May 28, 2017

Consensus, buddy consensus, scientific consensus, or what?

Comment on Simon Wren-Lewis on ‘Still not getting it after all these years’


You argue: “It is therefore a prime duty of government to ensure that, if interest rates have hit their lower bound, fiscal policy is solely directed at allowing monetary policy to raise rates. This idea is not new. It was always implicit in New Keynesian theory and what I call the Consensus Assignment. Paul Krugman, Brad DeLong and others have been going on about it at least since the financial crisis.”

And: “This is not one particular theory of monetary and fiscal policy interaction. It is the consensus theory.”

The consensus comprises a number of New Keynesian economists. Now it is known that both old and new Keynesian economics is axiomatically false.#1 It is also known that Walrasianism is false from supply-demand-equilibrium onward to DSGE.#2

The consensus among scientists is that economics is a failed science and urgently needs a paradigm shift. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept of profit wrong. Because of this, economic policy guidance NEVER had sound scientific foundations.

Within this dire context, the reference to a New Keynesian consensus does not cut much ice.

Egmont Kakarot-Handtke

#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#2 First Lecture in New Economic Thinking