives away a lot of money for social science-type research. And while he was there he'd talked to a friend of his, fohn Reed, the new chief executive officer of Citicorp. Now, Reed was a pretty interesting guy, said Adams.” (Waldrop, p. 91)
“Since becoming CEO in 1984, said Reed, he'd spent the bulk of his time cleaning up this mess. It had already cost Citibank several billion dollars-so far-and had caused worldwide banking losses of roughly $300 billion. So what kind of alternative was he looking for? Well, Reed didn't expect that any new economic theory would be able to predict the appointment of a specific person such as Paul Volker. But a theory that was better attuned to social and political realities might have predicted the appointment of someone like Volker-who, after all, was just doing the politically necessary job of inflation control superbly well. More important, he said, a better theory might have helped the banks appreciate the significance of Volker's actions as they were happening. ‘Anything we could do that would enhance our understanding and tease out a better appreciation for the dynamics of the economy in which we live would be well worth having,’ he said. And from what he'd heard about modern physics and chaos theory, the physicists had some ideas that might apply. Could the Santa Fe Institute help?” (Waldrop, p. 95)
Better to forget the complexity hype which was just another failed approach. For more on increasing returns and macroeconomics see Increasing Returns and Stability and Increasing returns and the art of self-trapping and The happy end of distortion.
Blog-Reference
Geoff Davies summarizes: “The need for a new start in economics arises regularly on this blog site.” and “Many of the ideas presented here have been around for some time but the subject has been in some confusion, with a tendency still, among dissenting economists, to think of ‘schools’ of thought and to promote a ‘pluralist’ approach. Whereas it is laudable to consider a wide range of ideas, rather than the sterile monoculture of mainstream neoclassical economics, the result has still lacked coherence. For example, the recently issued book Rethinking Economics has chapters on Post-Keynesian, Marxist, Austrian, Institutional, Feminist, Behavioural, Complexity, Co-operative and Ecological Economics but little about how the various conceptions might relate to each other.”
Indeed, economics is a heap of proto-scientific garbage. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Economics is a failed science. It has not even gotten its foundational concepts profit/income/saving etcetera right and therefore stands where physics stood in the Middle Ages before the foundational concept of energy was properly defined and clearly understood. What we actually have after 200+ years is the pluralism of provably false theories.
Scientific standards are well-defined for 2300+ years: “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)
Both Orthodoxy and traditional Heterodoxy are outside of science. Because of this, economics needs a Paradigm Shift. This is long known: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990, p. 362)
Economists know quite well that they are outside of science. However, they have no scruples to award themselves the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. Because there is no such thing as scientifically valid economics, the EconNobel is a fraud.
Worse, because economists do not have the true theory but only a heap of proto-scientific garbage, economic policy guidance is on one level with the poultry entrails-reading of the ancient Roman haruspex.#1
Economists are not smart enough to realize that, in science, pluralism is a sign of failure: “For if they [opinions] conflict, then at best only one of them can be true.” (Popper) Being stupid and corrupt for 200+ years, though, economists propagate more of the same: “Economics commentator Martin Wolf, in his Foreword to Rethinking Economics, puts it in more homely terms: ‘The economics that humanity will need will surely display the vigour of the mongrel, not the neuroses of the pure-bred.’”
The New Economic Thinking of folks who have not gotten the foundational concepts of economics right to this day and who have no idea where exactly economics went wrong is as brain-dead as the old economic thinking has been for over 200 years.
Keynes, at least, spotted the crucial methodological point: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.” and “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight — as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.”
Unfortunately, Keynes messed up the Paradigm Shift from microfoundations to macrofoundations. Here is the precise location in the General Theory where macroeconomics went wrong: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)
This syllogism is conceptually and logically defective because Keynes NEVER came to grips with profit: “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.)
Keynes, the economist and political busybody, had no idea what profit, the foundational concept of economics, is. Worse, neither pro-Keynesians nor anti-Keynesians spotted Keynes’ lethal blunder in the last 80+ years.#2-#4 All of them are too stupid for the elementary algebra that underlies macroeconomics. So, in effect since the founding fathers, economists get away with plain scientific garbage. The fact of the matter is that neither the general public nor the representative economist is able to spot a scientific blunder even when it is done in slow motion in front of their faces. They cannot spot fake science even when all the traditional warning signs are present and when they have been warned in no uncertain terms about cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.” (Feynman)
Those who tell the world that economics is failed/fake science are right. However, to state the obvious is scientifically not good enough: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)
In other words, it takes a Paradigm Shift. The problem with economists is that they have no idea what a Paradigm Shift is all about. Paradigm Shift does NOT mean exponentially increasing the pluralism of false theories. Given the state of economics, Paradigm Shift means to move from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.#5-#8 Needless to emphasize that this is absolutely beyond both orthodox and heterodox economists, i.e. of folks with an intellectual capacity that is just sufficient for an assignment as a clown and useful idiot in the political Circus Maximus.
The new start in economics, i.e. the Paradigm Shift, presupposes that all these folks, the ‘throng of superfluous economists’ as Joan Robinson called them, are expelled from the scientific community.
Next time, when somebody waffles about New Economic Thinking, ask her/him to show their set of axioms, i.e. their foundational propositions. If this set is not macroeconomic and not precise and not consistent and not testable in its logical implications but consists of critique, moralizing, and policy proposals that have no valid scientific foundations you know you have just another stupid/corrupt agenda pusher before you.
Time to bury these folks at the Flat-Earth-Cemetery.
Egmont Kakarot-Handtke
#1 Econogenics: economists pose a hazard to their fellow citizens
#2 Modern macro moronism
#3 Macroeconomics: Drain the scientific swamp
#4 Macroeconomics and the fake History of Economic Thought
#5 From false microfoundations to true macrofoundations (II)
#6 The canonical macroeconomic model
#7 Swimming naked: economists and the Paradigm Shift
#8 For details of the big picture see cross-references Paradigm Shift and cross-references Axiomatization.
Related 'Economics: The greatest scientific fraud in modern times' 'Eclecticism, anything goes, and the pluralism of false theories' and 'The inexorable Paradigm Shift in economics' and 'Both orthodox and heterodox economists are cargo cult scientists' and 'How Keynes got macro wrong and Allais got it right' and 'Show first your economic axioms or get out of the discussion' and 'If it isn’t macro-axiomatized, it isn’t economics'.
***
REPLY to Ken Zimmerman on Nov 29You say: “Economics, as any historian or anthropologist can tell you instantly, is hopelessly intertwined with politics and culture. Perhaps the lesson is obvious, but many had to learn it the hard way. Everything is interlocked, and no piece of the puzzle can be considered in isolation from the others. Thus, the basic question we need to ask and work to answer is: how does society work? In this work it became quickly clear that instead of looking for the simplest pieces possible, as social scientists do now, we needed to look at how those pieces go together into complex wholes. Complexity enters our work.”
First, economics is NOT a social science but a systems science. The question is NOT how society works but how the economy works. Second, you forgot to mention that the whole complexity thing was an Oligarchy-sponsored project. Not much different from the General Equilibrium thing that went before.
“By the way, he said, he'd recently been up in New York at a meeting of the board of the Russell Sage Foundation, which gives away a lot of money for social science-type research. And while he was there he'd talked to a friend of his, fohn Reed, the new chief executive officer of Citicorp. Now, Reed was a pretty interesting guy, said Adams.” (Waldrop, p. 91)
“Since becoming CEO in 1984, said Reed, he'd spent the bulk of his time cleaning up this mess. It had already cost Citibank several billion dollars-so far-and had caused worldwide banking losses of roughly $300 billion. So what kind of alternative was he looking for? Well, Reed didn't expect that any new economic theory would be able to predict the appointment of a specific person such as Paul Volker. But a theory that was better attuned to social and political realities might have predicted the appointment of someone like Volker-who, after all, was just doing the politically necessary job of inflation control superbly well. More important, he said, a better theory might have helped the banks appreciate the significance of Volker's actions as they were happening. ‘Anything we could do that would enhance our understanding and tease out a better appreciation for the dynamics of the economy in which we live would be well worth having,’ he said. And from what he'd heard about modern physics and chaos theory, the physicists had some ideas that might apply. Could the Santa Fe Institute help?” (Waldrop, p. 95)
Better to forget the complexity hype which was just another failed approach. For more on increasing returns and macroeconomics see Increasing Returns and Stability and Increasing returns and the art of self-trapping and The happy end of distortion.
***
Wikimedia AXEC121f
REPLY to Ken Zimmerman on Dec 9
It is pretty obvious that economics is a scientific failure and that economists are incompetent blatherers. So, what is needed is a Paradigm Shift.
Standard economics has been built upon this set of verbalized axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)
Methodologically, these core premises (and their variants) are unacceptable but economists swallowed them hook line and sinker from Jevons/Walras/Menger onward to DSGE. This is scientifically disqualifying.
The problem is that neither Orthodoxy nor traditional Heterodoxy is able to get above the proto-scientific level. There is always a lot of New Economic Thinking ― Complexity, Chaos Theory, Entropy, Behavioral Economics, Evolutionary Economics and what not ― but it always comes down to nothing.#1
This should come as no surprise. Economics perfectly fits Feynman’s definition of cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”
What is missing are the methodologically correct macrofoundations. To make matters short, here they are.
(A0) The 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.
(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) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
If you do not understand what the Paradigm Shift from HC1/HC5 to (A1)/(A3) is all about and if you cannot come forward with a better axiom set then this is too bad for you. Methodological waffling is over, time to get real.#3
For Orthodoxy and traditional Heterodoxy, the future shrinks to flush and down the scientific drain.#4
#4 For details of the big picture see cross-references Paradigm Shift
***
November 25, 2019
Q: How are you going to pay for it? MMT: By stealth taxation!
Own post, no external Blog-Reference*
To the question ‘How are you going to pay for it?’ MMT has the answer ‘By deficit-spending/money-creation’.#1 Or in the jargon of MMT: “MMT explains how Monetary sovereign govs actually work. As currency issuers they do not use money, they issue it. They can never run out and can’t go broke, bankrupt or default. Taxes are not revenue, they’re needed to create demand for the currency.” (@KynarethNoBaka)
Proper economic analysis tells one that deficit-spending/money-creation amounts to stealth taxation of WeThePeople. MMT is scientifically deficient, that is to say, MMT policy guidance has NO valid scientific foundations. So, first of all, MMT storytelling has to be replaced with proper economic analysis.
For a start, one needs a description of the elementary production-consumption economy. This economy is constructed from scratch with the following set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household sector and the business sector which in turn consists initially of one giant fully integrated firm. (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) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price as the dependent variable is given by P=W/R. This is the macroeconomic Law of Supply and Demand. For the graphical representation of the analytical starting point see Wikimedia AXEC31.#2
Saving/dissaving of the household sector is defined as S≡Yw−C and profit/loss of the business sector is defined as Q≡C−Yw. It always holds Q≡−S, in other words, the business sector’s surplus = profit equals the household sector’s deficit = dissaving and, vice versa, the business sector’s deficit = loss equals the household sector’s surplus = saving. This is the most elementary form of the macroeconomic Profit Law. Under the initial condition of budget-balancing, i.e. C=Yw, macroeconomic profit Q is zero.
Now we consider two cases (i) government spending = taxes and (ii) full deficit-spending, i.e. zero taxes.
(i) The government spends the amount G which becomes the wage income of public employees, i.e. G=Yg. This income is fully spent, i.e. Cg=Yg. The wage income Yw is taxed, this reduces disposable income Ywd≡Yw−T. The disposable income is fully spent, i.e. Cwd=Ywd. If the government’s budget is balanced, i.e. G=T, total income is Ywd+Yg=Yw and total consumption expenditures are Cwd+Cg=C and this boils down to C=Yw as in the initial case. The market-clearing price remains unchanged. What happens in real terms is that the part of real output O of the wage income receivers is reduced because they can buy less with their reduced disposable income. The difference O−Owd is bought by the public employees with their income Yg. Government spending and taxation lead to a redistribution of the unchanged period output O. Total employment increases, everything else ― total income, total expenditures, price ― remains unchanged. The economy as a whole increases output depending on what the government employees do, i.e. providing public services, going to war, planting trees, etc.
(ii) The government spends the amount G which becomes the wage income of public employees, i.e. G=Yg, but taxes are zero, i.e. the public deficit D≡G−T is equal to government spending G. The government gets the amount G from the Central Bank in the form of overdrafts. This increases deposits at the CB’s balance sheet by the same amount. Deposits at the CB are fiat money.
Total disposable income, i.e. Ywd≡Yw−T plus Yg, is now higher than in case (i) because of T=0. And because all income is spent total consumption expenditures are also higher, i.e. C=Cw+Cg=Yw+Yg. Under the condition of market-clearing, i.e. X=O, the price increases P=(Cw+Cg)/O. Deficit spending on current production causes a one-off price hike (NO inflation) and the business sector ends up with macroeconomic profit Q=G.
In real terms, the part of the output that goes to the wage income receivers is reduced through the price increase. The remaining part O−Ow goes to the receivers of government income.
In real terms, there is NO difference for the household sector as a whole between the two cases. The economic fact of the matter is: either the budget is balanced then WeThePeople pay for government spending through open taxation, or the government deficit-spends then WeThePeople pay through stealth taxation, i.e. through an almost unnoticeable one-off price hike (NO inflation).#3, #4, #5
Because the macroeconomic Profit Law entails Public Deficit = Private Profit the financial wealth of the Oligarchy grows in lockstep with public debt. For the overall profit of the business sector, it does NOT matter at all whether the deficit-spending goes to the military, to government services, or to environmental protection.
So, the answer to the question Who pays? is always and everywhere: WeThePeople pay in real terms no matter whether the budget is balanced or money is created out of nothing. It does NOT matter at all whether deficit-spending/money-creation is caused by military or social spending. The axiomatically correct Profit Law says Public Deficit = Private Profit. It is deficit-spending per se that feeds the Oligarchy.
The additional economic damage for WeThePeople consists of interest payments on the public debt and the always overlooked fact that the public debt has to be eventually redeemed.
Public deficit-spending/money-creation is a free lunch program for the Oligarchy. The fact is that the market economy is already for a long time on the life support of the State. Profit is in the main produced by public deficits. The Oligarchy, in turn, uses the opulent free lunches to corrupt the State’s legislative, executive, judiciary institutions in its favor.
MMT-propaganda buries all distributional consequences of deficit-spending/money-creation under vacuous blather about the monetary sovereignty of the State. The fact of the matter is that the State is the profit producer for the Oligarchy.
The economically correct answer to Who pays? is in any case WeThePeople.
Egmont Kakarot-Handtke
#1 Examples from Twitter
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d)
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#2 Wikimedia AXEC31
#3 Exploding the Household Fallacy
#4 How to pay for the war and to be bamboozled by economists
#5 No MMT illusions! YOU are going to pay for it
To the question ‘How are you going to pay for it?’ MMT has the answer ‘By deficit-spending/money-creation’.#1 Or in the jargon of MMT: “MMT explains how Monetary sovereign govs actually work. As currency issuers they do not use money, they issue it. They can never run out and can’t go broke, bankrupt or default. Taxes are not revenue, they’re needed to create demand for the currency.” (@KynarethNoBaka)
Proper economic analysis tells one that deficit-spending/money-creation amounts to stealth taxation of WeThePeople. MMT is scientifically deficient, that is to say, MMT policy guidance has NO valid scientific foundations. So, first of all, MMT storytelling has to be replaced with proper economic analysis.
For a start, one needs a description of the elementary production-consumption economy. This economy is constructed from scratch with the following set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household sector and the business sector which in turn consists initially of one giant fully integrated firm. (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) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price as the dependent variable is given by P=W/R. This is the macroeconomic Law of Supply and Demand. For the graphical representation of the analytical starting point see Wikimedia AXEC31.#2
Saving/dissaving of the household sector is defined as S≡Yw−C and profit/loss of the business sector is defined as Q≡C−Yw. It always holds Q≡−S, in other words, the business sector’s surplus = profit equals the household sector’s deficit = dissaving and, vice versa, the business sector’s deficit = loss equals the household sector’s surplus = saving. This is the most elementary form of the macroeconomic Profit Law. Under the initial condition of budget-balancing, i.e. C=Yw, macroeconomic profit Q is zero.
Now we consider two cases (i) government spending = taxes and (ii) full deficit-spending, i.e. zero taxes.
(i) The government spends the amount G which becomes the wage income of public employees, i.e. G=Yg. This income is fully spent, i.e. Cg=Yg. The wage income Yw is taxed, this reduces disposable income Ywd≡Yw−T. The disposable income is fully spent, i.e. Cwd=Ywd. If the government’s budget is balanced, i.e. G=T, total income is Ywd+Yg=Yw and total consumption expenditures are Cwd+Cg=C and this boils down to C=Yw as in the initial case. The market-clearing price remains unchanged. What happens in real terms is that the part of real output O of the wage income receivers is reduced because they can buy less with their reduced disposable income. The difference O−Owd is bought by the public employees with their income Yg. Government spending and taxation lead to a redistribution of the unchanged period output O. Total employment increases, everything else ― total income, total expenditures, price ― remains unchanged. The economy as a whole increases output depending on what the government employees do, i.e. providing public services, going to war, planting trees, etc.
(ii) The government spends the amount G which becomes the wage income of public employees, i.e. G=Yg, but taxes are zero, i.e. the public deficit D≡G−T is equal to government spending G. The government gets the amount G from the Central Bank in the form of overdrafts. This increases deposits at the CB’s balance sheet by the same amount. Deposits at the CB are fiat money.
Total disposable income, i.e. Ywd≡Yw−T plus Yg, is now higher than in case (i) because of T=0. And because all income is spent total consumption expenditures are also higher, i.e. C=Cw+Cg=Yw+Yg. Under the condition of market-clearing, i.e. X=O, the price increases P=(Cw+Cg)/O. Deficit spending on current production causes a one-off price hike (NO inflation) and the business sector ends up with macroeconomic profit Q=G.
In real terms, the part of the output that goes to the wage income receivers is reduced through the price increase. The remaining part O−Ow goes to the receivers of government income.
In real terms, there is NO difference for the household sector as a whole between the two cases. The economic fact of the matter is: either the budget is balanced then WeThePeople pay for government spending through open taxation, or the government deficit-spends then WeThePeople pay through stealth taxation, i.e. through an almost unnoticeable one-off price hike (NO inflation).#3, #4, #5
Because the macroeconomic Profit Law entails Public Deficit = Private Profit the financial wealth of the Oligarchy grows in lockstep with public debt. For the overall profit of the business sector, it does NOT matter at all whether the deficit-spending goes to the military, to government services, or to environmental protection.
So, the answer to the question Who pays? is always and everywhere: WeThePeople pay in real terms no matter whether the budget is balanced or money is created out of nothing. It does NOT matter at all whether deficit-spending/money-creation is caused by military or social spending. The axiomatically correct Profit Law says Public Deficit = Private Profit. It is deficit-spending per se that feeds the Oligarchy.
The additional economic damage for WeThePeople consists of interest payments on the public debt and the always overlooked fact that the public debt has to be eventually redeemed.
Public deficit-spending/money-creation is a free lunch program for the Oligarchy. The fact is that the market economy is already for a long time on the life support of the State. Profit is in the main produced by public deficits. The Oligarchy, in turn, uses the opulent free lunches to corrupt the State’s legislative, executive, judiciary institutions in its favor.
MMT-propaganda buries all distributional consequences of deficit-spending/money-creation under vacuous blather about the monetary sovereignty of the State. The fact of the matter is that the State is the profit producer for the Oligarchy.
The economically correct answer to Who pays? is in any case WeThePeople.
Egmont Kakarot-Handtke
#1 Examples from Twitter
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#2 Wikimedia AXEC31
#3 Exploding the Household Fallacy
#4 How to pay for the war and to be bamboozled by economists
#5 No MMT illusions! YOU are going to pay for it
* Note that there is a difference between spending on (i) consumption good output and (ii) investment good output. Obviously, this post deals with (i) and not with (ii). In the discussion about public debt, the two cases are often confounded. For more details see Squaring the Investment Cycle.
Related 'MMT: Redistribution as wellness program' and 'MMT, money creation, stealth taxation, and redistribution' and 'MMT, money printing, stealth taxation, and redistribution' and 'How MMT fools the ninety-nine-percenters' and 'MMT and the Green New Deal: Where is the snag? (I)' and 'MMT and the Green New Deal: Where is the snag? (II)' and 'The right and the wrong way to bring money into the economy' and 'Criminals and the monetary order' and 'MMT: A Trojan Horse for Labour courtesy of the Oligarchy' and 'Dear idiots, MMTers are Wall Street’s agenda pushers' and 'Mr. Wray goes to Washington' and 'MMT is an economic policy fraud' and 'Smart! How to make people fund their brain-washing'.
Related 'MMT: Redistribution as wellness program' and 'MMT, money creation, stealth taxation, and redistribution' and 'MMT, money printing, stealth taxation, and redistribution' and 'How MMT fools the ninety-nine-percenters' and 'MMT and the Green New Deal: Where is the snag? (I)' and 'MMT and the Green New Deal: Where is the snag? (II)' and 'The right and the wrong way to bring money into the economy' and 'Criminals and the monetary order' and 'MMT: A Trojan Horse for Labour courtesy of the Oligarchy' and 'Dear idiots, MMTers are Wall Street’s agenda pushers' and 'Mr. Wray goes to Washington' and 'MMT is an economic policy fraud' and 'Smart! How to make people fund their brain-washing'.
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Wikimedia AXEC165
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Twitter Mar 28 Taxpayer's money, counterfeit money, and stealth taxation
November 20, 2019
How Randall Wray takes the piss out of the House Budget Committee
Comment on New Economic Perspectives on ‘Wray Appearing Before Congress’
Blog-Reference and Blog-Reference (Link) and Blog-Reference on Nov 21 and Blog-Reference on Nov 22
In Section 5. Sectoral balances of his testimonial Randall Wray states: “One of the concepts that Modern Money Theory economists use to elucidate the impact of budget deficits on the economy is the sectoral balance identity developed by Wynne Godley (1996). At the level of the economy as a whole, aggregate spending is identically equal to aggregate income ― every dollar spent is received as income. It is useful to divide the economy into three sectors: government (national, state, and local), domestic private (households and firms), and foreign (rest of the world). If one sector spends more than its income (deficit), at least one other must spend less than its income (surplus) to maintain the aggregate identity that total spending equals total income. The balances (income minus expenditure) of the three sectors have to add up to zero since we are adding up all the income in the economy and subtracting all the spending, which are equal by identity. We can then write the aggregate identity as: government balance + domestic private balance + foreign balance = 0. For the US, the government balance taken as a whole is usually negative (government spending is greater than its revenue ― mostly taxes), the domestic private balance is usually positive (approximated as saving is greater than investment ), and the foreign sector balance is positive (the rest of the world has a surplus in relation to the US since our current account balance is a deficit). Figure 7 shows the US sectoral balances, with each sector’s balance presented as a percent of GDP.”#1
The scientific blunder is in the sentence “At the level of the economy as a whole, aggregate spending is identically equal to aggregate income ― every dollar spent is received as income.”
This leads to the false MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0. The true balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.#2-#5
Because the foundational macroeconomic relationship is ill-defined the whole analytical superstructure of MMT is false. The testimonial of Randall Wray is scientifically worthless.#6
Worse, MMT either ignores or deliberately hides the distributional consequences of the policy of deficit-spending/money-creation: “Although MMT has a set of policy prescriptions to achieve full employment and price stability, what I have discussed here is largely descriptive. MMT allows us to look at the economy through a different lens. While economists and policymakers may advocate for reducing government deficits and debt, MMT cautions that what we might be reducing is economic growth, as well as the private sector’s surpluses and net financial wealth.”
For “the private sector” read “the Oligarchy”. The MMT policy of deficit-spending/money-creation = growing public debt is to the advantage of the Oligarchy and to the disadvantage of WeThePeople ― not only in the present but even more so in the future.#7
Egmont Kakarot-Handtke
#1 Levy Economics Institute Publications
#2 Dear idiots, government deficits do NOT fund private savings
#3 Rectification of MMT macro accounting
#4 Down with idiocy!
#5 The sectoral balances obfuscation: stupidity or corruption?
#6 The state of MMT? Stone-dead!
#7 Gosh! the One Percent have gotten $21 trillion richer: Links on Distribution
Related 'Mr. Wray goes to Washington'
Figure 7 or How the profit rabbit vanishes in the MMT top hat: the household sector and the business sector are merged into the Domestic Private Sector. For more examples see Down with idiocy! See also Stephanie Kelton’s legendary Plain-Sight-Ink-Trick. The crucial point is that there are four sectors (household, business, government, and rest of the world) with saving as the balance of the household sector and profit as the balance of the business sector. By merging the household and the business sector and reducing the four sectors to three macroeconomic profit vanishes. This blunder/fraud invalidates the whole of MMT. MMT policy guidance has NO valid scientific foundations. Needless to emphasize that the House Budget Committee does NOT understand what Figure 7 says but is very impressed by the PowerPoint competence of its economic experts.
Blog-Reference and Blog-Reference (Link) and Blog-Reference on Nov 21 and Blog-Reference on Nov 22
In Section 5. Sectoral balances of his testimonial Randall Wray states: “One of the concepts that Modern Money Theory economists use to elucidate the impact of budget deficits on the economy is the sectoral balance identity developed by Wynne Godley (1996). At the level of the economy as a whole, aggregate spending is identically equal to aggregate income ― every dollar spent is received as income. It is useful to divide the economy into three sectors: government (national, state, and local), domestic private (households and firms), and foreign (rest of the world). If one sector spends more than its income (deficit), at least one other must spend less than its income (surplus) to maintain the aggregate identity that total spending equals total income. The balances (income minus expenditure) of the three sectors have to add up to zero since we are adding up all the income in the economy and subtracting all the spending, which are equal by identity. We can then write the aggregate identity as: government balance + domestic private balance + foreign balance = 0. For the US, the government balance taken as a whole is usually negative (government spending is greater than its revenue ― mostly taxes), the domestic private balance is usually positive (approximated as saving is greater than investment ), and the foreign sector balance is positive (the rest of the world has a surplus in relation to the US since our current account balance is a deficit). Figure 7 shows the US sectoral balances, with each sector’s balance presented as a percent of GDP.”#1
The scientific blunder is in the sentence “At the level of the economy as a whole, aggregate spending is identically equal to aggregate income ― every dollar spent is received as income.”
This leads to the false MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0. The true balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.#2-#5
Because the foundational macroeconomic relationship is ill-defined the whole analytical superstructure of MMT is false. The testimonial of Randall Wray is scientifically worthless.#6
Worse, MMT either ignores or deliberately hides the distributional consequences of the policy of deficit-spending/money-creation: “Although MMT has a set of policy prescriptions to achieve full employment and price stability, what I have discussed here is largely descriptive. MMT allows us to look at the economy through a different lens. While economists and policymakers may advocate for reducing government deficits and debt, MMT cautions that what we might be reducing is economic growth, as well as the private sector’s surpluses and net financial wealth.”
For “the private sector” read “the Oligarchy”. The MMT policy of deficit-spending/money-creation = growing public debt is to the advantage of the Oligarchy and to the disadvantage of WeThePeople ― not only in the present but even more so in the future.#7
Egmont Kakarot-Handtke
#1 Levy Economics Institute Publications
#2 Dear idiots, government deficits do NOT fund private savings
#3 Rectification of MMT macro accounting
#4 Down with idiocy!
#5 The sectoral balances obfuscation: stupidity or corruption?
#6 The state of MMT? Stone-dead!
#7 Gosh! the One Percent have gotten $21 trillion richer: Links on Distribution
Related 'Mr. Wray goes to Washington'
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REPLY to Mike Norman on Nov 21
You say: “He [Randall Wray] sat there silently as Representative Ralph Norman of South Carolina repeated a laundry list of completely inapplicable and grossly ignorant characterizations of U.S. debt and government finance.”
To be fair, Randall Wray was invited to give his MMT expert testimony and not to fight other participants. Therefore, his testimony has to be judged on its own merits.
True, what the others presented was garbage. But nobody ever expected anything else given the scientific incompetence and the substandard IQ in economics.
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Twitter Nov 24
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Wikimedia AXEC143d Macroeconomic Profit Law (with increasing complexity) and Balances Equation
November 19, 2019
Bill Mitchell’s pure MMT teachings for British Labour
Comment on Bill Mitchell on ‘Invoking neoliberal framing and language is a failing progressive strategy (British Labour)’*
Blog-Reference and Blog-Reference
Bill Mitchell claims to be a Progressive. In this capacity he fights British Labour: “I have never supported so-called ‘progressive’ parties that choose, for ‘political’ purposes, to lie to the electorates by adopting neoliberal framing and language as a way of minimising any difficulties that might arise, initially, from the dissonance that accompanies exposure to the truth, after years of believing in lies.”
At some point, Bill Mitchell tells the world, he has realized that British Labour plays a con game: “Over the years it’s been clear to me that we live in a fictional world when it comes to economic matters. … Which tells you that he [Paul Mason] either doesn’t understand what MMT is about (ignorance) or deliberately deceives his audience (fraud).”
To make the matter short here, it is Bill Mitchell and his MMTers who are the fraudsters.#1, #2
Proper economic analysis shows beyond any doubt that the MMT policy of deficit-spending/money-creation is to the advantage of the Oligarchy and to the disadvantage of WeThePeople. The macroeconomic Profit Law entails Public Deficit = Private Profit and this entails that financial wealth is roughly equal to the public debt. In the fictional world of economics, the fictional Progressives are the real agenda pushers/useful idiots of the Oligarchy.
This should be pretty obvious, Bill Mitchell argues vehemently against budget-balancing and taxing the rich and tells Labour that they are stuck in neoliberal thinking.
• “This is the classic ‘soft’ mainstream macroeconomics that assumes the government is financially constrained and is thus not dissimilar to a household. It is ‘soft’ because, unlike the hard mainstream positions, it allows for deficits (‘funded’ by debt) to occur in a non-government downturn but proposes them to be offset by surpluses in an upturn, irrespective of the overall saving position of the non-government sector.”#3
• “The incomes of the rich are therefore essential to provide the capacity for the government to fund the provision of services to health care and welfare.”
• None of this framing or language is what I would call ‘progressive’.
According to MMT, budget-balancing is unexcusable but taxing the rich is of the devil: “It is false to claim that it is virtuous to ‘tax the rich’ in order to fund essential health and welfare services. This is one of the worst frames that the progressives now deploy.”
Obviously, the whole MMT thing is a shell game with the word progressive.#4
Political take-away for British Labour: MMT is bad science, MMT is bad policy, MMTers are bad people. Bill Mitchell’s MMT teachings for British Labour are a gaslighting exercise.
Egmont Kakarot-Handtke
* Billy Blog
#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 MMT Progressives: The knife in the back of WeThePeople
#3 Exploding the Household Fallacy
#4 Mr. Wray goes to Washington
Related 'The sectoral balances obfuscation: stupidity or corruption?' and 'A beginner’s guide to MMT' and 'How Bill Mitchell stalks Jeremy Corbyn'.
Blog-Reference and Blog-Reference
Bill Mitchell claims to be a Progressive. In this capacity he fights British Labour: “I have never supported so-called ‘progressive’ parties that choose, for ‘political’ purposes, to lie to the electorates by adopting neoliberal framing and language as a way of minimising any difficulties that might arise, initially, from the dissonance that accompanies exposure to the truth, after years of believing in lies.”
At some point, Bill Mitchell tells the world, he has realized that British Labour plays a con game: “Over the years it’s been clear to me that we live in a fictional world when it comes to economic matters. … Which tells you that he [Paul Mason] either doesn’t understand what MMT is about (ignorance) or deliberately deceives his audience (fraud).”
To make the matter short here, it is Bill Mitchell and his MMTers who are the fraudsters.#1, #2
Proper economic analysis shows beyond any doubt that the MMT policy of deficit-spending/money-creation is to the advantage of the Oligarchy and to the disadvantage of WeThePeople. The macroeconomic Profit Law entails Public Deficit = Private Profit and this entails that financial wealth is roughly equal to the public debt. In the fictional world of economics, the fictional Progressives are the real agenda pushers/useful idiots of the Oligarchy.
This should be pretty obvious, Bill Mitchell argues vehemently against budget-balancing and taxing the rich and tells Labour that they are stuck in neoliberal thinking.
• “This is the classic ‘soft’ mainstream macroeconomics that assumes the government is financially constrained and is thus not dissimilar to a household. It is ‘soft’ because, unlike the hard mainstream positions, it allows for deficits (‘funded’ by debt) to occur in a non-government downturn but proposes them to be offset by surpluses in an upturn, irrespective of the overall saving position of the non-government sector.”#3
• “The incomes of the rich are therefore essential to provide the capacity for the government to fund the provision of services to health care and welfare.”
• None of this framing or language is what I would call ‘progressive’.
According to MMT, budget-balancing is unexcusable but taxing the rich is of the devil: “It is false to claim that it is virtuous to ‘tax the rich’ in order to fund essential health and welfare services. This is one of the worst frames that the progressives now deploy.”
Obviously, the whole MMT thing is a shell game with the word progressive.#4
Political take-away for British Labour: MMT is bad science, MMT is bad policy, MMTers are bad people. Bill Mitchell’s MMT teachings for British Labour are a gaslighting exercise.
Egmont Kakarot-Handtke
* Billy Blog
#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 MMT Progressives: The knife in the back of WeThePeople
#3 Exploding the Household Fallacy
#4 Mr. Wray goes to Washington
Related 'The sectoral balances obfuscation: stupidity or corruption?' and 'A beginner’s guide to MMT' and 'How Bill Mitchell stalks Jeremy Corbyn'.
November 17, 2019
Mr. Wray goes to Washington
Comment on New Economic Perspectives on ‘Wray Appearing Before Congress’*
Blog-Reference and Blog-Reference Nov 18
MMT is two things: a novel theoretical approach that claims scientific superiority compared to the mainstream and political activism with a progressive agenda. This dual strategy violates the principle of the separation of politics and science. This First Principle of Science has been clearly formulated by J. S. Mill#1 but economists of all stripes have it forgotten. Today, economists are, with few exceptions, first agenda-pushers and second scientists.
The strict separation of the scientific realm and the political realm is non-negotiable because science cannot improve politics but politics always and everywhere corrupts science.
Contrary to their progressive appearances, MMTers are agenda-pushers for the Oligarchy.#2, #3, #4 The common denominator of all MMT policy proposals is deficit-spending/money-creation. This amounts to stealth taxation of WeThePeople and free lunches for the Oligarchy.#5
Needless to emphasize that MMTers play down all negative consequences of MMT policy. Here is what Randal Wray is going to tell in Washington: “His goal is to explain a) why we needn’t fear sovereign government deficits and debt; b) why in some important sense, deficits and rising debt are ‘normal’; c) the deficit is in any case largely outside the control of Congress; d) deficits and rising debt ratios will not lead to government insolvency or bankruptcy; e) all government payments can be made on time unless f) Congress forces a default (due to the debt ceiling it imposes).”
It is important to notice that the lethal effect of MMT policy is NOT inflation or bankruptcy. Because Public Deficit = Private Profit, the lethal effect is on the distribution of income and wealth. You will not learn much about distribution in Randall Wray’s testimony.
In essence, Wray tells Congress not to worry about the public debt but to do the bidding of Wall Street and to get out of the way of increasing deficit-spending/money-creation.#6-#9
Egmont Kakarot-Handtke
* New Economic Perspective
#1 “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”
#2 Is MMT good for WeThePeople or for the Oligarchy?
#3 Deficit cheerleaders ― the Oligarchy’s useful idiots
#4 How MMT enlightens Washington
#5 MMT: A free lunch for the Oligarchy
#6 Dear idiots, MMTers are Wall Street’s agenda pushers
#7 Very busy these days: Wall Street’s agents
#8 MMT: The fusion of Wall Street and Academia
#9 MMT and the overall political corruption of economics
Related 'Deficit-spending, public debt, and macroeconomic profit/loss' and 'No MMT illusions! YOU are going to pay for it' and 'How to pay for the war and to be bamboozled by economists' and 'Some nasty MMT surprises behind the time horizon' and 'Controlled demolition of MMT ― an exercise in elementary logic' and 'Links on Austerity' and 'The state of MMT? Stone-dead!' and 'How Randall Wray takes the piss out of the House Budget Committee'.
I say: “MMT is a novel theoretical approach that claims scientific superiority compared to the mainstream …”
You say: “Keep dreaming they claim no such thing …”
Bill Mitchell says: “The voodoo, I am afraid is actually on the other foot! There are some fundamental errors in the logic in the article that highlight why MMT is a superior paradigm for understanding how the monetary system actually operates in comparison to the mainstream logic that the author uses against it.”#1
#1 Voodoo economic revisionism abounds – and it is not MMT doing the voodoo
Blog-Reference and Blog-Reference Nov 18
MMT is two things: a novel theoretical approach that claims scientific superiority compared to the mainstream and political activism with a progressive agenda. This dual strategy violates the principle of the separation of politics and science. This First Principle of Science has been clearly formulated by J. S. Mill#1 but economists of all stripes have it forgotten. Today, economists are, with few exceptions, first agenda-pushers and second scientists.
The strict separation of the scientific realm and the political realm is non-negotiable because science cannot improve politics but politics always and everywhere corrupts science.
Contrary to their progressive appearances, MMTers are agenda-pushers for the Oligarchy.#2, #3, #4 The common denominator of all MMT policy proposals is deficit-spending/money-creation. This amounts to stealth taxation of WeThePeople and free lunches for the Oligarchy.#5
Needless to emphasize that MMTers play down all negative consequences of MMT policy. Here is what Randal Wray is going to tell in Washington: “His goal is to explain a) why we needn’t fear sovereign government deficits and debt; b) why in some important sense, deficits and rising debt are ‘normal’; c) the deficit is in any case largely outside the control of Congress; d) deficits and rising debt ratios will not lead to government insolvency or bankruptcy; e) all government payments can be made on time unless f) Congress forces a default (due to the debt ceiling it imposes).”
It is important to notice that the lethal effect of MMT policy is NOT inflation or bankruptcy. Because Public Deficit = Private Profit, the lethal effect is on the distribution of income and wealth. You will not learn much about distribution in Randall Wray’s testimony.
In essence, Wray tells Congress not to worry about the public debt but to do the bidding of Wall Street and to get out of the way of increasing deficit-spending/money-creation.#6-#9
Egmont Kakarot-Handtke
* New Economic Perspective
#1 “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”
#2 Is MMT good for WeThePeople or for the Oligarchy?
#3 Deficit cheerleaders ― the Oligarchy’s useful idiots
#4 How MMT enlightens Washington
#5 MMT: A free lunch for the Oligarchy
#6 Dear idiots, MMTers are Wall Street’s agenda pushers
#7 Very busy these days: Wall Street’s agents
#8 MMT: The fusion of Wall Street and Academia
#9 MMT and the overall political corruption of economics
Related 'Deficit-spending, public debt, and macroeconomic profit/loss' and 'No MMT illusions! YOU are going to pay for it' and 'How to pay for the war and to be bamboozled by economists' and 'Some nasty MMT surprises behind the time horizon' and 'Controlled demolition of MMT ― an exercise in elementary logic' and 'Links on Austerity' and 'The state of MMT? Stone-dead!' and 'How Randall Wray takes the piss out of the House Budget Committee'.
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REPLY to Matt Franko on Nov 18I say: “MMT is a novel theoretical approach that claims scientific superiority compared to the mainstream …”
You say: “Keep dreaming they claim no such thing …”
Bill Mitchell says: “The voodoo, I am afraid is actually on the other foot! There are some fundamental errors in the logic in the article that highlight why MMT is a superior paradigm for understanding how the monetary system actually operates in comparison to the mainstream logic that the author uses against it.”#1
#1 Voodoo economic revisionism abounds – and it is not MMT doing the voodoo
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Twitter Nov 20 |
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November 16, 2019
Economics, philosophy, and the crapification of science
Comment on Lars Syll on ‘Why philosophy and methodology matter for economics’
Blog-Reference
Tom Hickey, the philosopher in the econblogosphere recently drew the sum of his insights: “All of us have a world view. World views differ, perhaps slightly but perhaps a great deal. We affiliate based on shared world views. If one beings to groups that don’t share a common world view. this creates some double binds and cognitive dissonance, or role-playing, These world views are ‘programed’ into the brain functioning. At the social level this results in group think and conflict within and among groups.”
Well, this is known since time immemorial: “There are always many different opinions and conventions concerning any one problem or subject-matter (such as the gods). This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides … was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other …” (Popper)
Most people are satisfied with the pluralism of opinions and only want tolerance for their own. The ambition of the genuine scientist/philosopher, though, is to advance from doxa = opinion to episteme = knowledge: “That the settlement of opinion is the sole end of inquiry is a very important proposition.” (Peirce)
The guiding principle for establishing knowledge is the distinction between true and false. Scientific truth is well-defined: “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)
The problem with economics is that it is NOT a science to this day. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, etc. — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong.
Economics is what Feynman called cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”
Some economists frankly admit that economics does not satisfy scientific standards but point out that it is influential nonetheless: “… the great economists pursued an inquiry as exciting — and as dangerous — as any the world has ever known. The ideas they dealt with, unlike the ideas of the great philosophers, did not make little difference to our daily working lives; the experiments they urged could not, like the scientists’, be carried out in the isolation of a laboratory. The notions of the great economists were world-shaking, and their mistakes were nothing short of calamitous. ‘The ideas of economists and political philosophers,’ wrote Lord Keynes, himself a great economist, ‘both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.’” (Heilbroner The Worldly Philosophers)
All this is historically correct but entirely beside the point. To recall, the criterion of science is true/false and NOT influential/ineffective. The latter is the chief criterion of propaganda. Propaganda, though, has NOTHING to do with episteme = knowledge. What we know from history and the content of so-called holy books is that people accept/believe/ defend any intellectual/moral perversion. The history of ideas is the history of scientifically worthless follower-generating opinions.
This holds also for the history of economic thought. There are political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
The fact is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Economics is fake science. Worse, economics is a political fraud.
True: “All of us have a world view”. True, this “world view” informs our actions. True, “world views” count in the political realm. However, “world views” count for NOTHING in the scientific realm.
To call economists worldly philosophers is a silly euphemism. Economics is neither science nor philosophy but political agenda-pushing. Economists are neither scientists nor worldly philosophers but clowns and useful idiots in the political Circus Maximus.
There is no such thing as an economist who works for the welfare or enlightenment of humanity. According to their own behavioral axiom, economists maximize their individual utility, which means — more often than not — that they are directly or indirectly on the payroll of the incumbent Oligarchy.
Economists have corrupted science and therefore have to be expelled from the scientific community.#1-#14
Egmont Kakarot-Handtke
#1 Economics: Poor philosophy, poor psychology, poor science
#2 Economics, philosophy, and mathematics
#3 Economics is NOT about what Happiness is but about what Profit is
#4 Economists: scientists or political clowns?
#5 Overreach: Economists have their fingers in every pie except real economics
#6 The irrelevance of economics
#7 Economics is NOT a social science
#8 Economics as storytelling and entertainment for the masses
#9 What is so great about cargo cult science? or, How economists learned to stop worrying about failure
#10 The economist as storyteller
#11 Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion
#12 Econogenics: economists pose a hazard to their fellow citizens
#13 Macroeconomics and the fake History of Economic Thought
#14 What it takes to become a great economist
You say: “Lars Syll is correct. Philosophy and methodology (the study of methods) do matter for economics.”
It is pretty obvious that philosophy and methodology have NOT helped Lars Syll much to advance economics. Lacking any understanding of elementary mathematics he still has not realized that Keynes messed up macroeconomics 80+ years ago.#1
Worse, Lars Syll constantly violates the first practical rule of philosophy, that is, Be Honest, which includes (i) NOT manipulating debate and suppressing critique#2, (ii) exclusively applying logical/empirical refutation and NOT political insinuation, (iii) to openly admit having been refuted, (iv) to accept the consequences of scientific failure and to retire from academia.
#1 Keynesianism is broken: Get over it!
#2 Cryptoeconomics ― the best of Lars Syll’s spam folder
You say: “People make economies and explain what they make. Talk with them, Observe their daily actions. And be respectful. They have the answers for which we search.”
No. That is NOT how science works. And this is known for 2300+ years.
“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.” (J. S. Mill)
“It [Political Economy] is an abstract science which labours under a special hardship. Those who are conversant with its abstractions are usually without a true contact with its facts; those who are in contact with its facts have usually little sympathy with and little cognisance of its abstractions. Literary men who write about it are constantly using what a great teacher calls ‘unreal words,’ — that is, they are using expressions with which they have no complete vivid picture to correspond. They are like physiologists who have never dissected; like astronomers who have never seen the stars; and, in consequence, just when they seem to be reasoning at their best, their knowledge of the facts falls short. Their primitive picture fails them, and their deduction altogether misses the mark — sometimes, indeed, goes astray so far, that those who live and move among the facts boldly say that they cannot comprehend ‘how any one can talk such nonsense.’ Yet, on the other hand, these people who live and move among the facts often, or mostly, cannot of themselves put together any precise reasonings about them." (Bagehot)
The very characteristic of science is to TRANSCEND the common sense of “people who live and move among the facts”. Economic methodology has suffered since Adam Smith from the Fallacy of Insufficient Abstraction.
Related 'How Heterodoxy got lost in the methodological woods' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?'.
Blog-Reference
Tom Hickey, the philosopher in the econblogosphere recently drew the sum of his insights: “All of us have a world view. World views differ, perhaps slightly but perhaps a great deal. We affiliate based on shared world views. If one beings to groups that don’t share a common world view. this creates some double binds and cognitive dissonance, or role-playing, These world views are ‘programed’ into the brain functioning. At the social level this results in group think and conflict within and among groups.”
Well, this is known since time immemorial: “There are always many different opinions and conventions concerning any one problem or subject-matter (such as the gods). This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides … was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other …” (Popper)
Most people are satisfied with the pluralism of opinions and only want tolerance for their own. The ambition of the genuine scientist/philosopher, though, is to advance from doxa = opinion to episteme = knowledge: “That the settlement of opinion is the sole end of inquiry is a very important proposition.” (Peirce)
The guiding principle for establishing knowledge is the distinction between true and false. Scientific truth is well-defined: “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)
The problem with economics is that it is NOT a science to this day. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, etc. — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong.
Economics is what Feynman called cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”
Some economists frankly admit that economics does not satisfy scientific standards but point out that it is influential nonetheless: “… the great economists pursued an inquiry as exciting — and as dangerous — as any the world has ever known. The ideas they dealt with, unlike the ideas of the great philosophers, did not make little difference to our daily working lives; the experiments they urged could not, like the scientists’, be carried out in the isolation of a laboratory. The notions of the great economists were world-shaking, and their mistakes were nothing short of calamitous. ‘The ideas of economists and political philosophers,’ wrote Lord Keynes, himself a great economist, ‘both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.’” (Heilbroner The Worldly Philosophers)
All this is historically correct but entirely beside the point. To recall, the criterion of science is true/false and NOT influential/ineffective. The latter is the chief criterion of propaganda. Propaganda, though, has NOTHING to do with episteme = knowledge. What we know from history and the content of so-called holy books is that people accept/believe/ defend any intellectual/moral perversion. The history of ideas is the history of scientifically worthless follower-generating opinions.
This holds also for the history of economic thought. There are political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
The fact is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Economics is fake science. Worse, economics is a political fraud.
True: “All of us have a world view”. True, this “world view” informs our actions. True, “world views” count in the political realm. However, “world views” count for NOTHING in the scientific realm.
To call economists worldly philosophers is a silly euphemism. Economics is neither science nor philosophy but political agenda-pushing. Economists are neither scientists nor worldly philosophers but clowns and useful idiots in the political Circus Maximus.
There is no such thing as an economist who works for the welfare or enlightenment of humanity. According to their own behavioral axiom, economists maximize their individual utility, which means — more often than not — that they are directly or indirectly on the payroll of the incumbent Oligarchy.
Economists have corrupted science and therefore have to be expelled from the scientific community.#1-#14
Egmont Kakarot-Handtke
#1 Economics: Poor philosophy, poor psychology, poor science
#2 Economics, philosophy, and mathematics
#3 Economics is NOT about what Happiness is but about what Profit is
#4 Economists: scientists or political clowns?
#5 Overreach: Economists have their fingers in every pie except real economics
#6 The irrelevance of economics
#7 Economics is NOT a social science
#8 Economics as storytelling and entertainment for the masses
#9 What is so great about cargo cult science? or, How economists learned to stop worrying about failure
#10 The economist as storyteller
#11 Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion
#12 Econogenics: economists pose a hazard to their fellow citizens
#13 Macroeconomics and the fake History of Economic Thought
#14 What it takes to become a great economist
***
REPLY to Ikonoclast on Nov 19You say: “Lars Syll is correct. Philosophy and methodology (the study of methods) do matter for economics.”
It is pretty obvious that philosophy and methodology have NOT helped Lars Syll much to advance economics. Lacking any understanding of elementary mathematics he still has not realized that Keynes messed up macroeconomics 80+ years ago.#1
Worse, Lars Syll constantly violates the first practical rule of philosophy, that is, Be Honest, which includes (i) NOT manipulating debate and suppressing critique#2, (ii) exclusively applying logical/empirical refutation and NOT political insinuation, (iii) to openly admit having been refuted, (iv) to accept the consequences of scientific failure and to retire from academia.
#1 Keynesianism is broken: Get over it!
#2 Cryptoeconomics ― the best of Lars Syll’s spam folder
***
REPLY to Ken Zimmerman on Nov 20You say: “People make economies and explain what they make. Talk with them, Observe their daily actions. And be respectful. They have the answers for which we search.”
No. That is NOT how science works. And this is known for 2300+ years.
“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.” (J. S. Mill)
“It [Political Economy] is an abstract science which labours under a special hardship. Those who are conversant with its abstractions are usually without a true contact with its facts; those who are in contact with its facts have usually little sympathy with and little cognisance of its abstractions. Literary men who write about it are constantly using what a great teacher calls ‘unreal words,’ — that is, they are using expressions with which they have no complete vivid picture to correspond. They are like physiologists who have never dissected; like astronomers who have never seen the stars; and, in consequence, just when they seem to be reasoning at their best, their knowledge of the facts falls short. Their primitive picture fails them, and their deduction altogether misses the mark — sometimes, indeed, goes astray so far, that those who live and move among the facts boldly say that they cannot comprehend ‘how any one can talk such nonsense.’ Yet, on the other hand, these people who live and move among the facts often, or mostly, cannot of themselves put together any precise reasonings about them." (Bagehot)
The very characteristic of science is to TRANSCEND the common sense of “people who live and move among the facts”. Economic methodology has suffered since Adam Smith from the Fallacy of Insufficient Abstraction.
Related 'How Heterodoxy got lost in the methodological woods' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?'.
***
#PointOfProof
Nov 21
***
Twitter May 10, 2021 The economics of philosophy
Twitter Jan 13, 2023 Economists are neither scientists nor philosophers but agenda pushers/useful idiots/clowns in the political Circus Maximus
Twitter/X Feb, 8, 2024 It looks like the intellectual quality problem is not confined to economics but there is a general trend
November 13, 2019
Marx and Marxists ― too stupid for the elementary algebra of profit
Comment on Michael Roberts on ‘Marx’s double-edge law’*
Blog-Reference and Blog-Reference
Marx got Profit Theory wrong and his followers did not get it right to this day.#1 This, of course, does not hinder them to give policy advice about how to better the economy and humanity. Needless to emphasize that economic policy that is not based on valid theory tends to worsen the situation.#2 As Stigum put it: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.”
To this day, Marxianism is merely opinion and NOT science, just like mainstream economics. Both get the foundational magnitude of economics ― profit ― wrong.#3
To make matters short, the axiomatically correct macroeconomic Profit Law is given by Q≡Qm+Qn with Qm≡Yd+(I−Sm)+(G−T)+(X−M) Legend: Qm monetary profit/loss of the business sector, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving of the household sector, G government expenditures, T taxes, X exports, M imports. Total profit Q is the sum of monetary and nonmonetary profit/loss. Roughly speaking, monetary profit Qm is determined by the excess of business sector investment over household sector saving, the government’s deficit, and the excess of exports over imports.
In order to derive the profit rate π the Profit Law is first simplified to Q≡I−Sm which says that macroeconomic profit is equal to the difference of business sector investment I and household sector monetary saving Sm.#4 Note that profit is gross, i.e. that depreciation D has been set to zero, i.e. Qn=−D=0. The point to notice is that investment is NEVER equal to saving and this means that Keynes’ I=S is false and with it the whole of Keynesianism.
To simplify further, household sector saving is set to zero. As a result, one gets Q=I, i.e. (gross) profit is equal to (gross) investment.
The profit rate is defined as π≡Q/K, i.e. profit in relation to capital. Now capital in period t is the sum of all previous investments, i.e. K≡ ∑ I. Mathematically, investment is the change of the capital stock, i.e. the derivative, and the capital stock is the sum of the changes, i.e. the integral. In the most elementary case (with zero depreciation), the profit rate depends alone on investment I.
This, though, gives one a positive feedback loop: “If company management see their profits or earnings slowing, they reduce their investment expansion and employment hiring and even reverse it.” But because of Q=I this reduces profit further. The analog holds for increasing profit. And this positive feedback explains the business cycle. The market economy is NOT an equilibrium system because of the positive feedback between profit and investment. This means that the whole of Walrasianism and Austrianism is false. All equilibrium models are proto-scientific garbage.
Whether the profit rate falls or rises depends in the most elementary case on the time profile of investment expenditures I. In the early phase of Capitalism investment, i.e. the growth of the capital stock, drives profit. For late Capitalism, the Profit Law tells one Qm≡(I−Sm)+(G−T), i.e. profit is mainly driven by public deficit spending. This means that the profit rate depends on the growth rate of public debt. The so-called free-market economy is on the full life support of the state.
Egmont Kakarot-Handtke
* Michael Roberts Blog HM1 ― Marx’s double-edge law
#1 Links on Karl Marx
#2 Econogenics: economists pose a hazard to their fellow citizens
#3 The real trouble with Capitalism: stupid/corrupt economists
#4 For more details see section 6.2 of Squaring the Investment Cycle
Related 'Profit for Marxists' and 'Economists cannot do the simple math of profit — better keep them out of politics' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'The GDP-death-blow for the economics profession'.
Blog-Reference and Blog-Reference
Marx got Profit Theory wrong and his followers did not get it right to this day.#1 This, of course, does not hinder them to give policy advice about how to better the economy and humanity. Needless to emphasize that economic policy that is not based on valid theory tends to worsen the situation.#2 As Stigum put it: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.”
To this day, Marxianism is merely opinion and NOT science, just like mainstream economics. Both get the foundational magnitude of economics ― profit ― wrong.#3
To make matters short, the axiomatically correct macroeconomic Profit Law is given by Q≡Qm+Qn with Qm≡Yd+(I−Sm)+(G−T)+(X−M) Legend: Qm monetary profit/loss of the business sector, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving of the household sector, G government expenditures, T taxes, X exports, M imports. Total profit Q is the sum of monetary and nonmonetary profit/loss. Roughly speaking, monetary profit Qm is determined by the excess of business sector investment over household sector saving, the government’s deficit, and the excess of exports over imports.
In order to derive the profit rate π the Profit Law is first simplified to Q≡I−Sm which says that macroeconomic profit is equal to the difference of business sector investment I and household sector monetary saving Sm.#4 Note that profit is gross, i.e. that depreciation D has been set to zero, i.e. Qn=−D=0. The point to notice is that investment is NEVER equal to saving and this means that Keynes’ I=S is false and with it the whole of Keynesianism.
To simplify further, household sector saving is set to zero. As a result, one gets Q=I, i.e. (gross) profit is equal to (gross) investment.
The profit rate is defined as π≡Q/K, i.e. profit in relation to capital. Now capital in period t is the sum of all previous investments, i.e. K≡ ∑ I. Mathematically, investment is the change of the capital stock, i.e. the derivative, and the capital stock is the sum of the changes, i.e. the integral. In the most elementary case (with zero depreciation), the profit rate depends alone on investment I.
This, though, gives one a positive feedback loop: “If company management see their profits or earnings slowing, they reduce their investment expansion and employment hiring and even reverse it.” But because of Q=I this reduces profit further. The analog holds for increasing profit. And this positive feedback explains the business cycle. The market economy is NOT an equilibrium system because of the positive feedback between profit and investment. This means that the whole of Walrasianism and Austrianism is false. All equilibrium models are proto-scientific garbage.
Whether the profit rate falls or rises depends in the most elementary case on the time profile of investment expenditures I. In the early phase of Capitalism investment, i.e. the growth of the capital stock, drives profit. For late Capitalism, the Profit Law tells one Qm≡(I−Sm)+(G−T), i.e. profit is mainly driven by public deficit spending. This means that the profit rate depends on the growth rate of public debt. The so-called free-market economy is on the full life support of the state.
Egmont Kakarot-Handtke
* Michael Roberts Blog HM1 ― Marx’s double-edge law
#1 Links on Karl Marx
#2 Econogenics: economists pose a hazard to their fellow citizens
#3 The real trouble with Capitalism: stupid/corrupt economists
#4 For more details see section 6.2 of Squaring the Investment Cycle
Related 'Profit for Marxists' and 'Economists cannot do the simple math of profit — better keep them out of politics' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'The GDP-death-blow for the economics profession'.
***
Wikimedia AXEC143d
Econogenics: economists pose a hazard to their fellow citizens
Comment on Bill Mitchell on ‘The evidence from the sociologists against economic thinking is compelling’*
Blog-Reference and Blog-Reference
Bill Mitchell summarizes: “One of the stark facts about the academic economics discipline is its insularity and capacity to deliver influential prognoses on issues that affect the well-being of millions with scant regard to the actual consequences of their opinions and with little attention to what other social scientists have to say. The mainstream economists continually get things wrong but take no responsibility for the damage they cause to the well-being of the people.”
And this is how it is done “So we get a formulaic approach to publications in macroeconomics that goes something like this
Not only mainstream economics, though, is proto-scientific garbage. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong. With their provably false theories, economists pose a hazard to their fellow citizens. However, the same holds for MMT, the approach Bill Mitchell represents.#1-#13
Bill Mitchell is right in his critique of what passes as economics but he has drawn the wrong conclusion from obvious scientific failure: “A mainstream professor who was supervising my economics graduate program once said to me: ‘Bill you are a bright boy but you should be doing sociology’, which was an example of the negative control mechanism designed to weed out dissidents (like me). It didn’t work. But I always considered the disciplines of sociology and anthropology (not to mention psychology, political science, social welfare etc) to be important in my journey to become ‘well read’.”
The correct conclusions from the lethal methodological blunders of economists are
From this follows that economics needs a full-blown Paradigm Shift. In concrete terms, this means that false microfoundations#16 have to be replaced by true macrofoundations#17.
Walrasianism, Keynesianism, Marxianism, Austrianism, and Bill Mitchell’s MMT have to be buried at the Flat-Earth-Cemetery.#18
Egmont Kakarot-Handtke
* Billy Blog
#1 Econogenics in action
#2 How the representative economist gets it wrong big-time
#3 Economics: The greatest scientific fraud in modern times
#4 Economics ― worse than fake
#5 Economics ― a doctor worse than the disease
#6 Economists and the destructive power of stupidity
#7 MMT: The economics moron as problem solver
#8 Mass unemployment: The joint failure of orthodox and heterodox economics
#9 No culpa, only stultitia
#10 As Napoleon said: don’t listen to economists
#11 Why do workers not tar and feather economists?
#12 Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion
#13 Scrap the EconNobel
#14 PsySoc — the scourge of economics
#15 Homo oeconomicus: the never-ending folk-psychological shitshow
#16 Microfoundations are verbally given by: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)
#17 The true Macrofoundations are given by (A0) 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. (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) C=PX consumption expenditure C is equal to price P times quantity bought/sold X. See True macrofoundations: the reset of economics
#18 The real trouble with Capitalism: stupid/corrupt economists
Related 'Economists: scientists or political clowns?' and 'Economists ― medics or barber-surgeons?' and 'False economic theory makes bad economic policy' and 'Economics is indefensible' and 'The real trouble with Capitalism: stupid/corrupt economists' and 'Economic policy has gone wrong because economic theory has gone wrong'.
Blog-Reference and Blog-Reference
Bill Mitchell summarizes: “One of the stark facts about the academic economics discipline is its insularity and capacity to deliver influential prognoses on issues that affect the well-being of millions with scant regard to the actual consequences of their opinions and with little attention to what other social scientists have to say. The mainstream economists continually get things wrong but take no responsibility for the damage they cause to the well-being of the people.”
And this is how it is done “So we get a formulaic approach to publications in macroeconomics that goes something like this
- Assert without foundation ― so-called micro-foundations ― rationality, maximisation, RATEX.
- Cannot deal with real world people so deal with one infinitely-lived agent!
- Assert efficient, competitive markets as optimality benchmark.
- Write some trivial mathematical equations and solve.
- Policy shock ‘solution’ to ‘prove’, for example, that fiscal policy ineffective (Ricardian equivalence) and austerity is good. Perhaps allow some short-run stimulus effect.
- Get some data ― realise poor fit ― add some ad hoc lags (price stickiness etc) to improve ‘fit’ but end up with identical long-term results.
- Maintain pretense that micro-foundations are intact ― after all, it is the only claim to intellectual authority.
- Publish articles that reinforce starting assumptions. Knowledge quotient ― ZERO ― GIGO.”
Not only mainstream economics, though, is proto-scientific garbage. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong. With their provably false theories, economists pose a hazard to their fellow citizens. However, the same holds for MMT, the approach Bill Mitchell represents.#1-#13
Bill Mitchell is right in his critique of what passes as economics but he has drawn the wrong conclusion from obvious scientific failure: “A mainstream professor who was supervising my economics graduate program once said to me: ‘Bill you are a bright boy but you should be doing sociology’, which was an example of the negative control mechanism designed to weed out dissidents (like me). It didn’t work. But I always considered the disciplines of sociology and anthropology (not to mention psychology, political science, social welfare etc) to be important in my journey to become ‘well read’.”
The correct conclusions from the lethal methodological blunders of economists are
- Leave sociology to the sociologists and psychology to the psychologists.
- Take their findings whenever needed.
- Focus instead on how the economic system works.
- Economics is NOT a social science but a systems science.#14, #15
- Economists are responsible for the social devastations that result from the application of provably false theories.
From this follows that economics needs a full-blown Paradigm Shift. In concrete terms, this means that false microfoundations#16 have to be replaced by true macrofoundations#17.
Walrasianism, Keynesianism, Marxianism, Austrianism, and Bill Mitchell’s MMT have to be buried at the Flat-Earth-Cemetery.#18
Egmont Kakarot-Handtke
* Billy Blog
#1 Econogenics in action
#2 How the representative economist gets it wrong big-time
#3 Economics: The greatest scientific fraud in modern times
#4 Economics ― worse than fake
#5 Economics ― a doctor worse than the disease
#6 Economists and the destructive power of stupidity
#7 MMT: The economics moron as problem solver
#8 Mass unemployment: The joint failure of orthodox and heterodox economics
#9 No culpa, only stultitia
#10 As Napoleon said: don’t listen to economists
#11 Why do workers not tar and feather economists?
#12 Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion
#13 Scrap the EconNobel
#14 PsySoc — the scourge of economics
#15 Homo oeconomicus: the never-ending folk-psychological shitshow
#16 Microfoundations are verbally given by: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)
#17 The true Macrofoundations are given by (A0) 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. (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) C=PX consumption expenditure C is equal to price P times quantity bought/sold X. See True macrofoundations: the reset of economics
#18 The real trouble with Capitalism: stupid/corrupt economists
Related 'Economists: scientists or political clowns?' and 'Economists ― medics or barber-surgeons?' and 'False economic theory makes bad economic policy' and 'Economics is indefensible' and 'The real trouble with Capitalism: stupid/corrupt economists' and 'Economic policy has gone wrong because economic theory has gone wrong'.
For more about iatrogenic economics see AXECquery.
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