Showing posts sorted by date for query title:Krugman. Sort by relevance Show all posts
Showing posts sorted by date for query title:Krugman. Sort by relevance Show all posts

April 19, 2026

Occasional X: Can anyone take Paul Krugman seriously? (III)

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May 2, 2025

Occasional Tweets: Can anyone take Paul Krugman seriously? (II)

 


For more about Paul Krugman, see AXECquery. 
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July 16, 2022

Occasional Tweets: Paul Krugman and MMT― a clash of imbeciles

 

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March 26, 2022

Occasional Tweets: The economist Krugman never understood what profit is but turns out to be a sharp Putin profiler

 
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April 27, 2021

Occasional Tweets: Scientific incompetence ― the case of Krugman and his applause trolls

 


Incompetence


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Twitter, 2 Sep, 2021 Krugman's cat ― economics for the for the mentally and
 emotionally disturbed

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April 4, 2021

Occasional Tweets: Can anyone take Paul Krugman seriously? (I)

 

For more  Paul Krugman, see AXECquery. 
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October 23, 2019

Links on Paul Krugman, proto-scientific impresario

Comment on Lars Syll on ‘Paul Krugman ― finally ― admits he was wrong!’

Blog-Reference and Blog-Reference and Blog-Reference on Oct 25

Paul Krugman has always been a clown and useful idiot in the political Circus Maximus. But Lars Syll has NOT been one iota better. Both, Krugmanian Orthodoxy and Syllian Heterodoxy are proto-scientific garbage.

► Krugman and the scientific implosion of economics
► Krugman is not an economist
► Paul the Menace
► Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
► Forget Krugman, forget Keynes, forget economists
► Profit and Distribution Theory is false for 200+ years
► Hooray! The formalization issue is finally settled
► Economics: a comedy of errors full of intrigue and aberration
► Paul’s and Stephanie’s economic delirium talk
► The stupidity of Heterodoxy is the life insurance of Orthodoxy
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February 14, 2019

Krugman vs MMT ― like the blind talking about colors

Comment on Brian Romanchuk on ‘Functional Finance Versus New Keynesian Economics, Krugman Edition’*

Blog-Reference and Blog-Reference and Blog-Reference on Feb 16 adapted to context and Blog-Reference on Feb 18

The characteristic of economic debates is to talk about everything except the point at issue.

Krugman starts the talk show with: “Well, it looks as if policy debates over the next couple of years will be at least somewhat affected by the doctrine of Modern Monetary Theory, …” Then he realizes that he is not up-to-date but this does not matter because: “The good news is that MMT seems to be pretty much the same thing as Abba Lerner’s ‘functional finance’ doctrine from 1943.” And off he goes parroting the worn-out stuff about inflation and crowding-out with the finale: “The bottom line is that while functional finance has a lot going for it, it’s not the kind of axiomatically true doctrine that Lerner ― and, I think, modern MMTers ― imagined it to be.”

No word about that MMT is just proto-scientific garbage. And, of course, no state-of-the-art refutation of the MMT approach, no proof of material/formal inconsistency.

Brian Romanchuk’s answer remains on the same low level and consists of pointing out that Krugman himself clings to a rather crappy approach: “The fundamental problem with the New Keynesian approach of Paul Krugman, Brad DeLong, Simon Wren-Lewis, etc., is that the model is fundamentally neoclassical rather than Keynesian, only departing somewhat in assumptions but not methodology. This methodology falls into the class of formal (mathematical) rather than empirically based, and it ignores the role of institutions and operations.”

Both parties are spot on in their critique of the other approach. The irony is that both approaches share a common blunder. Krugman refers via the IS-LM model back to Keynes and MMT via the sectoral balances equation, i.e., via (I−S)+(G−T)+(X−M)=0, which boils down to I=S when the public sector and the foreign sector are taken out of the picture for a moment.

The common blunder can be exactly located in the GT: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

“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.)

Keynes, like his academic colleagues, NEVER understood what profit is and thus ended with I=S ― one of the greatest blunders in the history of modern science. Neither New Keynesians nor MMTers, though, have realized anything for 80+ years. #1 Both are too stupid for the elementary mathematics that underlies macroeconomics.

The correct macroeconomic relations are given by Q≡−S for the elementary production-consumption economy and Q≡I−S for the elementary investment economy, with Q the business sector’s monetary profit, S the household sector’s monetary saving, business sector’s I investment expenditures. From this follows that all I=S/IS-LM models and their derivatives are scientifically worthless. #2

Both New Keynesianism and MMT are provably false.#3 By consequence, the economic policy arguments of both sides have NO scientifically valid foundations. What Krugman advertises as wonkish is just the usual brain-dead blather of failed/fake scientists.

Egmont Kakarot-Handtke


* NYT, Paul Krugman, What’s Wrong With Functional Finance? (Wonkish)
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#2 For details of the big picture, see cross-references Refutation of I=S
#3 See cross-references Keynesianism and cross-references MMT

Related '#DrainTheScientificSwamp' and 'Macroeconomics: Drain the scientific swamp'.

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REPLY to Brian Romanchuk on Feb 15

You say: “You’re defining profits wrong.”

Macroeconomic profit is defined for the most elementary case as Q≡C−Yw.

Stop waffling, just write down your definition with 6 or 7 characters. This is what a real mathematician would do.

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REPLY to Brian Romanchuk on Feb 15

Just write down YOUR definition with 6 or 7 characters.

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REPLY to Brian Romanchuk on Feb 16 and Blog-Reference

You say: “The cost of goods sold is itself complicated, since it depends on the valuation of inventory. … Depreciation is also based on the historical cost of capital. In summary, way more complex than the junk you blather on about.”

The alleged complexity is merely a projection of your own confusion.

(i) Total macroeconomic profit Q is composed of monetary profit Qm and nonmonetary profit Qn.

(ii) Nonmonetary profit Qn is the sum of all positive/negative changes of valuation, including depreciation.

(iii) Qn has been dealt with elsewhere and is taken out of the picture for a moment.

(iv) Monetary profit Qm for the one-fully-integrated-macroeconomic firm is defined as Qm≡C−Yw. In your words: Qm is “sales revenue” C minus “cost of goods sold” Yw in the most elementary production-consumption economy with market-clearing, i.e., X=O. Changes of inventory, i.e., X≠O, have been dealt with elsewhere.

(v) The investment economy has been dealt with elsewhere.

(vi) Monetary saving of the household sector is defined as Sm≡Yw−C. Total saving S is the sum of monetary Sm and nonmonetary saving Sn. The latter has been dealt with elsewhere.

(vii) Monetary profit Qm and monetary saving Sm are measurable with the precision of two decimal places. There is NOT the slightest ambiguity here. Qm and Sm are as real as cash in the box or as money in the bank.

(viii) From this follows: the macroeconomic Profit Law for the most elementary case of a production-consumption economy with market-clearing reads Qm≡−Sm. This is the irreducible hardcore of the macroeconomic Profit Law.

For the more complex cases, see the overview on Graphic. #1 From this overview follows that the MMT sectoral balances equation is provably false.

That you have not realized anything to this day disqualifies you as a mathematician and economist.


#1 See under the label Graphic AXEC143, Profit Law

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REPLY to Brian Romanchuk on Feb 16

You say: “You missed the entire point. There is no market-clearing in the model I referred to; there are inventories.”

The model you published last week is NOT the point at issue. The definition of macroeconomic profit is at issue. You said: “You’re defining profits wrong.”

The fact is that there are two cases: (i) market-clearing, (ii) inventory changes.

Case (ii) has been dealt with elsewhere.#1 This leaves one with (i). And in this case, macroeconomic profit is in the elementary production-consumption economy Qm≡−Sm. This formula is sufficient to disprove Keynes and MMT, and you. There is NO need to go any further. You got the basics wrong.


#1 Primary and Secondary Markets, Levy Economics Institute of Bard College Working Paper No. 741

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#PointOfProof
Feb 16
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February 28, 2018

Paul Krugman and economic poultry entrails reading

Comment on Brad DeLong on ‘Paul Krugman Looks Back at the Last Twenty Years of the Macroeconomic Policy Debate’

Blog-Reference and Blog-Reference and Blog-Reference on Mar 1

A theory must satisfy TWO criteria ― material AND formal consistency. Logical consistency is secured by applying the axiomatic-deductive method, and empirical consistency is secured by applying state-of-the-art testing. This 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 Wikipedia)

Paul Krugman, for one, is quite explicit about how he has solved the Starting Problem: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”

Paul Krugman has not realized since his student days that neoclassical economics has been dead in the cradle 150+ years ago. In other words, the neoclassical premises are NOT certain, true, and primary. In still other words, neoclassical economics is axiomatically false. And when the axiomatic foundations are false, the whole analytical superstructure is false. #1 As a result, the microfoundations approach from Jevons/Walras/ Menger onward to DSGE is scientifically worthless.

But Paul Krugman is also a Keynesian, sorta-kinda. Keynes built macro on these premises: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)

Unfortunately, Keynes got macroeconomic profit wrong: “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 profit is ill-defined, the whole theoretical superstructure of Keynesianism is false, in particular, all I=S/IS-LM models. #2

Paul Krugman, of course, realized nothing and used and praised IS-LM as a superior tool for macroeconomic analysis. #3

Needless to emphasize that Walrasian microfoundations and Keynesian macrofoundations do not fit together. Therefore, a synthesis of the two has been methodological madness since Samuelson’s 1948 textbook.

To this day, Paul Krugman’s economic policy guidance has NO sound scientific foundations but is plucked out of the thin air of political populism. Because both Walrasianism and Keynesianism are axiomatically false, economic policy advice is to this day no different from the poultry entrails reading of the old Roman haruspex.

Egmont Kakarot-Handtke


#1 For details of the big picture, see cross-references Axiomatization.
#2 For details of the big picture, see cross-references Keynesianism.
#3 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It

Related 'Krugman and the scientific implosion of economics' and 'The Krugman curse' and 'Paul the Menace'. For details of the big picture, see cross-references Failed/Fake Scientists.

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Graphic AXEC128c The Humpty Dumpty Fallacy

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April 25, 2017

The Krugman curse

Comment on David Glasner on ‘A Tale of Three Posts’

Blog-Reference

Humans are gregarious animals and therefore take reassurance from being part of the larger crowd and from a casual friendly pat of their leader. Accordingly, David Glasner is overjoyed to report that: “A number of my posts have achieved a fair amount of popularity, … Many, though not all, of my most widely viewed posts were mentioned by Paul Krugman in his blog. Whenever I noticed an unusually large uptick in the number of viewers visiting the blog, I usually found Krugman had linked to my post, causing a surge of viewers to my blog.”

This is a fine success according to the criteria of media-, public relations-, attention-, and reputation management. At second sight it is a comical attempt of two failed economists to mutually beef up their reputation.

David Glasner readily admits all the inconsistencies of standard economics but he is content with supply-demand-equilibrium as an explanation of how the market system works and does not feel any urge for a paradigm shift: “… most economists neither seek alternative theories nor believe that they can be found.” (Hausman) This is self-disqualifying.

Krugman, too, is unwaveringly committed to the orthodox paradigm: “… most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.” This, too, is self-disqualifying.

Krugman has not realized that both the neoclassical axioms and the Keynesian I=S are false on all methodological counts but applies an inconsistent synthesis of these two inconsistent approaches in order to explain current economic events.#1, #2 But, of course, Krugman is a well-respected loudspeaker of the profession.

What David Glasner has not realized is that economics is what Feynman called a cargo cult science#3 and in this topsy-turvy world holds Shakespeare’s ‘fair is foul, and foul is fair’. This means (i) that any Top-Ten chart tells one what NOT to touch under any circumstances, and (ii), that the approval of Paul Krugman amounts to a confirmation of utter scientific failure.

So, a link from Paul Krugman, Mark Thoma, Brad DeLong, and other ‘hearts and souls of the econ blogosphere’ is not a reason to feel elated and indebted but a curse that follows one beyond the grave. The curse says: We, the mutually interlinked leaders and followers of cargo-cult economics will never be accepted in the community of scientists.

Egmont Kakarot-Handtke


#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#2 The father of modern economics and his imbecile kids
#3 See Wikipedia

Related 'Paul the Menace' and 'Scientific suicide in the revolving door'
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September 4, 2016

Krugman is not an economist

Comment on Lars Syll on ‘Krugman’s gadget interpretation of economics’

Blog-Reference

Krugman has been refuted (2014). Keynes and the Post Keynesians have been refuted (2011). Traditional Heterodoxy has failed to replace these degenerate research programs with a progressive program. Economists have a realistic self-perception and know well that they will never get out from under the self-produced heap of scientific rubbish: “Yet most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992, p. 248). The Malmö branch of Heterodoxy has even fallen into total apathy and reduced itself to the endless repetition of: ‘We know that we know nothing.’

Whether Krugman is entitled to call himself a New Keynesian is a matter of indifference outside the economics kindergarten. Krugman has nothing to offer in the way of scientific insights about how the actual economy works. He is a political economist, and political economics has not produced anything of scientific value in the last 200 years.

Walrasianism, Keynesianism, Marxianism, and Austrianism are materially/formally inconsistent, that is, provably false. The problem is that all four approaches are tied to political groups/interests and are used as a means of persuasion/propaganda/justification. The current versions of economics have no scientific raison d’être, merely some political utility.

When Krugman supports the Democrats, when Wren-Lewis and Keen support Corbyn, when Varoufakis fights for democratizing the Eurozone, does this have anything to do with science? What do they and Hayek and Keynes and Friedman have in common? NEITHER of these so-called economists has a scientifically valid theory about how the economy works.

Political economists have made economics a banana science. Krugman is a prominent representative of this aberration. From the position of constructive Heterodoxy, Krugman is outside of science, and his contributions to economics are sitcom stuff. #1 Science and politics do not mix, never have, and never will. Political economics is NOT economics.

Egmont Kakarot-Handtke


References
Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL

#1 For a map of current/future economics, see Graphic AXEC85

Related 'Links on Paul Krugman, proto-scientific impresario'. For details of the big picture, see cross-references Political Economics/Stupidity/Corruption and cross-references Scientific Incompetence.

For the after-election sequel, see Zero Hedge

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COMMENT on Vladimir A. Masch on Sep 5

You overlooked what Napoleon said about economists: “Late in life, moreover, he 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, 1963)

Economists in their abysmal incompetence were a public danger then, and in the interim, things have worsened. You say “Truth, untruth, who knows and cares.” This has always been the motto of political economists.

Newton stood on the shoulders of scientific giants, and economists stand since Adam Smith on the shoulders of political busybodies.#1 It suffices to look at who has achieved what in the last 200 years.


#1 For details of the big picture, see cross-references Scientific Incompetence.
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June 19, 2016

Don’t tell me that Krugman’s economics is false, tell me instead what is true

Comment on Lars Syll on ‘Paul Krugman — mistaking the map for the territory’

Blog-Reference

Science is about true/false. The first error/mistake of the representative economist is to mess up things by tacitly replacing the scientific distinction true/false with the political distinction right/left (see graccibros’s post above). With this methodological shell game, theoretical economics degenerates into political economics. Political economics is scientifically worthless since Adam Smith and Karl Marx.

The fundamental problem of economics is that it claims to be a science but is not. In fact, economics violates the standards of material and formal consistency on a daily basis, that is, it is PROVABLY false. This holds for Walrasianism, Keynesianism, Marxianism, and Austrianism.

By implication, ALL textbooks since Samuelson’s prototype of 1948 are false. This includes Krugman, Mankiw, Blanchard, Lavoie, Rodrik, and so on.#1

Krugman’s blunder does NOT consist of simplification or abstraction or thought experiments but of taking the false axiomatic starting point. Boiled down to the essentials: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point” (Krugman’s blog). Maximization-and-equilibrium are NONENTITIES and this neatly explains why standard economics has never found a counterpart in the real world. The neoclassical map is for all practical purposes as good as the Map of Middle-Earth.

The fact that Krugman’s map is worthless does NOT prove that maps are worthless, it only proves that Krugman is an unskilled mapmaker: “My opinion continues to be that axiomatics, like every other tool of science, is no better than its user, and not all users are skilled.” (Clower, 1995, p. 308)

As a result of the elementary methodological blunder, ALL of Econ 101 (except plain descriptions or historical facts/data, of course) is as false as the geocentric theory ever was.#2

Economics is still at the proto-scientific level of ‘Babylonian incoherent babble’ (Davidson) because of a manifest ‘failure of reason’: “... we may say that the ... omnipresence of a certain point of view is not a sign of excellence or an indication that the truth or part of the truth has at last been found. It is, rather, the indication of a failure of reason to find suitable alternatives ...” (Feyerabend, 2004, p. 72)

This failure, though, is due to the scientific incompetence of Orthodoxy AND Heterodoxy. The tragedy of traditional Heterodoxy is that it is well aware of all orthodox blunders but has no idea of how to rise above incoherent proto-scientific babble.#3

The original task of Heterodoxy is ― NOT to waste time criticizing scientific write-offs like Krugman ― but to fully REPLACE all this Econ 101 maximization-and-equilibrium garbage with a superior Paradigm.

Egmont Kakarot-Handtke


References
Clower, R. W. (1995). Axiomatics in Economics. Southern Economic Journal, 62(2): 307–319. URL
Feyerabend, P. K. (2004). Problems of Empiricism. Cambridge: Cambridge University Press.

#1 Coming soon: the canonical economics textbook
#2 What’s wrong with Econ 101? Economists, of course!
#3 The scientific self-elimination of Heterodoxy
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February 22, 2016

Krugman and the scientific implosion of economics

Comment on Peter Radford on ‘Krugman versus Sanders’

Blog-Reference

Krugman is accused of supporting ‘political figures he likes, notably Hillary Clinton,’ and attacking Bernie Sanders. What could possibly be wrong with that? Nothing, of course, except that Krugman is an economist. What is indeed wrong is that economics is a science, and as a scientist, Krugman has no political mandate at all. Most people do not get the point because they have come to believe that science is just another sitcom format. And that is not wrong as far as economics is concerned.

Long before the hijacking of economics by morons, J. S. Mill, the economist and methodologist, was well aware that there is a categorical difference between politics and science: “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 ....”  (2006, p. 950)

In no uncertain terms, Mill told his fellow economists: politics and science have to be separated, and there is no revolving door between the two. The first thing to notice is that this message was obviously wasted on Krugman.

To speak of economics tout court is always misleading because there is political and theoretical economics, and there are storytelling and something like the true theory. The crucial distinction is this:
(i) The objective of political economics is to push an agenda; the objective of theoretical economics is to explain how the actual economy works.
(ii) In political economics, anything goes; in theoretical economics, scientific standards are observed. The standards are well-defined in terms of material and formal consistency.

Theoretical economics has to be judged according to the criteria true/false and nothing else. The criteria of political economics are good/bad or like/dislike. Political economics has produced NOTHING of scientific value since Adam Smith.

Accordingly, Krugman has to be criticized for having made the wrong choice between political economics (= agenda-pushing and storytelling) and theoretical economics (= science) and for trespassing the line between the two. He has to be criticized for being an incompetent scientist (2014) and thrown out of the scientific community.

Being outside of science, Krugman can no longer be criticized for preferring one politician over the other or talking economic nonsense. After all, he is then among equals at the lowest possible intellectual level.

There is neither a political nor a moral justification for an economist to give economic policy advice without sound scientific foundations. Economists owe society the true theory, not less, not more. Krugman lacks the true theory, and with him all who subscribe to sorta-kinda maximization-and-equilibrium.

For Krugman in particular and the political sects of Walrasians, Keynesians, Marxians, Austrians, and other scientific failures in general, there is only one honorable option left in this election campaign: to shut up.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL
Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected View of the Principles of Evidence and the Methods of Scientific Investigation, Vol. 8 of Collected Works of John Stuart Mill. Indianapolis: Liberty Fund.

Related 'Krugman is not an economist' and 'Scientists and science actors' and 'A science without scientists' and 'Economists, stupid or corrupt or both?' and 'New Economic Thinking: the 10 crucial points' and 'Economists’ three-layered scientific incompetence' and 'Economics: 200+ years of scientific incompetence and fraud' and 'Economics: The Battle of Frogs and Mice is over' and 'Enough! Economists, retire now!' and 'The real problem with the economics Nobel' and 'Econ 101: Economists flunk the intelligence test at the first hurdle' and 'Paul’s and Stephanie’s economic delirium talk' and 'Finally, the embarrassment of economics is over' and 'The economist as storyteller' and 'Economics: The greatest scientific fraud in modern times' and 'There is NO such thing as “smart, honest, honorable economists”' and 'Scientists and science actors' and 'Links on the Economics Nobel' and 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion' and 'Links on Paul Krugman, proto-scientific impresario' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?'. For details of the big picture, see cross-references Political Economics/Stupidity/Corruption and cross-references Failed/Fake Scientists.

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Graphic AXEC144c


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January 15, 2016

Is Paul Krugman necessary?

Comment on Paul Krugman on ‘Is Vast Inequality Necessary?’

Blog-Reference

Economists do not understand their proper task to this very day. J. S. Mill once told them: “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.” (2006, p. 950)

Economists were, from the very beginning, torn between science and politics. As scientific dilettantes, they preferred politics. This explains why economics never rose above the level of proto-scientific garbage: “In this and many analogous cases, of which modern economics is another deplorable example, economists indulged their strong propensity to dabble in politics, to peddle political recipes, to offer themselves as philosophers of economic life, and in doing so neglected the duty of stating explicitly the value judgments that they introduced into their reasoning.” (Schumpeter, 1994, p. 19)

Economists are addicted to political economics, and this is why they have not produced anything of scientific value: “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)

Paul Krugman does not have the true theory. As he summarized on his blog, “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point ...”

This starting point is provably false. #1 Because of this, Krugman’s arguments and proposals have no sound scientific foundations (2014).

It is high time for the separation of science and politics in economics. The task of theoretical economics is to figure out how the economy works. Economists owe society the true theory. Political economists can no longer be allowed to speak in the name of science.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? SSRN Working Paper Series, 2511741: 1–23. URL
Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected View of the Principles of Evidence and the Methods of Scientific Investigation, volume 8 of Collected Works of John Stuart Mill. Indianapolis: Liberty Fund.
Schumpeter, J. A. (1994). History of Economic Analysis. New York: Oxford University Press.
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge: MIT Press.

#1 Addendum to “Musings on Whether We Consciously Know More or Less than What Is in Our Models”


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Graphic AXEC108l


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REPLY  Wrong question, wrong answers

Most of the preceding posts fall into the Human-Nature category, and the contributors are obviously not aware that all questions about human behavior/motivation/aspiration/ intention/ etc belong to psychology, sociology, anthropology, political science, etcetera, but not to economics. It is not the task of economics to explain how humans behave; the task is to explain how the economy behaves. Second-guessing human behavior and waffling about utility maximization is not science but — as confirmed by more than 100 years of failure — a senseless exercise.

The first thing an economist with a modicum of scientific instinct understands is that “if we wish to place economic science upon a solid basis, we must make it completely independent of psychological assumptions and philosophical hypotheses.” (Slutzky, quoted in Mirowski, 1995, p. 362)

Does the world expect economists to find out how people behave? No. Does the world expect economists to figure out what profit is? Yes, of course, no philosopher, psychologist, anthropologist, biologist, or sociologist will ever try to figure this out. Have economists done their proper job? No. The Palgrave Dictionary summarizes “A satisfactory theory of profits is still elusive.” (Desai, 2008, p. 10)

Did Keynes have any idea about what profit is? No. “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., 2010, pp. 12-13, 16). This, obviously, could not hinder Keynes from philosophizing and sociologizing about the end of laissez-faire and third-generation men.

Does Krugman have any idea about what profit is? NO! (2014).

Does income distribution have something to do with wages and profits? These two concepts are obviously fundamental for distribution theory.

It is known since Hume that there is a categorical difference between ‘Is’ and ‘Ought’ and that science is exclusively concerned with ‘Is’. ‘Ought’ is the realm of philosophy, morals, ethics, and politics. ‘Is’ is the proper realm of science. Political economics is outside of science.

Krugman’s first mistake is to trespass on the line between ‘Is’ and ‘Ought’. It is pretty obvious that Ought-questions cannot, as a matter of principle, have a scientific answer. His second mistake is to answer the question without knowing the difference between profit and income, which is the worst thing that can happen to an economist.

The actual fact of the matter is that economists have no clear idea about the fundamental concepts of their discipline. This is like medieval physics before the concept of energy was fully understood.

Distribution theory is where economics reaches its lowest scientific ebb.

References
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
Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL
Mirowski, P. (1995). More Heat than Light. Cambridge: Cambridge University Press.
Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL
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March 27, 2015

Forget Krugman, forget Keynes, forget economists

Comment on Lars Syll on ‘Why Paul Krugman is no real Keynesian’

Blog-Reference

Keynes wrote in his General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, p. 63)

It has been rigorously demonstrated that this syllogism contains an elementary mistake (2011). By consequence, all models that contain I=S are scientifically worthless. This holds for all variants of IS-LM and, therefore, also for Krugman's model (2014).

Because of defective logic, both Krugman and Keynes are outside of science. There is nothing to choose from.

Constructive Heterodoxy cannot build upon the accustomed concepts but has to dig deeper (2015). This leads to the testable Employment Law for the investment economy, shown with Graphic AXEC46


This equation helps to answer Keynes's pivotal question, i.e.  Is the economy self-adjusting? The answer is no. This follows from the factor cost ratio ρFC, which formally represents the price mechanism. This variable is defined as the quotient of average wage rate W, price Pc, and productivity Rc in the consumption good industry.

The fact of the matter is that a fall in the average wage rate relative to the price reduces employment L under the condition of market clearing in the product market (all other variables fixed for the moment). The fatal defect of the price mechanism is that the right (= full employment) factor cost ratio does not come about spontaneously. Just the contrary. If unemployment effects a flexible fall in the average wage rate then unemployment increases. Thus, stickiness is not a problem. There is a positive feedback loop built right into the structural core of the economic system.

The claim that the market system is basically an equilibrium system that regulates itself with a tendency to full employment is entirely unfounded (methodologically, it is a quite ordinary petitio principii). Politicians who rely on the advice of representative economists to get out of recession or depression are bound to fail.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–15. URL
Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Employment. SSRN Working Paper Series, 2576867: 1–11. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
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February 8, 2014

Mr. Keynes, Prof. Krugman, IS-LM, and the end of economics as we know it {53}

Working Paper at SSRN
Working paper at ARCHIVE

Abstract  Krugman has recently revitalized IS-LM with a number of succinct analytical pieces on his blog. The reverberations were remarkable. Economists, however, are known often not grasp the full content of their own and, a fortiori, of others' models. This happened to Keynes in the days of high theory and to Krugman these days. Keynes applied a defect formalism, which is here replaced by objective-structural axioms. This yields the correct relationship between retained profit, saving, and investment which in turn makes it clear after the event that the IS-part of the IS-LM construct had been logically defective ab initio.
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February 3, 2014

Loanable funds vs endogenous money: Krugman is wrong, Keen is right {52}

Working paper at SSRN
Working paper at ARCHIVE

 Abstract  In his recent article, Keen resumes the debate with Krugman about the effects of debt upon the economy. It is hard to see how the question can be settled as long as all participants apply their idiosyncratic models. Hence the issue boils down, as Krugman rightly put it, to the deeper question: “how should one do economics.” Sketched with a broad brush, the consensus is that Orthodoxy has failed and that Heterodoxy has no convincing alternative to offer. The conceptual consequence of the present paper is to restart from a firm common formal ground. This relocation makes the debate solvable.
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