October 16, 2015

Misplaced augurs of doom

Comment on David Ruccio on ‘A gathering storm?’


You say “Marxist and other radical economists often remind people of the inherent instability of capitalism — unlike their mainstream counterparts, who tend to focus on equilibrium and the invisible hand of free markets.” (See intro)

Not only Marxists are in the doomsday business but the gold bugs, too, and the producers of survival kits, and the Armageddon-Christians, and the fiat money abolitionists, etcetera (see zerohedge or YouTube for the daily doom menue).

Fear mongering is good business, but it is not the economist’s business. What is missing is a theoretically sound account of the famous ‘long run’. Note well that the classics and Marx based their projections on the law of the falling profit rate. This is something quite different from the current bubble/crash panic talk. Until this very day, the representative economist does not know what profit is, much less how it develops in the long run (2014; 2015). Hence, all crisis projections are not much more than journalistic extrapolations of surface phenomena.

You sum up: “That’s the gathering storm they [policymakers, central bankers] — and we — should be worried about.”

Yes, but in a quite different sense. Economic crises are, in the last instance, the result of a total lack of understanding of how the economy works, that is, of the manifest failure of economics as a science. This holds first and foremost for employment theory. It was Keynes who addressed the problem during the Great Depression but could not solve it satisfactorily, neither could the Post-Keynesians (2011), not to speak of New Keynesians and New Classics.

Amidst the theoretical mess, what economists should be worried about is that they bear the intellectual responsibility for the next occurrence of mass unemployment and the accompanying societal devastation.* Indeed, the future is bleak — for economists in particular.

Egmont Kakarot-Handtke

Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2014). Mathematical Proof of the Breakdown of Capitalism. SSRN Working Paper Series, 2375578: 1–21. URL
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL

* Unemployment is avoidable, see 'Back to science' and cross-references Employment.