Kalecki and Keynes: The double macroeconomic false start

Comment on Lars Syll on ‘Kalecki and Keynes on the loanable funds fallacy’

Blog-Reference and Blog-Reference and Blog-Reference on Nov 22

Like Keynes, Kalecki got the foundational concepts of profit/income/saving wrong. Lars Syll and the rest of retarded After-Keynesians, though, have not realized anything to this day.

Lars Syll quotes Kalecki: “It should be emphasized that the equality between savings and investment … will be valid under all circumstances. In particular, it will be independent of the level of the rate of interest which was customarily considered in economic theory to be the factor equilibrating the demand for and supply of new capital. In the present conception investment, once carried out, automatically provides the savings necessary to finance it. Indeed, in our simplified model, profits in a given period are the direct outcome of capitalists’ consumption and investment in that period. If investment increases by a certain amount, savings out of profits are pro tanto higher …”

There NEVER was and NEVER will be an equality of saving and investment of any sort. This is one of the greatest blunders in the history of the cargo cult science called economics. #1

Keynes defined the formal foundations of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This elementary two-liner is conceptually and logically defective because Keynes never came to grips with profit. (Tómasson et al.)

The elementary version of the axiomatically correct macroeconomic Profit Law reads Q_m≡I−S_m, with Q_m as monetary profit and S_m as monetary saving. And this means that since Keynes/Hicks ALL I=S/IS-LM models are false.

Kalecki added profit and distributed profit to the macroeconomic equations. With profit distribution and the consumption/saving out of distributed profit, the expanded Profit Law reads Q_m≡Y_d+I−S_m. #2 Again, investment and saving are NEVER equal. There NEVER has been or will be such a thing as an equilibrium or an accounting identity I=S. Both Kalecki and Keynes were too stupid for the elementary mathematics that underlies macroeconomics. #3

Kalecki’s and Keynes’ macroeconomics are proto-scientific garbage. Because the profit theory is false, the whole analytical superstructure is false, including, of course, the theory of employment, interest, and money.

Because of this, both Kaleckian and Keynesian policy guidance have NEVER had sound scientific foundations. #4

Egmont Kakarot-Handtke


#1 For details of the big picture, see cross-references Refutation of I=S
#2 For details, see cross-references Kalecki
#3 Wikipedia and the promotion of economists’ idiotism (II)
#4 Keynes, Kalecki, MMT, and the accidental invention of the perpetual profit machine

Related 'Keynesians ― terminally stupid or worse?' and 'Keynes’s Missing Axioms' and 'Is Nick Rowe stupid or corrupt or both?' and 'I is never equal S and even Nick Rowe will eventually grasp it' and 'Truth by definition? The Profit Theory has been axiomatically false for 200+ years'

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Graphic AXEC139d

Causality in economics

Comment on Lars Syll on ‘In search of causality’

Blog-Reference and Blog-Reference and Blog-Reference on Nov 19

Lars Syll summarizes: “In a time when scientific relativism is expanding, it is important to keep up the claim for not reducing science to a pure discursive level. We have to maintain the Enlightenment tradition of thinking of reality as principally independent of our views of it and of the main task of science as studying the structure of this reality. Perhaps the most important contribution a researcher can make is revealing what this reality that is the object of science actually looks like. Science is made possible by the fact that there are structures that are durable and are independent of our knowledge or beliefs about them.”

These structures (invariances in Nozick’s terminology) relate to the economic system and NOT to economic behavior. Hence, the lethal methodological blunder consists of thinking of economics as a social science instead of a systems science. #1 The blunder started with Adam Smith, and this explains why economists have achieved nothing of scientific value in the past 200+ years. Economics is a cargo cult science; economists have misspecified their subject matter from the very beginning. #2

The heterodox economist Lars Syll is no exception and part of the wholesale failure.

Systemic laws are invariances much like physical laws, but do not entail the physicists’ specific notion of causality. So, the concept of causality has to be redefined for the economic system. There is no use in turning to philosophy and seeking help from Aristotle.

The elementary version of the economic system is formally given with the First Economic Law, as shown under the label of Graphic. #3

As it stands, the Law as a whole is deterministic but causality-free. Systemic causality consists of the fact that if one variable is altered, the others must change such that the equation is satisfied. However, it is NOT predetermined which of the other variables is altered and to what extent. The First Economic Law is an invariance with undetermined multiple inner causalities. The inner causalities can be said to be opportunistic or to follow the path of least resistance.

In order to establish a simple unidirectional causality, it is necessary that two of the four variables are fixed by the policymaker. So if, for example, ρ_E and ρ_X are fixed and ρ_D is changed, then the change of ρ_F is causally determined with absolute precision by the systemic interrelations. The problem is that the four ratios ρ_F, ρ_E, ρ_X, ρ_D consist, in turn, of multiple variables, ρ_F, for example, is given as the quotient of wage rate W, price P, and productivity R, i.e, ρ_F≡W/PR. This multiplies the number of variables to be controlled.

So, causality in economics is real but consists of undetermined multiple inner systemic causalities. As far as the required number of variables can be controlled, a politically defined causality can be established. Without knowledge of the systemic laws, this is impossible.

It holds: “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)

To this day, neither orthodox nor heterodox economists have more to offer than common sense blather. #4, #5

Egmont Kakarot-Handtke


#1 Economics is NOT a science of behavior (III)
#2 The economics Cargo Cult Prize
#3  Graphic AXEC06b First Economic Law
#4 The Law of Economists’ Increasing Stupidity
#5 A brief history of soapbox economics

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REPLY to Clint Ballinger on Nov 15

You ask, “… what would your ‘system’ imply should be done to make wellbeing higher?”

The axiomatically correct economic theory implies that the well-being of humanity is greatly increased if all stupid/corrupt political agenda pushers are expelled from economics. Draining the economic swamp is the precondition for scientific progress and should be done immediately. Scientific progress is, as everybody remembers from the Neanderthal, the only way to increase the physical and cultural well-being of humanity.

Political, religious, psychological, sociological, and philosophical blather has produced nothing positive throughout human history.

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REPLY to Lars Syll on Nov 16

What has become of Lars Syll? He writes: “I can’t but agree with Clint Ballinger on the so called ‘comments’ with which E.K-H pollutes this and other blog sites. E.K-H is a troll. He should be banned.”

What has become of the man who does not get tired of praising unconquerable freedom fighters on his own blog site?#1

What has become of the man whose evening prayer is Rosa Luxemburg’s “Freedom is always, and exclusively, freedom for the one who thinks differently.”

What has become of the tireless fighter for pluralism in economics?#2, #3

What has become of the man who has been refuted on all counts with regard to Keynesianism, Post-Keynesianism, and methodology?#4

What has become of the man who has quietly censored/manipulated his own blog site for a long time?#5

This man now forgets himself and desperately demands that E.K-H be banned from Mike Norman Economics.

In fact, nothing has changed. Behind the idealistic kitsch, Lars Syll has always been a scientifically incompetent political agenda pusher. #6


#1 Nelson Mandela — the captain of my soul
Nelson Mandela In Memoriam
The captain of an unconquerable soul
An unconquerable soul
Edward Snowden — unbroken and unconquerable
Unbroken and unconquerable
For my unconquerable soul
#2 Heterodoxy and pluralism in economics
#3 On the importance of pluralism
#4 Kalecki and Keynes: The double macroeconomic false start
#5 Cryptoeconomics ― the best of Lars Syll’s spam folder
#6 Feynman Integrity, fake science, and the econblogosphere

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REPLY to Clint Ballinger on Nov 17

Again: “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)

Neither you nor Lars Syll has the true economic theory. You do not even get the elementary mathematics that underlies macroeconomics right. You have not produced one tiny bit of sound economics.

Next time you board an airplane with the expectation to land safely at a distant place, be aware that this is possible due to the work of scientists/engineers and not to political, religious, psychological, sociological, and philosophical blather, and certainly not to the brain-dead agenda pushing of stupid/corrupt economists since Smith/Marx.

Your and Lars Syll’s contribution to the welfare of humanity is less than zero.

The MMT defenders of interest on public debt: stupid or corrupt or both?

Comment on Clint Ballinger on ‘Decouple Spending From Bond Sales’

Blog-Reference and Blog-Reference

MMTers tell everyone that public debt is nothing to worry about and that deficit-spending/money-creation is the method of choice to do away with unemployment and most other social ills.

One critical argument against a permanently rising public debt is that interest payments to the holders of the public debt rise automatically depending on the current rate of interest. This interest effect could, in principle, be greatly reduced if the government/central bank (i) does not issue bonds, to begin with, and (ii) keeps the interest on bonds as close as possible to zero.

What exactly happens if the government runs a deficit in an elementary production-consumption economy? From the general macroeconomic Profit Law Q_m≡Y_d+(I−S)+(G−T)+(X−M) follows that Public Deficit = Private Profit if all other variables are taken out of the picture.

So, at the end of the first period, the business sector’s deposits at the central bank are equal to the government’s overdrafts. If deficit spending is repeated period after period, then the government’s debt in the form of overdrafts grows permanently and the same holds for the business sector’s deposits. Under the assumption that the interest rate is zero for overdrafts and deposits at the central bank, there is NO interest effect and no interest burden on public debt.

However, if deficit up ⇒ profit up ⇒ cash up ⇒ the business sector’s need for interest-bearing/riskless/liquid assets goes up under the condition that profits are not distributed or reinvested. Solution: the government/central bank issues bonds. Extra benefit: interest on Gov-Bonds redistributes income from WeThePeople via taxes to the Oligarchy.

Needless to emphasize that the useful idiots of the Oligarchy have a number of arguments why riskless Gov securities with a juicy return are good for the economy, the proletariat, and the little guy who needs to beef up his pension.

There are two factions among MMTers: one is content with the profit effect and opts for the abolition of bond issuance which amounts to the limitless growth of zero-interest overdrafts at the central bank, the greedy faction wants all, that is, profit plus permanent interest on a permanently growing debt.

Clint Ballinger and Richard Murphy are two of the really hard pushers of Wall Street’s agenda.#1

Egmont Kakarot-Handtke


#1 Richard Murphy: the MMT fraudster dressed up as realist

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REPLY to Alan Longbon on Nov 14

You say: “The Federal Government Deficit = Private Sector Surplus, these are accounting identities true by definition.”

This is the foundational blunder of MMT. Time for you and the rest of retarded MMTers to do some scientific homework. The correct relationship is given with Public Deficit = Private Profit.

There is the household-, business-, government- and foreign trade-sector. The “private sector” is a swindle. For details see

• Down with idiocy!
• Rectification of MMT macro accounting
• Wikipedia and the promotion of economists’ idiotism

Unfortunately, MMTers are too stupid for the elementary mathematics that underlies macroeconomics. This holds without exception.

Keynes, Kalecki, MMT, and the accidental invention of the perpetual profit machine

Comment on Lars Syll on ‘Kalecki on wage-led growth’

Blog-Reference

Like Keynes, Kalecki got profit wrong. Lars Syll and the rest of retarded After-Keynesians have not realized anything to this day. #1

Keynes defined the formal foundations of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This elementary syllogism is conceptually and logically defective because Keynes never came to grips with profit. (Tómasson et. al.)

The elementary version of the axiomatically correct macroeconomic Profit Law, which is measurable with the precision of two decimal places, reads Q_m≡I−S_m with Q_m as monetary profit of the business sector and S_m as monetary saving of the household sector. And this means that since Keynes/Hicks, all I=S/IS-LM models are false.

Keynesian macroeconomics is proto-scientific garbage. Because the profit theory is false, the rest is false, including, of course, employment theory and the theory of money.#2

Kalecki’s profit theory is no better. #3, #4 And therefore, his employment theory, too, is provably false.

The axiomatically correct employment theory tells one that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R. So, there are two policy levers, and what has to be done is to combine demand-led and wage-led expansion in order to get out of unemployment.

The post-Keynesian preoccupation with demand is ultimately counterproductive because each increase in deficit spending increases macroeconomic profit. From the axiomatically correct macroeconomic Profit Law Qm≡(I−Sm)+(G−T)+(X−M)+Yd follows inter alia Public Deficit = Private Profit. #5

Keynes, Kalecki, MMTers, and Lars Syll are seen as Progressives who promote policies that benefit WeThePeople. This is just one more propaganda swindle in the long history of political economics. These fake Progressives have never done anything other than push the agenda of the Oligarchy. After all, this is what all economists have done since Adam Smith/Karl Marx. #6, #7

Egmont Kakarot-Handtke


#1 Demand-led and wage-led growth
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 Truth by definition? The Profit Theory has been axiomatically false for 200+ years
#4 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
#5 Keynes, Lerner, MMT, Trump, Biden, and exploding profit
#6 Mission impossible: economists join WeThePeople
#7 Why do workers not tar and feather economists?

Related 'Keynesianism as ultimate profit machine' and 'It’s the price and profit mechanism, stupid!'.

For details of the big picture, see cross-references Profit and cross-references Employment.

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Graphic AXEC145 The public-deficit component of the macrofounded Profit Law

MMT in a nutshell

Comment on Tim Worstall on ‘The Problem With Modern Monetary Theory’

Blog-Reference and Blog-Reference

Tim Worstall argues: “Much of Modern Monetary Theory is, as its proponents insist, simply true. Governments can create more of their own fiat currency at will.”

This is a shared and empirically corroborated insight of counterfeiters and governments since time immemorial. However, MMT claims to be a theory and the fact of the matter is that it does not satisfy the scientific criteria of material and formal consistency. In other words, MMT is provably false. MMTers are simply too stupid for the elementary mathematics that underlies macroeconomics.#1, #2

As a result, MMT policy has NO sound scientific foundations. It is only operationally true.

Technically speaking, MMT is based on this sectoral balances equation (X−M)+(G−T)+(I−S)=0, and this equation is mathematically false. The correct balances equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0 and from it follows that Public Deficit = Private Profit. In other words, the MMT policy of deficit-spending/money-creation boils down to money-making for the Oligarchy.#3

For the general public, the essential points are
• MMT has NO sound scientific foundations,
• MMT’s sectoral balances equations are mathematically false,
• MMTers violate scientific standards on a daily basis,
• MMT is political agenda pushing in a scientific bluff package,
• MMT policy is NOT for the benefit of WeThePeople but of the Oligarchy,
• MMT is just another political fraud.#4

Egmont Kakarot-Handtke


#1 MMT = Modern Monetary Trash
#2 Wikipedia and the promotion of economists’ idiotism
#3 Keynes, Lerner, MMT, Trump, Biden, and exploding profit
#4 For the full-spectrum refutation of MMT see cross-references MMT

Related '#PublicDeficitIsPrivateProfit #MMT #JustAnotherFraud' and 'MMT: A free lunch for the Oligarchy' and 'The MMT defenders of interest on public debt: stupid or corrupt or both?' and 'Keynes, Kalecki, MMT, and the accidental invention of the perpetual profit machine' and 'MMT-Progressives: stupid or corrupt or both?' and 'How MMT makes everybody happy' and 'Stephanie Kelton on how to become fabulously wealthy'.

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AXEC142

#PublicDeficitIsPrivateProfit #MMT #JustAnotherFraud

Comment on Richard Murphy on ‘Why governments need to issue bonds despite modern monetary theory’

Blog-Reference

As always, much operational blah blah and the complete loss of the big picture. Not one word about distributional effects.

Because PublicDeficitIsPrivateProfit if deficit up ⇒ profit up ⇒ cash up ⇒ business sector’s need for riskless assets up. Solution Gov-Bonds. Extra benefit: interest on Gov-Bonds redistributes income from WeThePeople via taxes to the Oligarchy. Thank you very much.

MMT deficit-spending/money-creation is the double-whammy for WeThePeople and the double-whopper, i.e., profit+interest, for the Oligarchy.

Bravo, Stephanie Kelton, Warren Mosler, Richard Murphy, and the other Wall Street agenda pushers for caring so heartfelt for the needy people when the TV cameras are on.

Bravo, MMT trolls for making the swindle disappear in the econblogosphere behind a smokescreen of senseless blather.

• MMT: The one deadly error/fraud of Warren Mosler
• Richard Murphy: the MMT fraudster dressed up as realist

Egmont Kakarot-Handtke

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Graphic AXEC147

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REPLY to Matt Franko, André on Nov 12

Get out of the Deutsche Bank woods.

Who buys and holds Gov-Bonds? NOT the little guy. It is, in a rather broad term, the Oligarchy that seeks for their idle cash some interest-bearing riskless liquid asset.

Why are Gov-Bonds deemed riskless? Because the Gov can exercise its power of taxation to get the interest from WeThePeople and transfer it to the bondholders. This government service saves the Oligarchy a lot of trouble.

The argument that the little guy needs Gov-Bonds to beef up his small pension is the usual MMT social policy fake in the interest of Wall Street.

By the way, the little guy is usually in debt himself. His credit card debt is securitized and also sold as an asset to people/institutions with surplus cash. These assets bear a risk premium because there is no government that guarantees timely interest and amortization payments through the power of taxation.

In the case of private asset-backed securities, the issuer is sometimes forced to engage the services of private bone breakers to secure the timely payment of interest and amortization.

By the way, virtually riskless private bonds have been invented long ago in Italy and have been available, for example, in Germany for 100+ years in the form of Pfandbriefe (mortgage bonds). This construct needs a reliable legal framework. This framework is not in place in the US, where Wall Street makes the laws.

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REPLY to Calgacus on Nov 13

You say: “Trapped in the (neo)classical reverse causation mode. This is logically impossible; it entails time travel. Spending, including on interest, comes first. Then taxation.”

This time travel nonsense is just silly MMT sloganizing. It originates from the false premise that money comes only into the economy through government deficit spending. This is plain wrong.

There are TWO ways to bring money into the economy. The correct way for the central bank to inject fiat money into the economy is by financing a growing wage bill. The incorrect way is the counterfeit-money-printer’s way, that is, by deficit-spending/money-creation. #1, #2

The first alternative has NO effect on macroeconomic profit, but the second has. The first alternative is distributionally neutral, while the second feeds the Oligarchy.

By applying a transaction graph #3, one can easily see that the government can tax wage income as it is paid out and spend the money later. If this happens in the same period, G=T applies. No time travel anywhere. And no profit for the Oligarchy. No wonder MMTers insist on bringing money into the economy via government deficit spending.

Again, MMTers in general, and Calgacus in particular, are stupid or corrupt or both.

#1 The creation and value of money and near-monies

#2 MMT and the promotion of Wall Street's idea of social policy

#3 Graphic AXEC98,  Idealized transaction pattern

Economics should never be a substitute for thinking

Comment on Lars Syll on ‘Econometrics: The Keynes―Tinbergen controversy’

Blog-Reference and Blog-Reference

Lars Syll’s fatal blunder consists of maintaining that economics is a social science while, in fact, it is a systems science. #1 And while there is, of course, no such thing as a behavioral law, there are systemic laws.

Walrasian economics is based on behavioral axioms. #2 Because these axioms are provably false, the whole theoretical superstructure of mainstream economics is false. Therefore, it comes as no surprise that econometrics does not yield valid results. This, though, does not support the conclusion that the statistical methods/tools of econometrics are worthless, but confirms the long-known fact that economic theory in all variants from Walrasianism, Keynesianism, Marxianism, to Austrianism is worthless.

Economists have not figured out the systemic laws to this day. In fact, they are too stupid for the elementary mathematics that underlies macroeconomics.

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

Keynes got macroeconomic profit wrong: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Let this sink in: the economist Keynes NEVER understood the foundational concept of his subject matter. Because profit is ill-defined, the complete theoretical superstructure of Keynesianism is false. Keynesian policy guidance NEVER had valid scientific foundations.

The elementary version of the axiomatically correct macroeconomic Profit Law, which is measurable with the precision of two decimal places, reads Q_m≡I−S_m, with Q_m as monetary profit and S_m as monetary saving. And this means that since Keynes/Hicks ALL I=S/IS-LM models are false.#3 Macroeconomics is proto-scientific garbage. Microeconomics is even worse.

Lars Syll summarizes Keynes’ critique of Tinbergen’s econometrics in great detail. Keynes argues: “The fallacy, of which ignorance of organic unity is a particular instance, may perhaps be mathematically represented thus: suppose f(x) is the goodness of x and f(y) is the goodness of y. It is then assumed that the goodness of x and y together is f(x) + f(y) when it is clearly f(x + y), and only in special cases will it be true that f(x + y) = f(x) + f(y).”

This, of course, is pure idiocy because goodness is a NONENTITY just like utility or equilibrium. The example proves that Keynes had no idea what economics is all about. He never understood the foundational concept of profit, and he was obviously too stupid for the elementary mathematics that underlies macroeconomics.

Trivially true: “Econometric modelling should never be a substitute for thinking.” and, because there is, to begin with, no substitute for thinking,  this applies also to Keynesianism. Nobody, except cargo cult scientists, can take seriously what Keynes has said about probability or econometrics or, for that matter, about profit or employment theory.#4

After 80+ years of storytelling/blather, Keynesians, Post-Keynesians, Anti-Keynesians, New Keynesians, MMTers, heterodox and pluralist retards, Lars Syll and the rest of stupid/ corrupt political agenda pushers, together with all their peer-reviewed articles/textbooks/blog-posts, have finally to be flushed down the scientific toilet.

Egmont Kakarot-Handtke


#1 Economics is NOT a social science
#2 Where economics went wrong
#3 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
#4 Go! ― test the Profit and Employment Law

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LINKS on Lars Syll's  'P-values are no substitute for thinking' on Nov 26

#DrainTheScientificSwamp

Scientists do NOT manipulate research with P-value, only the stupid/corrupt agenda pushers of orthodox and heterodox economics.

► Stop beating mainstream economics ― it is long dead
► The stupidity of Heterodoxy is the life insurance of Orthodoxy
► How Heterodoxy became the venue for science’s scum
► Lars Syll, fake scientist