Comment on Noah Smith on ‘Keynesian Economics Is Hot Again’
Blog-Reference and Blog-Reference on Apr 11
There is Orthodoxy with Walrasian microfoundations and it has been nicely defined by Krugman: “… most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”
There is Keynesianism with macrofoundations and they have been nicely defined by Keynes: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.”
Both, Walrasian microfoundations and Keynesian macrofoundations are provably false. Methodologically speaking, microeconomics and macroeconomics are axiomatically false. It holds when the premises/axioms/foundational propositions are false or contain NONENTITIES the whole theory/model/analytical superstructure is false. This includes all variants of IS-LM from Hicks to Krugman.#1
The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Because economists lack the true theory their economic policy guidance has NO sound scientific foundation since Adam Smith/Karl Marx.
There is NO use to combine axiomatically false approaches or periodically alternate between them. What Krugman or Christiano is doing is cargo cultic show biz.
Noah Smith maintains: “The right way forward for macro isn’t to go all-in on a hot new theory, or to passionately embrace old paradigms either. The best approach is to adopt more public humility and caution about their theories, while working to understand microeconomics better.”
In view of the fact that the profit theory is false for 200+ years, and microfoundations are false for 150+ years, and macrofoundations are false for 80+ years, the right way forward for Walrasians and Keynesians is to retire.
Egmont Kakarot-Handtke
#1 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
Related 'Economists ― medics or barber surgeons?' and 'Keynes saw the problems but did not solve them' and 'The fundamental problem of economics: scientific incompetence aka stupidity' and 'Economic policy guidance NEVER had sound scientific foundations' and 'The non-existence of economics' and 'Economics: The pluralism of false theories is over' and 'The futile synthesis of neoclassical rubbish and Keynesian garbage' and 'Macroeconomics without Keynes' and cross-references Keynesianism
April 10, 2017
April 7, 2017
Economists ― medics or barber-surgeons?
Comment on Simon Wren-Lewis on ‘Economists as medics’
Blog-Reference and Blog-Reference
When economists are told that economics does not satisfy the scientific standards of material and formal consistency, they invariably fall back on J. S. Mill’s slogan of economics as ‘inexact and separate science’. #1 This, of course, is merely one of the economists’ numerous unacceptable excuses. #2 There is NO such thing as an inexact and separate science. There is only science and non-science, respectively cargo cult science.
Feynman defined cargo cult science 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.”
What is missing among economists is a proper understanding of what science is all about. Wren-Lewis’s comparison of economics with medicine is the paradigmatic defense of a cargo cult scientist. To be sure, the representative economist can by NO stretch of the imagination be compared to a present-day medic. The present-day economist compares to the medieval barber-surgeon who, more often than not, killed his patients with bloodletting and toxic medicine.
Because economists lack the true theory, their economic policy guidance has had no sound scientific foundation since Adam Smith/Karl Marx. Ultimately, economists bear the responsibility for mass unemployment and the social devastation that comes with it. #3
Wren-Lewis argues: “ The science for economists is microeconomic theory, now enriched by behavioural economics.” The fact of the matter is that microeconomic theory is based on a behavioral axiom set that contains three NONENTITIES. Nothing of scientific value will ever come from provably false axiomatic foundations. #4
Economics needs a Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.
Like most economists, Wren-Lewis suffers from social science delusion. The subject matter of economics is NOT individual or social behavior but the behavior of the economic system. Economics is NOT a social science but a systems science.
Accordingly, the Case/Deaton study about the mortality rates of the US white population is the proper business of sociology. It cannot be taken as an example of good economics.
To this day, economists have not mastered the foundational concepts of their subject matter, i.e., profit and income. This is like medieval medicine before the blood circuit was properly understood.
Wren-Lewis’s conclusion is beside the point: “No one says that medicine has failed us, and we need to find fresh voices. No one will say that ‘mainstream medicine’ is in crisis, and we need to look at alternatives. They do not say that because it would be stupid to do so.”
Indeed, this IS stupid in relation to modern medicine, which is applied science, but NOT in relation to modern economics, which is a cargo cult science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational economic concept of profit wrong. It is stupid, indeed, to defend this indefensible proto-scientific garbage.
Egmont Kakarot-Handtke
#1 Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
#2 Failed economics: The losers’ long list of lame excuses
#3 See cross-references Employment
#4 Economists’ three-layered scientific incompetence
Related 'Educating economists? Yes, but where is the scientific stuff?' and 'The economist as stand-up comedian' and 'New economic thinking = old political fake'.
Blog-Reference and Blog-Reference
When economists are told that economics does not satisfy the scientific standards of material and formal consistency, they invariably fall back on J. S. Mill’s slogan of economics as ‘inexact and separate science’. #1 This, of course, is merely one of the economists’ numerous unacceptable excuses. #2 There is NO such thing as an inexact and separate science. There is only science and non-science, respectively cargo cult science.
Feynman defined cargo cult science 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.”
What is missing among economists is a proper understanding of what science is all about. Wren-Lewis’s comparison of economics with medicine is the paradigmatic defense of a cargo cult scientist. To be sure, the representative economist can by NO stretch of the imagination be compared to a present-day medic. The present-day economist compares to the medieval barber-surgeon who, more often than not, killed his patients with bloodletting and toxic medicine.
Because economists lack the true theory, their economic policy guidance has had no sound scientific foundation since Adam Smith/Karl Marx. Ultimately, economists bear the responsibility for mass unemployment and the social devastation that comes with it. #3
Wren-Lewis argues: “ The science for economists is microeconomic theory, now enriched by behavioural economics.” The fact of the matter is that microeconomic theory is based on a behavioral axiom set that contains three NONENTITIES. Nothing of scientific value will ever come from provably false axiomatic foundations. #4
Economics needs a Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.
Like most economists, Wren-Lewis suffers from social science delusion. The subject matter of economics is NOT individual or social behavior but the behavior of the economic system. Economics is NOT a social science but a systems science.
Accordingly, the Case/Deaton study about the mortality rates of the US white population is the proper business of sociology. It cannot be taken as an example of good economics.
To this day, economists have not mastered the foundational concepts of their subject matter, i.e., profit and income. This is like medieval medicine before the blood circuit was properly understood.
Wren-Lewis’s conclusion is beside the point: “No one says that medicine has failed us, and we need to find fresh voices. No one will say that ‘mainstream medicine’ is in crisis, and we need to look at alternatives. They do not say that because it would be stupid to do so.”
Indeed, this IS stupid in relation to modern medicine, which is applied science, but NOT in relation to modern economics, which is a cargo cult science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational economic concept of profit wrong. It is stupid, indeed, to defend this indefensible proto-scientific garbage.
Egmont Kakarot-Handtke
#1 Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
#2 Failed economics: The losers’ long list of lame excuses
#3 See cross-references Employment
#4 Economists’ three-layered scientific incompetence
Related 'Educating economists? Yes, but where is the scientific stuff?' and 'The economist as stand-up comedian' and 'New economic thinking = old political fake'.
For more about iatrogenic economics, see AXECquery.
April 6, 2017
Keynes saw the problems but did not solve them
Comment on Lars Syll on ‘Sticky wages is not the problem!’
Blog-Reference
Laypersons cling to the naive belief that economists know how the price and profit mechanism works. The fact is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/ formally inconsistent.
Keynes was right, of course, in “heaping scorn on what he called the ‘classical’ doctrine that cyclical … unemployment could be attributed to the failure of nominal wages to fall in response to a reduction in aggregate demand.” (David Glasner)
Thereof, though, does not follow that Keynes’ employment theory was correct: “Keynes never stopped insisting that the key defining characteristic of ‘involuntary’ unemployment is that a nominal-wage reduction would not reduce ‘involuntary’ unemployment. The very definition of involuntary unemployment is that it can only be eliminated by an increase in the price level, but not by a reduction in nominal wages.” (David Glasner)
There is not much use in reenacting one more time the farce titled ‘Mr. Keynes and the Classics’ so, here is the elementary version of the correct (objective, systemic, macrofounded) Employment Law on Graphic AXEC62 #1
From this equation follows that employment L depends (i) on aggregate demand, which is here given with the expenditure ratio ρE and investment expenditures I, and (ii), on the price mechanism, which is formally embodied in the macro-ratio ρF≡W/PR with W = average wage rate, P = average price, and R = average productivity.
Let ρE and I be fixed, and the rate of change of productivity R for simplicity be zero, i.e., r=0, then there are three logical cases:
(i) The rate of change of the wage rate W is equal to the rate of change of the price P, i.e., w=p, then employment does NOT change, NO MATTER how big or small the rates of change are.
(ii) The rate of change of the wage rate is greater than the rate of change of the price, then employment INCREASES.
(iii) The rate of change of the wage rate is lower than the rate of change of the price, then employment DECREASES.
So, it is DIFFERENCES in the rates of change of wage rate and price, and NOT the absolute magnitude of change. Every PERFECTLY SYNCHRONOUS inflation/deflation is employment-neutral, that is, employment sticks indefinitely where it actually is.
In general terms, the neutrality condition reads w=p+r+pr. Therefore, it is a matter of indifference whether the wage rate falls or rises, or whether wages are sticky or not. ALL depends on relative changes. Employment increases if w is greater than p+r+pr and decreases in the opposite case.
So, Keynes’s assertion that involuntary unemployment “can only be eliminated by an increase in the price level” is false. An increase in the price level with w=0, r=0 REDUCES employment. From this follows that Keynes, too, had NO idea how the price mechanism works or, as Allais put it: “... son insuffisance logique ne lui a pas permis de résoudre les problèmes que son intuition lui avait fait entrevoir.”
Keynes’s logical insufficiency is alive and kicking as After-Keynesians demonstrate until this very day.
Egmont Kakarot-Handtke
#1 For details of the big picture, see cross-references Employment and cross-references Keynesianism and cross-references Scientific Incompetence.
Blog-Reference
Laypersons cling to the naive belief that economists know how the price and profit mechanism works. The fact is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/ formally inconsistent.
Keynes was right, of course, in “heaping scorn on what he called the ‘classical’ doctrine that cyclical … unemployment could be attributed to the failure of nominal wages to fall in response to a reduction in aggregate demand.” (David Glasner)
Thereof, though, does not follow that Keynes’ employment theory was correct: “Keynes never stopped insisting that the key defining characteristic of ‘involuntary’ unemployment is that a nominal-wage reduction would not reduce ‘involuntary’ unemployment. The very definition of involuntary unemployment is that it can only be eliminated by an increase in the price level, but not by a reduction in nominal wages.” (David Glasner)
There is not much use in reenacting one more time the farce titled ‘Mr. Keynes and the Classics’ so, here is the elementary version of the correct (objective, systemic, macrofounded) Employment Law on Graphic AXEC62 #1
Let ρE and I be fixed, and the rate of change of productivity R for simplicity be zero, i.e., r=0, then there are three logical cases:
(i) The rate of change of the wage rate W is equal to the rate of change of the price P, i.e., w=p, then employment does NOT change, NO MATTER how big or small the rates of change are.
(ii) The rate of change of the wage rate is greater than the rate of change of the price, then employment INCREASES.
(iii) The rate of change of the wage rate is lower than the rate of change of the price, then employment DECREASES.
So, it is DIFFERENCES in the rates of change of wage rate and price, and NOT the absolute magnitude of change. Every PERFECTLY SYNCHRONOUS inflation/deflation is employment-neutral, that is, employment sticks indefinitely where it actually is.
In general terms, the neutrality condition reads w=p+r+pr. Therefore, it is a matter of indifference whether the wage rate falls or rises, or whether wages are sticky or not. ALL depends on relative changes. Employment increases if w is greater than p+r+pr and decreases in the opposite case.
So, Keynes’s assertion that involuntary unemployment “can only be eliminated by an increase in the price level” is false. An increase in the price level with w=0, r=0 REDUCES employment. From this follows that Keynes, too, had NO idea how the price mechanism works or, as Allais put it: “... son insuffisance logique ne lui a pas permis de résoudre les problèmes que son intuition lui avait fait entrevoir.”
Keynes’s logical insufficiency is alive and kicking as After-Keynesians demonstrate until this very day.
Egmont Kakarot-Handtke
#1 For details of the big picture, see cross-references Employment and cross-references Keynesianism and cross-references Scientific Incompetence.
April 5, 2017
Economics and the high art of kicking the can down the road
Comment on Chris Dillow on ‘Wages & Productivity’
Blog-Reference and Blog-Reference and Blog-Reference
Chris Dillow asks: “Would higher wages boost economic growth?” And he answers: “They might, if the marginal propensity to spend out of wages is higher than that out of profits. However, Ben Chu suggests a different mechanism ― that higher wages might stimulate growth via the supply-side rather than demand-side.”
Note first of all that there is NO such thing as spending out of profits, there is only spending out of distributed profits. Profit and distributed profit are quite different things but economists have not realized this in the past 200+ years. Anyway, this does not matter much because the ambition of economists is NOT to solve problems but to kick them down the road and ultimately to bury them in the swamp where it is deepest.
Swampiness is what Popper called an immunizing stratagem. Accordingly, Chris Dillow throws in a host of additional issues (capital-labor substitution, investment, retraining, business expansion, fiscal stimulus, Verdoorn’s law, uncertainty, management quality, fear of competition, credit constraints, the Phillips curve, weak profits, etc) and ends with this climax: “The question is: is capitalism cooperative or conflictual?” Needless to say, neither this nor any other question is answered.
Nobody, except economists, can take this clueless and inconclusive blather seriously.
So, here without much ado the elementary version of the correct (objective, systemic, macrofounded) Employment Law Graphic AXEC62 #1
Blog-Reference and Blog-Reference and Blog-Reference
Chris Dillow asks: “Would higher wages boost economic growth?” And he answers: “They might, if the marginal propensity to spend out of wages is higher than that out of profits. However, Ben Chu suggests a different mechanism ― that higher wages might stimulate growth via the supply-side rather than demand-side.”
Note first of all that there is NO such thing as spending out of profits, there is only spending out of distributed profits. Profit and distributed profit are quite different things but economists have not realized this in the past 200+ years. Anyway, this does not matter much because the ambition of economists is NOT to solve problems but to kick them down the road and ultimately to bury them in the swamp where it is deepest.
Swampiness is what Popper called an immunizing stratagem. Accordingly, Chris Dillow throws in a host of additional issues (capital-labor substitution, investment, retraining, business expansion, fiscal stimulus, Verdoorn’s law, uncertainty, management quality, fear of competition, credit constraints, the Phillips curve, weak profits, etc) and ends with this climax: “The question is: is capitalism cooperative or conflictual?” Needless to say, neither this nor any other question is answered.
Nobody, except economists, can take this clueless and inconclusive blather seriously.
So, here without much ado the elementary version of the correct (objective, systemic, macrofounded) Employment Law Graphic AXEC62 #1
From this equation follows:
(i) An increase in the expenditure ratio ρE leads to higher employment L (the Greek letter ρ stands for ratio). An expenditure ratio ρE greater than 1 indicates credit expansion, and a ratio ρE less than 1 indicates credit contraction.
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase in the factor cost ratio ρF≡W/PR leads to higher employment.
The complete Employment Law contains, in addition, profit distribution, the public sector, and the trade balance.
Items (i) and (ii) cover Keynes’ familiar arguments about aggregate demand. The factor cost ratio ρF, as defined in (iii), embodies the price mechanism. The fact of the matter is 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.
The systemic Employment Law contains measurable variables and is therefore readily testable. As always in science, a test decides the matter.
The simple answer of the correct Employment Law to the simple question “Would higher wages boost economic growth?” is unambiguous YES.
Egmont Kakarot-Handtke
#1 For details of the big picture, see cross-references Employment
(i) An increase in the expenditure ratio ρE leads to higher employment L (the Greek letter ρ stands for ratio). An expenditure ratio ρE greater than 1 indicates credit expansion, and a ratio ρE less than 1 indicates credit contraction.
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase in the factor cost ratio ρF≡W/PR leads to higher employment.
The complete Employment Law contains, in addition, profit distribution, the public sector, and the trade balance.
Items (i) and (ii) cover Keynes’ familiar arguments about aggregate demand. The factor cost ratio ρF, as defined in (iii), embodies the price mechanism. The fact of the matter is 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.
The systemic Employment Law contains measurable variables and is therefore readily testable. As always in science, a test decides the matter.
The simple answer of the correct Employment Law to the simple question “Would higher wages boost economic growth?” is unambiguous YES.
Egmont Kakarot-Handtke
#1 For details of the big picture, see cross-references Employment
April 4, 2017
The fundamental problem of economics: scientific incompetence aka stupidity
Comment on Dirk Ehnts on ‘Structuralist Macroeconomics’
Blog-Reference and Blog-Reference
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, i.e. profit, wrong. So, what we actually have is the pluralism of false theories.
The one thing that is common to all these failed approaches is that they do not get the fundamental economic concepts of profit and income right. This is like medieval physics before the concepts of force, mass, energy, etcetera were properly defined and understood.#1
Here is the point where economists go collectively over the cliff: “MACROECONOMICS begins with the notion that the value of saving generated by all participants in the economy must by one means or another come into equality with the value of investment in the short run.” (Lance Taylor, see intro)
The IS equality/equilibrium is false since the classics but Dirk Ehnts, too, does not get it: “I know from many conversations I had with students that the investment-savings inequality is very difficult to grasp and had my own problems in the context of planned investment / planned saving, but by now I am very certain.”
The fact of the matter is that the representative economist does not understand the pivotal concept of his subject matter and the elementary mathematics of accounting.
For the determination of monetary profit of the economy as a whole one has to start with the most elementary case of a pure consumption economy without investment, government, and foreign trade.#2 In this elementary economy three configurations are logically possible: (i) consumption expenditures are equal to wage income C=Yw, (ii) C is less than Yw, (iii) C is greater than Yw.
In case (i) the monetary saving of the household sector Sm≡Yw−C is zero and the monetary profit of the business sector Qm≡C−Yw, too, is zero.
In case (ii) monetary saving Sm is positive and the business sector makes a loss, i.e. Qm is negative.
In case (iii) monetary saving Sm is negative, i.e. the household sector dissaves, and the business sector makes a profit, i.e. Qm is positive.
It always holds Qm≡−Sm, in other words, loss is the counterpart of saving and profit is the counterpart of dissaving. This is the most elementary form of the macroeconomic Profit Law, which quite obviously satisfies the zero-sum requirement Qm+Sm=0 of macroeconomic accounting.
When distributed profits Yd and investment I are added the correct profit equation reads Qm≡Yd+I−Sm. Deficit spending of the household sector and profit distribution of the business sector are the determinants of total monetary profit in the market economy (ex government and foreign trade). Saving is NEVER equal to investment, neither ex-ante nor ex-post nor otherwise.#3
Failed economics has to fully replace false Walrasian microfoundations and false Keynesian macrofoundations by the true macrofoundations.
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith
#2 The macrofoundations approach starts with three systemic (= behavior-free) axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
#3 For details of the big picture see cross-references Refutation of I=S
Blog-Reference and Blog-Reference
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, i.e. profit, wrong. So, what we actually have is the pluralism of false theories.
The one thing that is common to all these failed approaches is that they do not get the fundamental economic concepts of profit and income right. This is like medieval physics before the concepts of force, mass, energy, etcetera were properly defined and understood.#1
Here is the point where economists go collectively over the cliff: “MACROECONOMICS begins with the notion that the value of saving generated by all participants in the economy must by one means or another come into equality with the value of investment in the short run.” (Lance Taylor, see intro)
The IS equality/equilibrium is false since the classics but Dirk Ehnts, too, does not get it: “I know from many conversations I had with students that the investment-savings inequality is very difficult to grasp and had my own problems in the context of planned investment / planned saving, but by now I am very certain.”
The fact of the matter is that the representative economist does not understand the pivotal concept of his subject matter and the elementary mathematics of accounting.
For the determination of monetary profit of the economy as a whole one has to start with the most elementary case of a pure consumption economy without investment, government, and foreign trade.#2 In this elementary economy three configurations are logically possible: (i) consumption expenditures are equal to wage income C=Yw, (ii) C is less than Yw, (iii) C is greater than Yw.
In case (i) the monetary saving of the household sector Sm≡Yw−C is zero and the monetary profit of the business sector Qm≡C−Yw, too, is zero.
In case (ii) monetary saving Sm is positive and the business sector makes a loss, i.e. Qm is negative.
In case (iii) monetary saving Sm is negative, i.e. the household sector dissaves, and the business sector makes a profit, i.e. Qm is positive.
It always holds Qm≡−Sm, in other words, loss is the counterpart of saving and profit is the counterpart of dissaving. This is the most elementary form of the macroeconomic Profit Law, which quite obviously satisfies the zero-sum requirement Qm+Sm=0 of macroeconomic accounting.
When distributed profits Yd and investment I are added the correct profit equation reads Qm≡Yd+I−Sm. Deficit spending of the household sector and profit distribution of the business sector are the determinants of total monetary profit in the market economy (ex government and foreign trade). Saving is NEVER equal to investment, neither ex-ante nor ex-post nor otherwise.#3
Failed economics has to fully replace false Walrasian microfoundations and false Keynesian macrofoundations by the true macrofoundations.
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith
#2 The macrofoundations approach starts with three systemic (= behavior-free) axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
#3 For details of the big picture see cross-references Refutation of I=S
April 3, 2017
Economic policy guidance has never had valid scientific foundations
Comment on Brad DeLong on ‘Why Were Economists as a Group as Useless Over 2010-2014 as Over 1929-1935?’
Blog-Reference and 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)
Economists do NOT have the 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. So, what we actually have is the pluralism of provably false theories.
Because of this, the economic policy proposals of the “top-five American economics departments ― Chicago, MIT, Harvard, Princeton, Yale ―” all lack sound scientific foundations. Economists have ‘not much more to offer than educated common sense or personal opinion.’
Brad DeLong asserts: “’Basic macro’ did fine. But basic macro was not the really existing macro that mattered.”
This is an optical illusion. Knowledge (= episteme) comes in the singular; opinion (= doxa) comes in the plural. Because opinions contradict each other, in retrospect, there is always one that ‘did fine’. This proves NOTHING.
Brad DeLong asserts that Keynes’ macro did fine. The fact of the matter is that Keynesianism and IS-LM are inconsistent and scientifically worthless for 80+ years, but After-Keynesians have not realized it. #1
Fortunately, all this does not matter much. The sobering reality of Romulus’s Sewer is that politicians do NOT listen to self-proclaimed economic experts but look at the power vectors and make their decision. Subsequently, they look for an economist in order to do the PR and to provide some scientific prestige. And ― lo and behold ― they ALWAYS find one because the community of economists ALWAYS holds one opinion and the exact opposite of it. #2 The truth-value of a theory/model does not matter; what matters is political use-value.
This is why BOTH right-wing and left-wing proto-scientific garbage survived since the founding fathers engaged in Political Economy. Soapbox economics, by its very nature, NEVER results in the scientific consensus. So, for the general public, the question is NOT how to make sense of nonsense but how to get rid of what Joan Robinson aptly called the throng of superfluous economists.
Egmont Kakarot-Handtke
#1 How Keynes got macro wrong and Allais got it right
#2 Austerity and the idiocy of political economists
Blog-Reference and 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)
Economists do NOT have the 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. So, what we actually have is the pluralism of provably false theories.
Because of this, the economic policy proposals of the “top-five American economics departments ― Chicago, MIT, Harvard, Princeton, Yale ―” all lack sound scientific foundations. Economists have ‘not much more to offer than educated common sense or personal opinion.’
Brad DeLong asserts: “’Basic macro’ did fine. But basic macro was not the really existing macro that mattered.”
This is an optical illusion. Knowledge (= episteme) comes in the singular; opinion (= doxa) comes in the plural. Because opinions contradict each other, in retrospect, there is always one that ‘did fine’. This proves NOTHING.
Brad DeLong asserts that Keynes’ macro did fine. The fact of the matter is that Keynesianism and IS-LM are inconsistent and scientifically worthless for 80+ years, but After-Keynesians have not realized it. #1
Fortunately, all this does not matter much. The sobering reality of Romulus’s Sewer is that politicians do NOT listen to self-proclaimed economic experts but look at the power vectors and make their decision. Subsequently, they look for an economist in order to do the PR and to provide some scientific prestige. And ― lo and behold ― they ALWAYS find one because the community of economists ALWAYS holds one opinion and the exact opposite of it. #2 The truth-value of a theory/model does not matter; what matters is political use-value.
This is why BOTH right-wing and left-wing proto-scientific garbage survived since the founding fathers engaged in Political Economy. Soapbox economics, by its very nature, NEVER results in the scientific consensus. So, for the general public, the question is NOT how to make sense of nonsense but how to get rid of what Joan Robinson aptly called the throng of superfluous economists.
Egmont Kakarot-Handtke
#1 How Keynes got macro wrong and Allais got it right
#2 Austerity and the idiocy of political economists
***
Graphic AXEC172
April 1, 2017
The economist as moralist
Comment on Lars Syll on ‘The limits of formal models’
Blog-Reference
Lars Syll frames his critique of formal economic models with a caricature. It shows two theater entrance areas with billboards above the doors saying ‘An Inconvenient Truth’ and ‘A Reassuring Lie’. People are all queuing at the lie-door. The caricature suggests that Orthodoxy, with its plethora of tidy deductive-axiomatic models, is merely a convenient lie.
This makes it immediately clear that Lars Syll has no idea what science is all about. The scientific criteria are true and false, with truth objectively defined as material and formal consistency. Truth and lie, on the other hand, are moral criteria.
It was obvious to John Stuart Mill that these are entirely different spheres: “The physical sciences are those which treat of the laws of matter, and of all complex phenomena in so far as dependent upon the laws of matter. The mental or moral sciences are those which treat of the laws of mind, and of all complex phenomena in so far as dependent upon the laws of mind.”
For deeper methodological reasons, the ‘moral sciences’ are NO sciences at all. However, moral scientists have a strong tendency to back up their arguments with some authority. Before the Enlightenment, they abused God; after the Enlightenment, they abuse science.
The fact of the matter is that the term ‘moral science’ is an oxymoron because science deals with IS and moral deals with OUGHT. Both spheres are known to be disjunct, and from this immediately follows that a moral scientist is a fake scientist. A moralizer does not solve scientific problems but claims to fight for a good cause.
The situation in economics is a bit perplexing for laypersons because there are TWO economixes: theoretical and political 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 deals with the OBJECTIVE properties of the economic system and NOTHING else: no psychology, no sociology, no moralizing.
Standing at the crossroads of science and politics, the classical economists opted for Political Economy: “From the above considerations the following seems to come out as the correct and complete definition of Political Economy: ― ‘The science which treats of the production and distribution of wealth, so far as they depend upon the laws of human nature.’ Or thus ― ‘The science relating to the moral or psychological laws of the production and distribution of wealth’.” (Mill)
There is NO such thing as moral and psychological laws, and economics has found none in the past 200+ years. But there are objective systemic laws of the monetary economy, for example, the all-important Profit Law, #1, but economists did not find them because they were mainly occupied with agenda pushing.
Political economics is utter scientific rubbish. But there is a way out for the incompetent scientist, that is, to politicize and moralize: “When economists address normative questions of economic welfare, they speak at least with an air of moral authority. They purport to know how to make life better.” (Hausman)
Because the moralizing economist is a storyteller and incompetent scientist, his economic policy proposals have NO sound scientific foundations. This applies to ALL political economists ― there is no difference between Orthodoxy or Heterodoxy or Walrasianism or Keynesianism or Marxianism or Austrianism.
What the general public does not realize is that one of the greatest dangers it faces, next to a mad head of state are the politicizing scientific failures called economists, who are ultimately responsible for the social devastation of mass unemployment, deflation, and stagnation. There is nothing more repugnant than a scientifically incompetent moralizing political economist.
Egmont Kakarot-Handtke
#1 Graphic AXEC08 Profit Law
Related 'True macrofoundations: the reset of economics' and 'From the pluralism of false models to the true economic theory' and 'Political economics: a deadhead sitcom' and 'Economists: scientists or political clowns?'
Blog-Reference
Lars Syll frames his critique of formal economic models with a caricature. It shows two theater entrance areas with billboards above the doors saying ‘An Inconvenient Truth’ and ‘A Reassuring Lie’. People are all queuing at the lie-door. The caricature suggests that Orthodoxy, with its plethora of tidy deductive-axiomatic models, is merely a convenient lie.
This makes it immediately clear that Lars Syll has no idea what science is all about. The scientific criteria are true and false, with truth objectively defined as material and formal consistency. Truth and lie, on the other hand, are moral criteria.
It was obvious to John Stuart Mill that these are entirely different spheres: “The physical sciences are those which treat of the laws of matter, and of all complex phenomena in so far as dependent upon the laws of matter. The mental or moral sciences are those which treat of the laws of mind, and of all complex phenomena in so far as dependent upon the laws of mind.”
For deeper methodological reasons, the ‘moral sciences’ are NO sciences at all. However, moral scientists have a strong tendency to back up their arguments with some authority. Before the Enlightenment, they abused God; after the Enlightenment, they abuse science.
The fact of the matter is that the term ‘moral science’ is an oxymoron because science deals with IS and moral deals with OUGHT. Both spheres are known to be disjunct, and from this immediately follows that a moral scientist is a fake scientist. A moralizer does not solve scientific problems but claims to fight for a good cause.
The situation in economics is a bit perplexing for laypersons because there are TWO economixes: theoretical and political 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 deals with the OBJECTIVE properties of the economic system and NOTHING else: no psychology, no sociology, no moralizing.
Standing at the crossroads of science and politics, the classical economists opted for Political Economy: “From the above considerations the following seems to come out as the correct and complete definition of Political Economy: ― ‘The science which treats of the production and distribution of wealth, so far as they depend upon the laws of human nature.’ Or thus ― ‘The science relating to the moral or psychological laws of the production and distribution of wealth’.” (Mill)
There is NO such thing as moral and psychological laws, and economics has found none in the past 200+ years. But there are objective systemic laws of the monetary economy, for example, the all-important Profit Law, #1, but economists did not find them because they were mainly occupied with agenda pushing.
Political economics is utter scientific rubbish. But there is a way out for the incompetent scientist, that is, to politicize and moralize: “When economists address normative questions of economic welfare, they speak at least with an air of moral authority. They purport to know how to make life better.” (Hausman)
Because the moralizing economist is a storyteller and incompetent scientist, his economic policy proposals have NO sound scientific foundations. This applies to ALL political economists ― there is no difference between Orthodoxy or Heterodoxy or Walrasianism or Keynesianism or Marxianism or Austrianism.
What the general public does not realize is that one of the greatest dangers it faces, next to a mad head of state are the politicizing scientific failures called economists, who are ultimately responsible for the social devastation of mass unemployment, deflation, and stagnation. There is nothing more repugnant than a scientifically incompetent moralizing political economist.
Egmont Kakarot-Handtke
#1 Graphic AXEC08 Profit Law
Related 'True macrofoundations: the reset of economics' and 'From the pluralism of false models to the true economic theory' and 'Political economics: a deadhead sitcom' and 'Economists: scientists or political clowns?'
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