And the answer is NCND ― economics after 200+ years of Glomarization

Comment on Lars Syll on ‘What are axiomatizations good for?’

Blog-Reference

Gilboa, Postlewaite, Samuelson, and Schmeidler ask: “What have these axiomatizations done for us lately?” Wrong question, of course. The right question economists have to ask themselves is: what have WE done for the proper axiomatization of economics lately?

The fact is, to begin with, that economic methodologists do not understand to this day what axiomatization is all about. Lars Syll even maintains that it is a kind of mental body-building: “Studying mathematics and logic is interesting and fun. It sharpens the mind.”

It is not at all a surprise, therefore, that economics is a failed science. Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives are mutually contradictory, axiomatically false, and materially/formally inconsistent. As a result, economic policy guidance has NO valid scientific foundations since Adam Smith/Karl Marx.

This pluralism of provably false theories is pretty strange. How could it happen that economics is still at the proto-scientific level while science has made such incredible advances? The answer is that economics had been captured from the very beginning by political agenda pushers. Agenda-pushers, though, have no truck with science except for building Potemkin facades.

Science is binary true/false and NOTHING in between. Non-science is the swamp between true and false where “nothing is clear and everything is possible” (Keynes). Vagueness/ inconclusiveness is what Popper called an immunizing stratagem because: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman) While scientifically this is a bad thing, politically it is a good thing.

Because economists are not scientists but swamp creatures, they see to it that no analysis and no debate ever leave the swamp. This is achieved by the tried and tested method of Glomarization. #1 For example, to the central question, Does a General Economic Equilibrium exist? The answer is: “We can neither confirm nor deny the existence of a General Equilibrium.” And so on with NCND for any other question. #2, #3, #4

Accordingly, if a clear-cut refutation occasionally happens, it is simply filibustered away: “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)

Glomarization is the communicative modus operandi in the political sphere. Science is the exact opposite of the political swamp. Science aims for a clear-cut true/false answer with truth well-defined as material and formal consistency. The methodological tool to achieve this is the axiomatic-deductive method. As Aristotle put it 2000+ years ago: “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.” This is why axiomatization is of overriding importance.

Neither orthodox nor heterodox economists know how to apply the axiomatic-deductive method correctly. #5 This is why their economic policy proposals have no valid scientific foundation. To the question What have economists ever done for their fellow citizens? The clear-cut answer is nothing but vacuous political blather.

Egmont Kakarot-Handtke


#1 Wikipedia, Glomar response
#2 How the representative economist gets it wrong big-time
#3 Economic recommendations out of the swamp between true and false
#4 Failed economics: The losers’ long list of lame excuses
#5 For details of the big picture, see cross-references Axiomatization

Related 'Clueless about money and profit' and 'Keynesianism ― the economists’ senile dementia' and 'Buridan’s ass economics' and 'Knowledge is attainable ― even in economics' and 'Failed critique of failed economics' and 'Stop knowing nothing, start knowing something' and 'The scientific self-elimination of Heterodoxy' and 'Prophets of Preemptive Vanitizations' and 'Economics as fool’s paradise' and 'A heap of proto-scientific rubbish' and 'Truth by definition? The Profit Theory has been axiomatically false for 200+ years' and 'Real-World Economics: The sanctuary of stupidity and corruption' and 'The inexorable paradigm shift in economics'.

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AXEC121i

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REPLY to John Vertegaal on Jul 15

You say: “Lars and Asad, great minds but still groping after all these years… All reasoning starts from assumptions, but in order to be valid in the real world, those assumptions require empirical confirmation. All economists, as far as I know, assume that the present is complete and we live within our economy. Hence, they come up with assumed points of departure like the accounting identity: Y=C+I, blissfully unaware that accounting itself is based on unprovable assumptions.”

Scientific analysis starts with premises, and these have to be clearly stated. This is the minimum requirement. #1 Otherwise, things end after a few steps in confusion and blather. This happened with economics in general, and this happens every day in the econblogosphere.

The current state of economics is that neither Orthodoxy nor Heterodoxy nor Lars Syll nor Asad Zaman nor Craig nor Dave Marsay nor the rest has gotten the foundational concepts of profit and income right. #2

Economists are swampies. Economics is a failed science. All microfounded (Walrasian) and macrofounded (Keynesian) models are provably false. Economists do not know how the economy works. Economics is a cargo cult science. The “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud.

“The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug) Economics needs a Paradigm Shift, and the expulsion of the scientifically incompetent or the “throng of superfluous economists” as Joan Robinson called them. #3

#1 United in the social science delusion

#2 Wikipedia and the promotion of economists’ idiotism (II)

#3 Joan Robinson and the ‘throng of superfluous economists’

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REPLY to Asad Zaman on Jul 16

Since Adam Smith/Karl Marx, economics claims to be a science, but is NOT. 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. #1

The fact is that economics is a failed science and that Heterodoxy has been complicit in the failure. #2 Whether this outcome was unintended/intended by individual economists does not matter. What counts is the collective effect, which is the perfect Glomarization of economics. There is not one policy proposal drawn from employment theory to monetary theory that embodies valid scientific knowledge about how the economy works, it is just opinion: “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. For every opinion, there is an equally plausible counter-opinion, and that is Glomarization ― hailed as pluralism and anything goes. #3

The political beauty of Glomarization is that it is paralyzing and therefore secures the status quo. Hayek, for one, instrumentalized this effect by arguing that just because of the lack of knowledge of economists and politicians about how the economy works, there is NO such thing as economic policy. For this epistemological reason, everything has to be left to the market as an information processor and knowledge producer.

To say economics needs a Paradigm Shift is to say that traditional Heterodoxy, too, has to be buried at the Flat-Earth-Cemetery. #4 This applies also to Asad Zaman, who has been refuted on all methodological counts. #5

By denying that, in principle, axiomatization produces logical consistency, and that state-of-the-art econometrics produces material consistency, heterodox methodologists in effect prevent scientific progress and indirectly support the political status quo.

#1The myth of economics knowledge

#2 Both orthodox and heterodox economists are cargo cult scientists

#3 The philosophy of know-nothingers

#4 Throw them out! Orthodox and heterodox economists are unfit for science

#5 Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need

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REPLY to davetaylor1, Prof Dr James Beckman, Germany, on Aug 2

davetaylor1 argues: “According to my dictionary the word ‘axiom’ can refer either to a self-evident truth or a universally accepted principle. Economists seem to be assuming the first of these and forgetting about the importance of the second, as exemplified in the ways of denoting sounds and numbers.”

And Prof Dr James Beckman, Germany, asks: “Self-evident to whom?”

This shows only that both heterodox blatherers have NO idea what axiomatization is all about. “Self-evidence” is NOT a criterion of axioms; this has always been popular BS.

Note that Newton, under the title of Axiomata Sive Leges Motu, states (in modern language): “In an inertial frame of reference, an object either remains at rest or continues to move at a constant velocity, unless acted upon by a force.”

This is NOT self-evident but an abstraction/idealization of observable motion on earth where an object does NOT move at a constant velocity.

All this is long known among people with more than two brain cells: “We may, therefore, agree with Ernst Mach, who very wisely pointed out that the law of inertia could hardly be ‘obvious’ or ‘self-evident’ since throughout most of recorded history men believed in a quite different law and would have denied the Cartesian-Newtonian inertial principle.” (Cohen, 1977)

The point of axiomatization is to clearly state the premises. As long as this is not done, any analysis and discussion will produce only proto-scientific garbage. Heterodox economists have never stated their axioms, and this is why Heterodoxy has never produced anything of scientific value. #1, #2, #3

#1 Don Lars and the axiomatic windmill

#2 For details of the big picture, see cross-references Axiomatization

#3 If it isn’t macro-axiomatized, it isn’t economics

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REPLY to davetaylor1, John Vertegaal, Craig on Aug 10

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 (Q_m≡C−Y_w, S_m≡Y_w−C). #1

#1 For details of the big picture, see cross-references Axiomatization

Truth by definition? The Profit Theory has been axiomatically false for 200+ years

Comment on Brian Romanchuk on ‘Primer: The Kalecki Profit Equation (Part I, II)’

Blog-Reference and Blog-Reference

(i) You said in the intro: “This article continues the discussion of the Kalecki Profit Equation. The Kalecki Profit Equation is an account identity (a statement that is true by definition) that determines the level of aggregate business sector profits in terms of other national accounts variables. The full equation is somewhat imposing, so the strategy employed here is to build up the equation by starting off with a simplified model economy that results in a brief equation, then adding new terms progressively.”

(ii) You say in your latest post: “Egmont, the expression ‘I could care less’ best summarises my views on this topic. If a ‘senior MMTer’ wrote something that contradicts standard accounting identities, feel free to take it up with said ‘senior MMTer.’ I cannot recall reading anything like that, so as far as I am concerned, you are beating up on a straw man. (The complaint I saw revolved around MMTers using ‘saving’ to refer to sectoral balances, and not the standard national accounting version. Since ‘saving’ and ‘investing’ are commonly used to refer to things not matching the national accounting definition, I view that as grasping at straws.)”

In (i), you say that you are dealing with “an account identity (a statement that is true by definition)”. In (ii), you say that there are standard accounting identities. Now, the standard identities are also known to be “true by definition”. In fact, this is a very common phrase in economics.

Simple logic tells everyone that wildly different accounting identities cannot all be “true by definition”. Economists obviously have a serious problem with understanding the elementary mathematical logic of accounting. This problem has been unsolved since Keynes. After-Keynesians still claim that Keynes’ famous I=S is an accounting identity. #1

Kalecki came up with a quite different accounting identity: “The economy is closed (there is no international trade) and there is no public sector. With these assumptions, Kalecki derives the following accounting identity: P+W=Cw+Cp+I, where P is the volume of gross profits (profits plus depreciation), W is the volume of total wages, Cp is capitalists’ consumption, Cw is workers’ consumption, and I is the gross investment that has been made in the economy. Since we have supposed workers who do not save (that is W=Cw in the preceding equation), we can simplify the two terms and arrive at: P=Cp+I. This is the famous profits equation, which says that profits are equal to the sum of investment and capitalists’ consumption.” (Wikipedia) #2

Kalecki’s profit equation is axiomatically false, that is, beyond repair. #3

In my post ‘The final implosion of MMT’ I came up with the axiomatically correct accounting equation for the most elementary economic configuration, Qm≡−Sm #4, which you commented on with the blog post ‘Fun With Accounting Identities’#5: “An article with the flamboyant title ‘The final implosion of MMT’ by Egmont Kakarot-Handtke caught my eye. As I observed at Mike Norman Economics, this was probably just an attempt to troll people. That said, I think it provides another useful example of national accounting works (or does not work...).”

You did not get the point then, and I commented: “Which part of Qm≡−Sm do you not understand? The equation says: at the heart of national income accounting is an identity — the business sector’s deficit (surplus) equals the household sector’s surplus (deficit).” and summarized “The current state of economics is that national accounting is provably false and that economic theory is axiomatically defective and that the ‘throng of superfluous economists’ (including Brian Romanchuk) has no clue and cannot rise above brain-dead blathering.”

Now, your post ‘Primer: The Kalecki Profit Equation (Part I)’ starts with (Model 1 Profits) = −(Household savings), in symbols, Qm≡ −Sm.

In principle, it is a good thing that you corrected your false assertions about macroeconomic accounting and adopted the axiomatically correct macroeconomic Profit Law. However, you are deceiving the general reader by attributing it to Kalecki.

I hereby inform you publicly that false attribution not only constitutes a violation of the standards of scientific discussion/publication but also of Wikipedia’s ‘Creative Commons Attribution-Share Alike 4.0 International’ as well as the International Copyright © and Trademark ® Laws. The correct attribution of the Model 1 to Model 5 profit equations is to AXEC/Egmont Kakarot-Handtke. #6, #7, #8

Egmont Kakarot-Handtke


#1 For details of the big picture, see cross-references Refutation of I=S
#2 Wikipedia Michał Kalecki The profit equation
#3 Refutation of Kalecki’s profit equation:

• What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
• The monetary circuit and how economists got it wrong
• Kalecki got it wrong, Allais got it right
• Kalecki: the man who missed it by a hair's breadth
• Kalecki’s wrong definition of profit and income
• Loanable funds ― no hoax, just breathtaking stupidity
• Macro for dummies (II)
• Economists: scientists or political clowns?
• Profit and stupidity
• How the Intelligent Non-Economist Can Refute Every Economist Hands Down

#4 AXEC Oct 31, 2016, The final implosion of MMT
#5 BondEconomics Nov 1, 2016, Fun With Accounting Identities
#6 Rectification of MMT macro accounting
#7 DSGE and profit―forget it! MMT and profit―forget it!
#8 Keynes’s Missing Axioms

Related 'MMT: How mathematical incompetence helps the Kelton-Fraud' and 'Wikipedia and the promotion of economists’ idiotism (II)'

The Theory of Value and the worthlessness of economics

Comment on Peter Dorman on ‘The Value of Life and the Metaphor of Choice’

Blog-Reference

Peter Dorman summarizes what economics is all about: “Here’s what I think it comes down to: the metaphor of choice. This metaphor is so deeply ingrained in economic analysis most economists can’t think beyond it, but the moment it is invoked the very notion of what it means to be alive rather than dead is rendered irrelevant.”

The curious thing, to begin with, is that choice is NOT AT ALL an issue for economics but for psychology and sociology. To build economics on behavioral concepts like utility/choice/optimization was the foundational blunder of Orthodoxy. Economists, though, either have not realized it to this day or have not found the way out of the proto-scientific PsySoc swamp. Human behavior is NOT the subject matter of economics ― the behavior of the economic system is.

Methodologically, economics is a systems science, but economists wasted 200+ years second-guessing Human Nature/motives/behavior/action.

To this day, economists have been unable to give a consistent description of how the monetary economy works. Economists do not even know what profit is. Because Profit Theory is false, Value Theory is false. This is like medieval physics before the concept of energy was consistently defined and fully understood. Economic policy guidance has NO sound scientific foundations since Adam Smith/Karl Marx.

For this compelling methodological reason, a paradigm shift is necessary, which means practically that Walrasianism, Keynesianism, Marxianism, and Austrianism have to be buried at the Flat-Earth-Cemetery.

These are the correct systemic foundations of economics. #1, #2 The elementary production-consumption economy is, for a start, defined by three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw), and two definitions (monetary profit/loss Qm≡C−Yw, monetary saving/dissaving Sm≡Yw−C). From this follows Qm≡−Sm, that is, macroeconomic profit comes in the most elementary case from the growth of household sector debt. #3 Macroeconomic profit has NOTHING to do with exploitation or innovation or value creation or optimization or the choice between strawberry and raspberry yogurt. #4

Capitalists don’t know this. Workers don’t know this. Orthodox economists don’t know this. Heterodox economists don’t know this. And Peter Dorman, too, does NOT know the most elementary fact about the economic system.

Egmont Kakarot-Handtke


#1 Do first your macroeconomic homework!
#2 Graphic AXEC137 New Foundations of Economics
#3 Graphic AXEC143 Profit Law and Balances Equation
#4 For details of the big picture, see cross-references Profit

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REPLY to Barkley Rosser on Jul 11

You say: “Egmont dismisses studying optimization.”

Not exactly. Egmont dismisses microfoundations and advances in a genuine paradigm shift to macrofoundations (see preceding post).

The microfoundations approach has been methodologically defined as follows: “As with any Lakatosian research program, the neo-Walrasian program is characterized by its hard core, heuristics, and protective belts. Without asserting that the following characterization is definitive, I have argued that the program is organized around the following propositions: 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. By definition, the hard-core propositions are taken to be true and irrefutable by those who adhere to the program. ‘Taken to be true’ means that the hard-core functions like axioms for a geometry, maintained for the duration of study of that geometry.” (Weintraub, 1985, Joan Robinson’s Critique of Equilibrium: An Appraisal, p. 147)

In order to be applicable, HC2 requires a lot of auxiliary assumptions, most prominently a well-behaved/differentiable production function.

HC2 introduces marginalism, which is the all-pervasive principle of Orthodoxy. HC2, though, and HC4 and HC5 are plain NONENTITIES, that is, they have not more reality content than the Easter Bunny, dancing angels on a pinpoint, the Tooth Fairy, or Pegasus.

The methodological fact of the matter is that ALL models that take just one NONENTITY into the premises are a priori false. And methodology tells us that if the premises are false, the whole analytical superstructure is false. Therefore, the standard microfoundations approach with all its variants and derivatives from Jevons/Walras/Menger up to DSGE is methodologically false.

To put NONENTITIES into the premises is the defining characteristic of fairy tales, science fiction, theology, Hollywood movies, politics, journalism, PR, propaganda, cargo cult science, and microfounded economics.

Not only constrained optimization, i.e., HC2, has to be dismissed, but the whole set of behavioral axioms. Microfoundations have to be fully replaced by objective-systemic macrofoundations. #1, #2, #3

Studying behavioral optimization, just like studying epicycles, is a thing of the proto-scientific past.


#1 If it isn’t macro-axiomatized, it isn’t economics
#2 How to restart economics
#3 New Economic Thinking: The 10 crucial points

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REPLY to Barkley Rosser on Jul 11

You say: “It [behavioral economics] studies how people behave and does not assume people optimize or are rational. It is clear that regarding many things they are not, and there are well known ways in some matters how they tend to deviate in actual behavior.”

Oh dear, this was already known 150+ years ago when Jevons/Walras/Menger started blathering about rational choice/constrained optimization.

Note that there is NO way that leads from the understanding of Human Nature/motives/ behavior/action to the understanding of the behavior of the economic system. All human-centered approaches invariably crash against the methodological wall of the Fallacy of Composition.

So, microfoundations are the lethal methodological blunder, and it does NOT help to replace constrained optimization by behavioral economics. These dead-pig cosmetics do not alter the fact that economics is a failed/fake science.

The microfoundations approach in ALL conceivable variants is bound to fail. Methodologically, it holds: If it isn’t macro-axiomatized, it isn’t economics.

By the way, while you are occupied with folk psychology/sociology, your academic colleagues from the MMT camp are pulling off a political fraud by pushing deficit spending/money creation and hiding the macroeconomic fact that Public Deficit = Private Profit. #1

Too bad for the American worker that you are of no help because, as a micro-behavior guy, cheerleader of cargo-cult economics, and political storyteller, you never had any idea what profit is and how the profit-mechanism works.


#1 The Kelton-Fraud

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REPLY to Barkley Rosser on Jul 16

With regard to the Theory of Value, you complain: “But you are uninterested in such matters, only your vacuous macro tautology based on your idiosyncratic definition of profit.”

The fact is that I rectified the ridiculous behavioral Paradox of Value long ago. See The Value of Water and Diamonds: Back to Square One.

Time for you to do some scientific homework.

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REPLY to Barkley Rosser on Jul 18

This is the behavioral theory of value: “In other words, how is it that water, which is essential to life, has little value, while diamonds, which are generally used for conspicuous consumption, command an exalted price? Although it troubled Adam Smith 200 years ago, we can resolve this paradox as follows: ‘The supply and demand curves for water intersect at a very low price, while supply and demand for diamonds are such that their equilibrium price is very high.’” (Samuelson et al., 1998, p. 90)

Note that a consumption good, which vanishes in the act of consumption, is juxtaposed to a durable=not-to-be-consumed store of value. This is imbecilic, to begin with, and the rest of the pseudo-explanation consists of vacuous supply-demand-equilibrium blather.

The axiomatically correct objective-systemic Circuit Theory of Value for produced consumption goods with equal wages reads P₁/P₂=R₂/R₁. #1 Relative prices are inversely proportional to productivities. This compares to: "In classical economics, the labor theory of value asserts that the economic value of a commodity is determined by the total amount of socially necessary labor required to produce it." (Wikipedia)

Because you do not understand anything, there is no need to elaborate on this fundamental economic relationship in any detail here.


#1 Graphic AXEC89d Relative Prices, Circuit Law of Value, labor time L plays no role

MMT: How mathematical incompetence helps the Kelton-Fraud

Comment on Brian Romanchuk on ‘Primer: The Kalecki Profit Equation (Part I, II)’

Blog-Reference and Blog-Reference

Under the title “Kalecki Profit Equation”, Brian Romanchuk presents 5 equations of increasing complexity referring to monetary economies of increasing complexity. This approach is obviously based on two of my posts. #1, #2 Insofar as it is correct, however, Brian Romanchuk still gets some essentials wrong. #3, #4 As a result, with his mathematical incompetence, he in effect helps the Kelton-Fraud. #5 Needless to emphasize that a mathematician is supposed to detect and correct logical errors/ contradictions and to secure formal consistency by strictly applying the axiomatic-deductive method.

To make matters short, a concise formal summary of the main points, which have been elaborated at length elsewhere, is given under the label of Graphic. #6

• Macroeconomic profit has to be derived from consistent macrofoundations. All microfounded profit theories are a priori false. #7

• First of all, the distinction between monetary profit (coll. money-in-the-cashbox/bank = tangible/measurable balance) and nonmonetary profit (coll. paper profit) is essential. Eq. (i)

• To speak of the “Kalecki Profit Equation” is utterly misleading. Kalecki’s equation is formally defective, and this has been demonstrated already in a 2011 working paper. #8.

• Eq. (iv) refutes all Keynesian and After-Keynesian I=S/IS-LM models from Hicks to Krugman and beyond. #9

• From the axiomatically correct Profit Law for the open economy with government and profit distribution, eq. (vi), follows the AXEC balances equation, eq. (vii), (I−S)+(G−T)+(X−M)−(Q−Yd)=0, which directly compares to the defective MMT balances equation (I−S)+(G−T)+(X−M)=0.

• The MMT balances equation features prominently in MMT presentations #10 for hiding the macroeconomic fact that Public Deficit = Private Profit. #11

Whether Brian Romanchuk does not realize that his Model 5 equation is inconsistent with the MMT balances equation or whether he intentionally obfuscates the issue is a matter of indifference. What counts at the end of the day is that he is in effect promoting the scientific and political fraud of MMT. #5

Egmont Kakarot-Handtke


#1 DSGE and profit―forget it! MMT and profit―forget it!
#2 Rectification of MMT macro accounting
#3 Profit: after 200+ years, economists are still in the woods
#4 The first to leave the sinking MMT ship?
#5 The Kelton-Fraud
#6 Graphic AXEC143d Profit Law and Balances Equation
#7 The Profit Theory is False Since Adam Smith
#8 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
#9 Keynes’s Missing Axioms
#10 Down with idiocy!
#11 MMT and the magical profit disappearance

Related 'Bill Mitchell, MMT’s fake scientist' and 'MMT: Academic snake oil for the people' and 'Cryptoeconomics ― the best of Bill Mitchell’s spam folder' and 'Political economics: Who hijacks British Labour?' and 'MMT: another case of inverted economics' and 'Truth by definition? The Profit Theory has been axiomatically false for 200+ years'.

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REPLY to Joe Leote on Jul 7

You say: “Applying a national accounting model with specified ‘heroic’ assumptions Minsky uses the Kalecki profit identity to conclude that profits = investment.”

Yes, Kalecki came up with his profit definition and Minsky with his, and Keen with his, and anybody else with theirs. #1

As the ancient Greeks already observed: “There are always many different opinions and conventions concerning any one problem or subject-matter…. This shows that they are not all true. For if they conflict, then at best only one of them can be true.” (Popper)

The fact is that NONE of them is true. To this day, economists do not get the foundational concept of their subject matter straight.


#1 Heterodoxy, too, is proto-scientific garbage

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REPLY Joe Leote on Jul 7

You say, “The majority of statements are neither true nor false.” True, indeed, 99.9 percent of statements are just brain-dead blather. The 0.1 percent is science.

Every layperson who is confronted with the statement: Mr. A has been murdered and you are the murderer, understands immediately the concept of scientific truth. Truth is (i) a binary concept, i.e., there is only true/false with NOTHING in between, and (ii) truth is objective, that is, provable in principle, and (iii) that it is worth every effort to find out the truth even if we cannot be absolutely sure that we will be successful.

Scientific truth has been well-defined for 2300+ years by formal and material consistency. However, there is a large swamp of cargo cult science (Feynman) where, as Keynes said, “nothing is clear and everything is possible.”

In the swamp, vagueness, indeterminacy, inconclusiveness, confusion dressed up as complexity, unresolved contradictions, storytelling, filibuster, gossip, finicky scholasticism (Popper), known/unknown unknowns, nonentities, vacuous doubt, silly beliefs, and the Humpty Dumpty Fallacy are the prevailing components of communication.

Economists are swampies. #1, #2 Economics is a failed science. To this day, economists have NOT gotten the foundational concept of their subject matter ― profit ― right. All microfounded (Walrasian) and macrofounded (Keynesian) models are provably false. Economists do not know how the economy works. Economics is a cargo cult science. The “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud.

To claim that there is no truth is an immunizing stratagem (Popper) of failed/fake/ stupid/corrupt proto-scientific blatherers. #3

You are on the wrong side of the demarcation line between science and non-science.


#1 Lousy scientists
#2 Economists ― medics or barber-surgeons?
#3 Failed economics: The losers’ long list of lame excuses

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REPLY to Joe Leote on Jul 7

Kalecki’s profit equation is formally defective, and this has been demonstrated already in a 2011 working paper. #1 The correct “Kalecki” equation is given with eq. (v) in the Graphic compilation. #2

The compilation settles the profit issue. #3


#1 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
#2 Graphic AXEC143c Profit Law and Balances Equation
#3 For details, see cross-references Profit

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REPLY to Brian Romanchuk on Jul 8 and Blog-Reference MNE on Jul 9

You say: “From my perspective, the issue is straightforward: do we want to model the operation of the industrial capitalist system that we have? If so, we need to stick with the definition of profit that capitalists use, …”

False! Capitalists know as much about capitalism as fish know about water ― nothing. This is long known: “… these people who live and move among the facts often, or mostly, cannot of themselves put together any precise reasonings about them.” (Bagehot, 1885)#1

This is why scientists redefine everyday concepts rigorously: “The only way to arrive at coherent languages is to set up axiomatic systems implicitly defining the basic concepts.” (Schmiechen)#2

The elementary production-consumption economy is, for a start, defined by three macro axioms (Y_w=WL, O=RL, C=PX), two conditions (X=O, C=Y_w), and two definitions (monetary profit/loss Q_m≡C−Y_w, monetary saving/dissaving S_m≡Y_w−C). From this follows Q_m≡−S_m, that is, macroeconomic profit comes in the most elementary case from the growth of household sector debt.#3

Capitalists don’t know this. Like goldfish, they know only how to swim in their little pond but have no idea where the water comes from.


#1 Bagehot’s wisdom and the silliness of modern economists
#2 How to get out of the swamp of ignorance
#3 Profit theory in less than 5 minutes

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REPLY Roger Sparks on Jul 10 and Blog-Reference MNE

You say: “It is hard to distinguish whether owner income comes from investment, hours worked, skill, or some other feature associated with ownership.”

This is entirely beside the point. Obviously, you do not understand how macroeconomic profit and microeconomic profit are related.#1, #2

Profit for the economy as a WHOLE has NOTHING to do with productivity, the wage rate, the working hours, exploitation, competition, innovation, capital, power, monopoly, risk, greed, choice, etcetera. These factors affect only the DISTRIBUTION of profit between firms. Macroeconomic profit is in the most elementary case, given by Qm≡−Sm, that is, profit comes from the growth of the household sector’s debt.

The crucial point is this: Brian Romanchuk’s Model 5 equation can immediately be transformed into this balances equation (I−S)+(G−T)+(X−M)−(Q−Yd)=0, which directly compares to the MMT balances equation (I−S)+(G−T)+(X−M)=0.

Brian Romanchuk argues: “Now I have no idea what he’s going on about the MMT equation. If I am not mistaken, the MMT equation is a sectoral balances equation, and does not tell us about profit. People who care about accounting identities argue that the ‘senior MMTers’ are pulling some technical legerdemain with the definition of saving used. However, I do not deeply care about accounting identitities, so I really never looked into this alleged controversy.”

So-called accounting identities are elementary algebra. If Brian Romanchuk does not see that his profit equation ⇒ balances equation directly contradicts the MMT balances equation, he is an incompetent mathematician.

Worse, the MMT balances equation obscures the fact that Public Deficit = Private Profit and is used to politically deceive the ninety-nine-percenters.#3 Either Brian Romanchuk is an incompetent mathematician, or he is complicit in the MMT fraud.

Either way, his two posts about the “Kalecki Profit Equation” go down the scientific drain.


#1 Zero-sum capitalism
#2 Capitalism, poverty, exploitation, and cross-over exploitation
#3 Down with idiocy!

The first to leave the sinking MMT ship?

Comment on Brian Romanchuk on ‘Primer: The Kalecki Profit Equation (Part II)’ #1

Blog-Reference and Blog-Reference on Jul 5

Brian Romanchuk asserts: “The Kalecki Profit Equation is an account identity (a statement that is true by definition) that determines the level of aggregate business sector profits in terms of other national accounts variables.”

Brian Romanchuk simply parrots one of the economists’ many brain-dead slogans. Get it, there is NO such thing as a “statement that is true by definition”. In science, the truth of a statement is established by the proof of material and formal consistency.

It has been shown in earlier posts that Brian Romanchuk’s grasp of scientific methodology is rather weak. #2

The good news is that he now gets the macroeconomic profit equation right ― at least for monetary profit. The bad news is that he fails to notice that this equation flatly contradicts the MMT balances equation. The MMT balances equation reads (I−S)+(G−T)+(X−M)=0. From the axiomatically correct profit equation follows (I−S)+(G−T)+(X−M)−(Q−Y_d)=0. #3

Only one of the equations can be true. It is quite obvious that the MMT sectoral balances equation is false. Because Brian Romanchuk is an outspoken promoter of MMT, the interesting question is whether he is now the first to leave the sinking MMT ship. #4

Egmont Kakarot-Handtke


#1 Sequel to Profit: after 200+ years, economists are still in the woods
#2 For an overview, see
The curious non-existence of profit in economics
MMT and grassroots movements
Macroeconomics for retarded economists
The final implosion of MMT
Infantile model bricolage, or, How many economists can dance on a non-existing pinpoint?
Mathiness is NOT the problem — scientific incompetence is
Economists: only good at excuses
#3 DSGE and profit―forget it! MMT and profit―forget it!
#4 The Kelton-Fraud

Related 'MMT: How mathematical incompetence helps the Kelton-Fraud'. For the full-spectrum refutation of MMT, see cross-references MMT.

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Graphic AXEC143d Profit Law (with increasing complexity) and Sectoral Balances Equation ®

The Kelton Fraud

Comment on Tom Hickey/Ben Judah on ‘The Right’s Straw Left’

Blog-Reference

Tom Hickey headlines: “The Right discovers it is up against MMT. Is Stephanie Kelton Superwoman?” This framing tells everyone that economics, too, has finally degenerated into a reality show. #1

To recall, economics claims since Adam Smith/Karl Marx to be a science. The criterion of science is true/false. So, the real question is NOT whether Stephanie Kelton is Superwoman but whether MMT, the economic approach she stands for, is true or false.

The short answer is: MMT is a scientific failure and a political fraud. Stephanie Kelton is just another clown in the political Circus Maximus.

In more detail #2, #3, #4, #5

• MMT’s social policy proposals ― the Job Guarantee in particular ― are political door-openers and Friend-of-the-People signaling.
• MMT policy guidance ultimately boils down to deficit-spending/money-creation.
• It is a macroeconomic fact that Public Deficit = Private Profit, so MMT is money-making for the one-percenters.
• MMT is stealth taxation for the ninety-nine percenters.
• MMT is ALWAYS a bad deal for the ninety-nine-percenters.
• The MMT policy of ever-increasing public debt amounts to the permanent self-financing of the Oligarchy.

If Stephanie Kelton, Professor at Stony Brook University, does not understand macroeconomics, she is an incompetent scientist; if she understands it, she is a political fraud. #6 In any case, she has to be expelled from the scientific community.

Egmont Kakarot-Handtke


#1 Hedges, Empire of Illusion, Nation Books, 2009
#2 Wrapping up the MMT narrative
#3 How MMT enlightens Washington
#4 MMT: Just another political fraud
#5 For the full-spectrum refutation of MMT, see cross-references MMT
#6 Down with idiocy!

Related 'MMT: How mathematical incompetence helps the Kelton-Fraud' and 'MMT and the single most stupid physicist' and 'The Magic Money Tree is real ― too bad that the magic is fraud' and 'Richard Murphy: the MMT fraudster dressed up as realist' and 'Lock them up' and 'MMT is idiocy and fraud' and 'MMT: The one deadly error/fraud of Warren Mosler' and 'National Accounting: scientific incompetence or political fraud?' and 'MMT: scientific incompetence or political fraud?' and 'Stephanie and Noah ― economics at the intellectual zero lower bound' and 'MMT, Bill Mitchell, and the lack of basic scientific integrity' and 'Why the MMT benefactors of humanity never talk about profit' and 'Forget mainstream economics, scrap MMT, move on to the new paradigm' and 'Links on Liza N. Burby‘s ‘Cutting-Edge Economist Stephanie Kelton Delivers Presidential Lecture’ and 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'Stephanie Kelton and the self-destructive stupidity of the super-rich' and 'MMT: economics for suckers' and 'Economics, MMT, and the capture of science by the political mob' and 'How a Swedish professor cares about the Oligarchy’s financial well-being' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?'.

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Twitter Jan 31, 2019, Stephanie Kelton's red/black ink trick  

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Graphic AXEC147

The miracle cure of economists’ micro-macro schizo

Comment on Nick Rowe on ‘Micro Profs teaching Intro Macro’

Blog-Reference and Blog-Reference on Jul 3 and Blog-Reference Link EV

“Could it be that there is something deeply wrong with mainstream economics … ?” (Blaug, 1984) Sooner or later, the intelligent student of economics arrives at this critical juncture. Starting with Samuelson’s prototype of 1948, economics textbooks consist of micro and macro, and it is obvious that the two parts do not fit together. #1 The cognitive dissonance is usually dispelled as follows: “Micro is a solid, cogent set of ideas that was carefully developed over several centuries. Macro was a desperate and doomed attempt to explain the Depression. Bad theories, inconsistent with micro and not even internally consistent, spouting nonsense like Y=C+I+G, AS/AD, IS/LM, and MV=PY.” (Sproul)

This is one of the many delusions of the representative economist. The fact is that microeconomics is proto-scientific garbage and macroeconomics is proto-scientific garbage, and the synthesis of the two is proto-scientific garbage squared. This is state-of-the-art economics, and teachers teach it, and students swallow it. #2 Economics has been for 200+ years now what Feynman called a cargo cult science.

This is the methodological core problem: “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)

Clearly, economists lack the true theory. It is pretty obvious that these cargo cult scientists never understood what methodology is all about. Aristotle put it thusly: “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.”

Here are the premises for everyone to evaluate. The (Walrasian) microfoundations approach is defined by this verbalized 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) 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)

Because both the microfoundations approach and the macrofoundations approach are axiomatically false, a Paradigm Shift is imperative. Who accepts Walrasian micro or Keynesian macro is forever outside of science.

The microfoundations approach is bottom-up and runs with necessity into the Fallacy of Composition. The macrofoundations approach is top-down and proceeds by successive differentiation until one arrives at the individual agent. Differentiation is the opposite of bottom-up or aggregation. Keynes was right in moving from microfoundations to macrofoundations, but due to his scientific incompetence, he ultimately messed up the Paradigm Shift. #3

This is the starter set of the correct macrofoundations approach. (A0) The objectively given and most elementary systemic configuration of the economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Y_w=WL wage income Y_w 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.

These premises are certain, true, and primary, and therefore satisfy all methodological requirements. The set of premises is minimalistic; that is, it cannot be reduced further, only expanded. The graphical representation of the elementary production-consumption economy is given under the label of Graphic.  #4, #5, #6

Under the condition of market-clearing X=O and budget-balancing C=Y_w follows the macroeconomic Law of Supply and Demand P=W/R.

From the definition of monetary saving/dissaving S_m≡Y_w−C and of monetary profit/loss Q_m≡C−Y_w follows Q_m≡−S_m, i.e., the most elementary form of the macroeconomic Profit Law.

The average stock of transaction money is M=κY_w under the condition of budget balancing.

Given the minimalist core propositions (A1) to (A3), one has now to proceed top-down by successive differentiation, i.e., two firms ― one market, two firms ― two markets, and so on to n firms ― m markets.

It is important to realize that macroeconomic axioms are composed of measurable variables. This is the precondition for testing the derived complex relationships, i.e., the systemic economic laws, and this, in turn, is the precondition of final corroboration or refutation, as the case may be.

The behavior-free objective-systemic macrofoundations fully replace the false Walrasian microfoundations and the false Keynesian macrofoundations. Economics leaves the proto-scientific stage and becomes ― what it falsely has claimed for more than two centuries ― a science.

Egmont Kakarot-Handtke


#1 The father of modern economics and his imbecile kids
#2 Fact of life: your econ prof is scientifically incompetent
#3 How Keynes got macro wrong and Allais got it right
#4 Graphic AXEC31 Elementary production-consumption economy
#5 Geometrical Exposition of Structural Axiomatic Economics
#6 Economics for Economists

Related 'Cryptoeconomics ― the best of Nick Rowe’s spam folder' and 'Is Nick Rowe stupid or corrupt or both?' and 'It has been said before but economists still don’t get it' and 'Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist' and 'Yes, economics is a bogus science' and 'Schizonomics' and 'The Logical Interface Between Objective Macrofoundations and Subjective Valuations' and 'Your economics is refuted on all counts: here is the real thing'. For details of the big picture, see cross-references Axiomatization.

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Graphic AXEC137b Extended macrofoundations. Behavior is formally integrated as the Propensity Function (last line)

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REPLY to Nick Rowe on Jun 2

You say: “Nobody knows what is going on!”

Walrasian microeconomists and Keynesian macroeconomists never had any clue, indeed, but economics is in the process of replacing them. See The miracle cure of economists’ micro-macro schizo.

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REPLY to Avraam Jack Dectis on Jul 5

You say: “Plenty of good Econ 101 textbooks out there.”

This is one of the many delusions of the representative economist. The fact is that microeconomics is proto-scientific garbage and macroeconomics is proto-scientific garbage, and the synthesis of the two is proto-scientific garbage squared. #1 This is state-of-the-art economics, and teachers teach it, and students swallow it. Economics has been, for 200+ years now, what Feynman called a cargo cult science.

#1 The father of modern economics and his imbecile kids

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REPLY to Nick Rowe on Jul 12

The microfoundations approach has been methodologically defined as follows: “As with any Lakatosian research program, the neo-Walrasian program is characterized by its hardcore, heuristics, and protective belts. Without asserting that the following characterization is definitive, I have argued that the program is organized around the following propositions: 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. By definition, the hard-core propositions are taken to be true and irrefutable by those who adhere to the program. ‘Taken to be true’ means that the hard-core functions like axioms for a geometry, maintained for the duration of study of that geometry.” (Weintraub, 1985, Joan Robinson’s Critique of Equilibrium: An Appraisal, p. 147)

In order to be applicable, HC2 requires a lot of auxiliary assumptions, most prominently a well-behaved/differentiable production function. #1

HC2 introduces marginalism, which is the all-pervasive principle of Orthodoxy. HC2, though, and HC4 and HC5 are plain NONENTITIES, that is, they have no more reality content than the Easter Bunny, dancing angels on a pinpoint, the Tooth Fairy, or Pegasus.

The methodological fact of the matter is that ALL models that take just one NONENTITY into the premises are a priori false. And methodology tells us that if the premises are false, the whole analytical superstructure is false. Therefore, the standard microfoundations approach with all its variants and derivatives from Jevons/Walras/Menger up to DSGE is methodologically false.

To put NONENTITIES into the premises is the defining characteristic of fairy tales, science fiction, theology, Hollywood movies, politics, propaganda, cargo cult science, and microfounded economics.

Not only constrained optimization, i.e., HC2, has to be dismissed, but the whole set of behavioral axioms. Microfoundations have to be fully replaced by objective-systemic macrofoundations. This is called a paradigm shift. #2

Teaching/studying behavioral optimization, just like teaching/studying epicycles, is a thing of the proto-scientific past.

#1 Putting the production function back on its feet

#2 New Economic Thinking: The 10 crucial points

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REPLY to Nick Rowe on Jul 16

Not only is the microfoundations approach axiomatically false, but also the macrofoundations approach. For the lethal methodological blunder, see Wikipedia and the promotion of economists’ idiotism (II).

Teaching/studying Walrasian Micro and Keynesian Macro is a thing of the proto-scientific past.

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REPLY to Livio de Matteo on Jul 23

Both the Walrasian microfoundations approach and the Keynesian macrofoundations approach are provably false. Economists are failed/fake scientists.#1 To this day, they do not know how the economy works. Since Adam Smith, they do not know what profit is #2, but they filibuster about the Russia-America CoDominium: an issue that is NOT AT ALL their business. #3

Time to end the shrunken heads perversity called economics.

#1 Economics: a science without scientists

#2 The profit theory is false since Adam Smith

#3 Economics: a “science” from suckers for suckers