AXEC: New Foundations of Economics: MMT ― now official doctrine

July 24, 2020

MMT ― now official doctrine

Comment on Tom Hickey on ‘A Job Guarantee Costs Far Less Than Unemployment, Pavlina Tcherneva’

Blog-Reference

It has always been clear that MMT is NOT a scientifically valid economic theory but political propaganda for the benefit of the one-percenters.#1 However, MMTers always claimed that their heroic fight was for the benefit of WeThePeople. Tom Hickey, the MMT philosopher, made it quite clear that his mental grandfather was Karl Marx. Same for Bill Mitchell, the MMT chief ideologist.

MMTers placed themselves firmly in the Progressive camp and demonstratively gathered behind the signboard of the Job Guarantee. That’s pro-labor and anti-capitalist, right? Yes, but only for people who have been trained since childhood to believe any crap.

Tom Hickey is very happy to announce that MMT colleague Pavlina Tcherneva is now on Foreign Affairs: “MMT is making it to the top of the list after having been marginalized for decades. Is the elite getting concerned? This is a superb article and it is addressed to the ruling elite, which is the audience of this venue.”

What is Foreign Affairs? Tom Hickey cites Wikipedia: “Foreign Affairs is an American magazine of international relations and U.S. foreign policy published by the Council on Foreign Relations, a nonprofit, nonpartisan, membership organization and think tank specializing in U.S. foreign policy and international affairs.”

In other words, Foreign Affairs tells the Oligarchy's underlings all over the world what the grand policy outline is. The new strategy in order to save the system is deficit-spending/ money-creation. And this is why MMT and its apostles are currently hyped across all media. Stephanie Kelton is No 1 on the NYT bestseller list and Pavlina Tcherneva is on Foreign Affairs. And the Marx pupil Tom Hickey applauds until he runs out of oxygen behind his mask.

Gentle reminder: the MMT policy of deficit-spending/money-creation is NOT and NEVER has been for the benefit of WeThePeople. MMT is the issuance of counterfeit currency in the form of deficit spending/money creation for the benefit of the one-percenters. Because PublicDeficit = PrivateProfit, MMT is the biggest redistribution program ever.#2 MMT is and always has been a political fraud.

That MMT is now promoted by Foreign Affairs is proof of it.

The COV19 emergency helps greatly to sell the fraud. Nobody can argue against a budget deficit in the 'state of exception'.

Egmont Kakarot-Handtke

#1 MMT ― a Wall Street myth
#2 More details

Related 'Keynes, Lerner, MMT, Trump, Biden, and exploding profit' and 'MMT, money creation, stealth taxation, and redistribution' and 'Dear idiots, MMTers are Wall Street’s agenda pushers' and 'Why the public debt must rise incessantly' and 'The new doctrine of State Capture' and 'MMT pushes the Oligarchy's agenda ― and they push MMT'.

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REPLY to Matt Franko on Jul 24

Economics is not an ordinary science but sciences: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel.”

Or, the classical definition: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Robbins)

Because the science claim is provably false,#1 economists are in fact fraudsters.

#1 Wikipedia, economics, scientific knowledge, or political agenda pushing?

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REPLY to Tom Hickey on Jul 24

When the folks of the social sciences cannot do real science for some spurious methodological reasons#1 that’s no problem. They can do talk shows or polit-marketing or comedy or social media trolling. What they cannot do is to claim that whatever they do is science and to award themselves Nobel prizes. They can award themselves Oscars for the funniest financial hoax and such things.

There are some minimum requirements for science. One is to realize in seconds, not in years, that 2+2=5 is false. Or, for that matter, that the Keynesian I=S is false.#2 MMTers do not satisfy these requirements. They still don’t get the macroeconomic balances right.#3 That is, they fail at elementary algebra. There is NO methodological excuse for that, ever.

There are also some ethical requirements for science. The first and foremost is not to lie and not to cheat. Another is, not to manipulate the communication. MMTers are big-time #EconBlocker and that is the unassailable proof that they are not scientists but political crooks.

MMT is hyped at the moment because the biggest Ponzi scheme of all time has to be sold as an employment program and academically blessed.

People trust science. What they don’t know is that economics in general and MMT, in particular, is fake science.#4

#1 How incompetent are economic methodologists? Very!
#2 Cross-references Refutation of I=S
#3 Profit
#4 Trust in science? Yes, but economics is NOT a science

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REPLY to Tom Hickey on Jul 25

You say “Arguing over what "science" is or what counts as "scientific" is philosophy of science and there is no general agreement on criteria for this terms.”

Yes, but there is a general agreement that 2+2=5 is false. And more agreement is not needed.

The foundational MMT sectoral balances equation is algebraically false.#1 And this settles the matter already. Because the foundational economic concept of profit is false the whole theoretical superstructure is false. Because of this, MMT policy guidance has no sound scientific foundations. The only open question is whether MMTers are too stupid for science or whether they abuse the prestige of science for political agenda pushing.

This question is answered by the appearance of MMT’s Pavlina Tcherneva on Foreign Affairs. Roughly speaking, Foreign Affairs is for the Capitalist Party what Pravda has been for the Communist Party. Foreign Affairs is the mouthpiece of the CFR. And everybody knows since Carrol Quigley’s Tragedy and Hope that the CFR and its forerunners had the interests of the Oligarchy on their mind and not so much the interests of WeThePeople.

The appearance of Pavlina Tcherneva on Foreign Affairs is a message from the Central Committee of Capitalism to economists worldwide to make up their minds and to support the current policy of deficit spending/money creation which is the last instrument to mitigate the accelerated breakdown of the system.

Of course, MMTers are free to fight for the survival of Capitalism but it is utter corruption to pretend that this is science.

#1 Profit

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REPLY to Tom Hickey on Jul 25

You say: “The foundational MMT sectoral balances equation is an accounting identity. Are you disputing that?”

Not at all. The crucial point is, that I have given the unassailable proof that MMTers have messed up the foundational macroeconomic accounting identity. See
Wikipedia, economics, scientific knowledge, or political agenda pushing?
Section ‘Exemplary proof of the inconsistency of economics’ and Sub-sections ‘Provably false Keynes/MMT’.

Everyone with basic mathematical skills can immediately check the proof.

So, MMT is disproved at the elementary level. Meaning, MMT is scientifically worthless. Meaning, MMT is brain-dead political agenda pushing to the advantage of the Oligarchy and to the disadvantage of WeThePeople.

And this is exactly why MMT is promoted by Foreign Affairs.

Pretty straightforward, indeed.

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Twitter Jan 18, 2021 It is called relief package but it is a free lunch for the Oligarchy.

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Bill Mitchell's Blog May 4 The macroeconomic narrative continues to evolve, the game is not yet over.

Bill Mitchell's Blog Mai 25 MMT is the new doctrine but there are some folks who still maintain that public deficit/debt is bad for WeThePeople

"Don’t say its over until its over ― MMT is not close to dominating the narrative

Don’t say its over until its over. There has been progress in the macroeconomics narrative since the GFC, which accelerated during the pandemic. Governments have certainly expanded fiscal deficits and taken on more debt and the usual hysteria, which many of those same governments helped to ferment in the public debate, has fallen away. Obviously, for political reasons, a government that has previously been terrorising the population about the dangers of deficits and rising debt as a cover for ideologically-driven austerity programs, has no incentive in continuing those narratives while they have been dragged into maintaining capitalism on life support."

Note that the words profit or distribution do NOT appear once in the whole article.

For more about the Profit Law see AXECquery.

For more on Austerity see Links.

Twitter 29 May The new doctrine at work

Twitter Jun 18 Senator John Yarmuth declares the policy switch from austerity to deficit overdrive

E-PAMPHLETS, August 2021, Randall Wray What Is MMT’s State of Play in Washington?

Knowledge only — no opinion

Science does not explain everything, but non-science explains nothing.

Neither orthodox nor heterodox economics satisfies the scientific criteria of material and formal consistency.

Economists cannot explain how the economy works. The Profit Theory is false since Adam Smith. There is much opinion and little knowledge.

Opinion is the realm of political economics, knowledge is the realm of theoretical economics.

Political economics is scientifically worthless.

Theoretical economics is built upon clearly stated premises, i.e., upon a set of axioms.

Orthodoxy got the axiomatic foundations wrong and Heterodoxy has none at all.

Economics is a failed science. Economists are incompetent scientists.

Profit

Neither Classicals, nor Walrasians, nor Marshallians, nor Marxians, nor Keynesians, nor Institutionialists, nor Monetary Economists, nor MMTers, nor Austrians, nor Sraffaians, nor Evolutionists, nor Game theorists, nor EconoPhysicists, nor RBCers, nor New Keynesians, nor New Classicals ever came to grips with profit. Hence, they all fail to capture the essence of the market economy.

Because of this, economists have nothing to offer in the way of a scientifically founded economic policy guidance.

The hybrid science

As a first approximation, one can agree on the general characteristic that the economy is a complex system.

However, with the term system one usually associates a structure with components that are non-human. In order to stress the obvious fact that humans are an essential component of the economic system the market economy should be characterized more precisely as a complex hybrid human/system entity.

The scientific method is straightforwardly applicable to the sys-component but not to the hum-component. While it is clear that the economy always has to be treated as an indivisible whole, for good methodological reasons the analysis has to start with the objective system-component.

In gestalt-psychological terms the economic system is the foreground, individual behavior the background. Common sense wrongly insists that the hum-component must always be in the foreground. This fallacy compares to geo-centrism. The economic system has its own logic which is different from the behavioral logic of humans. The systemic logic is what Adam Smith called the Invisible Hand.

There are systemic laws but no behavioral laws. Systemic laws have the same methodological status as physical laws.

Neither Orthodoxy nor Heterodoxy can tell what the systemic laws of the actual monetary economy are.

Whether the outcome of the human/system-interaction is good or bad is a politcal question that lies outside of theoretical economics. Theoretical economics explains how the actual economy works - no less, no more.

Narrative vs.Theory

Psychological, sociological or behavioral assumptionism cannot yield anything other than a gossip model of the world. Second-guessing the agents is not economic analysis.

Science deals exclusively with propositions that can in principle be decided by objective means. The rest is opinion, faith, phantasy, motive speculation, allegation, hallucination, myth, paranoia, ink-blot association, psychology, philosophy, in one word: storytelling.

Storytelling is the original mode of communication in the social realm — except science.

Political economics is storytelling and, by default, the natural habitat of confused confusers. Walrasianism, Keynesianism, Marxianism, Austrianism are social narratives and not scientifically valid representations of reality.

"The truth is, most persons, not excepting professional economists, are satisfied with very hazy notions." (Fisher)

In marked contrast, theoretical economics lives up to the standards of material and formal consistency. A scientific theory is the best mental representation of reality that is humanly possible.

Theory starts with a set of objective and consistent axioms.

Paradigm Shift

"The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy." (Feynman)

"As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction." (Nell)

"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)

"Is it not a fact, which stares at us from the histories of all sciences, that it is much more difficult for the human mind to forge the most elementary conceptual schemes than it is to elaborate the most complicated superstructure when those elements are well in hand?" (Schumpeter)

"The task of producing knowledge against the grain requires imagination." (Mirowski)

"A new idea is extremely difficult to think of. It takes a fantastic imagination." (Feynman)

"The scientific imagination dreams of explanations and laws." (Peirce)

"It is brilliance of imagination which makes the glory of science." (Evans)

"... we know little more now about ‘how the economy works,’ ... than we knew in 1790, after Adam Smith completed the last revision of The Wealth of Nations." (Clower)

Selftest and to watch for

You apply one of these items

• supply-demand-equilibrium,

• general equilibrium,

• marginal utility,

• well-behaved production functions,

• total income = value of output,

• total income = wages + profits,

• I=S,

• wage rate down - employment up,

• behavioral axioms?

Then you are out of science because of unnoticed material or formal inconsistency.

Every economist who uses the concept of equilibrium is scientifically incompetent because she/he failed to notice that equilibrium is an economic nonentity.

Practically this means: as soon as the word equilibrium appears in an economic text it can be thrown into the waste basket. The same holds for all other nonentities.

The vast majority of economists deals mainly with nonentities. This is why Walrasianism, Keynesianism, Marxianism, Austrianism is scientifically worthless.

Since Adam Smith, economic policy guidance has no sound scientific foundations.

To be replaced (1)

The core premises of Orthodoxy are uncertain and false and this fully explains the failure of the research program.

“As with any Lakatosian research program, the neo-Walrasian program is characterized by its hard core, heuristics, and protective belts. Without asserting that the following characterization is definitive, I have argued that the program is organized around the following propositions: 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)

The inescapable Paradigm Shift consists of the move from this obsolete hard core to the superior set of structural axioms.

To be replaced (2)

The fundamental equations of macroeconomics have been formulated by Keynes in two lines.

"Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment."

This elementary syllogism is demonstrably false. The demonstration consists in the proof that Keynes could not solve the Profit Puzzle. Neither did Post-Neo-New-Keynesians.

In the most general terms, the economics Paradigm Shift consists in switching from the behavior-centric bottom-up approach to the structure-centric top-down approach. This is comparable to the Copernican turn from geo-centrism to helio-centrism.

Consensus

Economics is a science without scientists. Because they are ignorant of the elementary difference between profit and income, the present generation of economists has not made and cannot make a significant contribution to the discussion about how the actual economy works.

Every orthodox or heterodox economist can convince himself/herself that their profit theory is defective.

Every non-economist can — by applying elementary logic — convince himself that conventional profit theories are false. See 'How the intelligent non-economist can refute every economist hands down'.

Because the profit theory is false the whole of conventional economic theory has to be rejected.

"What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work: were it engineering, the bridge would collapse." (McCauley)

No scientist will ever accept Walrasianism, Keynesianism, Marxianism, or Austrianism. These approaches are logically and/or empirically refuted. This is the actual methodological state-of-art. Walrasians, Keynesians, Marxians, or Austrians are still at the proto-scientific stage. These approaches cannot be improved, only abandoned.

Economists are a public nuisance because they have an opinion on everything but knowledge of nothing.

About me

“Bottom line is that your profit law is just a definition you made up nobody else agrees with, nobody. You are all alone with your precious tautology.” Barkley Rosser

“In any event, your entire theory is based on you doing macro accounting in wacky fashion that nobody agrees with.” Brian Romanchuk

"Your stuff is at least original: it's quite cool after a couple of decades at this to see a fresh Economics. But real promises are not advanced: they were around for millennia until the Greeks obscured them with Metaphysics." Chris Cook

"No mate, they're you-blockers. You have all the personality traits of a crank, and the rest of them have tired of you. You could be 100% right, and you'd still die as your only follower." Steve Keen

"What you are doing fills is all with joy, your constructive critique is most welcome!"

Achim Truger,

German Council of Economic Experts,

in a failed attempt to be ironic

"200+ years of thought and yet you are the only one who gets it—or even understands your argument. Thank god we have you, pseudonymous Twitter user. Otherwise no one would know."

William Luther

Assistant Professor of Economics

in a failed attempt to be funny

"Egmonts profit law is the perfect equation that demonstrates this in action. Put the equation into a spreadsheet and then add government spending and watch how it flows into profits. Enter in some debt (-Sm) and watch too how that flows into profits. It can't go anywhere else."

Dean

About the rest of economics

Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, Pluralism are mutually contradictory, axiomatically false, materially/ formally inconsistent. Economics is a failed science.

“There are three classes of people: those who see. Those who see when they are shown. Those who do not see.” Leonardo da Vinci

In economics, the overwhelming majority belongs to Class III. This explains why economics is after 200+ years still at the proto-scientific level.

The obvious task for every economist is to advance from cargo cult science and political agenda-pushing to science. This is absolutely beyond the means of Class III people.

For 200+ years now, economists are not scientists but agenda pushers, useful idiots, clowns in the political Circus Maximus.

Nopopop

This blog does not add to any popular/un- popular opinion.

This blog does not hand out advice about how to avoid taxes, to get rich on the stock market, to be successful in business, to increase the wealth of nations, to run an economy, to maximize welfare, to prevent national/global bankruptcy, to improve the institutional setup of society, to get out of national/global depression, nor about how to save humankind or any subgroup thereof.

This blog is about the true theory of the actual monetary economy.

"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." (Stigum)

Focus

Science is of primary interest and importance. Scientists are of secondary interest.

With regard to science, most people lose focus easily because of a natural preference for anecdotes and gossip over facts or subjectivity over objectivity.

Hence, Schumpeter once considered it necessary to remind his habitually disoriented fellow economists: “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.”

Science is about true/false and nothing else.

Disclaimer

Missing Blog-Reference links: AXEC does not guarantee that their comments can at any time be recovered from where they have been posted intitially because the availability depends on the publication policy of the blog owner which is implicitly accepted on entering a debate. See also: 'Economists: Incompetent? Stupid? Corrupt?'

Texts: Parts of arbitrary length of any of the author's texts is and will be used again by the author in papers, books, websites, blogs, and other media without explicit reference. The right to make corrections or minor textual improvements on reutilization is reserved. Therefore, it is always a good idea to double-check for the latest version.

Caution: Do not expect a corroboration of your political view. Neither a refutation. Political economics has been scientifically worthless since Adam Smith. Politics has to be separated from economics because it is categorically different from science. The best science can do and has always done is to prove beyond reasonable doubt that you have been objectively wrong or ignorant until now. Science goes beyond the naive common sense of today and becomes the sophisticated common sense of tomorrow.

See also Terms of Use and Legal at www.AXEC.org

Outlook

To recall, while political economics is storytelling, theoretical economics adheres to scientific standards.

The first task of theoretical economics is to get the axiomatic foundations right. This is what J. S. Mill called the opus magnum. Neither Orthodoxy nor Heterodoxy came up with a reasonable solution to this day. This explains the secular stagnation of economics.

There is no serious alternative to structural axiomatic economics. This is not a matter of opinion but of proof. The sole criteria are material and formal consistency.

All of economics has to be reconstructed from the ground up.

Major economic policy implication

The price mechanism does not work as standard economics hypothesizes. The axiom-based Employment Law states that overall employment increases if the average wage rate increases relative to average price and productivity. This gives one the lever to improve the employment situation all over the world and to fend off deflation without rising debt and without artificial capacity growth. To increase the average price relative to the average wage rate and productivity increases unemployment.

Right policy depends on true theory.

“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.” (Stigum)

Lacking the true theory, economists promote for more than 200 years opinion instead of knowledge.