Comment on Lars Syll on ‘Austerity policies — nothing but kindergarten economics’
Blog-Reference and Blog-Reference
Lars Syll quotes Kalecki asking this question: “The entrepreneurs in the slump are longing for a boom; why do they not gladly accept the synthetic boom which the government is able to offer them?”
And he quotes also the answer: “But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of ‘sound finance’ is to make the level of employment dependent on the state of confidence.”
This is a fine example of Political Economics. A political explanation consists of speculative mind reading and the triumphant exposure of the ‘true’ motive of the other fellow, which turns out to be crass self-interest in the best case or something far worse in all others. Schumpeter characterized the intellectual kindergarten of Political Economics as follows: “It is only our inability to divorce research from politics, or our suspicion, all too often justified, that the other fellow cannot analyze with single-minded devotion to truth, which makes problems and party issues out of decisions that do not excite anyone in more fortunate fields of research.” (1994, p. 566)
Needless to emphasize that from the intellectual kindergarten of Political Economics not much, if anything, of scientific value ever emerged. Economics is a failed science. Walrasianism, Keynesianism, Marxianism, and Austrianism are provably false. Science, or Theoretical Economics in contradistinction to Political Economics, is the “single-minded devotion to truth” which in turn is well-defined as material and formal consistency. Theoretical Economics refrains from speculative mind reading, motive imputation, and storytelling.
The very characteristic of the agenda pushers of Political Economics is that they are either ignorant of scientific standards or simply trample them underfoot. “As some one has said, it would seem that even the theorems of Euclid would be challenged and doubted if they should be appealed to by one political party as against another.” (Fisher, 1911, PF. 6)
The real problem of the austerity discussion is this. Neoclassical employment theory is provably false. Keynes’s employment theory is a great step in the right direction but only half-true because Keynes never came to grips with profit (2012). The same holds for Kalecki (2011).
So, neither orthodox nor Keynesian nor Kaleckian policy proposals with regard to employment/austerity/sound finance have a valid scientific foundation. In Political Economics there is a TOTAL DISCONNECT between an economic policy proposal and the underlying theory. Economic theory is worthless and only puts some pseudo-scientific lipstick on the political pig.
The Political Economics of traditional Heterodoxy is not better than that of Orthodoxy. ALL Political Economics is scientific garbage.
Fisher, I. (1911). The Purchasing Power of Money. Its Determination and Relation to Credit, Interest, and Crises. Library of Economics and Liberty. URL
Kakarot-Handtke, E. (2011). What is Wrong With Heterodox Economics? Kalecki’s Profit Theory as an Example. SSRN Working Paper Series, 1845803: 1–9. URL
Kakarot-Handtke, E. (2012). Keynes’s Employment Function and the Gratuitous Phillips Curve Disaster. SSRN Working Paper Series, 2130421: 1–19. URL
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford University Press.