August 29, 2018

China does NOT need Keynesianism

Comment on Frank Li on ‘John Maynard Keynes: The Best Economist Since 1899?


Frank Li argues: “Keynesian economics makes a world of sense today. Two main reasons: It is a valid theory, developed on top of the past economic theories, including both Adam Smith’s and Karl Marx’s. It was developed mostly in Britain, a great country with a long history, without an excessive delusion of exceptionalism.”

Let us put some points straight:

• The formal basis of the General Theory is given with “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)#1

• This proposition is conceptually/logically false because Keynes NEVER came to grips with profit.#2 This is self-defeating for an economist.

• Because the foundational economic concepts profit/income/saving are miss-specified, the whole theoretical superstructure of Keynesianism in ALL its variants is false.#3

• Keynes messed up the inexorable Paradigm Shift from microfoundations to macrofoundations.#4

• Keynes was an agenda pusher, NOT a scientist. Keynesian policy guidance has NO valid scientific foundations and in effect enables the self-alimentation of the oligarchy.#5

• Keynes’ policy proposals are nothing more than educated common sense and have NO valid scientific foundations. They are superior to Walrasian/Marshallian economics, though, but only because it is impossible to be worse.

• The extremely unequal distribution of income and financial wealth is the direct result of public deficit spending over the last decades. The macroeconomic Profit Law says Public Deficit = Private Profit.#6

• After-Keynesians have not detected/rectified Keynes’ blunders to this day. Macroeconomics ― profit and employment theory, in particular ― is materially/formally inconsistent.#7

• Keynesianism is scientifically worthless.

Frank Li summarizes: “(1) the free market cannot possibly be all self-functioning and self-stabilizing, and (2) a critical and indispensable ‘balancing’ force is the government, especially in time of crisis.” This is only a great insight to economists who, to recall, are known to be scientifically incompetent since the founding fathers. Keynes stood firmly in this tradition of cargo cult science.#8

China can do better without Smith, Marx, and Keynes.#9

Egmont Kakarot-Handtke

#1 Keynes and the logical brilliance of Bedlam
#2 How Keynes got macro wrong and Allais got it right
#3 Forget Keynes
#4 Finalizing the Keynesian Revolution
#5 Who or what exactly did Keynes save?
#6 Keynes, Lerner, MMT, Trump and exploding profit
#7 Post Keynesianism, science, and universal idiocy
#8 Marshall and the Cambridge School of plain economic gibberish
#9 For details of the big picture see cross-references Keynesianism