March 28, 2017

Austerity and the idiocy of political economists

Comment on Simon Wren-Lewis on ‘On criticising the existence of mainstream economics’


Unlearning Economics argues: “The case against austerity does not depend on whether it is ‘good economics’, but on its human impact. Nor does the case for combating climate change depend on the present discounted value of future costs to GDP. Reclaiming political debate from the grip of economics will make the human side of politics more central, and so can only serve a progressive purpose.”

In other words, UE says, let us put the whole squabble whether economic theory is true or false aside, the real issue is whether a policy measure serves the one-percenters or the ninety-nine-percenters. Economics is progressive if it serves the ninety-nine-percenters and regressive if it serves the one-percenters.

This amounts to abandoning science altogether. The criterion of science is true/false with truth defined as material and formal consistency: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

The problem of economics is that neither Orthodoxy nor Heterodoxy has the true theory. Therefore, the economic policy proposals of BOTH orthodox AND heterodox economists lack sound scientific foundations.

The discussion about austerity delivers proof of the utter scientific incompetence of political economists. Neither Orthodoxy nor Heterodoxy got the fundamental concept of economics, i.e. profit, right.#1 To make the argument short, the axiomatically correct macroeconomic Profit Law is given here as Qm≡Yd+(I−Sm)+(G−T)+(X−M) which reduces to Qm≡G−T for Yd, I, Sm, X, M = 0. The reduced Profit Law says that the monetary profit of the business sector Qm is equal to the deficit G−T of the public sector. In other words, Public Deficit = Private Profit.

So, from the standpoint of simple self-interest, the one-percenters and their useful academic spokespersons should argue FOR deficit spending/public debt, and the ninety-nine-percenters and their academic spokespersons should argue AGAINST it. Curiously, just the opposite happens.

The fact of the matter is that the measured increase in the relation between profit and wage income in the past decades has no other cause than the increase of public and private deficit spending. It has NOTHING AT ALL to do with greed, or productivity, or the smartness of business people. These factors only influence the distribution of overall profit Qm between the firms.

Because neither Orthodoxy nor Heterodoxy has the true profit theory#2 their economic policy proposals are counter-productive or regressive for the social groups/classes they speak for. The fact of the matter is that nobody does currently more for the one-percenters than deficit pushing heterodox economists who claim to “serve a progressive purpose”.

Economic disasters happen for 200+ years because political economists ― both orthodox and heterodox soapbox blatherers ― lack the true theory.#3

Egmont Kakarot-Handtke

#1 For details, references, and proofs see Meta-References, in particular, cross-references Profit.
#2 “A satisfactory theory of profits is still elusive.” (Palgrave Dictionary, Desai, 2008)
#3 Mass unemployment: The joint failure of orthodox and heterodox economics

Related 'Keynes, Lerner, MMT, Trump and exploding profit' and 'Austerity and the political games Progressives play' and 'MMT Progressives: stupid or corrupt or both?' and 'Economics: The greatest scientific fraud in modern times' and 'Econogenics in action'. For details of the big picture see cross-references Political Economics/Stupidity/Corruption.

Immediately preceding The non-existence of economics.


Twitter, Austerity talk is one thing, actual deficit-spending quite another

Source: Twitter Corbynator