September 29, 2020

Economists’ scientific incompetence is worse than the plague

Comment on Michael Roberts on ‘Ending the pandemic slump — a return to Keynes?’


Michael Roberts summarizes the situation: “The Great Lockdown has tipped the global economy into recession in 2020 on a scale not witnessed since the 1930s.” And “UNCTAD economists note … that the world economy was already heading for a slump before the pandemic hit.”

This leads quite naturally to the question: “What economic policies should be adopted to end this ‘lockdown slump’ and avoid or reduce the hit to the livelihoods of billions? That depends on the analysis of the causes of the slump itself.”

Right, good policy depends on true theory. The problem of economics as a science is this: “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)

And here is the snag: to this day, economists do NOT have the true theory but many silly opinions. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Economics is a failed science. As lousy scientists, economists are a hazard to their fellow citizens — not any different from quack doctors.#1

This has never hindered economists to give economic policy advice: “UNCTAD economists openly follow the Keynesian ‘explanation’ for the lost decade … since 2009. And their solution is a re-adoption of Keynesian policies to manage capitalism better. For UNCTAD, slumps start with a collapse in demand ie in investment spending and above all in household consumption.”

At this point, Michael Roberts begs to differ: “In a capitalist, profit-making, economy, it is profits and profitability that drive investment and when profitability drops, investment in the means of production and in labour will contract, leading to unemployment and loss of consumer incomes and demand.” And “Indeed, on occasion even Keynes recognised that profitability (which he called the ‘marginal efficiency of capital’) was an important factor in causing slumps.” As he said: “Unemployment … exists because employers have been deprived of profit. The loss of profit may be due to all sorts of causes. But, short of going over to Communism, there is no possible means of curing unemployment except by restoring to employers a proper margin of profit.”#2

And Michael Roberts continues: “You see, in the last 40 years, the share of profits in the national incomes of the major economies has risen at the expense of wages and so the crisis of capitalist production is ‘wage-led’ not ‘profit-led’.”

And then he finishes off UNCTAD: “There is no mention of profit or profitability in the whole of the long UNCTAD report. Instead we are asked to accept that slumps are caused by low wages and consumption and by low investment caused by a switch to financial speculation leading to ‘instability’.”

We can cut off the policy argument here because it is pointless. Obviously, there is something fatally wrong with the theoretical foundations and the concept of profit. The blunder is evident in the expression “share of profits in the national incomes”.

Because profit is NOT income (it is a difference of flows and not a flow like wage income) there is NO such thing as a “share of profits in the national incomes”.#3-#5

Because economists get the foundational economic concept of profit wrong the whole analytical superstructure of economics is false ― provably false. This means that economic policy NEVER has had sound scientific foundations. For 200+ years now political economics is nothing but brain-dead agenda pushing. UNCTAD and Michael Roberts are no exception. Like the rest of the profession, both have no idea of what profit is.

Egmont Kakarot-Handtke


#2 Keynes, too, got profit theory badly wrong. See Ch. 13, The indelible scientific disgrace of economics, in Sovereign Economics
#3 The Profit Law for the 3-sector economy is given by Qm≡Yd+(I−Sm)+(G−T)

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Source: Michael Robert's Blog

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REPLY to Matt Franko on Oct 1

You say: “Yes... They have big problems recognizing Minuends, Subtrahends and Differences.”

Indeed, this is the Flow-Balance Inconsistency (not to be confused with the Stock-Flow Inconsistency). In simple terms, “they” are too stupid for the elementary algebra that underlies macroeconomics.#1, #2

The Flow-Balance Inconsistency makes that the whole of MMT is proto-scientific garbage ― only good for trolling and deceiving #WeThePeople.


#2 For more on the Humpty Dumpty Fallacy see AXECquery.


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Wikimedia AXEC172

September 28, 2020

Occasional Tweets: MMT refuted

 

September 25, 2020

The unconditional surrender/sellout of science

Comment on Sabine Hossenfelder on ‘Follow the Science? Nonsense, I say.’


Sabine Hossenfelder gets directly to the heart of the matter: “Today I want to tell you why I had to stop reading news about climate science. Because it pisses me off. Every. Single. Time. There’s all these left-wing do-gooders who think their readers are too fucking dumb to draw their own conclusions so it’s not enough to tell me what’s the correlation between hurricane intensity and air moisture, no, they also have to tell me that, therefore, I should donate to save the polar bears.”

Obviously, science has been captured by political agenda pushers. Scientists have quietly left the realm of science and moved over to the political Circus Maximus with all its funny clowns and useful idiots and breathtaking stunts. The self-conception of science has fundamentally changed in the process.

“When I was your age, we learned science does not say anything about what we should do. What we should do is a matter of opinion, science is matter of fact. Science tells us what situation we are in and what consequences our actions are likely to have, but it does not tell us what to do.”

Indeed, that was exactly what J. S. Mill told his fellow economists: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”

The decision has to be made by the Legitimate Sovereign. It is an entirely different matter to clarify who the Legitimate Sovereign in a given situation is but that much is certain: genuine scientists will refuse to get involved in the issue. The genuine scientist sticks to the principle of the separation of science and politics.

In economics, the principle of the separation of science and politics has been violated from the first day onward. The founding fathers called their subject matter Political Economy. What comes under the label of economics these days is in fact two economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

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. Economics is a failed science.

Most people have not noticed it, but the official capitulation/sellout of science happened on Sep 3, 2020.#1

So, “Follow the Science is a complete rubbish idea, …” for various reasons. The worst of all is, that the prestige of science has been abused and ruined by the most unscientific assholes.

“You’d think it’s bad enough that politicians conflate scientific fact with opinion, but the media actually make it worse. They make it worse by giving their audience the impression that it matters what someone whose job it is to execute the will of the electorate believes about scientific facts. But I couldn’t care less if Donald Trump ‘believes’ in climate change. Look, this is a man who can’t tell herd immunity from herd mentality, he probably thinks winter’s the same as an ice age. It’s not his job to offer opinions about science he clearly doesn’t understand, so why do you keep asking him. His job is to say if the situation is this, we will do that. At least in principle, that’s what he should be doing. Then you look up what science says which situation we are in and act accordingly.”

There is no better exemplification of the indispensable separation of science and politics. In economics, in particular, there is no point at all to appeal to science because there has never been an economic science. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/ formally inconsistent.#2-#4

Egmont Kakarot-Handtke




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Wikimedia AXEC136g


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REPLY to Matt Franko on Sep 26

I stated above “Most people have not noticed it, but the official capitulation/sellout of science happened on Sep 3, 2020.”

It turns out that there is at least one person who realized the significance of the event: John Derbyshire “They Might As Well Put Bones Through Their Noses”— the Corruption of Scientific America.

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NOTE to Barkley Rosser on Sep 26, switch to EconoSpeak

On several occasions, I told you that economics is NOT a science and economists are NOT scientists but stupid and corrupt agenda pushers. With your replies, you regularly proved my point.

Things have now advanced into a new dimension. In a recent post, I stated “Most people have not noticed it, but the official capitulation/sellout of science happened on Sep 3, 2020.”

As it turned out, there was at least one person who realized the significance of the event: John Derbyshire “They Might As Well Put Bones Through Their Noses”— the Corruption of Scientific America.

Summarizing our exchanges about economics, it is fair to say that you played an active role in this development.

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REPLY to Matt Franko on Sep 27

You said “Egmont I think you are mis interpreting them ... you keep saying “they are not scientists” or “fake scientists” ... I don’t think they ever claimed to be scientists...”

What? Economists never claimed to be scientists?

They claimed it from Adam Smith/Karl Marx (Marxism = “scientific socialism”) onward and repeat the mantra every year, i.e. with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#1

SCIENCES! can't you read?

Economists NEVER lived up to the methodological and ethical standards of science. Economists, including MMTers, do not even live up to the standards of elementary algebra.#2, #3

The fact of the matter is that economists claim to be scientists but are merely political cockroaches.

However, there always was the role model of the genuine sciences with high standards and achievements that define every little piece of progress humanity has made over the last 200+ years.

Now, the significance of Sep 3, 2020, is that the genuine sciences have abandoned themselves by officially ending the separation of science and politics and by submitting themselves to political mob rule and the practices of the entertainment industry,#4 thus carrying the ongoing corruption of science one step further.


#3 See Ch. 13, The indelible scientific disgrace of economics, in Sovereign Economics

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REPLY to Barkley Rosser on Oct 3

You ask “So, do you want to give a quick explanation of what supposedly happened on Sept. 3, 2020, that was so earth shatteringly important about economics?”

The significance of Sep 3, 2020, is that the genuine sciences have abandoned themselves by officially ending the separation of science and politics and by submitting themselves to political mob rule and the practices of the entertainment industry. See Politics corrupts science, always and everywhere.

This, though, is what economists did long ago. Since the founding fathers, economists claim to be scientists but have never been anything else than political cockroaches.

In the recent presidential debate, Mr. Biden called Mr. Trump a liar and clown. As above, so below. What holds for the occupant of the top institution holds mutatis mutandis for the occupants of large parts of the institutional body, academic economics in particular. See my assessment of Nov 2016 Economists: The Trumps of science.

September 17, 2020

Governance, then and now

Comment on Frank Li on ‘Confucius on Governance’


In ancient Greece, the idea that the position in the social hierarchy should correspond to virtue/arete was not much different from Confucianism. “According to Plato, a philosopher king is a ruler who possesses both a love of wisdom, as well as intelligence, reliability, and a willingness to live a simple life.” (Wikipedia)

Things have changed a bit in the meantime. The Great Chain of Being model has been replaced by the Godfather model where sociopathology is the organizing principle with the worst person on top. Love of wisdom, intelligence, reliability, and a willingness to live a simple life have been turned on their heads.

Hollywood has produced a lot of educational material on mob rule. Compared to the three parts of The Godfather, Confucius' teachings look a bit naive. With Mr. Trump, the Chinese now learn it the hard way.

Egmont Kakarot-Handtke

September 16, 2020

Psychologism: how morons explain the world

Comment on Brian Romanchuk/Tom Hickey on ‘Canadian Establishment: "Deficit Myths? Yes, Please!"’


Brian Romanchuk explains: “The Canadian economic establishment is very much wedded to sound finance beliefs, courtesy of the Great Canadian Fiscal Crisis of the early 1990s.”

This sounds like an explanation but is pure blather. First, who is the “Canadian economic establishment” and, second, how can we know to which beliefs this fictitious subject is wedded and, third, is there any way to prove that Brian Romanchuk's statement is true?

This psychological motive-imputation is as far away from science as can be. It is, however, the stuff political propaganda is made of. Read three Trump tweets and you get the pattern.

Things are bad enough with fresh political events but they get exponentially worse with historical events.

As usual, Tom Hickey cannot resist jumping headfirst into the poop: “As an aside, Germany still can't get over the Weimar hyperinflation and ignores the turnaround engineered by Reichsbank president Hjalmar Schacht that contributed to the economic success of the Hitler regime through ‘creative finance’.”

Folk-psychologist Tom Hickey has “Germany” on his couch and diagnoses a trauma: hyperinflation.  And now it comes “since the end of WWII, Germany has been firmly committed to ‘sound finance’.” That is hysteresis of the worst sort.

OK Doctor, got it. Everybody who talks of sound finance is psychologically deranged. In particular, those people who accuse MMT of unsound economic policy. Your psycho-babble proves nothing but it is good enough for social media trolling.

The first point to realize is: the attempt to explain things historically is bound to fail because in most cases we have NO such thing as a historical fact. Everybody could know this since 1440 when Lorenzo Valla “proved that the Donation of Constantine was a forgery.”#1 This can be extrapolated backward to the folks who fabricated the bible and forward to those who wrote the Warren Report which “concluded that President Kennedy was assassinated by Lee Harvey Oswald and that Oswald acted entirely alone.” (Wikipedia)

Most people are aware that most of what is called history is silly propaganda. For this reason, it is a bad idea to use historical events or mere opinions about those events in an economic argument. History and psychology prove NOTHING. Scientific proof consists of the demonstration of material/formal consistency.

Psychoanalyzing the collective psyche of “Germany” and inflation is a futile exercise. What we know is (i) that hyperinflation does not happen by accident but has to be engineered, (ii) that it ruined the German economy with the middle class as the primary victim. Given the historical context, the combination of Weimar/Inflation is a signifier for an unprecedented political/economical catastrophe and not for some irrational phobia. Inflation has to be understood less as a mental illness and more as a weapon of economic warfare/subversion.

Having enjoyed a thorough economic education “Germany” is well-prepared to smell an economic rat. MMTers understandably do not like this and call “Germany” a paranoid Swabian housewife.

All this has nothing to do with economics understood as science. It is just a political shit-show. Scientifically, MMT is worthless and politically it is a fraud. Brian Romanchuk is part of it.#2

Egmont Kakarot-Handtke


#1 Wikipedia Lorenzo Valla
#2 For more on Brian Romanchuk see AXECquery.


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REPLY to Global Markets Training on Sep 17

You say: “When a bank makes a loan they DEBIT the asset named LOANS and they CREDIT the liability named DEPOSITS. Look up any definition of money as M1 or M2 and you will see that loans create deposits hence create M1 or M2 hence create money.”

For all practical purposes and in normal times, central bank deposits and bank deposits are functionally identical. However, in the strict sense, bank deposits are near-money, only central bank deposits/notes are money.#1 This explains the phenomenon of bank runs, i.e. when many people suddenly try to get central bank money/notes for their bank deposits.

You say: “And I audited banks for Ernst & Young. So I think I know something about the debits and credits of which I speak.”

Agreed. But despite the fact that the underlying math is the same, business accounting and macroeconomic accounting are different things. Obviously, you have not yet realized that MMT gets the macroeconomic sectoral balances equation wrong.#2 This foundational blunder makes that MMT as a whole is scientifically worthless.#3


#2 “And, although a classically trained economist I now fully accept the complete MMT lens.”

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REPLY to Tom Hickey on Sep 20

I argued above “For this reason, it is a bad idea to use historical events or mere opinions about those events in an economic argument. They prove NOTHING.”

For those economists who do not understand how the economy works and habitually try to explain actual problems with a reference to alledged historical precedents some devastating news about history in general just comes in: Almost all you know about history is probably wrong: How Long Was the First Millenium?#1



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Twitter May 17, 2021 History got lost around 1900, what remained is propaganda


September 15, 2020

Occasional Tweets: #EconTwitter and #EconBlocker

 



For more on #EconBlocker see AXECquery

September 13, 2020

Let's bury economics now

Comment on Lars Syll on ‘Michael Woodford on models’


Lars Syll argues against Michael Woodford: “This is — sad to say — a rather typical view among mainstream economists today. Defending the use of unrealistic and unsubstantiated models with the argument that models make it ‘easy for others to see what assumptions have been relied upon, and hence to challenge them’ is rather far-fetched.”

Yes, “unrealistic and unsubstantiated models” are indefensible. Yes, mainstream economics is proto-scientific garbage. Yes, mainstreamer are in the “story-telling business”.#1

Yes, yes, yes. All this is known for 150+ years. Yes, economics is failed/fake science. Yes, economists are stupid or corrupt or both. Yes, this applies in equal measure to Orthodoxy and Heterodoxy. It applies to economics in general and to Lars Syll, in particular.#2

The most important thing to realize is that there are theoretical economics and political economics. 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. Economic policy NEVER has had sound scientific foundations.

Both orthodox and heterodox economists are NOT scientists but clowns and useful idiots in the political Circus Maximus.#3, #4

The representative economist does not understand to this day what science is all about. So, here are eleven plain facts about ‘economic sciences’

1. Science manifests itself in the form of the true theory. 2. Truth is well-defined by material and formal consistency. 3. Logical consistency is secured by applying the axiomatic-deductive method and material consistency is secured by applying state-of-the-art testing. 4. The true theory/model is the humanly best mental representation of reality. 5. “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle, 300 BC)  6. The main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. 7. Because the foundations are false the analytical superstructure is false. 8. Economists are too stupid for elementary algebra. 9. Both orthodox and heterodox economics is failed/fake science. 10. Economic policy has no sound scientific foundations. 11. The EconNobel for ‘economic sciences’ is a fraud.

And this is the cause of the mess: economists have since the founding fathers consistently violated the separation of science and politics. In hashtags
#LawOfTheExcludedMiddle
#TheScientistIsNoActivist
#TheActivistIsNoScientist
#PoliticsCorruptsScience.

All this is known and needs no repetition. The consequence is: Economics and economists go directly to the Flat-Earth-Cemetery.

What next? Craig thinks he has a brilliant idea: “Paradigms, especially extremely relevant and urgently needed new paradigms are everything.” Yes, this is also known for a long time: “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)

Except that the Paradigm Shift from provably false Walrasian microfoundations and provably false Keynesian macrofoundations to true macrofoundations is an accomplished fact.#5

And now, Lars Syll and all the other agenda-pushers/activists lead your own funeral cortege!

Egmont Kakarot-Handtke


#2 Lars Syll is refuted on all counts. See blog query for details
#5 Sovereign Economics BoD


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Wikimedia AXEC136g

Putin or Trump — who is owned by the Oligarchy?

Comment on TASS/Tom Hickey on ‘Russia will keep low level of public debt to ensure macroeconomic stability — experts’


Tom Hickey comments “I guess they haven't yet discovered MMT.”

First, for governments, there is not much to discover with MMT. Governments do deficit-spending/money-creation since time immemorial. And the Russian government is NO exception.

Does anybody believe that Mr. Putin does not know recent history? “Adam Smith, when he wrote his Wealth of Nations, and Burke, when he produced his famous speech on economic reform, understood by ‘political economy’ a ‘branch of the science of the statesman or legislator’, a theory of practice, the science of the prudent management of the public finances. The growth of the huge debts which weighed on the great military nations would end in proving their ruin. This was especially true of England, which had become immensely in debt through the conquest of her colonial Empire.” (Halévy)

Second, does anybody believe that Mr. Putin does not know that MMT policy is NOT for the benefit of the People but for the benefit of the Oligarchy?#1 To recall, the macroeconomic Profit Law implies Public Deficit = Private Profit. Does it make sense for Mr. Putin to feed the Russian Oligarchs with newly created money?

Because we cannot read Mr. Putin's mind we really don't know.

It is different from Mr. Trump. The first thing he did after his inauguration was to surround himself with Wall Street folks. So, it is not really a surprise that Mr. Trump blew deficit-spending/money-creation up to hitherto unknown proportions.#2

After four years, it is pretty obvious that for Mr. Trump and his oligarchic backers it holds: mission accomplished.#3

No surprise then, that MMT has become so popular in the U.S. recently#4 but not so much in Russia.

Egmont Kakarot-Handtke





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Twitter Jan 23, 2021, The King of Debt


Occasional Tweets: Economists are NOT scientists but agenda pushers

 

September 12, 2020

Bang — the representative economist and supply-demand-equilibrium are dead

Comment on Brian Albrecht on ‘You'll have to pry supply and demand from my cold, dead hands’*


Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, materially/formally inconsistent, and all get profit ― the foundational concept of economics ― wrong. Because of the foundational blunder, the analytical superstructure of economics is false. Economics is a failed science.#1 This includes, of course, supply-demand-equilibrium, the one-graph-fits-all explanation of what happens in the economy.

Whether the ‘Totem of the Micro’ which consists of ill-founded marginalistic curves, has scientific value has often been questioned.#2-#10

• “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.” (Schumpeter 1954)
• “You can make even a parrot into a learned political economist – all he must learn are the two words ‘supply’ and ‘demand’.” (Anonymous in Samuelson 1973)
• “You cannot teach a parrot to be an economist simply by teaching it to say ‘supply’ and ‘demand’.” (Anonymous in Samuelson 2010)

The genuine scientists among economists are well aware of the failure of the overarching general equilibrium theory and acknowledge the need for 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)

This, though, is not how things play out in economics because the vast majority of economists are either stupid or corrupt or both. Economists either apply willful ignorance or come up with silly excuses.#11 Morgenstern criticized this back in 1941: “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.”

Refuted theories are not discarded but stubbornly recycled in Econ 101. The disgrace of economics consists of teaching generation after generation approaches that are provably false at the level of elementary algebra.#12

Brian Albrecht has heard about the failure of economics in general and of supply-demand-equilibrium in particular but that does not stop him: “I’m kicking this shindig off with a simple defense of (the increasingly scoffed at by the loudest voices online) supply and demand. It seems silly to need to defend supply and demand within economics circles. But it is 2020… tl;dr We can’t forget how much supply and demand explains about labor markets, especially when teaching students in their first economics course.”

Brian Albrecht does not know that without valid scientific foundations, economic policy guidance is something between worthless and socially disastrous: “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 1991)

To this day, economists do NOT have the true theory. Supply-demand-equilibrium has never been more than educated common sense. Its scientific value is zero. There is a fast and easy way to determine the scientific value of a theory/model. One has to look after what the theory/model says about profit. Profit is the pivot of economics, if profit is false the whole approach is false.#13

Now, how often does the word profit appear in Brian Albrecht's explanation of supply and demand? Not at all, zero! And this tells one without going into detail that Brian Albrecht is one of the many brain-dead blatherers who populate economics and are the very cause for the unassailable fact that economics is for 200+ years now a failed science.

The right thing to do is to bury supply-demand-equilibrium at the Flat-Earth-Cemetery and to start anew. In methodological jargon, this is called a Paradigm Shift. More specifically, one has to move from provably false Walrasian microfoundations and provably false Keynesian macrofoundations to true macrofoundations.#14

This, though, is entirely beyond the capacities of the representative economist. The only thing they can do is to sell their obsolete stuff to mentally retarded students: “We are trying to keep this lighthearted and fun while still discussing important economic ideas. We hope you do too.” Of course, the students do. The history of religion and the entertainment industry proves that young people readily accept any absurdity and stick to it until the end of their lives.

So, what does the correct Law of Supply and Demand look like? It is NOT derived from microfoundations because these end with methodological necessity in the Fallacy of Composition. There is NO way to come from microfoundations to an understanding of how the economy works.

Here are the basics of the macrofoundations approach.#15 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.

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 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, (ii) to differentiate the business sector into multiple firms and markets, and to determine the price structure.

For the time being, real balances are excluded, i.e. it holds X=O. The condition of budget-balancing, i.e. C=Yw, is now skipped. The monetary saving/dissaving of the household sector is defined as S≡Yw−C. The monetary profit/loss of the business sector is defined as Q≡C−Yw. Ergo Q≡−S.

The balances add up to zero. The mirror image of household sector saving S is business sector loss −Q. The mirror image of household sector dissaving (-S) is business sector profit Q. Q≡−S is the elementary version of the macroeconomic Profit Law.

Instant ramifications: (i) Because the mirror image of saving is loss Keynes' I=S is false, (ii) ALL IS-LM models are false, (iii) Post-Keynesianism in ALL variants is false.

For the macroeconomic Law of Supply and Demand follows P=ρE W/R with ρE≡C/Yw. This Law becomes a bit more complex when differentiated for an arbitrary number of firms/markets.

The point to grasp is that the Law of Supply and Demand has to be derived top-down from macrofoundations and NOT bottom-up from microfoundations and silly behavioral assumptions like utility or profit maximization. Time to pry supply and demand from Brian Albrecht's cold, dead hands.

Egmont Kakarot-Handtke


#10 Ch. 3 Market interdependence in Sovereign Economics
#13 Profit


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For more about supply-demand-equilibrium see AXECquery.

September 11, 2020

MMT: the Oligarchy's latest beauty treatment

Comment on Bill Mitchell on ‘British-EU disputes suggest the Tories are set to break away from the sordid Thatcher legacy’


Bill Mitchell summarizes: “There are several facets to the discussion: (a) the on-going hypocrisy of the European Union elites; (b) the necessity for major state intervention in Britain (and everywhere) and the possibility that the Tories will abandon Margaret Thatcher’s EU single market legacy is another sign that the paradigm shift in macroeconomics is well under way. (c) the way in which the Labour party are being wedged on the issue and refusing to come out in support of further state aid. Instead, inasmuch as they are saying anything, they are just repeating the mindless, neoliberal dogma about ‘free trade’.”

Reduced to slogans, the Thatcher/Reagan neoliberalism is remembered for:
• anti-statism/deregulation/privatization 
• free trade/globalization
• a macho/aggressive/anti-99%/pro-1% policy style
• rhetorical budget discipline.#1

After the successful implementation, at some point, the Oligarchy realized that this program backfired badly. So, in the last few years, the program was literally turned on its head. The most spectacular policy switch was from globalism to nationalism (MAGA) and from minimizing the state (Reagan's “government is the problem”) to capture the state.

Bill Mitchell and his MMTers are the propaganda prophets of the new strategy. This new policy is sold as progressive, i.e. as benefiting WeThePeople, and it is heavily pushed over all communication channels from Bill Mitchell's speaking tours to Stephanie Kelton's NYT bestseller to massive Twitter trolling by an army of morons.#2

The fact of the matter is that the U.S. economy hangs already for a long time on the state ventilator for its survival.#3 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. This means that the greater part of the profit in the U.S. is actually produced by the state. The U.S. economy is NOT a dynamic/wealth-creating free-market economy as described in the economic textbooks but hangs on the state ventilator for its survival. Private financial wealth is created by public deficit-spending/money-creation and is roughly equal to public debt.

The MMT policy of deficit-spending/money-creation is ultimately a means of postponing the breakdown of the U.S. economy.#4 It does not matter at all whether deficit-spending is justified with fighting unemployment, fighting COVID, or fighting climate change.#5 Because of the macroeconomic Profit Law, i.e. Public Deficit = Private Profit, the alleged benefit for WeThePeople, in any case, turns out to be a free lunch for the Oligarchy.

In order to save itself and to take the profit production into its own hands, the Oligarchy has given up its anti-state stance and tries to take over the national treasury and the central bank.#6 This is a Wall Street coup and has nothing at all to do with anti-Thatcherism/Reaganism/Neoliberalism.

Hollywood's political casting department has just replaced the bulldog face of aggressive Maggie Thatcher with the pretty face of emphatic Stephanie Kelton and ordered the academic Bill Mitchell to sell this botox farce as a scientific Paradigm Shift.

Egmont Kakarot-Handtke

#1 “During Reagan's eight year presidency, the annual deficits averaged 4.0% of GDP, compared to a 2.2% average during the preceding eight years.” Wikipedia

September 10, 2020

The tragedy of economics: stupid/corrupt economists

Comment on Lars P. Syll/Tom Hickey on ‘On war and economics’


Lars Syll argues: “Models may help us think through problems. But we should never forget that the formalism we use in our models is not self-evidently transportable to a largely unknown and uncertain reality. The tragedy with mainstream economic theory — and the ‘theorists’ that Clausewitz criticised — is that it thinks that the logic and mathematics used are sufficient for dealing with our real-world problems.”

The tragedy with Lars Syll is that he still thinks that mainstream economics is science. Time to take notice that economics is NOT science and never has been. Economics is proto-scientific garbage for 200+ years. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent. Economics is cargo cult science.

What Lars Syll sells as his grand methodological insight is a truism among genuine scientists and well-known among methodologists: “We are very far from being able to predict, even in physics, the precise results of a concrete situation, such as a thunderstorm, or a fire.” (Popper) Or a war, for that matter.

And, guess what, already J. S. Mill was well aware of the methodological situation: “Since, therefore, it is vain to hope that truth can be arrived at, either in Political Economy or in any other department of the social science, while we look at the facts in the concrete, clothed in all the complexity with which nature has surrounded them, and endeavour to elicit a general law by a process of induction from a comparison of details; there remains no other method than the à priori one, or that of ‘abstract speculation’.”

This means nothing more than that figuring out how the economy works requires a certain amount of abstraction. And here is exactly the point where economists in their bottomless methodological incompetence failed. Their blunder is known as Fallacy of Insufficient Abstraction.

The philosopher Tom Hickey hallucinates about science: “Science works quite well and consistently in dealing with physical matters, and fairly well in dealing with biological matters — other than psychology. But the record is not so good with social matters.”

The record is not so good with social matters because so-called social scientists are NOT scientists but stupid/corrupt political agenda pushers. Economists are even too stupid for the elementary algebra that underlies macroeconomics. The fact of the matter is, that economists do not know to this day what profit — the foundational concept of their subject matter — is.#3

To cover the scientific failure of economics with ontological and epistemological wish wash is the personal disgrace of Lars Syll and Tom Hickey within the general scientific disgrace of economics.#4

Egmont Kakarot-Handtke



September 7, 2020

September 6, 2020

MMT and the unbearable lightness of public debt slavery

Comment on Calgacus on ‘Anthropologist David Graeber, the man behind "We are the 99%" slogan, dead at 59’


I said “To recall, Debt: The First 5000 Years is about all forms of debt slavery” and referred to a post of mine.#1.

You answered, “Egmont, were it true that MMT sells children into debt slavery, I would oppose it.”

This if-my-grandma-had-wheels-she-would-be-an-omnibus counterfactual does NOT count as a refutation of my argument.

While nobody denies that debt slavery/bondage#2 is a historical fact and still practice in many countries, MMTers assert that no such thing can ever happen with the MMT policy of deficit-spending/money-creation as long as the debt is internal, i.e. not denoted in foreign currency.

Of course, purely internal debt slavery happens also but WeThePeople a.k.a. the 99-percenters normally do not realize it.

MMT policy is a two-step process:

1. According to the macroeconomic Profit Law it holds PublicDeficit = PrivateProfit. While the Oligarchy gets a free lunch, WeThePeople are taxed in real terms via a one-off unnoticeable price hike (NO inflation!). Deficit-spending increases public debt but WeThePeople do not care much because they think that this is a matter of the state. This is an error. For public debt holds WeThePeople owe the debt and the Oligarchy owns the corresponding financial assets.

2. Now, there is an interest rate greater than zero on the public debt. Because the public debt is not paid off but grows continuously through deficit-spending, the interest has to be paid for an indefinite time by children, grandchildren, etcetera.

At this point, MMTers apply Lerner’s Lie: “… if our children or grandchildren repay some of the national debt these payments will be made to our children or grandchildren and to nobody else.”

No, rather, the children or grandchildren of WeThePeople will pay annuity/interest to the children or grandchildren of the Oligarchy. They will pay it in the form of taxes. And this is why WeThePeople realize NOTHING. They hate the IRS and the taxman who, as a matter of fact, acts merely on behalf of the Oligarchy who owns the financial assets as the other side of the public debt.

In real terms, the disposable income of WeThePeople’s children, and thus their part of the output is reduced while the opposite applies to the Oligarchy’s children.

When the veil of money/deficit/debt/tax is taken away, the situation is not much different from the children of WeThePeople working part-time on the plantation of the children of the Oligarchy.#4 Therefore, it is economically correct to say that the deficit cheerleader Stephanie Kelton sells children into debt slavery.

Needless to emphasize that academic MMTers and their social media applause trolls stick to Lerner’s Lie and pose as progressive Friends-of-the-People. The fact is that they are merely the useful idiots of the Oligarchy.

Egmont Kakarot-Handtke


#4 For the broader issue of slavery/debt/interest see Leaf Garrit, British Abolition, Another Massive Taxpayer Heist

Occasionat Tweets: Stop thinking like an economist

 


For more about thinking/rethinking see AXECquery.

September 3, 2020

Occasional Tweets: Politics corrupts science, always and everywhere

 
The strict separation of science and politics is long gone. Politics has steadily corrupted science. Now it's official. Make no mistake, science as founded 2300+ years ago by the Greeks has been captured. Scientists have become clowns and useful idiots in the political Circus Maximus. Henceforth, the appeal to science/knowledge/truth means NOTHING. For more details see Links on the Economics Nobel and cross-references Political Economics/ Stupidity/Corruption.

Remembrance day: Official Capitulation/Sellout of Science, Sep 3, 2020.


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The Unz Review Sep 26 



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Bye, bye economic philosophers

Comment on Lars Syll/Tom Hickey on ‘The capital controversy’


What the Cambridge Capital Controversy has proven is that both orthodox and heterodox economists are NOT scientists but brain-dead political agenda pushers.#1

With regard to the CCC, Tom Hickey maintains: “From the perspective of a philosopher, this is a good illustration of why philosophy of economics and philosophy of science, which focus on clarification of concepts, is foundational to the discipline.”

Sort of, but the brute fact of the matter is that neither economists nor philosophers have clarified the foundational economic concept of profit.

Because of this, economics is a scientific failure. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent.#3

Not only the representative economist has proven to be scientifically incompetent ― actually, too stupid for elementary algebra ― but also the self-styled philosophers of science.#4, #5

It is a remarkable fact that the champions of scientific methodology never stumbled upon the plain fact that profit is ill-defined, except perhaps for Mirowski: “... one of the most convoluted and muddled areas in economic theory: the theory of profit.”

So, as economics currently goes down the scientific toilet let us by no means forget the philosophers of science.

Egmont Kakarot-Handtke



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REPLY to Matt Franko on Sep 3

You say: “It’s not foundational to Economics its foundational to Accounting.”

There is microeconomic accounting and macroeconomic accounting. Macroeconomic profit is foundational to economics because economics is about how the economy works.#1

To think one can understand the economy by studying the mom-and-pop store is known as the Fallacy of Composition. It is a bit like trying to understand the universe by studying a molehill in the backyard.



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REPLY to Matt Franko on Sep 3

You say: “It [accounting] has been ignored (espec.in macro) with a few exceptions (Lerner, Minsky, Godley, Lavoie, Bezemer, and Keen, among a very few others). ”

Accounting is elementary algebra, however, economists don't get it to this day. MMTers are no exception. Here is the proof


Yes, economists incl. MMTers and philosophers of science fail the intelligence test already at the entry-level.

No False-Hero-Memorials (III)

Comment on Barkley Rosser on ‘Assar Lindbeck Passes On’


Barkley Rosser remembers: “There are some oddities I shall recount based on gossip from primary sources I have heard from. So when I went to his [Lindbeck’s] Wikipedia page to double check on details of his career, it claimed that the award for James Buchanan in particular in 1986 was especially important for him as part of this general ideological agenda. … At the time Buchanan was pushing for a balanced-budget amendment to the US Constitution, basically a silly idea. But supposedly Lindbeck saw that as a way to send a message to the Reagan administration of disapproval for their high budget deficit policies, and this overcame whatever it was that had previously made Lindbeck so negative on Buchanan.”

Economics is NOT a science. Economists are NOT scientists but clowns and useful idiots in the political Circus Maximus. Because of this, the Bank of Sweden Nobel is a scientific fraud.#1, #2, #3

The EconNobel has never been anything else than a piece of political propaganda. Barkley Rosser “(I used to have good sources on that famous committee, …)” deserves praise for presenting the proof.

To this day, the ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’ has nothing to do with sciences because there is NO such thing as economic sciences.#4

Egmont Kakarot-Handtke



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Twitter Sep 5

September 2, 2020

Occasional Tweets: Confusing flows and balances