Are economics professors really that incompetent? Yes!

Comment on Lars Syll on ‘Wren-Lewis vs MMT’

Blog-Reference and Blog-Reference and Blog-Reference

With regard to the ongoing Neoliberalism vs MMT slapstick,#1 Lars Syll maintains: “In Wren-Lewis world we don’t need fiscal policy other than when interest rates hit their lower bound (ZLB). In normal times monetary policy suffices. … What Wren-Lewis and other mainstream economists have in mind when they argue this way, is nothing but a version of Say’s law, basically saying that savings have to equal investments and that if the state increases investments, then private investments have to come down (‘crowding out’). As an accounting identity, there is, of course, nothing to say about the law, but as such, it is also totally uninteresting from an economic point of view. What happens when ex-ante savings and investments differ, is that we basically get output adjustments. GDP changes and so makes saving and investments equal ex-post. And this, nota bene, says nothing at all about the success or failure of fiscal policies!”

There is NO such thing as an accounting identity of savings and investments. This erroneous notion is simply due to the fact that economists are too stupid for the elementary mathematics that underlies macroeconomics.#2, #3 Accordingly, neither the Swedish professor, nor Post Keynesians, nor New Keynesians, nor MMTers, nor Anti-Keynesians has spotted the blunder to this day.#4, #5

The scientific incompetence can be traced back to the General Theory: “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.)

Let this sink in, the economist Keynes NEVER understood profit, i.e. the fundamental concept of economics. So, Keynes’ I=S is false and by consequence the multiplier and all I=S/IS-LM models. Instead, Q≡I−S is true with Q as macroeconomic profit. The ex-ante/ex-post blather is absolutely beside the point.

Because the profit theory is false the whole analytical superstructure of economics is false. Because economics is proto-scientific garbage, economic policy guidance of both Neoliberals and MMTers is nothing but brain-dead agenda-pushing.#6, #7

Egmont Kakarot-Handtke


#1 The not so funny MMT vs Neoliberalism slapstick
#2 Wikipedia and the promotion of economists’ idiotism (I)
#3 Wikipedia and the promotion of economists’ idiotism (II)
#4 Keynesians ― terminally stupid or worse?
#5 I is never equal S and even Nick Rowe will eventually grasp it
#6 MMT’s true program
#7 Economics as a cover for agenda pushing

Related 'Economics is a science? You must be joking!' and 'Macro ignorance: Why Simon Wren-Lewis does not come to grips with the plain MMT-fraud' and 'The economist as storyteller' and 'Economics: The greatest scientific fraud in modern times' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'The GDP-death-blow for the economics profession'. For details see cross-references Accounting and cross-references Refutation of I=S and cross-references Failed/Fake Scientists.

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AXEC144c

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#PointOfProof

Jun 14

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How to spot a competent teacher?

Economics is a failed science for 200+ years and until May 2020 economists have produced NOT ONE textbook that satisfies the scientific standards of formal/material consistency.

The competent teacher has Sovereign Economics on the Economics Reading List.

Amazon.de, BoD, Amazon.com

MMT and the Green New Deal: Where is the snag? (II)

Comment on Richard Murphy on ‘Growth, MMT and the Green New Deal’

Blog-Reference and Blog-Reference

Strictly speaking, environmental protection is an issue for physicists, chemists, and other scientists. Economists are not scientists because they do not know to this day how the monetary economy works. This does not stop these abysmally incompetent folks from uttering their irrelevant opinion on every issue between heaven and earth.

Richard Murphy claims to have synthesized MMT and GND: “This one takes an explanation because it has become very closely associated with the Green New Deal, which is again at least in part my fault.”

Unfortunately, he gets the economics part of the synthesis badly wrong. In more detail:

1. “Fundamentally it [MMT] suggests that since we came off the gold standard all money is ‘fiat’ currency It’s a promise to pay and nothing more. The promise backed by the power of the state to tax.” FALSE! TRUE: The creation and value of money does NOT depend on the taxing power of the State.#1, #2 ,#3, #4

2. “But the state does not need tax to spend. All spending is effectively settled with money created by banks on demand from a customer. It is not paid for out of a stock of savings. And in the case of a government, it is not paid for out of tax received.” FALSE! TRUE: Spending on current output with newly created money is analogous to the spending of the counterfeiter.#5

3. “Instead gov’t spending is paid for by the government asking its bank ― the Bank of England ― to make payment for it. This is exactly akin to the fact that banks do not lend out customer funds: rather they make the funds they lend by a process of double-entry book-keeping and bank deposits are the result of that process, and not where it starts.” FALSE! TRUE: Money is a generalized IOU. Government deposits and overdrafts are produced simultaneously. The government spending is ‘financed’ by overdrafts at the central bank which have to be eventually repaid.#6

4. “The result is that a government with its own central bank and currency can never run short of money ― because it can instruct that it be made at will. And it can never go bankrupt if it borrows solely in its own currency because it can always create the funds to make payment. But of course, it cannot print money at will ― because inflation will result.” FALSE! TRUE: This is the good old Quantity Theory Fallacy. Continuous deficit spending and growing public debt do NOT cause inflation.#7

5. “So action has to be taken to keep inflation under control ― and that is the real purpose of tax in MMT.” FALSE because of 4.

6. “Its secondary purposes are to Ratify the value of money; Redistribute income and wealth; Reprice market failure; Reorganise the economy; Raise representation in a democracy.” FALSE! TRUE: Because of the macroeconomic Profit Law it holds Public Deficit = Private Profit and this means that the lethal effect of MMT policy is on distribution and that it secures ― intentionally or unintentionally does not matter ― the self-alimentation of the Oligarchy. Nothing could be more anti-democratic than MMT policy.

The claim of MMTers that a Green New Deal can be realized at any time by deficit spending is misleading at best. Technically, of course, there is no problem. However, as a matter of principle, any Green New Deal can be realized with a balanced budget. But in the MMT scheme of things, a balanced budget is something for the Swabian housewife and permanent deficit spending is the prerogative and duty of the Sovereign State.

The point is that MMTers are not so much interested in how the government’s budget is allocated but that the government runs a deficit because it is the deficit as such that produces the macroeconomic profit for the Oligarchy.#8

MMT is NOT science but political agenda pushing in a social/environmental bluff package. MMT and GND together are the dream team for deceiving WeThePeople for the benefit of the Oligarchy.#9

Egmont Kakarot-Handtke


#1 The creation and value of money and near-monies
#2 MMT, money, value, and transcendental Capitalism
#3 The canonical macroeconomic model
#4 MMT: fundamentally false
#5 How counterfeiters save America with an extra profit and make WeThePeople pay for it
#6 How to pay for the war and to be bamboozled by economists
#7 Settling the MMT―Inflation issue for good
#8 MMT and the promotion of Wall Street's idea of social policy
#9 Just one more day: How deficit-spending postpones the breakdown of Capitalism

Immediately preceding 

Related 'MMT and the Green New Deal: Where is the snag? (I)' and 'Economists: Trolls with a mortarboard' and 'The half-truths and half-falsehoods of MMT' and 'Fraud comes always in the cloak of philanthropy, salvation, or threat of doom' and 'MMT: If you’ve got a problem, I don’t care what it is, let me help' and 'MMT is NOT bold policy but spineless fraud' and 'Econogenics in action'.

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ADDENDUM (re. Andrew (Andy) Crow on May 24, submission closed)

Economists fall into two categories: political economists (= agenda pushers) and theoretical economists (= scientists).

As in every walk of life, there is the genuine thing and the lookalike: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. ... A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham, and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack)

Political economists in general, and MMTers, in particular, are fake scientists. MMT is provably false, i.e. materially and formally inconsistent.

When I as an economist say “Economists are not scientists because they do not know to this day how the monetary economy works.” the word “economists” clearly refers to political economists.

Needless to say, the general public does NOT discriminate between P-economists and T-economists and does not realize that P-economics is fake science. The point to grasp is: MMT is proto-scientific garbage and MMTers are agenda pushers for the Oligarchy.

Post Keynesian idiocy

Comment on Brian Romanchuk on ‘Primer: Post-Keynesian Inflation Theory Basics’#1

Blog-Reference and Blog-Reference

Brian Romanchuk defines the starting point of Post-Keynesian analysis as follows: “The defining characteristic of workers is that they are paid a wage, which is normally fixed nominally …. If we assume that all output is the result of wage labour, we can arrive at the identity (due to Weintraub): P=κW/R (i), where: κ is the average markup; W is the nominal wage rate; R is the output per worker.” (symbols altered from p, w, y to P, W, R)

He then argues: “The argument in Post-Keynesian Economics is that markups cannot rise forever, as that would imply an ever-rising profit share of national income. … Instead, we need to look at the first two terms: how much greater wage growth is than output per worker…. The analysis then leads to: why will wage gains outstrip productivity? The post-Keynesian answer is that this will happen if workers’ bargaining position increases relative to that of business owners.” “By most accounts, the bargaining position of labour has been crippled as a result of structural changes imposed since the early 1980s. From this standpoint, the deceleration of inflation is no accident.”

The inexcusable fault of Post Keynesianism is that the economy is ill-defined.#2 The scientific incompetence of Brian Romanchuk consists of failing to realize that the lethal blunder of Post Keynesianism lies in the inconsistency of foundational macroeconomic relationships.

To make matters short here is the correct core of macroeconomic premises:#3
(A0) The objectively given and most elementary systemic configuration of the production-consumption economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm.
(A1) Y_w=WL wage income Y_w 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.

The three axioms are supplemented by four definitions: expenditure ratio ρ_E≡C/Y_w, sales ratio ρ_X≡X/O, monetary profit/loss Q_m≡C−Y_w, monetary saving/dissaving S_m≡Y_w−C. This yields the most elementary version of the macroeconomic accounting identity, i.e. Q_m≡−S_m.

Given the conditions of market-clearing ρ_X=1 and budget-balancing ρ_E=1, the market-clearing price is derived for a start as P=W/R (ii). So, the macroeconomic price P is determined by the wage rate W, which has to be fixed as a numéraire, and the productivity R.

When the price is not the dependent variable but set by the markup formula (i) things change.

From (A3) C=PX and (i) and the definitions of the sales ratio and expenditure ratio follow for the general case: ρ_X=ρ_E/κ. (iii)

This formula says: the business sector can set the markup κ as high as it wants but, given the household sector’s expenditure ratio ρ_E=1, it cannot sell the whole output, i.e. X<O, i.e. ρ_X<1. This means that the inventory increases. This means also, that the business sector cannot increase monetary profit because with P up and X down C does not change and monetary profit Q_m≡C−Y_w remains unchanged. So, the business sector as a whole cannot determine its profit by markup pricing. The necessary condition for profit coming into existence is ρ_E>1.

Eq. (iii) says in detail
• If the markup κ is greater than the expenditure ratio ρ_E, the market is not cleared, i.e. the stock of unsold output increases, which leads eventually to production cuts and decreasing employment.
• If the markup κ is less than the expenditure ratio ρ_E, the inventory decreases and production is eventually ramped up.

Macroeconomic profit Q_m is alone determined by the expenditure ratio Q_m≡(ρ_E−1)Y_w and NOT by the markup κ. This means that the workers’ bargaining position is of NO importance for the profit ratio Q_m/Y_w and this means, in turn, that Post-Keynesian price-, profit- and employment-theory has never been anything else than proto-scientific garbage.

Monetary profit and the relation of profit to wage income depend in the closed economy mainly on the growth of public and private debt. This follows from the axiomatically correct macroeconomic Profit Law Q_m≡−S_m+Y_d+I+(G−T)+(X−M).#4

Egmont Kakarot-Handtke


#1 Preceding Economics as tireless production of proto-scientific garbage: inflation theory as an example
#2 Why Post Keynesianism Is Not Yet a Science
#3 True macrofoundations: the reset of economics
#4 Wikimedia AXEC143d Profit Law

Related 'Are economics professors really that incompetent? Yes!' and 'The Levy/Kalecki Profit Equation is false' and 'Keynes, Lerner, MMT, Trump, Biden and exploding profit'.

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Wikimedia AXEC143d