Blog-Reference and Blog-Reference Mar 14 and Blog-Reference
MMT is, of course, accurate as far as the refutation of Orthodoxy/Neoclassics is concerned. Standard economics is scientifically indefensible. There is no need for further discussions about the current state of economics. 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.
However, the critique of Orthodoxy has run its course: “… it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)
MMT claims to be a new theory that beats Orthodoxy. This is accurate with regard to the shift from microfoundations to macrofoundations. Microfounded approaches are dead already since Walras/Jevons/Menger. The problem is that economists in their incurable scientific incompetence messed up the indispensable Paradigm 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. It holds what Keynes observed with regard to Orthodoxy: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.”
The premises of MMT Macroeconomics are laid out on pp. 13-16 and pp. 83-86.
“By placing government, as the currency issuer, at the centre of the monetary system, the MMT approach immediately focuses on how a government spends, and how this spending influences … macroeconomic aggregates …” (p. 13)
This is methodologically false. Macroeconomics starts with what Keynes called the ‘monetary theory of production’. The most elementary economy consists of the household sector, the business sector, and the central bank. Government and foreign trade are included at a later stage. For the central bank holds that it “can never run out of its own currency.”
“One of the most basic propositions in macroeconomics that MMT emphasizes is 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 until 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 (in simplyfied notation) 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's saving S is the business sector's 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). If I and S are taken out of the picture for a moment, one gets Public Deficit = Private Profit.
In sum: (1) profit is NOT income, i.e. a flow, but a balance, i.e. the difference of flows, (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.#1
MMT theory is provably false. MMT policy serves the Oligarchy. Since Samuelson started the textbook industry in 1948, economists have produced NOT ONE textbook that satisfies scientific standards.#2 For generations, economics students swallow proto-scientific garbage without batting an eyelid. Not very smart, these folks.#3
* Mitchell, Wray, Watts Macroeconomics
#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 The father of modern economics and his imbecile kids
#3 There is NO such thing as “smart, honest, honorable economists”
Related 'Macroeconomics: Drain the scientific swamp' and 'The miracle cure of economists’ micro-macro schizo' and 'Is Nick Rowe stupid or corrupt or both?' and 'Keynesians ― terminally stupid or worse?' and 'MMT = Modern Monetary Trash' and 'Both mainstream economics and MMT are axiomatically false' and 'DSGE and profit―forget it! MMT and profit―forget it!' and 'Fact of life: your econ prof is scientifically incompetent' and 'Dear idiots, time to get saving and investment straight (II)' and 'Both mainstream economics and MMT are axiomatically false' and 'The Levy/Kalecki Profit Equation is false' and 'Wikipedia and the promotion of economists’ idiotism (I)' and 'Wikipedia and the promotion of economists’ idiotism (II)' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'MMT and the magical profit disappearance'. For details of the big picture see cross-references Econ 101/Old Curriculum/New Curriculum and cross-references Accounting.
***REPLY to Brian Romanchuk on Mar 14
You ask: “Have you managed to convince anyone that your definition, oops, “axiom,” [sic.] of profits is correct?”
The ‘axiom of profits’ exists only in your confused mind.
The macroeconomic AXIOMS are enumerated above under (i). The profit DEFINITION is given under (iii). There is a difference between axiom and definition.#1
There is also a difference between ‘to refute’ and ‘to convince’. Bill Mitchell and you are REFUTED and whether you are convinced of it is a matter of indifference. Nobody has any ambition to convince methodologically undereducated Flat-Earthers.#2 Refutation is sufficient.
#1 From false micro to true macro: the new economic paradigm
#2 Post Keynesianism, science, and universal idiocy
REPLY to Brian Romanchuk on Mar 15
You ask: “So, you have no links to *anyone* who agrees with you? These paradigm shifts are pretty darn slow, eh?”
The point at issue is: “One of the most basic propositions in macroeconomics that MMT emphasizes is is the notion that at the aggregate level, total spending equals total income and total output.” (Mitchell et al., p. 14)
This “most basic proposition” is provably false.#1 Because of this, the whole analytical superstructure is false. Because of this, MMT is proto-scientific garbage. Because of this, MMT policy has NO sound scientific foundations. Because of this, MMT is a political fraud.
The ‘most basic propositions’ are called axioms in methodology: “The attempt is made to collect all the assumptions, which are needed, but no more, to form the apex of the system. They are usually called the ‘axioms’ (or ‘postulates’, or ‘primitive propositions’; …). The axioms are chosen in such a way that all the other statements belonging to the theoretical system can be derived from the axioms by purely logical or mathematical transformations.” (Popper)#2
As Aristotle put it: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”
This was 2300+ years ago, however, economists in general and you, in particular, still don’t get it. Indeed, pretty darn slow, these economists.
The point at issue is that MMT is proto-scientific garbage and that MMTers are either stupid or corrupt or both. The new MMT Macroeconomics Textbook is the incontrovertible proof.
It holds as a general rule: The time it takes economists to realize that they are refuted on all counts is a simple metric of their scientific incompetence.#3
REPLY to Brian Romanchuk on Mar 16
There is only one question to answer: Which sectoral balances equation is true/false?
If you cannot answer this question you are unfit for economics/science. This, of course, holds also for the authors of the new MMT Macroeconomics Textbook.
There is no need for you to wreck your tiny brain with writing “a text that may be labelled a ‘review’”. Here is the final evaluation of William Mitchell, L. Randall Wray, and Martin Watts’s Macroeconomics: proto-scientific garbage.
Wikimedia AXEC128, AXEC129mch The Humpty Dumpty Fallacy