July 11, 2021
Keynes―Marx―Profit: The abysmal scientific failure of economics
Comment on Michael Roberts/Tom Hickey on ‘Marx’s reproduction schema’*
Michael Roberts summarizes: “… for Marx, under capitalism, … investment growth depends on profitability, …” and “for Marx, savings are profits because workers do not save, so there is a class aspect to his reproduction model.”
Tom Hickey cites Keynes: “The Engine which drives Enterprise is not Thrift, but profit.” (Treatise on Money, 1931)
OK folks, and what does profit depend on? The fact of the matter is that neither Marx nor Keynes had any idea of what profit is. And that is rather bad for any economist who claims to do science.#1, #2
The macroeconomic 3-sector Profit Law reads Q≡(G−T)+(I−S)+Yd.#3 This formula tells one, among many other important things, that monetary profit Q depends on investment I.#4 And there you have it: investment depends on profit, and profit depends on investment. In systems theory, this is called a positive feedback loop. And every half-wit knows by now that positive feedback is what destabilizes a system and eventually destroys it. The big insight about Capitalism is that at its heart there is a positive feedback loop. And this explains the economic system's dynamic and crises.
How does MMT fit in? The Profit Law implies Public Deficit (G−T)>0 = Private Profit Q. Thus, the MMT policy of deficit-spending/money-creation is a free lunch for the Oligarchy. While investment i.e. a growing real capital stock is the life elixir of Early Capitalism, growing public debt is the life elixir of Late Capitalism.#5
This, then, is the scandal of 200+ years of economics. Economics is all in one: scientific failure and political fraud because Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent, and ALL got profit wrong.
Because of this, economic policy guidance NEVER has had sound scientific foundations. It has ALWAYS been brain-dead agenda-pushing of political clowns. Left-right-center does not matter. Time to bury Marx and Keynes and MMT and all the rest at the Flat-Earth Cemetery.
* Michael Roberts blog