Blog-Reference and Blog-Reference
A false theory is never 100 percent false but the falsity or half-truth is sandwiched between two trivialities or common sense truths to which everybody can readily agree. So most of MMT is trivially true except this proposition: “3) The government’s financial deficit is everybody else’s financial surplus.”
The half-truth is hidden in the two words “everybody else’s”. These words have to be replaced by “one-percenters”. So proposition 3 reads correctly: “The government’s financial deficit is the one-percenters monetary profit.”*
So, what MMT policy in effect produces is the insanely biased income distribution everybody complains about ― Bernie Sanders in the first place.
How can it happen that well-meaning economists send their favorite politician with counter-productive policy advice against the wall? The short answer is that economists do not know what profit is. If this sounds strange look up the Palgrave Dictionary: “A satisfactory theory of profits is still elusive.” (Desai, 2008).
MMT goes back to Keynes who had NO idea what profit is: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)
Neither Post Keynesians nor Anti-Keynesians nor MMTers detected or rectified Keynes’ foundational mistake/error/blunder in the last 80 years. So, since 200+ years economists have NO idea of the foundational concepts of their subject matter, that is, of profit and income.
Because of this, economists’ policy advice, in general, is ruinous as already Napoleon knew: “Late in life, moreover, he claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.”
* The correct formula is given with Qm+Sm+(T−G)=0 (if I=0) which condenses to Qm=G−T, i.e. monetary profit Qm is equal to government spending minus taxes, in short, Public Deficit = Private Profit. For details see Wikipedia and the promotion of economists’ idiotism.
I clearly stated: “The correct formula is given with Qm+Sm+(T−G)=0 (if I=0) which condenses to Qm=G−T, i.e. monetary profit Qm is equal to government spending minus taxes.”
So, monetary profit Qm is equal to the government deficit in the SIMPLIFIED case Sm=0 and I=0. In the COMPLETE profit formula appears IN ADDITION distributed profit and the foreign trade balance. All these issues have been dealt with elsewhere#1 and left aside in the 2263 character post in order to FOCUS on the main point.
It is trivially true that Sm is normally different from zero. Accordingly, this case has already been dealt with elsewhere.#2 So you are not telling anything new but are simply poorly informed.
You tell me: “So you haven’t a clue what profit is either. It’s really just the wages of capitalists.”
If you were better informed you would know that the commonsensical formula total income = wages + profits is the worst blunder of all of economics.#3 More, this formula is the VERY SIGNATURE of the utter scientific incompetence and confusion of the representative economist.#4
#1 See the working papers on SSRN
#2 How the intelligent non-economist can refute every economist hands down
#3 Essentials of Constructive Heterodoxy: Profit
#4 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist
Related 'Keynesianism as ultimate profit machine' and 'Economists and the destructive power of stupidity'