Part I and II of the present paper reconstruct the quantity theory from structural axiomatic foundations. This yields a coherent view of the interrelations of quantity of money, transaction money, saving–dissaving, liquidity–illiquidity, rates of interest, leverage, allocation of labor, prices, profits, and employment. Part II focuses on the symmetric and asymmetric process of nominal and real saving–dissaving and on the monetization of nonfinancial assets. The distinction between liquidity preferences of individual households and the household sector as a whole proves to be crucial. From the objective structural axiom set follows a structural inflation formula.
August 2, 2011
July 26, 2011
Reconstructing the Quantity Theory (I) {11}
The quantity theory is disjunct to the hardcore of general equilibrium theory. It does not relate to the formal foundations of standard economics and, vice versa, from the behavioral axioms of standard economics a rationale for using money cannot be derived. The present paper leaves the standard axioms aside and reconstructs the quantity theory from entirely new structural axiomatic foundations. This yields a coherent view of the interrelations of quantity of money, transaction money, saving-dissaving, liquidity-illiquidity, rates of interest, leverage, allocation, prices, profits, unit of account, and employment.
July 14, 2011
Unemployment out of nowhere {10}
Working paper at SSRN
Abstract Unemployment is usually explained with reference to the equilibrium of supply and demand in the labor market. This approach rests on specific behavioral assumptions that are formally expressed as axioms. The standard set of axioms is replaced in the present paper by a set of structural axioms. This approach yields the objective determinants of employment. They consist of effective demand, the actual outcome of price formation, structural stress as determined by the heterogeneity within the business sector, and the income distribution. Sudden changes in employment are effected by latent relative switchers that are hard to spot empirically.
Abstract Unemployment is usually explained with reference to the equilibrium of supply and demand in the labor market. This approach rests on specific behavioral assumptions that are formally expressed as axioms. The standard set of axioms is replaced in the present paper by a set of structural axioms. This approach yields the objective determinants of employment. They consist of effective demand, the actual outcome of price formation, structural stress as determined by the heterogeneity within the business sector, and the income distribution. Sudden changes in employment are effected by latent relative switchers that are hard to spot empirically.
June 22, 2011
Exploitation and its unintended outcomes: an axiomatic view of Marx's surplus value {09}
Working paper at SSRN
Abstract The present paper scrutinizes the logical foundation of Marx's dialectic analysis of the evolving money economy. The frame of reference is thereby given with the set of structural axioms. It turns out, first, that the commonplace notion of exploitation has to be replaced by crossover exploitation among capitalists and workers; second, that the concept of surplus-value cannot explain the existence and magnitude of overall profits; finally, that the real shares of output are determined in the spheres of income and expenditure and not, as classical, Marxian and neoclassical economists unanimously maintain, in the sphere of production.
June 14, 2011
Properties of an Economy Without Human Beings {08}
Standard economics starts with behavioral axioms and arrives at conclusions about the equilibrium properties of the economy as a whole at point t. The present paper employs objective structural axioms and random changes in order to determine the conditions for market-clearing and budget-balancing in the pure consumption economy until the limit t → ∞. From the conditions of stochastic supersymmetry, six simple behavioral rules are derived that guarantee the desired outcome. These rules contrast with actual behavior and this explains why the plans and expectations of economic man are many times frustrated.
June 6, 2011
The coherency of money, profit, price, and distribution {07}
Working paper at SSRN
Working paper at ARCHIVE
Abstract When anything goes and nothing fits together this can be euphemized as pluralism. Lacking a common point of reference, discussions between various schools of economic thought proceed in the ‘hyperspace of assumptions’ (McCloskey). The incoherency of perspectives is due to self-chosen foundational assumptions. The present paper submits three structural axioms as formal core that is neutral with regard to assumptions about behavior. The objective is to clarify the interrelation of four elementary concepts and to eliminate some logical inconsistencies. Neither neoclassicals nor Keynesians came to grips with the relationship between profit and the distribution of the real product.
Abstract When anything goes and nothing fits together this can be euphemized as pluralism. Lacking a common point of reference, discussions between various schools of economic thought proceed in the ‘hyperspace of assumptions’ (McCloskey). The incoherency of perspectives is due to self-chosen foundational assumptions. The present paper submits three structural axioms as formal core that is neutral with regard to assumptions about behavior. The objective is to clarify the interrelation of four elementary concepts and to eliminate some logical inconsistencies. Neither neoclassicals nor Keynesians came to grips with the relationship between profit and the distribution of the real product.
June 2, 2011
Beginning, crises, and end of the money economy {06}
Working paper at SSRN
Working paper at ARCHIVE
Abstract A crisis is but a crisis when the long-run outlook is definitively positive. Then a lower turning point must exist. This implicates a vision or, in the ideal case, a formalized theory of the money economy's possible end states. This theory has to provide an endogenous explanation of end states and crises. The equilibrium approach excludes endogenous causes in principle. Thus disturbances can only be explained by exogenous random shocks. The structural axiomatic approach, which is applied in the following, consistently defines the potential systemic crisis point and the conditions of an economic happy end.
Abstract A crisis is but a crisis when the long-run outlook is definitively positive. Then a lower turning point must exist. This implicates a vision or, in the ideal case, a formalized theory of the money economy's possible end states. This theory has to provide an endogenous explanation of end states and crises. The equilibrium approach excludes endogenous causes in principle. Thus disturbances can only be explained by exogenous random shocks. The structural axiomatic approach, which is applied in the following, consistently defines the potential systemic crisis point and the conditions of an economic happy end.
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