May 12, 2016

The great economic equations

Comment on Matias Vernengo on 'The great economic equations'


The First Economic Law is shown on Wikimedia AXEC06 and it connects the fully integrated business sector, the household sector, the market, and the income distribution (2014, eq. (12)):
The First Economic Law is derived from the macroeconomic axiom set and is for economics what the Pythagorean Theorem is for geometry. The Profit Law is implicit in this foundational equation as well as the macroeconomic Law of Supply and Demand and the Employment Law. The axioms relate to a period of a given length.

From the First Economic Law, which holds for one period, follows the economic God Equation which embodies the open stochastic simulation of the elementary production-consumption economy from period t=0 to infinity. See Wikimedia AXEC25:
The God Equation is composed of the paths of the period variables (2020, pp. 23-26). The paths describe the history of the variables which together constitute the system's history.

The Keynesian multiplier 1/1−c is provably false. For the correct employment multiplier see (2012, eq. (39)). In order to arrive at the correct economic key equations, one has to move from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations as given by the axiom set.#1

All models that are not formally compatible with the systemic macrofoundations are provably false and therefore unacceptable.

Egmont Kakarot-Handtke

Kakarot-Handtke, E. (2012). Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster. SSRN Working Paper Series, 2130421: 1–19. URL
Kakarot-Handtke, E. (2014). The Synthesis of Economic Law, Evolution, and History. SSRN Working Paper Series, 2500696: 1–22. URL
Kakarot-Handtke, E. (2020) Sovereign Economics, Books on Demand, BOD