It is generally known by now that economics is NOT a science and that economists are NOT scientists but agenda pushers. Currently, economists are given new marching orders.#1 And MMTers with their mantra of deficit-spending/money-creation are paraded in the media as the avant-garde of new economic thinking#2
Peter Dorman frames the issue psychologically by evoking the sufferings of WeThePeople:#3 “… the [NYT] article simply assumes that ‘large’ deficits are unsustainable and bad, and that only irresponsible political motives prevent action on them. In the name of a nebulous, unspecified Evil of Debt, the population of the US must be subjected to a regime of austerity, beginning with cuts in the programs many depend on to keep themselves and family members out of poverty.”
Then comes the economic expert with the tranquilizer: “To begin with, federal debt is denominated entirely in US dollars, so servicing is not a problem. Countries that borrow in foreign currencies, like Greece (which had no control over the euro) and Argentina, can default; that’s not a problem for the US.” No need for WeThePeople to worry about public debt because the US government neither intends to pay it back nor can it default on it.
And here are the really good news: “Meanwhile, government debt is an injection of spending power into the economy that counterbalances the leakage of a significant, ongoing trade (and current account) deficit. That’s not quite the right way to put it, since private and public net deficits, taken together, are the current account deficit. Once you understand what this means, you can’t avoid the economic shrinkage — austerity — aspect of deficit-cutting, since that’s what keeps the identity identical at any point in time.”
Obviously, Peter Dorman refers to the MMT/Keynesian/macroeconomic sectoral balances equation (I−S)+(G−T)+(X−M)=0. Unfortunately, this equation is provably false but Peter Dorman has not realized it to this day. In the equation above the most important balance ― the profit of the business sector ― is missing.
What does this tell us? (i) Academic economists do not know what profit is and how the monetary economy works. (ii) Academic economists are too stupid for the elementary mathematics of macroeconomic accounting. (iii) Academic economists either unintentionally or intentionally push the agenda of the Oligarchy.
The axiomatically correct balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0 with Q as macroeconomic profit. The macroeconomic Profit Law boils down to Public Deficit (G−T>0) = Private Profit Q which means that the Oligarchy’s financial wealth and public debt grow in lockstep. It is the very characteristic of the free-market economy that it is already for a long time on life support of the state. Profit is produced by the government through deficit-spending/money-creation. The Oligarchy, in turn, uses the opulent free lunches to corrupt what remains of the state’s legislative, executive, and judiciary institutions.
Needless to emphasize that this state of affairs cannot be communicated to WeThePeople. This is why MMT repackages deficit-spending/money-creation as a social program for the benefit of WeThePeople. The propaganda says that deficit-spending/money-creation is the solution for all problems beginning with unemployment and ending with global warming. This is just a political fraud.#4 And there is nothing new about it, actually, this is very old economic thinking.#5 A public debt of currently $22 trillion has taken two centuries to build up.
The free-market economy runs on profit, and macroeconomic profit comes mainly from a permanently growing public debt. To tell WeThePeople that all is just fine is the task of academic agenda pushers. In economics, scientific fraud is traditionally rewarded with the EconNobel a.k.a. “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#6
#1 See the Tweets from Jackson Hole
#2 Stephanie Kelton: MMT’s public farce
#3 This is propagandistic standard operation procedure since Friedrich Engels’ The Condition of the Working Class in England,
#4 Is MMT good for WeThePeople or for the Oligarchy?
#5 Keynes, Lerner, MMT, Trump, etc. and exploding profit
#6 Economics ― not science, not ideology, just useful idiocy
Related 'Keynesianism as ultimate profit machine' and 'Keynes, Kalecki, MMT and the invention of the perpetual profit machine' and 'Economics ― from attention and reputation management to science' and 'Cheerleading the cargo cult' and 'MMT Progressives: stupid or corrupt or both?' and 'Links on Austerity' and 'Austerity and the political games Progressives play' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'The decisive reason to worry about government debt' and 'Safe assets ― how the state pampers the Oligarchy' and 'Stephanie Kelton: “All deficits are good for someone” Yes, Someone=Oligarchy' and 'Bill Mitchell, MMT, Progressives: economists as Oligarchy hacks' and 'The irrelevance of populism for economics' and 'From the debt economy to the gift economy: how America is brainwashed to love budget deficits' and 'MMT works just fine'.
The macroeconomic Profit Law entails Public Deficit = Private Profit. Because of this, the Oligarchy and their useful academic/journalistic spokespersons should consistently argue FOR deficit spending, and WeThePeople and their academic/journalistic spokespersons should consistently argue AGAINST it. So, it is very easy to test the competence/honesty of economists/politicians. For details see
► Austerity and the idiocy of political economists
► Austerity and the utter scientific ignorance of economists
► Austerity and the total disconnect between economic policy and science
► Austerity and the political games Progressives play
► Austerity: Who takes the little man for a ride?
You say: “We do tolerate Egmont, but do realize that none of us take him seriously. His ‘profit law’ is total bs accepted by no other economists.”
The non-acceptance of the macroeconomic Profit Law#1 by economists means the non-acceptance of economics as a science. In science, proof counts and NOT the opinion of folks who are too stupid for the elementary algebra that underlies macroeconomics.#2
Economists are NOT tolerated in the scientific community because of proven incompetence over the last 200+ years.
#1 Wikimedia AXEC143d Macroeconomic Profit Law (with increasing complexity) and Balances Equation
#2 I=S is provably false since Keynes but neither you nor your “other economists” have realized it.
You say: “Go to the end, your claim that I=S is not true. Sorry, but in terms of US national income and product accounts, they do by definition. You can claim that this is not the right definition all you want, but it is the one that is used. This is a hard fact.”
Indeed. There was a time when saying the sun goes around the earth was a hard fact. Among imbeciles it still is. The scientific hard fact, though, is that the Profit Theory is false since Adam Smith and that the blunder quite naturally sneaked into the conventions of National Accounting.#1, #2 So, the hardest of all hard facts is that economists and national accountants are too stupid for the elementary mathematics that underlies macroeconomics.
1. Premises: 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 expenditures C is equal to price P times quantity bought/sold X.
2. Logical implications: In the elementary production-consumption economy, THREE configurations are logically possible: (i) consumption expenditures are equal to wage income C=Yw, (ii) C is less than Yw, (iii) C is greater than Yw.
• In case (i) the monetary saving of the household sector S≡Yw−C is zero and the monetary profit of the business sector Q≡C−Yw, too, is zero. The product market is cleared, i.e. X=O in all three cases. For a start, the market-clearing price as the dependent variable is given by P=C/X=W/R for any employment level.
• In case (ii) saving S is positive and the business sector makes a loss, i.e. Q is negative. The market-clearing price P is less than W/R.
• In case (iii) saving S is negative and the business sector makes a profit, i.e. Q is positive.
It always holds Q≡−S, in other words, the balances of the business and the household sector always add up to zero. This is the Fundamental Law of Macroeconomic Accounting.#3
In other words, the business sector’s loss is equal to the household sector’s saving. In still 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. Vice versa profit is equal to dissaving, i.e. the growth of the household sector’s debt.
3. Conclusion: Simple algebra tells everybody that saving is NEVER equal to investment and that, as a logical consequence, macroeconomics is provably false since Keynes. This carries over to National Accounting. So, actual National Accounting practice proves NOTHING except mathematical incompetence.
4. Generalization: The axiomatically correct macroeconomic Profit Law says for the general case Q≡Yd+(I−S)+(G−T)+(X−M). For the elementary investment economy this boils down to Q=I−S, i.e. macroeconomic profit is the difference between business sector investment and household sector saving. The empirical fact that macroeconomic profit has been greater than zero for most of the time since the Industrial Revolution tells everyone with more than two brain cells that there NEVER was equality of I and S in the whole history of Capitalism.
You say: “Bottom line is that your profit law is just a definition you made up nobody else agrees with, nobody. You are all alone with your precious tautology. This is why you have been unable to publish a single paper in an actual economics journals, and I note that there are now way over 1000 economics journals, with them having a wide range of views.”
In the genuine sciences, peer review has been institutionalized as quality control, in economics it has been perverted into an instrument for perpetuating the 200+ years stranglehold of the proto-scientific academic mob.
Because the profit theory is provably false all microeconomic and all macroeconomic models are false and, therefore, 99 percent of the content of peer-reviewed journals is proto-scientific garbage. In economics, the publication in a journal is NOT a quality characteristic but a reliable indicator that both the author and reviewer are either stupid or corrupt or both.
#1 The Common Error of Common Sense: An Essential Rectification of the Accounting Approach
#2 Is Nick Rowe stupid or corrupt or both?
#3 For details of the big picture see cross-references Accounting