Blog-Reference and Blog-Reference on Jul 5
Brian Romanchuk asserts: “The Kalecki Profit Equation is an account identity (a statement that is true by definition) that determines the level of aggregate business sector profits in terms of other national accounts variables.”
Brian Romanchuk simply parrots one of the economists’ many brain-dead slogans. Get it, there is NO such thing as a “statement that is true by definition”. In science, the truth of a statement is established by the proof of material and formal consistency.
It has been shown in earlier posts that Brian Romanchuk’s grasp of scientific methodology is rather weak.#2
The good news is that he now gets the macroeconomic profit equation right ― at least for monetary profit. The bad news is that he fails to notice that this equation flatly contradicts the MMT balances equation. The MMT balances equation reads (I−S)+(G−T)+(X−M)=0, from the axiomatically correct profit equation follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0.#3
Only one of the equations can be true. It is quite obvious that the MMT sectoral balances equation is false. Because Brian Romanchuk is an outspoken promoter of MMT the interesting question is whether he is now the first to leave the sinking MMT ship.#4
#1 Sequel to Profit: after 200+ years, economists are still in the woods
#2 For an overview see
The curious non-existence of profit in economics
MMT and grassroots movements
Macroeconomics for retarded economists
The final implosion of MMT
Infantile model bricolage, or, How many economists can dance on a non-existing pinpoint?
Mathiness is NOT the problem — scientific incompetence is
Economists: only good at excuses
#3 DSGE and profit―forget it! MMT and profit―forget it!
#4 The Kelton-Fraud
Related 'MMT: How mathematical incompetence helps the Kelton-Fraud'. For the full-spectrum refutation of MMT see cross-references MMT.
Wikimedia AXEC143d Profit Law (with increasing complexity) and Sectoral Balances Equation ®