January 31, 2019

If religion is opium of the people, economics is crack of the people

Comment on Barkley Rosser on ‘Robert H. Nelson Dies: Religion And Economics’

Blog-Reference

Barkley Rosser summarizes: “A basic theme in all of his [Nelson’s] books is that economics is a form of secular religion that posits a material salvation in some distant future as a result of economic growth and redistribution, a material heaven on earth.”

As Simon Wren-Lewis once observed: “Narratives are a way people can try to understand things they know little about, and most people know little about economics or politics.”

This is an accurate observation. Where knowledge is lacking a story fills the void. Media of all types have always been in the business of storytelling, entertainment, and agenda-pushing. This goes from the so-called Holy Books to Rome’s Circus Maximus to Hollywood to Paul Krugman’s NYT blather, and to supply-demand-equilibrium textbooks.

Religion and economics have indeed a common denominator. It consists of the triad storytelling/entertainment/agenda-pushing.

It may have been the case that religion initially had a genuine spiritual content and an indispensable social function at the interface to the unknown and unknowable. But at some point in history, the priesthood took over and religion became psychological conditioning and social agenda pushing. With the secularization, economists in part took over where the priesthood lost ground.

Religion is about NONENTITIES and belief, science is about REALITY and knowledge. The communicative format of religion is the emotionally charged narrative, the format of science is the materially/formally consistent theory.

Economics is storytelling since the founding fathers. Adam Smith was NOT a scientist: “… he had no such ambitions; in fact, he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter)

All appearances to the contrary, economics is NOT a science but political agenda pushing. The formats of popular propaganda are the narrative, the talk show, and the shouting match in the political Circus Maximus. For a narrative, there is NO need to satisfy the scientific criteria of material/formal consistency. Basically, a narrative emotionally re-enacts a deep-seated archetype. The three great economic narratives are the story of the Schlauraffen Land of Plenty and Freedom, the story of the Alchemist who transmutes dirt into gold, and the story of the struggle of Capitalists vs Workers.

Economics is a failed science. All attempts to make economics a science remained on the surface. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit ― the foundational concept of the subject matter ― wrong.

With the pluralism of provably false theories, economists have not achieved anything of scientific value but have produced a lot of proto-scientific garbage, vacuous propaganda, breath-taking rhetorical stunts, and brain-dead ideological debates about the material/ moral superiority of Capitalism or Communism.

After 200+ years, the reality-content of economics is not significantly higher than that of any religion. The Invisible Hand of supply-demand-equilibrium has always been a NONENTITY just like the innumerable fictions of the priesthoods since time immemorial. Needless to emphasize that Barkley Rosser is part of the degeneration of what was intended as a scientific community to what has now become a coterie of ideological drug dealers.#1

Egmont Kakarot-Handtke


#1 References
• Economics as storytelling and entertainment for the masses
• Economics is not a science, not a religion, but proto-scientific garbage
• Knowledge vs. Belief
• Passionate belief is no substitute for knowledge
• Agenda-pushers and hijackers vs scientists
• Confounding Is and Ought: the economist as moralist
• Separation of politics and economics
• Economics: ‘a tale told by an idiot ... signifying nothing’
• Storytelling vs Theory = Politics vs Science
• The economist as storyteller
• Narrative economics and the imperatives of the sitcom
• Economics: stories, narratives, and disinformation
• Media-fake-farce-fraud-storytelling-macro
• How to save the economy from storytelling economists
• The end of storytelling
• Politics, storytelling, and science
• Economics — from storytelling to science
• Fake religion, fake science, fake news, and false complaints

Related 'The Supreme Being handed over these Twelve Economics Commandments' and 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion'.

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REPLY to Barkley Rosser on Feb 1

You say: “You really do need to face up to the fact that there is a scientific economics …”

Microeconomic supply-demand-equilibrium is axiomatically predicated on equilibrium. Equilibrium is a NONENTITY. General Equilibrium with the summum bonum of overall welfare which is realized by the Invisible Hand is a NONENTITY. Call it superstition, magical thinking, hallucination, religion, deception but do NOT call it science.

Macroeconomics is false since Keynes wrote down I=S. The equality/equilibrium of I and S is a NONENTITY. Economists are too stupid for the elementary algebra that underlies macroeconomics.#1

The defective Walrasian microfoundations and the defective Keynesian macrofoundations do NOT fit together. Every economics textbook is an instance of glaring inconsistency.#2

And then there is Barkley Rosser who maintains with the applause or tacit approval of his academic colleagues that his summary of MbS’ role in the Khashoggi affair: “He is guilty guilty guuilty” is a valid piece of legitimate political economics.

Robert Nelson’s comparison of economics with religion is a distraction at best and deception at worst. The provable fact of the matter is that economics is a failed/fake science.#3


#1 “But economics is not pure mathematics or logic” No, it is pure blather
#2 The father of modern economics and his imbecile kids
#3 There is NO such thing as “smart, honest, honorable economists”

***
REPLY to Barkley Rosser on Feb 12

You said: “You really do need to face up to the fact that there is a scientific economics …”

I said: “The provable fact of the matter is that economics is a failed/fake science.”

On Twitter is some news about the AEA for you.

“But economics is not pure mathematics or logic” No, it is pure blather

Comment on Lars Syll on ‘Economics and reality’

Blog-Reference and Blog-Reference on Feb 2

JKH comments: “‘But economics is not pure mathematics or logic.’ Not entirely true. Coherent thinking about money and banking in particular is founded on an understanding of elementary accounting, which is effect a type of algebra, featuring closure in logic. The General Theory is replete with the development of applicable accounting at the macro level.”

True. But the fact is that economists are too stupid for the elementary algebra that underlies macroeconomics.#1 Keynes is a case in point.

Keynes’ scientific incompetence can be exactly located in the GT: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

“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.)

Keynes, like his academic colleagues, NEVER understood what profit is and thus ended with I=S ― one of the greatest blunders in the history of modern science.

The correct macroeconomic relations are given by Q≡−S for the elementary production-consumption economy and Q≡I−S for the elementary investment economy with Q business sector’s monetary profit, S household sector’s monetary saving, and I business sector’s investment expenditures.#2 All variables are measurable with the precision of two decimal places and are as real as cash in the box or money in the bank.

Neither Keynesians nor Post Keynesians nor Anti-Keynesians nor orthodox economists nor heterodox economists understand to this day the elementary logic/mathematics of macroeconomics.#3 The whole bunch of scientifically incompetent economists has no idea about what the foundational magnitude ― profit ― of their subject matter is. To this day, economics is pure blather.

Because economists have NO grasp of logic/mathematics they have NO grasp on reality.

Egmont Kakarot-Handtke


#1 Wikipedia and the promotion of economists’ idiotism (II)
#2 For details of the big picture see cross-references Accounting
#3 Profit and the collective failure of economists

Related 'Economics as storytelling and entertainment for the masses' and 'There is NO such thing as “smart, honest, honorable economists”' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' For details of the big picture see cross-references Refutation of I=S and cross-references Failed/Fake Scientists and cross-references Math/Mathiness.

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#PointOfProof
Jan 31

January 30, 2019

Economics as storytelling and entertainment for the masses

Comment on John T. Harvey on ‘Does Modern Monetary Theory Have Any Scholarly Validity?’

Blog-Reference

Clint Ballinger advertises his latest project: “I am trying to make a non-technical book that the public and students will actually read, and a book that actually that gets all the operational basics right.”

As Simon Wren-Lewis once observed: “Narratives are a way people can try to understand things they know little about, and most people know little about economics or politics.”

This is an accurate observation. Where knowledge is lacking a story fills the void. The media have always been in the business of storytelling. This goes from the so-called Holy Books to Rome’s Circus Maximus to Hollywood to Paul Krugman’s NYT blather to economics supply-demand-equilibrium textbooks.#1

Economics is storytelling since the founding fathers. Adam Smith was NOT a scientist but a storyteller: “… he had no such ambitions; in fact, he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter)

All appearances to the contrary, economics is NOT a science but political agenda pushing. The format of popular propaganda is, of course, NOT the abstract theory but a concrete narrative. For a narrative, there is NO need to satisfy the scientific criteria of material and formal consistency. Basically, a narrative emotionally re-enacts a deep-seated archetype. The three great economic narratives are the story of the Schlauraffen Land of Plenty and Freedom, the story of the Alchemist who transmutes dirt into gold, and the story of the struggle of Capitalists vs Workers.

Economics is a failed/fake science. All attempts to make economics a science remained on the surface. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit ― the pivotal concept of the subject matter ― wrong. With the pluralism of provably false theories, economists have not achieved anything of scientific value but produced a lot of talk-show stuff.

So, they blather on and on. To this day, economists are storytellers.#2-#11 Clint Ballinger’s 1000 CASTAWAYS: Fundamentals of Economics is the latest example of populism, i.e. of low life political agenda pushing. Clint Ballinger is just one of the many economists who explain things in non-technical terms that they themselves do not understand in scientific terms.

Egmont Kakarot-Handtke


#1 Economics and encephalomalacia
#2 Economics: ‘a tale told by an idiot ... signifying nothing’
#3 Storytelling vs Theory = Politics vs Science
#4 The economist as storyteller
#5 Narrative economics and the imperatives of the sitcom
#6 Economics: stories, narratives, and disinformation
#7 Media-fake-farce-fraud-storytelling-macro
#8 How to save the economy from storytelling economists
#9 The end of storytelling
#10 Politics, storytelling, and science
#11 Economics — from storytelling to science

Related 'Economists cannot do the simple math of profit — better keep them out of politics' and 'New Economic Thinking, or, let’s put lipstick on the dead pig' and 'Does Asad Zaman fly with POL or SCI Airlines?' and 'The long genealogical tree of economic storytelling' and 'A political stench is in the air' and 'Macroeconomics: Drain the scientific swamp' and 'Profit Theory in less than 5 minutes' and 'Scientists and science actors' and 'The economist as second-guesser, mind reader, and folk psychologist' and 'Employment theory as an example of proto-scientific soapbubbling' and 'Economics: communication without content' and 'Ricardo and the invention of class war' and 'The Law of Economists’ Increasing Stupidity' and 'Wrapping up the MMT narrative' and 'MMT and the overall political corruption of economics' and 'MMT: How the Oligarchy communicates with WeThePeople' and 'MMTers are NOT Friends-of-the-People' and 'The Kelton-Fraud' and 'Krugman and the scientific implosion of economics' and 'End of a storyteller' and 'Storytelling and facts' and 'Around the world: storytelling vs. science' and 'The consistent ancients and the confused moderns' and 'The intelligent layperson's guide through vacuonomics' and 'Low-IQ economics: the beginner’s guide' and 'Entertainment vs. Science' and 'The economist as stand-up comedian' and '10 steps to leave cargo cult economics behind for good' and 'Economics textbooks ― tombstones at the Flat-Earth-Cemetery' and 'Mad but true: 200+ years after Adam Smith economists still have no idea what profit is' and 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion'. For details of the big picture see cross-references Political Economics/Stupidity/Corruption.

January 29, 2019

Here is the long-overdue scientific death certificate for Marx and Marxists

Comment on Michael Roberts on ‘Modern monetary theory ― part 1: Chartalism and Marx’

Blog-Reference and Blog-Reference

Michael Roberts evaluates the commonalities and differences of MMT and Marxianism. This is a futile exercise because both approaches are proto-scientific garbage. Let us prove this here for Marxianism. Marxianism is supposed to deliver the scientific foundations for the political doctrine of Marxism.

Michael Roberts summarizes: “Marx’s theory of money is specific to capitalism as a mode of production while MMT and Chartalism is ahistorical. For Marx under capitalism money is the representation of value and thus of surplus value. In M-C-P-C’-M’, M can exchange with C because M represents C and M’ represents C’. Money could not make exchange possible if exchangeability were not already inherent in commodity production, if it were not a representation of socially necessary abstract labour and thus of value. In that sense, money does not arise in exchange but instead is the monetary representation of exchange value, or socially necessary labour time.”

There are some serious blunders in this account, more specifically, Marx’s theory of value and profit is false.#1, #2, #3 In order to see this, one has to start with the most elementary version of what Keynes called the “monetary theory of production”.

As the analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector which, in turn, consists initially of one giant fully integrated firm. (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 expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price is given by P=W/R (1). The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R. This translates into W/P=R (2), i.e. the real wage is equal to the productivity. Under the initial condition of market-clearing X=O the workers get the whole product.

Monetary profit/loss of the business sector is defined as Qm≡C−Yw and monetary saving/dissaving of the household sector is defined as Sm≡Yw−C. It always holds Qm≡−Sm, in other words, the business sector’s nominal surplus = profit equals the household sector’s nominal deficit = dissaving. Vice versa, the business sector’s deficit = loss equals the household sector’s surplus = saving. This is the most elementary form of the macroeconomic Profit Law. Under the initial condition of budget-balancing C=Yw, total monetary profit is zero.

What is needed for a start is two things (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii), a legal system which declares the central bank’s deposits as legal tender. This is the analytical interface to Chartalism.

Deposit money is needed by the business sector to pay the workers who receive the wage income Yw per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e. if C=Yw. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income.

For the case of a balanced budget C=Yw, the idealized transaction pattern of deposits/ overdrafts of the household sector at the central bank over the course of one period is shown on Wikimedia.#4


The household sector’s deposits/overdrafts are zero at the beginning and end of the period. Money is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an accommodative role and simply supports the autonomous market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κYw (3) with κ determined by the transaction pattern. In other words, the average stock of money M is determined by the autonomous transactions of the household and business sector and created out of nothing by the central bank. The economy NEVER runs out of money.

The transaction equation reads M=κWL in the case of budget balancing and market clearing. If employment L is doubled, the average stock of transaction money M doubles. In a fiat money economy, growth is not hampered by a lack of the transaction medium. If the wage rate W is doubled M doubles. Because of (1) the price P doubles and the real wage (2) remains unchanged. In this case, one gets a strict proportionality of M and P which seems to confirm the Quantity Theory.

In sum, (i) money is NOT a commodity, (ii) there is NO fixed quantity of money, (iii) money is created and destroyed by the transactions between the household and the business sector, (iv) money is endogenous, (v) the value of money is given by W/P=R, i.e. is equal to the productivity, (vi) the creation of fiat money (= a generalized IOU) for the payment of wages is the correct way of bringing money into the economy, (vii) MMT’s deficit-spending is the incorrect way of bringing money into the economy, (viii) there is neither government-spending nor taxation needed to get the elementary production-consumption economy going and growing, (ix) if the rate of change of the wage rate W is equal to the rate of change of productivity R there is neither inflation nor deflation.

The elementary production-consumption economy has the following properties: (i) there is no exploitation, i.e. the workers get the whole product. (ii) there is no profit, (iii) there is no surplus value, i.e. whether the wage rate W is lowered or labor time L is extended does not matter, it always holds W/P=R, i.e. the workers get what they produce.

Where, then, does profit come from? The macroeconomic Profit Law Q≡−S tells one that profit comes from dissaving, i.e. comes only into existence if the household sector spends more than its wage income, i.e. if C>Yw. In this case, Marx’s formula for the business sector holds, i.e. money M thrown into the circulation creates more money M’. This extra money, though, does NOT come from exploitation or surplus value but from deficit spending = growth of household sector’s debt. This process is reversed as soon as the household sector starts to redeem the debt. Then profit turns into loss and capitalism breaks down.

The same holds for the deficit-spending of the government sector.#5

This is Michael Roberts characterization of how capitalism works: “Capitalism is a monetary economy. Capitalists start with money capital to invest in production and commodity capital, which in turn, through the expending of labour power (and its exploitation), eventually delivers new value that is realised in more money capital.”

This is pure proto-scientific garbage. From Marx onward to Michael Roberts, Marxians never had any idea of how the monetary economy works. Michael Roberts is so stupid that he does not even realize that MMT is a program for the permanent self-alimentation of the Oligarchy. As an anti-capitalist, you cannot sink deeper.

Egmont Kakarot-Handtke


#1 Profit for Marxists
#2 Capitalism, poverty, exploitation, and cross-over exploitation
#3 If we only had classes
#4 Wikimedia, Idealized transaction pattern
#5 Stephanie Kelton on how to become fabulously wealthy

Related 'Karl Marx, fake scientist' and 'Marx’s bicentennial ― nothing to discuss, nothing to celebrate' and 'The Law of Economists’ Increasing Stupidity' and 'Marx and the curious coexistence of provably false economic theories' and 'Marx, the moron' and 'Confounding sociology and economics' and 'MMT and Marxism: A debate between proto-scientific zombies' and '200 years in the dark ― how Marx got it wrong' and 'Note on ‘Duncan Foley On Socialist Alternatives to Capitalism’'. For details of the big picture see cross-references Profit.

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Wikipedia AXEC109i

January 28, 2019

There is NO such thing as “smart, honest, honorable economists”

Comment on Brad DeLong on ‘Yes, There Are Individual Economists Worth Paying Respect to. But Is Economics Worth Paying Respect to?’

Blog-Reference

“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)

To this day, economists do NOT have the true theory. To recall, scientific truth is well-defined: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

The fact of the matter is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.

For 200+ years now, economists do not know what profit is.#1 Because of this foundational blunder, economics is scientifically worthless. And because of this, economic policy guidance NEVER had sound scientific foundations. And because of this, economists are the major cause of economic crises. By default, every economic mess is econogenic unless proven otherwise.#2

Economics is for 200+ years at the proto-scientific level. What is long overdue is a Paradigm Shift. This cannot happen with the given personage. Economists’ modus operandi is to simply ignore scientific standards and to imperturbably recycle falsified theories: “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)

Krugman, for example, who is on the list of “smart, honest, honorable economists” has not realized to this day that Keynes’ I=S is false for 80+ years and still recommends IS-LM as a useful model.#3

Economists are not smart, the proof being that they have not figured out to this day what profit is and how the monetary economy works. They are neither honest nor honorable because what they are doing for 200+ years now is NOT science but political agenda pushing. Economists are NOT scientists but clowns and useful idiots in the political Circus Maximus.

Egmont Kakarot-Handtke


#1 For details of the big picture see cross-references Profit
#2 Econogenics in action
#3 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It

Related 'Economists: “a bevy of camp-following whores”' and 'Your economics is refuted on all counts: here is the real thing'.

January 27, 2019

Stephanie Kelton on how to become fabulously wealthy

Comment on Tom Hickey on ‘Stephanie Kelton on “makers and takers”’

Blog-Reference

The macroeconomic Profit Law reads Q≡Yd+(I−S)+(G−T)+(X−M) and this boils down to Q=(G−T) and this says that Public Deficit = Private Profit. As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt. In other words, fabulous wealth is the counterpart of fabulous public debt ($21.5 trillion). Never in history was the debt so fabulous as in the present-day USA.

Of course, this can be seen only from a considerable analytical height. It’s a bit like the Nazca lines which form shapes that can only be seen from high places. Most economists, though, do not rise above the micro-level. From the ant perspective, it seems to be obvious that profit comes from exploitation, hard work, innovation, productivity, greed, wage-cutting, risk, smart deals, monopoly power, patents, union weakness, etcetera. These microeconomic factors, though, are IRRELEVANT for macroeconomic profit and affect only the DISTRIBUTION of macroeconomic profit among firms but NOT the overall volume. The common sense micro explanations of profit and rent are simply false.#1, #2, #3, #4, #5

Tom Hickey maintains: “Under pure capitalism, an unattainable ideal, there would be no rent extraction since all gain in addition to that which is needed to bring goods to the market would be competed away.”

It is a very old and still unproven assertion that competition drives profit towards zero. This, of course, shows only that the philosopher Tom Hickey has no idea what profit is. Overall profit does NOT AT ALL depend on competition but alone on deficit spending of the household and the government sector. Macroeconomic profit does NOT vanish with competition. Only its distribution at the micro-level changes.

With her propagation of MMT policy, Stephanie Kelton sees to it that the “makers and takers” get their permanent free lunch from the government and become even more fabulously wealthy.#6

The differentiation between the good profit of makers and the bad rent of takers is a deception of the general public because profit and rent is the same thing and given by the Profit Law.#7

No group of political economists pushes “fabulous wealth” more than Stephanie Kelton and the MMTers.

Egmont Kakarot-Handtke


#1 Capitalism, poverty, exploitation, and cross-over exploitation
#2 For details of the big picture see cross-references Profit
#3 The Profit Theory is False Since Adam Smith
#4 Economists: scientists or political clowns?
#5 Ricardo and the invention of class war
#6 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#7 When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism

Related 'A clueless MMTer explains macroeconomics to clueless beginners'.

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Wikimedia AXEC109i

January 26, 2019

Both Austrianism and MMT is proto-scientific garbage

Comment on Robert Murphy on ‘The Upside-Down World of MMT’*

Blog-Reference and Blog-Reference

For his refutation of MMT, Robert Murphy takes the MMT balances equation as the analytical starting point.

“That is the three balances have to sum to zero. The sectoral balances derived are:
• The private domestic balance (I−S)
• The Budget Deficit (G−T)
• The Current Account balance (X−M).
A simplification is to add (I−S)+(X−M) and call it the non-government sector. Then you get the basic result that the government balance equals exactly $-for-$ … the non-government balance (the sum of the private domestic and external balances). This is also a basic rule derived from the national accounts and has to apply at all times.”

“So … we derive this equation: G−T=S−I. That is, the amount of government spending minus total tax revenue, is necessarily equal to private saving minus private investment. The MMTers might succinctly express this relationship in words: Government Budget Deficit = Net Private Saving.”

After this first demonstration of his scientific incompetence, Robert Murphy goes on: “This is the fundamental problem with relying on macro-accounting tautologies; people often bring in causal arguments from economic theories without realizing they are doing so. Let’s look again at the equation causing so much confusion: G−T=S−I. As a free-market economist, I don’t need to run from this tautology. I can use it to underscore the familiar ‘crowding out’ critique of government deficit spending.”

No, the fact of the matter is that the so-called “macro-accounting tautologies” are provably false because economists are too stupid for the elementary mathematics that underlies macroeconomic accounting.#1

To make a long story short, the correct macroeconomic relations are given as follows:#2
(1) Q≡−S in the elementary production-consumption economy,
(2) Q≡I−S in the elementary investment economy,
(3) Q≡Yd+I−S in the investment economy with profit distribution,
(4) Q≡Yd+(I−S)+(G−T)+(X−M) in the general case with government in an open economy.
Legend: Q profit, S saving, I investment, Yd distributed profit, G government expenditure, T taxes, X/M foreign trade.

The simplification of (4) yields Q=(I−S)+(G−T) (i) and this compares to Robert Murphy’s (G−T)=(S−I) resp. 0=(I−S)+(G−T) (ii).

The upshot is that (ii) implies that macroeconomic profit Q is zero. And this is plain analytical idiocy because a zero-profit economy does NOT exist. All this proves that Robert Murphy does not understand how the market economy works. The word profit does not appear once in his post. Austrianism is the failed attempt of explaining the market economy without ever mentioning the foundational economic concept profit which is objectively given with the precision of two decimal places.

Robert Murphy’s “Government Budget Deficit = Net Private Saving” has to be corrected to “Public Deficit = Private Profit”. And this correct formula tells everyone that MMT is a political fraud.#3

Robert Murphy, of course, does not realize anything. Austrians, in general, are not very smart. Because of this, Austrianism has never been anything else than vacuous proto-scientific blather.

Egmont Kakarot-Handtke


* Mises Institute
#1 Wikipedia and the promotion of economists’ idiotism
#2 Rectification of MMT macro accounting
#3 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

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REPLY to Bob Roddis on Jan 27

“Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

Austrians are a political sect. Hayek’s Road to Serfdom is a political pamphlet with zero scientific content. What comes in the cloak of economic theory is thinly veiled agenda-pushing.

The foundational tenet ― markets never fail if left alone ― has no empirical content. It is only good for blaming any crisis on some random interventionist. The very characteristic of Austrians is circular reasoning. Circular reasoning is irrefutable and Austrians advertise this as strength ignoring the well-known methodological fact that a theory that is non-refutable is not scientific.

The foundational tenet of Austrianism has been refuted. The market system is inherently unstable because the relationship of wage rate and employment constitutes a positive feedback loop. When the foundational premise is false all the rest is scientifically worthless.

Robert Murphy’s discussion of the MMT sectoral balances equation proves that he does not understand elementary algebra and never realizes that the equation represents a zero-profit economy.

Austrians are simply too stupid for science. From von Mises onward to Hayek to Robert Murphy to Bob Roddis they are active as useful idiots in the political Circus Maximus.

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REPLY to Bob Roddis on Jan 27

You ask rhetorically: “Investment causes savings. Right. What do have to invest if you haven’t saved it?”

The relation between saving and investment is not well understood for 200+ years. This is disqualifying for the whole profession of academic economists.

Above, Robert Murphy tries to “explain the importance of saving and investment in a barter economy” and concludes “This is an admittedly simple story, but it gets across the basic concepts of income, consumption, saving, investment, and economic growth.”

No, not at all. Real models have always been garbage. A barter economy is a NONENTITY. The subject matter of economics is, as Keynes put it, the “monetary theory of production”. Starting with the right foot, however, Keynes messed up macroeconomics and ended up with I=S.

I=S is provably false. Keynesianism is refuted.#1

The correct relationship is given in the most elementary case as Q≡I−S, Legend: Q business sector’s monetary profit, I business sector’s investment expenditures, S household sector’s monetary saving. All variables are measurable with the precision of two decimal places.

The equation tells one that the household sector’s saving and the business sector’s investment are independent and that their difference determines profit/loss of the business sector as a whole.

In a fiat money system, saving S ends up as deposits at the central bank (if private banks are taken out of the picture for a moment). Investment I is financed by the central bank through credit creation and ends up as long-term debt on the asset side of the central bank’s balance sheet. Profit Q ends up as deposits on the liability side. Needless to emphasize that the central bank’s balance is balanced. However, the term structure of both sides is not congruent. The liability side of the central bank, i.e. the household’s and business sector’s deposits, constitutes money.

The households can, in a second step, either keep their deposits or buy the business sector’s stocks/bonds on issuance. This destroys money and shortens the central bank’s balance sheet.

Both, the Austrian idea that saving is the precondition of investment and the Keynesian idea that investment creates saving via the income multiplier is nonsense. In a fiat money system, saving S and investment I are independent. There is no causality, no equality, no equilibrium. This is what Q=I−S tells those who can read a simple macroeconomic equation.


#1 Cross-references Refutation of I=S

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REPLY to Bob Roddis on Jan 27

Robert Murphy writes: “To explain the importance of saving and investment in a barter economy, I walk through a simple numerical example where Crusoe can gather ten coconuts per day with his bare hands.”

I respond: “A barter economy is a NONENTITY.”

You respond: “Actually, David Graeber, of all people, helped to improve and clarify the basic story because there was never a barter economy.”

So, we agree that Robert Murphy’s story about saving and investment is as silly as can be.

The real economy is NOT the ‘real’ barter economy but the monetary economy.#1 The economy constitutes itself through the interaction of real and nominal variables.

This interaction is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector which, in turn, consists initially of one giant fully integrated firm. (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 expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Yw, the price is given by P=W/R. This is the macroeconomic Law of Supply and Demand.

Profit for the economy as a whole is defined as Q≡C−Yw and saving as S≡Yw−C. It always holds Q≡−S, i.e. 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. Under the initial condition of budget balancing, profit is zero.

So, the counterpart of household sector’s saving is business sector’s loss AND NOT INVESTMENT! Get it Austrians, we are living in a monetary economy and saving is NOT some non-consumed coconuts but money in the bank.

Austrianism is dead since about 1900. Now, rest in peace Bob Roddis and the Mises Institute.


#1 The irreparable unreality of all ‘real’ models

Related 'Settling the Theory of Saving' and 'Squaring the Investment Cycle'.

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Switch to ‘Jennifer Morgan and Sharan Burrow — Tackling The Twin Challenges Of Climate Change And Inequality’

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REPLY to Bob Roddis on Jan 29

There is political agenda pushing and there is science. Economics as science tries to figure out how the monetary economy works. Austrian economics is proto-scientific garbage and a smokescreen for agenda pushing which comes under the euphemistic heading of Libertarianism.

Clearly, Austrians violate the principle of separation of politics and science since von Mises.

Your discussion of defensive or aggressive violence has no economic content. Worse, it misses the point. Compared to open violence, continuous low-intensity aggression/violence is currently the greater problem.

The upshot is, that this type of almost imperceptible violence is built right into the price system. And this brings us back to the heart of economics.

Contrary to Hayek, the major function of the price mechanism is NOT information processing and signaling but imperceptible redistribution. What is advertised as optimal functioning of an anonymous and apparently non-violent market system is, in fact, an impenetrable mechanism of continuous low-intensity redistribution.#1

To paint the market system as a superior information processor instead of a merciless slow-motion executor is one of the greatest deceptions of Austrianism.


#1 Pareto-efficiency, Hayek’s marvel, and the invisible executor

January 24, 2019

MMT and the clash of old and new agenda pushers

Comment on Mark Jeftovic on ‘The Disturbing Rise Of Modern Monetary Theory (MMT)’

Blog-Reference

Bob Roddis claims: “5. We know that the market does not fail and does not lead to mass unemployment.”

This is the fundamental Austrian hallucination. Since von Mises, Austrians are known as talented storytellers/agenda-pushers and incompetent scientists. Von Mises’ most profound insight was that “anti-capitalist sentiment was rooted in ‘envy’.” This was the intellectual level around 1900 in Vienna where Freud established penis envy as an all-purpose psychological explanans which was happily adopted by the Austro-Hungarian cretins of which Karl Kraus has given an intimate 30,000 pages portrait spanning from 1899 to 1936.

Austrians NEVER proved that the market system is self-stabilizing and optimizing if left alone. Fact is that the opposite has been proved.#1

Because the foundational premise of Austrianism is false all the rest is false. It was, however, usable for auto-hypnosis in the seances of the Mont Pelerin Society which institutionalized the political corruption of economics.

There is nothing to chose between Austrianism and MMT. Both are proto-scientific garbage.

Egmont Kakarot-Handtke


#1 Proof of the inherent instability of the market economy

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REPLY to Bob Roddis on Jan 24

You tell me: “You have to prove the market fails. I don’t have to prove it does not. But I will anyway.”

Your idea of proof is ridiculous. You need a well-articulated theory in order to carry out proof. As Feynman made clear: “By having a vague theory it is possible to get either result.” and “Another thing I must point out is that you cannot prove a vague theory wrong.”

Austrianism is NOT a well-articulated theory but confused blather.

Also, your historical examples count for nothing. As an Austrian, you should at least have a superficial knowledge of Popper who was an active co-agenda-pusher of the Mont Pelerin Society.

Here are some highlights:#1
• Almost anything can be a verification, as it can be justified after the fact.
• Confirmations are easy to find if you look for them.
• A theory that is non-refutable is not scientific.
• Confirming evidence doesn’t count unless it is a result of a genuine test.

Austrianism is logical BS: (i) Markets never fail if left alone, (ii) no, the Great Depression is proof that markets fail, (iii) no, the Great Depression happened because the Central Bank and those pesky Keynesians intervened, (iv) if no-one had messed things up markets would have worked just fine because of (i).

Austrians swallow this methodological garbage without turning an eyelid.


#1 Karl Popper Conjectures and Refutations, presented by Lucas Kempe-Cook

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REPLY to Bob Roddis on Jan 25

Science is about proof. You parrot the Austrian tenet: “We know that the market does not fail and does not lead to mass unemployment.” Austrians know nothing. Austrians are storytellers and political agenda pushers. Walrasians at least understood that they had to deliver proof that partial supply-demand-equilibrium logically entails the existence of a General Equilibrium with certain welfare properties. Austrians have never felt any obligation to prove their central tenet. You just echo this methodological deficiency: “You have to prove the market fails. I don’t have to prove it does not.”

The first point to mention is that Austrians never understood what profit is. There can be no greater laughing stock than an economist who has no idea about the foundational concept of his subject matter.

The second point is that Austrians never understood how the price mechanism works. The core of the price mechanism is the relationship between wage rate and employment.

The Employment Law is a macrofounded relationship which states that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R. This is the OPPOSITE of what microfounded Walrasianism and Austrianism say.

“We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price. If this is prevented by combinations in restraint of trade or by government regulations, then those impediments to competition should be removed. Applied to economy-wide unemployment, this doctrine places the blame on trade unions and governments, not on any failure of competitive markets.” (Tobin)

This is provably false. The macroeconomic Employment Law states that a reduction of the average wage rate REDUCES overall employment. This means that the price mechanism is NOT self-stabilizing. Just the opposite. At the heart of the market economy is a destabilizing positive feedback-loop.#1

The macroeconomic Employment Law is a testable relationship that can also be used to empirically refute the central Austrian tenet.#1, #2

In sum, Austrian Profit Theory and Price Theory are provably false.

So Austrians, it’s over. Only proof counts. Now pack your bag and get out of economics. And do not forget to take the MMTers and their falsified sectoral balances equation with you.


#1 The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
#2 For details of the big picture see cross-references Employment/Phillips Curve

January 23, 2019

The misleading nitty-gritty defense of MMT principles

Comment on Bill Mitchell on ‘Operationalising core MMT principles’

Blog-Reference

Yes, there is a lot of idiotic critique of MMT. Yes, there are tons of rubbish on the Internet about MMT from some “economics PhD student at a low-tier US university” or non-economists who either play dumb in order to derail a discussion or claim to know how to rectify economics and to save humanity and the planet.#1

This is nothing new in economics: “A sure sign of a crisis is the prevalence of cranks. It is characteristic of a crisis in theory that cranks get a hearing from the public which orthodoxy is failing to satisfy.” (Joan Robinson)

Bill Mitchell takes it upon him to defend MMT against all types of misinterpretation and rubbish by going at great length into the details of Inflation Theory and of the practical realization of a Job Guarantee. His arguments are sound and there is not much to say against them except that they are beside the point.

By addressing a lot of nitty-gritty stuff, Bill Mitchell deflects from the fact that MMT has been refuted at the level of principles. The formal inconsistency of MMT has been proved, the material inconsistency is testable.#2, #3, #4 The fact of the matter is that MMT is dilettante macroeconomics.

Bill Mitchell’s defense of MMT is as absurd as the answer of a bloodletter#5 who is told that his underlying theory of humors is false and that bloodletting does more harm than good: “What do you want, my handling of leeches is second to none and I have practically demonstrated this time and again.”

The fault of MMT does NOT lie at the operational level of how money can be created out of nothing and spent into the economy for all kinds of social purposes but at the level of theory.

This is the core of MMT’s scientific failure. The false MMT balances equation reads (I−S)+(G−T)+(X−M)=0, the correct equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0 and it boils down to Public Deficit = Private Profit. In other words, the MMT policy of permanent deficit-spending/money-creation amounts to a permanent free lunch for the Oligarchy. MMT policy is NOT social as claimed, just the opposite.

Because the foundational sectoral balances equation is false the whole analytical superstructure of MMT is false. Because the theory is false, the policy is counter-productive and it does not matter much whether the operational execution is perfect or not.

Bill Mitchell fills his blog with the nitty-gritty defense of MMT policy but never addresses the refutation of the theoretical foundations of this policy. Compared to the low-IQ critique of an “economics PhD student at a low-tier US university” and other trolls, Bill Mitchell’s defense is well-argued and convincing at the operational level. Unfortunately, he cannot disprove that MMT does not satisfy the scientific criteria of material and formal consistency. Bill Mitchell never addresses the argument that MMT amounts to bloodletting WeThePeople.

Egmont Kakarot-Handtke


#1 Debunking idiots does not prove that MMT is valid
#2 MMT sucks
#3 The final implosion of MMT
#4 Down with idiocy!
#5 “Bloodletting, whether by a physician or by leeches, was based on an ancient system of medicine in which blood and other bodily fluids were regarded as ‘humours’ that had to remain in proper balance to maintain health. It is claimed to have been the most common medical practice performed by surgeons from antiquity until the late 19th century, a span of almost 2,000 years.” (Wikipedia)

January 22, 2019

Profit and macrofoundations

Comment on James Galbraith on ‘A global macroeconomics ― yes, macroeconomics, dammit ― of inequality and income distribution’*

Blog-Reference

James Galbraith observes with regard to the JEL classification codes: “Under Macroeconomics there is nothing, unless you count E25 ‘Aggregate Factor Income Distribution,’ which surely means the analysis of factor shares ― Wages, Profits, Rent ― also known as the functional distribution.” and “From a theoretical standpoint distribution is the essence of micro, of market relations and of supply-and-demand. The discipline exists, largely, to explain factor returns. If it doesn’t explain ― I don’t say ‘justify’ ― the pay of the worker and the return to capital, then the rest of what it does would not sustain it.”

What is even more remarkable: the keyword Profit neither appears under Microeconomics nor Macroeconomics. The first problem of Distribution Theory is that economists obviously do not know what profit is.

Fact is: “A satisfactory theory of profits is still elusive” (Desai, Palgrave Dictionary) and this is the most damning verdict about economics. After 200+ years, economists cannot tell the difference between profit and income. This is the present state of economics: the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong.#1, #2, #3

Because Profit Theory is false Distribution Theory is false by logical implication.

James Galbraith identifies the point where things went wrong: “Lucas made the wrong choice. He decreed that micro takes precedence ― that the house is built on microfoundations. Godley did not have patience for this. Surely the house is better built on solid steel-and-concrete pilings, on macrofoundations, with micro-shingles on the roof?”

Indeed, that’s it. Economics needs a Paradigm Shift from false microfoundations to true macrofoundations. At this point, though, James Galbraith stops and turns to the prospects and problems of empirical research. He does not specify what the true macrofoundations are.#4, #5

From the true macrofoundations follows the macroeconomic Profit Law as Qm≡Yd+(I−Sm)+(G−T)+(X−M) Legend: Qm monetary profit, Yd distributed profit, Sm monetary saving, G government expenditures, T taxes, X exports, M imports. This reduces to the core Qm≡−Sm, i.e. the business sector’s profit is equal to the household sector’s dissaving, and vice versa, the business sector’s loss is equal to the household sector’s saving.

Macroeconomic profit has nothing to do with greed/exploitation/productivity but with growing/shrinking debt. Lo and behold, this is one of James Galbraith’s key findings: “1. There are global turning points in the path of pay inequality. They occur around 1971, around 1980, and around 2000. These correspond in each case to major shifts in the worldwide financial regime: to the breakdown of Bretton Woods, to the outbreak of the global debt crisis, and to return to low interest rates and rising commodity prices that followed the NASDAQ slump and the 9/11 attacks, along with the rise of China in world trade.”

Macroeconomic profit is an objectively given and well-defined magnitude. The first thing to notice is that profit is qualitatively different from income.#6 Loss or profit is NOT income. Distributed profit is income. Because of this, it is inadmissible to speak of ‘profit income’ because profit is the difference of flows and not a flow like wage income. Wage income and profit cannot be added together to total income and profit is not a share of total income. In their utter scientific incompetence, economists get the basics of distribution theory wrong from Adam Smith and David Ricardo onward to this day.#7, #8, #9

James Galbraith is right: “A global macroeconomics ― yes, macroeconomics, dammit” is the key to Profit Theory and Distribution Theory. Microfoundations are proto-scientific garbage since Jevons/Walras/Menger. Economics has to be based on macrofoundations. Get it: If it isn’t macro-axiomatized it isn’t economics.

Egmont Kakarot-Handtke


* Review of Keynesian Economics
#1 Profit and distribution: a primer
#2 Essentials of Constructive Heterodoxy: Profit
#3 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#4 First Lecture in New Economic Thinking
#5 From false microfoundations to true macrofoundations (II)
#6 Macro for dummies (II)
#7 Profit and distribution: a primer
#8 There is NO such thing as a “labor share of income”
#9 Ricardo, too, got profit theory wrong

Related 'The actual distribution is unacceptable? Do NOT seek economic advice!' and 'Income distribution: No market failure but theory failure' and 'The Levy/Kalecki Profit Equation is false'. For details of the big picture see cross-references Profit/Distribution.

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Wikimedia AXEC109i

What is wrong with MMT? and What is wrong with Brad DeLong?

Comment on Brad DeLong on ‘By Popular Demand: What Is “Modern Monetary Theory”?’

Blog-Reference and Blog-Reference

Brad DeLong defines macroeconomic common sense: “We do not like high unemployment. We do not like excessive inflation. Thus the government should make it its first priority to use its tools of economic management so that we do not experience either.” and asks “So what can go wrong with MMT?”

Like all economic common non-sensers, Brad DeLong forgets to mention distribution. What is missing in his list is: We do not like an extremely skewed distribution of income and financial wealth.

In his post, the word profit does not appear once. MMTers, too, desperately avoid mentioning profit. Mere coincidence?

In a nutshell, the lethal defect of MMT policy guidance is that according to the macroeconomic Profit Law it holds Public Deficit = Private Profit or in common-sense terms: permanent MMT deficit-spending/money-creation is a permanent free lunch for the one-percenters.#1

Keynes got macroeconomic profit wrong 80+ years ago,#2 but neither Post-Keynesians,  nor Anti-Keynesians, nor MMTers, nor Brad DeLong spotted the blunder to this day.

There is NO such thing as scientifically valid economics. It holds: false economic theory makes bad economic policy. Scientifically incompetent economists are the ultimate cause of unemployment, distributional implosion, financial collapse, and disaster. MMT is only the latest example of a 200+ years old fatal tradition.

Egmont Kakarot-Handtke


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 How Keynes got macro wrong and Allais got it right

Related 'MMT and the magical profit disappearance' and 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'Profit, income, and the Humpty Dumpty Fallacy' and 'Down with idiocy!' and 'False economic theory makes bad economic policy'.

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REPLY to Alan on Jan 23 and Blog-Reference

Yous say: “I’m not ready to ditch Keynes based on this effort.”

You are simply one of the many retarded economists who has not realized that Keynes messed up macro.

Keynes’ scientific incompetence can be exactly located in the GT: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

“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.)

So, the economist Keynes NEVER understood profit. Because of this, all I=S/IS-LM models and the rest of Keynesianism and Post-Keynesianism including MMT are false.#1

Keynes’ premise income = value of output is false. From the correct macroeconomic axioms follows:
(1) Q=−S in the elementary production-consumption economy,
(2) Q=I−S in the elementary investment economy,
(3) Q=Yd+I−S in the investment economy with profit distribution,
(4) Q=Yd+I−S+(G−T)+(X−M) in the general case with government in an open economy.

From (3) follows Allais’ correct equation Qre=I−S.

From (4) follows the correct sectoral balances equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which contrasts with the false MMT equation (I−S)+(G−T)+(X−M)=0.#2, #3

From (4) follows Public Deficit = Private Profit. And this tells one that MMT is a program for the permanent self-alimentation of the Oligarchy.

Macroeconomics is provably false from Keynes onward to MMT. The representative economist has not realized anything to this day because he is too stupid for the elementary mathematics that underlies macroeconomics.

Scientific incompetence is the reason why economics is after 200+ years still at the proto-scientific level.


#1 For more details see cross-references Refutation of I=S
#2 Rectification of MMT macro accounting
#3 Wikipedia and the promotion of economists’ idiotism

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REPLY to mulp on Jan 24

Yes, Friedman was an economics blatherer and political fraudster. He is now buried at the Flat-Earth-Cemetery together with the rest of failed/fake scientists. What about looking after the living and very busy fraudsters of present-day academia?

MMTers like Stephanie Kelton let profit disappear before your very eyes#1 and you don’t understand anything but conjure up the ghost of Mad Milton. What is wrong with you?


#1 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

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REPLY to Jared on Jan 26

Inflation is NOT the problem of MMT deficit-spending/money-creation. This is simple-minded Quantity Theory nonsense. Deficit spending causes a one-time price hike. Growing public debt is compatible with a stable price level.#1

The government can deficit-spend by simply increasing its overdrafts at the Central Bank and not consolidating this debt by issuing interest-bearing bonds. And the CB can at any time monetize bonds in circulation. So, as a matter of principle, the bond market is not a serious obstacle to MMT policy.

The government can spend without taxing. A stable Zero-Tax Economy is feasible in principle.#2

The lethal effect of MMT policy is on distribution. Because of the macroeconomic Profit Law, it holds Public Deficit = Private Profit. So MMT policy is first of all a free lunch for the Oligarchy. MMT’s social policy measures are paid for in real terms by WeThePeople themselves through stealth taxation.#3 To pay for social benefits with deficit-spending/ money-creation is simply a political fraud.

Brad DeLong as the representative economist has NEVER understood what profit is and because of this, he does not understand that MMT is a program for the permanent self-alimentation of the Oligarchy. As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt.

Politically speaking, MMT policy is a suicide program for US democracy. The thing is, that economists are part of it.


#1 MMT and the inflation-red-herring
#2 The Third Way: Towards the happy Zero-Tax Economy
#3 MMT, money creation, stealth taxation, and redistribution

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REPLY to Jared on Jan 28 and Blog-Reference on Jan 30

You say: “This is the real threat that MMT represents to the oligarchy.”

MMT represents NO threat to the oligarchy because MMTers are the agents of the Oligarchy. This follows from the fact that MMT policy guidance boils down to deficit-spending/money-creation. Now, the macroeconomic Profit Law tells everyone that Public Deficit = Private Profit and from this follows as a rule of thumb that the financial wealth of the Oligarchy grows in lockstep with the public debt. In other words, the fabulous wealth of the Oligarchy is the counterpart of humungous public debt ($21.5 trillion). To remove all obstacles to the further growth of public debt is the mission of MMTers.#1, #2, #3, #4

Now, everybody is entitled to use any medium between the soapbox and the blogosphere and to communicate any imaginable BS. In the political sphere, anything goes. However, this does not apply to the scientific sphere. While the currency in the political sphere is opinion, the currency in the scientific sphere is knowledge and both cannot coexist. This is known for 2300+ years: “There cannot be both opinion and knowledge of the same thing at the same time.” (Aristotle)

The political sphere and the scientific sphere have to be kept apart because politics always and everywhere corrupts science. This happened to economics. According to the scientific criteria of material and formal consistency, MMT is refuted on all counts.#5 However, MMT is not thrown out of science but allowed to use academia as a forum for pushing their political agenda.

The problem with Brad DeLong is that he is either too stupid to realize that MMT is proto-scientific garbage or he is part of the general political corruption of economics.

To say of MMT, or, for that matter, of Walrasianism, Keynesianism, Marxianism, Austrianism that it poses a threat to the oligarchy is a blatant misinterpretation of the history of economic thought since Adam Smith.


#1 Stephanie Kelton on how to become fabulously wealthy
#2 MMT: The fusion of Wall Street and Academia
#3 Very busy these days: Wall Street’s agents
#4 MMT and the promotion of Wall Street socialism
#5 For the full-spectrum refutation of MMT see cross-references MMT

January 21, 2019

MMT’s virtue-signaling distracts from failure/fraud

Comment on Bill Mitchell on ‘Why progressive values align more closely with our basic needs’

Blog-Reference

Bill Mitchell sets the frame: “One of the angles that will be delved into is the way in which neoliberal narratives and constructs have permeated individual consciousness. Yes, sounds a bit psychological doesn’t it.”

Yes, economists love to dwell upon Human Nature/motives/behavior/action since Adam Smith/Karl Marx. Bill Mitchell remembers: “When I was a student … and studying the works of Marx in depth, I was continually confronted with the claim that socialism is against human nature, which apparently is competitive and dog-eat-dog in form.”

The scientific incompetence of economists consists of the fact that it is beyond their means to realize that NO way leads from the understanding of Human Nature/motives/behavior/ action to the understanding of how the economic system works. The point to grasp is that economics is NOT a science of behavior but a systems science.#1

Economics, though, has defined itself as a social science. The result is nothing less than complete scientific failure. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent and all got the foundational economic concept ― profit ― wrong. In other words, there is NO such thing as scientifically valid economics. MMT fits into this pattern.

MMT is three things: theory, policy, activism. These three elements are constantly mixed in the public debate and this guarantees never-ending confusion.

Fact is that MMT theory is provably false, i.e. materially/formally inconsistent.#2 MMTers do not get the objective structural relations of the monetary economy right. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople.

Whether all MMTers understand it or not does NOT matter. What matters are the economic consequences of MMT policy. And these are disastrous with regard to distribution. Socially, the effects are the exact opposite of what MMTers claim. In a word, MMT policy benefits the one-percenters and NOT the ninety-nine-percenters.

Either MMTers do not understand their own theory and mislead the general public unwittingly or they purposefully push the agenda of the one-percenters and deliberately deceive the general public.#3, #4, #5 Bill Mitchell falls into the latter category.

Egmont Kakarot-Handtke


#1 Economics is NOT about Human Nature but the economic system
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 MMT: From science to agenda-pushing to story-telling to fraud
#4 MMTers are NOT Friends-of-the-People
#5 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

MMT: How to get out of the infinite meta-communication loop

Comment on Brian Romanchuk on ‘MMT In The Newsflow Again’

Blog-Reference and Blog-Reference

Brian Romanchuk observes some communicative delirium: “There have been a number of attempts to ‘explain’ MMT by various American conservatives. As one might expect, those attempts have been pathetic; …” and then heads towards a solution “There are two angles of attack to this debate.
1. Are MMT policy proposals radical?
2. Is it a radical approach to economic theory?”

This, though, means nothing else than a continuation of the communicative delirium. The point is to get out of meta-communication about MMT and to ask the scientifically relevant question: Is MMT true or false? with truth well-defined as material and formal consistency. Who cares about whether MMT is “radical”?

The scientist’s goal is to definitively settle a given question: “That the settlement of opinion is the sole end of inquiry is a very important proposition.” (Peirce) The blatherer’s goal, on the other hand, is simply to blather on in all eternity. After all, professional windbags, journalists, propagandists, soapbox economists, and trolls seek, like anybody else, long-term employment in a decently paid job.

There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. This holds also for MMT. MMT is refuted on all counts.#1 Scientifically, MMT is dead and buried, however, it still has substantial talk-show qualities.#2

Brian Romanchuk brushes off the shallow pseudo-explanations provided by “various American conservatives”: “Modern Monetary Theory is part of a long line of post-Keynesian economics; if you want to understand the theory, there’s a lot of reading to do.”

True. Indeed, there is not only a lot of reading to do for MMTers but ― even more important ― of thinking. What MMTers do not understand to this day is that post-Keynesian economics is scientifically dead since Keynes. Keynes got macroeconomics wrong and post-Keynesians, including MMTers, have not spotted the blunder.#3

The blunder is baked into the MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0. This equation proves that MMTers are too stupid for the elementary mathematics that underlies macroeconomic accounting.#4

Brian Romanchuk eventually stumbles upon the crucial point: “… my Twitter feed has been filled with condescending comments from mainstream economists who state that MMT has no empirical aspects to it. Firstly, if one does not read the literature, one will not find empirical work. Secondly, how much empirical work can we expect from theory in the first place?”

Good question. What first of all has to be done empirically is to decide between the false MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 and the axiomatically correct equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0. And this will settle the matter once and for all. The MMT equation will be empirically falsified ― after it has already been logically falsified ― and with it the whole verbal superstructure of MMT blather/fraud.

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 The economist as stand-up comedian
#3 Why Post Keynesianism Is Not Yet a Science
#4 Wikipedia and the promotion of economists’ idiotism (II)

Related 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'The page where Stephanie Kelton gets macroeconomics wrong'.

January 20, 2019

Ontological uncertainty is NOT the problem but economists’ ontological stupidity

Comment on Lars Syll on ‘Paul Krugman ― a methodological critique’

Blog-Reference

When economists are asked why they have achieved little or nothing of scientific value in the last 200+ years, they answer that their subject matter is characterized by idiosyncratic difficulties, i.e. uncertainty and complexity. Here is the classical answer: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort’.” (Bagehot, 1885)#1

The simple fact of the matter, though, is that economists are scientifically incompetent. One good example is Keynes.#2, #3 Keynes is known as the discoverer of economic uncertainty and its disastrous implications for the sheer possibility of economic theory.

What is uncertainty? “In his 1937 article entitled ‘The General Theory of Employment,’ Keynes, responding to critics of the general theory, offered the following definition of uncertainty: By ‘uncertain’ knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty. . . . Or . . . the expectation of life is only slightly uncertain. Even the weather is only moderately uncertain. The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence. . . . About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.” (Ferrari-Filho et al.)

Trivially true, indeed, except for the fact that ontological uncertainty is taken as a methodological excuse for the overall failure of economics: “One thing that’s missing from Krugman’s treatment of economics is the explicit recognition of what Keynes and before him Frank Knight, emphasized: the persistent presence of enormous uncertainty in the economy … Why is uncertainty so important? Because the more of it there is in the economy the less scope for successful maximizing and the more unstable are the equilibria the economy exhibits, if it exhibits any at all …” (Rosenberg, see Intro)

What economists overlook is that most of economic uncertainty is produced by the historically evolved bad design of the economy. Since Adam Smith, the economy is supposed to be a self-regulating system which produces optimal outcomes if not interfered with. Fact is, though, that the opposite is provably true.#4 As a result, it can be said that ontological economic uncertainty is in most cases the direct product of economists’ ontological stupidity.

Let us give one example.

As the analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (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 expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market clearing X=O and budget balancing C=Yw in each period, the price is given by P=W/R. The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R.

What is needed for a start is two things (i) a central bank which creates money on its balance sheet in the form of deposits, and (ii), a legal system which declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Yw per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e. if C=Yw. Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. For the case of a balanced budget, the idealized transaction sequence of deposits/overdrafts at the central bank over the course of one period is shown on Wikimedia.


The household sector’s deposits/overdrafts are ZERO at the beginning and end of the period. Money is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an accommodative role and simply supports the autonomous market transactions between the household and the business sector. The economy NEVER runs out of money. If employment L is doubled, the average stock of transaction money doubles. In a fiat money economy, growth is not hampered by a lack of the transaction medium.

The price is determined by the wage rate and productivity. Both vary over time unpredictably. Now, if one wants absolute price stability in the elementary production-consumption economy from beginning to eternity one has to apply the simple rule: change of wage rate = change of productivity. That’s all. Productivity may be influenced by unpredictable weather conditions or external shocks, this uncertainty is compensated for by changes in the wage rate so that the market price P remains absolutely constant. Needless to emphasize that this eliminates also the problem of destabilizing price expectations.

The task of economists is NOT to senselessly repeat Keynes’ silly mantra ‘We simply do not know’, but to figure out how uncertainty can be eliminated from the economic system.

Do not expect that proven imbeciles like Paul Krugman or Lars Syll will ever figure out anything.

Egmont Kakarot-Handtke


#1 Failed economics: The losers’ long list of lame excuses
#2 Forget Keynes
#3 Cross-references Failed/Fake Scientists
#4 Proof of the inherent instability of the market economy

Related 'Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It' and 'Trust in economics as a science?' and 'Is Lars Syll’s stupidity really infinite?' and 'Cryptoeconomics ― the best of Lars Syll’s spam folder' and 'What is dead certain in an uncertain world: economists’ abysmal incompetence' and 'Uncertainty: ‘Whereof one cannot speak, thereof one must be silent’' and 'The scientific self-elimination of Heterodoxy' and 'Econogenics: economists pose a hazard to their fellow citizens'.