October 5, 2019

Keynes ― the poster boy for the weakness of the economist’s mind

Comment on David Glasner on ‘Jack Schwartz on the Weaknesses of the Mathematical Mind’


David Glasner quotes Jack Schwartz approvingly: “In a psychological description of the computer intelligence, three related adjectives push themselves forward: single-mindedness, literal-mindedness, simple-mindedness. Recognizing this, we should at the same time recognize that this single-mindedness, literal-mindedness, simple-mindedness also characterizes theoretical mathematics, though to a lesser extent.”

This worn-off cliche of the small-minded mathematician is contrasted with the flamboyant artistic scientist: “Part of what goes into the making of a good scientist is a kind of artistic feeling for how to adjust or interpret a mathematical model to take into account what the bare mathematics cannot describe in a manageable way.”

This echoes Keynes’ hallucinatory self-description of the master economist: “The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher ― in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.”

Never has scientific incompetence advertised itself better. The fact is that Keynes was too stupid for the elementary algebra that underlies macroeconomics.#1

Keynes ― the trained mathematician ― stated in his General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This is provably false. The mathematically correct relationship reads Q≡I−S with Q as macroeconomic profit.#2, #3

Let this sink in, the master-economist Keynes had NO idea of profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.) Now it holds: when the foundational concepts are false the whole analytical superstructure is false. In other words, Keynes’ General Theory is scientifically worthless.#4

That is bad enough but it gets worse: After-Keynesians did NOT spot Keynes’ blunder to this day. For example, Paul Krugman still applies IS-LM. So, not only Keynes but Post- and Anti-Keynesians alike have been too stupid for the elementary algebra that underlies macroeconomics.

Economics (Walrasian, Keynesian, Marxian, Austrian) is mathematically flawed. As Georgescu-Roegen put it: “It is difficult to contemplate the evolution of the economic science over the last hundred years without reaching the conclusion that its mathematization was a rather hurried job.” This means that economic policy guidance NEVER has had valid scientific foundations. Note that the fault lies NOT with mathematics but with economists. Their proven mathematical/scientific incompetence notwithstanding, the pathetic master economists award themselves the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#5

Egmont Kakarot-Handtke

#1 Economics, math, pluralism, and corruption
#2 How Keynes got macro wrong and Allais got it right
#3 Wikimedia AXEC143 Macroeconomic Profit Law with increasing complexity of the economy
#4 For details of the big picture see cross-references Keynesianism
#5 Economics: The greatest scientific fraud in modern times

Related 'What it takes to become a great economist' and 'Who or what exactly did Keynes save?' and 'The unfinished Keynes (III)' and 'Keynes, the methodologist' and 'Hooray! The formalization issue is finally settled' and 'Marshall and the Cambridge School of plain economic gibberish' and 'Links on ‘Keynes: socialist, liberal, or conservative?’' and 'Forget Keynes' and 'Why Post Keynesianism Is Not Yet a Science' and 'Keynesianism is broken: Get over it!' and 'From Keynes’ fatal blunder to the true economic model' and 'Economics as storytelling and entertainment for the masses' and 'The economist as storyteller' and 'The real problem with the economics Nobel' and 'The canonical macroeconomic model' and 'Your economics is refuted on all counts: here is the real thing'.


Twitter/FRED The correlation of profit and investment