December 31, 2014

The profit theory is false since Adam Smith. What can you expect from distribution theory?

Comment on RWER issue 69 on Piketty's Capital


Critical economists never bought into marginalism as a theory of income distribution (Syll, 2014, p. 40) and it is clear by now that the orthodox approach is a failure. Quite naturally, Heterodoxy is drawn to Marx. Unfortunately, Marx also got it wrong. For the formal proof see (2014).

All major economic schools lack a consistent profit theory and therefore all distribution theories are hanging in the air. Piketty is no exception.

As Hicks already observed with regard to profit: economics is “a science still groping in the dark” (1931, p. 170). Economists have no true conception of the most important phenomenon in their universe. What is immediately obvious is that the theories of income distribution and wealth distribution are wrong by logical necessity.

The first step out of the cul-de-sac is (2012)

Egmont Kakarot-Handtke

Hicks, J. R. (1931). The Theory of Uncertainty and Profit. Economica, (32):
170–189. URL
Kakarot-Handtke, E. (2012). Income Distribution, Profit, and Real Shares. SSRN
Working Paper Series, 2012793: 1–13. URL
Kakarot-Handtke, E. (2014). Profit for Marxists. SSRN Working Paper Series,
2414301: 1–25. URL
Syll, L. P. (2014). Piketty and the Limits of Marginal Productivity Theory. realworld
economics review, (69): 36–43. URL

For an overview about the desolate state of profit theory, which has been known for
a long time but never rectified, see the web page here