September 29, 2018

Legitimacy lost

Comment on Barkley Rosser on ‘Trump Destroys His Favored SCOTUS Nominee’

Blog-Reference

After a long phase of degeneration, the institution of POTUS has now obviously lost the last bit of legitimacy.

After a long phase of degeneration, the institution of SCOTUS currently loses the last bit of legitimacy on the open stage.

We know this from the economist Barkley Rosser. That’s a bit strange, provided one realizes that it is NOT the business of the academic economist to dabble in politics. Politics is the proper business of Political Science. The business of the economist as a scientist is to figure out how the economy works ― not less, not more.

Economists have failed at their mission. They have to this day produced NOTHING of scientific value. Fact is that economists have messed up
• profit theory, for 200+ years,
• microfoundations, for 140+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

Economists do not know to this day how the price- and profit mechanism works. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism are mutually contradictory, axiomatically false, and materially/formally inconsistent. Because of this, economic policy guidance has NO sound scientific foundation since Adam Smith/Karl Marx.

As we speak, Stephanie Kelton, her academic fellow campaigners and the hyper-active MMT sales force on the social media pull off “one of the greatest cons ever perpetrated on the American people.”#1

MMT is proto-scientific garbage, the Post-Keynesian sectoral balances equation that underlies the whole analytical edifice is provably false but, curiously, the academic economist Barkley Rosser turns his eyes away from his own profession and prefers to comment on the reported sex and drinking scandals of SCOTUS nominee Brett Kavanaugh.

Why does a failed/fake economist repeat at great length what everybody knows already from the extensive media coverage and why does he let us know that he does “not feel sorry for Brett Kavanaugh”? Economics is NOT about feelings but about knowledge, NOT about politicians but about the economy.

Academic economics has entirely abandoned scientific standards and integrity. Economists over the whole spectrum from Orthodoxy to Heterodoxy, from Paul Krugman to Brad DeLong to Simon Wren-Lewis to Barkley Rosser to Steve Keen to Lars Syll to Yanis Varoufakis are full-time media clowns and useful political idiots. Academia, too, has become a failed institution.

To recall, political economics has NO legitimacy since the founding fathers: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill) #2, #3

As a matter of principle, it is entirely beyond the capacity of economists to make a valuable contribution to the advancement of humanity because economics has no sound scientific foundations to this day.#4

Egmont Kakarot-Handtke


#1 Stephanie and Noah ― economics at the intellectual zero lower bound
#2 The end of political economics
#3 The case for pure economics
#4 For details of the big picture see cross-references Political Economics/Stupidity/Corruption

***
REPLY to Zachary Smithingell on Oct 3

There is the political sphere and there is the scientific sphere. The political sphere is about agenda pushing, the scientific sphere is about knowledge.

In the political sphere, every imbecile is entitled to climb on a soapbox and to vomit the content of his dysfunctional brain all over the place.

In the scientific sphere, people are supposed to contribute something to the growth of knowledge. Scientific knowledge, in turn, is well-defined by material and formal consistency. Confused off-topic blather is NOT appreciated in the scientific sphere.

You certainly agree that Barkley Rosser’s gossip about Mr. Kavanaugh’s beer and sex life has NO economic or scientific content whatsoever. This would be no embarrassment if Barkley Rosser were a talk show host or a yellow press journalist. But Barkley Rosser pretends to be a competent academic economist.

And this is the point: economics claims to be a science and economists claim to be scientists and they communicate this every year loud and clear with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

Reality is different: economics is a cargo cult science, economists are fake scientists, and Barkley Rosser as brain-dead blatherer is the living proof that academia, too, is a failed institution.

***
REPLY to Mark Bahner on Oct 4

You let the world know on EconoSpeak: “For the record, I did not vote for Donald Trump or Hillary Clinton...I voted for Gary Johnson, who was a much better candidate than either Trump or Clinton.”

It is pretty obvious that this statement has zero informational content and is not of any interest to anyone.

So, a Mark Bahner, a Barkley Rosser, an Anonymous, and others are producing pure noise on EconoSpeak. This has NO positive effect whatsoever but only prevents that economic debate gets above the level of brain-dead nonsense.

To speculate about whether this effect is unintentional or intentional is a pointless exercise. Sticking to the facts as they are, what anyone can learn from the beer-sex-asshole noise on EconoSpeak is that the long march of the lowlifes of all walks of life has reached its logical end. The institutions of POTUS, SCOTUS, and ACADEME have lost their function and legitimacy and have been brought down to a noisy clown wrestling show.

So, EconoSpeak and Barkley Rosser have at least one positive purpose: to provide an indicator of how deep the social shithole has become by now.#1


#1 By the way, with his tortured irony “… you could get support from Egmont if you declare him to be the only person in worl history to have approached economics scientifically, with his theory of profits being an even greater scientific discovery than the discovery of the DNA molecule.” Barkley Rosser unintentionally hit the metaphorical nail. The three macroeconomic axioms (A1) Yw=WL, (A2) O=RL, (A3) C=PX are actually the DNA of economics. They replace the monster-producing Walrasian and Keynesian axioms. This is called evolution in biology and paradigm shift in methodology.

***
REPLY to Barkley Rosser on Oct 5

Every economist knows from the Palgrave Dictionary that Walrasian, Keynesian, Marxian, Austrian profit theories are false: “A satisfactory theory of profits is still elusive.” (Desai, 2008) So, there is only one interesting question in economics: is the axiomatically founded macroeconomic Profit Law Qm=Yd+(I−Sm)+(G−T)+(X−M) true?#1

As long as economists have not definitively clarified the concept of profit, economics is not merely a sick proto-scientific joke but a betrayal of the general public. As things stand at the moment, economics has NO scientific legitimacy.

You are on the F-side of the fence. F stands for false. I am on the T-side of the fence. T stands for true. It does not matter how many of your friends and colleagues stand also on the F-side. The number of followers does not make a false theory true.

There is no need to tell the world that you are goods friends with Meghnad Desai and Roy Weintraub and that they are on your side. Everybody on your side of the fence shares your fate and will end up at the Flat-Earth-Cemetery. There is enough space for the whole of academe.


#1 Go! ― test the Profit and Employment Law

***
REPLY to Barkley Rosser on Oct 6

You say: “If you go back and reread that long post I put up here about capital and profit that you and I had our longest exchanges about, I clearly states that we did not have clear agreement on the topic, that it remains an open matter of debate.”

No. The matter was settled then.#1

I started the debate with: “The representative economist fails to this day to capture the essence of a capitalist market economy.”

I concluded the debate with: “Barkley Rosser cannot get out of his self-created muddle. Who cannot handle three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw) and two definitions (Qm≡C−Yw, Sm≡Yw−C) and UNDERSTAND IMMEDIATELY that Qm=−Sm, i.e. that business profit and household saving are NEGATIVELY related, is OUT of economics. When the pivotal concept of profit is not properly understood the rest of the analytical superstructure of economics falls apart and there is NO use at all to filibuster about capital and equilibrium. The best the representative economist can do for the welfare of humanity is to get out of the way.”

This is the stupidity-feature of all those economists who stand together with you on the F-side of the fence. It is accompanied by the corruption-feature. The representative economist violates scientific standards and habitually denies refutation: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941).

And it is quite obvious why economists habitually violate scientific standards: “… suppose they did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.” (Hands)

To deny refutation, to obscure matters, and to claim that the debate is still open is the modus operandi of economists for 200+ years.#2 This is the reason why economics is a failed science and never rose above the proto-scientific level.#3

The corruption of economists consists of deliberately keeping things in the swamp between true and false where “nothing is clear and everything is possible” (Keynes) The apex of corruption is telling the general public that what they are doing is science and to congratulate themselves with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

The fundamental concepts of economics are inconsistent for 200+ years. Economics has NO scientific legitimacy.


#1 Economists: scientists or political clowns?
#2 And the answer is NCND ― economics after 200+ years of Glomarization
#3 The biggest scientific mistake of the last centuries, and it has much to do with academic economists

September 27, 2018

Dean Baker: progressive agenda pusher for the Oligarchy

Comment on Dean Baker on ‘Getting serious about debt and deficits: the deficit hawks did enormous harm to our kids’

Blog-Reference and Blog-Reference on Sep 29

Dean Baker argues: “With the possibility that the Democrats will retake Congress and press demands for increased spending in areas like health care, education, and child care, the deficit hawks (DH) are getting prepared to awaken from their dormant state. We can expect major news outlets to be filled with stories on how the United States is on its way to becoming the next Greece or Zimbabwe. For this reason, it is worth taking a few moments to reorient ourselves on the topic.” and “Just to remind everyone, the classic story of deficits being bad is that they crowd out investment and net exports, which makes us poorer in the future than we would otherwise be.”

Just to remind everyone, the classic debate about deficit-spending/money-creation entirely misses the point. The lethal argument against MMTers and other promoters of deficit-spending/money-creation is that the permanent growth of public debt is a program for the permanent self-enrichment of the Oligarchy, because of the macroeconomic Profit Law Public Deficit = Private Profit.#1

Fact is:
• MMT/Post-Keynesianism is a macroeconomic theory that is refuted on all counts. It is scientifically worthless.#2
• Like all other false friends-of-the-people Dean Baker does not mention once the profit effect of deficit-spending/money-creation.#3, #4
• All the social benefits MMTers promise are paid for in real terms by WeThePeople themselves via stealth taxation.#5
• Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon. In the meantime, income is redistributed from WeThePeople to WeThe Oligarchy via taxation/interest payments.
• Economically, the point to worry is that the US economy will drop dead as soon as the growth of public and private debt slows down and eventually reverses.

MMT claims to push the agenda of WeThePeople but in fact, pushes the agenda of WeTheOligarchy. MMT is a social fraud and so-called Progressives including Dean Baker are part of it.#7

Egmont Kakarot-Handtke


#1 Why the MMT benefactors of humanity never talk about profit
#2 For the full-spectrum refutation see cross-references MMT
#3 Stephanie and Noah ― economics at the intellectual zero lower bound
#4 Keynes, Lerner, MMT, Trump and exploding profit
#5 MMT, money printing, stealth taxation, and redistribution
#7 For details of the big picture see cross-references Debt/Deficit

Heterodox economics: When stupidity becomes a public danger

Comment on Asad Zaman on ‘The subtleties of effective demand’

Blog-Reference

Economics is a failed science since Adam Smith and this has never been a secret among heads of state: “Late in life, moreover, he [Napoleon] claimed that he had always believed that if an empire were made of granite the ideas of economists, if listened to, would suffice to reduce it to dust.” (Viner)

This is why economists are not really taken seriously but only employed as useful political idiots. The proof of the utter scientific incompetence of economists is given with the fact that the profit theory is false since Adam Smith.#1, #2, #3

Keynes, of course, is no exception. He started macroeconomics with false premises and ended with false conclusions: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)

After-Keynesians have NOT spotted the blunder in Keynes’ elementary syllogism to this day. Asad Zaman is no exception: “As I read more and more about effective demand, I got more and more confused ― how can I explain this concept to my poor students, if I don’t understand it myself? There are a huge number of articles with different and conflicting views and interpretations of this concept, which Keynes describes as being central to his theory.”

That an abysmally confused confuser can get even more confused is a real surprise. But, after all, one should never underestimate the stupidity of Asad Zaman.#4

What Asad Zaman has not realized is that, according to well-established scientific standards, profit theory, Keynesian economics in ALL variants, and all I=S/IS-LM models are definitively refuted.#5, #6, #7

Here is the short proof:
The elementary production-consumption economy is given with three macroeconomic axioms: (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditures C is equal to price P times quantity bought/sold X.

In the elementary production-consumption economy, three configurations are logically possible: (i) consumption expenditures are equal to wage income C=Yw, (ii) C is less than Yw, (iii) C is greater than Yw.

In case (i) the monetary saving of the household sector Sm≡Yw−C is zero and the monetary profit of the business sector Qm≡C−Yw, too, is zero. The product market is cleared, i.e. X=O in all three cases. For a start, the market clearing price as the dependent variable is given by P=C/X=W/R.

In case (ii) monetary saving Sm is positive and the business sector makes a loss, i.e. Qm is negative. The market clearing price P is less than W/R.

In case (iii) monetary saving Sm is negative, i.e. the household sector dissaves, and the business sector makes a profit, i.e. Qm is positive.

It always holds Qm+Sm=0 or Qm=−Sm, in other words, the business sector’s profit is equal to the household sector’s dissaving and the business sector’s loss is equal to the household sector’s saving. In still other words, saving is NOT equal to investment (because there is NO investment in the elementary production-consumption economy). There is NO such thing as an IS-curve or an equilibrium of I and S.

It holds:
(1) Qm=−Sm in the elementary production-consumption economy,
(2) Qm=I−Sm in the elementary investment economy,
(3) Qm=Yd+I−Sm in the investment economy with profit distribution.
(4) Qm=Yd+I−Sm+(G−T)+(X−M) in the general case with government and foreign trade.

Simple algebra tells everyone that saving is NEVER equal to investment. Both Orthodox and Heterodox economists are too stupid for the elementary mathematics that underlies macroeconomic accounting. Both Orthodox and Heterodox economists have to be expelled from the sciences.#8 This applies in particular to Asad Zaman before he can do even more damage to the brains of his poor students.

Egmont Kakarot-Handtke


#1 The profit theory is false since Adam Smith
#2 “A satisfactory theory of profits is still elusive.” (Palgrave Dictionary, Desai, 2008)
#3 “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” (Mirowski, 1986)
#4 Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need
#5 I is never equal S and even Nick Rowe will eventually grasp it
#6 Keynesians ― terminally stupid or worse?
#7 For details of the big picture see cross-references Refutation of I=S
#8 The inexorable paradigm shift in economics

Related 'Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It' and 'The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment' and 'How the Intelligent Non-Economist Can Refute Every Economist Hands Down' and 'Debunking Squared' and 'Economists: political trolls since 200+ years' and 'Where advanced Heterodoxy — represented by Steve Keen — took the wrong turn' and 'Essentials of Constructive Heterodoxy: Aggregate Demand'. For the new paradigm see cross-references Constructive Heterodoxy.

***

Wikimedia, AXEC144


#FakeScientistAcademicKickOut

Comment on Peter Dorman on ‘A Few Thoughts on “Sorry to Bother You”’

Blog-Reference

EconoSpeak just announced: “Comment moderation has been enabled. All comments must be approved by the blog author.”

Moderation is NewSpeak for censorship. Censorship is anti-science.

The initiators Barkley Rosser and Sandwichman are herewith expelled from the sciences because of proven scientific incompetence and anti-scientific machinations and are reclassified as journalists/propagandists/entertainer/useful political idiots.

Said fake scientists are, of course, entitled to spread their BS in the political Circus Maximus under the license of Free Speech.

Egmont Kakarot-Handtke

September 24, 2018

Stephanie and Noah ― economics at the intellectual zero lower bound

Comment on Stephanie Kelton/Noah Smith on ‘Just When Should We Start Worrying About Deficits?’

Blog-Reference and Blog-Reference

This is the point at issue: “The Congressional Budget Office just said it expects the deficit to top $1 trillion in 2019, a record. Should we be worried?”

This is an open invitation for Stephanie Kelton to enthusiastically push the agenda of the oligarchy:#1

• “What I find interesting is … the fact that Republicans added roughly $2 trillion in stimulus at a time when nearly everyone said it shouldn’t be done, citing proximity to full employment. ‘You don’t do stimulus at full employment,’ was basically the argument. Well, here we are well into the experiment and ... what’s the problem? Inflation remains in check, unemployment has ticked down a bit further, small business confidence is at a 45-year high and growth has accelerated.”

• “And, as you note, they helped without raising inflation, which tells me they didn’t overstimulate, which further tells me there may be room to do even more. Tax Cuts 2.0, anyone?”

• “And so while critics use terms like, ‘blowing up the deficit’ or ‘drowning in red ink’ to describe what’s happening to the government’s finances, Republicans seem more interested in the fact that their deficits will improve the private sector’s finances, especially the biggest corporations and wealthiest people in America. In other words, the GOP seems to understand that the government’s red ink is our black ink!”

• “The most intuitive way to show this is through the sector financial balances. This becomes clear if you listen to Hatzius explain why he thinks sector-balance analysis can send a signal when the private sector’s financial positions are becoming overly fragile. And because it’s nothing more than accounting, it also tells us that the crowding-out story is 100 percent wrong — a government deficit raises private sector incomes; it doesn’t crowd out private finance.”#2

The economic blunder/fraud is in the reference to MMT’s sectoral balances equation and in the assertion “the government’s red ink is our black ink.” No, it is not OUR black ink but THEIRS = the oligarchy’s black ink.#3

Noah Smith does not spot the lethal fault in Stephanie Kelton’s argument and merely waves with the inflation red-herring: “It seems like you’re agreeing with me that accelerating inflation is a risk of deficits. The question is whether that would come slowly or quickly.”

What, then, is the lethal fault is Stephanie Kelton’s argument? Fact is:

• The MMT sectoral balances equation, i.e. (I−S)+(G−T)+(X−M)=0, is provably false.#4 MMT has no sound scientific foundations.

• Neither Stephanie nor Noah ever mentions the profit effect of deficit-spending/money-creation.#5

• From the axiomatically correct Profit Law Qm=Yd+(I−Sm)+(G−T)+(X−M) follows Public Deficit = Private Profit.#6

• Therefore, MMT economic policy ultimately boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.

MMT is failed/fake science#7 and the proponents of MMT in general and Stephanie Kelton, in particular, are stupid/corrupt agenda pushers.

Egmont Kakarot-Handtke


#1 MMT: So-called Progressives as trailblazers for Trumponomics
#2 MMT = Modern Monetary Trash
#3 MMT and the single most stupid physicist
#4 Down with idiocy!
#5 Why the MMT benefactors of humanity never talk about profit
#6 Keynes, Lerner, MMT, Trump and exploding profit
#7 For the full-spectrum refutation see cross-references MMT

***
REPLY to Ralph Musgrave on Sep 25

Noah Smith asked rhetorically ‘Just When Should We Start Worrying About Deficits?’

Stephanie Kelton answers with the MMT refrain don’t worry, be happy. You parrot her with: “Personally, if my assets exactly equalled my debts, and I got a check from some sugar daddy, I would be LESS WORRIED (silly me) than prior to receiving the check.”

So, nothing to worry about except that what is unfolding in the grand political Circus Maximus is ― to use Stephanie Kelton’s words ― “one of the greatest cons ever perpetrated on the American people.”#1

The facts to worry about are:

• With their plea for deficit-spending/money-creation, Stephanie Kelton, her MMT colleagues, and the social media sales trolls push the agenda of Wall Street.#2

• MMTers claim to promote the cause of WeThePeople (care for jobs, health, education, social cohesion, public infrastructure, environment, etcetera). These issues, though, are abused as talking points and door openers. MMTer call themselves Progressives but de facto undermine the genuine social grassroots movements.#3, #4, #5

• In the Stephanie-Noah fake debate on Bloomberg, Stephanie Kelton does not talk any longer about her care for humanity but straightforwardly pushes for the next round of MMT deficit-spending/money-creation: “Tax Cuts 2.0, anyone?”

• Academic economics has entirely abandoned scientific standards and integrity. Not only MMTers have become full-time media clowns and useful political idiots. Academia, too, has become a failed institution.

• Economically, the point to worry is that the US economy will drop dead as soon as the growth of public and private debt slows down and eventually reverses. The axiomatically correct Profit Law says: increasing debt ⇒ macroeconomic profit up, decreasing debt ⇒ macroeconomic loss up. To this day, we have only experienced the first half of the debt story.


#1 MMT = Modern Monetary Trash
#2 MMT and the promotion of Wall Street socialism
#3 MMT and grassroots movements
#4 Political economics: Who hijacks British Labour?
#5 MMTers are NOT Friends-of-the-People

Economics as tireless production of proto-scientific toilet paper: inflation theory as an example

Comment on Brian Romanchuk on ‘Primer: Understanding The Post-Keynesian Rejection Of Mainstream Inflation Theory’

Blog-Reference and Blog-Reference and Blog-Reference

Economics is a failed/fake science or what Feynman called a cargo cult science. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit ― the pivotal concept of the subject matter ― wrong. The pluralism of provably false theories is evidence for the representative economist’s scientific incompetence.

After 200+ years, there is still no such thing as a valid profit-, employment-, or inflation theory, there is always a whole bunch of theories/models and everyone is free to pick the one that suits him politically. This guarantees that economics remains what it is since the founding fathers: a brain-dead talk-show.

Brian Romanchuk gives a vivid description of how economists produce their proto-scientific junk: “So imagine that your boss tells you to come up with ‘an inflation model’ for some country (which is a pretty common demand for employees of central banks or investment firms). According to post-Keynesian theory, the ‘correct’ answer is to respond that inflation is an historical accident. However, I must point out that the theoretically correct answer is also an extremely career-limiting one, so any employee stuck in that particular situation needs to figure out what their superiors want to see, and give them exactly that (even if the model stinks).”

This characterization of the representative economist fits the definition of a pseudo-inquirer: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. ... A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack)

There is no use to untangle the multiple idiocies in Brian Romanchuk’s treatment of inflation theory. What has to be done is to replace his blather by the scientifically correct approach.

In order to go back to the basics, the elementary production-consumption economy is for a start clearly defined by three macroeconomic axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw) and two definitions (profit/loss Qm≡C−Yw, saving/dissaving Sm≡Yw−C).

Money is needed by the business sector to pay the workers who receive the wage income Yw per period. The workers spend C per period. Given the two conditions, the market clearing price is derived for a start as P=W/R (i). So, the macroeconomic price P is determined by the wage rate W, which has to be fixed as a numéraire, and the productivity R.

The average stock of transaction money follows for a start as M=kYw, with k determined by the payment pattern. In other words, the quantity of money M is determined by the AUTONOMOUS transactions of the household and business sector and created out of nothing by the central bank. This, to begin with, kills the commonplace Quantity Theory of inflation.#1, #2

The market clearing price is given in the general case with the macroeconomic Law of Supply and Demand P = ρEW⁄R (ii), with ρE≡C/Yw.#3 An expenditure ratio ρE greater than 1 indicates credit expansion = dissaving, a ratio ρE less than 1 the opposite. In the initial period ρE=1, i.e. the household sector’s budget is balanced. The ratio ρE establishes the link between the product market and the money/capital market.

Now we have deficit spending, i.e. ρE greater 1, yields a price hike. If deficit spending is repeated period after period, the price remains on the elevated level but there is NO inflation. No matter how long the household sector’s debt increases, there is NO accelerated price increase. The same holds for the government sector.#4

The macroeconomic Law of Supply and Demand makes it clear that inflation only occurs if the wage rate W increases in successive periods faster than productivity R. This can happen at ANY employment level. It is NOT a precondition that employment is close to the capacity limit. This is merely a false interpretation of the original Phillips Curve.#5

The explanation for the fact that inflation in the USA is since some time below the FED’s target value of 2 percent is that the rate of change of the average wage rate has been lower than the rate of change of productivity. Things become a bit more complex, of course, when foreign trade, investment etcetera is taken into account. This does not change the fact that the core of inflation theory is given with eq. (ii). This tiny equation fully replaces Brian Romanchuk’s gigantic roll of proto-scientific toilet paper.

Egmont Kakarot-Handtke


#1 Inflation: back to basics
#2 Attention: there are THREE types of inflation
#3 Wikimedia, Macroeconomic Law of Supply and Demand
#4 MMT was right all along: Gov-Deficits do NOT cause inflation
#5 NAIRU, wage-led growth, and Samuelson's Dyscalculia

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REPLY to Joe Leote, Jerry Brown on Sep 26

You are obviously deep in the woods. The issue is inflation theory, but now you are at employment theory. The former has already been treated above, for the latter see
Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
Essentials of Constructive Heterodoxy: Employment

It would be a good thing if economists could get economic theory right before they pester the world with their brain-dead policy proposals: “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) … or senseless blather.

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REPLY to Crossover on Sep 26

You say: “There is also the ‘structuralist’ approach to inflation.” Indeed, almost everybody has an opinion about inflation. The problem is that the goal of science is NOT to have many contradicting opinions but the one materially/formally consistent theory: “That the settlement of opinion is the sole end of inquiry is a very important proposition.” (Peirce)

Post-Keynesianism has been refuted long ago,#1 hence there is no use to try to reanimate post-Keynesian inflation theory or to produce one more roll of proto-scientific toilet paper.


#1 Why Post Keynesianism Is Not Yet a Science

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REPLY to Brian Romanchuk on Sep 28 and Blog-Reference

You say: “Within modern conventional economics, there is an aversion to discussing the division of national income. (Back when economics was ‘political economy,’ this was not the case.) Standard mainstream models assume that wages and prices are determined by marginal considerations, and so the ratio between wages and prices is fixed by the shape of the production function. Conversely, post-Keynesian economics is entirely based on wage and profit shares. Although I did not discuss pricing in the articles, I would refer the reader back to my (three part) primer on the Kalecki Profit Equation.”

There are three lethal facts to note with regard to your approach:
• The profit theory is false since Adam Smith and because of this, distribution theory is false, too. This includes Post-Keynesianism.#1, #2, #3, #4
• Your ‘very simple economic model, in which there is just a business sector and a household sector’ is a good start except for the fact that ‘Profits are equal to the dividends paid’.#5
• Because profit is ill-defined, income is ill-defined, and by consequence, saving is ill-defined. Monetary profit, to begin with, is NOT a flow of income like wage income but the difference of flows. Distributed profit is income but profit is NOT income. Distributed profit and profit is NOT the same thing. By consequence, total income is NOT the sum of wages and profits, which in turn means that there is NO “profit share of income” and by consequence no “wage share of income”.#6

This means that the sequel to your inflation post is also vacuous blather because all is based on false premises. Your profit theory is provably false.#7 Therefore, your distribution and inflation theory are false, too. What you still have to realize is that Orthodoxy is dead and traditional Heterodoxy including Post-Keynesianism is dead and that the necessary paradigm shift means to leave this heap of proto-scientific garbage behind and to move on to Constructive Heterodoxy.#8


#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#2 Ricardo, too, got profit theory wrong. Sad!
#3 The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
#4 Why Post Keynesianism Is Not Yet a Science
#5 The Emergence of Profit and Interest in the Monetary Circuit
#6 There is NO such thing as a “labor share of income”
#7 Truth by definition? The Profit Theory is axiomatically false for 200+ years
#8 For details see cross-references Constructive Heterodoxy

***

REPLY to Brian Romanchuk on Sep 28 and Blog-Reference

You say: “Fine. When you can convince the accounting profession that paying dividends is an expense, I’ll re-write my text. Deal?”

I wonder, what makes you think that my mission is to convince economists in general and you in particular. The representative economists is a failed/fake scientist and has to be expelled from the sciences as fast as possible. His final resting place is the farthest corner of the Flat-Earth-Cemetery.

My mission is NOT to convince you of anything but to prove that you are too stupid for the elementary mathematics that underlies profit- and distribution theory.

For the correct treatment of distributed profit in National Accounting see
The Common Error of Common Sense: An Essential Rectification of the Accounting Approach.

For the correct treatment of profit and distributed profit in distribution theory see
Income Distribution, Profit, and Real Shares.

Quod erat demonstrandum.

***
REPLY to stone on Oct 1

You say: “If there were profit sharing arrangements with workers, then how might that affect inflation?”

If you were a serious researcher you would have checked Google and found out that your question has already been answered.#1

Distributed profit is itself a source of profit. The Profit Law for the elementary case of the production-consumption economy reads Qm=Yd−Sm. Yd is distributed profit.#2

For the case of the investment economy, the Profit Law reads Qre=I−Sm which is known since Allais.#3 Qre is macroeconomic retained profit.

Profit distribution/spending causes a one-off price hike but NO inflation.#4, #5

Just in case you and Brian Romanchuk start to wonder why you are so badly behind the curve, the problem is NOT in economics but in your goldfish brain and the corresponding complete lack of scientific competence.


#1 Enter in the Google search field “distributed profit Egmont Kakarot-Handtke”
#2 Profit Theory in less than 5 minutes
#3 How Keynes got macro wrong and Allais got it right
#4 The Structural Price Mechanism
#5 The final implosion of MMT

***

REPLY to Brian Romanchuk on Oct 2 and Blog-Reference

You say: “I forgot what a relable source you are. My bad.”

It is too obvious that you are a fake mathematician. A genuine mathematician does not care at all about “reliability” or “credibility” or other subjective social criteria but alone about objective proof.

If you had done the routine job of a competent scientist you would have found out two things:
(i) The equation Qre=I−Sm is logically true given the correct macroeconomic axioms and is objectively testable because all variables are measurable with the precision of two decimal places.
(ii) That this equation has been derived independently by Allais on a different route.#1

According to Wikipedia, Allais was a major proponent of mathematical economics and as a winner of the economics Nobel in 1988 he certainly satisfies your standard of “reliability”.

So, what you would have done as a genuine mathematician is to check the references and then to perform a little exercise in elementary algebra. Fact is that you are a scientifically incompetent blatherer.


#1 How Keynes got macro wrong and Allais got it right

***
REPLY to Brian Romanchuk on Oct 2

You say: “I suggest that you give this article a rest. Please wait until I write another article before regurgitating your stories.”

There is no need to produce another roll of proto-scientific toilet paper. Either you present the proof that the Allais/AXEC equation Qre=I−Sm is materially/logically inconsistent or you shut up completely.

Keynesianism and I=S/IS-LM are dead for 80+ years but the representative economist still doesn’t get it.#1,#2 There is no refutation of the axiomatically correct Profit Law, though.#3 So, what should anybody wait for? Failed/fake scientists are simply left behind the curve.#4


#1 Why Post Keynesianism Is Not Yet a Science
#2 Economists simply don’t get it
#3 Go! ― test the Profit and Employment Law
#4 Forget mainstream economics, scrap MMT, move on to the new paradigm

September 22, 2018

Why the MMT benefactors of humanity never talk about profit

Comment on John Weeks on ‘Why the public debt should be treated as an asset’

Blog-Reference and Blog-Reference and Blog-Reference and Blog-Reference

The most curious thing about economics is that most models ― Walrasian, Keynesian, Marxian, Austrian does not matter ― do NOT contain macroeconomic profit in explicit form. And when it appears occasionally it is misspecified.#1 This is why economics is a failed/fake science. MMT is no exception.

In John Weeks’ post about the mistreatment of public debt as perennial problem instead of a long-term benefit, the word profit does not appear once. The bottom line of his argument is that the public debt is not as massive as everybody thinks and on closer inspection, not a burden but, on the contrary, has a lot of advantages for WeThePeople. In detail he argues:
  • People are told that public debt 1) must be repaid, 2) threatens the country with bankruptcy, and 3) is a burden on future generations. All these arguments are wrong.
  • The British government can never default on its debt.
  • A good portion of the national debt is held by the public sector, i.e. Bank of England, this is what the public sector owes itself.
  • The interest paid on debt held by pension funds is income to retired households.
  • At the end of 2016, private corporate and foreign gilts holders owned 41% of the UK’s national debt. Only the £524 billion of gilts held by foreign creditors could be considered a “burden” in that the associated interest payments are from UK taxpayers to non-UK creditors.
  • A fair and progressive taxation system could ensure that interest payments to domestic bondholders don’t have negative redistribution effects.
  • Sound management of the national debt means more public borrowing for investment and current expenditure, which is justified by the modest size of the effective debt.
The whole argument boils down to a plea for more deficit spending/money creation. This is what MMT policy guidance is all about.

Fact is:
  • MMT is a macroeconomic theory that is refuted on all counts.#2
  • John Weeks does not mention once the profit effect of deficit-spending/money-creation.#3
  • From the axiomatically correct Profit Law follows the sectoral balances equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.#4
  • MMT economic policy boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.#5
  • All the social benefits MMTers promise are paid in real terms by WeThePeople themselves via stealth taxation.#6
  • Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon. Public debt is NOT an asset but a time bomb.
MMT claims to push the agenda of WeThePeople but in fact pushes the agenda of WeTheOligarchy. MMT is failed/fake science and the proponents of MMT are NOT benefactors of humankind but quite ordinary political swindlers.#7

Egmont Kakarot-Handtke


#1 For details of the big picture see cross-references Profit
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 Keynes, Lerner, MMT, Trump and exploding profit
#4 Down with idiocy!
#5 MMT: Redistribution as wellness program
#6 MMT, money printing, stealth taxation, and redistribution
#7 MMT: academic snake oil for the people

***
REPLY to Andrew Anderson on Sep 23

You say: “Jammers comment at Naked Capitalism has so far gone unrefuted and that’s a shame since he apparently has a good mind and some inkling of the issues involved. So, since I’m banned at NC, I’ll try to correct him here.”

Then you go on to elaborate on the difference between deficit-spending for investment goods and consumption goods/services.

This distracts from the main point, i.e. the profit effect of public deficit spending. When the axiomatically correct Profit Law, which is given by Qm=Yd+(I−Sm)+(G−T)+(X−M) for the simple case, is extended for deficit spending on public investment Qm=Yd+(Ib+Ig−Sm)+(G−T)+(X−M) with Ib indicating business investment expenditures and Ig indicating government investment expenditures and I=Ib+Ig then it becomes obvious that for the profit effect it makes no difference whether the government spending is on investment goods or consumption goods/services.

While in the first case public debt=liability is ‘backed’ by a real asset, in the second case the public debt is ‘backed’ by nothing. In any case, it would be false to follow John Weeks’ suggestion and to treat public debt as an asset. This is a verbal shell game.

The economic fact of the matter is (i) that public debt is a liability, (ii) that this liability may be ‘backed’ by real assets or not, and (iii), that this does not matter for the profit effect of deficit spending. It always holds Public Deficit = Private Profit and MMT is fake science and corrupt politics.

September 20, 2018

MMT = Modern Monetary Trash

Comment on Bill Mitchell on ‘Understanding what the T in MMT involves’

Blog-Reference and Blog-Reference and Blog-Reference on Sep 21

In his latest post#1, Bill Mitchell says: “… a Tweet the other day reminded me that there was still major misunderstandings of what Modern Monetary Theory (MMT) represents and that it was time to clarify some of those errors in comprehension. Specifically, there is a current out there that considers MMT to be incorrectly labelled because according to the argument there is no theory involved. It’s hard to imagine why anyone would think that but the fact that they do tells me that I should write this blog post. As I noted yesterday, our Macroeconomics textbook to be published by Macmillan Palgrave in February 2019 is full of theory. It has a lot of description, taxonomy, accounting, history, and philosophy, but also a lot of theory that ties some of those other components together in a meaningful way. The T in MMT is not a misnomer.”

Then he goes on to specify what a theory is and how scientific methodology relates to MMT. The first lethal error/blunder of Bill Mitchell is to maintain that economics is a social science. Here, MMT is in full accordance with mainstream economics. The fact of the matter is, though, that economics is a system science.#2

The second methodological error/blunder is that “There are no ‘laws’ in economics as there are in physics, for example.” This is true only insofar as there are NO behavioral laws. This, however, is irrelevant because economics is a system science and there are systemic laws of the monetary economy. Systemic laws are invariances (Nozick’s term) like physical laws but do not entail the physicists' notion of causality.

The third methodological error/blunder consists of abandoning the concept of scientific truth which is well-defined since 2000+ years by material and formal consistency and to replace it by congruency.

All this is in line with J. S. Mill’s attempt to establish economics as “separate and inexact science” which, however, has never been anything else but a euphemism for failed/fake science.

Since the founding fathers, economics is a cargo cult science (Feynman’s term) and Bill Mitchell is in the state of self-delusion by maintaining he and his MMT colleagues are “standing on the shoulders of giants”.#3

Fact is that economists do not get the foundational concepts of profit/income/saving straight to this day. MMTers are no exception.#4

Bill Mitchell argues: “An oft-stated claim is that MMT is about accounting relationships. … Those who make that spurious claim about MMT often use the sectoral balances framework to make their point. They note that the basic sectoral balances relationship, which is a core part of the way an MMT economist analyses the world, is, at heart an accounting truism that has to be true because it is derived from a larger accounting framework ― the nation’s National Accounts. That is true so far. While I know there is a debate in accounting about the theory of accounting, we will accept, here, that an accounting truism is one that has to be true (add up in this case) by the way we define it. It is not opinion or conjecture ― it just has to be. So the statement: the Government deficit (surplus) equals the Non-government surplus (deficit) dollar-for-dollar is such a truism. It must be true.”

Unfortunately, it is false.#5 As Schumpeter once put it: “There is no more fertile source of error than apparently trivial premises.” Economics is NO exception: “In fact, the history of every science, including that of economics, teaches us that the elementary is the hotbed of the errors that count most.” (Georgescu-Roegen)

Because the sectoral balances equation is false, the whole analytical superstructure is false. And because of this, MMT policy guidance has NO sound scientific foundations. Worse, MMT is a political fraud, it claims to promote the cause of WeThePeople but in fact, promotes the cause of WeTheOligarchy. The proof is in the accounting truism Public Deficit = Private Profit which follows from the axiomatically correct balances equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0.

Just like mainstream economics, MMT is cargo cult science. The difference is that mainstream economics is built upon false microfoundations and MMT is built upon false macrofoundations. MMT is proto-scientific trash and ― to use Stephanie Kelton’s words ― “one of the greatest cons ever perpetrated on the American people.”#6

Egmont Kakarot-Handtke


#1 Bill Mitchell, Understanding what the T in MMT involves
#2 For details see cross-references NOT a Science of Behavior
#3 Economists: Standing on the Shoulders of Gnomes
#4 MMT and the single most stupid physicist
#5 Rectification of MMT macro accounting
#6 Smart! How to make people fund their brain-washing

Related 'Stephanie and Noah ― economics at the intellectual zero lower bound'.

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Wikimedia, AXEC140

September 18, 2018

There is NO such thing as a “labor share of income”

Comment on Stephen Gordon on ‘Why do we care about the labour share of income?’

Blog-Reference

Stephen Gordon summarizes: “A lot has been said and written about the decline in the labour share of income, usually calculated as total employee compensation divided by nominal GDP. This decline is generally regarded as a negative development: the reduction in the share of income going to workers is interpreted as a symptom of suppressed wage growth and of increased income inequality.”

Indeed, a lot has been said and written about income, wages, profits and all is false because economists failed for 200+ years to get the concept of profit straight. As the Palgrave Dictionary summarizes: “A satisfactory theory of profits is still elusive.” (Desai, 2008)#1 In other words, economists have NO idea what the pivot of their subject matter is.

Because profit is ill-defined, income is ill-defined, and by consequence, saving is ill-defined. Monetary profit, to begin with, is NOT a flow of income like wage income but the difference of flows. Distributed profit is income but profit is NOT income. Distributed profit and profit is NOT the same thing.

By consequence, total income is NOT the sum of wages and profits,#2 which in turn means that there is NO “profit share of income” and by consequence no “wage share of income”. This means that the content of this thread, comments included, is vacuous blather because all is based on false premises. #3, #4, #5, #6

Without the true profit theory, there is no true distribution theory. The axiomatically correct Profit Law is given as Qm=Yd+(I−Sm)+(G−T)+(X−M) (i) and this reduces to Qm=(I−Sm)+(G−T) (ii) for Yd, X, M=0; Legend: Qm monetary profit/loss, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving, G government expenditures, T taxes, X exports, M imports. Total profit Q is the sum of monetary and nonmonetary profit, i.e. Q=Qm+Qn (iii).

Accordingly, the so-called “labor share” λ ― which is NOT a “share” but a quotient ― is defined as the relation of wage income Yw to the sum of wage income and total profit Q, that is, λ≡Yw/(Yw+Q) with Q given by (iii) above.

Fact is that neither market power nor declining unionization nor automation can account for a falling “labor share” λ. The MAIN drivers of increasing overall profit have been in the past decades the increased deficit spending of the household- and the government sector which translates into an ever-growing private/public debt.

Traditional distribution theory and the concept of a wage/profit “share” is abysmal proto-scientific nonsense since the founding fathers.#7, #8

Egmont Kakarot-Handtke


#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#2 How the Intelligent Non-Economist Can Refute Every Economist Hands Down
#3 Profit and distribution: a primer
#4 Profit and the decline of labor’s nominal share (I)
#5 Profit, income, and the Humpty Dumpty Fallacy
#6 For details of the big picture see cross-references Profit
#7 Ricardo, too, got profit theory wrong. Sad!
#8 Economists simply don’t get it

Related 'Truth by definition? The Profit Theory is axiomatically false for 200+ years'

Smart! How to make people fund their brain-washing

Comment on Down with Tyranny on ‘Want To Sound Really Smart About Economic Issues? Read This’

Blog-Reference and Blog-Reference and Blog-Reference

Down with Tyranny argues: “When Blue America endorses a candidate, there are several ways we can be helpful to their campaigns, the most obvious being to help them raise campaign funds by connecting them to small dollar campaign contributors. This cycle one of the most valuable other ways we’ve helped candidates is by connecting them to Stephanie Kelton, America’s most brilliant economist.”

Stephanie Kelton argues: “Government debt is just the money the government spent into the economy and didn’t tax back. That’s all the national debt is. It’s a historical record of all of the times that they made a net deposit, spent more than they taxed out, and the bonds are the difference between those. One of the greatest cons ever perpetrated on the American people is this notion that the national debt belongs to us, that we are responsible in our individual capacity for a share of it.”

Everything is wrong with Stephanie Kelton’s economics:
• Her whole argumentation is based on MMT which is an economic theory that is refuted on all counts.#1
• MMT is scientifically worthless. It is political economics, in other words, agenda-pushing in the garb of academic authority.
• MMT and Stephanie Kelton claim to push the agenda of WeThePeople but in fact push the agenda of WeTheOligarchy.
• All MMT policy guidance boils down to deficit-spending/money-creation.
• Because the macroeconomic Profit Law states Public Deficit = Private Profit, MMT economic policy boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.
• All the social goodies MMTers promise are paid in real terms by WeThePeople themselves via stealth taxation.
• Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon.
• From the scientifically correct Profit Law follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.#2 MMTers hide this distributional fact by lumping the business and the household sector together to the private sector and saying Public Deficit = Private Sector Surplus suggesting that private sector means WeThePeople. This is a verbal shell-game.#3, #4

MMT is ― to use Stephanie Kelton’s words ― “one of the greatest cons ever perpetrated on the American people”.#5

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 Keynes, Lerner, MMT, Trump and exploding profit
#3 MMT is gangsta economics
#4 The Kelton-Fraud
#5 MMT and grassroots movements

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Wikimedia, AXEC142

September 17, 2018

Good news for the one-percenters

Comment on Alan Longbon on ‘Good News: U.S. Government Posts A $214 Billion Deficit For August 2018, The U.S. Private Sector Posts A $214 Billion Surplus’

Blog-Reference and Blog-Reference

Alan Longbon rejoices: “The US budget deficit is $214 billion in August 2018; this is a net add of income to the private sector and a bumper month.” and “Professor Wynne Godley first comprehended the strategic importance of the accounting identity, which says that measured at current prices, the government’s budget balance, less the current account balance, by definition is equal to the private sector balance. GDP = Federal Spending [G]+ Non-Federal spending [P] + Net Exports [X].”

Unfortunately, the MMT balances equation is false. From the axiomatically correct Profit Law for the open economy with government and profit distribution, follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.

MMTer hide this distributional fact by lumping the business and the household sector together to the private sector and saying Public Deficit = Private Sector Surplus suggesting that private sector means WeThePeople. This is a verbal shell game. Given the saving/ dissaving of the household sector = WeThePeople, the public deficit increases the macroeconomic profit of WeTheOligarchy one to one.#1, #2

Alan Longbon’s good news is MMT’s shot in the head of WeThePeople.


#1 MMT and the single most stupid physicist
#2 Keynes, Lerner, MMT, Trump and exploding profit

***

REPLY to Tom Hickey, Konrad, The Economists Challenge, Calgacus on Sep 19

I am well aware that you suffer from ADHD but even you will realize that the issue is NOT the Job Guarantee but the “Good News: U.S. Government Posts A $214 Billion Deficit For August 2018, The U.S. Private Sector Posts A $214 Billion Surplus.” This is the MMT fraud in a nutshell.

There is no such thing as the private sector but there is the business sector and the household sector. Hence, the MMT balances equation is false. From the axiomatically correct Profit Law for follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.

So Alan Longbon’s good news is NOT good news for WeThePeople but for WeTheOligarchy.

MMT is one of the most devious attempts to deceive WeThePeople since Karl Marx #1, #2 and you are part of it.


#1 Wolfgang Waldner, Der preußische Regierungsagent Karl Marx
#2 Wolfgang Waldner, Karl Marx, Prussian government agent

***
REPLY to Calgacus on Sep 20

You say: “Define ‘the private sector’ as ‘the business sector’ plus ‘the household sector’. Did Zeus strike me down with lightning? As far as I know, you are the only person ever who has objected to making such definitions. Why? The (impossible) burden of proof is on you to defend the bizarre assertion that some well-defined and useful ways of dividing up an economy are ‘real’ while others are not. This isn’t Karl Mannheim; it is just common sense and using natural language and accounting in a completely unexceptionable and humdrum way, when they entirely coincide.”

You are just parroting long refuted arguments.#1 To think that one is free to define anything in any way is the Humpty Dumpty Fallacy.#2, #3

Common sense is NOT a valid argument in science because since the Middle Ages it is well-known that the ‘sun goes up’ is well-accepted among common-sense imbeciles but not accepted among scientists.#4

Take notice that MMT has NO sound scientific foundations, MMT’s sectoral balances equations are mathematically false, MMTers violate scientific standards on a daily basis, MMT is political agenda pushing in a scientific bluff package.#5, #6

From the fact that Zeus does not strike you and the rest of brain-dead/corrupt MMTers down with lightning does not follow anything because that is not how science works. MMT is long dead because of material/formal inconsistency. The fact that common-sense folks have not realized that MMT is a proto-scientific zombie is only a redundant confirmation of their abysmal stupidity.


#1 Failed economics: The losers’ long list of lame excuses
#2 Profit, income, and the Humpty Dumpty Fallacy
#3 Wikipedia and the promotion of economists’ idiotism (II)
#4 Why J. S. Mill had no friendly word for the bigots and votaries of common sense
#5 For the full-spectrum refutation of MMT see cross-references MMT
#6 Are MMTers stupid or corrupt or both?

September 13, 2018

Both Mainstreamer and MMTer are either stupid or corrupt or both

Comment on Bill Mitchell on ‘The divide between mainstream macro and MMT is irreconcilable ― Part 3’

Blog-Reference and Blog-Reference and Blog-Reference on Sep 15

In order to clarify the specifics of MMT, Bill Mitchell refers back to functional finance: “So his classic statement of functional finance: Government should adjust its rates of expenditure and taxation such that total spending in the economy is neither more nor less than that which is sufficient to purchase the full employment level of output at current prices. If this means there is a deficit, greater borrowing, ‘printing money,’ etc., then these things in themselves are neither good nor bad, they are simply the means to the desired ends of full employment and price stability …” and “But we do consider fiscal policy should be directed to advancing public purpose and the particular levels of resulting aggregates (for example, fiscal deficits/surpluses) are immaterial.”

This, clearly, is a statement about the objectives of economic policy. What everybody overlooks is that the economist as a scientist is NOT entitled to policy agenda pushing. His sole task is to figure out how the actual economy works. So, economists are comparable to the physicists and engineers who figure out how a piece of metal can be made to defy gravity and to get off the ground and to safely land at the desired destination.

Economists as scientists have NO say about the destination. The destination is determined in the political process by the Legitimate Sovereign. So, political economics is a contradiction in itself.#1

Economists are NOT the Legitimate Sovereign as already J. S. Mill made abundantly clear: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”

For 200+ years economists overstep their competence. They have taken on the role as clowns and useful idiots in the political Circus Maximus and they have failed thoroughly as scientists. The four main approaches ― Walrasianism, Keynesianism/MMT, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit ― the pivotal concept of the subject matter ― wrong. With this pluralism of provably false theories, economists have not achieved anything of scientific value.

Bill Mitchell is right in pointing out that mainstream economics is but one big Fallacy of Composition.#2 But he fails to address the fact that MMT is based upon provably false macrofoundations. With regard to economic policy, he fails to address the fact that deficit-spending in the intellectual tradition of Keynes/Lerner has produced the insoluble distributional problems everybody has clearly before their eyes today.#3

So, with regard to scientific failure/corruption, there is NO difference between the mainstream and MMT.#4, #5 With regard to policy there seems to be a real difference. Mainstream economics is traditionally the mouthpiece of the one-percenters. MMT claims to be morally superior and to promote the cause of the ninety-nine-percenters.

This is an optical illusion. There is no real political difference either. Both Mainstreamer and MMTer are agenda-pusher for the oligarchy.#6, #7 The meager academic to-and-fro between Bill Mitchell and Jayadev/Mason has nothing at all to do with science but is a smokescreen for the ongoing joint political fraud that is the economist’s business since Adam Smith/Karl Marx.

Egmont Kakarot-Handtke


#1 The end of political economics
#2 Reference to Arjun Jayadev/J. W. Mason ‘Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?
#3 Keynes, Lerner, MMT, Trump and exploding profit
#4 MMT, Bill Mitchell, and the lack of basic scientific integrity
#5 For the full-spectrum refutation of MMT see cross-references MMT
#6 MMT: How WeTheOligarchy communicates with WeThePeople
#7 MMT and grassroots movements

Preceding 'Forget mainstream economics, scrap MMT, move on to the new paradigm' and 'Both, mainstream economics and MMT are axiomatically false' and 'Neoclassics and MMT ― much like pest and cholera'.

***
Wikimedia, AXEC142

September 12, 2018

Forget mainstream economics, scrap MMT, move on to the new paradigm

Comment on Bill Mitchell on ‘The divide between mainstream macro and MMT is irreconcilable ― Part 2’

Blog-Reference and Blog-Reference and Blog-Reference

Stop beating mainstream economics ― it is long dead.#1 Bill Mitchell, though, does not get tired of enumerating, again and again, the flaws and idiocies of DSGE/RBC/New Keynesianism.

This is Bill Mitchell’s Groundhog Day indictment:#2

  • “The problem is that their conclusion is flawed at the most elemental level …”
  • “And so, mass unemployment was seen to be a problem of minimum wages, excessive trade union power, other legal constraints on wage cuts etc.”
  • “New Keynesian specifications have to be overly simplistic and reliant on behavioural assumptions … that no self-respecting social scientist that actually studies human behaviour would consider to be credible in the least.” [“No science has been criticized by its own servants as openly and constantly as economics. The motives of dissatisfaction are many, but the most important pertains to the fiction of homo oeconomicus.” (Georgescu-Roegen, 1971)]
  • “The mainstream proponents want to claim virtue based on the fact that their models are rigourous… but then respond to empirical anomalies with ad hoc (non rigourous) tack ons.”
  • “The results they end up producing … are not ‘derivable’ from first-order, microfounded principles at all. Their claim to theoretical rigour fails.”

Yes, mainstream economics is a ludicrous, proto-scientific exercise. The axioms are false, the analytical superstructure is false, and from this follows that economic policy guidance NEVER had sound scientific foundations. Mainstream economics is refuted on all counts and therefore scientifically indefensible. Who still defends it is stupid or corrupt or both.

More is not to say about the failed/fake science economics.#3 And now the real task begins: “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

Is MMT the new theory? No, because MMT, too, is axiomatically false.#4 Because of this, MMT policy guidance, too, has no sound scientific foundations.#5, #6

Egmont Kakarot-Handtke


#1 Stop beating mainstream economics ― it is long dead
#2 Reference to Arjun Jayadev/J. W. Mason ‘Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?
#3 The biggest scientific mistake of the last centuries, and it has much to do with academic economists
#4 Both, mainstream economics and MMT are axiomatically false
#5 For the full-spectrum refutation of MMT see cross-references MMT
#6 From false micro to true macro: the new economic paradigm

Preceding 'Both, mainstream economics and MMT are axiomatically false'

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AXEC106h

September 9, 2018

No doubts about wage-led growth

Comment on Chris Dillow on ‘Doubts About Wage-led Growth’

Blog-Reference and Blog-Reference on Sep 12

Chris Dillow asks: “The question here, then, is: can we have wage-led growth, whereby higher wages trigger growth and productivity improvements? Or do we need profit-led growth, in which firms are induced to invest by high profit margins?”

The question shows that Chris Dillow lacks the true employment and profit theory. Therefore, there is not much use to refute his wish-wash in great detail.

To cut the meticulous formal derivation short, an elementary version of the correct systemic Employment Law is shown on Wikimedia.#1, #2, #3, #4


From this equation follows inter alia:
(i) An increase in the expenditure ratio ρE leads to higher employment L (the Greek letter ρ stands for ratio).
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase in the factor cost ratio ρF=W/PR leads to higher employment.

The complete employment equation is a bit longer and contains in addition profit distribution, the public budget, and import/export.

Items (i) and (ii) are familiar since Keynes. But Keynesian macro is incomplete. The correct employment multiplier is composed of the expenditure ratio and the factor cost ratio. The ratio rhoF as defined in (iii) embodies the price mechanism. It works such that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.

The Employment Law tells one that there are multiple policy levers, i.e. independent variables on the right-hand side of the =sign. What has to be done is to combine demand-led and wage-led expansion in order to get out of unemployment. All determinants have to be dealt with separately. Focusing on the macroeconomic price-mechanism, the variable ρF tells one UNAMBIGUOUSLY that the (average) wage rate must grow faster than the combination of price and productivity in order to increase overall employment.#5

Egmont Kakarot-Handtke


#1 Demand-led and wage-led growth
#2 NAIRU, wage-led growth, and Samuelson's Dyscalculia
#3 You have the data, here is the Employment Law
#4 For more details see cross-references Employment
#5 Go! ― test the Profit and Employment Law

September 8, 2018

Both mainstream economics and MMT are axiomatically false

Comment on Arjun Jayadev/J. W. Mason on ‘Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?’

Blog-References and Blog-Reference on Sep 10

Jayadev/Mason argue: “Despite disparate policy beliefs, MMT and orthodox macro rely on many of the same theoretical foundations.” and “While MMT’s policy proposals are unorthodox, the analysis underlying them is entirely orthodox. …The difference between MMT and orthodox policy can be thought of as a different assignment of the two instruments of fiscal position and interest rate to the two targets of price stability and debt stability. As such, the debate between them hinges not on any fundamental difference of analysis, but rather on different practical judgements…”

Nothing could be further from the truth. Mainstream economics is based on Walrasian microfoundations, MMT is based on Keynesian macrofoundations. The unfortunate fact of the matter is that both mainstream economics and MMT are axiomatically false. Now, methodology tells us that if the axiomatic foundations are false the whole analytical superstructure is false. This means, in turn, that economic policy guidance has no sound scientific foundations.

“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) Neither mainstreamer nor MMTer have the true theory.#1

Jayadev/Mason argue: “Recent incarnations of MMT pool several distinct elements ― a theory of money …, a discussion of current monetary operations, a political program (typically a job guarantee), an exercise in national income accounting (sectoral balances) and a program for macroeconomic policy.”

It has been proved that the MMT sectoral balances equation is false.#2, #3

Jayadev/Mason argue: “Both orthodox policy macroeconomics and functional finance start from the same key assumptions: “… 3. There is a level of output such that the behavior of both inflation and unemployment is acceptable. … This assumption can be represented as a Phillips curve, the same general form of which is used by MMT as in conventional textbook presentations.”

It has been proved that the commonplace Phillips curve is false.#4, #5, #6

Fact is that economists do NOT have the true theory. What all of the main approaches ― Walrasianism, Keynesianism/MMT, Marxianism, Austrianism ― have indeed in common is that they are axiomatically false, materially/formally inconsistent, and ALL got profit ― the foundational concept of the subject matter ― wrong.#7

Egmont Kakarot-Handtke


#1 From false micro to true macro: the new economic paradigm
#2 MMT and the single most stupid physicist
#3 For the full-spectrum refutation of MMT see cross-references MMT
#4 Employment theory as an example of proto-scientific soapbubbling
#5 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#6 For details of the big picture see cross-references Employment/Phillips Curve
#7 If it isn’t macro-axiomatized, it isn’t economics

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REPLY to Tom Hickey, Matt Franko, André, Konrad on Sep 11

Before things get even deeper into the dark woods a reminder: both mainstream economics and MMT are axiomatically false and materially/formally inconsistent. The proofs are open before all eyes. So, there is no use to discuss this cargo cult science stuff any longer.

The right thing to do is to bury orthodox and heterodox economics at the Flat-Earth-Cemetery and to forget it. As Joan Robinson said: “Scrap the lot and start again.”

MMTers and other incompetent scientists can do something useful for a better world and a brighter future by giving up blogging but instead taking part in an MMT Job Guarantee Program.

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REPLY to ejhr on Sep 14

The T in MMT stands for theory. A theory has to be materially and formally consistent. Descriptively convincing is not enough because the ‘sun goes up’ is also descriptively convincing but scientifically unacceptable.#1

Take notice that MMT is materially/formally inconsistent and therefore refuted on all counts.


#1 Richard Murphy: the MMT fraudster dressed up as realist

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REPLY to ejhr on Sep 16

For the full-spectrum refutation of MMT see cross-references MMT.

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REPLY to ejhr on Sep 17

Politically, MMT is money-making for the one-percenters and scientifically it is proto-scientific junk. The MMT balances equation (I−S)+(G−T)+(X−M)=0 is provably false.

MMT is scientifically worthless and you are way behind the curve.

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REPLY to ejhr on Sep 18

Economics is NOT about the Constitution, the Law, or the institutional specifics of the Federal Reserve System. This is the stuff of other disciplines. Economics is about how the monetary economy works and about the economic laws, for example, the Profit Law or the Employment Law.

MMTers do NOT know the Profit Law because they are scientifically incompetent. How ridiculous is this ― economists who do not even know what profit is! #1

MMT policy guidance has NO sound scientific foundations. It is brain-dead propaganda and agenda-pushing for the one-percenters. #2, #3

Take notice that the MMT sales personnel is NOT qualified to take part in a scientific debate. This does not only apply to intellectual low-fliers like Warren Mosler, Stephanie Kelton, Bill Mitchell but a fortiori to garbage posters like you.


#1 Both Mainstreamer and MMTer are either stupid or corrupt or both
#2 MMT: The one deadly error/fraud of Warren Mosler
#3 Smart! How to make people fund their brain-washing

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REPLY to ejhr on Sep 19

You say: “Fancy thinking Economics could be a science. It’s nothing but an assembly of opinions.”

You are obviously deep in the woods: “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)

Neither mainstreamer nor MMTers have the true theory. But economists claim for 200+ years that economics is a science. Obviously, you never heard of the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

So, not only MMTers are fake scientists but economics as a whole is a proto-scientific fraud since the founding fathers.

Science is about knowledge. Opinions are worthless. This is known since the ancient Greeks introduced the distinction between episteme and doxa more than 2000 years ago. MMTers have no valid scientific knowledge but are clowns and useful idiots in the political Circus Maximus. They are not different from the rest of the profession.


#1 What is so great about cargo cult science? or, How economists learned to stop worrying about failure

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REPLY to ejhr on Sep 20

You said above: “MMT cannot be rebutted as it is not a theory. [The fed reserve of Chicago described it as Modern Monetary Mechanics] but a description of existing structures in economics. We already live in an MMT world.”

In his latest post#1, Bill Mitchell says: “… a Tweet the other day reminded me that there was still major misunderstandings of what Modern Monetary Theory (MMT) represents and that it was time to clarify some of those errors in comprehension. Specifically, there is a current out there that considers MMT to be incorrectly labelled because according to the argument there is no theory involved. It’s hard to imagine why anyone would think that but the fact that they do tells me that I should write this blog post. As I noted yesterday, our Macroeconomics textbook to be published by Macmillan Palgrave in February 2019 is full of theory. It has a lot of description, taxonomy, accounting, history, and philosophy, but also a lot of theory that ties some of those other components together in a meaningful way. The T in MMT is not a misnomer.”

It is pretty obvious that you do not understand anything about science in general and MMT, in particular. This defect you share with the rest of the MMT sales personnel.#2

I said, MMT is proto-scientific garbage and ― to use Stephanie Kelton’s words ― “one of the greatest cons ever perpetrated on the American people”#3


#1 Bill Mitchell, Understanding what the T in MMT involves
#2 Richard Murphy: the MMT fraudster dressed up as realist
#3 Smart! How to make people fund their brain-washing