December 7, 2019

Understanding socialism presupposes understanding profit

Comment on Michael Roberts/Tom Hickey on ‘Understanding socialism’*

Blog-Reference and Blog-Reference

“The New York Times magazine has described Richard Wolff as ‘probably America’s most prominent Marxist economist’.”

From the word ‘prominent’ alone you know that you are outside of science and in the midst of the usual journalistic propaganda hype. The applause troll Michael Roberts tries to arouse even more enthusiasm by quoting Wolff: “If you want to understand an economy, not only from the point of view of people who love it, but also from the point of view of people who are critical and think we can do better, then you need to study Marxian economics as part of any serious attempt to understand what’s going on.”

No, you don’t because Marx’s economics is refuted on all counts and Wolff only recycles long-dead stuff: “Wolff concentrates on Marx’s key discovery about capitalism, namely the surplus value, which is what employers appropriate above what they pay for wages.”

The fact of the matter is that Marx NEVER understood what profit ― the foundational magnitude of economics ― is.#1 Neither did his followers to this day.#2 The rectification of Marxianism consists of the replacement of the key-concept of exploitation by cross-over exploitation.#3

Wolff sticks to surplus value and this tells one that he is a rather feeble thinker. Marx got economics wrong, so he can safely be forgotten. Same for Wolff’s policy proposals which have no sound scientific foundations.

Oh no, says the philosopher Tom Hickey: “He [Marx] was a philosopher, social and political activist, political theorist, historian, and one of the founders the disciplines that later became sociology and economics.”

True, but irrelevant.#4 Marx’s economics is provably false = scientifically worthless and this makes it very probable that the rest of his intellectual output was also proto-scientific garbage.

Egmont Kakarot-Handtke

* Michael Roberts Blog
#1 Links on Karl Marx
#2 Dear idiots, Marx got profit and exploitation wrong
#3 Capitalism, poverty, exploitation, and cross-over exploitation
#4 Perhaps the debunker Miles Mathis is closer to the historical facts than the philosopher Tom Hickey: “In that sense, Marxism is probably the greatest propaganda success of all time. The smashing success of this early major psy-op has led to everything we have seen since, including the sharp rise of all forms of misdirection. The upper class discovered that most people could be fooled most of the time, and that this fooling allowed for complete control of society.”

REPLY to Bob on Dec 8

The crucial point with Marx/Socialism/Communism/Capitalism is whether Marx understood how the monetary economy works. This presupposes an understanding of the foundational economic magnitude of profit. The point is that Marx and Marxians have NO idea what profit is. For the proof see Profit for Marxists.

So, Marxianism is scientifically worthless for 150+ years. Maybe Marx is philosophically relevant, in any case, he is irrelevant for economics understood as science.

Note in passing that philosophy has degenerated much from the ancient Greeks to the present and has become irrelevant itself. The practical proof is that philosophers readily board an aircraft that has been constructed by scientists/engineers but would refuse to board an aircraft that has been constructed by philosophers.

Now, the philosopher Tom Hickey claims: “I would add, at the very least. Marx and Engels, and subsequent Marxists and those influenced by Marx are still highly relevant and they are becoming more so as capitalism is more and more in crisis owing to neoliberalism, neoliberal globalization, and the challenge of climate change.” Given their track record, the idea that philosophers or Marxists, or economists can solve any of humanity’s problems is downright idiotic.

To repeat, Marx is scientifically irrelevant. And whether he gets many likes from folks like Richard Wolff, Michael Roberts, Tom Hickey and the brain-dead journalists of the New York Times is a scientific non-event.

The fact is that Marx got profit wrong and this he has in common with MMTers. The fact is that Marxians, MMTers, and philosophers like Tom Hickey are too stupid for the elementary algebra that underlies macroeconomics. The proof has been given elsewhere.

To expect from folks who cannot put 2 and 2 together a contribution to the advancement of science, culture, and civilization is the very definition of madness.

REPLY to Bob on Dec 8

You say: “Marx was concerned with the operation of individual businesses, hence the profit of the firm. He was looking at microeconomics.” and “Can science come to a conclusion that a relationship (employer/employee) is exploitative?”

Yes, Marx generalized what can be observed in a single firm, that is, methodologically Marxianism is one big Fallacy of Composition from Marx onward to retarded Marxians like Richard Wolff and the applause trolls of the NYT/econblogosphere.

If one does not understand macroeconomic profit one cannot understand exploitation and cross-over exploitation.

Here is the abbreviated argument.#1

The business sector is split into two identical firms and firm 1 is supposed to cut the wage rate W1 arbitrarily by half. From this follows that the market-clearing price P declines if all independent variables remain unchanged. Firm 2 is affected because total income Yw falls and with it consumption expenditures C and the market-clearing price P.

The reduction of the wage rate W1 increases the profit of firm 1 and produces a loss in firm 2. When we look alone at firm 1 we see what Smith, Mill, Ricardo, and Marx have seen before, to wit, wages down ― profit up. This fits the time-honored stereotype of wages and profits as antagonists.#2

The error/mistake/blunder of economists since the Classics has been to generalize what is true for a single firm and this is known as Fallacy of Composition.

If profits have been zero in the initial period because of budget-balancing C=Yw then firm 2 makes a loss which is exactly equal to firm 1’s profit. Therefore, the arbitrary wage rate cut of firm 1 does NOT increase the profit of the business sector as a whole but only REDISTRIBUTES profit/loss between the firms that constitute the business sector.

Seen from the perspective of a single firm, the antagonism of wages and profits is absolutely real. This, though, is parochial realism. The complete picture reveals that firm 1 is better off to the disadvantage of firm 2 and the workers of firm 2 are better off to the disadvantage of the workers of firm 1 because at a lower market-clearing price they absorb a bigger share of output O with their unaltered income.

The situation of the business sector AS A WHOLE is unchanged and the same is true for the household sector AS A WHOLE. If there is exploitation it happens WITHIN the sectors. A partial wage rate change leads only to a redistribution of profits between the firms and of output between the workers. So, in real terms, the exploitation of the workers of firm 1 benefits the workers of firm 2. The capitalist class as a whole does NOT benefit from the exploitation by the owners of firm 1 because the profit of firm 1 is exactly equal to the loss of firm 2.

So, Marx got the relationship between profit, exploitation, and class badly wrong. Marxians are for 150+ years now struck with the Fallacy of Composition. Not very smart these ‘philosophers, social/political activists, political theorists, and historians’. Time to bury them at the Flat-Earth-Cemetery in the dark corner that is reserved for the worst of all useful political idiots.

#1 Capitalism, poverty, exploitation, and cross-over exploitation
#2 Ricardo, too, got profit theory wrong

REPLY to Bob on Dec 9

You say: “Parochial realism is the perspective they are interested in. Marxists and business owners are not interested in macroeconomic explanations.”

It is a matter of indifference what Marxists and business owners are interested in. The economist as scientist figures out how the economy works just like astrophysicists figure out how the universe works and it is a safe bet that they are not at all interested in what retarded flat-earthers think or want.

The first thing an economist is supposed to know is what macroeconomic profit is. Marx did NOT know it and this is why Marxianism is proto-scientific garbage to this day. Why folks like Richard Wolff, Michael Roberts, the journalists of the New York Times, or Tom Hickey are recycling Marxian proto-scientific garbage is at anybody’s guess. OK, the journalists are on the payroll of the Oligarchy. The others are perhaps only stupid. Anyway, for all of them holds Voltaire’s écrasez l'infâme!

REPLY to Bob on Dec 10

You say: “… but you have to answer their questions. ... How do we eliminate unemployment?”

The matter has already been settled. For the axiomatically correct Employment Law see Full employment through the price mechanism and for more details see cross-references Employment/Phillips Curve.

REPLY to Calgacus on Dec 11

Marx always claimed that he was doing science. Of course, he was NOT. He was a political agenda pusher.
► Karl Marx, fake scientist

The same holds for Marxians to this day. And also for Walrasians, Keynesians, Austrians, and MMTers.

This brings us back full circle to
► Economics, philosophy, and the crapification of science
and to
► Economics ― the science that never was

To this day, Marxians are NOT doing science. Neither do the others. Economists are clowns and useful idiots in the political Circus Maximus.

REPLY to Bob on Dec 12

You say: “If the matter were settled, I wouldn’t have had to provide five places for five different answers. Could this be settled if there were a technical debate free of politics?”

The matter IS settled. The problem is that the scientific mechanism does not work in economics.

Science is NOT an endless conversation and never-ending recycling of old arguments but eventually ends with the refutation of materially/logically inconsistent theories: “That the settlement of opinion is the sole end of inquiry is a very important proposition.” (Peirce)

Being incompetent scientists, i.e. being stupid or corrupt or both, economists simply ignore refutation. This defect is well known: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern 1941)

This is the simple reason why you have to provide “five places for five different answers”. And this tells you that economics is NOT a science.

“There are always many different opinions and conventions concerning any one problem or subject-matter (such as the gods). This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides … was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other …” (Popper)

Walrasians, Keynesians, Marxians, Austrians, MMTers violate scientific standards. The “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud.

Stop blathering, apply the principles of science and your five places reduce to one. Simple.

REPLY to Dr. Wintermute on Dec 13 and Blog-Reference

Broadly speaking, economics is about how the economy works and NOT about how society or the human brain works. The economy is a sub-set of the universe and the subject matter is defined with phenomena like profit, income, price, output, saving, etcetera that do not appear in other sub-sets of reality like physics or biology.

Science takes the concrete form of a theory. The true theory/model is the humanly best mental representation of reality. Scientific truth is well-defined by material and formal consistency. “The chief demerit is inconsistency …” (Popper)

In this thread, we are concerned specifically with Marx’s economics. The proof has been given that Marx’s profit theory is false. Because Marx got the foundational concept of economics wrong the analytical superstructure of Marxianism is scientifically worthless.

This is the 150+ years overdue end of Marxian economics. Tom Hickey admits this but argues: “Secondly, Marx was a philosopher in his own right and a public intellectual in this time as a journalist and writer of political tracts in the context of the contemporary debates.” Yes, but this does NOT change the fact that Marx was a fake scientist and Marxianism is proto-scientific garbage.

What the philosopher Tom Hickey does is meta-communication. We are no longer talking about how the economy works but about the philosopher and agenda pusher Marx. Calgacus goes further in the wrong direction: “That’s some sort of positivism, analytic philosophy stuff. Stuff that was popular in the 20th century. Especially virulent in the postwar era. 1945-1970 or so. There was a bit of that in Marx, but not much. He was German, not English!” Perhaps this is good to know in a TV quiz.

You drive meta-communication even further away from the point at issue: “Your beef with Hegelian Dialectics is that on one hand, you don’t understand that the set of things which can be thought of without contradiction is only a subset of all possible things, and on the other hand, that the Kantian assumption that knowledge as such is limited is itself inconsistent. So you cannot blame the assumption of existing «real contradictions» solely on bad theorizing.”

I do not blame Marx or any other economist for bad theorizing, I blame them for being too stupid for the elementary algebra that underlies macroeconomics.#1 In fact, I prove it and the proof is as good as the proof of the Pythagorean Theorem and in any case vastly superior to your brain-dead off-topic meta-communication.

To make it concrete and politically relevant: Dear philosophers tell the econblogosphere which of the two sectoral balances equations is true?
a) (I−S)+(G−T)=0 (MMT, Keynesianism)
b) (I−S)+(G−T)=Q (AXEC)

Equation b) boils down to Public Deficit = Private Profit and this gives one the life formula of present-day Capitalism. You certainly agree that one cannot find this enlightening formula that gives you the conditions of the breakdown of Capitalism in the works of the philosopher and political agenda pusher Marx nor in Hegel’s Dialectic nor in Dr. Wintermute’s Analytische Sozialkritik.

#1 The ancient philosophers were supposed to be proficient at math as the motto of Plato’s Academy testifies.