This blog connects to the AXEC Project which applies a superior method of economic analysis. The following comments have been posted on selected blogs as catalysts for the ongoing Paradigm Shift. The comments are brought together here for information. The full debates are directly accessible via the Blog-References. Scrap the lot and start again―that is what a Paradigm Shift is all about. Time to make economics a science.
August 31, 2020
The new economic Paradigm requires a new textbook
August 30, 2020
MMT: fraudsters united
August 27, 2020
The trouble with truth
Comment on Philip Giraldi on ‘Rashomon American Style–Truth is somewhere in between’
Philip Giraldi’s summary misses the point by suggesting that truth is an entirely subjective affair: “The story reveals how all of the contradictory testimony was fundamentally dishonest, in that each participant was interpreting events to support his or her self-interest in the outcome of the tragedy.”
This conclusion is true for the political sphere. In the Rashomon story, though, the 5th person is missing: the detective/scientist. It seems that the paradox of multiple truths has been solved already by the ancient Greeks: “There are always many different opinions and conventions concerning any one problem or subject-matter … 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)
The idea of truth has no meaning in the political context. It has no meaning in economics either, because economics is not a science. Science is digital=binary=true/false and NOTHING in between. There is NO such thing in science as roughly right or roughly wrong, it is only materially/formally true/false. The swamp between true/false where “nothing is clear and everything is possible” (Keynes) is the natural habitat of morons, agenda pushers, confused confusers, blatherers, fraudsters, trolls, incompetent scientists, in one word, of political economists.#1, #2
Price theory — more than beating the dead horse again and again
Blog-Reference and Blog-Reference
Blair Fix summarizes “… Jonathan Nitzan demolishes the neoclassical theory of prices. It’s a master lesson in how to deconstruct a theory.”
Mainstream economics, though, does not need another deconstruction. Mainstreamers have admitted failure long ago “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., 1990)
Clearly, everybody knows by now for sure that supply-demand-equilibrium is proto-scientific garbage. Back in 1954, Schumpeter found it still necessary to diffuse doubts about the scientific status of the supply-demand-equilibrium approach “The primitive apparatus of the theory of supply and demand is scientific. But the scientific achievement is so modest, and common sense and scientific knowledge are logically such close neighbors in this case, that any assertion about the precise point at which the one turned into the other must of necessity remain arbitrary.”
So, the right thing to do is to bury and forget the “Totem of the Micro”: “If neoclassical theory is bunk, then what explains prices? Jonathan Nitzan, together with Shimshon Bichler, argues that prices are inseparable from power.”#4
With this, though, everything remains in the old economics-is-a-social-science paradigm. The behavioral assumption of price-taking is replaced by the assumption of price-setting. To remain in the psycho-sociological sphere is the lethal blunder of the power approach because economics is a systems science.#5
Here are the basics of the macrofoundations approach. 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 (1a). The price is determined by the wage rate W, which takes the role of the nominal numéraire, and the productivity R. This is the most elementary case, i.e. when the economy gets more complex the price equation becomes longer.*
The macroeconomic Law of Supply and Demand (1a) implies W/P=R (1b), i.e. the real wage is always equal to the productivity no matter how the wage rate W is set or how long the individual or aggregate working time L is. Full employment is possible, the workers always get the whole product O. The workers' living standard depends ultimately on productivity.
The logical next steps are (i) to skip the conditions of market-clearing and budget-balancing and to allow for price-setting, (ii) to differentiate the business sector into multiple firms and markets and to determine the price structure.#6
Egmont Kakarot-Handtke
#1 There is NO such thing as supply-demand-equilibrium
#2 How to Get Rid of Supply-Demand-Equilibrium
#3 The Law of Supply and Demand: Here It Is Finally
#4 This echoes Macht und ökonomisches Gesetz (Power and Economic Law), Schriften des Vereins für Socialpolitik, 1972.
#5 Your economics is refuted on all counts: here is the real thing
#6 See Ch. 3 Market interdependence in Sovereign Economics
August 26, 2020
Occasional Tweets: Where does profit come from?
#Economics#Profit
— E.K-H (@AXECorg) August 26, 2020
The question ‘Where does profit come from?’ on p. 70 of Bichler/Nitzan Capital as Power is answered on p. 11 ff. of #SovereignEconomics.https://t.co/Gxuijmw6po
#LearnEconomics#Profit
— E.K-H (@AXECorg) August 26, 2020
The axiomatic #ProfitLaw is to be found already for a long time on Wikimediahttps://t.co/92WmLnfHe7
and other easily accessible places, e.g. SSRN or Bloghttps://t.co/3x9c31peUB
Learn to google. pic.twitter.com/hDDqmaA383
#LearnEconomics#Profit
— E.K-H (@AXECorg) August 26, 2020
I have alerted you several times since 2015 – free of charge – that your approach is proto-scientific garbage. See blog searchhttps://t.co/IyHrijYpKo
and you will find the #ProfitLaw.
Learn to google.
Learn to read.
Learn to think.
#LearnEconomics#Profit
— E.K-H (@AXECorg) August 26, 2020
The Profit Theory is False Since Adam Smith … (SSRN Oct 2014)https://t.co/l1bcDv0bPv
Profit for Marxists (SSRN Mar 2014)https://t.co/94jqoxxHCP#Economics #FailedScience #Economists #ScientificIncompetence #DefundEconomics #FireEconomists #ScrapTheLot
Lest I forget, Steve Keen got a personal refutation
— E.K-H (@AXECorg) August 26, 2020
Debunking Squared (SSRN Nov 2013)https://t.co/WP0GvLkq4d
All behavior-based economic textbooks are false
Blog-Reference
Mainstream economics is known for a long time to be dead and in need of a Paradigm Shift “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., 1990)
John Komlos echoes this insight “… how misleading it can be to apply oversimplified models of perfect competition to the real world. The math works well on college blackboards but not so well on the Main Streets of America.”
However, “The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy.” (Feynman)
John Komlos takes up the challenge. His textbook “… demonstrates how we should take into account the inefficiencies that arise due to asymmetric information, mental biases, unequal distribution of wealth and power, and the manipulation of demand.”
This is laudable, except for one point: John Komlos’ approach is behavior-centered like the mainstream approach, only the behavioral premises have been changed and are certainly more ‘realistic’. However, John Komlos remains in the old economics-is-a-social-science paradigm. This is a lethal blunder because economics is a systems science. Economics is NOT about how people behave but how the economic system behaves. Human behavior is the subject matter of psychology and sociology and history and political science but NOT of economics.
Why do economists cling so tenaciously to the behavioral approach? Because they are political agenda pushers and NOT scientists. And politics is about the control of behavior. Economic incentives are but one form of behavioral control.
It is a scientific fact that economics as social science has to this day not figured out what macroeconomic profit — the foundational concept of economics — is. The behavioral approach is a methodological failure. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent.#1, #2
What economics needs is a Paradigm Shift from behavioral microfoundations to structural macrofoundations.#3
This Paradigm Shift and its far-reaching consequences can be studied with Sovereign Economics. This textbook contains the axiomatically true theory as an indispensable prerequisite of economic policy guidance.
“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)
John Komlos’ textbook is an outstanding example of educated common sense. The fact of the matter is, though, that neither orthodox nor heterodox economists have realized to this day what science is all about.
Egmont Kakarot-Handtke
#1 Economics is a disgrace ― now more than ever
#2 Wikipedia, economics, scientific knowledge, or political agenda pushing?
#3 Your economics is refuted on all counts: here is the real thing
August 18, 2020
Occasional Tweets: Economists are too stupid for science
#Economics#FailedScience#Economists#StupidOrCorruptOrBoth#Reset— E.K-H (@AXECorg) August 18, 2020
Macroeconomics: Economists are too stupid for sciencehttps://t.co/vTNWwrNUxA
Profithttps://t.co/0i4XICiAtV
Economics as science begins on p. 1 of the textbook Sovereign Economicshttps://t.co/Gxuijmw6po
The entire point of MMT is to sell deficit-spending/money-creation as a social good deed to WeThePeople. This is a political fraud.https://t.co/F9uHrcRyWd— E.K-H (@AXECorg) August 18, 2020
What is worse is that MMT is a scientific fraud. So, S Kelton, B Mitchell, etc have to be urgently expelled from academia.
The macroeconomic Profit Law implies #PublicDeficitIsPrivateProfit. And from this follows for #PublicDebt #WeThePeopleOwsItOligarchyOwns it.— E.K-H (@AXECorg) August 18, 2020
MMT is the biggest distributional fraud of all time. And you are part of it.
#MMT#JustAnotherFraud— E.K-H (@AXECorg) August 17, 2020
MMT is refuted on all counts. Because of #PublicDeficitIsPrivateProfit, the MMT policy of deficit-spending/money-creation is a free lunch for the Oligarchy. MMT is the political deception of WeThePeople and you are part of it.
#MMT#FakeScience— E.K-H (@AXECorg) August 17, 2020
The MMT sectoral balances equation is provably false. MMTers are too stupid for the elementary algebra that underlies macro. MMT is scientifically worthless.
Master of MMT ― Master of proto-scientific garbagehttps://t.co/9g4sA44hdE#DrainTheScientificSwamp pic.twitter.com/QBJivmqAxN
Quit wasting your tweets on hashtags and insults and actually respond or I will assume that you are insane or being paid by the Lincoln proj— Optimist 🇳🇫💰🔋🚅 (@Optimistbot) August 18, 2020
Thanks. Im about done. Im just intrigued. It must be a bot or some sort of autoreply. I’m trying to wrap my head around the lack of humanity— Optimist 🇳🇫💰🔋🚅 (@Optimistbot) August 18, 2020
you're a conspiracy theorist.— Optimist 🇳🇫💰🔋🚅 (@Optimistbot) August 19, 2020
Blocking you.
August 17, 2020
Fake America great again
Blog-Reference
Barkley Rosser reports on the actual state of the economy: “Dems indicated that they were willing to compromise on many issues. To pick a big symbolic one has to do with the total spending level. Going into this the Dems were pushing $3+ trillion and the GOP was pushing $1 trillion. Gosh, looks like $ 2 trillion would be an obvious compromise, and the Dems have publicly indicated they would be willing to go to that, but, no, … As it is, Meadows left town and the Senate has gone on leave until after Labor Day. No deal.”
This is Barkley Rosser’s usual newspaper digest. Not one small crumb of real economic analysis. That is regrettable because what unfolds before our eyes is the spectacular finale of the so-called free-market economy.
In the elementary production-consumption economy with a state sector, macroeconomic profit comes ultimately from the household and state sector’s deficit-spending/money-creation, i.e. Qm≡(G−T)−Sm.#1
For Sm=0 this boils down to (G−T)=Qm, i.e. public deficit equals private profit. The profit of the monetary economy is in this analytical limiting case produced entirely by the state. This case is at odds with the popular ideas of a free-market economy and Laissez-faire but it is practically the new normal.
The greater part of the profit in the United States is actually produced by the state. The US economy hangs for a long time already on the state ventilator for its survival. With the current boost of deficit-spending, the situation becomes even more extreme.
The policy of deficit-spending/money-creation is ultimately a means of postponing the breakdown of the US economy. Deficit-spending/money-creation is a free lunch for the Oligarchy. Financial wealth grows in lockstep with public debt. While employment and wage income go down, Mr. Trump’s current policy will blow up macroeconomic profit to hitherto unimaginable proportions. This profit will nearly 100 percent be state-produced.
Say, economists, what exactly has always been the strong point of Laissez-faire capitalism?
Egmont Kakarot-Handtke
#1 Wikipedia, economics, scientific knowledge, or political agenda pushing?
You say: “Second you have the oddity that while you claim profits are tied to budget deficits, why is it that it is pro-business Republicans who are now opposing larger deficits thereby endangering business profits?”
Economics is about how the economy works and NOT about how the brains of GOP Senators work.
Btw. this question has already been dealt with. See
Stephanie Kelton and the self-destructive stupidity of the super-rich
You say: “Yo are one of those caricatures of an economist who when confronted with facts that do not coincide with his theory declare that the facts are either wrong or irrelevant because the theory is true.”
The voting behavior of GOP Senators is NOT part of any economic theory but your re-telling of what you have read in the newspapers, which is obviously your main intellectual occupation.
What I told you is that profit in the US economy is nowadays entirely produced by the state and that the exploding deficit-spending will explode profit within a short time span.
This perverse correlation of high unemployment and high state-produced profit is a bit at odds with the popular idea of a free-market economy and should, therefore, provoke the interest of the professional economist.
I realize that it is impossible to get you above the newspaper level.
Anyway, I take the opportunity and, in order to honor myself as the author of the Axiomatic Profit Law, I call the correlation of exploding unemployment, exploding public debt, and exploding profit Handtke’s Law of Exitus Capitalism. It replaces the Law of the Tendency of the Rate of Profit to Fall.
You say: “Sorry, Egmont, but your claim tha profit is produced by the state is simply wrong, so wrong that it is not even wrong, as they say.”
What “they” say is absolutely irrelevant, because it is known by now that “they” are scientifically incompetent. Economics is a failed science. That is a fact.
The macroeconomic Profit Law for a closed economy is given by Qm≡Yd+(I−Sm)+(G−T) and this implies Qm=(G−T), i.e. macroeconomic profit is equal to the state’s budget deficit.#1 In order that there is a surplus in the business sector, there must be a deficit in the state sector. Balances always add up to zero.
So, I am right and you and “they”, i.e. the rest of American academics, are wrong. This is elementary algebra, the proof is in the public domain, and you can do NOTHING against it.
#1 Wikipedia, economics, scientific knowledge, or political agenda pushing?
August 9, 2020
Disgrace again ― is economics really that bad?
Blog-Reference
There is a lot of talk about the disgrace of economics these days.#1, #2, #3, #4 Now, David Glasner is pouring petrol on the fire by characterizing The Wall Street Journal’s editorial page as “a self-parody of obnoxious, philistine anti-intellectualism.”
What is the rage all about? It is about Mr. Moore’s claim “Because too often economic theories defy common sense.” This, indeed, is a recurring issue since J. S. Mill debunked the “bigots of common sense” a long time ago.#5 Obviously, there has not been much progress in the meantime.
The fact of the matter is that economists lack the true theory for 200+ years now and therefore regress periodically to common sense: “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)
David Glasner argues: “But Keynesian ideas are also rooted in certain common-sense notions, for example, the idea that income and expenditure are mutually interdependent, the income of one person being derived from the expenditure of another.”
Yes, Keynes famously stated in the General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)
This elementary syllogism is false because the premise is false. It is quite commonsensical but nonetheless false that “Income = value of output”. The value of output is normally greater than income and the difference is macroeconomic profit. Profit, though, is a balance of flows and not a flow like wage income. Against common sense: profit is NOT income. A balance and a flow are different things.
Keynes NEVER understood 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.)
What did Keynes do? “In the early thirties he confessed to Roy Harrod that he was ‘returning to an age-long tradition of common sense’.”#6
A fatal move, but After-Keynesians did not spot the blunder to this day.
Economists got macroeconomic profit wrong. Because of this foundational blunder, the whole of economics is proto-scientific garbage. See Ch. 13, The indelible scientific disgrace of economics, in Sovereign Economics.#7
Common sense naively assumes that so many economists can not be wrong for such a long time. As always, common sense is mistaken.
Egmont Kakarot-Handtke
#2 Economics is a disgrace (EKH)
#3 Economics is a disgrace ― now more than ever
#4 Economists can hardly wait for their burial at the Flat-Earth-Cemetery
#5 The bigots of common sense
#6 Coates, The Claims of Common Sense: Moore, Wittgenstein, Keynes, 2007, p. 11
#7 Amazon, BoD, etc
August 8, 2020
Economists can hardly wait for their burial at the Flat-Earth Cemetery
Source: Twitter |
Source: Twitter |
Source: Twitter |