Mindfuck or the Eternal Return of dead economic theories

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

Blog-Reference and Blog-Reference

The state of economics is this: theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years.

The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational concept of the subject matter ― profit ― wrong. What we have is the pluralism of provably false theories.

Obviously, economists violate the core principle of science, i.e., bury refuted theories for good: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941)

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

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

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

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

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

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

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

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

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

Egmont Kakarot-Handtke


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

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

Economics ― not science, not ideology, just useful idiocy

Comment on Simon Wren-Lewis on ‘How should academic economics cope with ideological bias’

Blog-Reference

A closer look at the history of economic thought reveals that there are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda; the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

The historical fact is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years: Walrasianism, Keynesianism, Marxianism, Austrianism, MMT are mutually contradictory, axiomatically false, and materially/formally inconsistent. This pluralism of provably false theories is NOT science.

However, from Adam Smith/Karl Marx onward to the faux ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’, academic economists claim to do science. As Simon Wren-Lewis asserts, “Economics can only be called a science because it embraces the scientific method. The moment evidence is routinely ignored by academics because it does not help some political project economics stops being the science it undoubtedly is.”

It is NOT. The fact is that economists continuously violate scientific standards, which are well-defined since antiquity: “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 scientific method implies the elimination of falsified approaches/hypotheses/theories. This does NOT happen in economics as Morgenstern criticized back in 1941: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” Or as Hands put it: “... suppose they did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.”

Economists never managed to produce more than proto-scientific garbage or to rise above the level of what Feynman called cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

What is missing to this day is the materially/formally consistent theory of how the monetary economy works. Economists do NOT strive for clear-cut true/false answers but instead, keep everything in the swamp between true and false, where “nothing is clear and everything is possible.” (Keynes) #1 Vagueness is a tried and tested survival strategy because “… you cannot prove a vague theory wrong.” (Feynman)

The historical fact is that economists are too stupid for the elementary math that underlies macroeconomics. To this day, Keynesians, Post-Keynesians, and MMTers use the sectoral balances equation (I−S)+(G−T)+(X−M)=0, which is provably false because it lacks the balance of the business sector, i.e., macroeconomic profit. #2 This is not a minor mistake, but it invalidates the whole of macroeconomics and microeconomics. Because economic theory is false, economic policy guidance has NEVER had sound scientific foundations.

The heap of inconsistent economic approaches has no truth-value; however, this does not matter much in the political realm, where all that counts is propagandistic use-value. This is why proto-scientific garbage is still around. Economics has always been a well-stocked rummage table for arguments that help to secure the status quo. More has not been expected by the founders and funders of economics departments, chairs, and institutions. And this has always been delivered. Rockefeller called the university ‘the best investment’ he ever made.

This is the built-in bias of economics since J. S. Mill, who was 35 years on the payroll of the East India Company and defined economics as “inexact and separate science”. Economics is NOT a science and NOT an ideology. #3 Economics is agenda-pushing in the cloak of science. To this day, economics lacks valid scientific foundations. This holds for both orthodox and heterodox economics, and Simon Wren-Lewis is no exception. #4-#7

Egmont Kakarot-Handtke


#1 And the answer is NCND ― economics after 200+ years of Glomarization
#2 The axiomatically correct balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0. See also: Wikipedia and the promotion of economists’ idiotism (II)
#3 An ideology is a manufactured ensemble of ideas/beliefs/norms/symbols as a means of creating/upholding/mobilizing group identity, i.e., a more or less sharp distinction between We (inclusion) and the Rest (exclusion). See also Wikipedia.
#4 Macro ignorance: Why Simon Wren-Lewis does not come to grips with the plain MMT-fraud
#5 Economic policy and the skirmishes of failed/fake scientists
#6 Are economics professors really that incompetent? Yes!
#7 The retirement of a fake scientist and real agenda pusher

Related 'Links on the Economics Nobel' and 'The end of political economics (I) and 'The end of political economics (II)'. For details of the big picture, see cross-references Political Economics/Stupidity/Corruption'.

Economic policy and the skirmishes of failed/fake scientists

Comment on Simon Wren-Lewis on ‘Bill Mitchell’s fantasy about Labour’s fiscal rule’

Blog-Reference

The status of economics is this: There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the monetary economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Political economics is mere opinion, theoretical economics is knowledge: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

And that is the problem: economists do not have the true theory. Because of this, economic policy guidance NEVER had sound scientific foundations. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong.

The macroeconomic models that underlie the argumentation of both Simon Wren-Lewis and Bill Mitchell are provably false.#1, #2, #3 This, in turn, means that the whole debate about the relative merits of monetary and fiscal policy is pointless from the scientific standpoint.#4 However, scientific irrelevance does NOT mean political ineffectiveness.

Both Simon Wren-Lewis and Bill Mitchell are not so much scientists as political agenda pushers.#5 What is currently at the top of the agenda of political economists is NOT AT ALL Labour’s Fiscal Rule but the possibility that Jeremy Corbyn becomes the next PM.

What Simon Wren-Lewis fails to address is the economic fact that because of the macroeconomic Profit Law it holds Public Deficit = Private Profit.#6 Therefore, the MMT policy of deficit-spending/money-creation is clearly in the interest of the Oligarchy.#7 MMTers are fake Progressives.

Whether both Simon Wren-Lewis and Bill Mitchell do not know the macroeconomic Profit Law or whether both intentionally mislead the representatives and members of the Labour Party is at anybody’s guess.

Egmont Kakarot-Handtke


#1 Macroeconomics: Economists are too stupid for science
#2 MMT sucks
#3 The canonical macroeconomic model
#4 Against the mainstream! Against MMT!
#5 Economics as a cover for agenda pushing
#6 Are economics professors really that incompetent? Yes!
#7 MMT’s true program

Related 'MMT: A new myth for WeThePeople' and 'Controlled demolition of MMT ― an exercise in elementary logic' and 'Thinking about economic policy for future PM Corbyn' and 'Deficit-spending, public debt, and macroeconomic profit/loss' and 'Mission impossible: economists join WeThePeople' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'The economist as useful political idiot' and 'How MMT fools the ninety-nine-percenters' and 'Political economics: Who hijacks British Labour?' and 'Macro ignorance: Why Simon Wren-Lewis does not come to grips with the plain MMT-fraud'.

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#PointOfProof

Jul 20

comment still missing

The retirement of a fake scientist and real agenda pusher

Comment on Simon Wren-Lewis on ‘Triangulation or bipartisanship does not work when one side goes off the scale’

Blog-Reference

Simon Wren-Lewis cites Brad DeLong approvingly: “Brad DeLong describes himself as a Rubin Democrat, which he defines as ‘largely neoliberal, market-oriented, and market-regulation and tuning aimed at social democratic ends. It is a natural position for an economist to be: it is generally more efficient to tweak markets than destroy them. But he thinks the time has come for this kind of Democrat to pass the baton over to the left. ‘We are still here, but it is not our time to lead.’”

It is an unnoticed absurdity that economists introduce themselves by waving a political flag. However, the general public and economists themselves have become accustomed to the idea that economics is just another act in the political Circus Maximus.

This impression is correct but there is a problem. There is the political sphere and the scientific sphere and both cannot go together. Economics claims to be science from Adam Smith/Karl Marx onward to the ‘Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel’. The task of economics as a science is to figure out how the monetary economy works. Did economists make a good job? No! This is where we stand today: provably false
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

Economics is a failed science. And economists like Brad DeLong and Simon Wren-Lewis are public representatives of the worst scientific performance since the Flat-Earth-Theory. Economics is dead as science but alive as political agenda pushing. As Brad DeLong proudly remarks: “We are still here.”

Unfortunately, this is all too true. There are always excellent employment opportunities in the political sphere for failed/fake scientists. Lenin called them useful idiots, economists prefer to describe themselves as experts ‘who know and care about the detail and the difficulties involved in populist policies.’#1, #2 Too bad that they do not know how the economy works.

“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 lack true theory. 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. There is NO scientific truth in economics.#3

But this does not matter much for an agenda pusher. What matters is to wave a political flag: “Our current bunch of leftists are wonderful people, as far as leftists in the past are concerned. They’re social democrats, they’re very strong believers in democracy. They’re very strong believers in fair distribution of wealth. They could use a little more education about what is likely to work and what is not. But they’re people who we’re very, very lucky to have on our side.”

After having passed the baton over to the next generation of useful idiots it is time for the old guard of political economics to bury themselves at the Flat-Earth-Cemetery in the large section reserved for economists.#4 Adam Smith and Karl Marx are already there.

Egmont Kakarot-Handtke


#1 A political stench is in the air
#2 Economics as a cover for agenda pushing
#3 Links on capital-T Truth, stupidity, corruption
#4 For details of the big picture see cross-references Political Economics

Economics as a cover for agenda-pushing

Comment on Simon Wren-Lewis on ‘The new party: lessons the Labour leadership and its supporters failed to learn’

Blog-Reference

“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)

We know since the Ancient Greeks what the criteria of scientific truth are “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)

Economists lack the true theory to this day. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.

Because they lack the true theory, economists have nothing to offer but educated common sense and their personal opinion. Economic policy guidance NEVER had sound scientific foundations.#1

However, those who are not fit for science may still find employment in the political Circus Maximus as op-eder, propagandist, entertainer, agenda pusher, and useful idiot. This would not be a problem at all, of course, if economists would not claim to do science. They don’t, they just put their square academic cap on and sell their right- or left-wing stuff in the bluff package of science. Fact is that political economics has zero scientific content.#2

Simon Wren-Lewis is a case in point. He has not realized to this day that both orthodox and heterodox economics is proto-scientific garbage but exhausts himself (i) with telling his audience that the BBC and the mainstream press deceive the people about Brexit, and (ii), with undermining the current Labour leadership.

These are Simon Wren-Lewis’ lessons

• “With its Brexit policy the leadership, and more particularly the cabal around Corbyn himself, failed to do this job.”
• “For Corbyn to pledge that members will make party policy, and then ignore the view of the overwhelming majority on the most critical issue of the day, just reeks of hypocrisy.”
• “Corbyn is not a natural manager of a large team, and that makes it all the more important that Labour policies keep the majority of MPs and members on board.”
• “It is almost certainly Corbyn’s biggest mistake since he became Labour leader.”

Obviously, the lessons Simon Wren-Lewis teaches have zero scientific content. But then, had Oxford economics ever any? The fact is that economists have messed up Profit Theory for 200+ years, Microfoundations for 150+ years, Macrofoundations for 80+ years, and the application of elementary logic/mathematics since the founding fathers.

Egmont Kakarot-Handtke


#1 Opinion, conversation, interpretation, blather: the economist’s major immunizing stratagems
#2 For details of the big picture see cross-references Political Economics/Stupidity/Corruption.

Related 'Thinking about economic policy for future PM Corbyn' and 'How Bill Mitchell stalks Jeremy Corbyn' and 'MMT and grassroots movements' and 'Oxford economics — still at the proto-scientific level' and 'Economists ― medics or barber-surgeons?' and 'Educating economists? Yes, but where is the scientific stuff?' and 'The apocalypse of stupidity' and 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion' and 'The economist as stand-up comedian' and 'Legitimacy lost' and 'The GDP-death-blow for the economics profession'.

Deficit spending, public debt, and macroeconomic profit/loss

Comment on Simon Wren-Lewis on ‘Should we worry about temporarily raising government debt?’

Blog-Reference

The curious thing about Simon Wren-Lewis’s argument is that it does not contain the word profit. It goes without saying that this omission makes the whole argument worthless.

Simon Wren-Lewis’s argument is based on the underlying standard model. This model is provably false and therefore has to be rectified first. #1

As the correct analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Yw, the price is given by P=W/R, i.e., the market-clearing price is equal to unit wage costs. This translates into W/P=R, i.e. the real wage is equal to productivity.

Profit for the economy as a whole is defined as Q≡C−Yw, and saving as S≡Yw−C. It always holds Q≡−S, i.e., the business sector’s profit is equal to the household sector’s dissaving, or the business sector’s loss is equal to the household sector’s saving.

(i) Now, if the government runs a deficit in period 1, total expenditures are C+G, the market-clearing price rises, and the business sector makes a profit Q=G. The output O is redistributed between the household and the government sector. This amounts to taxation in real terms, which is brought about by the price increase.

(ii) 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.

There is no longer deficit spending. The price returns to its original level.

This intermediary time lasts from period 2 to t−1, and the government’s debt is simply rolled over. If employment and/or productivity increase, the economy grows.

(iii) In period t, the debt is redeemed. The government taxes the household sector, total expenditures reduce to C−T with T=G, the market-clearing price falls, and the business sector makes a loss of −G. After the government’s repayment, both overdrafts and deposits at the CB are again zero.

As a result, the grandchildren are hit by taxes T but get the whole output O. The business sector’s loss in period t is equal to its profit in t=1. The real taxation happened in t=1, but nominal taxation is deferred to period t.

If the interest rate on overdrafts is, for simplicity, equal to the interest rate on deposits, the government sector taxes the household sector, and the interest payments go to the business sector respectively the firms’ owners a.k.a one-percenters.

The taxation/redistribution over the indefinite intermediary time and the final taxation and redemption in period t could be avoided by immediate nominal taxation in period t=1. Immediate taxation settles ALL issues of intertemporal redistribution and is, from the perspective of the ninety-nine-percenters, preferable to deficit spending and deferred taxation.

From the government’s perspective, stealth taxation through deficit spending is preferable because nominal taxation vanishes behind the time horizon. From the business sector’s perspective, profits now and losses behind the time horizon are also preferable.

So, let the next administration worry about permanently growing public debt. #2

Egmont Kakarot-Handtke


#1 On the saying “We owe the debt to ourselves”
#2 Keynes, Lerner, MMT, Trump and exploding profit

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REPLY to Simon Wren-Lewis on Jan 25

You sum up: “In policy terms I think it is the last nail in the coffin of what Paul Krugman calls the deficit scolds. Those who argued for austerity because of the burden on future generation, although on weak ground even if r > g, find their argument collapses if g > r.”

Paul Krugman (i) confuses some issues and (ii) lets some negative facts simply disappear by dividing them by infinity.

If the present government deficit spends 100 on current output on behalf of the present generation, then in some future period t, the debt of 100 has to be redeemed. Now Krugman argues that if GDP is currently x and in period t has grown to 1000x, then the burden in terms of Debt-to-GDP is greatly reduced and in the course of time approaches zero. This is undoubtedly true, but misses the point. The debt burden is not reduced by one penny, but only optically by putting it in relation to an arbitrary denominator. If the economy shrinks instead, the relative debt burden increases. And this collapses the argument of Paul Krugman. 

Because nobody can say whether the economy is bigger or smaller in a future period t the whole argument degenerates to an exercise in pointless speculation.

The real problem with government deficit spending is the distributional effect. In crude terms, because of Public Deficit = Private Profit, the Oligarchy gets a free lunch from the government. This, in turn, generates interest income for an indefinite time, i.e., the government taxes WeThePeople and hands the interest over to the Oligarchy. Finally, in some period t, it is NOT the future “generation” who redeems the debt. Instead, the government taxes the future WeThePeople and hands the money over to the future Oligarchy, which has inherited the financial assets = public liabilities.

In sum: compared to immediate taxation, deficit-spending is a bad deal for WeThePeople and a good deal for the Oligarchy.

The intentionally or unintentionally overlooked distributional effect of public deficit-spending is the last nail in the coffin of the soapbox economist Paul Krugman.

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AXEC141e

Oxford economics — still at the proto-scientific level

Comment on Simon Wren-Lewis on ‘Why should someone who is anti-austerity care about debt’

Blog-Reference

Simon Wren-Lewis summarizes: “This is not the only reason why raising government debt to GDP in the long run can be detrimental, but this one is simple because it depends only on some basic economics, algebra and logic.”

The fact of the matter is that to this day economists do not get basic economics, algebra and logic right. Simon-Wren Lewis is no exception. He is too stupid for the elementary algebra that underlies macroeconomics.

To make matters short: The central problem of the MMT policy of permanent deficit-spending/money-creation and a permanently growing debt is NOT inflation but distribution. In political terms, MMT policy benefits the Oligarchy and NOT WeThePeople.

The macroeconomic Profit Law, which is unknown to the Oxford economist Simon Wren-Lewis, says Public Deficit = Private Profit and this follows straight from the TRUE sectoral balances equation (X−M)+(G−T)+(I−Sm)−(Qm−Yd)=0 which compares to the FALSE Post-Keynesian/MMT balances equation (X−M)+(G−T)+(I−S)=0.#1, #2, #3

Neither MMTers nor Mainstreamers ever got profit right. As Mirowski put it: “... one of the most convoluted and muddled areas in economic theory: the theory of profit.”#4 This is why economics never rose above the proto-scientific level and why the debate about austerity and budget-balancing is so utterly absurd.

Oxford economics, in particular, is a scientific failure.#5

Simon Wren-Lewis argues: “However there is another reason to demand a higher nominal interest rate on debt, and that is if you think there will be additional inflation in the country. Spending more without raising taxes will tends to increase inflation.”

This is the standard argument against MMT and it is patently false. Deficit-spending/ money-creation causes a small one-off price hike but NO inflation.#6, #7 So, as a matter of principle, public debt can grow steadily for an indefinite time without ever causing inflation.

Economically, the permanent growth of public debt is a program for the self-alimentation of the Oligarchy. Whether they are aware of it or not does not matter, but de facto MMTers are the agenda-pushers of Wall Street.#8, #9

Egmont Kakarot-Handtke


#1 Wikipedia and the promotion of economists’ idiotism (II)
#2 Truth by definition? The Profit Theory has been axiomatically false for 200+ years
#3 Back-of-the-envelope proof:
If the total wage income of the household sector is 100 in a given period and the household sector spends all on consumption, then the macroeconomic profit of the business sector is zero.
If the total wage income of the household sector is 100 and the household sector spends all on consumption and the government sector applies deficit-spending/money-creation of 10, then the profit of the business sector is 10.
Generalization: Public Deficit = Private Profit.
#4 For details of the big picture see cross-references Profit
#5 Where economics went wrong (II)
#6 Gov-Deficits do NOT cause inflation
#7 Economics as tireless production of proto-scientific garbage: inflation theory as an example
#8 MMT and the overall political corruption of economics
#9 Mission impossible: economists join WeThePeople

Related 'Legitimacy lost' and 'The biggest scientific mistake of the last centuries, and it has much to do with academic economists' and 'The economist as useful political idiot' and 'The demise of phony experts: macroeconomics is provably false' and 'Why is economics a total scientific failure?' and 'Macroeconomics: self-delusion and empty promises' and 'Economics has arrived at the bottom of the proto-scientific shithole' and 'How MMT fools the ninety-nine percenters' and 'Political economics: Who hijacks British Labour?' and 'Deficits matter for distribution' and 'How some MMTers got inflation wrong' and 'Inflation: back to basics'.

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AXEC141e

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TWITTER on Oct 29

The interest effect of public debt is deflationary because the propensity to consume of the interest receivers is lower than that of the average taxpayer.

Oxford economics — still at the proto-scientific level

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TWITTER on Oct 29

MMT's permanent deficit-spending/money-creation is lethal because of the distribution effect and NOT of the inflation effect.

Deficits matter for distribution

MMT and the inflation-red-herring

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TWITTER on Oct 29

#PublicDeficitIsPrivateProfit

#WeTheOligarchy

Keynes, Lerner, MMT, Trump, Biden, and exploding profit

Where economics went wrong (II)

Comment on Simon Wren-Lewis on ‘Talk on where macroeconomics went wrong’

Blog-Reference and Blog-Reference

Simon Wren-Lewis’s talk is a fine example of what may be called an epicycle explanation. Essentially, like a Ptolemaic astronomer, he argues that it was with the 23rd epicycle that an error sneaked in, and this explains why the theory failed.

Simon Wren-Lewis maintains: “The mistake was the revolution part. In the US, DSGE models replaced traditional modelling within almost a decade. In my view DSGE models should have coexisted with more traditional modelling, each tolerating the other.”

No. Both DSGE modeling and more traditional modeling are methodologically defective, and the first step on the way forward is to bury both for good at the Flat-Earth-Cemetery. As Joan Robinson put it: “Scrap the lot and start again.”

What is needed is NOT the repair of the 23rd epicycle but a Paradigm Shift from false microfoundations to true macrofoundations. Nothing less will do.

This is the state of economics. Provably false:
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

The major approaches ― Walrasianism, Keynesianism, Marxianism, and Austrianism are mutually contradictory, axiomatically false, and materially/formally inconsistent. Because of this, economic policy guidance has never had sound scientific foundations from Adam Smith/Karl Marx onward to DSGE and New Keynesianism.

It was Keynes who spotted the fatal flaw of mainstream economics: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.” (Keynes)

In the same vein: “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)

Clearly, it is microfoundations that are false. The Walrasian approach is defined by 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) Every model that is built upon HC1 to HC5 or contains a subset thereof is false.

On the other hand, the Keynesian macrofoundations approach is defined by this set of foundational propositions: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63) Every model that is built upon this elementary syllogism is false, in particular, all I=S/IS-LM models and the whole of MMT.

Because both the microfoundations approach and the macrofoundations approach are axiomatically false, roughly 90 percent of the content of peer-reviewed journals is scientifically worthless.

A Paradigm Shift is imperative. #1 Who still accepts and applies Walrasian microfoundations or Keynesian macrofoundations or a combination thereof goes straight to the Flat-Earth-Cemetery.

It is known for 2300+ years: “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) Economists’ premises have NEVER been certain, true, and primary. Economics went wrong from the very beginning.

Egmont Kakarot-Handtke


#1 From false microfoundations to true macrofoundations

Related 'Where modern macroeconomics went wrong' and 'Where economics went wrong (I)''. For details of the big picture, see cross-references Failed/Fake Scientists and
cross-references Political Economics/Stupidity/Corruption and
cross-references Paradigm Shift.

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AXEC144c

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LINK to The science that never was, Blog-Reference on Oct 12

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REPLY to Kien, tom m on Oct 13

Your blather about good intentions and Pareto Optimality is an indicator that you simply don’t get the obvious facts straight:

• Economics is a cargo cult science,

• Both Nordhaus and Romer are fake scientists,

• The EconNobel is a fraud.

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REPLY to Daniel Schiffman on Oct 16

William Nordhaus is the co-author of the textbook Economics. This textbook was “first published in 1948, and it immediately became the authority for the principles of economics courses.” (Amazon, product information)

There is Orthodoxy with microfoundations and there is Keynesianism with macrofoundations. Both Walrasian microfoundations and Keynesian macrofoundations are provably false, i.e. materially/formally inconsistent.

In the Samuelson/Nordhaus synthesis, the defective Walrasian micro axioms and Keynes’ defective macro axioms were cobbled together. Needless to emphasize that both halves do not logically fit together.

The Samuelson/Nordhaus textbook has the lowest scientific content of all textbooks ever written. And nothing substantial has improved in the last 70 years. Supply-demand-equilibrium will forever stand out as the silliest construct in the history of science, and it is still at the core of economics teaching.

William Nordhaus cannot by any stretch of the imagination be taken seriously as a scientist, except in a cargo cult science. Feynman defined it as follows: “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.”

Indeed, they have not realized for 80+ years that economics is proto-scientific garbage, and they even award a cargo cult Nobel to the co-author of a cargo cult textbook.

The biggest scientific mistake of the last centuries, and it has much to do with academic economists

Comment on Simon Wren-Lewis on ‘The biggest economic policy mistake of the last decade, and it had nothing to do with academic economists’

Blog-Reference and Blog-Reference and Blog-Reference on Aug 22

Simon Wren-Lewis argues: “I think this lack of influence that academic economics can have is not understood by many. It often suits some heterodox economists to pretend otherwise. Economists can be influential, but only when politicians want to listen, or the media is prepared to confront them with academic knowledge.”

Economists have it always in BOTH ways. Keynes famously argued: “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

In economics, everything and the exact opposite has already been said sometime, somewhere, by somebody. Self-contradiction is NOT a disadvantage. Just the opposite. If some major economic event happens, there is always somebody who ‘saw it coming’ or ‘who got it right but, unfortunately, was ignored’. The discussion about austerity is NOT different.

Simon Wren-Lewis tells the story of how he, Paul Krugman, Brad DeLong, and others have successfully taken down the arguments for austerity: “As far as us Keynesians were concerned, the intellectual battles were won by the end of 2012 if not before.”

This gives us the Iron Rule of Political Economics: If economic shit happens, then it was NEVER the fault of economists but of politicians who do not understand economics and always listen to the incompetent economists and ignore the competent economists.” The truth is just the opposite: “Late in life, moreover, he [Napoleon] claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner)

This is why intelligent heads of state do not listen to economists but only employ them as useful idiots.

The point is this: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

Now, this is the current state of economics: the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit ― the foundational concept of the subject matter ― wrong. With the pluralism of provably false theories, economists have NOT achieved anything of scientific value. They nonetheless hold up the claim to be scientists and experts.

The key to understanding economics is that there are TWO economixes: political and theoretical economics. Theoretical economics (= science) had been hijacked from the very beginning by the agenda pushers of political economics. Economics claims to be a science, but it is NOT. Economists claim to know how the economy works, but do NOT. From this follows that economic policy guidance from Smith/Marx onward has NEVER had sound scientific foundations. This applies also to the issue of austerity.#1, #2, #3

Neither Simon Wren-Lewis nor Paul Krugman nor Brad DeLong nor the rest know how the economy works, yet all have very strong opinions on what the politicians should do. Economists have entirely forgotten that agenda pushing is NOT AT ALL their business: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)

All the more so, because economists messed up science.#4 After 200+ years of political agenda pushing, economics is one of the most embarrassing failures in the history of modern science.

Egmont Kakarot-Handtke


#1 Austerity and the idiocy of political economists
#2 Austerity and the utter scientific ignorance of economists
#3 Austerity and the total disconnect between economic policy and science
#4 For details of the big picture see cross-references Failed/Fake Scientists

Related Ch. 13 in Sovereign Economics: The indelible scientific disgrace of economics.

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REPLY to Tom Hickey on Aug 23

You say: “All of us have a world view. World views differ, perhaps slightly but perhaps a great deal. We affiliate based on shared world views. If one beings to groups that don’t share a common world view. this creates some double binds and cognitive dissonance, or role-playing, These world views are ‘programed’ into the brain functioning. At the social level this results in group think and conflict within and among groups.”

Wow. And you found this out by stressing your two brain cells? Take notice that the difference between doxa = opinion and episteme = knowledge was settled by the Greek philosophers more than 2300 years ago.

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

To deny the true/false demarcation means to kick oneself out of science. And this is exactly what you are doing.

It is rather trivial to state that there are a lot of different opinions around. Genuine philosophers went well beyond this triviality: “That the settlement of opinion is the sole end of inquiry is a very important proposition.” (Peirce)

In brief, Walrasianism, Keynesianism, MMT, Marxianism, Austrianism, Pluralism, and Eclecticism are mere opinions and will find their final resting place at the Flat-Earth Cemetery together with your silly anything-goes philosophy.

You say: “All of us have a world view”. What you call a “world view” is qualitatively not different from a bacillus fart. The representative orthodox and heterodox economist does NOT have a valid worldview but is scientifically incompetent/corrupt. The proof is all over the econblogosphere, including the Mike Norman Economics blog.#1, #2, #3


#1 The scientific self-elimination of Heterodoxy
#2 MMT, Bill Mitchell, and the lack of basic scientific integrity
#3 You don’t see what you don’t see: censorship in the econblogosphere

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REPLY to Tom Hickey on Aug 23

You say: “Right, and most people today are completely unaware of this. They have been captured by ‘science’ that is really pseudoscience.”

Worse, they have been captured by ‘philosophy’ that is really pseudophilosophy. After the sciences and mathematics have left philosophy behind, it is only a shadow of its former self and practically indistinguishable from journalism/propaganda/agenda-pushing.

The anything-goes philosopher Tom Hickey is a sad example of the political sellout of philosophy.

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AXEC141f

The economist as useful political idiot

Comment on Simon Wren-Lewis on ‘Interest rate vs fiscal policy stabilisation’

Blog-Reference and Blog-Reference

The key point for understanding economics is that there are TWO economixes: political and theoretical economics. The main differences are: (i) The objective of political economics is to successfully push an agenda; the objective of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Theoretical economics (= science) had been hijacked from the very beginning by the agenda pushers of political economics. Note that neither Simon Wren-Lewis nor Bill Mitchell knows how the economy works, but both have very strong opinions on what the Labour Party’s economic policy should look like.

There is no need to bother much with the scientific underpinnings of Simon Wren-Lewis’ or Bill Mitchell’s policy guidance because there are none. Both DSGE and MMT are scientifically worthless. Economics is not a branch of science, and economists are not scientists. #1

For political purposes, though, this does not matter much because in the political sphere, the number of useful idiots is decisive for success and not any genuine scientific merits.

So, how are the useful idiots positioned these days in the UK?
(i) The hardcore neoliberal position is that the state has to be kept out of the economy, so fiscal policy is a priori ruled out. What is admissible is the interest rate policy of a (nominally) independent Central Bank. This policy is already in place and is continually adapted/ improved.
(ii) The soft neoliberal approach of Simon Wren-Lewis gives fiscal policy a greater role in the case of economic emergency/stress but delegates policy to a (nominally) independent body of experts that is tasked with budget-balancing (ex investment spending) over a rolling five-year horizon.
(iii) The hardcore MMT position is that monetary policy has always been ineffective and that only permanent deficit-spending/money-creation keeps the economy going at full employment. Bill Mitchell’s main point of critique of (ii) is that Labour clings to the obsolete idea of budget balancing and is not progressive enough.#2

After blowing the whole pseudo-scientific argumentative fog away, what remains with regard to the positioning vis-à-vis the current Labour leadership is:
(i) means attacking Labour/Corbyn from the right,
(iii) means attacking Labour/Corbyn by the fake left a.k.a. Progressives,#3
(ii) means neutralizing Labour/Corbyn through a committee of (nominally) independent economic experts.#4

Among economists, the current Labour leadership has NO real supporters. A paranoiac view of the political world would come to the conclusion that the Oligarchy has successfully encircled Jeremy Corbyn with their useful academic idiots.

Egmont Kakarot-Handtke


#1 For details of the big picture, see cross-references Failed/Fake Scientists
#2 How Bill Mitchell stalks Jeremy Corbyn
#3 The Kelton-Fraud
#4 The demise of phony experts: macroeconomics is provably false

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AXEC144b

MMTers are NOT Friends-of-the-People

Comment on Bill Mitchell on ‘MMT is just plain old bad economics’

Blog-Reference and Blog-Reference and Blog-Reference on Aug 11 adapted to context

Bill Mitchell recounts: “The exchange took place on the social media page of a Labour Party insider who has long advocated a Land Tax, which McDonnell is on the public record as saying will ‘raise the funds we need’ to help local government. He called it a ‘radical solution’ (Source). An aside, but not an irrelevant one. It reflects the mindset of the inner economics camp in the British Labour Party, a mindset that is essentially in lockstep with the neoliberal narrative about fiscal policy.”

Bill Mitchell has serious doubts about whether the current Labour leadership really has the people’s best interests in mind:
• “The British Labour Party has not crowned itself in glory in the last few weeks by proposing to consider adding a UBI to its policy platform.”
• “As many commentators have pointed out the problem with this proposal can be summarized by just considering the party’s own title – Labour Party. A party that is concerned for the welfare and aspirations of workers who work and their dependents.”
• “Why would a progressive ‘Labour’ party want to introduce a UBI to solve unemployment when in government it could always ensure that all idle labour is productively employed?”
• “Why would a progressive Labour Party want to surrender to the neoliberal idea that there will never be enough jobs to go round when there is patently millions of jobs that can be created to serve community and environment if the government funds them?”

There is social policy, and there is the funding of social policy. And these are TWO ENTIRELY DIFFERENT things. The economic stunt is that one can pull social policy out of the monetary cylinder that does NOT benefit WeThePeople but the Oligarchy. And one can call oneself a real Progressive and present oneself as a true Friend-of-the-People and stab the elected party leadership in the back.

Classical social policy is rather straightforward: increase social spending and balance the budget by increasing the taxes of the rich, or, alternatively, increase social spending and balance the budget by lowering military spending while keeping taxes unchanged.

Progressive social policy does not bother with either. As Bill Mitchell said elsewhere: “Do we need the rich’s money?” “No”. #1 Progressive social policy does not need taxes because, in a fiat money system, the sovereign government solves all problems by deficit-spending/ money-creation. MMTers correctly point out that, historically, ever-growing public debt has posed no serious problems and has never caused inflation. And this should tell everybody that all arguments against MMT are scientific and political BS.

In sum, Bill Mitchell argues that all available evidence confirms that Progressive social policy is superior to the obsolete social policy of the current Labour leadership, which seems, moreover, to be mentally in bed with Neoliberals, Austerity sadists, and balanced-budget imbeciles.

The fact is that Progressives/MMTers are NOT true Friends-of-the-People. MMT is scientifically refuted on all counts. #2, #3, #4, #5, #6, #7 Because of the Profit Law, i.e., Public Deficit = Private Profit, MMT policy ultimately benefits only the Oligarchy.

Politically speaking, Bill Mitchell is Wall Street’s knife in the back of the current Labour leadership.

Economics is scientifically worthless and politically corrupted since the founding fathers. This holds for Walrasianism, Keynesianism, Marxianism, Austrianism, and MMT.

Egmont Kakarot-Handtke


#1 MMT: Academic snake oil for the people
#2 MMT, money creation, stealth taxation, and redistribution
#3 Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople
#4 Down with idiocy!
#5 MMT and the magical profit disappearance
#6 Keynes, Lerner, MMT, Trump and exploding profit
#7 MMT: So-called Progressives as trailblazers for Trumponomics

Related 'MMT and grassroots movements' and 'MMT Progressives: The knife in the back of WeThePeople' and 'How Bill Mitchell stalks Jeremy Corbyn' and 'Is MMT good for WeThePeople or for the Oligarchy?'.

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Graphic AXEC142

The demise of phony experts: Macroeconomics is provably false

Comment on Simon Wren-Lewis on ‘Nominal wages are not real wages, and why it matters in the UK’

Blog-Reference

Simon Wren-Lewis discusses the relationship between UK wage and profit share, real wage, employment, and the NAIRU to bust two myths about immigration and employment. This is a futile exercise because macroeconomics is false since Keynes. After-Keynesians have not realized it until this day.#1

Roughly speaking, economists never got their foundational concepts straight. Here is the evidence from the General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This elementary syllogism is conceptually and logically defective because Keynes never came to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Because the foundational concept of profit is false, the whole analytical superstructure is false. Since Keynes, macroeconomics is scientifically worthless.

Macroeconomic profit Q_m is not a flow like wage income Y_w, but the difference of flows, i.e., Q_m≡C−Y_w in the most elementary case. It is methodologically not admissible to add wage income Y_w and profit Q_m together and to call the sum total income. This is the Humpty Dumpty Fallacy.#2

Because the Profit Theory is false, the Distribution Theory is false, and the concept of profit “share” is nonsensical.

From the correct macroeconomic axioms follows the Profit Law as Q_m≡Y_d+(I−S_m)+(G−T)+(X−M). Total income is the sum of wage income Y_w, and distributed profit Y_d.

Employment Theory is false by logical implication. The most elementary version of the correct macroeconomic Employment Law is shown under the label Graphic. #3
 
From this equation follows, inter alia, that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R. This is the opposite of what standard economics teaches.

As Simon Wren-Lewis argues: “It is often difficult to convince those on the left that weakening labour power over wages can be a good thing, if lower nominal wages are passed on to lower prices. It can be a good thing because it allows the central bank to raise demand and therefore output by more than they otherwise could while keeping inflation stable. It reduces the sustainable unemployment rate: the NAIRU.”

It is difficult to convince microfounded economists, who are hopelessly trapped in the Fallacy of Composition, that the average wage rate must rise relative to price and productivity in order to reduce unemployment and that NAIRU has always been a NONENTITY.#4, #5

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)

Economists do NOT have the true theory. Macroeconomics is axiomatically false. Economists do not know how the price and profit mechanism works. Economic policy guidance has had no sound scientific foundations since Adam Smith/Karl Marx. There never was such a thing as an economic expert.

Egmont Kakarot-Handtke


#1 Why Post Keynesianism Is Not Yet a Science
#2 For details of the big picture, see cross-references Profit
#3 Graphic AXEC62 Employment Law
#4 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#5 For details of the big picture, see cross-references Employment

Related 'The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment' and 'The Coherency of Money, Profit, Price, and Distribution' and 'Essentials of Constructive Heterodoxy: Profit'.

Macroeconomics: self-delusion and empty promises

Comment on Simon Wren-Lewis on ‘Did macroeconomics give up on explaining recent economic history?’

Blog-Reference

Simon Wren-Lewis summarizes: “… John Williams … calls here for the next generation of DSGE models to focus on three areas. First, they need to have a greater focus on modelling the labour market and the degree of slack, which I think amounts to the same thing as how the NAIRU changes over time. Second, he talks about a greater focus on medium- or long-run developments to both the ‘supply’ and ‘demand’ sides of the economy. The third, of course, involves incorporating the financial sector. Perhaps one day DSGE models will do all this, although I suspect the macroeconomy is so complex that there will always be important gaps in what can be microfounded. But if it does happen, it will not come anytime soon.”

It will NEVER come, for the simple reason that the microfoundations approach is methodologically dead. The problem is that the present generation of economists is in a state of manifest self-delusion. The point to grasp is that economics has to be macrofounded.*

For more details, see

• NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
• Infantile model bricolage, or, How many economists can dance on a non-existing pinpoint?
• DSGE and profit―forget it! MMT and profit―forget it!

Because the axiomatic foundations of economics are false, the whole of economics is false. Economic policy guidance has had no valid scientific foundations since Adam Smith/Karl Marx.

Egmont Kakarot-Handtke


Related 'Full employment, the Phillips Curve, and the end of Gaganomics' and 'End of the Lump of Labor sitcom' and 'Full employment through the price mechanism'.

* Graphic AXEC113o2 

Economics has arrived at the bottom of the proto-scientific shithole

Comment on Simon Wren-Lewis on ‘Brexit and Corbyn: how our media fails the people’

Blog-Reference

There are political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and 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.

Economics claims to be a science but is NOT. Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers).

The true economic theory tells one how the economic system works. The economist needs the true theory, i.e. the humanly best mental representation of reality: “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 a true theory but they have opinions for all seasons. Actually, economists have long ago given up science and turned to the shaping of public opinion.

These, for example, are the latest posts of Simon Wren-Lewis
• Brexit and Corbyn: how our media fails the people,
• The media and Attitudes to Austerity,
• Is Trump about race and Brexit about culture?
• Jeremy Corbyn cannot end Brexit,
• The Output Gap is no longer a sufficient statistic for inflationary pressure,
• Beliefs about Brexit,
• A road to right-wing authoritarian government.

Six of the seven posts are about how corrupt UK media distort reality, and only one post is about economics proper. It is a fair summary to say that Simon Wren-Lewis is primarily in the PR/propaganda/journalism business and only superficially engaged in science.

Simon Wren-Lewis’ expertise consists of educated common sense and academic majority opinion but lacks sound scientific foundations because he has not realized that standard economics in its current incarnation as DSGE is proto-scientific garbage.

The vast majority of economists have entirely lost any scientific instincts, which would tell them to keep science and politics strictly apart,#1 and have joined the crowd of clowns and useful idiots in the political Circus Maximus.

Everyone can know from history that science cannot improve politics but that politics inescapably corrupts science, or as Schumpeter put it: “The first thing a man will do for his ideals is lie.” Much more so, if he has no ideals.

Economics was captured 200+ years ago by political agenda pushers and this is why it has become the most embarrassing failure in the history of modern science.

Egmont Kakarot-Handtke


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

Related 'Orthodoxy vs. Heterodoxy: the squabbling of quacks' and 'Cranks? What cranks? That’s economics!' and 'MMT: Academic snake oil for the people'. For details of the big picture see cross-references 'Failed/Fake Scientists.

How MMT fools the ninety-nine-percenters

Third comment on Simon Wren-Lewis on ‘The dangers of pluralism in economics: the case of MMT’

Blog-Reference and Blog-Reference

One of MMT’s wake-up shocker slogans is: Taxes Don’t Fund Gov’t spending. This is operationally true, of course, but raises false expectations. What is sold as a benefit for the ninety-nine-percenters turns out to be a benefit for the one-percenters. MMT policy is false/misleading because MMT theory is false, more specifically, MMTers do not know how the price and profit mechanism works.

In order to go back to the basics of economics, the elementary production-consumption economy is, for a start, defined by three macroeconomic axioms (Y_w=WL, O=RL, C=PX), two conditions (X=O, C=Y_w), and two definitions (profit/loss Q≡C−Y_w, saving/dissaving S≡Y_w−C). #1

It always holds Q≡−S, in other words, the business sector’s surplus = profit equals the household sector’s deficit = dissaving, vice versa, the business sector’s deficit = loss equals the household sector’s surplus = saving. This is the most elementary form of the macroeconomic Profit Law. This Law refutes the MMT profit theory. So, strictly speaking, MMT is scientifically dead already at this point.

Money is needed by the business sector to pay the workers who receive the wage income Y_w per period. The workers spend C per period. Given the two conditions, the market-clearing price is derived for a start as P = W/R. So, the price P is determined by the wage rate W, which has to be fixed as a numéraire, and the productivity R. This is the macroeconomic Law of Supply and Demand.

The average stock of transaction money follows as M=κY_w, with κ determined by the payment pattern. In other words, the “quantity of money” M is determined by the autonomous transactions of the household and business sector and created out of nothing by the central bank. The economy never runs out of money.

Now, the government starts deficit spending. Economically, it does not matter much for what purpose. The money, which is created by the central bank, is simply handed over to a social subgroup that fully spends it.

Government spending is denoted by G. The new market-clearing price is now given by P₁=(C+G)/X, which translates into P₁=P+G/RL, that is, there is a price hike, which depends on the amount of the government’s deficit spending G. If G is small in relation to total output O=RL the price hike is almost imperceptible. There is NO such thing as inflation if the deficit is repeated period after period. The elevated price P₁ remains constant. However, the debt of the government vis-à-vis the central bank rises continuously. This can go on for an indefinite time.

MMT is right, taxes are not required to fund government spending, and debt does not matter for the time being. However, that does not mean that the wage income receivers are not taxed. The price hike reduces the real quantity Y_w can buy, that is, the wage income receivers are taxed in real terms in proportion to G without realizing it.

What about the one-percenters? With total expenditures C+G and unchanged wage income, profit is now equal to government deficit spending and rises from zero to Q=G.

Due to stealth taxation and the Profit Law, which says that Public Deficit = Private Profit, deficit spending/money creation is always a bad deal for the ninety-nine-percenters. The amount of public debt reminds people how much tax they have to pay. MMT policy ultimately benefits only the one-percenters. #2

Right policy depends on true theory. MMT is proto-scientific garbage, just like Walrasianism, Keynesianism, Marxianism, Austrianism, and Pluralism.

Egmont Kakarot-Handtke


#1 For the detailed description, see How the intelligent non-economist can refute every economist hands down.
#2 For the full-spectrum refutation of MMT, see cross-references MMT

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Graphic AXEC135f

Political economics: Who hijacks British Labour?

Comment on Simon Wren-Lewis on ‘The dangers of pluralism in economics: the case of MMT’

Blog-Reference and Blog-Reference

Bill Mitchell writes: “Another point that interests me here is the role of academia. Historically, our role was to bear witness to governments and their behaviour. To provide ‘independent’ scrutiny. That role was one of the reasons that tenure was introduced ― to allow us security of employment no matter what we said about governments or other powerful entities. …These days, academics have largely lost tenure … and are bullied by managerial bosses into virtual silence for fear that Government Ministers will ring up their institutions and damage their prospects if they speak out openly.”#1

Economics always claimed to be a science. It never was. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong.

There are political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. And this means, in turn, that economic policy guidance NEVER had sound scientific foundations. Economists have NO scientifically valid knowledge about how the price- and profit mechanism works.#2 There is a total logical DISCONNECT between economic policy arguments and economic theory.#3

The lack of scientifically valid theory, though, never prevented economists from assuming the role of useful political idiots.

What can be observed at the moment is that New Keynesianism and MMT are trying to get hold of Labour’s economic policy lever. New Keynesianism is derived from Walrasianism which is scientifically dead for 150+ years. MMT is derived from Keynesianism which is defunct for 80+ years because Keynes messed the analytical foundations of macro up. So, neither approach has sound macroeconomic foundations.

Apart from this lack of qualification, economists have entirely forgotten that politics and science are ruled by entirely different principles and that both spheres have to be strictly kept apart. As J. S. Mill had it: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”

This did not make much impression on the agenda pushers of all colors and this, in turn, explains the fact that economists are for 200+ years fooling around at the proto-scientific level. Scientific failure, of course, does not matter at all in the political sphere where a scientific bluff package has at all times been quite sufficient.#4

Egmont Kakarot-Handtke


#1 billy blog
#2 Mass unemployment: The joint failure of orthodox and heterodox economics
#3 Paul Krugman and economic poultry entrails reading
#4 MMT and grassroots movements

Related 'MMT is NOT an alternative to Neoliberalism' and 'What is so great about cargo cult science? or, How economists learned to stop worrying about failure'. For details of the big picture see cross-references Political Economics.

Immediately following How MMT fools the ninety-nine-percenters.

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REPLY to Matt Franko on Mar 3 and Blog-Reference MM

To debunk Wren-Lewis’ New Keynesianism, as Bill Mitchell has done in his series,#1 is the easy part. Yes, anyone who has said in the last 150+ years that mainstream economics is garbage has been right. The point is that debunking has run its course by now and that the world is tired of Walrasianism, Keynesianism, Marxianism, Austrianism and wants to know what the true economic theory looks like.

Bill Mitchell makes two claims, (i) that MMT is the scientifically correct description of how the actual monetary economy works, and (ii), that MMT’s progressive political agenda promotes the cause of the ninety-nine-percenters.

With regard to the actual political situation in Britain this boils down to (i) New Keynesianism, represented by Simon Wren-Lewis, misleads Labour, (ii) MMT, represented by Bill Mitchell, and Labour are the political dream team.

Both claims are false. MMT does not satisfy the scientific criteria of material/formal consistency. It has been proven that the MMT balances equation is false.#2 So, MMT is NOT scientifically superior to New Keynesianism. Both share the same methodological defect, that is, the foundational economic concepts of profit and income are ill-defined. This is lethal for every economic approach.

The two most popular MMT claims, i.e. deficit spending/money creation easily fixes most economic problems and debt does not matter, are misleading at best. Deficits matter for distribution.#3 More specifically, public deficits are the main drivers of upward redistribution from Keynes onward.#4

The academic Wren-Lewis has been denounced by MMTers as a neoliberal agenda pusher. So, the question is legitimate, what agenda the academic Bill Mitchell is pushing.

Bill Mitchell argues: “Another point that interests me here is the role of academia. Historically, our role was to bear witness to governments and their behaviour. To provide ‘independent’ scrutiny.”

This independence never existed. Economics started as Political Economy and only wrapped itself at some point in history in the cloak of science. In fact, the majority of economists never rose above agenda pushing. As a consequence, economics never reached the heights of scientific independence, objectivity, and truth. From this follows: “So we really ought to look into theories that don’t work, and science that isn’t science.” (Feynman)

What do we see when we look closer into MMT? Bill Mitchell argues: “A rising fiscal deficit is neither good nor bad. It all depends on the saving and spending desires of the non-government sector and the state of capacity utilisation. A rising deficit associated with a growing economy and full employment with stable prices is to be desired.”#5

The MMT swindle lies in the word non-government sector. There is NO such thing as the “non-government sector”, there are TWO sectors, the business- and the household sector. And the business sector does NOT save. Saving/dissaving is the balance of the household sector, profit/loss is the balance of the business sector. The word profit, though, does not appear once in Bill Mitchell’s analysis. Why? Because it holds Public Deficit = Private Profit which means that Bill Mitchell does not really care about poor Britain but about the wellness of the one-percenters.#6


#1 The New Keynesian fiscal rules that mislead British Labour
#2 Rectification of MMT macro accounting
#3 Deficits matter for distribution
#4 Keynes, Lerner, MMT, Trump and exploding profit
#5 Oh poor Britain …
#6 MMT: Academic snake oil for the people

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REPLY to Matt Franko on Mar 3

Bill Mitchell makes the distinction between the government sector and the non-government sector. I say, there is the government sector on the one side and the household and the business sector on the other.#1 You say “I’m sure you agree the govt institutions exist?” Are you sure that you don’t have Alzheimer's? I say that the household and the business sector cannot be analytically lumped together to the “non-government sector” because this makes profit invisible.#2 I have called this elsewhere the Humpty Dumpty Fallacy.

You say: “Bill is not in any way shape or form a tool of the 1%ers...”. I am in no way involved in the inner life of fellow economists. What alone matters is what they express on their blogs, in papers, and in books. Because MMTers propose deficit spending as a cure-all and because the macroeconomic balances equation tells one that Public Deficit = Private Profit, MMT policy OBJECTIVELY benefits the one-percenters. Whether this is an unintended effect of a well-meant measure for the ninety-nine-percenters or whether this is the intended outcome is open to motive speculation which is known to be entertaining but irrelevant.

It is, in any case, wrong to claim that MMT policy benefits the ninety-nine-percenters when axiomatically correct macroeconomic analysis proves that it benefits the one-percenters.#3 Scientifically, the matter is settled.


#1 Foreign trade is left out of the picture. For more details see Rectification of MMT macro accounting
#2 MMT and the magical profit disappearance
#3 MMT is ALWAYS a bad deal for the 99-percenters

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REPLY to Matt Franko on Mar 4

I say, Bill Mitchell’s NON-government sector does not exist and that from the macroeconomic balances equations logically follows Public Deficit = Private Profit and you ask “I’m sure you agree the govt institutions exist?”

Your attention span is obviously extremely short.

The point is that the government sector is instrumentalized for boosting the overall profit of the business sector aka one-percenters. MMTers sell this as a care package for the ninety-nine-percenters. How cranky is this?

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REPLY to Tom Hickey on Mar 4

Your philosophical blather about convenience, pedagogy, and ontology is way beside the point. What you call consolidation is either stupidity or fraud, on a par with 2+2=5. What Bill Mitchell and the rest of MMT commits is the Humpty Dumpty Fallacy.

In the elementary investment economy, macroeconomic profit Q is equal to the difference of business sector investment I and household sector saving, i.e. Q=I−S (i).

Now, Humpty Dumpty introduces a redundant definition by saying that profit may be called “saving of the business sector” and that this “saving” can be added up (= consolidated) with saving of the household sector to “total saving” Σ thus
(a) Σ≡Q+S and now (i) is rewritten
(b) Q+S=I and then, hey presto,
(c) Σ≡I that is, “total saving” is “by definition” identical to investment or in the usual sloppy parlance “saving equals investment” which obviously contradicts (i) and ― strangely enough ― makes profit invisible.

This definitional idiocy can be traced back to Keynes “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT p. 63)

The axiomatically correct complete balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0. And the false MMT balances equation reads (I−S)+(G−T)+(X−M)=0

The MMT balances equation is FALSE and this has NOTHING to do with ontology but with the elementary mathematics of macroeconomic accounting.

Science is about proof and measurement. MMT is provably false.

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REPLY to Calgacus on Mar 5

As everybody knows, there are inadmissible operations in mathematics, e.g. division by zero. Likewise, there are inadmissible operations in the process of the definition of a subject matter, e.g. giving two names to the same thing. Trivially, if you are a witness and tell the police that Maria crashed the car against the wall and one minute later that Josef crashed the car and when the police officer remarks there is a contradiction and you answer no, not at all, its the same guy I only call him sometimes Maria and sometimes Joseph you are not regarded as a reliable witness but as a moron or worse, as an economist.

So, one more time in slow motion.

The elementary production-consumption economy is for a start given by two sectors, i.e. household- and business sector, and defined by three macro axioms (Y_w=WL, O=RL, C=PX), two conditions (X=O, C=Y_w), and two definitions (Q≡C−Y_w, S≡Y_w−C).

Wage income Y_w is a flow from the business to the household sector. Consumption expenditures C is a flow from the household to the business sector. Profit/loss is the DIFFERENCE between these two flows Q≡C−Y_w and saving/dissaving is the exact mirror image S≡Y_w−C.

Because we have TWO sectors we have TWO balances and if we “consolidate” the two sectors we get Q+S=0, that is, trivially, for the economy as a whole, there is NO balance. “Consolidation” destroys the information about profit/loss and saving/dissaving that we have gained by splitting up the economy into two sectors.

So, we have the flow wage income Y_w and the difference of flows (= balance) profit/loss Q and saving/dissaving S. Note that a flow is always positive, while a balance can be either positive or negative. A smart macro accountant knows that to lump a flow and a balance together is a category mistake.#1 Economists commit this methodological blunder since Adam Smith. They still do not realize that by saying total macroeconomic income is the sum of wages and profits they are exposing themselves as incurable incompetent scientists.

From the definition Q≡C−Y_w follows by mindless symbol manipulation Q+Y_w≡C, so the sum of Q and Y_w is already implicitly defined by the initial definition of profit/loss.

To introduce an ADDITIONAL definition of the sum of wages and profits is forbidden by the methodological rule called Occam’s Razor. So, Ψ≡Q+Y_w is INADMISSIBLE and leads to Ψ≡C which says that two symbols are used for the same thing. The formula states that the word total income (symbol Ψ) and the word consumption expenditures (symbol C) can be used interchangeably.

Obviously, this is semantic madness. However, in the formulation total income is equal to the value of output is sounds like a deep economic insight. And so this Humpty Dumpty stuff became the foundation of Keynesianism: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)

Post Keynesians, Anti-Keynesians, and MMTers have not realized until this day that they are caught in a methodological delirium. Because the foundational balances equation of MMT is proto-scientific garbage the whole of MMT is proto-scientific garbage, that is, brain-dead political agenda pushing for the one-percenters.


#1 A tale of three accountants

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See also MMT presentation charts at Google Images MMT Sectoral Balances

Source: What You Know For Sure That Just Ain't So

Source: What You Know For Sure That Just Ain't So

Question: Why do MMTers not show the balances of the household- and the business sector separately but, in most cases, only the balance of a construct called the "non-government sector" or "private sector"?

Answer: Because they try to convince the audience that public deficits are good for "us" aka "the ninety-nine percenters".

Fact: The MMT balances equation is provably false.

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REPLY to Calgacus on Mar 5

There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Scientific standards are well-defined since 2000+ years: “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)

Anybody is entitled to push any agenda and to talk as much incoherent BS as she/he likes. But nobody is entitled to claim that she/he is doing science when she/he is, in fact, pushing a political agenda. This is plain fraud.

The ethics of science consists in the free/voluntary commitment to the highest standards of material/formal consistency. MMT does not satisfy these standards and MMTers violate scientific standards on a daily basis.

You are simply pleading for anything-goes: “Other people are not bound to your definitions. Other people are not bound to be saying what you are saying. If they don’t want to talk about profit, however defined, that is their prerogative. Giving two names for the same thing is not such a serious ‘error’ and is not usually considered ‘inadmissible’.”

Nothing new here, this is the modus operandi of the Humpty Dumpties of political economics: “As some one has said, it would seem that even the theorems of Euclid would be challenged and doubted if they should be appealed to by one political party as against another.” (Fisher, 1911)

There is NO problem with people who claim to fight for the ninety-nine-percenters and in fact push the agenda of Wall Street. That is politics and more is not to say about it. The problem of economics is that academic economists claim to do science and in fact push an agenda. This applies to Walrasians, Keynesians, MMTers, Marxians, Austrians, and Pluralists.

The problem with economics is how can society get rid of incompetent/stupid/corrupt fake scientists and political clowns like Paul Krugman, Warren Mosler, Simon Wren-Lewis, Steve Keen, Bill Mitchell, and not to forget you, the philosopher Tom Hickey, Matt Franko, Peter Cooper, Brian Romanchuk and all the rest of MMT trolls, and to move from incoherent blather to material/formal consistency and so finally become a science.#1, #2

Alternatively, simply rename MMT to MMP ― Modern Monetary Party ― and leave science. Mind you, a theory has to be materially/formally consistent and MMT is NOT.


#1 Economists: political trolls for 200+ years
#2 For details see cross-references Failed/Fake Scientists

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REPLY to Calgacus on Mar 6

Your wordplay does not help. A theory has to satisfy the criteria of material/formal consistency. MMT does NOT. So MMT and MMTers are outside of science. MMT is political agenda pushing in a scientific bluff package, that’s all.

The MMT marketing/sales/PR team consists of characters like Stephanie Kelton who talks about ponies and care for the ninety-nine-percenters, and characters like Bill Mitchell who defines profit away by “consolidating” the business- and the household sector and by redefining profit as “private” or “non-governmental” saving. The MMT agenda pushers are going to great lengths asserting that deficits are good for the people and skating around the basic economic relationship Public Deficit = Private Profit.

To come back to the core issue. Simon Wren-Lewis’ New Keynesianism is proto-scientific garbage, Bill Mitchell is right on this score. But Bill Mitchell’s claim that MMT is superior is provably false. The fact is, New Keynesianism is based on false microfoundations and MMT is based on false macrofoundations. So both approaches are axiomatically false.

What is common to both approaches is that they got profit theory wrong. And this is the real kicker: after 200+ years, economists of ALL schools do not know what profit is. So, the debate between Simon Wren-Lewis and Bill Mitchell has NO scientific content at all.

As a practical consequence, the best British Labour can do in the current situation is to keep both New Keynesians and MMTers out of their advisory council.#1

You say: “People don’t always have to be talking about profit.” No, but we are not on Facebook where people are supposed to hit the Like/Dislike button like lab rats. An economic theory/model that does not contain the variable profit lacks the most important element of economic reality. And what stupid people “think” about profit is irrelevant. Populism is important in politics but not at all in science. Just the opposite, the common sense people are the worst nuisance for science as already J. S. Mill made clear.

“People fancied they saw the sun rise and set, the stars revolve in circles round the pole. We now know that they saw no such thing; what they really saw was a set of appearances, equally reconcileable with the theory they held and with a totally different one. It seems strange that such an instance as this, ... , should not have opened the eyes of the bigots of common sense, and inspired them with a more modest distrust of the competency of mere ignorance to judge the conclusions of cultivated thought.”#2

What the MMT bigots of common sense say about profit is provably false. Profit is the foundational concept of economics, therefore the whole analytical superstructure of MMT is proto-scientific garbage.

By splitting up the elementary monetary economy into two sectors ― business and household ― two balances become visible: profit/loss and saving/dissaving. These variables are well-defined and measurable with the precision of two decimal places by proper National Accounting. With Bill Mitchell’s “consolidation”, i.e. the lumping together of the business- and the household sector, the balances between the sectors disappear again.#3 MMT’s “consolidation” is a methodologically inadmissible operation and because of this the “non-government sector” does NOT exist, it is a Humpty Dumpty construct.

What MMTers do is either idiocy or fraud.#4 With silly analogies and populistic blather, you are trying to obscure this plain fact. In vain, the proof stands: the tripartite MMT balances equation ― as extensively paraded at Google Images #5 ― is materially/formally inconsistent.


#1 Economists cannot do the simple math of profit — better keep them out of politics
#2 Marshall and the Cambridge school of plain economic gibberish
#3 MMT and the magical profit disappearance
#4 Post Keynesianism, science, and universal idiocy
#5 Google Images *

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Source: Google Images MMT