Social justice folks are economically, scientifically, and politically illiterate. This is why they are being taken in by the sales folks of MMT. See
Before social justice folks get too enthusiastic about MMT they better switch from emotion to thinking and do some economics homework. Recommended for a start
Down with idiocy!
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REPLY to Matt Franko on Jan 6
You say “… all the MMT people are some of the most legit social justice people on planet earth...”
This, of course, is what they are trying to tell the genuine social justice people of the genuine grassroots movements. In fact, MMT is nothing but good old Political Economy.
What genuine social justice people have first of all to understand is that there are political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Economics started as Political Economy ― that is, as open agenda pushing for the one-percenters ― and in the last 200+ years never advanced to real science. Economists never rose above the proto-scientific level of Adam Smith/Karl Marx.#1
MMTers, like their peers from the other sects, do to this day not understand the difference between profit and income, i.e. of the fundamental concepts of economics.#2 Because of this, MMT is pure proto-scientific garbage = political blather.
Do the genuine social justice people need the support of academics who are too stupid to put 2 and 2 together, that is, who do not even get the sectoral balances of macroeconomics right?#3 The grassroots movements need MMT like a hole in the head.
It is the other way around: the MMTers need the grassrooters to push their own agenda. The debt-does-not-matter meme has no other purpose than to encourage deficit spending for everything which, in turn, has one absolutely certain effect due to the
Profit Law, i.e.
Public Deficit = Private Profit, that is, to make Wall Street happy.
To pose as social justice fighter is one of the oldest tricks of Political Economy. It is applied right before our eyes by Stephanie Kelton and the other members of Warren Mosler’s academic sales team.
The claim that “all the MMT people are some of the most legit social justice people on planet earth” is perhaps effective for hijacking genuine grassroots movements but otherwise simply a bad joke.
With MMT, the original brain-dead Political Economy has, after some pseudo-scientific and pseudo-social window dressing, come full circle.#4
#1
Economics: 200+ years of scientific incompetence and fraud
#2 For the proof see
cross-references MMT
#3
Down with idiocy!
#4
The end of political economics
***
REPLY to Matt Franko on Jan 6
For facts see the MMT-meme on Wikimedia
AXEC122
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REPLY to Matt Franko, Andrew Anderson on Jan 7
The Lord spoke out of the bush and handed over these
Ten Economics Commandments:
1. Never cite the Bible or other religious texts in an economic argument.
2. Maintain the strict separation of science and religion under all circumstances.
3. Maintain the strict separation of science and politics under all circumstances.
4. Do not dabble in Psychology, Sociology, Anthropology, History, Political Science, Social Philosophy, or any other of the so-called social sciences.
5. Figure out how the actual economic system works and communicate your results in the format of a materially/formally consistent theory.
6. Absolutely refrain from storytelling, metaphors, analogies, narratives, gossip, insinuation, filibuster, and other rhetorical means.
7. Do not apply Methodological Individualism/Microfoundations.
8. Do not moralize, the subject matter of economics is IS not OUGHT. How the Good Society can be realized has to be determined in the political sphere.
9. Be aware that there are knowledge and opinion, science and non-science, scientific standards and anything-goes, true and false with nothing in-between, and that most people are unable to get out of the proto-scientific swamp.
10. Rest assured that those who violate scientific standards go to hell and will be tortured in all eternity with the senseless blather of Walrasianism, Keynesianism, Marxianism, Austrianism, and MMT.
***
REPLY to Andrew Anderson on Jan 7
The
axiomatically correct macroeconomic
Profit Law is given for the general case as
Qm≡Yd+(I−Sm)+(G−T)+(X−M). Legend: Q
m total monetary profit, Y
d distributed profit, I investment expenditures, S
m monetary saving, G government expenditures, T taxes, X exports, M imports.
Neither Walrasians, Keynesians, Marxians, Austrians, nor MMTers got profit right until this very day. This is why economics is a failed science.
From the general macroeconomic Profit Law follows Qm=G−T if Yd, I, Sm, X, M = 0, that is, Public Deficit = Private Profit.
With deficit spending and the permanent increase of public debt, MMT promotes the agenda of the one-percenters.
***
REPLY to Andrew Anderson on Jan 7
You say: “Yet some increase in the amount of fiat is undoubtedly good to keep up with population growth to prevent the old from looting the young via deflation.”
Admirable, how you mess up every issue.
There are TWO ways to bring money into circulation and MMT deficit spending is definitely the wrong way.#1
***
You say “Hello Brian, I completely agree with your observation that ‘it is not going to be easy for an MMTer to offer a short summary of what MMT is. Someone may be able to come up with a succinct theoretical summary, but that summary would be meaningless for anyone not already familiar with MMT in the first place.’”
In fact, it is quite straightforward: MMT is money-making for the one-percenters because Public Deficit = Private Profit and fake science because MMT’s foundational balance equation (I−S)+(G−T)+(X−M)=0 is false. For details see
Down with idiocy!
You say “Bill Mitchell has an interesting post on the subject that includes the sectoral balance approach. A quote: ‘How does Kalecki see budget deficits in this model? The way in which the budget deficit generates profits is via its effect on national income.’”
You say “A very interesting publication on the subject is available from the Jerome Levy forecasting Center entitled Where Profits Come From.”
I have summarized this paper as follows “The lethal error/mistake/blunder of the Levy approach consists in starting with Saving = Investment.” This is the original Keynes-blunder. See
Rethinking deficit spending.
Brian Romanchuk’s remark “I think it’s Doktor E.K-H. I tried deciphering his arguments a year ago, and I think his arguments came down to his using some primitive cash-based notion of profit.” tells you that he does not even understand what the matter is all about.
So here in brief: The MMT sectoral balances equation
(I−S)+(G−T)+(X−M)=0 is false and the E.K-H balances equation
(I−S)+(G−T)+(X−M)=(Qm−Yd) is true. Legend: Q
m is monetary profit, and Y
d is distributed profit. Q
n, i.e. non-monetary profit, has been left out here to simplify matters but has been treated extensively in the Levy Economics Institute of Bard College
Working Paper No. 741.
See also The Common Error of Common Sense: An Essential Rectification of the Accounting Approach Levy Economics Institute of Bard College
Working Paper No. 371.
So, the description of MMT boils ultimately down to MMT is proto-scientific garbage that is promoted by folks with less than two brain cells who cannot even tell what profit is.
***
The formal basis of the General Theory is given with: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (Keynes, 1973, p. 63)
This two-liner is conceptually and logically defective because Keynes did not come 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., 2010, pp. 12-13)
So, Keynes, the fake scientist, had NO idea of the foundational concept of economics. After-Keynesians in their bottomless incompetence never spotted Keynes’ blunder ― with one honorable exception: Allais.#1, #2
Post Keynesians and MMTers blindly reproduced Keynes’ blunder to this very day.#3
So it is NOT the case that I “defined profit differently” but it is indeed the case that I defined the macroeconomic Profit Law for the first time axiomatically correctly.
From this follows for the balances equations
(I−S)+(G−T)+(X−M)=0 = MMT = false
(I−S)+(G−T)+(X−M)=(Qm−Yd) = AXEC = true.#4
Now it is your turn. The Walrasians have put their axioms on the table, so have I.#4 Stop blathering, show your axioms and your definition of macroeconomic profit or get out of the scientific discussion.
#2 “A satisfactory theory of profits is still elusive.” (Palgrave Dictionary, Desai, 2008)
***
You said, “It would be very easy to be annoyed at these characterisations of MMT; they almost invariably trivialise the theory, saying it is ‘just’ some simple theory (the word ‘just’ is always in the phrasing). ... The first thing to keep in mind is that MMT is not a single idea, it is what appears to be an internally consistent economic school of thought, which lies in the ‘broad tent post-Keynesian’ economics, following the definition of Marc Lavoie in his text Post-Keynesian Economics: New Foundations.”
Why do you not simply put down in clear language the handful of core propositions MMT is built upon instead of constantly being annoyed by the wrong characterizations and misunderstandings of non-MMTers? After all, this is how science works for 2300+ years: “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.” (Aristotle)
If your premises/core assumptions/primitive propositions/principles/axioms are not well-defined the whole of your argument falls apart. It is pretty obvious that you are too confused to define MMT properly. Instead, you waffle about quantum physics or the use of the word axiom.
You maintain “I believe that ‘axiom’ is essentially ‘assumption’ in Greek, but in the English-speaking mathematics world, ‘axiom’ is reserved for foundational mathematical assumptions, like those for plane geometry or the real line.”
Obviously, you have never heard that one of the most famous books in physics ― Newton’s Principia ― starts with the words Axiomata Sieve Leges Motus or that Debreu titled one of the most important Neoclassical books The theory of value: an axiomatic analysis of economic equilibrium.
Keynes understood the crucial role of axioms very well “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.”#2
The same holds for MMT. Because of a lack of clearness in the premises/axioms, MMT is simply a heap of inconsistent and confused blather that MMTers themselves do not understand. Every approach stands or falls with the consistency of its axioms.
You say “In any event, you can pick up practically any introductory macro textbook and get the *definitions* used in the national accounts.” Yes, but the fact of the matter is, that these *definitions* are false since Samuelson’s textbook of 1948.#3
I understand that you have a lot of problems on your plate which explains that there has not been one second left since your textbook years for thinking about profit and income which are without any doubt the foundational concepts of economics. The fact is that you are too stupid for the elementary mathematics that underlies accounting.#4
***
You say “Newton was writing in Latin, not English. As I wrote, this is the convention in the English-speaking world.”
WOW, did you never realize that the Principia was translated into English in 1729, and Book I starts since then with ‘Axioms, or the Laws of motion’?
Where did you get your diploma from? Trump University?
As far as axiomatization in mathematics is concerned you better look up Hilbert, Bourbaki, Russel, and Whitehead in Wikipedia before posting brain-dead nonsense.
In economics, axiomatization started with Senior: “To Senior belongs the signal honor of having been the first to make the attempt to state, consciously and explicitly, the postulates that are necessary and sufficient in order to build up … that little analytic apparatus commonly known as economic theory, or to put it differently, to provide for it an axiomatic basis.” (Schumpeter)#1
Modern microeconomic textbooks start with the Axiom of Rationality, see Mas-Colell Microeconomic Theory, page 5.
Obviously, you have no idea of the scientific “conventions in the English-speaking world.”
But our issue is not methodology in general but the conceptual mess of MMT. And here the proof has been given that the balances equation MMT is based upon is false.#2
MMT is scientifically dead, admit it, and then get out of the way.
***
You say ”I’m trained as a mathematician, not a ‘scientist,’ and your writing style is mangling *modern* mathematical conventions.”
Frankly, it is a matter of indifference to what your training was. Perhaps Wikipedia can bring you up to speed with regard to axiomatization: “The Zermelo-Fraenkel axioms, the result of the axiomatic method applied to set theory, allowed the ‘proper’ formulation of set-theory problems and helped to avoid the paradoxes of naïve set theory. One such problem was the Continuum hypothesis. Zermelo–Fraenkel set theory with the historically controversial axiom of choice included is commonly abbreviated ZFC, where C stands for choice. ... Today ZFC is the standard form of axiomatic set theory and as such is the most common foundation of mathematics.”
You say “I cannot see how a ‘definition’ (of profits) turns into an ‘axiom.’” Nobody can see a definition turning into an axiom because this is a hallucination of your own making.
The three macroeconomic axioms for the elementary production-consumption economy are given by (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. And the profit definition reads Qm≡C−Yw.
You say “But for our purposes, MMT uses standard national accounting, which is a formal framework developed earlier and is still under revision. National accounting provides an internally-consistent set of definitions for defining aggregates.”
Because of this, the MMT balances equation (I−S)+(G−T)+(X−M)=0 is false. A mathematician worth his salt sees this immediately. Profit is the balance of the business sector and it is MISSING in the equation.
Your reference to the SFC modeling literature is pointless because if the foundational concepts of profit and income are ill-defined the models are only good for the wastebasket. This applies to all MMT models.
MMT policy guidance lacks sound scientific foundations.
***
At the beginning of every scientific investigation stands the following question “What are the propositions which may reasonably be received without proof? That there must be some such propositions all are agreed, since there cannot be an infinite series of proof, a chain suspended from nothing. But to determine what these propositions are is the opus magnum of the more recondite mental philosophy.” (J. S. Mill)
The foundational propositions are called axioms in methodology. Every scientific discipline is ultimately based on axioms.
In economics, we have Walrasian microfoundations and Keynesian macrofoundations. Both are clearly defined and provably false. So what is needed is a paradigm shift. As Keynes put it “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight ― as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.”#1
MMT claims to be a new approach, aka Paradigm, and has published its foundational assumptions, aka axioms, on Wikipedia.#2. And what do we see here? the sectoral balances equation which is false since Keynes wrote I=S on p. 63 of the GT.
So, MMT is not a new paradigm but Post Keynesian rubbish. Keynes did not understand what profit is, and the abysmally incompetent After-Keynesians did not realize the foundational blunder in the last 80 years.
What is the last refuge of morons? It is Humpty Dumpty wordplay “‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that's all’.”
This is NOT how science works. The freedom or arbitrariness of definition is a methodological illusion. It applies only to the first definition. Subsequently, one has to make sure that every new definition is consistent with the preceding ones. Formal consistency is indispensable.
The MMT balances equation is provably false. Because the foundational assumptions, aka axioms, are false the whole analytical superstructure of MMT is false. MMT policy guidance has NO sound scientific foundations.#3
Needless to emphasize that the Trump University economists Romanchuk, Kelton, Mosler, Mitchell, Tcherneva, Wray, Fullwiler, Forstater, Kaboub, Pettifor, Keen, Tymoigne, Willingham, Grumbine etcetera, who do not even get the elementary mathematics of macroeconomic accounting right and do not know what profit is, are too stupid for the opus magnum, that is, for the formulation of a consistent set of foundational propositions, aka axioms, of the hallucinatory new paradigm called MMT.
***
Come to the point and tell everybody in a few clear sentences and a neat equation what the MMT definition of profit is instead of complaining that MMT is not just ‘Theory X’.
“In modern science, the term ‘theory’ refers to scientific theories, a well-confirmed type of explanation of nature [or sub-systems like the economy for example], made in a way consistent with scientific method, and fulfilling the criteria required by modern science.” (Wikipedia)
The criteria of modern science are material and formal consistency “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)
MMT is no valid theory because it lacks logical consistency and MMTer cannot even tell what profit is.
***
I asked you to state “in a few clear sentences and a neat equation what the MMT definition of profit is.”
You merely give the question back “What ‘profits’ do you want to know about?” In other words, you have no idea what profit is.
So, here we go, profit for dummies.
For the determination of monetary profit of the economy as a whole one has to start with the most elementary case of a pure production-consumption economy without investment, government, and foreign trade.#1 In this elementary economy three configurations are logically possible: (i) consumption expenditures are equal to wage income C=Yw, (ii) C is less than Yw, (iii) C is greater than Yw.
- In case (i) the monetary saving of the household sector Sm≡Yw−C is zero and the monetary profit of the business sector Qm≡C−Yw, too, is zero.
- In case (ii) monetary saving Sm is positive and the business sector makes a loss, i.e. Qm is negative.
- In case (iii) monetary saving Sm is negative, i.e. the household sector dissaves, and the business sector makes a profit, i.e. Qm is positive.
It always holds Qm+Sm=0 or Qm≡−Sm, in other words, loss is the counterpart of saving and profit is the counterpart of dissaving. This is the most elementary form of the Profit Law. Total profit is scattered among the firms that comprise the business sector.
Profit for the economy as a WHOLE has NOTHING to do with productivity, the wage rate, working hours, exploitation, competition, innovation, capital, power, monopoly, waiting, risk, greed, the smartness of capitalists, or any other subjective factors. Total profit/loss is objectively determined in the most elementary case by the change in the household sector’s debt.
Monetary profit/loss is measurable with the precision of two decimal places.
Needless to emphasize that the complexity of the monetary economy can now be successively increased. Accordingly, Qm≡−Sm+Yd+I+(G−T)+(X−M) is the Profit Law for an open economy (X−M) with a government sector (G−T) and with the business investment I and distributed profit Yd.
This equation tells everybody that Public Deficit = Private Profit and this, in turn, tells everybody that MMT’s relentless propagation of deficit spending for social purposes is nothing but agenda pushing for the one-percenters.
So, an MMTer is either stupid because he does not know what profit is, or corrupt because he deceives the ninety-nine-percenters.#2 Take your pick.
#1 (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (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. For a start it holds X=O. Note that ALL variables are measurable.
***
Science is about universals. The Law of Gravitation is not different in Newton’s Cambridge, in the US, or in China but holds throughout the universe. However, when it comes to measurement, some practical problems arise because different countries measure mass or length in different units.
Therefore, the first and foremost task of science is to define the foundational concepts and their dimensions (e.g. mass, length) consistently and with the utmost precision. This is the precondition of testing which is the final arbiter in science. In order to get rid of different national definitions of dimensions, in physics, natural units are used which are “physical units of measurement based only on universal physical constants”. (Wikipedia)
Analogously, economics has to establish a consistent set of foundational economic concepts (e.g. income, profit, employment, etc) and then figure out how they are related (e.g. Profit Law, Employment Law). How is this done? “The only way to arrive at coherent languages is to set up axiomatic systems implicitly defining the basic concepts.” (Schmiechen)
Economics has failed already at this first step. Profit is ill-defined since Adam Smith, and MMT is no exception. The scientific incompetence of economists stinks to the high heavens. Physics students all over the world can tell you precisely what energy is but economics students look up the definition of profit in their national tax code. This tells the general public everything about the absurdity of the claim that economics is a science.
Your reference to GAAP is a case in point. We are dealing here with the MMT balances equation which is a macroeconomic relation and macroeconomic magnitudes are measured by national accounting. Here the practical problem arises that different countries have historically developed their own systems. The problem of unification has been addressed by the United Nations System of National Accounts.#1, #2
The GAAP has the practical purpose of determining profit for taxing American firms. It has NO scientific content whatsoever. When we are talking about macroeconomic profit the GAAP is absolutely IRRELEVANT.
The
axiomatically correct balances equation reads
(I−S)+(G−T)+(X−M)=(Qm−Yd). The MMT balances equation reads
(I−S)+(G−T)+(X−M)=0. As everybody can see, monetary profit Qm and distributed profit Yd are MISSING in the foundational equation of MMT.
MMTers have not realized to this day that the most important real-world economic magnitude ― profit ― is absent in their “theory”. They even think they can look it up in the GAAP. More proof of manifest idiocy is not needed.
***
It is pretty obvious that you are eager to demonstrate to the world that you know the difference between Cash Basis and Accrual Basis accounting.
What you fail to recognize, though, is that we are talking about the MMT balances equation and national accounting principles and NOT about your personal bookkeeping and GAAP accounting principles. In other words, macroeconomics is about the universe and micro is about the molehill and you are unable to look beyond your molehill horizon.
I need not answer your silly GAAP bookkeeping question because I have explained the difference between macroeconomic and microeconomic accounting already to another smart MMTer. Just look it up.#1
***
Let us agree on the following
• There is micro and macro and the MMT balances equation is macro. So all your references to the behavior of firms and individuals and GAAP accounting principles are entirely beside the point.
• Macro is false since Keynes due to the Fallacy of Insufficient Abstraction. MMT has inherited Keynes' methodological blunder. It is a historical fact that the Keynesian Revolution, i.e. the move from microfoundations to macrofoundations, i.e. the replacement of micro axioms by macro axioms, i.e. the paradigm shift, failed.
• If my argument sounds bizarre to you this has nothing to do with language or terminology but with the plain FACT that economics has failed in the last 200+ years to get the definition of the foundational concepts of income and profit right.#1 MMT is NO exception. The actual state of economics is like medieval physics before the foundational concept of energy was properly defined and fully understood.#2 If this is not bizarre, what is?
• The question is not at all how my argument sounds but whether it is true or false. I wonder how long it takes MMTers to stop talking methodological nonsense and in earnest try to disprove the axiomatically correct balances equation.
• The whole issue boils down to this: Which one of the two macroeconomic relationships is true MMT=(I−S)+(G−T)+(X−M)=0 or AXEC=(I−S)+(G−T)+(X−M)−(Qm−Yd)=0?
We both know the simple answer: the AXEC equation is true and the MMT equation is rather bizarre because it applies to a zero-profit economy. And this means that MMT policy proposals have NO sound scientific foundation.#3 Not one of them.
#2 “Thousands upon thousands of scholars, as well as thousands of statesmen and men of affairs, have contributed their efforts to the attempt to understand the course of events of the economic world. And today this field of investigation is being cultivated more extensively, than ever before. How is it, then, that in all these years, and with all the undoubted talent that has been lavished upon it, the subject of economics has advanced so little?” (Schoeffler)
***
You say “If you think we can only define things one way, your investment in higher education was sadly wasted.”
The lack of definitions is NOT the problem. Just the opposite. In the political realm, at Trump University, or in the Station for Mentally Deranged you can define anything in multiple ways. Not so in science. If you leave science and rename MMT to MMB ― Multiple Monetary Blather ― you can define anything in any way and are safe from criticism and refutation.
My higher education tells me that you are 2700+ years behind the curve “There are always many different opinions and conventions concerning any one problem or subject-matter …. This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides ... was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other …” (Popper)
