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
* 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
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
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.
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