February 22, 2015

Heterodoxy, too, is still in the wood

Comment on José A. Tapia on 'Money and Say’s law: on the macroeconomic models of Kalecki, Keen, and Marx'


José Tapia sets out to clarify the interrelations between aggregate income, aggregate demand, money, credit, profit, and Say's Law in Kalecki's, Keen's, and Marx's respective approaches. This is an absolute theoretical necessity because Heterodoxy cannot claim that Orthodoxy is false and then present a motley of heterodox approaches that do not fit together or are even contradictory. Heterodoxy has to prove its superiority.

It is remarkable that, for example, the profit theories of the Top 20 heterodox economists (link below) are quite different. Clearly, they cannot all be correct at the same time. As a matter of fact, they are all false. This has been demonstrated in a formally rigorous way for Marx (2014a), Keynes (2011b), Kalecki (2011a), and Keen (2013).

And this is why not only the orthodox but also the heterodox stories about the functioning of the market system are false (2014b). For the correct heterodox version of Say's Law see (2015b).

The general relationship between monetary profit Qm, distributed profit Yd, investment I, and saving Sm is given with the formula on Wikimedia AXEC09c.

It is easy to see that Minsky, too, is contained in this equation as a limiting case for Yd=0 and S=0. To recall “For Minsky, the notion that profits equal investment was ‘a profound insight into how a capitalist economy works’.” (Tapia, 2015, p. 110)

For the formally correct interrelation between aggregate demand and money see (2015a).

The general relationship between employment, aggregate demand, and changes in money/credit is given with the formula on Wikimedia AXEC07.

This equation contains Keen's relationship between changes in employment and changes in debt.

José Tapia has shown how major heterodox economists have treated the relationships between aggregate income, aggregate demand, money, credit, profit, and Say's Law in their idiosyncratic approaches. What is lacking is a consistent synthesis, so he leaves Heterodoxy in the wood.

In marked contrast, the structural axiomatic approach puts the essential building blocks in a formally rigorous way together. This is the prerequisite for a successful Paradigm Shift.

Given the failure of Orthodoxy, there cannot be the slightest doubt that a paradigm shift is overdue.

Egmont Kakarot-Handtke

Kakarot-Handtke, E. (2011a). What is Wrong With Heterodox Economics? Kalecki’s Profit Theory as an Example. SSRN Working Paper Series, 1845803: 1–9. URL
Kakarot-Handtke, E. (2011b). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–15. URL
Kakarot-Handtke, E. (2013). Debunking Squared. SSRN Working Paper Series, 2357902: 1–5. URL
Kakarot-Handtke, E. (2014a). Profit for Marxists. SSRN Working Paper Series, 2414301: 1–25. URL
Kakarot-Handtke, E. (2014b). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Kakarot-Handtke, E. (2015a). Essentials of Constructive Heterodoxy: Aggregate Demand. SSRN Working Paper Series, 2564590: 1–23. URL
Kakarot-Handtke, E. (2015b). Essentials of Constructive Heterodoxy: Say’s Law. SSRN Working Paper Series, 2556434: 1–10. URL
Tapia, J. A. (2015). Money and Say’s law: On the Macroeconomic Models of Kalecki, Keen, and Marx. real-world economics review, (70): 110–120. URL

Link to Top 20 Heterodox Economics Books here.