June 30, 2019

Opportunity cost ― another case of poor economic logic

Comment on John Quiggin on ‘Opportunity cost, MMT and public spending’*

Blog-Reference and Blog-Reference (Link)

Wikipedia says: “In microeconomic theory, the opportunity cost, or alternative cost, of making a particular choice is the value of the most valuable choice out of those that were not taken. In other words, opportunity that will require sacrifices. When an option is chosen from two mutually exclusive alternatives, the opportunity cost is the ‘cost’ incurred by not enjoying the benefit associated with the alternative choice. The New Oxford American Dictionary defines it as ‘the loss of potential gain from other alternatives when one alternative is chosen’. Opportunity cost is a key concept in economics, and has been described as expressing ‘the basic relationship between scarcity and choice’.” and “Thus opportunity cost requires sacrifices. If there is no sacrifice involved in a decision, there will be no opportunity cost. In this regard the opportunity costs not involving cash flows are not recorded in the books of accounts, but they are important considerations in business decisions.” and “The term was first used in 1894 by David L. Green in an article in the Quarterly Journal of Economics entitled ‘Pain Cost and Opportunity-Cost’.#1

It is pretty obvious from the sacrifice and pain verbiage that opportunity cost is a concept from and for mentally retarded masochists. So, let us get rid of folk psychology and rethink the objective economics of social choice. Because economics is NOT psychology what is needed first is a description of the monetary economy as a whole.

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 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 as the dependent variable is given by P=W/R. This is the macroeconomic Law of Supply and Demand. For the graphical representation see Wikimedia.#2


So, to begin with, there is not much choice. The elementary production-consumption economy produces one consumption good which is fully consumed in the period under consideration. Total labor input L is given. Macroeconomic profit is zero.

The price P is objectively determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R. The macroeconomic Law of Supply and Demand contains NO subjective element at all.

What about the subjective side? The workers would not spend their wage income C=Yw on the firm’s output if the product had no “utility” for them. Let us assume the economy consists of 1000 workers, then each one has a positive “utility” but since subjective “utility” is neither measurable nor comparable we are already here at the end of the road.

It is necessary that the workers translate their subjective “utility” into an objective reservation price P'. The subjective condition for buying the output of the firm is that the reservation price is higher than or at least equal to the market price, i.e. P'≥P. Choice is binary: buy if P'≥P otherwise do not buy. From the fact that all 1000 workers have bought the output, i.e. X=O, one can then conclude that their subjective reservation prices have at least been equal to the market price. The difference between the subjective reservation price and the objective market price, i.e. P'−P, is the subjective consumer rent per unit of output.

As a result, the elementary production-consumption economy is objectively and subjectively reproducible for the time being. Needless to emphasize that reservation prices can change quickly, after all, they are only in the head.

Now, the business sector invents a second product that is minimally different from the first. Say, product 1 has lemon taste and 2 has orange taste, otherwise, they are identical. Let us assume the business sector makes market research and finds out that 500 workers prefer the new product the others stay with lemon taste. The business sector adapts production accordingly.

The production alternatives follow with fixed total employment, i.e. L=L1+L2, directly from the axioms and are given by O1=R1L−R1/R2 O2. For the graphical representation see Wikimedia.#2


In the initial period with only one product, the economy was at the position A. After the introduction of the second product the economy is at position B. The economy disappears at A and reappears in the next period at B, it does NOT move from A to B. Total employment, wage rate, total wage income, productivities, etc. remain unchanged, the only thing that is different is the composition of output. The respective prices are Pl=W/R1 and Po=W/R2 with R1 and R2 equal for simplicity.

The subjective valuation of the lemon-taste group remains unchanged, all individual reference prices Pl' with Pl'≥Pl (= buy) from 1 to 500 stay put and the reference price for the new product is Po'<Po (= don’t buy).

The subjective valuation of the orange-taste group is accordingly Po'≥Po (= buy) from 501 to 1000 and Pl'<Pl (= don’t buy) for the lemon taste product which was in the initial period valued with Pl'≥Pl.

So, the new output combination has a higher total subjective value than the old because the orange-taste group attaches a higher subjective value to the new product while the lemon-taste group stays put. Total labor input remains the same. It can be said that the additional option increases subjective value for the economy as a whole under the condition that both the firm and the workers are indifferent about whether lemon-taste or orange-taste output is produced.

The crucial point is that the orange-taste group sacrifices NOTHING because the old product is simply replaced by a new product with a higher subjective value. The economy as a whole jumps from a lower subjective valuation of total output to a higher subjective valuation of the new composition of total output. The switch from A to B involves NO sacrifice but increases total subjective value because the new product suits part of workers/consumers better.

Where, then, does the sacrifice thinking come from and why is it so plausible? Imagine a boy is sent to the supermarket with one dollar to buy a pot of yogurt for himself. The boy is confronted with the choice between strawberry and raspberry yogurt but cannot decide. So, he takes both, that is he enriches himself temporarily. The store manager makes it clear to him that with one dollar he can have only one pot and that he has to give back the other. This makes the boy think that choice involves a sacrifice. This sacrifice, though, is only imaginary. Generally speaking, sacrifice thinking comes from people who erroneously think that the best solution to the choice problem is to have both alternatives. For children this is natural, for grown-ups it is sociopathic.

Society can choose between A and B but with the choice of the subjectively better alternative, NO sacrifice is involved. The choice of B makes A impossible and the subjective value of A is, therefore, uno actu zero. What has no value cannot be sacrificed.

Egmont Kakarot-Handtke


* Crooked Timber
#1 Wikipedia Opportunity cost
#2 Wikimedia AXEC31 Elementary production-consumption economy
#3 Wikimedia AXEC154a Production alternatives

Related 'For MMT = For the Oligarchy' and 'No MMT illusions! YOU are going to pay for it' and 'MMT and the Green New Deal: Where is the snag? (I)' and 'The half-truths and half-falsehoods of MMT'.

June 27, 2019

Totally schizo ― MMT and policy

Comment on Bill Mitchell on ‘The European Union once again reveals why it should be dissolved’

Blog-Reference and Blog-Reference

Bill Mitchell, the MMT loudspeaker, does not get tired claiming that MMT is a scientific lens for seeing economic reality as it is and not a policy: “There is no MMT program!”. All this under the headline “Seize the Means of Production of Currency.”#1 Schizo!

Next, he flagellates the ECB and the europhile Left: “Yet, meanwhile, over in Frankfurt, the ECB is merrily funding government deficits ― totally in contravention of the European law, if was properly interpreted by the courts ― and they all turn a blind eye and create loopholes in the rules that allow them to do anything they want. And the Europhile progressives blithely carry on as if a few reforms are all that is needed to make this monstrosity a progressive paradise.”

However, last week he flagellated Mr. Weidmann for declaring that he intends to respect the law that defines the ECB’s mandate: “… we have to ensure that the prohibition of monetary financing is respected.”#2 Schizo!

It is pretty obvious that MMT is NOT a lens for seeing how the monetary economy works but a cover for political agenda pushing. As Tom Hickey reveals: “The Left is hopelessly lost, and that leaves the field to the Right to deal with neoliberalism. I am seeing less on economics and finance per se, and more on the political fight going on among different camps, including those that are promoting the MMT POV as the optimal way to approach policy. While am encouraged by the strides that MMT has made in breaking into the political ring, with the highly competent Stephanie Kelton is public face, the MMT position is as yet far from strong, since it is mostly allied with a Left that is fractured and largely incompetent.”

The problem is that the MMT policy guidance of deficit-spending/money-creation has NO sound scientific foundations#3 and that the “highly competent Stephanie Kelton” and other MMT academics are not Friends-of-the-People but stupid/corrupt agenda pushers for the Oligarchy.#4 Schizo!

Egmont Kakarot-Handtke


#1 MMT’s true program
#2 MMT: The communicative war on budget-balancers
#3 For the full-spectrum refutation of MMT see cross-references MMT
#4 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

Related 'Is MMT good for WeThePeople or for the Oligarchy?' and 'How the MMT fraud works' and 'The MMT fraud in slow motion, so that even economists can get it' and 'The MMT fraud hides behind the false "We"' and 'The Kelton-Fraud' and 'Very busy, those Wall Street propaganda folks' and 'Political fraud and the silence of academia'.

Zamanomics

Comment on Asad Zaman on ‘MMT macro final exam’

Blog-Reference

Asad Zaman: “Explain the key identity of MMT: Government Injections + Foreign Injections = Private Surplus.”

Provably false. MMT is refuted on all counts. See
► Quick MMT 101 refutation

Asad Zaman failed the final macro exam. Se also
► Econ 101: Economists flunk the intelligence test at the first hurdle

Egmont Kakarot-Handtke


Related 'Rectification of MMT macro accounting' and 'Wikipedia and the promotion of economists’ idiotism (II)' and 'Controlled demolition of MMT ― an exercise in elementary logic' and 'Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need' and 'The inexorable Paradigm Shift in economics' and 'Links on Asad Zaman’s ‘Defining Islamic Economics’' and 'Is MMT good for WeThePeople or for the Oligarchy?'

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Wikimedia AXEC144b

June 25, 2019

The Palgrave Dictionary ― a comprehensive collection of False-Hero-Memorials

Comment on Barkley Rosser on ‘Learning The Origin Of “Duality”’

Blog-Reference

Barkley Rosser reports: “Yesterday I learned that the person who first used the term ‘duality’ in connection with linear programming, indeed with anything in economics, was John von Neumann in a private conversation with George Dantzig in 1947, the ‘father of linear programming.’ That was the year Dantzig published his paper showing the simplex method for solving linear programming problems, bot their primals and their duals. … It is not really surprising that it would be von Neumann as there are deep links between oprimizing programming and game theory.”

Yes, indeed, and the deep link is in the Walrasians axioms. The hardcore propositions of microeconomics are given with: “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)

This axiom set contains a lot of NONENTITIES, a fact that did not escape the mathematicians: “Walras approached Poincaré for his approval. ... But Poincaré was devoutly committed to applied mathematics and did not fail to notice that utility is a nonmeasurable magnitude. ... He also wondered about the premises of Walras’s mathematics: It might be reasonable, as a first approximation, to regard men as completely self-interested, but the assumption of perfect foreknowledge ‘perhaps requires a certain reserve’.” (Porter)

The next mathematician to realize that Walrasian mathematics was not up to standards was von Neumann: “You know, Oskar, if those books are unearthed sometime a few hundred years hence, people will not believe they were written in our time. Rather, they will think that they are about contemporary with Newton, so primitive is their mathematics. Economics is simply still a million miles away from the state in which an advanced science is, such as physics.”

The two central issues the mathematicians addressed where HC2, i.e. constrained optimization, and HC5, i.e. equilibrium. The end result was General Equilibrium Theory which is known today to be a failure.#1 The mathematicians fixed the economists’ mathematical blunders#2, #3 but von Neumann uncritically bought into the silly behavioral assumptions of mainstream economics.#4 So, the project of the proper formalization of economics had one fatal drawback, von Neumann left the foundational assumptions untouched: “But this [establishing the analytic mother-structure] required one very crucial maneuver that was nowhere stated explicitly: namely, that the model of Walrasian general equilibrium was the root structure from which all further work in economics would eventuate.” (Weintraub)

Because of this, the NONENTITIES HC2 and HC5 are still with us from choice theory to Game Theory. Strictly speaking, von Neumann messed up the Paradigm Shift and this is where things stand to this day: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al.)

Barkley Rosser does not fail to mention that economists have developed the habit to award themselves faux Nobels for their scientific failure and that “it has long been viewed by many as being one of the greatest mistakes and wrongs that when the Nobel Prize was given for linear programming, Dantzig was not one of the recipients, …” Indeed, False-Hero-Memorials are the real problem of the cargo cult science economics.

Egmont Kakarot-Handtke


#1 “At long last, it can be said that the history of general theory from Walras to Arrow-Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin. It has been a dead alley because the most rigorous solution of the existence problem by Arrow and Debreu turns general theory into a mathematical puzzle applied to a virtual economy that can be imagined but could not possibly exist, while the extremely relevant ‘stability problem’ has never been solved either rigorously or sloppily. General theory is simply a research program that has run into the sands.” (Blaug)

#2 “The so-called ‘mathematical’ economists in the narrower sense ― Walras, Pareto, Fisher, Cassel, and hosts of other later ones ― especially, have completely failed even to see the task that was before them. Professor Hicks has to be added to this list, which is regrettable because he wrote several years after decisive work had been done ― in principle ― by J. von Neumann and A. Wald.” (Morgenstern)

#3 “Consequently, it was the von Neumann perspective that shaped general equilibrium theory and game theory, and thus reconstituted economic theory. Thus, David Hilbert was the spiritual grandfather of this new economics. (Weintraub) Interestingly, both von Neumann and Einstein got/took their advanced math from Hilbert and the Göttingen School.

#4 “In any event, it seems that Morgenstern finally convinced von Neumann that they must proceed tactically by means of the conciliatory move of phrasing the payoffs in terms of an entity called ‘utility’, but one that von Neumann would demonstrate was cardinal ― in other words, for all practical purposes indistinguishable from money . . .” (Mirowski)

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REPLY to Barkley Rosser on Jun 26

When the classical economists for a moment stopped writing their silly propaganda pamphlets and watched what was going on in the triumphant sciences they could not fail to notice that calculus was a core element of analysis: “Already Maupertuis considered his minimum principle as proof that the world, where among many virtual movements the one leading to maximum effect with minimum effort is realized, is the ‘best of all worlds’ and work of a purposeful creator. Euler made a similar remark: ‘Since the construction of the whole world is the most eminent and since it originated from the wisest creator, nothing is found in the world which would not show a maximum or minimum characteristic.’ ...” (von Bertalanffy)

Economists had the presence of mind to adopt optimization as a foundational principle and eventually it became HC2 of the Walrasian axiom set. This is how economics became marginalistic and remained so to this day: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point ...” (Krugman)

Constrained optimization is simple if the assumption of a well-behaved production function is added. In the course of time, mathematicians found solutions for more complicated problems of production, transport, warfare, and the like. This is where Dantzig and Kantorovich came in.

However, while mathematicians developed solutions for real-world problems, economists applied constrained optimization to human behavior. This is the foundational idiotism of microfoundations: “Throughout its history, the idea of some ‘Fundamental Assumption’, some basic ‘Economic Principle’ about human conduct, from which much or most of economics can ultimately be deduced, has been deeply rooted in the procedure of economic theory. Some such notion is still, in many quarters, dominant at the present time. For example, it has recently been stated that the task of economics is ‘to display the structure and working of the economic cosmos as an outgrowth of the maximum principle’.” (Hutchison)

The point is: no way leads from a behavioral assumption (optimization or otherwise) to the understanding of how the economy works. Standard economics is based on behavioral axioms and this is not a solid enough foundation: “… if we wish to place economic science upon a solid basis, we must make it completely independent of psychological assumptions and philosophical hypotheses.” (Slutzky)

So, mathematicians have done a fine job by solving all kinds of complex optimization problems. This, though, does not alter the fact that microfoundations HC1 to HC5 are proto-scientific garbage and have to be replaced by macrofoundations. This is called a Paradigm Shift which, as everyone knows by now, has been messed up by the waffling economist Keynes. Economists are simply too stupid for the elementary mathematics that underlies macroeconomics.#1, #2

Economists claim since Adam Smith that the free market economy is self-regulating and self-optimizing if left to itself. In reality, it is just the opposite: the real part of the economy is kept on life-support by the government, the monetary/financial part is kept on life-support by the Central Bank.#3

Economics is a failed science and the Bank of Sweden fake Nobel is the most fraudulent of all False-Hero-Memorials.#3


#1 Are economics professors really that incompetent? Yes!
#2 Econ 101: Economists flunk the intelligence test at the first hurdle
#3 The Levy/Kalecki Profit Equation is false

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REPLY to Barkley Rosser on Jun 27

You say: “Sorry, but a lot of the people you label as ‘economists’ were or are really mathematicians, e.g. von Neumann, Nash, Kantorovich.”

No. My point is that it was mathematicians and not economists who cleared up the mathematical mess of economists and did all the heavy lifting that resulted in General Equilibrium Theory. See Mirowski’s More Heat Than Light for the finer points, especially how mathematically trained engineers who dabbled in economics desperately tried to make economists aware that they applied calculus incorrectly. To no avail, of course.

It is mathematicians who deserve most or all of the credit for solving the tricky optimization problems that were implicit in the (verbalized i.e. not yet formalized) Walrasian axiom HC2. Solving optimization problems is mathematics and, strictly speaking, not economics. Economics is about how the economic system works. The simple fact of the matter is that General Equilibrium Theory, which is based on HC2, i.e. constrained optimization, and HC5, i.e. equilibrium, does NOT explain how the economy works. This showpiece of the mathematicians’ ingenuity has NO economic content at all. GET belongs to the “... crop of monster-structures, entirely without application.” (Bourbaki)

To award an economics “Nobel” to a mathematical achievement has to be seen as an attempt to give the cargo cult science economics the appearance of genuine science.

Von Neumann’s contribution has to be seen in the context of the ideological/physical war capitalism/USA vs communism/Russia and the involvement of mathematicians/physicists in the development of the atom bomb. Von Neumann recommended himself to the US military with his famous statement: “If you say why not bomb them tomorrow, I say why not today? If you say today at five o’clock, I say why not one o’clock?” (Wikiquote)

The US military needed the most advanced mathematics available on the planet, so von Neumann was sent to Göttingen: “In 1926 von Neumann went to Göttingen on a Rockefeller fellowship to work as Hilbert’s assistant. Göttingen was not only one of the centers of mathematics but it also was a mecca of theoretical physics; thus in Göttingen von Neumann could familiarize himself with the latest developments concerning quantum mechanics. Hilbert himself gave lectures on the mathematical foundations of quantum mechanics in the academic year 1926-1927. Von Neumann attended these lectures, and working out the lecture notes taken during those lectures led to a joint publication and eventually to von Neumann’s three ground breaking papers on the mathematical foundations of quantum mechanics that served as the basis of his book.”#1

Not to forget, Game Theory is not so much about parlor games or the problems of incarcerated mobsters or strategic economic behavior as about war games.

What von Neumann learned from Hilbert was the crucial importance of axiomatization: “When we assemble the facts of a definite, more-or-less comprehensive field of knowledge, we soon notice that these facts are capable of being ordered. This ordering always comes about with the help of a certain framework of concepts... The framework of concepts is nothing other than the theory of the field of knowledge. ... If we consider a particular theory more closely, we always see that a few distinguished propositions of the field of knowledge underlie the construction of the framework of concepts, and these propositions then suffice by themselves for the construction, in accordance with logical principles, of the entire framework. ... The procedure of the axiomatic method, as it is expressed here, amounts to a deepening of the foundations of the individual domains of knowledge — a deepening that is necessary for every edifice that one wishes to expand and to build higher while preserving its stability.” (Hilbert)

Note that the Theory of Games and Economic Behavior is axiomatized.

You say: “To the extent what they [the mathematicians] did id not good because of a failure to allow for a macrofoundatiions and that amounts to recognizing your silly profit accounting, your comments are just irrelevant and silly, Egmont.”

What I actually say is that ECONOMISTS are too stupid for the elementary mathematics that underlies macroeconomics. This is a provable fact.

Since Keynes, neither Post-Keynesians nor New Keynesians nor Anti-Keynesians have realized that I=S is false and has to be replaced by Q≡I−S with Q representing macroeconomic profit. What Hilbert called “the framework of concepts” is false in economics to this day.

Needless to emphasize that you neither understand the problem of the proper axiomatization of economics nor the macroeconomic Profit Law. So, you are the ideal person to work on a new edition of the Palgrave collection of False-Hero-Memorials of the cargo cult science economics.

Economics is a failed/fake science and the Palgrave Dictionary and you are part of it. Economics needs a Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.


#1 PDFs.semanticscholar Miklós Rédei, John von Neumann 1903-1957

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REPLY to Barkley Rosser on Jun 28

Let’s return to the main point: “According to George Dantzig, the duality theorem for linear optimization was conjectured by John von Neumann immediately after Dantzig presented the linear programming problem. Von Neumann noted that he was using information from his game theory, and conjectured that two person zero sum matrix game was equivalent to linear programming.”#1

Von Neumann identified the Walrasian approach as given with the verbalized axioms HC1 to HC5 as petitio principii (TOG p. 15), that is, as methodologically unacceptable.#2 So, he introduced a new set of axioms: “An exact and exhaustive elaboration of these ideas requires the use of the axiomatic method.” (TOG p. 19) The formulation of a new set (TOG p. 24 f.) amounts to a Paradigm Shift.

Note, in particular, von Neumann’s general remark on axiomatization: “The axioms should not be too numerous, their system is to be as simple and transparent as possible, and each axiom should have an immediate intuitive meaning by which its appropriateness may be judged directly.” (TOG p. 25)

Generally speaking, von Neumann’s approach is (i) behavioral and (ii) bottom-up. In this, it resembles the Walrasian approach. Both may be put together under the label microfoundations. Now, the correct approach to economics is (i) structural and (ii) top-down. For good methodological reasons, economics has to be macrofounded.

Game Theory is predicated on von Neumann’s specification of utility (TOG p. 15) and this leads to the concept of zero-sum games: “In game theory and economic theory, a zero-sum game is a mathematical representation of a situation in which each participant’s gain or loss of utility is exactly balanced by the losses or gains of the utility of the other participants.”#3 Note that there is a quite subtle transition from utility (ordinal) to profit (cardinal): “In 1944, John von Neumann and Oskar Morgenstern proved that any non-zero-sum game for n players is equivalent to a zero-sum game with n+1 players; the (n+1)th player representing the global profit or loss.”#3

And exactly here is the lethal blunder: global profit or loss cannot be determined within the framework of Game Theory.

Here is the axiomatically correct proof. 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 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.

Note that this set satisfies von Neumann’s general criteria of proper axiomatization as quoted above.

Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price as the dependent variable is given by P=W/R. This is the macroeconomic Law of Supply and Demand.

The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. it holds X=O. The condition of budget balancing, i.e. C=Yw, is now skipped. The monetary saving/dissaving of the household sector is defined as S≡Yw−C. The monetary profit/loss of the business sector is defined as Q≡C−Yw. 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.

From Q+S=0 one could conclude that economics is a zero-sum game between the business sector and the household sector. However, this is only the first half of the truth. From the fact that profit comes from dissaving, it follows that the household sector accumulates debt (overdrafts at the central bank) while the business sector accumulates money (deposits at the central bank). Now, debt has to be eventually repaid and this inverts the whole game: profit Q in period t is exactly annihilated by loss (-Q) in period t+1. The mirror image is dissaving (-S) in t and saving S in t+1. The result of these interlocked zero-sum games is zero profit over all periods.

The monetary economy is an intertemporal zero-sum game and the n+1th player is the future. This is the reason why capitalism will eventually break down and NOT Marx’s phony Revolution of the Proletariat. The intertemporal zero-sum theorem fully replaces folk psychology/ sociology. Note that the intertemporal zero-sum theorem holds for a monetary economy that is for capitalism AND communism AND anything in-between. Which in turn proves that political economics has NEVER been anything else than proto-scientific garbage of the worst sort.


#1 Wikipedia Duality (optimization)
#2 Petitio principii — economists’ biggest methodological mistake
#3 Wikipedia Zero-sum game
#4 The Levy/Kalecki Profit Equation is false

Profit and Distribution Theory is false for 200+ years

Comment on Paul Krugman’s ‘Notes on Excessive Wealth Disorder’

Blog-Reference

The Oligarchy’s financial wealth and public debt (currently $22 trillion and counting) grow in lockstep. The macroeconomic Profit Law Qm≡Yd+(I−Sm)+(G−T)+(X−M explains the extremely skewed distribution of income and financial wealth. Macroeconomic profit comes in the main from public deficit-spending/ money-creation. See
► Profit and macrofoundations
► The Levy/Kalecki Profit Equation is false

Egmont Kakarot-Handtke


Related 'First Fundamental Law vs. Fundamental theorem of income distribution' and 'Econ 101: Economists flunk the intelligence test at the first hurdle' and 'Profit'. For details of the big picture see cross-references Profit/Distribution.

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Wikimedia AXEC109i

June 24, 2019

Econ 101: Economists flunk the intelligence test at the first hurdle

Links on John Warner on ‘Indoctrinated by Econ 101’*

Blog-Reference and Blog-Reference

There is no such thing as economics. There are TWO economixes: political economics 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 (= science) has been hijacked early on by political agenda pushers.

Political economics has produced NOTHING of scientific value in the last 200+ years. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong. Economics is a failed/fake science.

But there is nothing to worry about with regard to education. It is an empirical fact that economics students swallow proto-scientific garbage hook, line, and sinker for generations. They are not particularly smart. Whoever accepts supply-demand-equilibrium as an explanation of how the market system works flunks the entry-level intelligence test of science.

For details see:


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Wikimedia AXEC144c


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Twitter May 11, 2021 Constrained optimization: the making of an economist

June 23, 2019

Economics as target group marketing

Comment on Matt Franko on ‘AOC Gardening’

Blog-Reference

Your critical evaluation of AOC is, of course, objectively correct: “Climate nutter thinks photosynthesis is ‘magic!’ LOL! Hey moron ever hear of: 6CO2 + 6H2O --> C6H12O6 + 6O2.
Try taking a biochemistry course some time Liberal Art trained moron!!! LOL!!!! Probably withdraw failing after the second week!!! LOL Unqualified dialectic trained moron!!!!”

What you overlook, however, is that 99.9 percent of the population is born/living/dying in the Circus Maximus and has no truck whatsoever with science.

AOC cannot be taken seriously because she is a creature of the Marketing-PR department of the party apparatus designed for the new voter generation. To recall, AOC’s profile is the perfect mirror image of her predecessor Joseph Crowley (male-old-white-rich-educated). “Mr. Crowley was defeated by a 28-year-old political newcomer, Alexandria Ocasio-Cortez, a former organizer for Bernie Sanders’s presidential campaign, who had declared it was time for generational, racial and ideological change.”#1

That Alexandria Ocasio-Cortez has no idea of anything does not matter at all because neither has her target group. The Marketing/PR department sees to it that she echos what the opinion polls tell them the target group wants to hear. Politics is emotion management and has at best homeopathic reality content.

It is pretty obvious that the MMT loudspeakers apply the same marketing strategy.#2 Since Adam Smith/Karl Marx, economics has NOTHING to do with science but with political agenda pushing. Economists are NOT scientists but clowns and useful idiots in the Circus Maximus.#3 MMTers are NO exception.#4

Egmont Kakarot-Handtke


#1 The New York Times, Alexandria Ocasio-Cortez Defeats Joseph Crowley in Major Democratic House Upset
#2 MMT: If you’ve got a problem, I don’t care what it is, let me help
#3 The economist as storyteller
#4 MMT’s true program

Related 'MMT and the Green New Deal: Where is the snag? (I)' and 'MMT and the Green New Deal: Where is the snag? (II)' and 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion'.

The Levy/Kalecki Profit Equation is false

Comment on Alex Barrow/Macro Ops on ‘Minsky and the Levy/Kalecki Profit Equation’

Blog-Reference (Link)

Alex Barrow comes directly to the point: “Let’s kick things off with the Levy/Kalecki Profit Equation. The Profit Equation is just a macroeconomic accounting identity for how the global economy actually operates. Specifically, it answers the question as to where ‘Profits’ come from and thus, growth.”#1

And this is the answer: “The actual accounting identity looks like this: Profits before tax = + Investment – Nonbusiness saving + Dividends + Corporate profits taxes. This accounting identity, which like any identity holds true under any circumstance, is just saying that corporate profits are the direct result of net investment minus nonbusiness (Households + Government + rest of world) saving before dividends and corporate taxes are paid out.”

And this is the rationale: “Well, if you pull back and look at the global economy as a whole, it’s a closed system. Its closed in the sense that profits aren’t magically appearing from anywhere outside of the global economy. But profits obviously aren’t a zero sum game. If one company earns profits it doesn’t necessarily mean that another company somewhere has to be operating at a loss. There wouldn’t be any growth if that was the case. So, where do profits come from then?”

Yes, where? “The answer is in net investment, which is a positive sum game. If we divide the economy into our four aggregate entities (1) US Corporations (2) Households (3) All levels of US Government and (4) the Rest of the World (RoW) and look at them as a whole, there needs to be net positive investment as a whole for their to be profits. Profits are essentially the result of expanding balance sheets (increases in debt). The more balance sheets expand the lower interest rates need to drop in order to decrease debt servicing costs and keep the cost of capital down for marginally profitable firms — essentially keep the economy from going into free fall.”

Alex Barrow, respectively his source, derives the Profit Equation with the help of the identity method. More specifically:

“II. FINDING THE SOURCES OF PROFITS: THE IDENTITY METHOD
Profits, Saving, and Investment
Aggregate profits, after corporate income taxes and dividends have been paid out, are the wealth the business sector accumulates during a period of time. Of course, businesses are not the only ones accumulating wealth ― households, government, and foreign entities also do so. The wealth the business sector accumulates is equal to the total new wealth created in the economy less that accumulated by the other sectors. In economics, the accumulation of wealth is called saving, and the creation of wealth is called investment. By common sense, the new wealth the economy accumulates equals the new wealth the economy creates; that is, saving equals investment.” and “But no matter what accounting system one uses, saving will always equal investment.”#2

This is NOT correct. On closer inspection, common sense gets the accounting identity  mathematically wrong.#3 To make matters short, here is the proof.#4, #5

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 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 as the dependent variable is given by P=W/R. The elementary production-consumption economy is shown on Wikimedia.#6

The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. it holds X=O. The condition of budget balancing, i.e. C=Yw, is now skipped. The monetary saving/dissaving of the household sector is defined as S≡Yw−C. The monetary profit/loss of the business sector is defined as Q≡C−Yw. 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.

In other words, saving is NOT equal to investment (because there is NO investment in the elementary production-consumption economy) but saving is equal to loss.

So, Alex Barrow’s assertion is false: “ it [the global economy as a whole] is a closed system. Its closed in the sense that profits aren’t magically appearing from anywhere outside of the global economy. But profits obviously aren’t a zero sum game.” No, but profit/loss of the business sector and dissaving/saving of the household sector is a zero-sum game, i.e. Q+S=0.

When more sectors are added, the macroeconomic Profit Law reads with increasing complexity:
(i) Q≡−S in the elementary production-consumption economy,
(ii) Q≡I−S in the elementary investment economy,
(iii) Q≡(I−S)+(G−T)+Yd in the investment economy with government deficit/surplus (G−T), and distributed profit Yd.

The macroeconomic Profit Law fully replaces the false Profit Equations of Levy/Kalecki.#7-#12 The fact that the Profit Equation and the Profit Law look similar at the surface does not alter the fact that the Profit Equation is “educated common sense” (Stigum) and lacks proper scientific foundations.

Crucial conclusions: The monetary economy breaks down ― at the latest ― if macroeconomic profit Q turns negative. At the moment, the U.S. economy is on full life-support of the government, i.e. the government deficit (G−T) is where the greater part of profit actually comes from. It is the government that prevents “the economy from going into free fall”.

The policy of deficit-spending/money-creation clearly benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law which entails Public Deficit = Private Profit. Thus the Oligarchy’s financial wealth and public debt (currently $22 trillion) grow in lockstep. The Profit Law explains the extremely skewed distribution of income and financial wealth.

Economists claim since Adam Smith that the free market economy is self-regulating and self-optimizing if left to itself. In reality, it is just the opposite: the real part of the economy is kept on life-support by the government, the monetary/financial part is kept on life-support by the Central Bank.

Economics is proto-scientific garbage for 200+ years now because it does not get the foundational concept of profit right and the Levy/Kalecki Profit Equation is an integral part of the overall failure.

Egmont Kakarot-Handtke


#1 Macro Ops
#2 The Jerome Levy Forecasting Center, Where Profits Come From
#3 Wikipedia and the promotion of economists’ idiotism (II)
#4 Controlled demolition of MMT ― an exercise in elementary logic
#5 For details of the big picture see cross-references Refutation of I=S and cross-references Profit/Distribution
#6 Wikimedia AXEC31 Elementary production-consumption economy


#7 Profit: after 200+ years, economists are still in the woods
#8 Truth by definition? The Profit Theory is axiomatically false for 200+ years
#9 MMT Progressives: The knife in the back of WeThePeople
#10 MMT and grassroots movements
#11 Kalecki and Keynes: The double macroeconomic false start
#12 MMT: How mathematical incompetence helps the Kelton-Fraud

Related 'Are economics professors really that incompetent? Yes!' and 'Refuting MMT’s  Macroeconomics Textbook' and '#DrainTheScientificSwamp' and 'Macroeconomics: Drain the scientific swamp' and 'Is Nick Rowe stupid or corrupt or both?' and 'Keynes, Kalecki, MMT and the invention of the perpetual profit machine' and 'The failure of Post-Keynesianism' and 'Kalecki got it wrong, Allais got it right' and 'Rethinking deficit spending' and 'MMT Progressives: The knife in the back of WeThePeople' and 'Keynes’s Missing Axioms'.

***
Wikimedia AXEC143d Profit Law (with increasing complexity) and Balances Equation

June 20, 2019

MMT: The communicative war on budget balancers

Comment on Bill Mitchell on ‘A leopard never changes its spots ― Jens Weidmann, ECB President aspirant’

Blog-Reference and Blog-Reference

The MMT policy of deficit-spending/money-creation clearly benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law that entails Public Deficit = Private Profit. Thus the Oligarchy’s financial wealth and public debt (currently $22 trillion in the U.S. alone#1) grow in lockstep. MMT policy is disastrous for distribution.

It is MMT’s global mission to keep this business going. The three communicative tools are (i) false solidarity with and false promises for WeThePeople, (ii) belittlement of future negative consequences, and (iii), slandering the budget balancers.

Some days ago it was the Labour leadership who even dares to speak of a relative reduction of public debt: “at the end of every Parliament, Government debt as a proportion of trend GDP is lower than it was at the start.”#2

This is absolutely antithetical to MMT as a joint venture of Academia and Wall Street.#3 In order to get the Central Bank, i.e. the Means of Production of Currency, into the Oligarchy’s hands, the fake scientists/useful idiots of MMT incite Populism: “If there’s anything the establishment fears more than the working classes seizing the means of production, it’s the working classes seizing the means of production of currency. You would think that socialists would understand that.”

But undermining UK Labour leadership is merely a finger exercise compared to undermining the ECB leadership: “So Europe is back to its Franco-German rivalry and emerging out of that process is the unthinkable ― Bundesbank President, Jens Weidmann ― becoming a front-runner to take over the ECB role. He is a man with a past and his current ‘political’ statements, as he lobbies for the position he clearly covets, appear to contradict that past. A leopard never changes its spots. Beware.”

What provokes the ire of the MMT loudspeaker Bill Mitchell more than anything else is Mr. Weidmann’s statement: “Central bank funding must not become entrenched as a catch-all solution to all our woes.” because this is exactly the fundamental tenet of MMT which has ONE solution for ALL economic/social problems: deficit-spending/money-creation.#4 In the eyes of MMT agenda pushers, Mr. Weidmann disqualifies himself by declaring that he intends to respect the law that defines the ECB’s mandate: “… we have to ensure that the prohibition of monetary financing is respected.”

This impertinence kicks Bill Mitchell into hyperventilation: “That is all on the public record.” Accordingly, “Jens Weidmann should be forced to explain to all and sundry why he is a suitable ECB President given his past claims about ECB policy, which, as he admits, remains ‘current’, and which he would be responsible for.”

It should be obvious that Mr. Weidmann will NOT get MMT’s approval even if he admits that he was wrong then but has now converted to MMT: “The reality is that he was wrong in the first place and his predictions and resistance were reflecting the German inflation angst and the application of flawed mainstream macroeconomics.”

Because “… that doesn’t alter the point.” The point being, once a Swabian housewife ― always a Swabian housewife. Those folks are the worst enemies of the deficit-spenders/ money-creators of MMT and other useful idiots of the Oligarchy.#5

Note well that MMT macroeconomics is refuted on all counts#6 and that Bill Mitchell is a scientifically incompetent academic.#7

Egmont Kakarot-Handtke


#1 Infographic Visual Capitalist

Source: Visual Capitalist

#2 MMT has an offer that Labour cannot refuse
#3 MMT: The fusion of Wall Street and Academia
#4 MMT: If you’ve got a problem, I don’t care what it is, let me help
#5 MMT’s true program
#6 For the full-spectrum refutation of MMT see cross-references MMT
#7 There is NO such thing as “smart, honest, honorable economists”

Related 'Economic policy and the skirmishes of failed/fake scientists' and 'The economist as storyteller' and 'Are economics professors really that incompetent? Yes!' and 'MMT: doom or survival?' and 'Bill Mitchell cracks the spending whip over the Swabian housewife' and 'Swabian housewife vs Wall Street loan shark' and 'Keynes, Lerner, MMT, Trump, Biden and exploding profit'.

***

Twitter Oct 20, 2021, Jens Weidmann, another obstacle to the takeover of the means of production of currency vanishes


Twitter Oct 20

June 17, 2019

MMT has an offer that Labour cannot refuse

Comment on Bill Mitchell/Thomas Fazi on ‘Seize the Means of Production of Currency ― Part 3’

Blog-Reference and Blog-Reference

The MMT policy of deficit-spending/money-creation clearly benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law which entails Public Deficit = Private Profit. Thus the Oligarchy’s financial wealth and public debt (currently $22 trillion in the U.S. alone) grow in lockstep.

The first communicative task of MMT is, therefore, to obfuscate its true purpose and “… to get citizens and workers to accept ― demand even ― policies that are not in their class interest.”#1, #2

So, Bill Mitchell/Thomas Fazi start with presenting themselves as the good guys: “It should be clear by now that MMT has absolutely nothing in common with mainstream economics.”

After this framing as real Progressives, Bill Mitchell/Thomas Fazi come to business. What the MMT deficit-spenders/money-creators cannot tolerate are balanced budgets much less a reduction of public debt. But this is exactly what the Labour leadership with their Fiscal Credibility Rule (FCR) plans: “But more importantly, and leaving aside the aspect of the rule where recurrent spending and taxes will balance over some rolling 5-year window, the FCR requires that ‘at the end of every Parliament, Government debt as a proportion of trend GDP is lower than it was at the start’.”

Nothing could be more antithetical to MMT.

The first thing Labour needs is an MMT lesson about how the economy works: “Further, there is no finite pool of saving that government debt issuance soaks up, and, in doing so, forces increased competition for the funds and higher interest rates. Fiscal deficits increase income which, in turn, expands the pool of saving.”

This is the core scientific blunder/fraud of MMT: fiscal deficits expand the pool of PROFITS and NOT the pool of saving as one can directly glean from the macroeconomic Profit Law, i.e. from Q=Yd+(I−S)+(G−T)+(X−M).#3, #4

The political agenda of MMT is to discredit the Labour leadership and to brainwash members and supporters. To this end, MMTers unmask the false neoliberal consciousness of the Labour leadership: “It is the fact that by embracing the macroeconomic neoliberal framing about ‘fiscal responsibility’, Labour is setting up a deadly trap for itself.” and “This is the language of neoliberals ― ‘fiscal health’ as if there is a ‘patient’ involved that can become sick; ‘should not be borrowing for day-to-day spending’ ― why not?; and the implication that without such a rule ‘investment’ will be damaged and along with it ‘future growth’.” Get it, Labour: balanced budgets are bad, deficits are good, the greater the public debt, the better for you and your grandchildren.

But to brainwash the Labour Party into deficit-spending/money-creation is only the first step of MMT’s communicative assault. The ultimate goal of the Oligarchy is to get the Central Bank, i.e. the Means of Production of Currency, into their hands. And this coup they have reserved for nobody else than the working class: “If there’s anything the establishment fears more than the working classes seizing the means of production, it’s the working classes seizing the means of production of currency. You would think that socialists would understand that.”

From Adam Smith to Marx to Hayek to Keynes to Friedman to MMT, the fake scientists of the failed science economics have done nothing else than to wind up WeThePeople.#5

Bill Mitchell/Thomas Fazi are quite relaxed: “The bottom line … is that MMT is here to stay. The UK Labour Party can choose to stick to the old neoliberal fiscal paradigm ― or it can join the revolution.” That’s how they talk in their Oligarchy meetings: “I’m gonna make him an offer he can’t refuse.”

Egmont Kakarot-Handtke


#1 MMT’s true program
#2 MMT: A new myth for WeThePeople
#3 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#4 MMT: How mathematical incompetence helps the Kelton-Fraud
#5 Economic policy and the skirmishes of failed/fake scientists

Related 'Macro ignorance: Why Simon Wren-Lewis does not come to grips with the plain MMT-fraud'. For the full-spectrum refutation of MMT see cross-references MMT.

***

Instead of attempting to capture the national currency issuer, as MMT propagates,  one can simply become the issuer of a private currency.

Source Twitter Jun 20

June 16, 2019

Macro ignorance: Why Simon Wren-Lewis does not come to grips with the plain MMT-fraud

Links on Simon Wren-Lewis on ‘Bill Mitchell’s fantasy about Labour’s fiscal rule’

Blog-Reference (Link) and Blog-Reference (Link) on Jun 19

The discussion between Simon Wren-Lewis and Bill Mitchell suffers from the obvious fact that both lack the true macroeconomic theory.

■ Economic policy and the skirmishes of failed/fake scientists
■ Are economics professors really that incompetent? Yes!
■ The retirement of a fake scientist and real agenda pusher
■ Economics as a cover for agenda pushing
■ Thinking about economic policy for future PM Corbyn
■ Deficit-spending, public debt, and macroeconomic profit/loss
■ Oxford economics — still at the proto-scientific level
■ Where economics went wrong (II)
■ Legitimacy lost
■ The biggest scientific mistake of the last centuries, and it has much to do with academic economists
■ The economist as useful political idiot
■ The demise of phony experts: macroeconomics is provably false
■ Why is economics a total scientific failure?
■ Macroeconomics: self-delusion and empty promises
■ Economics has arrived at the bottom of the proto-scientific shithole
■ How MMT fools the ninety-nine-percenters
■ Political economics: Who hijacks British Labour?
■ Deficits matter for distribution
■ From false microfoundations to true macrofoundations (II)
■ Time to retire political economists
■ Microfoundations R.I.P.
■ Mr. Corbyn and the perils of political economics
■ Selling public debt with Ricardo’s tear gland rhetoric
■ Some fatal flaws of MMT
■ The economist as amateur journalist
■ Proof of the inherent instability of the market economy
■ MMT was right all along: Gov-Deficits do NOT cause inflation
■ Why is MMT so false?
■ Economics: the emancipation of science from politics
■ A bitter pill for political economists
■ The myth of economics knowledge
■ Attention: there are THREE types of inflation
■ Economic bungee jumping without cord
■ Consensus, buddy consensus, scientific consensus, or what?
■ Austerity and the total disconnect between economic policy and science
■ Media-fake-farce-fraud-storytelling-macro
■ Redefining economics
■ Economists ― medics or barber-surgeons?
■ Austerity and the idiocy of political economists
■ The non-existence of economics
■ Endtime for soapbox economists
■ NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
■ NAIRU: an exhaustive dancing-angels-on-a-pinpoint blather
■ Delusions of useful idiots
■ Economics ― worse than fake

►For the full-spectrum refutation of MMT see cross-references MMT

Egmont Kakarot-Handtke

June 15, 2019

Economic policy and the skirmishes of failed/fake scientists

Comment on Simon Wren-Lewis on ‘Bill Mitchell’s fantasy about Labour’s fiscal rule’

Blog-Reference

The status of economics is this: There is political economics 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 monetary economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Political economics is mere opinion, theoretical economics is knowledge: “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 that is the problem: economists do not have the true theory. Because of this, economic policy guidance NEVER had sound scientific foundations. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong.

The macroeconomic models that underlie the argumentation of both Simon Wren-Lewis and Bill Mitchell are provably false.#1, #2, #3 This, in turn, means that the whole debate about the relative merits of monetary and fiscal policy is pointless from the scientific standpoint.#4 However, scientific irrelevance does NOT mean political ineffectiveness.

Both Simon Wren-Lewis and Bill Mitchell are not so much scientists as political agenda pushers.#5 What is currently at the top of the agenda of political economists is NOT AT ALL Labour’s Fiscal Rule but the possibility that Jeremy Corbyn becomes the next PM.

What Simon Wren-Lewis fails to address is the economic fact that because of the macroeconomic Profit Law it holds Public Deficit = Private Profit.#6 Therefore, the MMT policy of deficit-spending/money-creation is clearly in the interest of the Oligarchy.#7 MMTers are fake Progressives.

Whether both Simon Wren-Lewis and Bill Mitchell do not know the macroeconomic Profit Law or whether both intentionally mislead the representatives and members of the Labour Party is at anybody’s guess.

Egmont Kakarot-Handtke


#1 Macroeconomics: Economists are too stupid for science
#2 MMT sucks
#3 The canonical macroeconomic model
#4 Against the mainstream! Against MMT!
#5 Economics as a cover for agenda pushing
#6 Are economics professors really that incompetent? Yes!
#7 MMT’s true program

Related 'MMT: A new myth for WeThePeople' and 'Controlled demolition of MMT ― an exercise in elementary logic' and 'Thinking about economic policy for future PM Corbyn' and 'Deficit-spending, public debt, and macroeconomic profit/loss' and 'Mission impossible: economists join WeThePeople' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'The economist as useful political idiot' and 'How MMT fools the ninety-nine-percenters' and 'Political economics: Who hijacks British Labour?' and 'Macro ignorance: Why Simon Wren-Lewis does not come to grips with the plain MMT-fraud'.

***

#PointOfProof
Jul 20

June 14, 2019

The economist as storyteller (II)

Comment on Caitlin Johnstone on ‘Propaganda Is The Root Of All Our Problems’*

Blog-Reference

There is the infinite reality and there is the limited individual consciousness, and between the two is a medium. This epistemological condition has been captured by Plato in the Allegory of the Cave: “Plato has Socrates describe a group of people who have lived chained to the wall of a cave all of their lives, facing a blank wall. The people watch shadows projected on the wall from objects passing in front of a fire behind them, and give names to these shadows. The shadows are the prisoners’ reality. Socrates explains how the philosopher is like a prisoner who is freed from the cave and comes to understand that the shadows on the wall are not reality at all, for he can perceive the true form of reality rather than the manufactured reality that is the shadows seen by the prisoners. The inmates of this place do not even desire to leave their prison; for they know no better life.”#1

The situation has not fundamentally changed since the ancient Greeks. Newspapers, radio, TV, and social media only multiply the shadows on the blank wall. The situation is summarized with a graph on Wikimedia.#2


There are three relationships between reality and consciousness:
(i) Faithful mapping from A-reality to A'-consciousness.
(ii) Reduction of B-reality to zero, i.e. to conscious non-existence.
(iii) Blowing up NONENTITIES to predominant C'-consciousness.

Alternative (i) is what science/philosophy is supposed to achieve. Alternatives (ii) and (iii) constitute the prisoners’ manufactured reality. As physical force is applied in order to control the physical realm, communicative force is applied to control the mental realm. This communicative force is called propaganda and it comes either under the religious, political, or entertainment cloak.#3 In the real world, both forces are of roughly equal importance. Professional storytellers (historians, priests, romancers, journalists, movie makers) tend to think that the ‘pen is mightier than the sword’: “As I never tire of saying, the real underlying currency in our world is not gold, nor bureaucratic fiat, nor even raw military might. The real underlying currency of our world is narrative, and the ability to control it.”

Maintaining narrative control is also the main business of the economist. #4, #5, #6, #7, #8

Scientific truth has two inseparable methodological components: material and formal consistency. This, of, course, holds also for economics: “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)

To this day, economists do not have the true theory. Economics is fake science since Adam Smith. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit ― the foundational concept of the subject matter ― wrong.

Economists have produced NOTHING of scientific value in the last 200+ years. This does not matter much, though, because in the political Circus Maximus there has always been a greater demand for storytellers, blatherers, trolls, actors, clowns, activists, and propagandists than for scientists. Scientific truth has never been a concern for religion, politics, and entertainment ― just the opposite. This is why human communication consists for the greater part, approx. 99.9 percent, of mental garbage a.k.a. propaganda/ disinformation.

As failed scientists, economists easily get a second chance, for example as exhibitionists of the Conscience of a Liberal in a propaganda outlet of the Oligarchy or as a billionaire-sponsored troll in the econoblogosphere.

Time for a dishonorable discharge of these stupid/corrupt storytellers from the sciences.

Egmont Kakarot-Handtke


* Caitlin Johnstone
#1 Wikipedia Allegory of the Cave
#2 Wikimedia AXEC153 Allegory of the Cave
#3 “Propaganda is information that is not objective and is used primarily to influence an audience and further an agenda, often by presenting facts selectively to encourage a particular synthesis or perception, or using loaded language to produce an emotional rather than a rational response to the information that is presented. Propaganda is often associated with material prepared by governments, but activist groups, companies, religious organizations and the media can also produce propaganda.
In the twentieth century, the term propaganda has often been associated with a manipulative approach, but propaganda historically was a neutral descriptive term.” (Wikipedia)
#4 Economics, Plato’s Cave and the Silver Blaze Case
#5 Economics: communication without content
#6 Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems
#7 MMT: How the Oligarchy communicates with WeThePeople
#8 Narrative economics and the imperatives of the sitcom

Related 'Are economics professors really that incompetent? Yes!' and 'Economics textbooks ― tombstones at the Flat-Earth-Cemetery' and 'Economics: The greatest scientific fraud in modern times' and 'Macroeconomics: Economists are too stupid for science' and 'Are economists natural-born scientific failures?' and 'Fact of life: your econ prof is scientifically incompetent' and 'Fake religion, fake science, fake news, and false complaints' and 'Dear idiots, MMTers are Wall Street’s agenda pushers' and '“We have sunk very low”' and 'FakeNews, FakeScience: economics in the information age' and 'Economics as storytelling and entertainment for the masses' and 'A brief history of soapbox economics' and 'If You Meet the Storyteller on the Road, Kill Him' and 'Economics: ‘a tale told by an idiot ... signifying nothing’ and 'The economist as stand-up comedian' and 'Economics: No method to the madness' and 'How to spot economics trolls' and 'Lock them up' and 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion'.

***

This is what Plato has said in The Republic about stories “… which are now in use [but] must be discarded.”

“Of what tales are you speaking? he said. …
Those, I said, which are narrated by Homer and Hesiod, and the rest of the poets, who have ever been the great story-tellers of mankind.
But which stories do you mean, he said; and what fault do you find with them?
A fault which is most serious, I said; the fault of telling a lie, and, what is more, a bad lie.”

***
Wikimedia AXEC139d