July 17, 2017

You are fired!

Comment on Barkley Rosser on ‘Those Of You Who Are Old Enough Will Really Get This’

Blog-Reference and Blog-Reference and Blog-Reference

(i) Barkley Rosser reports: “I am adding yet more to my most recent two posts where I am complaining about this essentially side remark that Larry Summers made in his commemoration of his late uncle, Kenneth Arrow, in which he reports that at the party celebrating Arrow’s Nobel Prize in 1972, Summers’s other uncle, the late Paul Samuelson was supposedly ‘discussing how stupid Joan Robinson was’.”

The geniality of Joan Robinson is engraved in everlasting granite with this verdict about economics: “Scrap the lot and start again.”

To her fellow economists, she referred as ‘throng of superfluous economists’. Indeed, this is their track record: provably false
• profit theory, for 200+ years,
• Walrasian microfoundations (including equilibrium), for 150+ years,
• Keynesian macrofoundations (including I=S, IS-LM), for 80+ years.

ALL theories/models that contain profit, maximization-and-equilibrium, or I=S/IS-LM are a priori false and this is more than 90 percent of the content of peer-reviewed economic quality journals and 100 percent of textbooks of renowned authors since 1948.

The throng of superfluous economists has not realized that the core of economics ― profit theory ― is false since Adam Smith.

(ii) Most famous example: Keynes. This is the piece of evidence from the General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This syllogism is conceptually and logically defective because Keynes did not come to grips with profit: “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.)

Because profit is ill-defined the whole theoretical superstructure of Keynesianism is false. This holds also for Walrasianism, Marxianism, Austrianism.

(iii) All errors and misinterpretations are eliminated by turning to mathematical formalism and graphical representation.

(a) National accounts, elementary production-consumption economy, two sectors, initial period C=Yw, consumption expenditures = wage income, Wikimedia AXEC94a

(b) National accounts, dissaving C > Yw, consumption expenditures greater than wage income, profit Qm = dissaving (−Sm) (with Qm≡C−Yw, Sm≡Yw−C, Qm≡−Sm), Wikimedia AXEC95

(c) National accounts, saving C < Yw, consumption expenditures less than wage income, loss (−Qm ) = saving Sm, Wikimedia AXEC96

The national accounts tell one important thing: profit is NOT the income of capital but the mirror image of dissaving, i.e. the household sector’s increase of debt.

(iv) From the accounting graphics, it is immediately obvious that Keynes’s foundational identity “Income = value of output” is false. This seemingly commonsensical identity is the biggest methodological blunder in all of the economics because it led ― among other errors/ mistakes ― to the treatment of profit as income of capital.

Because the profit theory is false since Adam Smith ― “... one of the most convoluted and muddled areas in economic theory: the theory of profit” (Mirowski) ― economics became the failed science that it is today.

(v) The scientific incompetence of the representative economist is documented by the fact that he cannot tell the difference between profit and income to this very day. The ‘throng of superfluous economists’ has NO idea of the foundational concepts of their subject matter. From the freshman to the Nobel Laureate it is just proto-scientific blather.

Joan Robinson realized this and told the world. Now it is time to get rid of these folks.

Egmont Kakarot-Handtke

Related 'How economists habitually mess it up' and 'Macro for dummies' and 'The real problem with the economics Nobel' and 'We are not yet out of the wood; in fact, we are not yet in it' and 'Economics is not a science, not a religion, but proto-scientific garbage' and 'How Arrow pushed economics over the cliff' and 'New Economic Thinking: the 10 crucial points'

REPLY to anne on Jul 17

For more on Joan Robinson see
► Joan Robinson and the ‘throng of superfluous economists
► Let’s do it
► Habermas, Albert, Robinson, Syll are right — now scrap the crap
► The overdue public clarification of economics’ actual scientific state
► Will economics ever become a science?

REPLY to ProGrowthLiberal on Jul 17

See The futile attempt to recycle Sraffa.

REPLY to ProGrowthLiberal on Jul 17

The Economics God Equation, Wikimedia AXEC25, fully replaces Sraffa’s awkward “real” construct. Note that there is NO profit in a “real” economy. Seems to have escaped you since Econ 101.

The Economics God Equation

REPLY to Barkley Rosser on Jul 18

The consistency with which you grab into the toilet is remarkable. Joan Robinson said TWO correct things, which is TWO MORE than Arrow, Samuelson, Summers e tutti quanti ever said:
  • “Scrap the lot and start again.”
  • “An excess of saving over the value of investment is therefore a loss to firms … and an excess of investment over saving is an undistributed profit to the firms …”#1
So, Joan Robinson got macro accounting almost right (see also case (iii) c above) but did not see the significance for profit/capital theory and fell back to vacuous microeconomic argumentation.#2

Stupid as ever, you cited the 'wrong' Joan Robinson.

#1 For details see Keynes’s Missing Axioms p. 21, references
#2 For the correct capital theory see Squaring the Investment Cycle.

REPLY to Barkley Rosser on Jul 18

You say: “If she said the second, you will need to show where, troll, although she probably would say that it is often the case, as it is, but not one that necessarily holds in general.”

Learn reading. I gave you the source already above with the baby spoon: #1 For details see Keynes’s Missing Axioms p. 21, references

There you will find the original source: Robinson, J. (1956). The Accumulation of Capital. London: Macmillan, p. 402.

Perhaps there is a brilliant mind in your circle of blather buddies who can read it aloud for you.

Wikimedia AXEC144b