Where economics went wrong (II)

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

Blog-Reference and Blog-Reference

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

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

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

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

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

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

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

In the same vein: “For it can fairly be insisted that no advance in the elegance and comprehensiveness of the theoretical superstructure can make up for the vague and uncritical formulation of the basic concepts and postulates, and sooner or later ... attention will have to return to the foundations.” (Hutchison)

Clearly, it is microfoundations that are false. The Walrasian approach is defined by this axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub) Every model that is built upon HC1 to HC5 or contains a subset thereof is false.

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

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

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

It is known for 2300+ years: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle) Economists’ premises have NEVER been certain, true, and primary. Economics went wrong from the very beginning.

Egmont Kakarot-Handtke


#1 From false microfoundations to true macrofoundations

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

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

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REPLY to Kien, tom m on Oct 13

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

• Economics is a cargo cult science,

• Both Nordhaus and Romer are fake scientists,

• The EconNobel is a fraud.

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REPLY to Daniel Schiffman on Oct 16

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

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

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

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

William Nordhaus cannot by any stretch of the imagination be taken seriously as a scientist, except in a cargo cult science. Feynman defined it as follows: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

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

If we only had classes

Comment on David Ruccio/Jamie Morgan on “Capital and class’*

Blog-Reference and Blog-Reference

Since Adam Smith/Karl Marx, economists have not figured out how the price and profit mechanism works. Because economists do not know what profit is, distribution theory is a mess. Ruccio/Morgan maintain that this is no accident: “Mainstream economics in general tends to deflect attention from the existence of inequality (e.g., by focusing on growth, output, and the price level versus distribution) and from the economic and social problems created by inequality ….”

The fact is, though, that not only orthodox economists but also heterodox economists like Ruccio/Morgan themselves get profit and distribution theory utterly wrong. The bad news for the general public is that economics is a failed science, and economists are fake scientists. For lack of valid scientific knowledge in the past 200+ years, economists have never been helpful in bringing about the Good Society.

The root defect of distribution theory is that economists do not know to this day what profit is. What has to be done is a Paradigm Shift, that is, the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― have to be buried in the darkest corner of the Flat-Earth-Cemetery.

The new paradigm starts with three macroeconomic axioms that consistently define the elementary production-consumption economy: (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) 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. #1, #2

Under the conditions of market-clearing X=O and budget-balancing C=Yw in each period, the price is given by P=W/R (1), i.e., the market-clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. It translates into W/P=R (2), i.e., the real wage is equal to productivity.

Monetary profit/loss of the business sector is defined as Q_m≡C−Y_w, and monetary saving/dissaving of the household sector is defined as S_m≡Y_w−C. It always holds Q_m≡−S_m, in other words, the business sector’s surplus = profit equals the household sector’s deficit = dissaving. Vice versa, the business sector’s deficit = loss equals the household sector’s surplus = saving. This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget-balancing C=Y_w, total monetary profit is zero.

In the elementary production-consumption economy, workers get the whole product, and profit is zero at any level of employment. The wage rate W can be doubled or halved; this does not matter, the real wage is always equal to the productivity. So, where does profit come from?

Macroeconomic profit depends, in the most elementary case, solely on deficit spending, that is, on the increase of the household sector’s debt. It does NOT depend on labor time, or wages, or productivity, or risk-taking, or monopoly power, or exploitation, or on psychological factors like greed or utility maximization.#3

In the elementary production-consumption economy, the wage rate for all employees (employees = labor = working-class = blue-collar workers + white-collar workers + management + executives) is equal, labor gets the whole product according to (2), and profit for the business sector as a whole is zero because of C=Y_w. This is as equal as one can get for a start.

Obviously, there is NO such thing as antagonism of wages and profits in the elementary production-consumption economy. If the wage rate W goes up, the market-clearing price goes up according to (1) and the real wage remains unchanged according to (2).

Now, the employees are arbitrarily split into two groups of equal size. The wage rate of group 1 is then increased by a factor of 1.5, and the wage rate of group 2 is halved, thus that the total wage income Y_w=WL=W₁L₁+W₂L₂ remains unchanged. All other things, i.e., output O, consumption expenditures C, and the market-clearing price P remain unchanged.

Accordingly, the real wage of group 1, i.e., W₁/P, increases 1.5-fold, and the real wage of group 2 halves. The macroeconomic profit is still zero because of C=Y_w. The unchanged real product O is redistributed among the employees; that is, group 1 is better off at the expense of group 2.

The profit of the business sector is zero before and after wage discrimination. So, it is NOT the case that the capitalists, defined as owners of the firm, are better off through wage discrimination. The redistribution of output O happens WITHIN the working class. There is NO exploitation of workers by capitalists.

Now, the business sector is split into two identical firms, and firm 1 is supposed to cut the wage rate W₁ arbitrarily by half. From this follows that the market-clearing price P declines if all other variables are unchanged. Firm 2 is affected because total wage income Y_w falls, and with it consumption expenditures C and the market-clearing price P.

The reduction of the wage rate W₁ increases the profit of firm 1 and produces a loss in firm 2. When we look alone at firm 1, we see what Smith, Mill, Ricardo, and Marx have seen before, to wit, wages down ― profit up. This fits the time-honored stereotype of wages and profits as antagonists. Exactly at this point, the idea of class war strikes the naive observer with the force of a revelation.#4, #5

The error/mistake/blunder of economists since the Classicals has been to generalize what is true for a single firm, and this is known as the Fallacy of Composition.

If profit has been zero in the initial period because of budget-balancing C=Y_w, then firm 2 makes a loss which is exactly equal to firm 1’s profit. Hence, the arbitrary wage rate cut of firm 1 does NOT increase the profit of the business sector as a whole but only REDISTRIBUTES profit/loss between the firms that constitute the business sector.

Seen from the perspective of a single firm, the antagonism of wages and profits is real. This, though, is parochial realism. The complete picture reveals that firm 1 is better off to the disadvantage of firm 2, and the workers of firm 2 are better off at the disadvantage of the workers of firm 1, because at a lower market-clearing price, they absorb a bigger share of output O with their unaltered income. The situation of the business sector as a whole is unchanged, and the same is true for the household sector as a whole. If there is exploitation, it happens WITHIN the sectors.

For the economy as a whole, the antagonism of wages and profits is an optical illusion. The concept of exploitation of the working class by the capitalist class has to be replaced by the concept of cross-over exploitation WITHIN the classes.

When Capitalism is roughly defined as ownership of the firms that make up the business sector by profit-seeking capitalists, then the capitalists, taken as a whole, cannot increase overall profit by lowering wages. Only the individual capitalist can do this at the expense of the other capitalists. On closer inspection, it turns out that there is NO capitalist class with a common class interest.

The understanding of the phenomenon of cross-over exploitation quite naturally leads to the conclusion that it would be institutionally advantageous to have classes. Imagine there is an institutionalized capitalist class that represents the interests of the business sector as a whole. From the class standpoint, it makes NO sense at all that one firm increases its profit by slashing wages and at the same time reduces the profits of the rest of the business sector. This is a silly zero-sum game. The fundamental construction defect of historically evolved capitalism is that it does NOT function according to class interest but according to the myopic interest of individual capitalists. This does NOT lead to an optimal outcome for the economy as a whole.

It would be much better to have a capitalist class that embodies the interests of the business sector as a whole and a working class that embodies the interests of the employees as a whole, and to let them negotiate all economic issues and solve all economic problems. The socially most destructive effect of the current institutional order is the phantasmagoric class war that is produced by the Fallacy of Composition.

Economists have always been the sand sacks on the way to the Good Society because, in their bottomless scientific incompetence, they never understood the concepts of profit, classes, and cross-over exploitation.

Retarded folks like Ruccio/Morgan are still trapped in the Fallacy of Composition: “And it is important to remember that the growth of corporate profits is both a condition and consequence of the stagnation of workers’ wages.” False! Instead, it is important to remember that the growth of corporate profit is the mirror image of the growth of government sector and household sector debt. There has NEVER been an antagonism between overall wage income and macroeconomic profit. #6

Profit and distribution theory are false since Adam Smith. Economists ― both orthodox AND heterodox ― have a 200+ years track record of incompetence/stupidity/corruption, and are the main obstacle on the way to the Good Society.

Egmont Kakarot-Handtke


* Real-World Economics Review

#1 Capitalism, poverty, exploitation, and cross-over exploitation
#2 Graphic, AXEC31 Elementary Production-Consumption Economy
#3 For details of the big picture, see cross-references Profit
#4 Ricardo and the invention of class war
#5 Profit for Marxists
#6 There is NO such thing as a “labor share of income”

Related 'The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?' and 'Major Defects of the Market Economy' and 'Income Distribution, Profit, and Real Shares' and 'The Coherency of Money, Profit, Price, and Distribution' What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example' and 'Debunking Squared' and 'When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism' and 'The Emergence of Profit and Interest in the Monetary Circuit' and 'How the Intelligent Non-Economist Can Refute Every Economist Hands Down' and 'Truth by definition? The Profit Theory has been axiomatically false for 200+ years'.

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AXEC109i

Post Keynesian idiocy

Comment on Brian Romanchuk on ‘Primer: Post-Keynesian Inflation Theory Basics’#1

Blog-Reference and Blog-Reference

Brian Romanchuk defines the starting point of Post-Keynesian analysis as follows: “The defining characteristic of workers is that they are paid a wage, which is normally fixed nominally …. If we assume that all output is the result of wage labour, we can arrive at the identity (due to Weintraub): P=κW/R (i), where: κ is the average markup; W is the nominal wage rate; R is the output per worker.” (symbols altered from p, w, y to P, W, R)

He then argues: “The argument in Post-Keynesian Economics is that markups cannot rise forever, as that would imply an ever-rising profit share of national income. … Instead, we need to look at the first two terms: how much greater wage growth is than output per worker…. The analysis then leads to: why will wage gains outstrip productivity? The post-Keynesian answer is that this will happen if workers’ bargaining position increases relative to that of business owners.” “By most accounts, the bargaining position of labour has been crippled as a result of structural changes imposed since the early 1980s. From this standpoint, the deceleration of inflation is no accident.”

The inexcusable fault of Post Keynesianism is that the economy is ill-defined. #2 The scientific incompetence of Brian Romanchuk consists of failing to realize that the lethal blunder of Post Keynesianism lies in the inconsistency of foundational macroeconomic relationships.

To make matters short: here is the correct core of macroeconomic premises: #3
(A0) The objectively given and most elementary systemic configuration of the production-consumption 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.

The three axioms are supplemented by four definitions: expenditure ratio ρ_E≡C/Y_w, sales ratio ρ_X≡X/O, monetary profit/loss Q_m≡C−Y_w, and monetary saving/dissaving S_m≡Y_w−C. This yields the most elementary version of the macroeconomic accounting identity, i.e., Q_m≡−S_m.

Given the conditions of market-clearing ρ_X=1 and budget-balancing ρ_E=1, the market-clearing price is derived for a start as P=W/R (ii). So, the macroeconomic price P is determined by the wage rate W, which has to be fixed as a numéraire, and the productivity R.

When the price is not the dependent variable but set by the markup formula (i), things change.

From (A3) C=PX and (i), and the definitions of the sales ratio and expenditure ratio follow for the general case: ρ_X=ρ_E/κ. (iii)

This formula says: the business sector can set the markup κ as high as it wants, but, given the household sector’s expenditure ratio ρ_E=1, it cannot sell the whole output, i.e., X<O, i.e., ρ_X<1. This means that the inventory increases. This means also that the business sector cannot increase monetary profit because with P up and X down C does not change, and monetary profit Q_m≡C−Y_w remains unchanged. So, the business sector as a whole cannot determine its profit by markup pricing. The necessary condition for profit coming into existence is ρ_E>1.

Eq. (iii) says in detail
• If the markup κ is greater than the expenditure ratio ρ_E, the market is not cleared, i.e. the stock of unsold output increases, which leads eventually to production cuts and decreasing employment.
• If the markup κ is less than the expenditure ratio ρ_E, the inventory decreases and production is eventually ramped up.

Macroeconomic profit Q_m is alone determined by the expenditure ratio Q_m≡(ρ_E−1)Y_w and NOT by the markup κ. This means that the workers’ bargaining position is of NO importance for the profit ratio Q_m/Y_w and this means, in turn, that Post-Keynesian price, profit, and employment theory has never been anything else than proto-scientific garbage.

Monetary profit and the relation of profit to wage income depend in the closed economy mainly on the growth of public and private debt. This follows from the axiomatically correct macroeconomic Profit Law Q_m≡−S_m+Y_d+I+(G−T)+(X−M).#4

Egmont Kakarot-Handtke


#1 Preceding Economics as tireless production of proto-scientific garbage: inflation theory as an example
#2 Why Post Keynesianism Is Not Yet a Science
#3 True macrofoundations: the reset of economics
#4 Graphic, AXEC143d Profit Law

Related 'Are economics professors really that incompetent? Yes!' and 'The Levy/Kalecki Profit Equation is false' and 'Keynes, Lerner, MMT, Trump, Biden and exploding profit'.

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MMT: Agenda-pushing and money-making for the Oligarchy

Comment on Tom Hickey on ‘Randall Wray — Modern Money Theory: How I Came to MMT and What I Include in MMT’

Blog-Reference and Blog-Reference

Randall Wray reports: “Godley taught us about stock-flow consistency and he insisted that all mainstream macroeconomics is incoherent.”

This, of course, is true. MMT’s critique and refutation of mainstream macro and monetary theory are justified in all dimensions. Mainstream economics is dead; however, this does not imply that MMT macro is coherent. Just the opposite: MMT macroeconomics is provably false.

The theory of money has to be embedded in a consistent macroeconomic framework or in what Keynes called the ‘monetary theory of production’. MMT gives a historical account of how money came into existence as a creation of the state. This historical account is not false, but methodologically it is NO substitute for the theory of money, just as the history of the burning of Rome, London, and San Francisco is no substitute for the theory of thermodynamics. #1

Randall Wray claims: “What we do is Macroeconomics. There is no coherent alternative to MMT.” He summarizes under the 9th bullet point: “The government’s debt is our financial asset. This follows from the sectoral balances approach of Wynne Godley. We have to get our macro accounting correct. Minsky always used to tell students: Go home and do the balance sheets because what you are saying is nonsense.”

Unfortunately, MMT’s macroeconomic accounting is provably false. #2, #3, #4 and this makes nonsense of all the rest of what they are saying. #5 In particular, it is just a public/private debt that drives money. #6, #7

In his 10-bullet-point summary of what MMT is all about, Randall Wray forgets completely to mention that because of the macroeconomic Profit Law Public Deficit = Private Profit, which follows from the axiomatically correct sectoral balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0#8, MMT policy boils down to agenda-pushing and money-making for the Oligarchy.

Egmont Kakarot-Handtke


#1 A historical misunderstanding
#2 Rectification of MMT macro accounting
#3 Wikipedia and the promotion of economists’ idiotism (II)
#4 For the full-spectrum refutation of MMT, see cross-references MMT
#5 MMT is dead
#6 The ultimate ― analytical ― origin of money
#7 Money and time
#8 MMT and the single most stupid physicist

Related 'Mission impossible: economists join WeThePeople'.

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Mission impossible: economists join WeThePeople

Comment on Kaivey on ‘David Dayen: Nancy Pelosi Promises That Democrats Will Handcuff The Democrat Agenda If They Take The House’

Blog-Reference

Kaivey summarizes: “Warren Mosler recommended this saying it had good quotes from Stephanie Kelton. Some people say that Warren Mosler did not develop MMT for left wing politics, but he seems to like what Stephanie Kelton has to say about public spending. I think we can get rid off the myth that Warren Mosler doesn’t approve of left wing economists like Stephanie Kelton. But are they left wing, they are only proposing a better type of capitalism?”

From the macroeconomic Profit Law follows Public Deficit = Private Profit. So, clearly, the MMT policy of deficit-spending/money-creation benefits the Oligarchy alone. In its naked form, MMT is absolutely unsaleable to WeThePeople. Hence, MMT needs a social fig leaf. It is amply provided by folks like Stephanie Kelton and other self-styled Progressives. #1

Most people have learned by now that, more often than not, politics is a fraud. This holds in any case for MMT. What is made to appear as social policy in the interest of WeThePeople is in effect a policy of perpetual self-alimentation of the Oligarchy.

The heavily biased distribution of income and financial wealth, which is with overwhelming clarity before all eyes, is a direct result of continuous deficit-spending/money-creation and the resulting perpetual growth of public debt. #2

The demonstrative care for jobs, health, education, social cohesion, public infrastructure, environment, etc., is the banner that Stephanie Kelton and the rest of the MMT sales team wave before the people’s eyes in order to cover their one-percenter agenda.

As we speak, Stephanie Kelton, her academic fellow campaigners, and the hyper-active MMT sales force on the social media pull off “one of the greatest cons ever perpetrated on the American people.” #3

Academic economics has entirely abandoned scientific standards and integrity. Economists over the whole spectrum from Orthodoxy to Heterodoxy, from Paul Krugman to Brad DeLong to Simon Wren-Lewis to Stephanie Kelton to Bill Mitchell to Lars Syll to Yanis Varoufakis are full-time media clowns and useful political idiots.

What we have with MMT is Warren Mosler and other Wall Street folks as promoters of MMT, and some academics who provide social credibility and some proto-scientific voodoo. #4, #5

As a matter of principle, it is entirely beyond the capacity of economists in general and MMT, in particular, to make a valuable contribution to the advancement of humanity because economics has no sound scientific foundations to this day. #6

Egmont Kakarot-Handtke


#1 MMT: How the Oligarchy communicates with WeThePeople
#2 Keynes, Lerner, MMT, Trump. Biden and exploding profit
#3 Stephanie and Noah ― economics at the intellectual zero lower bound
#4 MMT and the promotion of Wall Street's idea of social policy
#5 How MMT enlightens Washington
#6 For details of the big picture, see cross-references Political Economics/Stupidity/Corruption

Related 'MMT and grassroots movements' and 'How MMT enlightens Washington' and 'How Bill Mitchell stalks Jeremy Corbyn' and 'MMTers are NOT Friends-of-the-People'.

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REPLY to Kaivey on Oct 2

You say: “Eventually, in the end, the money might end up in the banks of the oligarchs, but it would have driven much of the economy by then creating jobs and prosperity. If it eventuality ends up in the banks of the oligarchs, then why not have an extra tax on them to get it back again.”

You have some serious problems with logic.
(i) MMT is refuted on all counts. #1
(ii) MMT policy guidance has no sound scientific foundations.
(iii) Because of the macroeconomic Profit Law, the MMT policy of deficit-spending/money-creation enriches the Oligarchy.
(iv) The social benefits that are promised by MMT are paid for in real terms via stealth taxation by WeThePeople themselves.
(v) The increasing macroeconomic profit that comes with deficit-spending/money-creation increases the funds available to the Oligarchy for lobbying.
(vi) So, the Oligarchy could spend more money to lobby for an extra tax in order to neutralize the positive effect of deficit-spending/money-creation on their overall profit.

Yes, they could. But even you understand that this will NOT happen in the remaining lifetime of this planet.


#1 For the full-spectrum refutation of MMT, see cross-references MMT.

Legitimacy lost

Comment on Barkley Rosser on ‘Trump Destroys His Favored SCOTUS Nominee’

Blog-Reference

After a long phase of degeneration, the institution of POTUS has now obviously lost the last bit of legitimacy.

After a long phase of degeneration, the institution of SCOTUS currently loses the last bit of legitimacy on the open stage.

We know this from the economist Barkley Rosser. That’s a bit strange, provided one realizes that it is NOT the business of the academic economist to dabble in politics. Politics is the proper business of Political Science. The business of the economist as a scientist is to figure out how the economy works ― not less, not more.

Economists have failed at their mission. They have to this day produced NOTHING of scientific value. The fact is that economists have messed up
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

Economists do not know to this day how the price- and profit mechanism works. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/formally inconsistent. Because of this, economic policy guidance has NO sound scientific foundation since Adam Smith/Karl Marx.

As we speak, Stephanie Kelton, her academic fellow campaigners, and the hyper-active MMT sales force on social media pull off “one of the greatest cons ever perpetrated on the American people.”#1

MMT is proto-scientific garbage, the Post-Keynesian sectoral balances equation that underlies the whole analytical edifice is provably false but, curiously, the academic economist Barkley Rosser turns his eyes away from his own profession and prefers to comment on the reported sex and drinking scandals of SCOTUS nominee Brett Kavanaugh.

Why does a failed/fake economist repeat at great length what everybody knows already from the extensive media coverage and why does he let us know that he does “not feel sorry for Brett Kavanaugh”? Economics is NOT about feelings but about knowledge, NOT about politicians but about the economy.

Academic economics has entirely abandoned scientific standards and integrity. Economists over the whole spectrum from Orthodoxy to Heterodoxy, from Paul Krugman to Brad DeLong to Simon Wren-Lewis to Barkley Rosser to Steve Keen to Lars Syll to Yanis Varoufakis are full-time media clowns and useful political idiots. Academia, too, has become a failed institution.

To recall, political economics has NO legitimacy since the founding fathers: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill) #2, #3

As a matter of principle, it is entirely beyond the capacity of economists to make a valuable contribution to the advancement of humanity because economics has no sound scientific foundations to this day.#4

Egmont Kakarot-Handtke


#1 Stephanie and Noah ― economics at the intellectual zero lower bound
#2 The end of political economics
#3 The case for pure economics
#4 For details of the big picture see cross-references Political Economics/Stupidity/Corruption

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REPLY to Zachary Smithingell on Oct 3

There is the political sphere and there is the scientific sphere. The political sphere is about agenda-pushing, and the scientific sphere is about knowledge.

In the political sphere, every imbecile is entitled to climb on a soapbox and to vomit the content of his dysfunctional brain all over the place.

In the scientific sphere, people are supposed to contribute something to the growth of knowledge. Scientific knowledge, in turn, is well-defined by material and formal consistency. Confused off-topic blather is NOT appreciated in the scientific sphere.

You certainly agree that Barkley Rosser’s gossip about Mr. Kavanaugh’s beer and sex life has NO economic or scientific content whatsoever. This would be no embarrassment if Barkley Rosser were a talk show host or a yellow press journalist. But Barkley Rosser pretends to be a competent academic economist.

And this is the point: economics claims to be a science and economists claim to be scientists and they communicate this every year loud and clear with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

Reality is different: economics is a cargo cult science, economists are fake scientists, and Barkley Rosser as brain-dead blatherer is living proof that academia, too, is a failed institution.

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REPLY to Mark Bahner on Oct 4

You let the world know on EconoSpeak: “For the record, I did not vote for Donald Trump or Hillary Clinton...I voted for Gary Johnson, who was a much better candidate than either Trump or Clinton.”

It is pretty obvious that this statement has zero informational content and is not of any interest to anyone.

So, a Mark Bahner, a Barkley Rosser, an Anonymous, and others are producing pure noise on EconoSpeak. This has NO positive effect whatsoever but only prevents economic debate geting above the level of brain-dead nonsense.

Speculating whether this effect is unintentional or intentional is a pointless exercise. Sticking to the facts as they are, what anyone can learn from the beer-sex-asshole noise on EconoSpeak is that the long march of the lowlifes of all walks of life has reached its logical end. The institutions of POTUS, SCOTUS, and ACADEME have lost their function and legitimacy and have been brought down to a noisy clown wrestling show.

So, EconoSpeak and Barkley Rosser have at least one positive purpose: to provide an indicator of how deep the social shithole has become by now.#1


#1 By the way, with his tortured irony “… you could get support from Egmont if you declare him to be the only person in worl history to have approached economics scientifically, with his theory of profits being an even greater scientific discovery than the discovery of the DNA molecule.” Barkley Rosser unintentionally hit the metaphorical nail. The three macroeconomic axioms (A1) Yw=WL, (A2) O=RL, (A3) C=PX are actually the DNA of economics. They replace the monster-producing Walrasian and Keynesian axioms. This is called evolution in biology and paradigm shift in methodology.

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REPLY to Barkley Rosser on Oct 5

Every economist knows from the Palgrave Dictionary that Walrasian, Keynesian, Marxian, and Austrian profit theories are false: “A satisfactory theory of profits is still elusive.” (Desai, 2008) So, there is only one interesting question in economics: is the axiomatically founded macroeconomic Profit Law Qm≡Yd+(I−Sm)+(G−T)+(X−M) true?#1

As long as economists have not definitively clarified the concept of profit, economics is not merely a sick proto-scientific joke but a betrayal of the general public. As things stand at the moment, economics has NO scientific legitimacy.

You are on the F-side of the fence. F stands for false. I am on the T-side of the fence. T stands for true. It does not matter how many of your friends and colleagues stand also on the F-side. The number of followers does not make a false theory true.

There is no need to tell the world that you are good friends with Meghnad Desai and Roy Weintraub and that they are on your side. Everybody on your side of the fence shares your fate and will end up at the Flat-Earth Cemetery. There is enough space for the whole of the academe.


#1 Go! ― test the Profit and Employment Law

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REPLY to Barkley Rosser on Oct 6

You say: “If you go back and reread that long post I put up here about capital and profit that you and I had our longest exchanges about, I clearly states that we did not have clear agreement on the topic, that it remains an open matter of debate.”

No. The matter was settled then.#1

I started the debate with: “The representative economist fails to this day to capture the essence of a capitalist market economy.”

I concluded the debate with: “Barkley Rosser cannot get out of his self-created muddle. Who cannot handle three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw), and two definitions (Qm≡C−Yw, Sm≡Yw−C) and UNDERSTAND IMMEDIATELY that Qm≡−Sm, i.e. that business profit and household saving are NEGATIVELY related, is OUT of economics. When the pivotal concept of profit is not properly understood the rest of the analytical superstructure of economics falls apart and there is NO use at all to filibuster about capital and equilibrium. The best the representative economist can do for the welfare of humanity is to get out of the way.”

This is the stupidity feature of all those economists who stand together with you on the F-side of the fence. It is accompanied by the corruption feature. The representative economist violates scientific standards and habitually denies refutation: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941).

And it is quite obvious why economists habitually violate scientific standards: “… suppose they did reject all theories that were empirically falsified ... Nothing would be left standing; there would be no economics.” (Hands)

To deny refutation, to obscure matters, and to claim that the debate is still open is the modus operandi of economists for 200+ years.#2 This is the reason why economics is a failed science and never rose above the proto-scientific level.#3

The corruption of economists consists of deliberately keeping things in the swamp between true and false where “nothing is clear and everything is possible” (Keynes) The apex of corruption is telling the general public that what they are doing is science and congratulating themselves with the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

The fundamental concepts of economics are inconsistent for 200+ years. Economics has NO scientific legitimacy.


#1 Economists: scientists or political clowns?
#2 And the answer is NCND ― economics after 200+ years of Glomarization
#3 The biggest scientific mistake of the last centuries, and it has much to do with academic economists

Dean Baker: progressive agenda pusher for the Oligarchy

Comment on Dean Baker on ‘Getting serious about debt and deficits: the deficit hawks did enormous harm to our kids’

Blog-Reference and Blog-Reference on Sep 29

Dean Baker argues: “With the possibility that the Democrats will retake Congress and press demands for increased spending in areas like health care, education, and child care, the deficit hawks (DH) are getting prepared to awaken from their dormant state. We can expect major news outlets to be filled with stories on how the United States is on its way to becoming the next Greece or Zimbabwe. For this reason, it is worth taking a few moments to reorient ourselves on the topic.” and “Just to remind everyone, the classic story of deficits being bad is that they crowd out investment and net exports, which makes us poorer in the future than we would otherwise be.”

Just to remind everyone, the classic debate about deficit-spending/money-creation entirely misses the point. The lethal argument against MMTers and other promoters of deficit-spending/money-creation is that the permanent growth of public debt is a program for the permanent self-enrichment of the Oligarchy, because of the macroeconomic Profit Law Public Deficit = Private Profit.#1

The fact is:
• MMT/Post-Keynesianism is a macroeconomic theory that is refuted on all counts. It is scientifically worthless.#2
• Like all other false Friends-of-the-People Dean Baker does not mention the profit effect of deficit-spending/money-creation.#3, #4
• All the social benefits MMTers promise are paid for in real terms by WeThePeople themselves via stealth taxation.#5
• Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon. In the meantime, income is redistributed from WeThePeople to WeTheOligarchy via taxation/interest payments.
• Economically, the point to worry about is that the US economy will drop dead as soon as public and private debt growth slows down and eventually reverses.

MMT claims to push the agenda of WeThePeople but pushes the agenda of the Oligarchy. MMT is a social fraud and so-called Progressives including Dean Baker are part of it.#7

Egmont Kakarot-Handtke


#1 Why the MMT benefactors of humanity never talk about profit
#2 For the full-spectrum refutation see cross-references MMT
#3 Stephanie and Noah ― economics at the intellectual zero lower bound
#4 Keynes, Lerner, MMT, Trump and exploding profit
#5 MMT, money creation, stealth taxation, and redistribution
#7 For details of the big picture see cross-references Debt/Deficit

For more about Oligarchy see AXECquery.

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Twitter Nov 9, 2022 Major study finds the US is an Oligarchy