Economics: The proto-scientific mob embroiled in just another gang war

Comment on William Black on ‘The Day Orthodox Economists Lost Their Minds and Integrity’

Blog-Reference and Blog-Reference

William Black tells the world: “Something extraordinary happened yesterday. Orthodox economists, frustrated by their inability to intimidate progressive elected officials, have launched a coordinated assault on MMT in hopes of making it politically dangerous for elected officials to embrace MMT. Yesterday brought three remarkable revelations about orthodox economists’ willingness to engage in naked intellectual dishonesty in their desperation to find something to discredit MMT.”

This, of course, is risible because economists’ “naked intellectual dishonesty” is nothing new. In fact, it is their modus operandi for 200+ years now.#1, #2, #3 The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong. There is NO scientific truth in economics.#4

And there are no joint efforts to do serious research and to develop the true theory about how the economy works but there is endless meta-communication.#5

• “The orthodox ‘scholars’ have found it impossible to quote MMT scholars writing something that is demonstrably false. It is child’s play …, however, for an orthodox economist to create a strawman claim that is obviously, demonstrably false.”

• “Yesterday, dozens of orthodox economists, many of them prominent, collectively lost their minds and their integrity. They coordinated their actions to create a show trial that would have warmed Stalin’s spleen.”

• “The results of that natural experiment are spectacular ― a large group of the world’s prominent economists failed the test of honesty and competence even though the test set such a low bar that they should have passed it without discernible effort.”

• “Wolfers’ dishonesty spurred Paul Krugman to tweet a level of calculated dishonesty that exceeds the term ‘disgraceful’.”

• “Every aspect of Krugman’s chutzpah is logically false, dishonest, immoral, and wackiness of epic proportions.”

This is a lot of hot air. The fact of the matter is that BOTH orthodox New Keynesians and heterodox MMTers are scientifically incompetent. Krugman has not realized that IS-LM is false since Keynes/Hicks.#6 MMTers have not realized that their foundational sectoral balances equation is false since Keynes.#7, #8

William Black is right with regard to Krugman et al.: orthodox economists are stupid/ corrupt. The same, though, holds for MMTers.#9

Egmont Kakarot-Handtke


#1 The retirement of a fake scientist and real agenda pusher
#2 There is NO such thing as “smart, honest, honorable economists”
#3 Feynman Integrity, fake science, and the econblogosphere
#4 Links on capital-T Truth, stupidity, corruption
#5 Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems
#6 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#7 Refuting MMT’s Macroeconomics Textbook
#8 Paul’s and Stephanie’s economic delirium talk
#9 For the full-spectrum refutation of MMT, see cross-references MMT

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AXEC144b

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#PointOfProof

Mar 18

before

after

Where MMT goes off the rails

Comment on Lars Syll on ‘MMT — modern monetary realism’*

Blog-Reference and Blog-Reference

“MMT is not, as its opponents seem to think, primarily a set of policy ideas. Rather, it is essentially a description of how a modern credit economy actually works – how money is created and destroyed, by governments and by banks, and how financial markets function. … Governments create money by spending and extinguish it via taxation.” (J. K. Galbraith)

This is not quite correct. It is the Central Bank that creates/destroys money. Roughly speaking, there are two ways of bringing money into the (closed) economy: (i) by financing the wage bill of the business sector, (ii) by deficit-spending of the household or government sector.

The unhindered creation of fiat money for the payment of the wage bill is the correct way of bringing money into the economy. MMT’s government deficit spending is the incorrect way. Why? Because of the macroeconomic Profit Law, it holds Public Deficit = Private Profit, in other words, bringing money at the demand side into the economy creates a free lunch for the Oligarchy.

In the most elementary case, transaction money is created by wage payments and destroyed by consumption spending.#1

MMT theory is provably false.#2, #3 Because of this, MMT policy guidance has NO sound scientific foundations. Because of the macroeconomic Profit Law, i.e., Public Deficit = Private Profit, MMT policy serves the Oligarchy. Fabulous financial wealth is the mirror image of fabulous public debt ($22 trillion).

MMT is NOT a scientifically valid theory but a political agenda pushing for the Oligarchy in a scientific/social bluff package.#4

Egmont Kakarot-Handtke


* Project Syndicate
#1 From MMT misunderstandings to the true Theory of Money
#2 The half-truths and half-falsehoods of MMT
#3 Refuting MMT’s Macroeconomics Textbook
#4 For the full-spectrum refutation of MMT, see cross-references MMT

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REPLY to Bob Roddis on Mar 17

“MMT is not, as its opponents seem to think, primarily a set of policy ideas. Rather, it is essentially a description of how a modern credit economy actually works …” (J. K. Galbraith)

MMT is an economic theory and the point at issue is whether it is true or false.

You answer a scientific question with your personal political credo: “Libertarian mantra: Completely abolish the initiation of violence.”

Politics and science have to be strictly kept apart because the former always corrupts the latter.

Austrians are excluded from any scientific discussion because they are too stupid to understand that there is a crucial qualitative difference between science and political blather.

Austrianism and MMT are scientifically worthless. And more is not to say about the whole matter.

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REPLY to Ralph Musgrave on Mar 18

“For the umpteenth time, Axec trotts out his moronic ‘law’, i.e. that ‘Public Deficit = Private Profit’ which apparently means that all deficit dollars end up in the pockets of the super rich. Since when does 100% of an increase in demand for the products of a particular firm, or sector of the economy or for the products made by the economy as a whole end up in the pockets of the rich?”

You would not ask this question if you had done your macroeconomic homework.

► Essentials of Constructive Heterodoxy: Profit
► Essentials of Constructive Heterodoxy: Employment
► Go! ― test the Profit and Employment Law

This is how deficit spending works in the most elementary case. If the total wage income of the household sector is 100 in a given period and the household sector spends all on consumption, then the macroeconomic profit of the business sector is zero. If the total wage income of the household sector is 100, and the household sector spends all on consumption, and the government sector applies deficit-spending/money-creation of 10, then there is a one-off price hike, and the profit of the business sector is 10. Generalization: Public Deficit = Private Profit.#1

Easy to understand if one has more than two brain cells.


#1 For the interrelationship of the macroeconomic Profit- and Employment Law, see

AXEC107f

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REPLY to Bob Roddis on Mar 18

Violence is the subject matter of Psychology/Sociology. Economists are supposed to know how the economy works.#1 So, you should be able to say which of the two sectoral balances equations is true/false?

(i) (I−S)+(G−T)+(X−M)=0

(ii) (I−S)+(G−T)+(X−M)−(Q−Yd)=0

You know nothing about economics. This is not exactly a qualification for Psychology/ Sociology or anything else.

#1 Economics is NOT a social science

The retirement of a fake scientist and real agenda pusher

Comment on Simon Wren-Lewis on ‘Triangulation or bipartisanship does not work when one side goes off the scale’

Blog-Reference

Simon Wren-Lewis cites Brad DeLong approvingly: “Brad DeLong describes himself as a Rubin Democrat, which he defines as ‘largely neoliberal, market-oriented, and market-regulation and tuning aimed at social democratic ends. It is a natural position for an economist to be: it is generally more efficient to tweak markets than destroy them. But he thinks the time has come for this kind of Democrat to pass the baton over to the left. ‘We are still here, but it is not our time to lead.’”

It is an unnoticed absurdity that economists introduce themselves by waving a political flag. However, the general public and economists themselves have become accustomed to the idea that economics is just another act in the political Circus Maximus.

This impression is correct but there is a problem. There is the political sphere and the scientific sphere and both cannot go together. Economics claims to be science from Adam Smith/Karl Marx onward to the ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’. The task of economics as a science is to figure out how the monetary economy works. Did economists make a good job? No! This is where we stand today: provably false
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

Economics is a failed science. And economists like Brad DeLong and Simon Wren-Lewis are public representatives of the worst scientific performance since the Flat-Earth-Theory. Economics is dead as science but alive as political agenda pushing. As Brad DeLong proudly remarks: “We are still here.”

Unfortunately, this is all too true. There are always excellent employment opportunities in the political sphere for failed/fake scientists. Lenin called them useful idiots, economists prefer to describe themselves as experts ‘who know and care about the detail and the difficulties involved in populist policies.’#1, #2 Too bad that they do not know how the economy works.

“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)

Economists lack true theory. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong. There is NO scientific truth in economics.#3

But this does not matter much for an agenda pusher. What matters is to wave a political flag: “Our current bunch of leftists are wonderful people, as far as leftists in the past are concerned. They’re social democrats, they’re very strong believers in democracy. They’re very strong believers in fair distribution of wealth. They could use a little more education about what is likely to work and what is not. But they’re people who we’re very, very lucky to have on our side.”

After having passed the baton over to the next generation of useful idiots it is time for the old guard of political economics to bury themselves at the Flat-Earth-Cemetery in the large section reserved for economists.#4 Adam Smith and Karl Marx are already there.

Egmont Kakarot-Handtke


#1 A political stench is in the air
#2 Economics as a cover for agenda pushing
#3 Links on capital-T Truth, stupidity, corruption
#4 For details of the big picture see cross-references Political Economics

Links on capital-T Truth, stupidity, corruption

Blog-Reference

It is, first of all, of utmost importance to distinguish between political and theoretical economics. The main differences are: (i) The goal of political economics is to push an agenda; the goal of theoretical economics is to explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, scientific standards are observed.

Theoretical economics has to be judged according to the criteria true/false and nothing else. 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)

Economics claims since Adam Smith/Karl Marx to be a science ― explicitly with the ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’. The fact is that most economists are to this day not ethically bound to scientific truth. What they are doing is political agenda pushing in a scientific bluff package.

The four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong. There is NO scientific truth in economics.

► Economics, too, is pre-truth
► Economics between truth and blather
► Economics and truth
► Pre-truth and post-truth in economics
► Economics is not post-truth but pre-truth
► There is no truth in political economics
► Two steps towards truth
► Economics ― worse than fake
► False models and true incompetence
► Failed economics: The losers’ long list of lame excuses
► A heap of proto-scientific garbage
► There is NO such thing as “smart, honest, honorable economists”
► Scrap the EconNobel
► For details, see cross-references Failed/Fake Scientists

Economists deceive the general public and violate scientific standards on a daily basis. The credo of corrupt economists is: “… capital-T truth is irrelevant. It’s the wrong reference point, and it doesn’t matter that no one really knows (for sure) what it is.” It is just the other way round among genuine scientists: “So the idea of truth (of an ‘absolute’ truth) ... is our main regulative idea.” (Popper)

Egmont Kakarot-Handtke

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#PointOfProof

Oct 10

post missing

Refuting MMT’s Macroeconomics Textbook

Comment on Bill Mitchell on ‘Macroeconomics ― MMT Textbook’*

Blog-Reference and Blog-Reference Mar 14 and Blog-Reference

MMT is, of course, accurate as far as the refutation of Orthodoxy/Neoclassics is concerned. Standard economics is scientifically indefensible. There is no need for further discussions about the current state of economics. This is where we stand today: provably false
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

However, the critique of Orthodoxy has run its course: “… 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)

MMT claims to be a new theory that beats Orthodoxy. This is accurate with regard to the shift from microfoundations to macrofoundations. Microfounded approaches are dead already since Walras/Jevons/Menger. The problem is that economists, in their incurable scientific incompetence, messed up the indispensable Paradigm Shift from microfoundations to macrofoundations.

MMT is NO exception. And the proof is in the new MMT Textbook, more specifically in the premises of MMT. It holds what Keynes observed with regard to Orthodoxy: “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.”

The premises of MMT Macroeconomics are laid out on pp. 13-16 and pp. 83-86.

“By placing government, as the currency issuer, at the centre of the monetary system, the MMT approach immediately focuses on how a government spends, and how this spending influences … macroeconomic aggregates …” (p. 13)

This is methodologically false. Macroeconomics starts with what Keynes called the ‘monetary theory of production’. The most elementary economy consists of the household sector, the business sector, and the central bank. Government and foreign trade are included at a later stage. For the central bank holds that it “can never run out of its own currency.”

“One of the most basic propositions in macroeconomics that MMT emphasizes is the notion that at the aggregate level, total spending equals total income and total output.” (p. 14)

Unfortunately, the most basic proposition in macroeconomics is false since Keynes and MMTers have not realized it to this day.

Here is the short proof that economists in general and MMTers, in particular, get the elementary mathematics that underlies macroeconomics wrong.

(i) The elementary production-consumption economy is given by three macroeconomic axioms: (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.

(ii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e., X=O.

(iii) The monetary profit of the business sector is defined (in simplified notation) as Q≡C−Yw,

(iv) The monetary saving of the household sector is defined as S≡Yw−C.

(v) Ergo Q≡−S.

The balances add up to zero. The counterpart of the household sector's saving S is the business sector's loss −Q. The counterpart of household sector dissaving (-S) is business sector profit Q. Both Q and S are measurable with the precision of two decimal places.

For the elementary investment economy holds Q≡I−S.

For the elementary investment economy, the government holds Q≡(I−S)+(G−T). If I and S are taken out of the picture for a moment, one gets Public Deficit = Private Profit.

In sum: (1) profit is NOT income, i.e. a flow, but a balance, i.e. the difference of flows, (2) distributed profit Yd is income and adds up with wage income Yw to total income, (3) total income is NEVER equal to total spending, (4) in the most elementary case, the difference between total spending of the household sector C and total wage income Yw is saving/ dissaving, (5) profit/loss of the business sector is the mirror image of dissaving/saving of the household sector, i.e Q≡−S, (6) saving and investment are causally INDEPENDENT and NEVER equal, (7) all I=S/IS-LM models are false since Keynes/Hicks, (8) Keynesianism, Post-Keynesianism, New Keynesianism and all variants are scientifically worthless, (9) the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is false because it lacks the balance of the business sector Q, (10) because profit is false, the whole of MMT is false, (11) because the theory is false, MMT policy guidance has no sound scientific foundations. #1

MMT theory is provably false. MMT policy serves the Oligarchy. Since Samuelson started the textbook industry in 1948, economists have produced NOT ONE textbook that satisfies scientific standards. #2 For generations, economics students swallow proto-scientific garbage without batting an eyelid. Not very smart, these folks. #3

Egmont Kakarot-Handtke


* Mitchell, Wray, Watts Macroeconomics
#1 For the full-spectrum refutation of MMT, see cross-references MMT
#2 The father of modern economics and his imbecile kids
#3 There is NO such thing as “smart, honest, honorable economists”

Related 'Macroeconomics: Drain the scientific swamp' and 'The miracle cure of economists’ micro-macro schizo' and 'Is Nick Rowe stupid or corrupt or both?' and 'Keynesians ― terminally stupid or worse?' and 'MMT = Modern Monetary Trash' and 'Both mainstream economics and MMT are axiomatically false' and 'DSGE and profit―forget it! MMT and profit―forget it!' and 'Fact of life: your econ prof is scientifically incompetent' and 'Dear idiots, time to get saving and investment straight (II)' and 'Both mainstream economics and MMT are axiomatically false' and 'The Levy/Kalecki Profit Equation is false' and 'Wikipedia and the promotion of economists’ idiotism (I)' and 'Wikipedia and the promotion of economists’ idiotism (II)' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'MMT and the magical profit disappearance'. For details of the big picture, see cross-references Econ 101/Old Curriculum/New Curriculum and cross-references Accounting.

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REPLY to Brian Romanchuk on Mar 14

You ask: “Have you managed to convince anyone that your definition, oops, “axiom,” [sic.] of profits is correct?”

The ‘axiom of profits’ exists only in your confused mind.

The macroeconomic AXIOMS are enumerated above under (i). The profit DEFINITION is given under (iii). There is a difference between an axiom and a definition. #1

There is also a difference between ‘to refute’ and ‘to convince’. Bill Mitchell and you are REFUTED, and whether you are convinced of it is a matter of indifference. Nobody has any ambition to convince methodologically undereducated Flat-Earthers. #2 Refutation is sufficient.


#1 From false micro to true macro: the new economic paradigm
#2 Post Keynesianism, science, and universal idiocy

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REPLY to Brian Romanchuk on Mar 15

You ask: “So, you have no links to *anyone* who agrees with you? These paradigm shifts are pretty darn slow, eh?”

The point at issue is: “One of the most basic propositions in macroeconomics that MMT emphasizes is the notion that at the aggregate level, total spending equals total income and total output.” (Mitchell et al., p. 14)

This “most basic proposition” is provably false. #1 Because of this, the whole analytical superstructure is false. Because of this, MMT is proto-scientific garbage. Because of this, MMT policy has NO sound scientific foundations. Because of this, MMT is a political fraud.

The ‘most basic propositions’ are called axioms in methodology: “The attempt is made to collect all the assumptions, which are needed, but no more, to form the apex of the system. They are usually called the ‘axioms’ (or ‘postulates’, or ‘primitive propositions’; …). The axioms are chosen in such a way that all the other statements belonging to the theoretical system can be derived from the axioms by purely logical or mathematical transformations.” (Popper) #2

As Aristotle put it: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

This was 2300+ years ago; however, economists in general and you, in particular, still don’t get it. Indeed, pretty darn slow, these economists.

The point at issue is that MMT is proto-scientific garbage and that MMTers are either stupid or corrupt or both. The new MMT Macroeconomics Textbook is the incontrovertible proof.

It holds as a general rule: The time it takes economists to realize that they are refuted on all counts is a simple metric of their scientific incompetence. #3

#1 Macroeconomics for retarded economists

#2 How to restart economics

#3 The clock runs down on economics

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REPLY to Brian Romanchuk on Mar 16

There is only one question to answer: Which sectoral balances equation is true/false?

(i) (I−S)+(G−T)+(X−M)=0

(ii) (I−S)+(G−T)+(X−M)−(Q−Yd)=0

If you cannot answer this question, you are unfit for economics/science. This, of course, also holds for the authors of the new MMT Macroeconomics Textbook.

There is no need for you to wreck your tiny brain with writing “a text that may be labelled a ‘review’”. Here is the final evaluation of William Mitchell, L. Randall Wray, and Martin Watts’s Macroeconomics: proto-scientific garbage.

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Graphic AXEC152

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Graphic AXEC128, AXEC129mch The Humpty Dumpty Fallacy

Hype does not help: MMT is toast

Comment on Bill Mitchell on ‘The conga line of MMT critics ― marching into oblivion’

Blog-Reference and Blog-Reference Mar 12 and Blog-Reference Mar 13

After 200+ years of failure, economists still present themselves as scientists and experts. Fact is, though, that economics is NOT part of science but an integral part of the political Circus Maximus. Accordingly, by mentioning MMT in the context of her Green New Deal initiative, the representative Alexandria Ocasio-Cortez’s triggered an avalanche of political/economical comments.

As Bill Mitchell observes: “The rising popularity of MMT is bringing out a lot of people from the woodwork who have ignored our work until now but who, for one reason or another, feel they have to have a stake in the game or look stupid.”

It is indeed pretty obvious that a lot of mainstream critique of MMT is just stupid.#1 This is no surprise because, by definition, one must be rather stupid to be a card-carrying mainstreamer, which means still failing to realize that standard economics is proto-scientific garbage. Therefore, Bill Mitchell is right: “And, they mostly end up looking foolish given the quality of their criticisms.”

To win an argument against a mainstreamer is easy but does by no stretch of the imagination imply that MMT itself is scientifically acceptable. What MMT has actually achieved is this: “The whole MMT journey to date has been to caution readers about the actual nature of constraints on government spending rather than the false constraints taught in economics courses around the world and wheeled out continually by self-serving politicians and lobbyists. By showing there are no intrinsic financial constraints on such spending, MMT, in no way, is advocating a carte blanche.”

This, though, is a rather trivial point. MMT has clarified a lot of silly misunderstandings and the unqualified critique of mainstreamers. MMT is clearly superior to mainstream economics because it is macrofounded. However, MMT has not answered to the scientific refutation, i.e. the proof of inconsistency#2 and its far-reaching implication.#3

• MMT’s macroeconomic foundations are unacceptable, i.e. MMT’s foundational sectoral balances equation is mathematically false, more specifically (I−S)+(G−T)+(X−M)=0 is false and (I−S)+(G−T)+(X−M)−(Q−Yd)=0 is true. This is a testable proposition.

• Because the axiomatic foundations are false, one can safely forget the rest. MMT is fake science.

• By not addressing refutation but systematically blocking it, MMTers violate scientific standards.

• On the one hand, Bill Mitchell claims: “MMT is not about political theory or praxis.” On the other hand, MMTers present themselves as Progressives and criticize the genuine left-wing parties and movements for having swallowed Neoliberalism.#4

• As a matter of fact, MMT is political agenda pushing in a scientific bluff package.

• Because of the macroeconomic Profit Law, i.e. Public Deficit = Private Profit, the MMT policy of deficit-spending/money-creation is NOT for the benefit of WeThePeople but of the Oligarchy.#5 MMT is just another political fraud.

In the final analysis, MMTers are either stupid or corrupt ― just like mainstream economists. This turns every discussion between the two political sects into an absurd proto-scientific performance.#6

Egmont Kakarot-Handtke


#1 Paul’s and Stephanie’s economic delirium talk
#2 The final implosion of MMT
#3 MMT for beginners
#4 MMT Progressives: stupid or corrupt or both?
#5 Very busy these days: Wall Street’s agents
#6 The clock runs down on economics

Related 'MMT-Refutation for Dummies' and 'Misrepresenting MMT' and 'Krugman vs MMT ― like the blind talking about colors' and 'The half-truths and half-falsehoods of MMT' and 'Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems' and 'From MMT misunderstandings to the true Theory of Money' and 'Debunking idiots does not prove that MMT is valid' and 'Very busy these days: Wall Street’s agents' and 'MMT and the promotion of Wall Street's idea of social policy' and 'MMT = proto-scientific garbage + deception of the 99-percenters' and 'How MMT enlightens Washington' and 'MMT, Warren Mosler, and the little helpers from Wall Street and Academia' and 'MMT: The fusion of Wall Street and Academia'.

The clock runs down on economics

Comment on Stephanie Kelton on ‘The Clock Runs Down on Mainstream Keynesianism’*

Blog-Reference

Almost everybody knows by now that mainstream economics is dead. As a matter of fact, mainstream economics was already dead in the cradle 150+ years ago. The real wonder is why it is still around and why failed scientists like Paul Krugman are still producing proto-scientific garbage. For some reason, the basic methodological principle of science, i.e., to discard falsified theories, does not work in economics. The simple idea of scientific progress is that theories that have been proven materially/formally inconsistent are unceremoniously buried at the Flat-Earth-Cemetery and the attention turns to a more promising research program.

Applied to economics, this means that mainstream folks like Krugman are done. #1 However, there is a snag: “… 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)

Stephanie Kelton claims that MMT is the new theory that hammers the final nail in Paul Krugman’s coffin: “No economist is going to get everything right. But the odds of getting things right improve dramatically when you’re working with a macro framework that doesn’t lead you astray. The IS-LM framework is a gadget that will often align with sensible real-world analysis. It may perform better than a stopped clock, but it is no match for MMT.” and “The [IS-LM] model remains the workhorse for many mainstream Keynesians. MMT considers it fundamentally flawed.” #2

On this point, Stephanie Kelton is absolutely right: IS-LM is refuted on all counts #3, and only stupid or corrupt economists still apply it.

However, therefrom this does not follow that MMT is the long-awaited replacement for mainstream economics. Although MMT is way better than IS-LM it is still flawed. The curious thing is that IS-LM and MMT share the same foundational blunder, which can be traced back to Keynes’ General Theory. #4

From the methodological standpoint, both New Keynesianism and MMT are empirically/ logically inconsistent and not much more than commonsensical storytelling. Neither Paul Krugman’s nor Stephanie Kelton’s policy guidance has sound scientific foundations.

In order to make her point, Stephanie Kelton cites Galbraith: “There are two ways to get the increase in total spending that we call ‘economic growth.’ One way is for the government to [deficit] spend. The other is for banks to lend. For ordinary people, public budget deficits, despite their bad reputation, are much better than private loans. Deficits put money in private pockets…This is called an increase in ‘net financial wealth’… In contrast, when a bank makes a loan, the cash is not owned free and clear.”

This is a hard-to-disentangle analytical half-truth and a full political fraud. Because it holds Public Deficit = Private Profit, MMT deficit-spending/money-creation puts money in the pockets of the Oligarchy. The fundamental law of Capitalism is the macroeconomic Profit Law, and it says Q≡Yd+(I−S)+(G−T)+(X−M), which boils down to Q≡(G−T), i.e., profit Q is equal to the government’s deficit spending G>T.

The claim that MMT policy is for the benefit of WeThePeople is provably false. Because MMT gets the foundational concept of profit wrong, the whole theory is scientifically worthless. Politically, MMT is for the benefit of the Oligarchy. #5, #6 In the final analysis, MMTers are either stupid or corrupt ― just like mainstream economists. #7, #8, #9

The clock runs down not only on Paul Krugman’s New Keynesianism but also on Stephanie Kelton’s MMT.

Egmont Kakarot-Handtke


* BloombergOpinion, The clock runs down and BloombergOpinion, 4 Answers
#1 Enough! Economists, retire now!
#2 How to finally hammer down the nails in the coffin of Monty Python economics
#3 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#4 Krugman vs MMT ― like the blind talking about colors
#5 Keynes, Lerner, MMT, Trump, Biden, and exploding profit
#6 MMTers make Capitalism work
#7 The Kelton-Fraud
#8 MMT: The one deadly error/fraud of Warren Mosler
#9 Bill Mitchell, MMT’s fake scientist

Related 'Paul’s and Stephanie’s economic delirium talk'

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Short version: The clock runs down on economics

Blog-Reference Mar 8

Almost everybody knows by now that mainstream economics is dead. As a matter of fact, mainstream economics was already dead in the cradle 150+ years ago. The real wonder is why it is still around and why failed scientists like Paul Krugman are still producing proto-scientific garbage. For some reason, the basic methodological principle of science, i.e., to discard falsified theories, does not work in economics. The simple idea of scientific progress is that theories that have been proven materially/formally inconsistent are unceremoniously buried at the Flat-Earth-Cemetery and the attention turns to a more promising research program.

Applied to economics, this means that mainstream folks like Krugman are done. However, there is a snag: “… 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)

Stephanie Kelton claims that MMT is the new theory that hammers the final nail in Paul Krugman’s coffin.
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For the full 3618-character post, see here
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The claim that MMT policy is for the benefit of WeThePeople is provably false. Because MMT gets the foundational concept of profit wrong, the whole theory is scientifically worthless.

The clock runs down not only on Paul Krugman’s New Keynesianism but also on Stephanie Kelton’s MMT.

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LINKS on Mario Seccareccia/Marc Lavoie’s ‘Sir John and Maynard Would Have Rejected the IS-LM Framework for Conducting Macroeconomic Analysis’ on Mar 11

Keynes messed up macroeconomics. IS-LM is proto-scientific garbage for 80+ years. For details see
► How Keynes got macro wrong and Allais got it right
► Dear idiots, time to get saving and investment straight
► Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
► Getting out of IS-LM = Getting out of despair
► Where modern macroeconomics went wrong
► John Hicks, fake scientist