AXEC: New Foundations of Economics

October 31, 2020

Reminder on inflation

Comment on Bill Mitchell on ‘Inflation is not necessarily due to excessive spending’*

The most elementary macroeconomic price formula states P=ρ_EW/R. ρ_E>1 represents private/public deficit-spending/money-creation and this implies that a period deficit produces a ONE-OFF price hike and NOT inflation.

In order to get inflation going, the wage increases have to be constantly above the productivity increases. In fact, the exact opposite happened.#1 The price formula tells one that in this case, deflation will result.

The crucial point is that the quantity of money is NOT among the price determinants. The price formula implicitly refutes the commonplace Quantity Theory.#2

Egmont Kakarot-Handtke

* Billy Blog

#1 Chart, Twitter, Economic Policy Institute: The gap

#2 Links on Inflation

October 29, 2020

Occasional Tweets: Akward economists

#LearnEconomics

The #ProfitLaw Q=(G-T)+(I-S) implies #PublicDeficitIsPrivateProfit. The current policy of massive #DeficitSpendingMoneyCreation benefits the #Oligarchy. Nobelist Stiglitz is too stupid for the elementary algebra that underlies macro. Seehttps://t.co/ABFUc41eMs
— E.K-H (@AXECorg) October 29, 2020

Unfortunately, you and the rest of academic economics are too stupid for the elementary algebra that underlies macroeconomic accounting.

National Accounting: scientific incompetence or political fraud?https://t.co/0t1vz3XnEB

and cross-referenceshttps://t.co/ghaLCK4wMh
— E.K-H (@AXECorg) October 29, 2020

October 21, 2020

Advancing humanity. Really?

Comment on Bill Mitchell on ‘An economy that guarantees health and wellbeing for all’*

Blog-Reference

Bill Mitchell summarizes: “The event was in conjunction with the Public Health Association of Australia’s annual conference and we are discussing the interface between health and the economy and the right to work and income security. It was an interesting and very civilised discussion. And when you are through watching that, we also have a ‘provocation’ to consider and then some jazz. All the interests of advancing humanity!”

Bill Mitchell conveys the impression that he is a good person and that MMT, of which he is a leading representative, is for the benefit of WeThePeople.

This does not fit together with some facts

• MMT is provably false at the level of elementary algebra.#1 So, MMT is scientifically worthless and MMT policy guidance has NO sound scientific foundations.

• The (simplified) macroeconomic Profit Law Q≡(G−T)−S implies Public Deficit (G−T) = Private Profit Q. Because of this, the MMT policy of deficit-spending/money-creation is a permanent free lunch for the Oligarchy.#2, #3

• Accordingly, private financial assets grow in lockstep with public debt. The interest on public debt is taxed from WeThePeople for an indefinite time and handed over to the Oligarchy.#4

• Bill Mitchell and his MMT colleagues are NOT scientists but propagandists and #EconBlockers. They constantly violate the AEA Code of Professional Conduct.#5, #6

• MMT is political agenda-pushing for the Oligarchy in a scientific bluff package.#7, #8

MMTers are NOT advancing humanity. They are clowns and useful idiots in the political Circus Maximus.

Egmont Kakarot-Handtke

* Billy blog

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

#2 MMT: A free lunch for the Oligarchy

#3 Q: How are you going to pay for it? MMT: By stealth taxation!

#4 MMT and the unbearable lightness of public debt slavery

#5 AEA code

#6 MMT, Bill Mitchell, and the lack of basic scientific integrity

#7 How Bill Mitchell stalks Jeremy Corbyn

#8 MMT: Corbynism is dead, British Labour is next

Related 'MMT: Redistribution as wellness program' and 'Why the MMT benefactors of humanity never talk about profit'. For the full-spectrum refutation of MMT see cross-references MMT.

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Twitter Oct 24 The Australian faction of MMT is particularly strong and activist.

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Twitter Feb 1, 2021

October 16, 2020

OMG, after 200+ years, economics becomes a science

Comment on Lars Syll on ‘Studying economics — a total waste of time’

Blog-Reference and Blog-Reference on Oct 17

Lars Syll argues: “It’s hard not to agree with Elster’s critique of mainstream economics and its practice of letting models and procedures become ends in themselves, without considerations of their lack of explanatory value as regards real-world phenomena. The message writes itself: If you’re really interested about what goes on in our economies — stay away from economics!”

This is correct but misses the point altogether. The lethal defect of economics is that the main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL get the foundational economic concept of profit wrong.#1 Economics is a heap of proto-scientific garbage. Because of this, economic policy guidance NEVER has had sound scientific foundations. With regard to scientific content, there is NO difference between left/center/right policy.

So, there is NO such thing as a choice between bad Orthodoxy and good Heterodoxy. Heterodoxy, too, gets profit wrong. As a consequence, both Orthodoxy and Heterodoxy have to be buried for good at the Flat-Earth-Cemetery.#2 What is needed is a new Paradigm.

Mainstream economics is a waste of time and Lars Syll's brain-dead critique of mainstream economics is also a waste of time: “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 methodological terms: it takes a Paradigm Shift.

The good news for scientists and the bad news for time wasters is that the Paradigm Shift is an accomplished fact. See the new textbook Sovereign Economics.#3

Egmont Kakarot-Handtke

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

#2 Let's bury economics now

#3 Sovereign Economics, Amazon.de, BoD, etc.

October 15, 2020

Fake economics great again

Comment on Barkley Rosser on ‘In The Face Of Total Turbulence, Go Totally Conventional For The Nobel Prize’

Blog-Reference

Barkley Rosser gives his assessment: “But this year's award was clearly in the works after Jean Tirole and Alvin Roth got theirs. The real question for this one was which of the ‘Gang of Four,’ David Kreps, Paul Milgrom, John Roberts, and Robert B. Wilson, who coauthored the super important game theory paper on reputation effects, allowing for cooperation over time in prisoner's dilemma and other games, would get it.”

Clearly, the EconNobel is something economists in U.S. academe feel entitled to. They feel betrayed and even hang themselves if things do not turn out as expected. This happened in 2019 with Martin Weitzman: “Marty Weitzman was the pre-eminent environmental economist of the modern era, which is to say of all times,” (Nordhaus) and he committed suicide ― “depressed at his not getting the Nobel Prize” (Rosser).

There is, obviously, a strong tendency of self-aggrandizement in academic economics. And it seems that the main purpose of the creation of the EconNobel has been to satisfy an urgent personal/national PR need.#1

There would be no problem at all if economics were some nutty sort of talk show and the Swedish monarch would annually proclaim a winner in a glitzy ceremony because he/she had collected more than 100,000 google scholar citations. The problem is that economics claims to be a science, but is NOT.

The lethal defect of economics is that the main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL get the foundational economic concept of profit wrong.#2 Economics is a heap of proto-scientific garbage.

To put improvements of auction theory on the same level with achievements like quantum physics proves a serious lack of scientific sense. Note that economists are supposed to explain how the economy works and they come up with a proposal of how to improve the auction of radio frequency bands.

The EconNobel has always been a fake prize for fake scientists. It has nothing to do with science but is a reward for loyal services in the propagation of oligarchy-approved economics.#3

Egmont Kakarot-Handtke

#1 Philip Mirowski, The Neoliberal Ersatz Nobel Prize

#2 Profit

#3 Scrap the EconNobel

October 13, 2020

The Paradigm Shift is an accomplished fact

Comment on David Ruccio on ‘Limits of mainstream economics today’

Blog-Reference

David Ruccio argues: “On one side are neoclassical economists, who celebrate the invisible hand and argue that markets are the best way to efficiently allocate scarce resources. On the other side are Keynesian economists, who argue instead for the visible hand of government intervention to move markets toward full employment.” And “What mainstream economics includes is the idea that neoclassical and Keynesian approaches establish the limits within which theoretical and policy debates can and should take place. Together, they define what is in the “economic toolkit,” and therefore what it means to ‘think like an economist’.” And “What the definition of mainstream economics excludes is any approach, such as Marxian economics, that is based on a theoretical approach that lies outside the protocols of neoclassical and Keynesian economics.”

This is descriptively correct but misses the point altogether. The lethal defect of economics is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL get the foundational economic concept of profit wrong. Economics is a heap of proto-scientific garbage. Hence, economic policy guidance NEVER has had sound scientific foundations. With regard to scientific content, there is NO difference between left, center, or right policy. It is all brain-dead agenda-pushing.

So, there is no such thing as a choice between bad mainstream and good Marxian economics. Marx, too, got profit and exploitation wrong.#2 As a consequence, both Orthodoxy and Heterodoxy have to be buried for good at the Flat-Earth-Cemetery. What is needed is the true Paradigm.

The good news is that the Paradigm Shift is an accomplished fact, see the new textbook Sovereign Economics.#3

Egmont Kakarot-Handtke

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

#2 Links on Karl Marx

#3 Sovereign Economics Amazon.de, BoD, Amazon.com etc.

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AXEC106m

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Real-World Economics Review Blog and Physikalische Zeitschrift

October 9, 2020

MMT: nice try to paint it pink

Comment on Aaron Wistar on ‘Mainstreaming MMT’*

Blog-Reference and Blog-Reference

Aaron Wistar recounts, “The past few years have been good ones for Modern Monetary Theory (MMT). A decade ago, you would have been hard-pressed to find a mainstream economist who had even heard of this fringe school of left-Keynesian economics. But ever since Bernie Sanders made MMT proponent Stephanie Kelton a senior economic advisor for his 2016 presidential campaign, it has gradually trickled into the mainstream. In June, Kelton’s new book, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, landed on the New York Times Bestsellers list, no small feat for a tome about monetary issues.”

Aaron Wistar makes it appear that MMT's “meteoric rise” is due to its scientific merits and to the final triumph of the true theory over old mainstream myths. This is NOT the case. The scientific value of MMT is zero. And its meteoric rise is a fine marketing success of Wall Street's Warren Mosler ― one of the two founding fathers of the MMT movement. It's an easy task for these folks to produce any New York Times bestseller they want.

The macroeconomic foundations of MMT are provably false. #1 Because of this, MMT is proto-scientific garbage. #2 And the claim that MMT benefits WeThePeople is a political fraud. MMT benefits Oligarchy. #3 The insane distribution of income and financial wealth between the 1% and the 99% is the direct result of the MMT policy of deficit-spending/ money-creation. #4

The fact that Stephanie Kelton sells MMT as the Birth of the People’s Economy is breathtaking political infamy. That she is assisted by the mainstream media, Bernie Sanders, and a Ph.D. candidate in History of Consciousness in selling a Wall Street agenda as a progressive/left project is just another proof of widespread political corruption.

Make no mistake, after globalization had run its course, the goal for Wall Street as the avant-garde of the Oligarchy is to “reclaim the nation-state” by bringing the Fed and the Treasury under their control and to produce as much deficit, money, and profit as they ever need for their self-perpetuation according to the macroeconomic Profit Law that implies Public Deficit = Private Profit.

Egmont Kakarot-Handtke

* Los Angeles Review of Books

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

#2 For the full-spectrum refutation of MMT, see cross-references MMT

#3 Is MMT good for WeThePeople or for the Oligarchy?

#4 Keynes, Lerner, MMT, Trump, etc. and exploding profit

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REPLY to Jacob Richter on Oct 11 and Blog-Reference

You say: “This is an excellent article on the *need* to incorporate MMT into any actual left reform planks of Marxist political strategy!”

The macroeconomic Profit Law for the basic three-sector economy reads Q≡(G−T)−S, i.e., the public deficit G−T generates the business sector's profit Q. For the proof, see here.

The Profit Law tells everyone that the MMT policy of deficit-spending/money-creation is for the benefit of the Oligarchy. MMT's Stephanie Kelton, though, claims that MMT is the “Birth of the People’s Economy”. Obviously, just the opposite is the case.

Now you want MMT to be incorporated into a “Marxist political strategy.”

It is interesting to learn that it is “Marxist political strategy” to provide permanent free lunches for the Oligarchy.

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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.