January 10, 2019

Econogenics in action

Comment on Barkley Rosser on ‘How Shocking Was Shock Therapy?’


Barkley Rosser reports: “Very important was that it [Poland] did not undo its generous social safety net, especially its generous pension system. This was a central issue in the 1993 election, with both Blacerowicz and Sachs unhappy about this outcome. I remember well the 1994 ASSA convention at which Sachs gave a major speech in which he basically whined about this election outcome and essentially accused the Polish people of being a bunch of spoiled brats for wanting to hang onto their supposedly overly generous pension system.”

Note first of all that the organization of the Polish economy is the business of the Legitimate Sovereign of Poland. The economic stand-up comedian Jeffrey Sachs does NOT by any stretch of the imagination come close to something resembling a Legitimate Sovereign. So, his whining at the ASSA convention about the Polish people is a non-event, except perhaps for the retarded members of the American Economic Association.

What economists have not fully realized to this day is that they have no mandate to dabble in politics because (i) this violates the principle of the separation of politics and science, (ii) they lack the true theory of how the economy works.

That economist in their utter incompetence make matters worse is a regularly repeated experience throughout history: “Late in life, … 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)

To this day, economists do not know how the economy works. Employment Theory and Profit Theory are provably false.#1, #2 The belief that economists can make a contribution to social welfare is patently absurd. It is just the opposite.#3

Well-informed people know by now that economists are not trustworthy scientists but stupid/corrupt agenda pushers.#4

Egmont Kakarot-Handtke

#1 Macro for dummies
#2 Rethinking the Profit Law
#3 How to minimize econogenic outcomes
#4 Trust in economics as a science?

REPLY to Barkley Rosser on Jan 11

You say: “Example: relation between wages and employment. Sure, sometimes higher wages are associared wirh higher employment, but sometimes not. Very complicated, with you not remotely getting any of that, just repeating your same old nonsense.”

After 200+ years of research, this is what the representative economist has to say about one of the most fundamental relations of his subject matter. And he does not even realize that this absolutely vacuous statement is the open declaration of scientific bankruptcy.#1

As Feynman made clear: “By having a vague theory it is possible to get either result. ... It is usually said when this is pointed out, ‘When you are dealing with psychological matters things can’t be defined so precisely’. Yes, but then you cannot claim to know anything about it.”

And that is the simple fact of the matter, economists do not know anything about how the economy works. It’s all wish-wash. From this, though, follows that economists are not qualified to give economic policy advice.

“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)

Economists do not have a true theory. Their good luck is that in the political realm, scientific qualities are not in great demand but propaganda and entertainment qualities are.

So, at an early stage in the development of their discipline, economists threw scientific principles out of the window and started think-tanking for some businessman/billionaire or some three-letter government agency. The Cowles Foundation for Research in Economics is one prominent example of this and it produced General Equilibrium Theory and many Nobel Laureates.

It is common knowledge by now that GE is one of the worst scientific failures of all time. However, what arrived at the general public is the impression that it has been rigorously proved by the finest thinkers with the most advanced mathematical tools that the market economy is a stable system and produces maximum welfare.

The Cowles Foundation is only the tip of the iceberg. It is unknown at present to which degree economics has degenerated to mere journalism/propaganda/agenda-pushing. It is a bad omen, indeed, that fake scientists like Paul Krugman are considered as thought-leaders.#2

If there is still some scientific spirit around in the profession, you have not been blessed with it. That much is absolutely certain.

#1 For details of the big picture see cross-references Employment/Phillips Curve
#2 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It

REPLY to Barkley Rosser on Jan 12

Tobin said: “We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price.”

You say: “Sure, sometimes higher wages are associared wirh higher employment, but sometimes not.”

The macroeconomic Employment Law states unambiguously: “Overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.”#1

The Employment Law consists of measurable variables and is testable. 

After 200+ years of blather, the representative economist does not know one of the most fundamental relations of his subject matter. Because of this, his policy advice is counter-productive.

Economists are a hazard to humanity. Economic crises are econogenic. The difference between iatrogenic and econogenic is that doctors are sued but economists are not.

REPLY to Barkley Rosser on Jan 15

A funny economist you are, indeed. You are very vague about the all-decisive relationship between wage rate and employment but you are absolutely certain about MbS’ role in the Khashoggi affair: “He is guilty guilty guuilty”.

It is quite obvious that you are not a qualified scientist but some retarded political agenda pusher.

While the scientist seeks a clear true/false answer to a given problem, the political economist tries to keep everything in the bottomless swamp of inconclusive blather. Inconclusiveness is what Popper called an immunizing stratagem because: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman) This methodological message was not lost on fake scientists. They deliberately keep everything in the swamp of inconclusiveness where “nothing is clear and everything is possible” (Keynes).

You argue: “Funny how you declare something is an absolute ‘Employment Law,’ but then admit that it is ‘testable,’ which suggests the possibility that it might not be true. As a matter of fact, the relationship between wages and employment is one that has had so much empirical testing that I have lost count, and, sorry, but there is no agreed upon conclusion, with this getting into all sorts of messes over data ets and econometric techniques, and on and on.”

Funny that you seem to never have heard of Popper’s: “A theory that is non-refutable is not scientific.”#3 So, testable is a quality criterion that every theory must meet.#4

The Employment Law is a macroeconomic relationship. What indeed has been tested ad nauseam is microeconomic relationships. The inconclusive results of this wrong approach say NOTHING about the validity of the macroeconomic relationship which states unambiguously: “Overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.” This tells one that wage-cutting was the wrong policy in the Great Depression. Thank you, economists! 

So why do you not simply try to empirically refute the macroeconomic Employment Law?

I see, your main job as a scientist and economist is foreign policy and your most urgent task is to punish MbS: “I think being prevented from becoming the King of Saudi Arabia will be for him the worst punishment.”

That’s academic economics after 200+ years of “scientific” research.

REPLY to Barkley Rosser on Jan 16

You say: “As it is, it is hard to get a clean test of what you claim is your Law, although it was previously formulated by Keynes, whom you mostly disparage.”

The point at issue is neither “my Law” nor the psychological profiling of Keynes. Economics is about how the economy works and not gossiping about economists.

The point at issue is that Keynesian macroeconomics is provably false. More precisely, Keynes’ Profit Theory is proto-scientific garbage. Because the foundational concepts profit/income/saving are ill-defined the whole analytical superstructure including employment theory is false.#1, #2

To summarize that Keynes was an incompetent scientist who did not understand the foundational concept of his subject matter ― profit ― is a statement of fact.

But Keynes is history and the actual scientific embarrassment is that After-Keynesians have not spotted Keynes’ inexcusable blunder to this day.

It is NOT a disparagement to summarize that economics is a failed/fake science and that contemporary economists are incompetent scientists. That economists are stupid/corrupt agenda pushers since Adam Smith/Karl Marx is a historical fact.

Your posts just prove the rule.

#2 For more details see cross-references Keynesianism


REPLY to Barkley Rosser on Jan 16

You say: “BTW, if your macro version of the law is a true testable law, then tell us about all the tests that have been done that verify it, making sure that there are none that question those tests.”

In your economic incompetence, you have not realized that the macroeconomic version of employment theory is embodied in the Phillips Curve. The Phillips Curve has been thoroughly tested and refuted. This is an indirect corroboration of the axiomatically correct Employment Law.

As it happens, there is a new San Francisco Fed study out and I commented on the issue. See False economic theory makes bad economic policy; Comment on Mish Shedlock on ‘Yet Another Fed Study Concludes Phillip’s Curve is Nonsense’

Mish Shedlock summarizes: “Proponents of the Phillips Curve keep looking for ways in which it works. Yet, another study concludes it doesn’t. The Phillips Curve, an economic model developed by A. W. Phillips purports that inflation and unemployment have a stable and inverse relationship. This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.”

The Phillips Curve (better: bastard Phillips Curve) is the centerpiece of standard employment theory. Economists get employment theory wrong for 200+ years. The Phillips Curve has always been the highly visible landmark of economists’ scientific incompetence.

“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)

The materially/formally inconsistent Phillips Curve has to be replaced by the correct macroeconomic Employment Law. For details see

REPLY to Barkley Rosser on Jan 18

Let us put things into perspective.

In my 2012 working paper, I showed in detail the defects of the bastard Phillips Curve and the standard employment theory.#1 Relating to a recent San Francisco Fed study, a commentator summarized: “Various studies have proven the theory [Phillips Curve] is bogus.” This is a corroboration of the critical part of my working paper.

In about the same period, you wasted your time reading the international press and doing some foreign policy agenda-pushing, e.g. “MbS Must Go”.

You are still under the illusion that dabbling in politics is the right and duty of an economist.

To this day, your Profit Theory and Employment Theory are false. This, though, does not matter in an environment with rather low scientific standards.

Your academic colleague and MMT agenda pusher Stephanie Kelton is currently actively deceiving the general public.#2 What about a “Kelton Must Go” from Barkley Rosser?

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