June 27, 2015

The trouble with counting to 3

Comment on Blissex on ‘Keenonomics, aggregate demand/change of debt, and some misleading critique’


You comment my verbatim quote from the General Theory as: “That’s a ridiculous misquote.” Obviously you had not the time to check it. For your convenience, here is a direct link to Google-books.

Ok, we agree, my quote is correct and your assertion is incorrect, or, don't let us mince words, utterly ridiculous.

And so it goes on. You refer to the ex ante/ex post storytelling. Nice try. Here is the fact of the matter.
“Throughout the 1920s and 1930s the focus was increasingly on the role of the equality of saving and investment, but the semantic squabbles that dominated much of the debate (the distinctions between "ex ante," and "ex post," "planned" and "realized" saving and investment, the discussion of whether the equality of saving and investment was an identity or an equilibrium condition) reflected a deeper confusion.” (Blanchard, 2000, p. 1378)

This confusion has not been resolved in a formally satisfactory way until today and your reiteration is a telling example that 'deeper confusion' is still with us.

The almost tragic thing is that accounting is elementary mathematics and that economists botch it up even at the beginner's level. An accountant who writes down every single real-world transaction during a period and then comes up at period end with I=S instead of Qre=I-S gets fired because of incompetence or cooking up the books. And telling the ex ante/ex post story cannot prevent this (2012).* Bookeeping provides the most precise and reliable empirical test in economics. Is anyone surprised that economists cannot handle it properly?

Egmont Kakarot-Handtke

Blanchard, O. (2000). What Do We Know about Macroeconomics that Fisher and Wicksell Did Not? Quarterly Journal of Economics, 115(4): 1375–1409. URL
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

* See the I-unequal-S cross-references for blog posts and the formal proof