AXEC: New Foundations of Economics

September 23, 2021

Occasional Tweets: "Empirical observations without theory are directionless." (Kant) ― the case of Kuznets

#Economics #FailedScience #FakeScience

The history of economic thought is the history of scientific failure. Kuznets got the foundational economic concepts #Profit and #Income wrong.

Cross-references Profit/Distributionhttps://t.co/2jMouD0laK #NoFalseHeroMemorials
— E.K-H (@AXECorg) September 23, 2021

Occasional Tweets: No way around it ― Post Keynesianism is proto-scientific garbage

#Economics #FailedScience #FakeScience

Post Keynesianism, too, is proto-scientific garbagehttps://t.co/btS3FS31kH pic.twitter.com/gEnsTiAQAP
— E.K-H (@AXECorg) September 23, 2021

Occasional Tweets: To this day, economics is fake science and economists are brain-dead agenda pushers

#Economics #FailedScience #FakeScience #Economists #StupidOrCorruptOrBoth

The history of economic thought is the history of scientific failure.

Since the founding fathers, economics is NOT science but political agenda-pushinghttps://t.co/dZhAtFEGBb pic.twitter.com/UjSSG600SJ
— E.K-H (@AXECorg) September 23, 2021

For details of the big picture see cross-references Political Economics/Stupidity/Corruption.

September 22, 2021

MMT vs Mainstream ― a proto-scientific shitshow

Comment on Bill Mitchell on ‘ECB researchers find fiscal policy is very effective and more so if central banks buy up the debt’ and ‘They never wrote about it, talked about it, and, did quite the opposite ― yet they knew it all along!’*

Blog-Reference

In these two pieces, Bill Mitchell argues in great detail that mainstream economics is proto-scientific garbage. And he correctly identifies the foundational methodological blunder: “Consequently, treating macro as if it is micro means there is a tendency to conclude that what applies at the individual level also applies at the aggregate level, which is demonstrably false.” Indeed, this is the well-known Fallacy of Composition.#1

As far a the critique of mainstream economics goes, Bill Mitchell is on firm ground. However, the death and burial of mainstream economics at the Flat-Earth Cemetery is NOT news, and repeating the non-news is not exactly a contribution to scientific progress. Also, the suggestion that the provable falsity of mainstream economics somehow implies the correctness of MMT is misleading.#2-#4

While MMT's policy intuition is superior to that of the Sargent/Wallace crowd.#5, the underlying theoretical foundations are also provably false. So, this is the current state of economics: the Walrasian microfoundations of the mainstream are false and the Keynesian macrofoundations of MMT are false.#6-#10

Bill Mitchell concludes:

(i) “So far in more than 25 years of doing this stuff, I have not been systematical wrong about my predictions, which are quite converse relative to the mainstream predictions.”

(ii) “So it matters how you come to a conclusion, which might be similar to a conclusion that the rival paradigm reaches. The surrounding body of knowledge is what matters.”

It turns out that (i) is true with regard to fiscal and monetary policy. It is NOT true with regard to macroeconomic profit, distribution, the advantages for the Oligarchy, and the disadvantages for WeThePeople. The problem-solving capacity of MMTers is basically that of counterfeiters.#11

Yes, from the standpoint of science “it matters how you come to a conclusion” and the “body of knowledge is what matters”. The fact is that both mainstream and MMT are based on provably false axiomatic foundations and because of this, all policy advice lacks sound scientific foundations. Actually, mainstream policy guidance is plucked from the vacuum of five behavioral axioms.#12

Economics has to advance beyond the mainstream and MMT.

Egmont Kakarot-Handtke

* Bill Mitchell's blog here and here

#1 For more about the Fallacy of Composition see AXECquery

#2 MMT vs Mainstream: examining proto-scientific garbage in detail

#3 From the fact that mainstream economics is false does not logically follow that MMT is true

#4 MMT: fundamentally false

#5 “When I started studying economics in the mid-1970s, this was a raved about paper. I read it and couldn’t believe how asinine it was.”

#6 Clueless economists / Macrofoundations

#7 Forget Keynes

#8 Profit: The most powerful formula of economics

#9 Refuting MMT’s Macroeconomics Textbook

#10 The page where Stephanie Kelton gets macroeconomics wrong

#11 Criminals and the monetary order

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

September 21, 2021

Occasional Tweet: The representative economist ― flying like a goldfish

The history of economic thought is the history of scientific failure. #Walrasianism, #Keynesianism, #Marxianism, #Austrianism, #MMT are mutually contradictory, axiomatically false, materially/formally inconsistent.

Thinking like an economist is as good as flying like a goldfish. pic.twitter.com/COlJtnCBgj
— E.K-H (@AXECorg) September 21, 2021

Stop thinking like an economist

For more about thinking/rethinking see AXECquery.

September 20, 2021

Occasional Tweets: Economic agenda pushing has no scientific legitimacy

The history of economic thought is the history of scientific failure. #Walrasianism, #Keynesianism, #Marxianism, #Austrianism, #MMT, are mutually contradictory, axiomatically false, and materially/formally inconsistent.

Economic policy guidance has NO scientific #Legitimacy. pic.twitter.com/CE7VOa5Rcr
— E.K-H (@AXECorg) September 20, 2021

The headline says Guide to Governing and is a clear message for the next government.

Occasional Tweets: Cross-hyping ― how political economists abuse social media

#Economics #FailedScience #FakeScience #Economists #StupidOrCorruptOrBoth

Another example of cross-hyping, the political economists' favorite scam for 200+ years.

How economists serve the richhttps://t.co/ewSNNOshNk pic.twitter.com/IHLYOsQeRs
— E.K-H (@AXECorg) September 20, 2021

For details of the big-picture see cross-references Political Economics/Stupidity/Corruption.

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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 or sys-hum.

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 clowns and useful idiots 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.