Blog-Reference and Blog-Reference
Murray Rothbard argued: “In short, what can help a depression is not more consumption, but, on the contrary, less consumption and more savings (and, concomitantly, more investment).”
Charlie Price argued: “… you can’t create investment by saving. In fact, attempts at saving will reduce investment.”
Keynes argued: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63).
Here is the short proof that economists are to this day too stupid for the elementary mathematics that underlies macroeconomics.
(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=0 or 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.
From (v) follows immediately that saving is NEVER equal to investment.#1, #2, #3, #4
For the elementary investment economy holds Q=I−S. From this follows that (1) saving and investment are causally INDEPENDENT and NEVER equal, (2) all I=S/IS-LM models are false since Keynes/Hicks, (3) Keynesianism, Post-Keynesianism, New Keynesianism and all variants are scientifically worthless, (4) the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is provably false, (5) by consequence, the whole of MMT is false.
Lacking sound scientific foundations on both sides, the Krugman/Kelton debate is just one of those brain dead proto-scientific wrestling shows economists are known for since 200+ years.
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#2 Settling the Theory of Saving
#3 Squaring the Investment Cycle
#4 For details of the big picture see cross-references Refutation of I=S
Related 'Krugman vs MMT ― like the blind talking about colors' and 'Dear idiots, time to get saving and investment straight (I)' and 'Macro for dummies (I)' and 'Macro for dummies (II)' and 'Wikipedia and the promotion of economists’ idiotism (II)' and 'Keynes and the logical brilliance of Bedlam' and 'Either stupid or duplicitous' and '#DrainTheScientificSwamp'.