Steve Keen correctly observed: “So the textbooks are wrong.” (2011, p. 19)
The mess started with Samuelson's textbook of 1948. The pivotal point is that Samuelson's profit theory is logically defective and this invalidates the greater part of the theoretical superstructure.
Here is the smoking gun: “GDP, or gross domestic product, can be measured in two different ways: (1) as the flow of final products, or (2) as the total costs or earnings of inputs producing output. Because profit is a residual, both approaches will yield exactly the same total GDP.” (Samuelson and Nordhaus, 1998, p. 392)
This quote is paradigmatic for the flimsy logic and the loose verbal reasoning that is endemic in economics. The fundamental mistake/error lies in the premise that total income is equal to the value of output (2012, Sec. 1.6).
The scientific incompetence of the MIT crowd does not consist in sharing the same approach but in sharing the same logical defect for more than 50 years.
The sad fact of the matter is that not only MIT cannot tell the difference between income and profit but critical Heterodoxy also. Steve Keen and others of the heterodox camp still think that total income is the sum of wages and profits (2013).
The final debunking of MIT economics from Samuelson to Summers consists of the rigorous proof that their profit theory is false (2014).
The scientific embarrassment of both Orthodoxy and Heterodoxy is that the representative economist fails to capture the essence of the market economy. The idea that economists understand how the economy works and therefore can help to steer it is ludicrous. What we have at the moment is the pluralistic inbreeding of provably false theories.
Kakarot-Handtke, E. (2012). The Common Error of Common Sense: An Essential Rectification of the Accounting Approach. SSRN Working Paper Series, 2124415: 1–23. URL
Kakarot-Handtke, E. (2013). Debunking Squared. SSRN Working Paper Series, 2357902: 1–5. URL
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Keen, S. (2011). Debunking Economics. London, New York: Zed Books, rev. edition.
Samuelson, P. A., and Nordhaus, W. D. (1998). Economics. Boston, Burr Ridge, etc.: Irwin, McGraw-Hill, 16th edition.