Comment on Stephanie Kelton on ‘Modern Monetary Theory Is Not a Recipe for Doom’*
Blog-Reference and Blog-Reference
Stephanie Kelton introduces her rebuttal of Paul Krugman thusly: “Although he’s had almost a decade to come to terms with the approach, he is still getting some of the basic ideas wrong. This matters for two reasons: one, because people listen to Paul Krugman, who won the Nobel economics prize in 2008, and, two, because the approach he is discussing is at the heart of how to design economic policies that affect millions of Americans. I’d like to try to move the conversation forward by addressing his concerns.”
The conversation is pointless for the simple reason that both Paul Krugman and Stephanie Kelton are failed/fake scientists. Paul Krugman never understood how the economy works, #1 he is an agenda-pushing journalist on a large fake-news platform, and the economics “Nobel” signifies nothing because economics is a failed science.#2 Stephanie Kelton, on the other hand, promotes the profit-boosting MMT policy of deficit-spending/money-creation in a social/environmental bluff package.#3, #4, #5, #6
Stephanie Kelton’s critique of Paul Krugman’s policy blather hits the point: mainstream economics is a scientific Zombie ― dead but not buried. But Paul Krugman’s critique of MMT is entirely beside the point. The lethal effect of MMT policy is NOT on inflation or crowding out or on the monetary-fiscal tradeoff, but on distribution.
The macroeconomic Profit Law entails Public Deficit = Private Profit which means that the Oligarchy’s financial wealth and public debt (currently $22 trillion) grow in lockstep. Hence the MMTers’ arguments for permanent deficit-spending/money-creation have a tangible use-value for the Oligarchy. The so-called free-market economy hangs already for a long time on the full life-support of the state, i.e. on a smoothly growing public debt.
On closer inspection, both Stephanie Kelton and Paul Krugman are in the same business, i.e., of helping the Oligarchy to survive for another day by brainwashing WeThePeople with academic snake oil.#8
Egmont Kakarot-Handtke
* BloombergOpinion
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#2 Krugman and the scientific implosion of economics
#3 The Kelton-Fraud
#4 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#5 Down with idiocy!
#6 No MMT illusions! YOU are going to pay for it
#7 The canonical macroeconomic model
#8 Just one more day: How deficit-spending postpones the breakdown of Capitalism
Related 'Paul’s and Stephanie’s economic delirium talk' and 'The clock runs down on economics' and 'Mission impossible: economists join WeThePeople'.
Showing posts with label zBLO. Show all posts
Showing posts with label zBLO. Show all posts
May 31, 2019
April 25, 2019
Macroeconomics: Economists are too stupid for science
Comment on Noah Smith on ‘Beware of Economic Theories Claiming to Explain Everything’*
Blog-Reference and Blog-Reference (Link) and Blog-Reference (Link)
“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)
The goal of science is the true theory. The true theory is the humanly best mental representation of reality. Science is for 2300+ years defined by material and formal consistency. Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-art testing.
According to the criteria of material/formal consistency, economics is a failed science. Economists do not possess a true theory. The fact of the matter is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong.
Non-science is the swamp between true and false where ‘nothing is clear and everything is possible’ (Keynes). This corresponds approximately to Noah Smith’s mistaken idea of science: “What it [orthodox macroeconomics] is, is science. Not the clean, idealized lab science of physics or chemistry, or the simple, convincing studies of microeconomics. But as messy and limited as it is, empirical macro represents a real, honest, ongoing attempt by dedicated researchers to explore the ins and outs of a hideously complex and hard-to-measure system. Someday, thanks to their modest, diligent efforts, we will probably understand the phenomena of booms and busts much better than we do now.”
Noah Smith thinks that Orthodoxy has a communication problem: “But elected politicians looking for a bold policy program and asset managers looking for a bold investment thesis are frequently tempted by heterodox economic theories claiming to have simple, sweeping solutions. Two examples are Austrian economics and modern monetary theory.” And: “The boldness and confidence of these predictions — and the comparative lack of math — makes these theories much more attractive to politicians and investors compared to the turgid scribblings of professors.”
No, communication is neither the problem of Orthodoxy nor of Heterodoxy. Scientific content is the problem. Both Orthodoxy and Heterodoxy is proto-scientific garbage. Both, orthodox and heterodox economists are scientifically incompetent. As a consequence, Noah Smith’s conclusion misses the point: “In other words, both policy makers and politicians should be reluctant to embrace the sweeping claims of unconventional theorists. Instead, a cautious approach, relying on judgment, data, and an eclectic mix of theories, seems best.”
There is no way around it: economics does NOT need an “eclectic mix” of provably false theories but the true theory. After 200+ years, economics has to get out of the swamp of what Feynman called cargo cult science. In methodological parlance, economics has to abandon false Walrasian microfoundations#1 and false Keynesian macrofoundations#2 and move to true macrofoundations.#3 Economics needs a Paradigm Shift. The materially/ formally inconsistent orthodox and heterodox models have to be buried at the Flat-Earth Cemetery. All orthodox and heterodox economists have to be expelled from the scientific community.
To this day, the axiomatic foundations of economics are provably false. This holds for Walrasianism, Keynesianism, Marxianism, Austrianism, and also for MMT.#4 MMT has the methodological advantage that it is based on a clearly defined sectoral balances equation. This enables the straightforward application of the scientific method. Accordingly, the question is which of the two foundational macroeconomic equations is true, i.e. materially and formally consistent:
• the MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 or
• the axiom-based equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0.
Both equations consist of measurable variables and are testable with the precision of two decimal places. This is a clear-cut true/false question that can be unambiguously decided according to well-established scientific criteria.
The MMT equation is logically/mathematically false. Economists are too stupid for the elementary mathematics that underlies macroeconomics.#5 Because of this, the whole analytical superstructure of MMT is false. Because the theory is false MMT policy guidance has NO sound scientific foundations ― just like Walrasianism, Keynesianism, Marxianism, and Austrianism.
Right policy depends on true theory. To this day, economists do NOT have the true theory. There is no escape: false theory becomes political fraud#6 and incompetent scientists become useful political idiots. This is the state of present-day economics.
Egmont Kakarot-Handtke
* BloombergOpinion
#1 Microfoundations are given with this axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub) Accepting these axioms has always been a reliable indicator of idiocy.
#2 How Keynes got macro wrong and Allais got it right
#3 True macrofoundations are given with this axiom set: (A0) The most elementary configuration of 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.
#4 Hooray! The formalization issue is finally settled
#5 Wikipedia and the promotion of economists’ idiotism (II)
#6 MMT: How mathematical incompetence helps the Kelton-Fraud
Related 'Economists: too stupid for counting' and 'Knowledge is attainable ― even in economics' and 'How economists murdered the economy and got away with it' and 'Economics is locked in idiocy: How could this happen?' and 'Dani Rodrik, fake scientist' and 'Still beyond the reach of economists: The Holy Grail of Science' and 'Are economists natural born scientific failures?' and 'Confused Orthodoxy vs. confused Heterodoxy' and 'Eclecticism, anything goes, and the pluralism of false theories' and 'The creative destruction of Wren-Lewis' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'Why is economics a total scientific failure?' and 'Economists: Either stupid or corrupt or both' and 'From Keynes’ fatal blunder to the true economic model' and 'Mad but true: 200+ years after Adam Smith economists still have no idea what profit is' and 'Smart young empirically-minded economists: another vain hope' and 'Media-fake-farce-fraud-storytelling-macro' and 'Economists: Either stupid or corrupt or both' and 'Proving Bill Mitchell wrong ― burying MMT for good' and 'The canonical macroeconomic model' and 'There is NO such thing as “smart, honest, honorable economists”' and 'Profit' and 'Your economics is refuted on all counts: here is the real thing'.
Blog-Reference and Blog-Reference (Link) and Blog-Reference (Link)
“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)
The goal of science is the true theory. The true theory is the humanly best mental representation of reality. Science is for 2300+ years defined by material and formal consistency. Logical consistency is secured by applying the axiomatic-deductive method and empirical consistency is secured by applying state-of-art testing.
According to the criteria of material/formal consistency, economics is a failed science. Economists do not possess a true theory. The fact of the matter is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong.
Non-science is the swamp between true and false where ‘nothing is clear and everything is possible’ (Keynes). This corresponds approximately to Noah Smith’s mistaken idea of science: “What it [orthodox macroeconomics] is, is science. Not the clean, idealized lab science of physics or chemistry, or the simple, convincing studies of microeconomics. But as messy and limited as it is, empirical macro represents a real, honest, ongoing attempt by dedicated researchers to explore the ins and outs of a hideously complex and hard-to-measure system. Someday, thanks to their modest, diligent efforts, we will probably understand the phenomena of booms and busts much better than we do now.”
Noah Smith thinks that Orthodoxy has a communication problem: “But elected politicians looking for a bold policy program and asset managers looking for a bold investment thesis are frequently tempted by heterodox economic theories claiming to have simple, sweeping solutions. Two examples are Austrian economics and modern monetary theory.” And: “The boldness and confidence of these predictions — and the comparative lack of math — makes these theories much more attractive to politicians and investors compared to the turgid scribblings of professors.”
No, communication is neither the problem of Orthodoxy nor of Heterodoxy. Scientific content is the problem. Both Orthodoxy and Heterodoxy is proto-scientific garbage. Both, orthodox and heterodox economists are scientifically incompetent. As a consequence, Noah Smith’s conclusion misses the point: “In other words, both policy makers and politicians should be reluctant to embrace the sweeping claims of unconventional theorists. Instead, a cautious approach, relying on judgment, data, and an eclectic mix of theories, seems best.”
There is no way around it: economics does NOT need an “eclectic mix” of provably false theories but the true theory. After 200+ years, economics has to get out of the swamp of what Feynman called cargo cult science. In methodological parlance, economics has to abandon false Walrasian microfoundations#1 and false Keynesian macrofoundations#2 and move to true macrofoundations.#3 Economics needs a Paradigm Shift. The materially/ formally inconsistent orthodox and heterodox models have to be buried at the Flat-Earth Cemetery. All orthodox and heterodox economists have to be expelled from the scientific community.
To this day, the axiomatic foundations of economics are provably false. This holds for Walrasianism, Keynesianism, Marxianism, Austrianism, and also for MMT.#4 MMT has the methodological advantage that it is based on a clearly defined sectoral balances equation. This enables the straightforward application of the scientific method. Accordingly, the question is which of the two foundational macroeconomic equations is true, i.e. materially and formally consistent:
• the MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 or
• the axiom-based equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0.
Both equations consist of measurable variables and are testable with the precision of two decimal places. This is a clear-cut true/false question that can be unambiguously decided according to well-established scientific criteria.
The MMT equation is logically/mathematically false. Economists are too stupid for the elementary mathematics that underlies macroeconomics.#5 Because of this, the whole analytical superstructure of MMT is false. Because the theory is false MMT policy guidance has NO sound scientific foundations ― just like Walrasianism, Keynesianism, Marxianism, and Austrianism.
Right policy depends on true theory. To this day, economists do NOT have the true theory. There is no escape: false theory becomes political fraud#6 and incompetent scientists become useful political idiots. This is the state of present-day economics.
Egmont Kakarot-Handtke
* BloombergOpinion
#1 Microfoundations are given with this axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub) Accepting these axioms has always been a reliable indicator of idiocy.
#2 How Keynes got macro wrong and Allais got it right
#3 True macrofoundations are given with this axiom set: (A0) The most elementary configuration of 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.
#4 Hooray! The formalization issue is finally settled
#5 Wikipedia and the promotion of economists’ idiotism (II)
#6 MMT: How mathematical incompetence helps the Kelton-Fraud
Related 'Economists: too stupid for counting' and 'Knowledge is attainable ― even in economics' and 'How economists murdered the economy and got away with it' and 'Economics is locked in idiocy: How could this happen?' and 'Dani Rodrik, fake scientist' and 'Still beyond the reach of economists: The Holy Grail of Science' and 'Are economists natural born scientific failures?' and 'Confused Orthodoxy vs. confused Heterodoxy' and 'Eclecticism, anything goes, and the pluralism of false theories' and 'The creative destruction of Wren-Lewis' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'Why is economics a total scientific failure?' and 'Economists: Either stupid or corrupt or both' and 'From Keynes’ fatal blunder to the true economic model' and 'Mad but true: 200+ years after Adam Smith economists still have no idea what profit is' and 'Smart young empirically-minded economists: another vain hope' and 'Media-fake-farce-fraud-storytelling-macro' and 'Economists: Either stupid or corrupt or both' and 'Proving Bill Mitchell wrong ― burying MMT for good' and 'The canonical macroeconomic model' and 'There is NO such thing as “smart, honest, honorable economists”' and 'Profit' and 'Your economics is refuted on all counts: here is the real thing'.
***
Wikimedia AXEC118d
February 1, 2019
Stephanie Kelton and the self-destructive stupidity of the super-rich
Comment on Stephanie Kelton on ‘The Wealthy Are Victims of Their Own Propaganda ― To escape higher taxes, they must embrace deficits.’*
Blog-Reference and Blog-Reference
Stephanie Kelton is desperate:
What a big letdown for Stephanie Kelton who has worked so hard for the benefit of the Oligarchy.#7
Egmont Kakarot-Handtke
* BloombergOpinion
#1 What is wrong with MMT? and What is wrong with Brad DeLong?
#2 Stephanie Kelton on how to become fabulously wealthy
#3 MMT: Academic snake oil for the people
#4 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#5 MMT: The fusion of Wall Street and Academia
#6 Austerity: Who takes the little man for a ride?
#7 MMT Progressives: The knife in the back of WeThePeople
Related 'MMT in a nutshell' and 'MMT: For the record' and 'MMT Progressives: stupid or corrupt or both?' and 'Austerity and the political games Progressives play' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'Note on “Era of Austerity coming to an end...”' and 'Economics: A pointless left-right wrestling show' and 'MMT: Distribution is the drawback NOT Inflation'. For the full-spectrum refutation of MMT see cross-references MMT.
You say: “Every public dollar spent becomes a private dollar in savings. This isn’t even MMT, it’s just basic macroeconomics.”
No! Basic macro says Public Deficit = Private Profit. Do your macroeconomic homework. See
The Kelton-Fraud.
Because of the macroeconomic Profit Law, i.e. Public Deficit = Private Profit, MMT benefits the Oligarchy and NOT WeThePeople. See MMT: A free lunch for the Oligarchy.
Take notice that MMT is refuted on all counts according to the scientific criteria of material/formal consistency.
For details see cross-references MMT.
As you can easily see, the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is logically/mathematically defective. Because of this, the whole of MMT is scientifically worthless.
The point is NOT who says what but whether is it provably true, i.e. materially and formally consistent.
What MMT is saying to WeThePeople is the same as what the counterfeiter says to his wife pointing to his printer: I can buy you everything you ever want. Technically this is possible, of course, but economically it is a fraud. See
How MMT makes everybody happy
The day when WeThePeople sends debt-deranged economists to hell
Why do you permanently try to sidetrack the fact that MMT is a political fraud?
The Kelton-Fraud
Which of the two macroeconomic sectoral balances equations is true?
a ► (I−S)+(G−T)+(X−M)=0
b ► (I−S)+(G−T)+(X−M)−(Q−Yd)=0
If you cannot answer this simple question you are out of economics.
Those equations tell everybody that Public Deficit = Private Profit, that MMT is a free lunch program for the Oligarchy, and that fabulous financial wealth in the US is equal to fabulous public debt (22 trillion).
That a counterfeit money producer cannot go bankrupt is a rather trivial revelation. The fact is that MMT is a political fraud that hurts WeThePeople big time.
MMTers are either stupid or corrupt or both.
No one with more than two brain cells takes seriously what politicians, billionaires, MMTers, or Stephanie Kelton blather about budget deficits.
Stephanie Kelton says “… the government’s ‘red ink’ becomes our ‘black ink”. The fact is instead Public Deficit = Private Profit. You say “Kelton helps the poor”. The fact is, Kelton provides a free lunch for the Oligarchy.#1
MMT is bad theory, MMT is bad policy, MMTers are bad people.
#1 Fraud comes always in the cloak of philanthropy, salvation, or threat of doom
Blog-Reference and Blog-Reference
Stephanie Kelton is desperate:
- For years now, MMTers propose deficit-spending/money-creation as the key policy instrument for the solution of any social/economic problem
- Because of the macroeconomic Profit Law, it holds Public Deficit = Private Profit#1
- Clearly, MMT policy is a permanent free lunch for the Oligarchy
- The fabulous wealth of the Oligarchy is the mirror image of the fabulous public debt ($21.5 trillion).#2
- Part of the free-lunch profit is invested in government bonds and generates ultra-safe interest income, which is taxed from WeThePeople, for an indefinite time
- MMTers argue consistently against taxing the rich#3
- MMTers deceive WeThePeople about the distributional effects of MMT policy#4
- MMT academics corrupt science on a daily basis by violating well-defined standards.#5
What a big letdown for Stephanie Kelton who has worked so hard for the benefit of the Oligarchy.#7
Egmont Kakarot-Handtke
* BloombergOpinion
#1 What is wrong with MMT? and What is wrong with Brad DeLong?
#2 Stephanie Kelton on how to become fabulously wealthy
#3 MMT: Academic snake oil for the people
#4 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#5 MMT: The fusion of Wall Street and Academia
#6 Austerity: Who takes the little man for a ride?
#7 MMT Progressives: The knife in the back of WeThePeople
Related 'MMT in a nutshell' and 'MMT: For the record' and 'MMT Progressives: stupid or corrupt or both?' and 'Austerity and the political games Progressives play' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'Note on “Era of Austerity coming to an end...”' and 'Economics: A pointless left-right wrestling show' and 'MMT: Distribution is the drawback NOT Inflation'. For the full-spectrum refutation of MMT see cross-references MMT.
***
REPLY to Julian Potter on Feb 3You say: “Every public dollar spent becomes a private dollar in savings. This isn’t even MMT, it’s just basic macroeconomics.”
No! Basic macro says Public Deficit = Private Profit. Do your macroeconomic homework. See
The Kelton-Fraud.
***
REPLY to Julian Potter on Feb 3Because of the macroeconomic Profit Law, i.e. Public Deficit = Private Profit, MMT benefits the Oligarchy and NOT WeThePeople. See MMT: A free lunch for the Oligarchy.
***
REPLY to JuHoansi on Feb 5Take notice that MMT is refuted on all counts according to the scientific criteria of material/formal consistency.
For details see cross-references MMT.
***
REPLY to JuHoansi on Feb 6As you can easily see, the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is logically/mathematically defective. Because of this, the whole of MMT is scientifically worthless.
***
REPLY JuHoansi on Feb 7The point is NOT who says what but whether is it provably true, i.e. materially and formally consistent.
***
REPLY to JuHoansi on Feb 8What MMT is saying to WeThePeople is the same as what the counterfeiter says to his wife pointing to his printer: I can buy you everything you ever want. Technically this is possible, of course, but economically it is a fraud. See
How MMT makes everybody happy
The day when WeThePeople sends debt-deranged economists to hell
***
REPLY to JuHoansi on Feb 9Why do you permanently try to sidetrack the fact that MMT is a political fraud?
The Kelton-Fraud
***
REPLY to JuHoansi on Feb 10Which of the two macroeconomic sectoral balances equations is true?
a ► (I−S)+(G−T)+(X−M)=0
b ► (I−S)+(G−T)+(X−M)−(Q−Yd)=0
If you cannot answer this simple question you are out of economics.
***
REPLY to JuHoansi on Feb 11Those equations tell everybody that Public Deficit = Private Profit, that MMT is a free lunch program for the Oligarchy, and that fabulous financial wealth in the US is equal to fabulous public debt (22 trillion).
That a counterfeit money producer cannot go bankrupt is a rather trivial revelation. The fact is that MMT is a political fraud that hurts WeThePeople big time.
MMTers are either stupid or corrupt or both.
***
REPLY to JuHoansi on Feb 11No one with more than two brain cells takes seriously what politicians, billionaires, MMTers, or Stephanie Kelton blather about budget deficits.
Stephanie Kelton says “… the government’s ‘red ink’ becomes our ‘black ink”. The fact is instead Public Deficit = Private Profit. You say “Kelton helps the poor”. The fact is, Kelton provides a free lunch for the Oligarchy.#1
MMT is bad theory, MMT is bad policy, MMTers are bad people.
#1 Fraud comes always in the cloak of philanthropy, salvation, or threat of doom
January 18, 2019
MMT: Not a joke but a fraud
Comment on Michael R. Strain on ‘Modern Monetary Theory’ Is a Joke That’s Not Funny’
Blog-Reference and Blog-Reference
Michael R. Strain opens the argument: “First, let’s start with the confusion over what it is. The answer seems to depend on which advocate of MMT is being asked. It is sometimes a theory of money. MMT is also being discussed in the context of a political program to justify huge increases in social spending. Finally, there is its role as a prescription for macroeconomic policy. … Even as just an economic theory, it is not settled or fully developed. … The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills.”
What is specific to MMT is the claim that almost all economic/social problems can and should be solved by deficit-spending/money-creation. MMT is advertised as a potent medicine that benefits the ninety-nine-percenters and that has no serious short- or long-term negative side effects. MMT claims further that orthodox economics is provably false and that orthodox policy is counterproductive.
MMT is three things: theory, policy, activism. These three elements are constantly mixed in the public debate and this guarantees inconclusive blather in all eternity which keeps soapbox economists, journalists, agenda pushers, propagandists, social media trolls, and the rest of the Circus Maximus employed and fed.
MMT theory is provably false, i.e. materially/formally inconsistent. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern for consistency, truth, or scientific validity.
The lethal negative effect of permanent deficit-spending/money-creation is NOT on inflation but on distribution.#1 According to the macroeconomic Profit Law [Q=Yd+(I−S)+(G−T)+(X−M) → Q=(G−T)], it holds Public Deficit = Private Profit and this means that MMT policy benefits the one-percenters and not the ninety-nine-percenters.
Expressed as a parable. The MMTer resembles a person who prints counterfeit money, say a million, and distributes it with great fanfare among the poor of the town. The media praise her as a fine example of social responsibility and charity. The economic effect of the matter, though, is that the workers are the real benefactors who unwittingly are made to share their real income with the poor. The redistribution of output is effected by barely noticeable price hikes. In the end, the counterfeit money ends up as profit of the business sector as a whole.
The undeniable charm of MMT policy is that apparently there are only winners. Fact is, though, that MMT is proto-scientific garbage and political fraud#2 and that, at the end of the day, the ninety-nine-percenters hold the bag.#3, #4
As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt of WeThePeople.
Egmont Kakarot-Handtke
#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#3 MMT = proto-scientific garbage + deception of the 99-percenters
#4 Deficit-spending, public debt, and macroeconomic profit/loss
Related 'Warren Mosler: scientific dilettante and political fraudster' and 'How MMT makes everybody happy' and 'MMT is NOT bold policy but spineless fraud'. For the full-spectrum refutation of MMT see cross-references MMT.
REPLY to Bob Roddis on Jan 18
You ask: “Do I have that right?”
No, you don’t get anything right. Bad Austrian karma.
Imagine for a start an elementary production-consumption economy with a balanced household sector budget in the initial period, i.e. C=Yw.#1
Now, if the government runs a deficit in period 1, total expenditures are C+G, the market-clearing price rises (no inflation), and the business sector makes a profit Q=G. Taxes are zero, i.e. T=0.
The banking system consists alone of the central bank. So, profit takes the form of deposits at the CB. The business sector’s deposits are equal to the government’s overdrafts. For a start, there is no interest on deposits/overdrafts.
If the government decides to issue bonds in order to consolidate their overdrafts at the central bank and the business sector buys these bonds then both overdrafts and deposits go again to zero. Money = deposits at the CB vanishes. The business sector now holds interest-bearing bonds. The government has to tax the household sector in order to pay interest to the bondholders.
The government’s debt took first the form of overdrafts and then the form of bonds (liabilities). The business sector’s profit took first the form of deposits and then the form of bonds (assets).
#1 Deficit-spending, public debt, and macroeconomic profit/loss
Blog-Reference and Blog-Reference
Michael R. Strain opens the argument: “First, let’s start with the confusion over what it is. The answer seems to depend on which advocate of MMT is being asked. It is sometimes a theory of money. MMT is also being discussed in the context of a political program to justify huge increases in social spending. Finally, there is its role as a prescription for macroeconomic policy. … Even as just an economic theory, it is not settled or fully developed. … The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills.”
What is specific to MMT is the claim that almost all economic/social problems can and should be solved by deficit-spending/money-creation. MMT is advertised as a potent medicine that benefits the ninety-nine-percenters and that has no serious short- or long-term negative side effects. MMT claims further that orthodox economics is provably false and that orthodox policy is counterproductive.
MMT is three things: theory, policy, activism. These three elements are constantly mixed in the public debate and this guarantees inconclusive blather in all eternity which keeps soapbox economists, journalists, agenda pushers, propagandists, social media trolls, and the rest of the Circus Maximus employed and fed.
MMT theory is provably false, i.e. materially/formally inconsistent. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern for consistency, truth, or scientific validity.
The lethal negative effect of permanent deficit-spending/money-creation is NOT on inflation but on distribution.#1 According to the macroeconomic Profit Law [Q=Yd+(I−S)+(G−T)+(X−M) → Q=(G−T)], it holds Public Deficit = Private Profit and this means that MMT policy benefits the one-percenters and not the ninety-nine-percenters.
Expressed as a parable. The MMTer resembles a person who prints counterfeit money, say a million, and distributes it with great fanfare among the poor of the town. The media praise her as a fine example of social responsibility and charity. The economic effect of the matter, though, is that the workers are the real benefactors who unwittingly are made to share their real income with the poor. The redistribution of output is effected by barely noticeable price hikes. In the end, the counterfeit money ends up as profit of the business sector as a whole.
The undeniable charm of MMT policy is that apparently there are only winners. Fact is, though, that MMT is proto-scientific garbage and political fraud#2 and that, at the end of the day, the ninety-nine-percenters hold the bag.#3, #4
As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt of WeThePeople.
Egmont Kakarot-Handtke
#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
#3 MMT = proto-scientific garbage + deception of the 99-percenters
#4 Deficit-spending, public debt, and macroeconomic profit/loss
Related 'Warren Mosler: scientific dilettante and political fraudster' and 'How MMT makes everybody happy' and 'MMT is NOT bold policy but spineless fraud'. For the full-spectrum refutation of MMT see cross-references MMT.
***
REPLY to Bob Roddis on Jan 18
You ask: “Do I have that right?”
No, you don’t get anything right. Bad Austrian karma.
Imagine for a start an elementary production-consumption economy with a balanced household sector budget in the initial period, i.e. C=Yw.#1
Now, if the government runs a deficit in period 1, total expenditures are C+G, the market-clearing price rises (no inflation), and the business sector makes a profit Q=G. Taxes are zero, i.e. T=0.
The banking system consists alone of the central bank. So, profit takes the form of deposits at the CB. The business sector’s deposits are equal to the government’s overdrafts. For a start, there is no interest on deposits/overdrafts.
If the government decides to issue bonds in order to consolidate their overdrafts at the central bank and the business sector buys these bonds then both overdrafts and deposits go again to zero. Money = deposits at the CB vanishes. The business sector now holds interest-bearing bonds. The government has to tax the household sector in order to pay interest to the bondholders.
The government’s debt took first the form of overdrafts and then the form of bonds (liabilities). The business sector’s profit took first the form of deposits and then the form of bonds (assets).
#1 Deficit-spending, public debt, and macroeconomic profit/loss
September 24, 2018
Stephanie and Noah ― economics at the intellectual zero lower bound
Comment on Stephanie Kelton/Noah Smith on ‘Just When Should We Start Worrying About Deficits?’
Blog-Reference and Blog-Reference
This is the point at issue: “The Congressional Budget Office just said it expects the deficit to top $1 trillion in 2019, a record. Should we be worried?”
This is an open invitation for Stephanie Kelton to enthusiastically push the agenda of the oligarchy:#1
• “What I find interesting is … the fact that Republicans added roughly $2 trillion in stimulus at a time when nearly everyone said it shouldn’t be done, citing proximity to full employment. ‘You don’t do stimulus at full employment,’ was basically the argument. Well, here we are well into the experiment and ... what’s the problem? Inflation remains in check, unemployment has ticked down a bit further, small business confidence is at a 45-year high and growth has accelerated.”
• “And, as you note, they helped without raising inflation, which tells me they didn’t overstimulate, which further tells me there may be room to do even more. Tax Cuts 2.0, anyone?”
• “And so while critics use terms like, ‘blowing up the deficit’ or ‘drowning in red ink’ to describe what’s happening to the government’s finances, Republicans seem more interested in the fact that their deficits will improve the private sector’s finances, especially the biggest corporations and wealthiest people in America. In other words, the GOP seems to understand that the government’s red ink is our black ink!”
• “The most intuitive way to show this is through the sector financial balances. This becomes clear if you listen to Hatzius explain why he thinks sector-balance analysis can send a signal when the private sector’s financial positions are becoming overly fragile. And because it’s nothing more than accounting, it also tells us that the crowding-out story is 100 percent wrong — a government deficit raises private sector incomes; it doesn’t crowd out private finance.”#2
The economic blunder/fraud is in the reference to MMT’s sectoral balances equation and in the assertion “the government’s red ink is our black ink.” No, it is not OUR black ink but THEIRS = the oligarchy’s black ink.#3
Noah Smith does not spot the lethal fault in Stephanie Kelton’s argument and merely waves with the inflation red-herring: “It seems like you’re agreeing with me that accelerating inflation is a risk of deficits. The question is whether that would come slowly or quickly.”
What, then, is the lethal fault is Stephanie Kelton’s argument? Fact is:
• The MMT sectoral balances equation, i.e. (I−S)+(G−T)+(X−M)=0, is provably false.#4 MMT has no sound scientific foundations.
• Neither Stephanie nor Noah ever mentions the profit effect of deficit-spending/money-creation.#5
• From the axiomatically correct Profit Law Qm≡Yd+(I−Sm)+(G−T)+(X−M) follows Public Deficit = Private Profit.#6
• Therefore, MMT economic policy ultimately boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.
MMT is failed/fake science#7 and the proponents of MMT in general and Stephanie Kelton, in particular, are stupid/corrupt agenda pushers.
Egmont Kakarot-Handtke
#1 MMT: So-called Progressives as trailblazers for Trumponomics
#2 MMT = Modern Monetary Trash
#3 MMT and the single most stupid physicist
#4 Down with idiocy!
#5 Why the MMT benefactors of humanity never talk about profit
#6 Keynes, Lerner, MMT, Trump and exploding profit
#7 For the full-spectrum refutation see cross-references MMT
Noah Smith asked rhetorically ‘Just When Should We Start Worrying About Deficits?’
Stephanie Kelton answers with the MMT refrain don’t worry, be happy. You parrot her with: “Personally, if my assets exactly equalled my debts, and I got a check from some sugar daddy, I would be LESS WORRIED (silly me) than prior to receiving the check.”
So, nothing to worry about except that what is unfolding in the grand political Circus Maximus is ― to use Stephanie Kelton’s words ― “one of the greatest cons ever perpetrated on the American people.”#1
The facts to worry about are:
• With their plea for deficit-spending/money-creation, Stephanie Kelton, her MMT colleagues, and the social media sales trolls push the agenda of Wall Street.#2
• MMTers claim to promote the cause of WeThePeople (care for jobs, health, education, social cohesion, public infrastructure, environment, etcetera). These issues, though, are abused as talking points and door openers. MMTers call themselves Progressives but de facto undermine the genuine social grassroots movements.#3, #4, #5
• In the Stephanie-Noah fake debate on Bloomberg, Stephanie Kelton does not talk any longer about her care for humanity but straightforwardly pushes for the next round of MMT deficit-spending/money-creation: “Tax Cuts 2.0, anyone?”
• Academic economics has entirely abandoned scientific standards and integrity. Not only MMTers have become full-time media clowns and useful political idiots. Academia, too, has become a failed institution.
• Economically, the point to worry about is that the US economy will drop dead as soon as the growth of public and private debt slows down and eventually reverses. The axiomatically correct Profit Law says: increasing debt ⇒ macroeconomic profit up, decreasing debt ⇒ macroeconomic loss up. To this day, we have only experienced the first half of the debt story.
#1 MMT = Modern Monetary Trash
#2 MMT and the promotion of Wall Street's idea of social policy
#3 MMT and grassroots movements
#4 Political economics: Who hijacks British Labour?
#5 MMTers are NOT Friends-of-the-People
Blog-Reference and Blog-Reference
This is the point at issue: “The Congressional Budget Office just said it expects the deficit to top $1 trillion in 2019, a record. Should we be worried?”
This is an open invitation for Stephanie Kelton to enthusiastically push the agenda of the oligarchy:#1
• “What I find interesting is … the fact that Republicans added roughly $2 trillion in stimulus at a time when nearly everyone said it shouldn’t be done, citing proximity to full employment. ‘You don’t do stimulus at full employment,’ was basically the argument. Well, here we are well into the experiment and ... what’s the problem? Inflation remains in check, unemployment has ticked down a bit further, small business confidence is at a 45-year high and growth has accelerated.”
• “And, as you note, they helped without raising inflation, which tells me they didn’t overstimulate, which further tells me there may be room to do even more. Tax Cuts 2.0, anyone?”
• “And so while critics use terms like, ‘blowing up the deficit’ or ‘drowning in red ink’ to describe what’s happening to the government’s finances, Republicans seem more interested in the fact that their deficits will improve the private sector’s finances, especially the biggest corporations and wealthiest people in America. In other words, the GOP seems to understand that the government’s red ink is our black ink!”
• “The most intuitive way to show this is through the sector financial balances. This becomes clear if you listen to Hatzius explain why he thinks sector-balance analysis can send a signal when the private sector’s financial positions are becoming overly fragile. And because it’s nothing more than accounting, it also tells us that the crowding-out story is 100 percent wrong — a government deficit raises private sector incomes; it doesn’t crowd out private finance.”#2
The economic blunder/fraud is in the reference to MMT’s sectoral balances equation and in the assertion “the government’s red ink is our black ink.” No, it is not OUR black ink but THEIRS = the oligarchy’s black ink.#3
Noah Smith does not spot the lethal fault in Stephanie Kelton’s argument and merely waves with the inflation red-herring: “It seems like you’re agreeing with me that accelerating inflation is a risk of deficits. The question is whether that would come slowly or quickly.”
What, then, is the lethal fault is Stephanie Kelton’s argument? Fact is:
• The MMT sectoral balances equation, i.e. (I−S)+(G−T)+(X−M)=0, is provably false.#4 MMT has no sound scientific foundations.
• Neither Stephanie nor Noah ever mentions the profit effect of deficit-spending/money-creation.#5
• From the axiomatically correct Profit Law Qm≡Yd+(I−Sm)+(G−T)+(X−M) follows Public Deficit = Private Profit.#6
• Therefore, MMT economic policy ultimately boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.
MMT is failed/fake science#7 and the proponents of MMT in general and Stephanie Kelton, in particular, are stupid/corrupt agenda pushers.
Egmont Kakarot-Handtke
#1 MMT: So-called Progressives as trailblazers for Trumponomics
#2 MMT = Modern Monetary Trash
#3 MMT and the single most stupid physicist
#4 Down with idiocy!
#5 Why the MMT benefactors of humanity never talk about profit
#6 Keynes, Lerner, MMT, Trump and exploding profit
#7 For the full-spectrum refutation see cross-references MMT
***
REPLY to Ralph Musgrave on Sep 25Noah Smith asked rhetorically ‘Just When Should We Start Worrying About Deficits?’
Stephanie Kelton answers with the MMT refrain don’t worry, be happy. You parrot her with: “Personally, if my assets exactly equalled my debts, and I got a check from some sugar daddy, I would be LESS WORRIED (silly me) than prior to receiving the check.”
So, nothing to worry about except that what is unfolding in the grand political Circus Maximus is ― to use Stephanie Kelton’s words ― “one of the greatest cons ever perpetrated on the American people.”#1
The facts to worry about are:
• With their plea for deficit-spending/money-creation, Stephanie Kelton, her MMT colleagues, and the social media sales trolls push the agenda of Wall Street.#2
• MMTers claim to promote the cause of WeThePeople (care for jobs, health, education, social cohesion, public infrastructure, environment, etcetera). These issues, though, are abused as talking points and door openers. MMTers call themselves Progressives but de facto undermine the genuine social grassroots movements.#3, #4, #5
• In the Stephanie-Noah fake debate on Bloomberg, Stephanie Kelton does not talk any longer about her care for humanity but straightforwardly pushes for the next round of MMT deficit-spending/money-creation: “Tax Cuts 2.0, anyone?”
• Academic economics has entirely abandoned scientific standards and integrity. Not only MMTers have become full-time media clowns and useful political idiots. Academia, too, has become a failed institution.
• Economically, the point to worry about is that the US economy will drop dead as soon as the growth of public and private debt slows down and eventually reverses. The axiomatically correct Profit Law says: increasing debt ⇒ macroeconomic profit up, decreasing debt ⇒ macroeconomic loss up. To this day, we have only experienced the first half of the debt story.
#1 MMT = Modern Monetary Trash
#2 MMT and the promotion of Wall Street's idea of social policy
#3 MMT and grassroots movements
#4 Political economics: Who hijacks British Labour?
#5 MMTers are NOT Friends-of-the-People
April 25, 2018
Economics between misguided and lethal critique
Comment on Noah Smith on ‘Econ Critics Are Stuck in the Past’
Blog-Reference
Misguided critique is characterized by a lack of understanding of what science is all about. Relevant examples include
“For it can fairly be insisted that no advance in the elegance and comprehensiveness of the theoretical superstructure can make up for the vague and uncritical formulation of the basic concepts and postulates, and sooner or later ... attention will have to return to the foundations. (Hutchison)
Lethal critique
Egmont Kakarot-Handtke
#1 Scientists do not predict
#2 Time to retire political economists
#3 Infantile model bricolage, or, How many economists can dance on a non-existing pinpoint?
#4 Overreach: Economists have their fingers in every pie except real economics
*
Blog-Reference
Misguided critique is characterized by a lack of understanding of what science is all about. Relevant examples include
- predictive failure ⇒ scientists do not predict (only charlatans do)#1,
- politically biased ⇒ false if applied by left-wingers against right-wingers and vice versa but appropriate if applied to ALL political agenda pushers/useful idiots.#2
- mathiness ⇒ false if application comes first and mathematical tool is tailored to application but appropriate if tool comes first and application is trimmed to fit the tool,
- deductive enterprise ⇒ false if premises are true but appropriate if NONENTITIES are put into the premises.
“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)#3
“For it can fairly be insisted that no advance in the elegance and comprehensiveness of the theoretical superstructure can make up for the vague and uncritical formulation of the basic concepts and postulates, and sooner or later ... attention will have to return to the foundations. (Hutchison)
Lethal critique
- Walrasian microfoundations (in particular equilibrium), are false for 150+ years,
- Keynesian macrofoundations (in particular I=S/IS-LM), are false for 80+ years,
- Walrasianism, Keynesianism, Marxianism, Austrianism, and all variations/ derivatives thereof are axiomatically false and materially/formally inconsistent,
- economists are scientifically incompetent,
- economics is a cargo cult science,
- because profit theory is false since Adam Smith, economic policy guidance has no sound scientific foundations for 200+ years.*
Egmont Kakarot-Handtke
#1 Scientists do not predict
#2 Time to retire political economists
#3 Infantile model bricolage, or, How many economists can dance on a non-existing pinpoint?
#4 Overreach: Economists have their fingers in every pie except real economics
*
December 2, 2017
Deficit-spending/Money-creation is ALWAYS a bad deal for WeThePeople
Comment on Noah Smith/Bloomberg View on ‘Bigger Deficits for Bad Tax Cuts Is a Bad Deal’
Blog-Reference and Blog-Reference
Noah Smith summarizes: “Her [Stephanie Kelton’s] reasoning, common in MMT circles, is that government deficits are also private-sector surpluses. That’s simple accounting ― since there are only the government and the private sectors in the world, when the government borrows it’s the private sector that lends. When banks or individuals buy government bonds, they become net lenders, meaning that they’re running a financial surplus with respect to the government.”
That’s NOT simple accounting, that’s false accounting. The fact is that economists get macroeconomic accounting wrong since Keynes.#1 The scientific embarrassment is that accounting is elementary mathematics. Because MMTers are too stupid for elementary math the whole theoretical superstructure falls apart, which, in turn, means practically that MMT policy proposals have NO sound scientific foundation.
Whatever Stephanie Kelton thinks she is doing or claims she is doing for the ninety-nine percenters is a matter of indifference, what she is actually doing is agenda-pushing for the one-percenters.
From correct macroeconomic accounting follows Public Deficit = Private Profit. With the MMT policy, the business sector is always better off. The household sector, on the other hand, always holds the bag. It is taxed in real terms in the period of government deficit spending without realizing it. It is taxed in subsequent periods if the interest on government debt is greater than zero, and it is taxed in nominal terms in the indefinite future, i.e. beyond the time horizon, in order to eventually redeem the accumulated government debt.
The Pavlovian counter-argument against MMT is that it produces inflation. This is nonsense, more precisely, old Quantity Theory nonsense. MMT policy does not cause inflation but massive distributional distortions.#2
MMTers and Post Keynesians and Functional Financers in their utter scientific incompetence simply have no idea how the monetary economy works. The profit and employment theory is provably false since Keynes.#3
With MMT policy, Warren Mosler and his scientifically incompetent academic supporters have found a way to propagandistically endorse full employment, healthcare, and all other popular social agendas and to increase at the same time the business sector’s profit with the help of the sovereign money-issuing state.#4
Egmont Kakarot-Handtke
#1 Rectification of MMT macro accounting
#2 MMT, money creation, stealth taxation, and redistribution
#3 MMT: The one deadly error/fraud of Warren Mosler
#4 MMT and the promotion of Wall Street's idea of social policy
Related 'Selling public debt with Ricardo’s tear gland rhetoric' and 'How MMT enlightens Washington' and 'MMT: Just another political fraud' and 'MMT: Money-making for the one-percenters' and 'From the debt economy to the gift economy: how America is brainwashed to love budget deficits' and 'Links on Austerity'.
You say: “Well the MMT people will often readily admit that ‘the only limit to high deficit is inflation’ so your point here is a bit off the mark... iow it is not a counter argument but a disagreement on scale effect of the tax cuts... iow Smith thinks the "inflation" threshold will be breached and apparently the MMT elites do not...”
What the MMT people readily admit is old Quantity Theory nonsense. Deficit spending leads to a one-off price hike and NOT to inflation.#1 The disastrous effect of MMT is NOT on inflation but on DISTRIBUTION.#2
The whole inflation argument is a bit off the mark.
#1 Gov-Deficits do NOT cause inflation
#2 Austerity and the idiocy of political economists
You say: “You’re still peddling this notion that the US federal level macroeconomy is based on your definition of science, terms you insist must be obeyed in order for you to grant the poobahs from your point-of-view the honor of being an economic scientist here.”
The Law of Gravity and 2+2=4 applies always and everywhere. This is the very kick of science that it applies universally. The same holds, of course, for economic laws and the elementary math of accounting.
Warren Mosler argues: “In other words, government deficits equal increased ‘monetary savings’ for the rest of us, to the penny. Simply put, government deficits ADD to our savings (to the penny). This is an accounting fact, not theory or philosophy. There is no dispute. It is basic national income accounting.”#1
No, correct accounting says Public Deficit = Private Profit. Warren Mosler is either stupid or he deliberately deceives his brain-dead followers. His assertion “Simply put, government deficits ADD to our savings (to the penny).” is false. It is NOT “our” savings but “their” profits.
If you do not understand what science is all about, that’s OK. But that academics and people with an economics diploma like Mitchell, Tcherneva, Wray, Kelton, Fullwiler, Forstater, Kaboub, Tymoigne, etc. join Warren Mosler’s sales force is strange, to say the least.
#1 MMT: The one deadly error/fraud of Warren Mosler
You say: “I don’t agree, Public Deficit = Private Profit. Doesn’t make sense.”
National accounting deals with period flows for the economy as a whole. Your airport example shows that you do not understand what aggregated period flows are. The lack of sense is in your head.
Consistent National Accounting results in the formula Public Deficit = Private Profit. Private profit is total monetary profit for the business sector as a whole. The formula is provable and testable to the penny. For the proof see Rectification of MMT macro accounting.
For the MMT accounting mistake/error/fraud see MMT and the magical profit disappearance.
Public deficit spending has always been a profit machine for the one-percenters, see Keynesianism as ultimate profit machine.
That people who call themselves Progressives argue for deficit spending is either stupidity or fraud or both, see Austerity: Who takes the little man for a ride?.
MMT policy does NOT cause inflation but the gigantic distortions of the distribution of income and wealth that so-called Progressives criticize so vehemently. A bit schizo, isn’t it?
Blog-Reference and Blog-Reference
Noah Smith summarizes: “Her [Stephanie Kelton’s] reasoning, common in MMT circles, is that government deficits are also private-sector surpluses. That’s simple accounting ― since there are only the government and the private sectors in the world, when the government borrows it’s the private sector that lends. When banks or individuals buy government bonds, they become net lenders, meaning that they’re running a financial surplus with respect to the government.”
That’s NOT simple accounting, that’s false accounting. The fact is that economists get macroeconomic accounting wrong since Keynes.#1 The scientific embarrassment is that accounting is elementary mathematics. Because MMTers are too stupid for elementary math the whole theoretical superstructure falls apart, which, in turn, means practically that MMT policy proposals have NO sound scientific foundation.
Whatever Stephanie Kelton thinks she is doing or claims she is doing for the ninety-nine percenters is a matter of indifference, what she is actually doing is agenda-pushing for the one-percenters.
From correct macroeconomic accounting follows Public Deficit = Private Profit. With the MMT policy, the business sector is always better off. The household sector, on the other hand, always holds the bag. It is taxed in real terms in the period of government deficit spending without realizing it. It is taxed in subsequent periods if the interest on government debt is greater than zero, and it is taxed in nominal terms in the indefinite future, i.e. beyond the time horizon, in order to eventually redeem the accumulated government debt.
The Pavlovian counter-argument against MMT is that it produces inflation. This is nonsense, more precisely, old Quantity Theory nonsense. MMT policy does not cause inflation but massive distributional distortions.#2
MMTers and Post Keynesians and Functional Financers in their utter scientific incompetence simply have no idea how the monetary economy works. The profit and employment theory is provably false since Keynes.#3
With MMT policy, Warren Mosler and his scientifically incompetent academic supporters have found a way to propagandistically endorse full employment, healthcare, and all other popular social agendas and to increase at the same time the business sector’s profit with the help of the sovereign money-issuing state.#4
Egmont Kakarot-Handtke
#1 Rectification of MMT macro accounting
#2 MMT, money creation, stealth taxation, and redistribution
#3 MMT: The one deadly error/fraud of Warren Mosler
#4 MMT and the promotion of Wall Street's idea of social policy
Related 'Selling public debt with Ricardo’s tear gland rhetoric' and 'How MMT enlightens Washington' and 'MMT: Just another political fraud' and 'MMT: Money-making for the one-percenters' and 'From the debt economy to the gift economy: how America is brainwashed to love budget deficits' and 'Links on Austerity'.
For details of the big picture see cross-references MMT.
***
REPLY to Matt Franko on Dec 2You say: “Well the MMT people will often readily admit that ‘the only limit to high deficit is inflation’ so your point here is a bit off the mark... iow it is not a counter argument but a disagreement on scale effect of the tax cuts... iow Smith thinks the "inflation" threshold will be breached and apparently the MMT elites do not...”
What the MMT people readily admit is old Quantity Theory nonsense. Deficit spending leads to a one-off price hike and NOT to inflation.#1 The disastrous effect of MMT is NOT on inflation but on DISTRIBUTION.#2
The whole inflation argument is a bit off the mark.
#1 Gov-Deficits do NOT cause inflation
#2 Austerity and the idiocy of political economists
***
REPLY to MRW on Dec 3You say: “You’re still peddling this notion that the US federal level macroeconomy is based on your definition of science, terms you insist must be obeyed in order for you to grant the poobahs from your point-of-view the honor of being an economic scientist here.”
The Law of Gravity and 2+2=4 applies always and everywhere. This is the very kick of science that it applies universally. The same holds, of course, for economic laws and the elementary math of accounting.
Warren Mosler argues: “In other words, government deficits equal increased ‘monetary savings’ for the rest of us, to the penny. Simply put, government deficits ADD to our savings (to the penny). This is an accounting fact, not theory or philosophy. There is no dispute. It is basic national income accounting.”#1
No, correct accounting says Public Deficit = Private Profit. Warren Mosler is either stupid or he deliberately deceives his brain-dead followers. His assertion “Simply put, government deficits ADD to our savings (to the penny).” is false. It is NOT “our” savings but “their” profits.
If you do not understand what science is all about, that’s OK. But that academics and people with an economics diploma like Mitchell, Tcherneva, Wray, Kelton, Fullwiler, Forstater, Kaboub, Tymoigne, etc. join Warren Mosler’s sales force is strange, to say the least.
#1 MMT: The one deadly error/fraud of Warren Mosler
***
REPLY to MRW on Dec 4You say: “I don’t agree, Public Deficit = Private Profit. Doesn’t make sense.”
National accounting deals with period flows for the economy as a whole. Your airport example shows that you do not understand what aggregated period flows are. The lack of sense is in your head.
Consistent National Accounting results in the formula Public Deficit = Private Profit. Private profit is total monetary profit for the business sector as a whole. The formula is provable and testable to the penny. For the proof see Rectification of MMT macro accounting.
For the MMT accounting mistake/error/fraud see MMT and the magical profit disappearance.
Public deficit spending has always been a profit machine for the one-percenters, see Keynesianism as ultimate profit machine.
That people who call themselves Progressives argue for deficit spending is either stupidity or fraud or both, see Austerity: Who takes the little man for a ride?.
MMT policy does NOT cause inflation but the gigantic distortions of the distribution of income and wealth that so-called Progressives criticize so vehemently. A bit schizo, isn’t it?
September 21, 2017
Profit and the decline of workers’ nominal share (II)
Comment on Noah Smith on ‘Why Workers Are Losing to Capitalists’
Blog-Reference and Blog-Reference
Every economist knows from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words, economists have NO clue about the foundational concept of their subject matter.#1
Without the true profit theory, there is no true distribution theory. The axiomatically correct macroeconomic Profit Law is given as Qm≡Yd+(I−Sm)+(G−T)+(X−M) [1] and this reduces to Qm=(I−Sm)+(G−T) [2] for Yd, X, M=0; Legend: Qm total monetary profit/loss, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving, G government expenditures (consumptive), T taxes, X exports, M imports.
The nominal labor share λ is defined as the quotient of wage income Yw and the sum of wage income and monetary profit Qm, that is, λ≡Yw/(Yw+Qm)≡1/(1+Qm/Yw) with Qm given by [1] above.
Noah Smith concludes: “In other words, the two most conventional explanations for rising inequality and falling wages might both be correct. A perfect storm of robots and free trade … could be shifting power from the proletariat to the capitalists.” This conclusion is based on the traditional = false profit theory.
The fact is that market power and automation cannot account for a falling nominal labor share λ. The main drivers of increasing overall profit have been the increased deficit spending of the household- and the government sector in the past decades. Market power and automation can only account for the distribution of overall profit Qm among firms but NOT for the total amount.#2
Traditional distribution theory is merely a stubborn Fallacy of Composition.
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#2 For details of the big picture see cross-references Profi/Distribution.
Wikimedia AXEC129d On closer inspection it turns out that the concept of labor/share is formally/dimensionally defective because profit is a balance and wage income is a flow. This blunder is called Flow-Balance Inconsistency.
Blog-Reference and Blog-Reference
Every economist knows from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words, economists have NO clue about the foundational concept of their subject matter.#1
Without the true profit theory, there is no true distribution theory. The axiomatically correct macroeconomic Profit Law is given as Qm≡Yd+(I−Sm)+(G−T)+(X−M) [1] and this reduces to Qm=(I−Sm)+(G−T) [2] for Yd, X, M=0; Legend: Qm total monetary profit/loss, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving, G government expenditures (consumptive), T taxes, X exports, M imports.
The nominal labor share λ is defined as the quotient of wage income Yw and the sum of wage income and monetary profit Qm, that is, λ≡Yw/(Yw+Qm)≡1/(1+Qm/Yw) with Qm given by [1] above.
Noah Smith concludes: “In other words, the two most conventional explanations for rising inequality and falling wages might both be correct. A perfect storm of robots and free trade … could be shifting power from the proletariat to the capitalists.” This conclusion is based on the traditional = false profit theory.
The fact is that market power and automation cannot account for a falling nominal labor share λ. The main drivers of increasing overall profit have been the increased deficit spending of the household- and the government sector in the past decades. Market power and automation can only account for the distribution of overall profit Qm among firms but NOT for the total amount.#2
Traditional distribution theory is merely a stubborn Fallacy of Composition.
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
#2 For details of the big picture see cross-references Profi/Distribution.
Related 'How the Intelligent Non-Economist Can Refute Every Economist Hands Down' and 'Profit and the decline of labor’s nominal share (I)' and 'Austerity: Who takes the little man for a ride?' and 'The abject failure of orthodox and heterodox distribution theory' and 'Debunking Squared' and 'Intellectual deficit spending' and 'The GDP-death-blow for the economics profession'.
For more about the so-called wage/profit share see AXECquery.
***
Wikimedia AXEC129d On closer inspection it turns out that the concept of labor/share is formally/dimensionally defective because profit is a balance and wage income is a flow. This blunder is called Flow-Balance Inconsistency.
August 4, 2017
Going beyond No-Idea economics
Comment on Noah Smith on ‘Japan Buries Our Most-Cherished Economic Ideas’
Blog-Reference and Blog-Reference on Aug 6
Noah Smith summarizes: “So Japan’s experience underscores one central, disturbing truth: Economists really have no idea how inflation works. It is simply a mystery.” and “In Japan, nothing of the sort has happened ― wages and prices show little sign of rising despite the disappearance of unemployment. So much for the Phillips Curve.”
The fact is that economics is a failed science because economists are scientifically incompetent. NO mystery here.
The fact that the Phillips curve now seems to be flat only tells one that it has been misspecified all along. Thanks to the scientific incompetence of economists this remained undetected since Samuelson/Solow messed things up. The methodological blunder consists of interpreting the Phillips curve as a behavioral relationship. What has to be done is to formulate the Phillips curve as a structural-systemic relationship.#1 This relationship consists alone of measurable variables and is therefore readily testable.
The correct relationship covers the familiar arguments about how effective demand and deficit spending affects employment. Secondly, the so-called factor cost ratio shows how the price mechanism affects employment.
The correct systemic Phillips curve tells one that in the given situation the only way for Japan to maintain full employment and to turn deflation around is to engineer an increase of the average wage rate.
Egmont Kakarot-Handtke
#1 Putting economic policy on scientific foundations
Blog-Reference and Blog-Reference on Aug 6
Noah Smith summarizes: “So Japan’s experience underscores one central, disturbing truth: Economists really have no idea how inflation works. It is simply a mystery.” and “In Japan, nothing of the sort has happened ― wages and prices show little sign of rising despite the disappearance of unemployment. So much for the Phillips Curve.”
The fact is that economics is a failed science because economists are scientifically incompetent. NO mystery here.
The fact that the Phillips curve now seems to be flat only tells one that it has been misspecified all along. Thanks to the scientific incompetence of economists this remained undetected since Samuelson/Solow messed things up. The methodological blunder consists of interpreting the Phillips curve as a behavioral relationship. What has to be done is to formulate the Phillips curve as a structural-systemic relationship.#1 This relationship consists alone of measurable variables and is therefore readily testable.
The correct relationship covers the familiar arguments about how effective demand and deficit spending affects employment. Secondly, the so-called factor cost ratio shows how the price mechanism affects employment.
The correct systemic Phillips curve tells one that in the given situation the only way for Japan to maintain full employment and to turn deflation around is to engineer an increase of the average wage rate.
Egmont Kakarot-Handtke
#1 Putting economic policy on scientific foundations
April 10, 2017
Review of the economics troops
Comment on Noah Smith on ‘Keynesian Economics Is Hot Again’
Blog-Reference and Blog-Reference on Apr 11
There is Orthodoxy with Walrasian microfoundations and it has been nicely defined by Krugman: “… most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”
There is Keynesianism with macrofoundations and they have been nicely defined by Keynes: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.”
Both, Walrasian microfoundations and Keynesian macrofoundations are provably false. Methodologically speaking, microeconomics and macroeconomics are axiomatically false. It holds when the premises/axioms/foundational propositions are false or contain NONENTITIES the whole theory/model/analytical superstructure is false. This includes all variants of IS-LM from Hicks to Krugman.#1
The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Because economists lack the true theory their economic policy guidance has NO sound scientific foundation since Adam Smith/Karl Marx.
There is NO use to combine axiomatically false approaches or periodically alternate between them. What Krugman or Christiano is doing is cargo cultic show biz.
Noah Smith maintains: “The right way forward for macro isn’t to go all-in on a hot new theory, or to passionately embrace old paradigms either. The best approach is to adopt more public humility and caution about their theories, while working to understand microeconomics better.”
In view of the fact that the profit theory is false for 200+ years, and microfoundations are false for 150+ years, and macrofoundations are false for 80+ years, the right way forward for Walrasians and Keynesians is to retire.
Egmont Kakarot-Handtke
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
Related 'Economists ― medics or barber surgeons?' and 'Keynes saw the problems but did not solve them' and 'The fundamental problem of economics: scientific incompetence aka stupidity' and 'Economic policy guidance NEVER had sound scientific foundations' and 'The non-existence of economics' and 'Economics: The pluralism of false theories is over' and 'The futile synthesis of neoclassical rubbish and Keynesian garbage' and 'Macroeconomics without Keynes' and cross-references Keynesianism
Blog-Reference and Blog-Reference on Apr 11
There is Orthodoxy with Walrasian microfoundations and it has been nicely defined by Krugman: “… most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”
There is Keynesianism with macrofoundations and they have been nicely defined by Keynes: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.”
Both, Walrasian microfoundations and Keynesian macrofoundations are provably false. Methodologically speaking, microeconomics and macroeconomics are axiomatically false. It holds when the premises/axioms/foundational propositions are false or contain NONENTITIES the whole theory/model/analytical superstructure is false. This includes all variants of IS-LM from Hicks to Krugman.#1
The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Because economists lack the true theory their economic policy guidance has NO sound scientific foundation since Adam Smith/Karl Marx.
There is NO use to combine axiomatically false approaches or periodically alternate between them. What Krugman or Christiano is doing is cargo cultic show biz.
Noah Smith maintains: “The right way forward for macro isn’t to go all-in on a hot new theory, or to passionately embrace old paradigms either. The best approach is to adopt more public humility and caution about their theories, while working to understand microeconomics better.”
In view of the fact that the profit theory is false for 200+ years, and microfoundations are false for 150+ years, and macrofoundations are false for 80+ years, the right way forward for Walrasians and Keynesians is to retire.
Egmont Kakarot-Handtke
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
Related 'Economists ― medics or barber surgeons?' and 'Keynes saw the problems but did not solve them' and 'The fundamental problem of economics: scientific incompetence aka stupidity' and 'Economic policy guidance NEVER had sound scientific foundations' and 'The non-existence of economics' and 'Economics: The pluralism of false theories is over' and 'The futile synthesis of neoclassical rubbish and Keynesian garbage' and 'Macroeconomics without Keynes' and cross-references Keynesianism
March 10, 2017
Economics is NOT a misunderstanding but cargo cultic crap
Comment on Mark Buchanan on ‘The Misunderstanding at the Core of Economics’
Blog-Reference and Blog-Reference and Blog-Reference on Mar 11 and Blog-Reference on Mar 27 adapted to context
Mark Buchanan is harping on one of the most idiotic stereotypes ever, that is, that a theory is something that is detached from reality. It is just the opposite. The fact of the matter is that a materially/formally consistent theory is the best mental representation of reality that is humanly possible. The true theory incorporates knowledge and all the rest of human communication is mere opinion, belief, storytelling, wish-wash, gossip, sitcom blather, tautological triviality, commonsensical delusion, or disinformation.
The misleading idea that there could be a conflict between ‘theory and practice’ is very old and immensely popular among laypersons. So much so that Kant bothered to refute it in an essay, first published in 1793, with the title ‘On the Old Saw: That May Be Right in Theory But It Won’t Work in Practice.’ Kant exploded the silly saw with the famous punch-line “There is nothing as practical as a good theory.” So Mark Buchanan is 200+ years behind the curve.
It is absolutely irrelevant whether the economist Kenneth Arrow “was a model academic ― brilliant, creative, precise, unfailingly modest.” (See intro) What is alone relevant is whether his economic theory is true or false: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)
The fact of the matter is that Arrow’s theory is materially and formally inconsistent. Therefore, his General Equilibrium Theory is forever scientifically unacceptable. It is what Feynman famously called cargo cult science. As methodologists know very well: “At long last, it can be said that the history of general theory from Walras to Arrow-Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin. … General theory is simply a research program that has run into the sands.” (Blaug)
Arrow’s General Equilibrium Theory is inapplicable NOT because it is a theory but because it is a FALSE theory, i.e. it is materially and formally inconsistent. Equilibrium economics has already been dead in the cradle 150+ years ago. The miracle of economics is that the representative economist has until this very day not realized that he is perpetuating proto-scientific garbage.
Mark Buchanan is right on one count: “This perversion isn’t Arrow’s fault.” It is the inevitable result of the utter scientific incompetence of economists since Adam Smith.
Egmont Kakarot-Handtke
Related 'Where economics went wrong' and 'There is no scientific elite in economics' and 'Economics between mathiness, dyscalculia and idiocy' and 'Schizonomics' and 'Modern macro moronism' and 'The methodological blunders of fake scientists' and 'How Arrow pushed economics over the cliff' and 'If it isn’t macro-axiomatized, it isn’t economics'
You say: “There are few inviolable laws of human behavior. They say that nothing is certain except death and taxes.”
Take notice that economics is NOT about human behavior but the behavior of the economy. Economics is NOT a social science but a systems science.#1
The most annoying trait of the run-of-the-mill economist is that he dabbles in sociology, psychology, political science, social philosophy, history, theology, ethics, pedagogy, anthropology, biology, Darwinism/evolution theory, etcetera but has no idea of what profit is.
Because every economist could know from the Palgrave Dictionary that the profit theory is false (Desai, 2008) he can be defined as a moron who does not know what the pivotal phenomenon of his subject matter is#2 but keeps on blathering about every political/social issue that crosses his empty brain.
The great insight of behavioral economics after 200+ years: Nothing is certain except death and taxes.#3 True, but people do not need economists to figure this out.
#1 From Orthodoxy to Heterodoxy to Metadoxy
#2 For details of the big picture see cross-references Scientific Incompetence
#3 For the elementary systemic laws see False and true economic laws
Blog-Reference and Blog-Reference and Blog-Reference on Mar 11 and Blog-Reference on Mar 27 adapted to context
Mark Buchanan is harping on one of the most idiotic stereotypes ever, that is, that a theory is something that is detached from reality. It is just the opposite. The fact of the matter is that a materially/formally consistent theory is the best mental representation of reality that is humanly possible. The true theory incorporates knowledge and all the rest of human communication is mere opinion, belief, storytelling, wish-wash, gossip, sitcom blather, tautological triviality, commonsensical delusion, or disinformation.
The misleading idea that there could be a conflict between ‘theory and practice’ is very old and immensely popular among laypersons. So much so that Kant bothered to refute it in an essay, first published in 1793, with the title ‘On the Old Saw: That May Be Right in Theory But It Won’t Work in Practice.’ Kant exploded the silly saw with the famous punch-line “There is nothing as practical as a good theory.” So Mark Buchanan is 200+ years behind the curve.
It is absolutely irrelevant whether the economist Kenneth Arrow “was a model academic ― brilliant, creative, precise, unfailingly modest.” (See intro) What is alone relevant is whether his economic theory is true or false: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)
The fact of the matter is that Arrow’s theory is materially and formally inconsistent. Therefore, his General Equilibrium Theory is forever scientifically unacceptable. It is what Feynman famously called cargo cult science. As methodologists know very well: “At long last, it can be said that the history of general theory from Walras to Arrow-Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin. … General theory is simply a research program that has run into the sands.” (Blaug)
Arrow’s General Equilibrium Theory is inapplicable NOT because it is a theory but because it is a FALSE theory, i.e. it is materially and formally inconsistent. Equilibrium economics has already been dead in the cradle 150+ years ago. The miracle of economics is that the representative economist has until this very day not realized that he is perpetuating proto-scientific garbage.
Mark Buchanan is right on one count: “This perversion isn’t Arrow’s fault.” It is the inevitable result of the utter scientific incompetence of economists since Adam Smith.
Egmont Kakarot-Handtke
Related 'Where economics went wrong' and 'There is no scientific elite in economics' and 'Economics between mathiness, dyscalculia and idiocy' and 'Schizonomics' and 'Modern macro moronism' and 'The methodological blunders of fake scientists' and 'How Arrow pushed economics over the cliff' and 'If it isn’t macro-axiomatized, it isn’t economics'
***
REPLY to RC AKA Darryl, Ron on Mar 10You say: “There are few inviolable laws of human behavior. They say that nothing is certain except death and taxes.”
Take notice that economics is NOT about human behavior but the behavior of the economy. Economics is NOT a social science but a systems science.#1
The most annoying trait of the run-of-the-mill economist is that he dabbles in sociology, psychology, political science, social philosophy, history, theology, ethics, pedagogy, anthropology, biology, Darwinism/evolution theory, etcetera but has no idea of what profit is.
Because every economist could know from the Palgrave Dictionary that the profit theory is false (Desai, 2008) he can be defined as a moron who does not know what the pivotal phenomenon of his subject matter is#2 but keeps on blathering about every political/social issue that crosses his empty brain.
The great insight of behavioral economics after 200+ years: Nothing is certain except death and taxes.#3 True, but people do not need economists to figure this out.
#1 From Orthodoxy to Heterodoxy to Metadoxy
#2 For details of the big picture see cross-references Scientific Incompetence
#3 For the elementary systemic laws see False and true economic laws
March 9, 2017
There is no scientific elite in economics
Comment on Justin Fox on ‘Science Is Elitist for a Reason’
Blog-Reference and Blog-Reference
Science is elitist because at any point in time there are only a few genuine scientists in a population. France’s Royal Academy of Sciences had the good luck to have Lavoisier and Laplace among its founding fathers.
Economics was not so lucky. It had Adam Smith, who lacked any knack for science, among the founding fathers: “Smith … disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter)
From this bad start economics never recovered and it developed into what Feynman called cargo cult science, which he defined as: “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.”
In economics, the essential thing is to keep political and theoretical economics apart. 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.
The goal of theoretical economics is the true theory: “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)
Economists do NOT have the true theory. Theoretical economics (= science) had been hijacked from the very beginning by political economics (= agenda-pushing). Political economics has produced NOTHING of scientific value in the last 200+ years. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, materially/formally inconsistent, axiomatically false, and ALL got the pivotal magnitude of economics ― profit ― wrong.
There is NO economic science. Yes, there is a prize with the title: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” but NOTHING REAL corresponds to the word Sciences. Economics had the bad luck that among its ranks there never was such a thing as a scientific elite.
Egmont Kakarot-Handtke
Related 'Lacking the Midas touch of science' and 'On economists’ stupidity' and 'Why not simply throw all economists under the bus?' and 'Paul the Menace' and 'Economists and the destructive power of stupidity' and 'Economists cannot do the simple math of profit — better keep them out of politics' and 'There is NO such thing as an economic expert' and 'A rough business plan for science'
Blog-Reference and Blog-Reference
Science is elitist because at any point in time there are only a few genuine scientists in a population. France’s Royal Academy of Sciences had the good luck to have Lavoisier and Laplace among its founding fathers.
Economics was not so lucky. It had Adam Smith, who lacked any knack for science, among the founding fathers: “Smith … disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter)
From this bad start economics never recovered and it developed into what Feynman called cargo cult science, which he defined as: “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.”
In economics, the essential thing is to keep political and theoretical economics apart. 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.
The goal of theoretical economics is the true theory: “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)
Economists do NOT have the true theory. Theoretical economics (= science) had been hijacked from the very beginning by political economics (= agenda-pushing). Political economics has produced NOTHING of scientific value in the last 200+ years. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, materially/formally inconsistent, axiomatically false, and ALL got the pivotal magnitude of economics ― profit ― wrong.
There is NO economic science. Yes, there is a prize with the title: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” but NOTHING REAL corresponds to the word Sciences. Economics had the bad luck that among its ranks there never was such a thing as a scientific elite.
Egmont Kakarot-Handtke
Related 'Lacking the Midas touch of science' and 'On economists’ stupidity' and 'Why not simply throw all economists under the bus?' and 'Paul the Menace' and 'Economists and the destructive power of stupidity' and 'Economists cannot do the simple math of profit — better keep them out of politics' and 'There is NO such thing as an economic expert' and 'A rough business plan for science'
January 12, 2017
The united tribe of the scientifically incompetent
Comment on Noah Smith on ‘Tribal Warfare in Economics Is a Thing of the Past’
Blog-Reference and Blog-Reference
Economics is a failed science, that is, the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory and axiomatically false. More specifically, it is not only so that orthodox/standard/mainstream economics is false as Heterodoxy ritually asserts, but traditional Heterodoxy, too, is false and never provided a valid alternative. What we actually have is the pluralism of well-established false theories.
As a consequence, the heap of scientific rubbish grows with every peer-reviewed issue of ranked quality journals. All grand debates end where they started, that is, in the swamp of conceptual confusion, undecidability, impenetrable mishmash, a category error, inconsistent definitions, cross-talk, and inconclusiveness. Accordingly, the scientific content of economics textbooks from Samuelson to Mankiw and Rodrik is below the level of a Donald Duck cartoon.
Neither orthodox nor heterodox economists can explain how the economy works and they have no idea how to get out of the deadlock: “Yet most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992)
Because economists cannot explain the macroeconomic universe they have (i) regressed to the study of microeconomic molehills which are easy to understand by any half-wit, and (ii), they have formed one big tribe at the lowermost scientific level of anything-goes.
Egmont Kakarot-Handtke
Related ‘Failed economics: The losers’ long list of lame excuses’ and 'Economists’s real job problem' and 'Heterodoxy, too, is proto-scientific garbage' and 'Economics is indefensible' and 'The economic machine is broken? Don’t call the heterodox repairman!' and 'Economics: The pluralism of false theories is over' and 'Substandard reasoners'
Blog-Reference and Blog-Reference
Economics is a failed science, that is, the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory and axiomatically false. More specifically, it is not only so that orthodox/standard/mainstream economics is false as Heterodoxy ritually asserts, but traditional Heterodoxy, too, is false and never provided a valid alternative. What we actually have is the pluralism of well-established false theories.
As a consequence, the heap of scientific rubbish grows with every peer-reviewed issue of ranked quality journals. All grand debates end where they started, that is, in the swamp of conceptual confusion, undecidability, impenetrable mishmash, a category error, inconsistent definitions, cross-talk, and inconclusiveness. Accordingly, the scientific content of economics textbooks from Samuelson to Mankiw and Rodrik is below the level of a Donald Duck cartoon.
Neither orthodox nor heterodox economists can explain how the economy works and they have no idea how to get out of the deadlock: “Yet most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992)
Because economists cannot explain the macroeconomic universe they have (i) regressed to the study of microeconomic molehills which are easy to understand by any half-wit, and (ii), they have formed one big tribe at the lowermost scientific level of anything-goes.
Egmont Kakarot-Handtke
Related ‘Failed economics: The losers’ long list of lame excuses’ and 'Economists’s real job problem' and 'Heterodoxy, too, is proto-scientific garbage' and 'Economics is indefensible' and 'The economic machine is broken? Don’t call the heterodox repairman!' and 'Economics: The pluralism of false theories is over' and 'Substandard reasoners'
January 11, 2017
Economists’ real job problem
Comment on Justin Fox on ‘Economists Contemplate Life on the Outs’
Blog-Reference and Blog-Reference and Blog-Reference on Jan 18
The current state of economics is that of a cargo cult or fake science. The skirmishes with Mr. Trump cannot distract from the fact that economists are incompetent scientists. The real problem is NOT AT ALL that they are kept out of the new administration. For society, the real problem is how economists as fake scientists can be expelled as fast as possible from the scientific community.
For details see
► Inequality: Market failure or theory failure?
► Failed economics: The losers’ long list of lame excuses
Egmont Kakarot-Handtke
Related 'Economists cannot do the simple math of profit — better keep them out of politics' and 'Economic policy advice has never had sound scientific foundations' and 'The economist as stand-up comedian' and 'There is NO such thing as an economic expert' and 'Narrative economics and the imperatives of the sitcom' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?'
Blog-Reference and Blog-Reference and Blog-Reference on Jan 18
The current state of economics is that of a cargo cult or fake science. The skirmishes with Mr. Trump cannot distract from the fact that economists are incompetent scientists. The real problem is NOT AT ALL that they are kept out of the new administration. For society, the real problem is how economists as fake scientists can be expelled as fast as possible from the scientific community.
For details see
► Inequality: Market failure or theory failure?
► Failed economics: The losers’ long list of lame excuses
Egmont Kakarot-Handtke
Related 'Economists cannot do the simple math of profit — better keep them out of politics' and 'Economic policy advice has never had sound scientific foundations' and 'The economist as stand-up comedian' and 'There is NO such thing as an economic expert' and 'Narrative economics and the imperatives of the sitcom' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?'
August 17, 2016
Orthodoxy/Heterodoxy/Metadoxy
Comment on Noah Smith on ‘Economics Without Math Is Trendy, But It Doesn’t Add Up’
Blog-Reference and Blog-Reference and Blog-Reference adapted to context
Noah Smith asserts: “So heterodox economics hasn’t really produced a replacement for mainstream macro.” This is true for traditional Heterodoxy but not for Constructive Heterodoxy.
See From Orthodoxy to Heterodoxy to Metadoxy and cross references Paradigm Shift.
Egmont Kakarot-Handtke
Related 'Heterodoxy'
Blog-Reference and Blog-Reference and Blog-Reference adapted to context
Noah Smith asserts: “So heterodox economics hasn’t really produced a replacement for mainstream macro.” This is true for traditional Heterodoxy but not for Constructive Heterodoxy.
See From Orthodoxy to Heterodoxy to Metadoxy and cross references Paradigm Shift.
Egmont Kakarot-Handtke
Related 'Heterodoxy'
August 16, 2016
Heterodoxy
Comment on Noah Smith on ‘Economics Without Math Is Trendy, But It Doesn’t Add Up’
Blog-Reference and Blog-Reference adapted to context
Noah Smith is only partly correct. The whole truth is that Walrasianism, Keynesianism, Marxianism, and Austrianism are PROVABLY false, i.e. materially and formally inconsistent. It is not just about Orthodoxy and Heterodoxy. The ultimate reason for the all-around failure is the scientific incompetence of economists (including Noah Smith, of course).
For more details about the actual state see The scientific self-elimination of Heterodoxy and cross references Heterodoxy.
Egmont Kakarot-Handtke
Related 'Orthodoxy/Heterodoxy/Metadoxy'
Blog-Reference and Blog-Reference adapted to context
Noah Smith is only partly correct. The whole truth is that Walrasianism, Keynesianism, Marxianism, and Austrianism are PROVABLY false, i.e. materially and formally inconsistent. It is not just about Orthodoxy and Heterodoxy. The ultimate reason for the all-around failure is the scientific incompetence of economists (including Noah Smith, of course).
For more details about the actual state see The scientific self-elimination of Heterodoxy and cross references Heterodoxy.
Egmont Kakarot-Handtke
Related 'Orthodoxy/Heterodoxy/Metadoxy'
August 5, 2016
Economists’ full-scale retreat
Comment on Lars Syll on ‘How true is Friedman’s permanent income hypothesis?’
Blog-Reference and Blog-Reference and Blog-Reference adapted to context
Economics started as Political Economy. Political Economy is agenda pushing and economists from Smith, Ricardo, Marx, Keynes, Hayek, Friedman to the present were agenda pushers first and scientists second. As a matter of fact, they were incompetent scientists because they never figured out how the actual monetary economy works. How do we know this? We know this for sure because the profit theory is provably false (Desai, 2008) and without the correct profit theory, the economist is lost in the wood and only babbles incoherent nonsense. This happened to Friedman. He was a lifetime political economists and ALL political economics from Smith and Marx onward is scientifically worthless.
That the permanent income hypothesis is utter scientific dilettantism ― or what Feynman famously called cargo cult science ― could and should have been obvious from the beginning around 1960. The real question is why it took economists more than 50 years to realize that: “Unfortunately, there’s just one small problem ― it’s almost certainly wrong.”#1 Unfortunately, there is a second small problem: “PIH is so dominant that almost all modern macroeconomic theories are based on it. They enshrine the idea with a formula called a ‘consumption Euler equation,’ which has appeared in the vast majority of academic macro models during the past few decades.”#1 In other words, the economics of the past 50 years has been pure scientific garbage.
The fact that economists are in the process of abandoning one core piece of modern macroeconomic theory after another is a sign for worse things to come. As long as the economy has a reasonably good run, economists are mainly occupied with praising themselves and their relentless championship of markets. Now they distance themselves even from “the great Milton Friedman”#1, renounce mathiness, and readily degrade themselves from upper case Science to lower case science. The greater economic problems become, the smaller economists make themselves.
But economists have never admitted failure without offering betterment for the future: “Kocherlakota thinks macroeconomists should set aside their big, complex formal models of the economy, since these elaborate constructions are built on a foundation that probably doesn’t describe reality all that well. He recommends that economists go back to the drawing board, and look around for new, more accurate kernels of insight with which to build the theories of tomorrow.”#1
Yes, indeed, Kocherlakota is spot on. The Walrasian microfoundations are unacceptable for more than 150 years and the Keynesian macrofoundations are false for more than 80 years. Kocherlakota should have even gone one step further and explicitly recommend the correct macrofoundations “with which to build the theories of tomorrow”. See for a start:
► Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist
► Economics for Economists
Egmont Kakarot-Handtke
Reference
Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, 1–11. Palgrave Macmillan, 2nd edition. URL
#1 See ‘Economists Give Up on Milton Friedman’s Biggest Idea’ on BloombergView
Blog-Reference and Blog-Reference and Blog-Reference adapted to context
Economics started as Political Economy. Political Economy is agenda pushing and economists from Smith, Ricardo, Marx, Keynes, Hayek, Friedman to the present were agenda pushers first and scientists second. As a matter of fact, they were incompetent scientists because they never figured out how the actual monetary economy works. How do we know this? We know this for sure because the profit theory is provably false (Desai, 2008) and without the correct profit theory, the economist is lost in the wood and only babbles incoherent nonsense. This happened to Friedman. He was a lifetime political economists and ALL political economics from Smith and Marx onward is scientifically worthless.
That the permanent income hypothesis is utter scientific dilettantism ― or what Feynman famously called cargo cult science ― could and should have been obvious from the beginning around 1960. The real question is why it took economists more than 50 years to realize that: “Unfortunately, there’s just one small problem ― it’s almost certainly wrong.”#1 Unfortunately, there is a second small problem: “PIH is so dominant that almost all modern macroeconomic theories are based on it. They enshrine the idea with a formula called a ‘consumption Euler equation,’ which has appeared in the vast majority of academic macro models during the past few decades.”#1 In other words, the economics of the past 50 years has been pure scientific garbage.
The fact that economists are in the process of abandoning one core piece of modern macroeconomic theory after another is a sign for worse things to come. As long as the economy has a reasonably good run, economists are mainly occupied with praising themselves and their relentless championship of markets. Now they distance themselves even from “the great Milton Friedman”#1, renounce mathiness, and readily degrade themselves from upper case Science to lower case science. The greater economic problems become, the smaller economists make themselves.
But economists have never admitted failure without offering betterment for the future: “Kocherlakota thinks macroeconomists should set aside their big, complex formal models of the economy, since these elaborate constructions are built on a foundation that probably doesn’t describe reality all that well. He recommends that economists go back to the drawing board, and look around for new, more accurate kernels of insight with which to build the theories of tomorrow.”#1
Yes, indeed, Kocherlakota is spot on. The Walrasian microfoundations are unacceptable for more than 150 years and the Keynesian macrofoundations are false for more than 80 years. Kocherlakota should have even gone one step further and explicitly recommend the correct macrofoundations “with which to build the theories of tomorrow”. See for a start:
► Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist
► Economics for Economists
Egmont Kakarot-Handtke
Reference
Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, 1–11. Palgrave Macmillan, 2nd edition. URL
#1 See ‘Economists Give Up on Milton Friedman’s Biggest Idea’ on BloombergView
March 30, 2016
Your profit theory is false
Comment on Justin Fox on ‘When Workers Get More of the Income Pie’
Blog-Reference
You write: “For corporate profits to grow faster than GDP (and faster than national income) some other sectors have to lose out.”
It is one of the oldest errors in economics that wages and profits are antagonistic: “And thus we arrive at Mr. Ricardo’s principle, that profits depend upon wages; rising as wages fall, and falling as wages rise.” (J. S. Mill, 1874, IV.12)
This relationship holds for a single firm but not for the economy as a whole.#1 The correct profit equation for the closed investment economy reads Qm≡Yd+I−Sm (2014, p. 8, eq. (18)). Legend: Qm monetary profit, Yd distributed profit, I investment expenditures, Sm monetary saving.
When the profit theory is false, then the rest of economic theory is false. The reason why the profit development appears “ominous” to you is that you simply do not know what profit is. That’s rather bad for an economist, isn’t it?
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On Profits, and Interest. Library of Economics and Liberty. URL
#1 As goes GM, so goes America — A rather ordinary Fallacy of Composition.
Related 'The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?' and 'Essentials of Constructive Heterodoxy: Profit' and 'Profit for Marxists' and 'Debunking Squared'.
It seems that you cannot read. The slice-of-a-pie metaphor is inappropriate for the description of the relationship between wages and profits since Ricardo. Your concept of profit is still on the flat-earth level.
For the derivation of the formally correct Profit Law see How the intelligent non-economist can refute every economist hands down.
Blog-Reference
You write: “For corporate profits to grow faster than GDP (and faster than national income) some other sectors have to lose out.”
It is one of the oldest errors in economics that wages and profits are antagonistic: “And thus we arrive at Mr. Ricardo’s principle, that profits depend upon wages; rising as wages fall, and falling as wages rise.” (J. S. Mill, 1874, IV.12)
This relationship holds for a single firm but not for the economy as a whole.#1 The correct profit equation for the closed investment economy reads Qm≡Yd+I−Sm (2014, p. 8, eq. (18)). Legend: Qm monetary profit, Yd distributed profit, I investment expenditures, Sm monetary saving.
When the profit theory is false, then the rest of economic theory is false. The reason why the profit development appears “ominous” to you is that you simply do not know what profit is. That’s rather bad for an economist, isn’t it?
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On Profits, and Interest. Library of Economics and Liberty. URL
#1 As goes GM, so goes America — A rather ordinary Fallacy of Composition.
Related 'The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?' and 'Essentials of Constructive Heterodoxy: Profit' and 'Profit for Marxists' and 'Debunking Squared'.
***
REPLY to Farcaster on Mar 31It seems that you cannot read. The slice-of-a-pie metaphor is inappropriate for the description of the relationship between wages and profits since Ricardo. Your concept of profit is still on the flat-earth level.
For the derivation of the formally correct Profit Law see How the intelligent non-economist can refute every economist hands down.
February 11, 2016
Economists cannot think as well as we thought
Comment on ‘Markets Don't Work as Well as We Thought’
Blog-Reference
The problem is not so much that economists do not understand how financial markets work, the problem is that economists do not understand how the market economy works.
Walrasianism, Keynesianism, Marxianism, and Austrianism are provable false. The fundamental flaw is that economists cannot tell the difference between the elementary concepts of income and profit. This is like medieval physics before the difference between kinetic and potential energy was clearly understood.
One of the big unanswered questions of the history of human thought is how economists ever came to hallucinate that the proto-scientific stuff they produce for more than 200 years is something other than what the genuine scientist Feynman called cargo cult science.
Egmont Kakarot-Handtke
Related ‘Economists’ three-layered scientific incompetence’ and ‘Economists are a menace to their fellow citizens’ and ‘Economists cannot do the simple math of profit — better keep them out of politics’.
CHALLENGE economistsview links-for-02-11-16
Funny, how you are politically groping in the dark. Did it ever occur to you that none of your arguments has a sound theoretical foundation?
Right policy depends on true theory.
“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, p. 30)
Lacking the true theory, economists promote for more than 200 years opinion instead of knowledge.#1
Before blogging, do your scientific homework first (e.g. 2015)
References
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.
#1 Economists’ three-layered scientific incompetence
Blog-Reference
The problem is not so much that economists do not understand how financial markets work, the problem is that economists do not understand how the market economy works.
Walrasianism, Keynesianism, Marxianism, and Austrianism are provable false. The fundamental flaw is that economists cannot tell the difference between the elementary concepts of income and profit. This is like medieval physics before the difference between kinetic and potential energy was clearly understood.
One of the big unanswered questions of the history of human thought is how economists ever came to hallucinate that the proto-scientific stuff they produce for more than 200 years is something other than what the genuine scientist Feynman called cargo cult science.
Egmont Kakarot-Handtke
Related ‘Economists’ three-layered scientific incompetence’ and ‘Economists are a menace to their fellow citizens’ and ‘Economists cannot do the simple math of profit — better keep them out of politics’.
***
CHALLENGE economistsview links-for-02-11-16
Funny, how you are politically groping in the dark. Did it ever occur to you that none of your arguments has a sound theoretical foundation?
Right policy depends on true theory.
“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, p. 30)
Lacking the true theory, economists promote for more than 200 years opinion instead of knowledge.#1
Before blogging, do your scientific homework first (e.g. 2015)
References
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.
#1 Economists’ three-layered scientific incompetence
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