February 26, 2020

Master of MMT ― Master of proto-scientific garbage

Comment on Bill Mitchell on ‘Rounding off the Masterclass in London last weekend’*


Bill Mitchell tells his masterclass: “Viewed in a differ way, we have the accounting expression for the sectoral balances; (G – T) = (S – I) – (X – M + FNI)”

This equation is provably false because the balance of the business sector which is known as macroeconomic profit Q is missing. An economic approach that lacks the foundational magnitude profit is proto-scientific garbage.

Because the foundational macroeconomic relation is false the whole of MMT's analytical superstructure is false. Therefore, MMT's policy guidance has NO sound scientific foundations. Because of their absolute lack of scientific competence, MMTers are a public danger.

The correct sectoral balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0.#1-#6

Egmont Kakarot-Handtke

* billy blog
#1 MMTers: too stupid for simple math
#2 #DrainTheScientificSwamp
#3 The sectoral balances obfuscation: stupidity or corruption?
#4 Wikipedia and the promotion of economists’ idiotism (II)
#5 Rectification of MMT macro accounting
#6 MMT is refuted on all counts, see cross-references MMT

Related 'Refuting MMT’s Macroeconomics Textbook'

Wikimedia AXEC118d

REPLY to S400 on Feb 27

Bill Mitchell is doing good old Keynesian macro in his masterclass. Unfortunately, he has not realized to this day that

• there is NO such thing as equilibrium in economics,
• the correct sectoral balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0 with Q as macroeconomic profit,
• that the Keynesian multiplier lacks the price mechanism.#1, #2

Bill Mitchell claims: “So we have moved beyond meagre accounting at this stage.” No, MMT got not even the elementary algebra that underlies macro accounting right.

REPLY to S400 on Apr 3

You say: “I asked you two questions. You answered none.”

Here is the one answer to all your questions Stop Recycling Dead Economic Theories, Start the Paradigm Shift.

February 15, 2020

MMTers: too stupid for simple math

Comment on Peter Cooper on “Politicians Who Want Us to Live Beyond Our Means”#1


Peter Cooper asserts: “Here is a simple accounting relationship. It is an identity, true by definition: Government Balance + Domestic Private Sector Balance + Foreign Balance = 0.

This identity composes a nation’s economy into three broad sectors. The government sector spends and taxes. The domestic private sector spends (households consume, businesses invest) and receives income. The foreign sector receives payments from and makes payments to, domestic residents.

A sector is in surplus (its financial balance is positive) when its total spending is less than its income or revenue. Conversely, a sector is in deficit (its balance is negative) when its total spending exceeds its income or revenue. The accounting identity shows that the balances of the three sectors must sum to zero. If one sector maintains a surplus, at least one of the other sectors must be in deficit.”

Matt Franko echoes: “‘Here is a simple accounting relationship. It is an identity, true by definition: Government Balance + Domestic Private Sector Balance + Foreign Balance = 0’ if it was that ‘simple!’ then everybody would understand it …”.

Good point. MMTers definitively do NOT understand it. Neither does the rest of the basket of deplorables who have completed Econ 101 with an academic degree.

Eric Tymoigne, for example, asserts#2: “First, regarding the identity itself, for a domestic economy, we have, in terms of economic flows: GFB + PDFB + RWFB ≡ 0.

With PDFB the private domestic financial balance, RWFB the financial balance of the Rest of the World, and GFB the government financial balance. This identity holds all the time, in any domestic economy (in a world economy RWFB disappears). For economic analysis, it is insightful to arrange this identity differently in function of the type of monetary regime. In a country that is monetarily sovereign the federal government has full financial flexibility. By monetary sovereignty, one means that there is a stable and operative federal/national government that is the monopoly supplier of the currency used as ultimate means of payment in the domestic economy, and that the domestic currency is not tied to any asset (like gold) or foreign currency.” and “This means that, for a monetarily sovereign country, the most insightful way to arrange the national accounting identity is: −GFB ≡ PDFB + RWFB or −GFB ≡ NGFB.

Where NGFB is the non-government financial balance (the sum of the financial balance of the private domestic sector and the Rest of the World). This way of arranging the identity shows well that the government sector (through its federal branch) is the ultimate provider/holder of domestic currency: government fiscal deficit (surplus) is always equal to non-government financial surplus (deficit).”

All this is provably false.#3-#8 

To begin with, the number of sectors is four: household sector, business sector, government sector, and Rest of the World. Accordingly, the axiomatically correct balances equation reads (X−M)+(G−T)+(I−S)−(Q−Yd)=0. Legend: Q macroeconomic profit, S household sector saving, G government expenditures, T taxes.

The sectoral balances equation reduces to −SQ (i.e. Q+S=0) when the economy is reduced to the household and business sector. And it reduces to (G−T)Q when the economy is reduced to the government and business sector, that is Public Deficit = Private Profit.

Note that neither Peter Copper nor Eric Tymoigne ever tells one anything about macroeconomic profit Q which is the balance of the business sector. One would think that this balance plays a central role in any description of the monetary economy. Obviously, it does NOT and this tells one something important about economics and economists: economics is failed/fake science, and economists are either stupid or corrupt or both.

Egmont Kakarot-Handtke

#1 heteconomist
#2 New Economic Perspectives, Another Take on the Financial Balances
#3 The sectoral balances obfuscation: stupidity or corruption?
#4 Wikipedia and the promotion of economists’ idiotism (I)
#5 Wikipedia and the promotion of economists’ idiotism (II)
#6 Rectification of MMT macro accounting
#7 Economists cannot do the simple math of profit — better keep them out of politics
#8 Truth by definition? The Profit Theory is axiomatically false for 200+ years

Related 'Deficit cheerleaders ― the Oligarchy’s useful idiots' and 'Wikipedia, economics, scientific knowledge or political agenda pushing?'

For more about sectoral balances see AXECquery.

REPLY to Matt Franko on Feb 16

You say: “‘that is Public Deficit = Private Profit.’ Egmont the libertarians will N_E_V_E_R accept that... they just will not....”

Economics is a science according to its self-definition since the founding fathers. Science runs on the criterion true/false with true/false defined by material/formal consistency and NOTHING else. In science, it is a matter of indifference to what libertarians think or accept or do not accept. Libertarians are political agenda pushers and NOT scientists. The opinions of anti-scientists/politicians/trolls are irrelevant in science. Science is about knowledge, and politics is about opinions. Opinions are worthless, and politicians are known to be utterly stupid creatures.

Money does originally NOT come into the economy by government deficit-spending. Imagine that the balances of the government and the household sector are zero for a start, that is, all sectoral balances are zero, does this means that no money comes into the economy? NO! It is the Central Bank that issues the transaction money, i.e. finances the wage bill Yw with C=Yw and G=T and Q=0.#1-#5

Scientists listen to what the math says and NOT to what political agenda pushers say. And the math says that the MMT sectoral balances equation is false. MMT is refuted on all counts.

#1 The ultimate ― analytical ― origin of money
#2 How money emerges out of nothing ― the functional account
#3 Basics of monetary theory: the two monies
#4 The right and the wrong way to bring money into the economy
#5 Criminals and the monetary order

Wikimedia AXEC118d The false and the true macroeconomic relationship between sectoral balances


February 10, 2020

Mindfuck or the Eternal Return of dead economic theories

Comment on David Andolfatto on ‘Kalecki on the Political Aspects of Full Employment’

Blog-Reference and Blog-Reference

The state of economics is this: theoretical economics (= science) had been hijacked from the very beginning by political economists (= 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. What we have is the pluralism of provably false theories.

Obviously, economists violate the core principle of science, i.e. to bury refuted theories for good: “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)

The characteristic of science is ‘Conjecture and Refutation’, i.e. to ensure the material and formal consistency of a theory, to bury a theory at the Flat-Earth-Cemetery if refuted, and to replace it with something better. The characteristic of non-science, i.e. religion, politics, and common sense, is to endlessly repeat the same silly stories and the same false claims and only to defend/adapt them by ever more intricate reinterpretations.

Non-science means to keep everything in the swamp between true and false where “nothing is clear and everything is possible” (Keynes). Science means to get out of the swamp.

Economics is NOT science. Economists are NOT scientists but political agenda pushers.#1 The very characteristic of agenda-pushing is meta-communication or what the Ancients called sophistry or what the Moderns call mindfuck.

Science tries to figure out whether a given statement that relates to a real-world subject matter is true or false. Scientific truth is well-defined by material/formal consistency. Mindfuck is not about reality but about what others say or think about reality and the motivation behind it.

Kalecki is a case in point. He argues
“[1] Absent full employment policy the ‘state of confidence’ will produce business cycles. Under laisser-faire then, industry leaders can credibly use this fact to exert a powerful indirect control over government policy.
[2] Supporting obviously beneficial public sector investments leads to a slippery slope. The government may wish to encroach in other areas in competition with private enterprise.
[3] In a perpetually full employment economy, the threat of unemployment vanishes as a discipline device for employers. As well, the social position of the boss would be undermined and the self assurance and class consciousness of the working class would grow, leading to political instability.”

Obviously, Kalecki speculates about what goes on in the heads of politicians, workers, and the captains of industry. Obviously, Kalecki is NOT concerned about how the economic system works. He is NOT doing science but brain-dead folk-psychology.#2

Thinking hard about how the actual economy works will eventually lead to the true employment theory. Mindfuck, on the other hand, will never get out of the self-referential cycle of second-guessing and motive-imputation.#3

Kalecki, to be sure, is but one incompetent scientist in the history of economics mindfuck which is euphemistically called the history of economic thought. No thought there, merely political blather.

Kalecki, to be sure, is refuted on all counts.#4, #5, #6 High time for Mr. Andolfatto to bury him and to end those proto-scientific mindfuck exercises.

Egmont Kakarot-Handtke

#1 There are NO crank scientists in economics because economics is NOT a science
#2 Cross-references NOT a Science of Behavior
#3 The economist as storyteller
#4 Truth by definition? The Profit Theory is axiomatically false for 200+ years
#5 Kalecki got it wrong, Allais got it right
#6 For details of the big picture see cross-references Kalecki

Related 'The problem with economics as a discipline' and 'Economic narratives are for the scientific garbage dump' and 'Economics ― the science that never was' and 'Ending the pluralism of provably false economic theories with the long-overdue Paradigm Shift' and 'Stop Recycling Dead Economic Theories, Start the Paradigm Shift'.

February 8, 2020

There are NO crank scientists in economics because economics is NOT a science

Comment on Blair Fix on ‘How do you spot a crank?’


Crank-spotting is a recurrent issue in economics: “A sure sign of a crisis is the prevalence of cranks. It is characteristic of a crisis in theory that cranks get a hearing from the public which orthodoxy is failing to satisfy. In the thirties we had Major Douglas, and social credit ― it can all be done with a fountain pen ― and Warren and Pearson who convinced President Roosevelt that raising the dollar price of gold would raise the price of everything else and bring the slump to an end. The cranks are to be preferred to the orthodox because they see that there is a problem. Nowadays we have plenty of cranks taking up the problems that the economists overlook.” (Joan Robinson, 1972)#1

Blair Fix takes up the issue for our time and clarifies it for himself: “I think about everything I know about neoclassical economics ― its flaws, its absurdities. I reassure myself that I’ve made the right choice. I’m not a crank. I’m a rational critic of an absurd theory.”

Well, that is what all cranks say, so Blair Fix has to go a little deeper: “The only way to judge if someone is a crank is to think rationally for yourself. You must become knowledgeable in the subject matter. You must immerse yourself in the crank’s arguments, and in the counterarguments. You must study the evidence, and if needed, run your own tests. In short, to identify a ‘crank’ you must become a scientist yourself.”

And this brings us immediately to the end of the road: “You likely see the problem with this approach. Few people have the time to become experts in one subject. And no one has the time to become an expert in every subject. So the best way to identify a crank (do science for yourself) is out of most people’s reach.”

Having told lay people that they have no chance of spotting a crank, Blair Fix then turns around and tells them how to spot cranks and how he spotted them in economics, more specifically, in neoclassical economics.

But in the end it amounts again to a big frustration for laypeople: “Philosophers of science have thought for a long time about the ‘crank identification problem’. But they don’t call it this, of course. They call it the ‘demarcation problem’. The demarcation problem is about how to distinguish between ‘science’ and ‘non-science’. It’s a problem that has kept many philosophers up at night. Karl Popper thought he had the solution with ‘falsifiability’. Scientific theories, Popper proposed, make falsifiable predictions. Pseudoscience, in contrast, does not. Many scientists (including me) still think that falsifiability is the bare-bones standard of a good theory.”

Note that Blair Fix has just played a trick on you. By citing philosophers of science he implicitly suggested that economics is a science and he, too, is a scientist: “Many scientists (including me) still think …”. The point is that Blair Fix is a fake scientist who has to be expelled from the scientific community.

The methodological fact of the matter is that economists claim from Adam Smith/Karl Marx onward to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” that they are doing science. They do NOT. Economics is what Feynman called cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”#2

What economics is still missing after 200+ years is the true theory. 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. As a result of the utter scientific incompetence of the representative economist, what has been achieved is the pluralism of provably false theories.

Economics is a failed science. Blair Fix, though, cannot admit that economists are incompetent scientists but pulls the complexity argument out of the top hat#3: “But as we move to more complex systems, theory becomes more difficult to test. And for that reason, knowledge becomes less secure. Chemistry is more complex than physics, and so less secure knowledge. Biology is more complex than chemistry, and so less secure still. And the social sciences? They study impossibly complex systems. So knowledge in the social sciences is orders of magnitude less secure than in the natural sciences.”

It is worth recalling that this lame excuse has already been used by the founding fathers: “There is a property common to almost all the moral sciences, and by which they are distinguished from many of the physical; this is, that it is seldom in our power to make experiments in them. In chemistry and natural philosophy, we can not only observe what happens under all the combinations of circumstances which nature brings together, but we may also try an indefinite number of new combinations. This we can seldom do in ethical, and scarcely ever in political science. We cannot try forms of government and systems of national policy on a diminutive scale in our laboratories, shaping our experiments as we think they may most conduce to the advancement of knowledge. We therefore study nature under circumstances of great disadvantage in these sciences; being confined to the limited number of experiments which take place (if we may so speak) of their own accord, without any preparation or management of ours; in circumstances, moreover, of great complexity, and never perfectly known to us; and with the far greater part of the processes concealed from our observation. (J.S. Mill)#4

Sounds plausible but is completely beside the point because economics is NOT a social science and not a science of human behavior but a systemsm science.

What economists tell the world is that the failure of economics is due to the subject matter and not to the scientific incompetence of economists. On this point, there is unanimity among economists of all schools. The fact of the matter is, though, that economists are even too stupid for the elementary algebra that underlies macroeconomics.#5, #6

Economics is a failed science. Economists are NOT scientists but political agenda pushers, i.e. clowns and useful idiots in the political Circus Maximus.#7 Blair Fix is no exception.

Egmont Kakarot-Handtke

#1 For the history of crank-spotting see Wikipedia Fads and Fallacies in the Name of Science
#2 What is so great about cargo cult science? or, How economists learned to stop worrying about failure
#3 Failed economics: The losers’ long list of lame excuses
#4 Complexity and stupidity
#5 In principle, everybody can check it out for themselves: How the Intelligent Non-Economist Can Refute Every Economist Hands Down
#6 MMT: How mathematical incompetence helps the Kelton-Fraud
#7 Cross-references Political Economics/Stupidity/Corruption

Related 'Complexity, scientific incompetence, and the art of asking the right questions' and 'There is no soft science only soft brains' and 'The problem with economics as a discipline' and 'Microfoundations are dead for 150+ years: high time to move on' and 'Why is economics such a scientific embarrassment?' and 'Economics: The greatest scientific fraud in modern times' and 'Economics: Not a pretty story' and 'Ending the pluralism of provably false economic theories with the long-overdue Paradigm Shift' and 'Your economics is refuted on all counts: here is the real thing'.

Feb 10


Scientific American May 2020
Hermits and Cranks: Lessons from Martin Gardner on Recognizing Pseudoscientists

Source: Scientific American ‡

‡ This has been a test. If you felt the urge to vomit while reading Gardner's text you have good scientific instincts. Scientists prove and refute but never resort to psychologizing. In science, the criterion is true/false with truth well-defined since the ancient Greeks by material/formal consistency. Psychologizing is what Popper called an immunizing stratagem.