March 29, 2019

Dear idiots, government deficits do NOT fund private savings

Comment on D.T. Cochrane on ‘How government deficits fund private savings’*

Blog-Reference

D.T. Cochrane argues: “Changes in the financial assets of the government and the private sector mirror each other. Government debt equals private sector financial assets, by definition. When the government posts a deficit, the private sector’s financial assets increase. When the government posts a surplus, the private sector’s financial assets decrease. In other words, when the Canadian Taxpayers Federation hauls out their debt clock, showing the federal government’s increasing debt, they are also showing the private sector’s increasing financial wealth.”

This is not correct and the reason is that D.T. Cochrane is too stupid for the elementary mathematics that underlies macroeconomics.

Here is the correct macroeconomics in a nutshell.
(i) The elementary production-consumption economy is given by three macroeconomic axioms: (A1) Yw=WL wage income Yw is equal to the 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.
(ii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. X=O.
(iii) The monetary profit/loss of the business sector is defined as Q≡C−Yw,
(iv) The monetary saving/dissaving of the household sector is defined as S≡Yw−C.
(v) Ergo Q≡−S.

The balances add up to zero. The mirror image of household sector saving S is business sector loss −Q. The mirror image of household sector dissaving (-S) is business sector profit Q. Q≡−S is the elementary version of the macroeconomic Profit Law.

For a start, we have only two sectors: the household and the business sector. The surplus of the business sector, i.e. profit, is the exact mirror image of the deficit of the household sector, i.e. dissaving. The deficit of the business sector, i.e. loss, is the exact mirror image of the surplus of the household sector, i.e. saving.

Now, the government sector is brought into the picture.

The complete macroeconomic Profit Law is given by Q≡Yd+(I−S)+(G−T)+(X−M). In order to focus on the interactions between household, business, and government sector, it is here reduced to Q≡−S+(G−T). Legend: Q macroeconomic profit, S household sector saving, G government expenditures, T taxes, (G−T)>0 government deficit.

If the government’s budget is balanced, i.e. G=T, and if the households dissave then the business sector makes a profit, i.e. Q is positive.

If the government’s budget is balanced and the households save, i.e. S≡Yw−C>0, then the business sector makes a loss, i.e. Q is negative.

If the government’s budget deficit, i.e. (G−T)>0, is equal to the household sector’s saving, i.e. (G−T)=S, then macroeconomic profit Q is zero.

If the government’s deficit is greater than household sector saving, then the business sector makes a profit.

If the household sector’s saving is zero, i.e. S=0, and the government deficit is greater than zero, i.e. (G−T)>0, then it holds Q=(G−T), i.e. business sector profit equals government deficit, in other words, Public Deficit = Private Profit.

So, there are two limiting cases, (i) government deficit equals household sector saving, (ii) government deficit equals business sector profit.

There is NO such thing as ‘government deficit equals private saving’ or “government deficits fund private savings”.

Whether the term “private savings” is introduced because of terminological sloppiness or intentionally in order to hide the fact that a government deficit is a free lunch for the Oligarchy to the extent that the public deficit is greater than household sector saving. The word profit does not appear once in D.T. Cochrane’s article.

For the simplified case, i.e. Yd, (I−S), (X−M)=0, financial wealth of the Oligarchy is the exact mirror image of public debt (currently $22 trillion). In this limiting case, the (net) financial wealth of WeThePeople is exactly zero. The talk of “private” financial wealth obscures the distributional reality.

It holds in any case that MMT is either a blunder or a fraud and that MMTers are either stupid or corrupt.

Egmont Kakarot-Handtke


The Conversation

Related 'The Kelton-Fraud' and 'Down with idiocy!' and 'MMT: Just another political fraud' and 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'MMT Progressives: The knife in the back of WeThePeople' and 'MMT and the magical profit disappearance' and 'MMT: fundamentally false' and 'Dear idiots, time to get saving and investment straight (II)' and 'Dear idiots, time to get saving and investment straight (I)' and 'Dear idiots, Marx got profit and exploitation wrong' and 'Dear idiots, government deficits do NOT cause inflation' and 'The clock runs down on economics'.

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Source: The Conversation

The graph suffers from the Humpty Dumpty Fallacy. For details see Profit, income, and the Humpty Dumpty Fallacy and Down with idiocy!.

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NOTE/LINK on The Conversation on Mar 29

D.T. Cochrane argues: “Changes in the financial assets of the government and the private sector mirror each other. Government debt equals private sector financial assets, by definition. When the government posts a deficit, the private sector’s financial assets increase. When the government posts a surplus, the private sector’s financial assets decrease. In other words, when the Canadian Taxpayers Federation hauls out their debt clock, showing the federal government’s increasing debt, they are also showing the private sector’s increasing financial wealth.”

This is NOT correct and the reason is that D.T. Cochrane is too stupid for the elementary mathematics that underlies macroeconomics. For details see here

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REPLY to Arnd Liebenberg on Mar 29

The macroeconomic Profit Law implies Public Deficit = Private Profit and NOT Public Deficit = Private Saving.

Either D.T. Cochrane and you are too stupid for the elementary mathematics that underlies macroeconomics or you are trying to hide the profit effect of deficit-spending-money-creation. For more on agenda pushing for the Oligarchy see
► Meet the MMT smart arses

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REPLY to D.T. Cochrane on Mar 29

You say: “Your entire response has nothing to do with the issue raised here, which is the relationship between government debt and private sector wealth. The relationship described here is empirical fact, which you can confirm by following the data source for the graph.”

The title of your post reads: ‘How government deficits fund private savings’. My comment contains the proof that this statement is false. The correct formulation should read: ‘How government deficits fund private profits.’

The macroeconomic Profit Law implies Public Deficit = Private Profit and NOT Public Deficit = Private Saving. From this follows, in turn, that the MMT policy of deficit-spending/money-creation benefits the Oligarchy and harms WeThePeople.

You are obviously unable to realize that MMT theory is refuted on all counts#1, #2 and that MMT policy is distributional infamy.

MMT claims that public deficits increase “private” financial wealth. This is not quite correct because, more specifically, public deficits increase the financial wealth of the one-percenters and NOT of the ninety-nine-percenters. The weasel word “private” obscures this distributional fact. The MMT policy of permanent deficit-spending/money-creation amounts to a permanent self-alimentation of the Oligarchy to the detriment of the ninety-nine-percenters.#3

Clearly, MMT is a scientific/social/political fraud. Obviously, you are part of it.


#1 Refuting MMT’s Macroeconomics Textbook
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 MMT = proto-scientific junk + deception of the 99-percenters

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REPLY to D.T. Cochrane on Mar 30

You say: “The word ‘profit’ does not appear in my article because I do not deal with the distribution within the private sector. So, once again, my argument is based on facts, which demonstrate given accounting identities.”

There is no such thing as the “private sector” there is the household sector and the business sector and both cannot be lumped together. This is the Humpty Dumpty Fallacy. The “private sector” is an MMT construct.

You have not realized that the MMT accounting identities are provably false because MMTers are too stupid for the elementary mathematics that underlies macroeconomic accounting.#1, #2

This is the false MMT sectoral balances equation: (I−S)+(G−T)+(X−M)=0. And this is the true equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0. All variables are measurable with the precision of two decimal places. Therefore, the matter can be decided empirically.

The disappearance of profit in the mirror graph is the smoking gun proof that MMT deceives the general public.#3


#1 Wikipedia and the promotion of economists’ idiotism (II)
#2 See cross-references Accounting
#3 MMT and the magical profit disappearance

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REPLY to D.T. Cochrane on Apr 1

You say: “We’re done”

No. YOU are done. Your mirror graph is false. There are THREE sectors household, business, and government. So there should be THREE curves that show the balance of each sector. The balances are called saving/dissaving, profit/loss, government deficit/surplus. In your graph, though, there are only TWO curves because you lump saving and profit together and call the sum private saving. Thus profit vanishes. This is the MMT deception. MMTers claim to benefit WeThePeople while the exact opposite is true.

March 27, 2019

MMT: fundamentally false

Comment on Warren Mosler's ‘MMT White Paper’

Blog-Reference

The purpose of Warren Mosler’s White Paper is “to publicly present the fundamentals of MMT.”

This is the first fundamental proposition:
“MMT Alone Recognizes that the US Government and its Agents are the Only Supplier of That Which it Demands for Payment of Taxes
That is, the currency itself is a simple public monopoly.
The US government levies taxes payable in $US
The $US to pay those taxes can only originate from the US government and its agents.
The $US to purchase US Treasury securities can only originate from the US Government and its agents.
The economy has to sell goods and services to the US Government or borrow from the US Government, or it will not be able to pay its taxes or purchase US Treasury securities.
Ramifications: 1. The US government and its agents, from inception, necessarily spend first, only after that can taxes be paid or state securities purchased.”

Because the first MMT axiom is false the rest of MMT is false.

MMT lacks sound macroeconomic foundations. As the correct 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 the 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 (1a). The price P is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R.#1 The elementary production-consumption economy is shown on Wikimedia.#2


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. These institutions have to be established by the state.

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.#3


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 supports the autonomous market transactions between the household and the business sector. From this follows the average stock of transaction money as M=κYw, with κ determined by the transaction pattern.

If employment L is doubled, the average stock of transaction money M doubles. In a well-designed fiat money economy, growth is not hampered by a lack of the transaction medium.

Ramifications: (i) The state is needed for the institutional setup of the monetary order, (ii) the state is NOT needed for injecting money into the economy, (iii) what is needed is an accommodative Central Bank, (iv) neither the state nor the Central Bank interferes with the autonomous transactions of the household and business sector, (v) money is a generalized IOU, (vi) money is created and destroyed by the transactions between the household and the business sector, (vii) the value of money is given by W/P=R (1b), i.e. is equal to the productivity, (viii) the value of money does NOT depend on the (average) stock of money M, (ix) the functionality of monetary institutions and the value of money does NOT depend on the taxing power of the state.

If the state deficit-spends money into the elementary production-consumption economy it follows from the macroeconomic Profit Law#4, #5 that Public Deficit = Private Profit.

Bringing money into the economy by public deficit spending is NOT distributionally neutral, just the opposite: it is a free lunch for the Oligarchy.

So, MMT is not only scientifically worthless#6 but economically harmful to the ninety-nine-percenters.

Egmont Kakarot-Handtke


#1 Geometrical Exposition of Structural Axiomatic Economics
#2 Wikimedia AXEC31 Elementary production-consumption economy
#3 Wikimedia AXEC98 Idealized transaction pattern
#4 Profit Law Q≡Yd+(I−S)+(G−T)+(X−M)
#5 How counterfeiters save America with an extra profit and make WeThePeople pay for it
#6 Refuting MMT’s Macroeconomics Textbook

Related 'Understanding public deficits, money, and profit' and 'The miracle cure of economists’ micro-macro schizo' and 'The Third Way: Towards the happy Zero-Tax Economy'.

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COMMENT on Brad DeLong on Mar 28 and Blog-Reference MNE

Science is NOT about love/hate but true/false. So, to begin with, the question Why Does Everyone Hate MMT? leads directly into the bottomless swamp of political economics.#1

The problem with MMT is that it is axiomatically false.#2 Because employment and distribution theory is provably false MMT’s policy guidance has NO sound scientific foundations. This, though, applies also to New Keynesianism. IS-LM is refuted on all counts.#3 This answers the question Why is the MMT vs Mainstream debate utterly absurd?

Brad DeLong summarizes: “Perhaps the key to the eagerness of Wray to dismiss me (and James Montier) for saying that MMT is Lerner+ is sociological. Perhaps MMT is not model-based (‘IS-LM with a near-vertical IS curve’) and not idea-based (‘Functional Finance’) so that it can be guru-based.”

Whether MMT is sociology-based, model-based, idea-based, or guru-based is a mute question. Theories are axiom-based and the macroeconomic axioms of MMT are provably false.#4 By consequence, the whole analytical superstructure is untenable.

Macrofoundations are false for 80+ years, microfoundations are false for 150+ years. Methodologically, mainstream economics is even worse than MMT’s proto-scientific garbage.


#1 Love and hate in economics: the PsySoc shell game
#2 MMT: fundamentally false
#3 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#4 For the full-spectrum refutation of MMT see cross-references MMT

Related 'MMT for beginners' and 'Warren Mosler: scientific dilettante and political fraudster' and 'MMT sucks' and 'MMT Progressives: The knife in the back of WeThePeople' and 'MMT: The fusion of Wall Street and Academia' and 'MMT: A free lunch for the Oligarchy'.

Love and hate in economics: the PsySoc shell game

Comment on Randy Wray on ‘A Must Read: Why does everyone hate MMT?’*

Blog-Reference

James Montier summarizes: “Modern Monetary Theory (MMT) seems to provoke a visceral reaction amongst the ‘great and the good’ such as Rogoff, Krugman, and Summers. However, when reading their criticism I am often left with the impression that they haven’t actually bothered reading anything on the subject of their critique.” and “Sadly, the behaviour of the great and the good is far from exemplary in terms of economic debate. Terms like mess, foolish, fringe, nonsense, and voodoo alongside fear-mongering mentions of hyperinflations may make for an exciting story but they do little to advance the debate. In fact, the use of these words and the generally dismissive (but thoroughly unsubstantiated) nature of these articles appear to be typical of the output of those suffering from groupthink.”#1

To complain about economists’ ceaseless blather is either naive or insincere. Economics claims to be a science since Adam Smith/Karl Marx but has never been anything else than political propaganda. In the political sphere, nobody cares about scientific truth. The point of political communication is to engage the audience and the tools are well-known since the ancient Sophists: rhetoric/storytelling/lying, empty promises, fear-mongering, and smearing.

It is no secret how politics works and there would be no problem at all if the political sphere and the scientific sphere were strictly kept apart. However, this is not the case with economics. Economists claim to do science but instead push a political agenda. Economics is the worst scientific failure of modern times. So, the profession’s claim to do science as expressed in the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud. Economists are not scientists but useful political idiots.#2

The scientific mission of economics is to figure out how the monetary economy works. Economists have failed at this task. Instead of figuring out the mechanics of the economic system, they have exhausted themselves with pointless speculation about Human Nature/motives/behavior/action. The point is, though, that Human Nature/motives/ behavior/action is the subject matter of Psychology, Sociology, Anthropology etcetera. That is, economists have never understood what their subject matter is. The scientific fact of the matter is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that all get the foundational concept of the subject matter ― profit ― wrong. MMT is no exception.#3

And this makes it inevitable that economic debates degenerate in the shortest possible time to folk-psychological sitcom blather. Explanations do not consist of the identification of objective economic relationships but of speculation about subjective motives/emotions which, in turn, boil down to hate, revenge, resentment, greed, imperiousness, and other psychological/social pathologies. Thus, economics leaves the scientific sphere and ends in PsySoc blather.

The current Mainstream vs MMT debate is no exception. Each side accuses the other of stubborn groupthink. This psychological explanation is beside the point. Each side pushes a political agenda. The lethal defect of economics is not cognitive impairment but political corruption.

In order to get out of the mess, the first thing to do is to proceed from PsySoc blather to science. MMT has to be rejected because it is materially/formally inconsistent. The lethal blunder of MMT is located in the foundational sectoral balances equation (I−S)+(G−T)+(X−M)=0. Because there is a crack in the foundations the whole analytical superstructure of MMT is scientifically untenable. #4, #5

MMT has not to be flushed down the drain because some random moron hates it or because some academic loudspeakers suffer from groupthink but because MMT is provably false, i.e. does not satisfy the scientific criteria of material/formal consistency. This is how science works. Economists, though, are to this day not guided by the principles of science.#6

Noone hates MMT but everyone despises stupid/corrupt economists.

Egmont Kakarot-Handtke


* GMO, James Montier, Why does everyone hate MMT.
#1 See also Bill Mitchell Fake surveys and Groupthink in the economics profession.
#2 For details of the big picture see cross-references Political Economics.
#3 MMT is better than mainstream economics but still not good enough.
#4 Refuting MMT’s Macroeconomics Textbook.
#5 For the full-spectrum refutation of MMT see cross-references MMT.
#6 For details of the big picture see cross-references Failed/Fake Scientists.

Related 'Economics: the honeypot for know-nothings' and 'MMT vs WSJ: Another futile exercise in moron bashing' and 'Meet the MMT smart arses' and 'The retirement of a fake scientist and real agenda pusher' and 'The clock runs down on economics' and 'Too much ado about deficit spending' and 'MMT-Refutation for Dummies'. For details of the big picture see cross-references Not a Science of Behavior.

March 25, 2019

MMT vs WSJ: Another futile exercise in moron bashing

Comment on Bill Mitchell on ‘The mainstream old guard tell it as it is ― and how different that is to MMT’

Blog-Reference and Blog-Reference

Bill Mitchell first comments on actual economic trends and how they refute mainstream economics and confirm MMT. Then he turns to a recent Op-Ed about MMT in the Wall Street Journal: “The problem with Martin Feldstein, mainstream economist, and sometime film actor, is that the record has been stuck for decades and he doesn’t see to get that all he produces is noise.”

To complain about the noise production of economists is either naive or insincere. It is common knowledge that the Wall Street Journal is not an organ for the dissemination of scientific truth but that it is the Pravda of the Oligarchy. And it is common knowledge that academics who Op-Ed in the mainstream media are fake scientists who fit Lenin’s definition of useful idiots. The mission of these folks is not enlightenment but entertainment, disinformation, agenda-pushing, opinion-leading, and the instigation of argumentative dog fights.

Of course, not one of the Op-Ed trolls from Feldstein to Krugman can be taken seriously. That is not at all the problem. The problem with these folks is that they abuse and corrupt the reputation of science.

What gets lost in the actual MMT vs Mainstream noise is that economics is not a science, to begin with and that both MMT and the Mainstream is proto-scientific garbage. Worse, what gets lost is that the four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that all get the foundational concept of the subject matter ― profit ― wrong.

Because of this, all debates between the different camps are a ritualistic exchange of worn-out slogans and the outcome is predictable with absolute certainty: the status quo, i.e. the scientifically unacceptable but politically convenient pluralism of false theories, is secured for another day.#1

Of course, there are slight qualitative differences with regard to the degree of garbishness. MMT is clearly superior to mainstream economics because it is macrofounded.#2 Microfounded mainstream economics marks the absolute zero of scientific competence.

However, being superior to mainstream economics is not such a great feat because it is impossible to be worse.#3 Fact is that MMT, too, is axiomatically false.

From this follows that neither MMT nor Mainstream policy guidance has 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)

Economists do NOT have the true theory. Economics is a failed science. Economics is political agenda pushing. MMT is soapbox economics just like Walrasianism, Keynesianism, Marxianism, Austrianism.

The lethal blunder of MMT is located in the sectoral balances equation (I−S)+(G−T)+(X−M)=0. Bill Mitchell easily refutes the WSJ/NYT Op-Ed morons but it is impossible for him to refute the proof of the foundational inconsistency of MMT.#4, #5 When mainstream blatherers are debunked and the dust settles and the noise ebbs away it becomes clear that MMT is just another instance of the 200+ years old systemic corruption of economics by political agenda pushers.#6

Egmont Kakarot-Handtke


#1 Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems
#2 MMT is better than mainstream economics but still not good enough
#3 Debunking idiots does not prove that MMT is valid
#4 Refuting MMT’s Macroeconomics Textbook
#5 For the full-spectrum refutation of MMT see cross-references MMT
#6 Economists: “a bevy of camp-following whores”

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Wikimedia AXEC122b

March 23, 2019

Economists: “a bevy of camp-following whores”

Comment on David Glasner on ‘James Buchanan Calling the Kettle Black’

Blog-Reference and Blog-Reference on Mar 30

David Glasner cites James Buchanan: “The inverse relationship between quantity demanded and price is the core proposition in economic science, … Just as no physicist would claim that ‘water runs uphill,’ no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teachings of two centuries; we have not yet become a bevy of camp-following whores.”

The fact is that economists are since the founding fathers “a bevy of camp-following whores”. It is of utmost importance to distinguish between political 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 has to be judged according to the criteria true/false and NOTHING else. The history of political economics from Adam Smith onward can be summarized as an utter scientific failure. Theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. The different camps of political economics have produced NOTHING of scientific value in the last 200+ years. 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.

One of the most consequential failures is employment theory. From microfounded economics follows an inverse relationship between wage rate and employment. However, microfoundations are methodologically unacceptable. From the correct macrofoundations,#1 follows that there is a positive relationship between (average) wage rate and employment.#2, #3, #4, #5, #6

False theory leads to false policy guidance. With their defective microfounded employment theory, economists bear for 150+ years now the political responsibility for the social devastation of mass unemployment.

David Glasner concludes: “Buchanan was implicitly applying an inappropriate paradigm of price adjustment in a single market to the analysis of how wages adjust in the real world. The truth is we don’t have a good understanding of how wages adjust, and so we don’t have a good understanding of the effects of minimum wages. But in arrogantly and insultingly dismissing Krueger’s empirical research on the effects of minimum wage laws, Buchanan was unwittingly exposing not Krueger’s ideological advocacy but his own.”

Not quite right. Buchanan was exposing himself and his academic colleagues as incompetent scientists. Contrary to naive common sense, this is not at all a sorry fate. There are always excellent employment opportunities in the political sphere for failed/fake scientists. Lenin called them useful idiots.#7 False theories have great use-value in the political Circus Maximus where nobody cares much for scientific validity. Political economics does not work according to the principles of science. Fake scientists like Buchanan are sponsored by billionaires.#8 False theories are NOT eliminated in the peer-review process, just the opposite, they are eventually rewarded with the faux Nobel.

Since Adam Smith/Karl Marx economics claims to be a science. It is NOT. James Buchanan is not an example of an incompetent/corrupt outlier but the proof that economics has never been anything else than brain-dead political agenda-pushing.#9

Egmont Kakarot-Handtke


#1 From false microfoundations to true macrofoundations
#2 More on economists’ sticky brains
#3 Full employment through the price mechanism
#4 Employment theory as an example of proto-scientific soapbubbling
#5 Full employment, the Phillips Curve, and the end of Gaganomics
#6 Go! ― test the Profit and Employment Law
#7 The economist as stand-up comedian
#8 Lynn Parramore, Meet the Economist Behind the One Percent’s Stealth Takeover of America
#9 For details of the big picture see cross-references Political Economics/Stupidity/Corruption

Related 'Equilibrium and the violation of a fundamental principle of science' and 'Ground Control to David Glasner' and 'How economic thinkers think they think about interest' and 'Economics ― from attention and reputation management to science' and 'What’s wrong with Econ 101? Economists, of course!' and 'Equilirium' and 'The prime primer on equilibrium' and 'The Krugman curse' and 'NAIRU and economists’ lethal swampiness' and 'Modern macro moronism' and 'Sticky prices or sticky brains?' and 'Beware of the moralizing economist' and 'What is so great about cargo cult science? or, How economists learned to stop worrying about failure' and 'Econogenics in action' and 'Your economics is refuted on all counts: here is the real thing'.

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Twitter Feb 18, 2021



Twitter Jun 24, 2021 The default presumption is that economists are either directly or indirectly on the payroll of the Oligarchy.



Twitter Jul 1, Serge Benest, The Politics of Funding: The Rockefeller Foundation and French Economics, 1945-1955


Twitter 4 Jul Dark money




Jacobin 6 Jul, Doug Henwood, Take Me to Your Leader: The Rot of the American Ruling Class

March 22, 2019

Meet the MMT smart-arses

Comment on Kaivey on ‘Richard Murphy ― Steve Keen on MMT’*

Blog-Reference

The applause troll Richard Murphy introduces Steve Keen: “I think it fair to say that at a technical level you are quite right that Steve Keen is a smart arse: he is an incredibly intelligent man. … I don’t know Steve well, but I know well enough to be aware that what happens to the people and planet the matter to him, a great deal.”

The applause troll Kaivey introduces MMT: “MMT is a fantastic system for producing a fairer and wealthier society. Social democracy and capitalism can work together, strengthening both. We end up with far less suffering, a safer society, a well educated workforce producing wealth, less crime ― so less money spent on crime prevention ― more people in work, so the tax burden is spread more widely, less ill health ― because people are happier and less stressed ― and excellent infrastructure, etc. The job guarantee can get help people back into work, which won’t be a grind but an enjoyable social, work experience, and a way of meeting new people instead of being stuck at home with nothing to do. And the old and people with disabilities can get the help they require, and need never be lonely either. The countryside can be managed better, with any litter being cleaned up. …”

This, of course, are merely talking points for the MMT sales team. MMT claims to be a superior economic theory and therefore has to be seen against the background of present-day economics. The four 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 Economics is a failed science and MMT as a relatively young approach fits in this pattern. MMT is NOT a scientifically valid theory but political agenda pushing for the Oligarchy in a scientific/social bluff package.#2, #3, #4

Accordingly, MMTers and their supporters cannot be taken seriously. These folks are not so much smart-arses but either stupid or corrupt or both. For details about this motley crew of proto-scientific con artists see Stephanie Kelton,#5, #6 Richard Murphy,#7 Warren Mosler,#8 Ellis Winningham,#9 Bill Mitchell,#10 Lars Syll/Dirk Ehnts,#11 Clint Ballinger,#12 Brian Romanchuk,#13 Steve Keen,#14.

Needless to emphasizes that scientific standards do not exist for economists in general and MMTers, in particular.#15, #16, #17

Egmont Kakarot-Handtke


* Tax Research UK
#1 To this day, economists have produced NOT ONE textbook that satisfies scientific standards
#2 MMT is better than mainstream economics but still not good enough
#3 Refuting MMT’s Macroeconomics Textbook
#4 For the full-spectrum refutation of MMT see cross-references MMT
#5 The Kelton-Fraud
#6 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#7 Richard Murphy: the MMT fraudster dressed up as realist
#8 MMT: The one deadly error/fraud of Warren Mosler
#9 A clueless MMTer explains macroeconomics to clueless beginners
#10 Bill Mitchell, MMT’s fake scientist
#11 The public-debt and private-profit pushers
#12 What and where is profit?
#13 Economics: How to stop mental pollution and global dumbing
#14 Where advanced Heterodoxy — represented by Steve Keen — took the wrong turn
#15 Economists/MMTers: agenda pushers, distractors, blockers, muters, censors
#16 Economics: The proto-scientific mob embroiled in just another gang war
#17 Economics: 200+ years of scientific incompetence and fraud

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REPLY to Kaivey on Mar 23

You say: “Let’s assume all Businesses make 5% profit.”

That is your problem: you have no macroeconomic theory, to begin with, and therefore you have no idea how a 5% profit comes about.

The first question of economics is this: “How can they [the capitalists] continually draw 600 p. st. out of circulation, when they continually throw only 500 p. st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.” (Marx)

Marx did not answer the question correctly and neither did Walrasians, Keynesians, Austrians, and MMTers.#1 What all these fake scientists lack for a proper analysis are the correct macrofoundations.

The correct macrofoundations are given with this axiom set: (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.

So, if the total wage income of the household sector Yw is 100 in a given period and the household sector spends all on consumption C=Yw, then the macroeconomic profit of the business sector Q≡C−Yw is zero. It does not matter whether there is full employment or unemployment. Profit is zero at any employment level.#2

If the total wage income of the household sector is 100 and the household sector spends C=105 on consumption then there is a one-off price hike and the profit of the business sector is 5. This is how the business sector makes a 5% profit. Profit comes from deficit-spending/dissaving of the household sector. The macroeconomic Profit Law says Q≡−S for the most elementary case.

This is in essence how the monetary economy works. And economists including MMTers don’t get it to this day.#3

If the total wage income of the household sector is 100 and the household sector spends all on consumption and the government sector applies deficit-spending/money-creation of 5, then there is a one-off price hike and the profit of the business sector is 5.

If the total wage income of the household sector is 100 and the household sector spends all on consumption and if the government sector puts hitherto unemployed to work for cleaning up the environment and pays them 5 and these additional workers fully spend their income on the unchanged output O of consumer goods, then there is a one-off price hike and the profit of the business sector is 5.

Note well that this deficit-spending/money-creation has to be repeated in subsequent periods, otherwise, employment and profit fall back to their initial levels. This has the effect that public debt grows continuously. The mirror image of growing public debt is the growing financial wealth of the Oligarchy. This is what the smart-arse MMT policy of deficit-spending/money-creation amounts to.#4, #5

There is a better way to achieve full employment.#6


#1 The Profit Theory is False Since Adam Smith
#2 Essentials of Constructive Heterodoxy: Employment
#3 Refuting MMT’s Macroeconomics Textbook
#4 Keynes, Lerner, MMT, Trump, etc. and exploding profit
#5 MMTers make Capitalism work
#6 Full employment through the price mechanism

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REPLY to Kaivey on Mar 23

You say: “Richard Wolff says the capitalists have to mark up prices more than they cost to produce, and so the wages of the wages will never be enough to buy all the products they make, and this leads to unemployment and poverty.”

To recall, the elementary production-consumption economy is for a start defined by three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw), and two definitions (Q≡C−Yw, S≡Yw−C).

Given the two conditions, (i) the market-clearing price is P=W/R (= macroeconomic Law of Supply and Demand), and (ii), monetary profit Q is zero because of C=Yw (= macroeconomic Profit Law).

The Law of Supply and Demand says that the price P is the dependent variable. On the other hand: “Richard Wolff says the capitalists have to mark up prices …”

In this case, the price is NOT the dependent variable but the independent variable. By consequence, the quantity variable has to adapt. So, the condition of market-clearing X=O has to be skipped. With a markup price P>W/R, the business sector obviously can no longer sell the whole output, i.e. X<O, and the stock of unsold output accumulates. Profit, though, is still zero because of C=Yw.

Markup pricing does NOT produce a higher profit only a higher inventory. This, of course, is not a stable situation. If the business sector reduces employment this only slows down the growth of inventory. The economy is in a death spiral.

The methodological point is that economists cannot make up their minds between two incompatible models (i) market-clearing and price as dependent variable, (ii) markup price-setting and change of inventory as dependent variable. Supply-demand-equilibrium Walrasians and markup Keynesians simply blather past each other in all eternity.

The upshot, however, is, that all this has no bearing on profit because profit Q depends alone on deficit spending, i.e. on C>Yw.

MMTers, though, have not realized anything. The proof is in the MMT sectoral balances equation which reads (I−S)+(G−T)+(X−M)=0. In this equation, the balance of the business sector Q ― the key variable of Capitalism ― is missing. Not so smart, the MMT smart-arses.

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REPLY to Calgacus on Mar 24

You say: “As the Robinson-Kalecki saying goes, Workers spend what they get. Capitalists get what they spend. And the last includes capitalist, rentier spending on taxes. The tax take has to be put back into the economy or there will be unsustainable surpluses and depressions.”

The first point to notice is that the Kalecki profit equation is provably false.#1, #2

Secondly, you do not properly differentiate between wage income Yw and distributed profit income Yd. Roughly speaking, wage income goes to the ninety-nine-percenters, distributed profit income goes to the one-percenters.

It is generally agreed since Kalecki that the spending out of wage income is proportionally higher than spending out of distributed profit income. So, let us assume that the taxation of wage income is reduced and the taxation of distributed profit is increased by the same amount such that total taxes remain unchanged.

Because of the different spending propensities, the increase of spending of the ninety-nine-percenters is higher than the reduction of spending of the one-percenters and the net effect is an increase of overall demand which has a positive employment effect. So there will NOT be “unsustainable surpluses and depressions”.

The fact that tax-the-rich has before AOC not been a prominent element of MMT economic policy guidance#3 is another indicator that MMTers are, contrary to their social rhetoric, agenda pusher for the Oligarchy.

Your attempt to psychologically defuse the tax-the-rich issue is not very convincing: “Sure progressive taxation is good, but what is really important is the job guarantee, the spending on the non-rentiers. That is what the rentiers hate above all, above progressive taxation.”

You are in line with Bill Mitchell: “The ‘tax the rich’ call bestows unwarranted importance on them.” So MMTers, let’s forget taxation and return to our main job, i.e. to crank up deficit-spending/money-creation and thereby profit.

You say: “The rentiers and the MMTers are the only ones who understand what’s going on.” Yes, these smart-arses are well aware that Public Deficit = Private Profit.


#1 Truth by definition? The Profit Theory is axiomatically false for 200+ years
#2 The axiomatically correct macroeconomic Profit Law is given by Q≡Yd+(I−S)+(G−T)+(X−M) with Q as monetary profit and Yd as distributed profit income.
#3 MMT: Distribution is the drawback NOT Inflation

March 21, 2019

MMT is better than mainstream economics but still not good enough

Comment on James Galbraith on ‘Is there a better model to explain economics in the Trump era?’*

Blog-Reference

MMT now gets the eagerly awaited attention and James Galbraith jubilates: “A specter is haunting mainstream economics. It is the specter of . . . modern monetary theory? So recent essays from Harvard luminaries Kenneth Rogoff and Lawrence Summers attest. For Rogoff, MMT is ‘just nuts,’ ‘folly,’ and ‘nonsense.’ For Summers, MMT adherents are ‘fringe economists’; their ideas are ‘voodoo,’ or what is worse, ‘supply-side economics.’ The flood of invective suggests that the two professors feel a threat. Probably not to themselves, but to the orthodoxies they represent and uphold.”

Whether the loudspeakers of mainstream economics feel threatened or not is a matter of indifference because nobody takes them seriously anyway. Nobody with more than two brain cells, that is.

Then, James Galbraith remembers that economics is not a propaganda exercise but a science: “Is something, perhaps, wrong with the mainstream’s models?”

This is a rhetorical question because it is well-known that mainstream economics is long dead. Among all blunders in modern science, economics is the worst. It has never been anything else than what Feynman called a cargo cult science.

The foundational blunder of economics is microfoundations.#1 Microfounded approaches are worthless from Walras/Jevons/Menger onward to DSGE and New Keynesianism. However, the majority of economists has not realized anything.

Keynes has to be credited for realizing that economics needs a Paradigm Shift from microfoundations to macrofoundations. James Galbraith emphasizes: “MMT is built on the work of John Maynard Keynes and Hyman Minsky. A core insight is that money in ‘modern States’ ― meaning, as Keynes wrote, for the ‘past four thousand years at least’ ― is defined by government.”

This is accurate. However, under a broader perspective, one cannot fail to realize that Keynes messed up the move from micro to macro. MMT inherited Keynes’ macro blunder which is encapsulated in the sectoral balances equation (I−S)+(G−T)+(X−M)=0.#3

James Galbraith summarizes: “MMT is about the way the world actually works.#4 It explains why big deficits do not drive up interest rates or ‘crowd out’ private investment, and why big governments in big countries don’t go bankrupt. … So I admire and support the MMT group, which is voicing a powerful common sense in the face of grumpy resistance.”

The keyword is common sense. Mainstream economics is so idiotic that it can be beaten by common sense. At this point, though, the superiority of MMT ends already.

Because of false macrofoundations, Keynesianism, Post-Keynesianism, and MMT are scientifically worthless. The foundational MMT sectoral balances equation is false because it lacks the balance of the business sector. Because profit is false, the whole of MMT is false, and because the theory is false, MMT policy guidance has no sound scientific foundations.#5

Egmont Kakarot-Handtke


* Boston Globe
#1 Microfoundations are given with this axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)
#2 The correct macrofoundations are given with this axiom set: (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.
#3 Refuting MMT’s Macroeconomics Textbook
#4 Keynes, Lerner, MMT, Trump, etc. and exploding profit
#5 Hype does not help: MMT is toast

March 20, 2019

The public-debt and private-profit pushers

Comment on Lars Syll/Dirk Ehnts on ‘Public debt — a macroeconomic necessity’

Blog-Reference and Blog-Reference

Dirk Ehnts argues: “The problem stems from the fact that the affluent, which include successful entrepreneurs and capital owners, save relatively more than average or poor households … For this to work out, additional demand would have to be created … The implication of this is that there’s a macroeconomic requirement to run public deficits, founded on a demand gap that arises from households and firms wanting to set aside savings in the form of money … This demand gap cannot be closed but by an increase in government spending and hence debt.”

This is at best a half-truth.

The macroeconomic Profit Law is given by Q≡Yd+(I−S)+(G−T)+(X−M). In order to focus on the interaction between the household sector and the government sector, it is here reduced to Q≡−S+(G−T). Legend: Q macroeconomic profit, S household sector saving, G government expenditures, T taxes.

If the government’s budget is balanced, i.e. G=T, and if the households dissave, i.e. S≡Yw−C<0 Legend: Yw wage income, C consumption expenditures, then the business sector makes a profit, i.e. Q is positive. This is a sustainable situation for the business sector, however, since the household sector’s debt grows, it all depends on how long this can go on which, in turn, depends on the institutional make-up of the banking sector.

If the government’s budget is balanced, i.e. G=T, and the households save, i.e. S≡Yw−C>0, then the business sector makes a loss, i.e. Q is negative. This is not a sustainable situation.

However, if the government’s budget deficit, i.e. (G−T)>0, is equal to the household sector’s saving, i.e. (G−T)=S, then macroeconomic profit Q is zero. This is the minimum condition for the market economy to function. If the government’s deficit is greater than household sector saving, then the business sector makes a profit. This is a sustainable situation for the business sector, however, since the government sector’s debt grows, it all depends on how long this can go on. MMTers claim that, as a matter of principle, sovereign debt can grow indefinitely.#1

So, government deficit spending in excess of household sector saving, i.e. (G−T)>S, makes that overall profit is positive and this prevents the breakdown of the market economy. In other words, the so-called free market economy hangs on the life-support of the State. In still other words, fabulous financial wealth is the mirror image of fabulous public debt ($22 trillion).

It is correct to say that a minimum government deficit, i.e. (G−T)=S, is necessary in order to secure the very existence of the market economy. From a systemic standpoint, the historically evolved economic system has a serious construction flaw. And the claim of the free-market champions that the State should keep out of the economy is suicidal stupidity.

However, as far as the government deficit exceeds saving, i.e. (G−T)>S, this amounts to a free lunch for the Oligarchy. So, in the final analysis, the MMT policy of permanent deficit-spending/money-creation does NOT benefit WeThePeople but the Oligarchy.#2

The public-debt pusher Lars Syll/Dirk Ehnts either do not understand macroeconomics#3 or they are two of Wall Street’s many academic trolls.#4

Egmont Kakarot-Handtke


#1 Some nasty MMT surprises behind the time horizon
#2 MMT Progressives: stupid or corrupt or both?
#3 Keynesians ― terminally stupid or worse?
#4 MMT: The fusion of Wall Street and Academia

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Twitter WEF Mar 22

March 18, 2019

To this day‡, economists have produced NOT ONE textbook that satisfies scientific standards

Comment on Peter Dorman on ‘Introductory Econ Textbooks: A Different Take on the Issues’

Blog-Reference and Blog-Reference and Blog-Reference Mar 19 and Blog-Reference Mar 22

Peter Dorman summarizes: “Mankiw lays out three alternatives, teaching the mainstream and suppressing your own views, teaching minority or fringe views (i.e. your own), or not teaching introductory econ at all. … Whenever possible, I point out where other disciplines differ, and while I encourage students to judge for themselves, I don’t pressure them into adopting any one point of view. This is called critical thinking, and it barely exists in the world of economics textbooks, which proselytize shamelessly.”

No, this is NOT critical thinking. This is post-modern anything-goes, i.e. the pluralism of provably false theories. Economics is scientifically indefensible: “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)

And this is the crux of the matter: economists do not have the true theory. This is where we stand today: provably false
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

Economics is what Feynman called a cargo cult science and the textbooks reflect this. Economics is in need of a Paradigm Shift.#1 Since Samuelson started the textbook industry in 1948, economists have produced NOT ONE textbook that satisfies scientific standards.#2 Since generations, economics students swallow proto-scientific garbage without batting an eyelid. Not very smart, these folks.#3

Needless to emphasize that there have been multiple attempts to improve the situation. The latest initiative comes from MMT. MMT claims to be the new approach that beats failed Orthodoxy. This is accurate with regard to the long-overdue shift from microfoundations to macrofoundations. Microfounded approaches are dead already since Walras/Jevons/ Menger.#4 The problem is that economists messed up the shift from microfoundations to macrofoundations.

MMT is NO exception. And the proof is in the new MMT Textbook, more specifically in the premises of MMT.#5 The premises are laid out on pp. 13-16 and pp. 83-86.

“One of the most basic propositions in macroeconomics that MMT emphasizes is the notion that at the aggregate level, total spending equals total income and total output.” (p. 14)

Unfortunately, the most basic proposition in macroeconomics is false since Keynes, and MMTers have not realized it to this day. Here is the short proof that economists in general and MMTers, in particular, get the elementary mathematics that underlies macroeconomics wrong.

(i) The elementary production-consumption economy is given by 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 expenditure C is equal to price P times quantity bought/sold X.

(ii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. X=O.

(iii) The monetary profit of the business sector is defined as Q≡C−Yw,

(iv) The monetary saving of the household sector is defined as S≡Yw−C.

(v) Ergo Q≡−S.

The balances add up to zero. The counterpart of household sector saving S is business sector loss −Q. The counterpart of household sector dissaving (-S) is business sector profit Q. Both Q and S are measurable with the precision of two decimal places.

For the elementary investment economy holds Q≡I−S. For the elementary investment economy plus government holds Q≡(I−S)+(G−T). And so on with growing complexity.*

In sum: (1) profit is NOT income, i.e. a flow, but a balance, i.e. the difference of flows,#6 (2) distributed profit Yd is income and adds up with wage income Yw to total income, (3) total income is NEVER equal to total spending, (4) in the most elementary case, the difference between total spending of the household sector C and total wage income Yw is saving/dissaving, (5) profit/loss of the business sector is the mirror image of dissaving/ saving of the household sector, i.e Q≡−S, (6) saving and investment are causally INDEPENDENT and NEVER equal, (7) all I=S/IS-LM models are false since Keynes/Hicks, (8) Keynesianism, Post-Keynesianism, New Keynesianism and all variants are scientifically worthless, (9) the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is false because it lacks the balance of the business sector Q, (10) because profit is false, the whole of MMT is false, (11) because the theory is false, MMT policy guidance has no sound scientific foundations.

What holds for the new MMT Textbook holds mutatis mutandis for ALL predecessors including Peter Dorman’s Microeconomics and Macroeconomics: A Fresh Start.

Egmont Kakarot-Handtke


#1 New Economic Thinking: The 10 crucial points
#2 The father of modern economics and his imbecile kids
#3 There is NO such thing as “smart, honest, honorable economists”
#4 The problem with macro in two words
#5 William Mitchell, L. Randall Wray, and Martin Watts Macroeconomics
#6 The Profit Theory is False Since Adam Smith

Related 'False on principle' and 'Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist' and 'Nothing to choose between Orthodoxy and traditional Heterodoxy' and 'Heterodoxy ― an axiomatic failure just like Orthodoxy' and 'Economists’ three-layered scientific incompetence' and 'Textbooks and the mental cloning of dumb economists' and 'Refuting MMT’s  Macroeconomics Textbook' and 'Economics textbooks ― tombstones at the Flat-Earth-Cemetery' and 'All behavior-based economic textbooks are false' and 'Occasional Tweets #210103: Economics textbooks to throw away' and 'The new economic Paradigm requires a new textbook'.


Wikimedia AXEC143d


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REPLY to Barkley Rosser on Mar 19

Above, Peter Dorman recounts: “We just saw a ‘Nobel’ prize awarded to an economist, Bill Nordhaus, whose primary claim to fame is an application of the welfare framework to climate change. Nearly every economist working on climate issues adopts the same approach. It would not be an exaggeration, however, to say that the vast majority of climate scientists regard their work as nuts.”

It is a plain fact that economics textbooks are the main medium for the faithful reproduction of nutters.#1

Everybody who ever accepts microfoundations#2 and supply-demand-equilibrium proves conclusively his scientific incompetence.

As Hahn put it in 1980: “I often wonder whether other subjects suffer as much from textbook writers.” Certainly not, because in the genuine sciences nutty textbook writers like Samuelson are not awarded fake Nobels.


#2 Microfoundations are given with this or a similar behavioral axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

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‡ "To this day" means precisely June 25, 2020. See Amazon.de, BoD, Amazon.com, etc.

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Twitter Jan 19, 2020


Economics: The proto-scientific mob embroiled in just another gang war

Comment on William Black on ‘The Day Orthodox Economists Lost Their Minds and Integrity’

Blog-Reference and Blog-Reference

William Black tells the world: “Something extraordinary happened yesterday. Orthodox economists, frustrated by their inability to intimidate progressive elected officials, have launched a coordinated assault on MMT in hopes of making it politically dangerous for elected officials to embrace MMT. Yesterday brought three remarkable revelations about orthodox economists’ willingness to engage in naked intellectual dishonesty in their desperation to find something to discredit MMT.”

This, of course, is risible because economists’ “naked intellectual dishonesty” is nothing new. In fact, it is their modus operandi for 200+ years now.#1, #2, #3 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. There is NO scientific truth in economics.#4

And there are no joint efforts to do serious research and to develop the true theory about how the economy works but there is endless meta-communication.#5

• “The orthodox ‘scholars’ have found it impossible to quote MMT scholars writing something that is demonstrably false. It is child’s play …, however, for an orthodox economist to create a strawman claim that is obviously, demonstrably false.”

• “Yesterday, dozens of orthodox economists, many of them prominent, collectively lost their minds and their integrity. They coordinated their actions to create a show trial that would have warmed Stalin’s spleen.”

• “The results of that natural experiment are spectacular ― a large group of the world’s prominent economists failed the test of honesty and competence even though the test set such a low bar that they should have passed it without discernible effort.”

• “Wolfers’ dishonesty spurred Paul Krugman to tweet a level of calculated dishonesty that exceeds the term ‘disgraceful’.”

• “Every aspect of Krugman’s chutzpah is logically false, dishonest, immoral, and wackiness of epic proportions.”

This is a lot of hot air. The fact of the matter is that BOTH orthodox New Keynesians and heterodox MMTers are scientifically incompetent. Krugman has not realized that IS-LM is false since Keynes/Hicks.#6 MMTers have not realized that their foundational sectoral balances equation is false since Keynes.#7, #8

William Black is right with regard to Krugman et al.: orthodox economists are stupid/ corrupt. The same, though, holds for MMTers.#9

Egmont Kakarot-Handtke


#1 The retirement of a fake scientist and real agenda pusher
#2 There is NO such thing as “smart, honest, honorable economists”
#3 Feynman Integrity, fake science, and the econoblogosphere
#4 Links on capital-T Truth, stupidity, corruption
#5 Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems
#6 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#7 Refuting MMT’s Macroeconomics Textbook
#8 Paul’s and Stephanie’s economic delirium talk
#9 For the full-spectrum refutation of MMT see cross-references MMT

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Wikimedia AXEC144b


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#PointOfProof
Mar 18

March 16, 2019

Where MMT goes off the rails

Comment on Lars Syll on ‘MMT — modern monetary realism’*

Blog-Reference and Blog-Reference

“MMT is not, as its opponents seem to think, primarily a set of policy ideas. Rather, it is essentially a description of how a modern credit economy actually works – how money is created and destroyed, by governments and by banks, and how financial markets function. … Governments create money by spending and extinguish it via taxation.” (J. K. Galbraith)

This is not quite correct. It is the Central Bank that creates/destroys money. Roughly speaking, there are two ways of bringing money into the (closed) economy, (i) by financing the wage bill of the business sector, (ii) by deficit-spending of the household- or government sector.

The unhindered creation of fiat money for the payment of the wage bill is the correct way of bringing money into the economy. MMT’s government deficit-spending is the incorrect way. Why? Because of the macroeconomic Profit Law, it holds Public Deficit = Private Profit, in other words, bringing money at the demand side into the economy creates a free lunch for the Oligarchy.

In the most elementary case, transaction money is created by wage payments and destroyed by consumption spending.#1

MMT theory is provably false.#2, #3 Because of this, MMT policy guidance has NO sound scientific foundations. Because of the macroeconomic Profit Law, i.e. Public Deficit = Private Profit, MMT policy serves the Oligarchy. Fabulous financial wealth is the mirror image of fabulous public debt ($22 trillion).

MMT is NOT a scientifically valid theory but political agenda pushing for the Oligarchy in a scientific/social bluff package.#4

Egmont Kakarot-Handtke


* Project Syndicate
#1 From MMT misunderstandings to the true Theory of Money
#2 The half-truths and half-falsehoods of MMT
#3 Refuting MMT’s Macroeconomics Textbook
#4 For the full-spectrum refutation of MMT see cross-references MMT

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REPLY to Bob Roddis on Mar 17

“MMT is not, as its opponents seem to think, primarily a set of policy ideas. Rather, it is essentially a description of how a modern credit economy actually works …” (J. K. Galbraith)

MMT is an economic theory and the point at issue is whether it is true or false.

You answer a scientific question with your personal political credo: “Libertarian mantra: Completely abolish the initiation of violence.”

Politics and science have to be strictly kept apart because the former always corrupts the latter.

Austrians are excluded from any scientific discussion because they are too stupid to understand that there is a crucial qualitative difference between science and political blather.

Austrianism and MMT are scientifically worthless. And more is not to say about the whole matter.

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REPLY to Ralph Musgrave on Mar 18

“For the umpteenth time, Axec trotts out his moronic ‘law’, i.e. that ‘Public Deficit = Private Profit’ which apparently means that all deficit dollars end up in the pockets of the super rich. Since when does 100% of an increase in demand for the products of a particular firm, or sector of the economy or for the products made by the economy as a whole end up in the pockets of the rich?”

You would not ask this question if you had done your macroeconomic homework.

► Essentials of Constructive Heterodoxy: Profit
► Essentials of Constructive Heterodoxy: Employment
► Go! ― test the Profit and Employment Law

This is how deficit spending works in the most elementary case. If the total wage income of the household sector is 100 in a given period and the household sector spends all on consumption, then the macroeconomic profit of the business sector is zero. If the total wage income of the household sector is 100 and the household sector spends all on consumption and the government sector applies deficit-spending/money-creation of 10, then there is a one-off price hike and the profit of the business sector is 10. Generalization: Public Deficit = Private Profit.#1

Easy to understand if one has more than two brain cells.


#1 For the interrelationship of the macroeconomic Profit- and Employment Law see Wikimedia

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Wikimedia AXEC107f


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REPLY to Bob Roddis on Mar 18

Violence is the subject matter of Psychology/Sociology. Economists are supposed to know how the economy works.#1 So, you should be able to say which of the two sectoral balances equation is true/false?
(i) (I−S)+(G−T)+(X−M)=0
(ii) (I−S)+(G−T)+(X−M)−(Q−Yd)=0

You know nothing about economics. This is not exactly a qualification for Psychology/ Sociology or anything else.