False economic theory makes bad economic policy

Comment on Mish Shedlock on ‘Yet Another Fed Study Concludes Phillip’s Curve is Nonsense’

Blog-Reference and Blog-Reference and Blog-Reference

Mish Shedlock summarizes: “Proponents of the Phillips Curve keep looking for ways in which it works. Yet, another study concludes it doesn’t. The Phillips Curve, an economic model developed by A. W. Phillips, purports that inflation and unemployment have a stable and inverse relationship. This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.”

The Phillips Curve (better: bastard Phillips Curve) is the centerpiece of standard employment theory. Economists have gotten employment theory wrong for 200+ years. The Phillips Curve has always been the highly visible landmark of economists’ scientific incompetence.

“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)

The materially/formally inconsistent Phillips Curve has to be replaced by the correct macroeconomic Employment Law. For details see

• NAIRU, wage-led growth, and Samuelson’s Dyscalculia
• Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
• NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
• Full employment, the Phillips Curve, and the end of Gaganomics

Egmont Kakarot-Handtke

***

REPLY to Stuki on Jan 16

Economists claim to do science from Adam Smith/Karl Marx onward to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. The fact is, though, that economics is a failed/fake science or what Feynman called a cargo cult science.

The problem does NOT lie in the subject matter but in the fact that economics is a science without scientists. Economics has been hijacked early on by political agenda pushers. These stupid/corrupt folks have produced NOTHING of scientific value in the last 200+ years. They do not understand to this day the elementary mathematics that underlies macroeconomic accounting. #1

Economists can always explain why they are still at the proto-scientific level. You, too, repeat merely worn-out slogans from the long list of lame excuses. #2

The scientific incompetence of economists consists of the fact that it is beyond their means to realize that NO way leads from the understanding of Human Nature/motives/behavior/ action to the understanding of how the economic system works. What makes things worse is that there is NO scientifically valid knowledge of Human Nature/motives/behavior/ action, to begin with.#3

What has to be done is (i) to get rid of all stupid/corrupt agenda pushers, (ii) to execute the Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.


#1 DrainTheScientificSwamp
#2 Failed economics: The losers’ long list of lame excuses
#3 Economics is NOT about Human Nature but the economic system

***

REPLY to Bob Roddis on Jan 18

You say: “I want money that maintains its value over the years.”

Economic theory can show you the way, but of course, neither Austrianism nor MMT.

Let us start with the simplest possible economic configuration. The elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

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.

The price is determined by the wage rate, which takes the role of the nominal anchor, and the productivity. From (1) follows W/P=R (2), i.e., the real wage is equal to productivity. Productivity determines the real value of money.

If one wants absolute price stability in the elementary production-consumption economy from beginning to eternity, one has to apply the simple rule: change of wage rate = change of productivity.

Needless to emphasize that things become a bit more complex if investment, saving, government, and foreign trade are added. This, though, does NOT alter the core rule that the wage rate has to move synchronously with the productivity.

A fiat money system with perfect price stability is possible. Austrians have been too stupid to figure this out.

***

REPLY to Bob Roddis on Jan 18

You say: “However, for a particular sale, cost is irrelevant to the subjective valuation of the ultimate buyer. ”

Oh no, the Austrian value theory. Take notice that the derivation of the market-clearing price above relates to the economy as a whole and NOT to a particular sale. The argument is based on objective-systemic macroeconomic axioms and not on silly Austrian individualistic subjectivism.

The macroeconomic profit Q≡C−Yw in the elementary production-consumption is zero because of the condition of budget balancing. This is fully compatible with, for example, the film industry making a huge profit and the rest of the economy making a loss of equal magnitude.

Macroeconomic profit, too, is an objectively given and well-defined magnitude. It does not come of wishful thinking or individual necessity but from dissaving, i.e., C greater Yw. Microeconomics in all variants is known by now as a methodological failure.

Get it, Austrianism is dead since its inception. The fact that it still appeals to brain-dead blatherers has to be taken as supporting evidence.

***

REPLY to Bob Roddis on Jan 18

The Austrian core assertion is that laissez-faire would result in a stable economy with overall optimal outcomes. This assertion has never been proven. The provable fact of the matter is that the market economy is inherently unstable. #1

So, the very premise of Austrian economics is false, and because of this, the whole verbal superstructure is false. Austrian economics is scientifically worthless, and Austrians’ vacuous blather is only good for political agenda pushing.

You say: “There is no such thing as the ‘macro economy’.” You are a casualty of the methodological blunder called the Fallacy of Insufficient Abstraction. Macroeconomic profit, for example, is measurable with the precision of two decimal places. Austrians cannot tell to this day what profit is.

It is macroeconomics that is objective. Microeconomics, on the other hand, has never been anything but psychological/behavioral blather and pointless motive speculation. #2 Austrianism is a case in point.


#1 Proof of the inherent instability of the market economy
#2 The economist as second-guesser, mind reader, and folk psychologist

***

REPLY to Stuki on Jan 19

You say that economics cannot be a science. This is simply false.

Economics has been hijacked early on by political agenda pushers. These stupid/corrupt folks have produced NOTHING of scientific value in the last 200+ years.

The problem with economics is that it is a science without scientists. For details of the big picture, see cross-references Failed/Fake Scientists.

***

LINKS on Roger Farmer’s ‘Replacing the Phillips Curve: I showed you my macro model. Now show me your macro model’ on Apr 22 and Blog-Reference EV

► NAIRU, wage-led growth, and Samuelson’s Dyscalculia
► Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
► Full employment, the Phillips Curve, and the end of Gaganomics
► NAIRU: an exhaustive dancing-angels-on-a-pinpoint blather
► The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
► NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
► False economic theory makes bad economic policy
► The five pathetic blunders of Roger Farmer
► Modern macro moronism
► For more details of the big picture, see cross-references Employment/Phillips Curve

***

Source: Real-World Economics Review Blog on Apr 27

Source: Real-World Economics Blog

Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

Comment on Z. Byron Wolf on ‘Debt? What debt? At $22 trillion, here’s the argument the national debt doesn’t matter’*

Blog-Reference

Stephanie Kelton argues: “When the government spends more than it collects in the form of taxes (and other payments), we label it ‘deficit spending.’ But that’s only part of the story. To complete the picture, suppose the government spends $100 into the economy but only taxes $90 back out. The result is a surplus equal to $10 that shows up somewhere in the non-government part of the economy. In other words, the government’s ‘red ink’ becomes our ‘black ink.’ Their deficits are our financial surpluses. So where does the ‘debt’ come into play? Whenever the government runs a deficit, it sells government bonds called U.S. Treasuries. This is usually referred to as ‘borrowing,’ but that’s actually misleading. What’s really happening is that the government is allowing people to trade in their dollars for a bond that pays some interest. A pretty good deal if you happen to be lucky enough to hold some of that $22 trillion.”

Indeed. The government’s ‘red ink’ becomes our ‘black ink.’ We are the lucky ones, WeThePeople, right? Wrong!

Macroeconomics gives one this balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0 which boils down to Q=(G−T) which says that macroeconomic profit Q (= black ink) is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment, i.e. Public Deficit = Private Profit.

Stephanie Kelton’s provably false MMT balances equation reads (X−M)+(G−T)+(I−S)=0, which reduces to S=(G−T) which says “a surplus S shows up somewhere in the non-government part of the economy” (= black ink) which is equal to the government’s deficit (G−T) (= red ink) if the other variables are taken out of the picture for a moment.

Note that the business sector’s profit Q becomes “a surplus somewhere in the non-government part of the economy” S. This is a clear case of obfuscation.

In other words, the government’s ‘red ink’ becomes our their ‘black ink’ i.e. our=WeThePeople has to be corrected to their=the Oligarchy.#1, #2 So, for the most elementary case the correct relationship reads: The government's red ink is the Oligarchy's black ink. From this follows with regard to public debt: WeThePeople owes it, Oligarchy owns it.

MMT’s Stephanie Kelton is a political fraudster who deceives WeThePeople.#3

Egmont Kakarot-Handtke


* CNNpolitics
#1 MMT and the single most stupid physicist
#2 Down with idiocy!
#3 The Kelton-Fraud

Related 'Why the MMT benefactors of humanity never talk about profit' and 'Stephanie and Noah ― economics at the intellectual zero lower bound' and 'Profit, income, and the Humpty Dumpty Fallacy' and 'MMT and the magical profit disappearance' and 'Dear idiots, government deficits do NOT fund private savings' and 'The page where Stephanie Kelton gets macroeconomics wrong' and 'Proof of MMT's inconsistency' and 'Profit' and 'MMT refuted in three easy steps'. For the full-spectrum refutation of MMT see cross-references MMT.

For more about sectoral balances see AXECquery.

For more about Public Deficit = Private Profit see AXECquery.

***

Twitter June 26, 2018

***

COMMENT on peterc on Ivan Horrocks — Job guarantee programmes: back to the future? on Jan 15

MMT is three things: theory, policy, activism.

The theory is provably false. Because of this, MMT policy proposals have no sound scientific foundations. This, though, does not matter much for the MMT activists because these folks present themselves as the can-do good guys, the real Progressives, the benefactors of WeThePeople who care for the unemployed, the vulnerable, the poor pensioners, the indebted students, and the environment. The activists use MMT as a grab bag of arguments without any concern about consistency, truth, or scientific validity.

MMT activists, like all political agenda pushers, give a shit on theory/science/truth but on occasion put on the cloak of science in order to enhance respectability/credibility/ authority. Academic MMTers are not different from the rest of economists who claim to do science since Adam Smith/Karl Marx but only push a political agenda and deceive the general public with a fake Nobel.

In sum, MMT is bad theory, MMT is bad policy, MMTers are bad people. MMT is not much different from Walrasianism, Keynesianism, Marxianism, and Austrianism.

***

Twitter Jun 04, 2021 Continous deliberate deception of WeThePeople by academic economics

MMT is NOT bold policy but spineless fraud

Comment on Pavlina Tcherneva on ‘Tcherneva, Sawicky and Kaboub on MMT and policy’

Blog-Reference

“There is nothing more crippling to a bold policy agenda than the myth that the government can run out of money. This myth is behind every But how will you pay for it? objection to proposals such as a Green New Deal and Medicare for All. New House Majority Leader Nancy Pelosi (D-Calif.) has even proposed instituting self-defeating PAYGO (pay as you go) rules, which would require all new government spending to be matched with increased revenue, wrongly prioritizing the balancing of the budget over the well-being of the public.”

Imagine PAYGO is institutionalized, does this prevent bold social policy? Not at all! Under PAYGO conditions, a Green New Deal and Medicare for All can be financed by a reduction of military spending and higher taxes for the rich. This, of course, is anathema among MMTers. Why? Because MMTers are fake Progressives.

MMT is about permanent deficit spending and this doctrine comes under the headline of Functional Finance. Now, macroeconomics tells one that Public Deficit = Private Profit and from this follows that permanent deficit spending amounts to a permanent free lunch for the one-percenters. The social benefits that can be achieved with deficit spending are paid for in real terms through stealth taxation by the ninety-nine-percenters themselves.

Self-styled MMT Progressives use the Green New Deal and Medicare for All as a pretext for public deficit-spending/money-creation that ultimately benefits the one-percenters. Because they are agenda-pushers for the Oligarchy, MMTers never answer the question How will you pay for it? with cutting military spending and taxes for the rich. The boldness of Progressives ends exactly where the Oligarchy loses its sense of humor.

To pay for social benefits with deficit-spending/money-creation is simply a political fraud.

Egmont Kakarot-Handtke

Debunking idiots does not prove that MMT is valid

Comment on Chris Beck on ‘Modern Monetary Theory Renders a Critic Incoherent’

Blog-Reference

Yes, there is a lot of idiotic critique of MMT and MMTers can easily debunk it. These lowlife economics wrestling performances are part of Circus Maximus entertainment and distract from the three crucial points, i.e. MMT is bad theory, MMT is bad policy, MMTers are bad people.

(i) “‘MMT promises an end to austerity with the ability to pay for any social policy, infrastructure investment or deficit cancellation without the need to raise taxes. It sounds too good to be true ― and guess what, it is.’ ‘Except that it is true. The U.S. government, which can produce dollars with a few keystrokes, doesn’t need tax revenue to pay for anything.’”

This is technically true, just as it is technically true for any ordinary counterfeiter. Fact is, though, that it is a fraud to bring money at the demand side into the economy. The correct way is to finance the wage bill.#1, #2

(ii) “Under MMT, government deficits are seen as surpluses for the citizens. In fact, the amount of the deficit matches private savings to the penny.”

This is the core of MMT’s scientific failure/fraud. The MMT balances equation reads (I−S)+(G−T)+(X−M)=0, the correct equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0 and it boils down to Public Deficit = Private Profit, i.e. (G−T)=Q, in other words, “the amount of the deficit matches” ― NOT private SAVING but private PROFIT ― “to the penny”.

Because the foundational sectoral balances equation is false the whole analytical superstructure of MMT is false. Because the critics of MMT are also too stupid for the elementary mathematics of macroeconomic accounting, they do not spot the lethal defect.

The lethal defect of MMT is Profit Theory and Distribution Theory. MMT policy guidance has NO sound scientific foundations. It is brain-dead agenda pushing.

(iii) “… if a government can spend what it wants there is no restriction on unhinged leaders spending in a way that kills the planet.” This is NOT a fault of MMT. In fact, governments have found this out long ago and this is how wars have always been financed. This is why Kant ruled deficit-spending out back in 1795 in his essay Perpetual Peace.

(iv) “… MMT explicitly states that it’s taxation that gives the dollar much of its value by creating demand for it. People need dollars to pay their taxes. Therefore, MMT could never be used to justify replacing taxation, just as capitalism couldn’t be used to justify the government owning the means of production.”

This is pure MMT nonsense. The value of money does NOT come from taxation.#3 A Zero-Tax Economy is feasible.#4 In fact, it is the logical limiting case of MMT. Remember “The U.S. government … doesn’t need tax revenue to pay for anything.”?

MMTers simply do not understand the implications of the basic tenets of their theory. Their good luck is that their critics are even more stupid.

Egmont Kakarot-Handtke


#1 The MMT-Yawner: Government is not a household
#2 MMT Progressives: The knife in the back of WeThePeople
#3 The creation and value of money and near-monies
#4 The Third Way: Towards the Happy Zero-Tax Economy

Deficit spending, public debt, and macroeconomic profit/loss

Comment on Simon Wren-Lewis on ‘Should we worry about temporarily raising government debt?’

Blog-Reference

The curious thing about Simon Wren-Lewis’s argument is that it does not contain the word profit. It goes without saying that this omission makes the whole argument worthless.

Simon Wren-Lewis’s argument is based on the underlying standard model. This model is provably false and therefore has to be rectified first. #1

As the correct analytical starting point, the elementary production-consumption economy is defined with this set of macroeconomic axioms: (A0) The economy consists of the household and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Yw, the price is given by P=W/R, i.e., the market-clearing price is equal to unit wage costs. This translates into W/P=R, i.e. the real wage is equal to productivity.

Profit for the economy as a whole is defined as Q≡C−Yw, and saving as S≡Yw−C. It always holds Q≡−S, i.e., the business sector’s profit is equal to the household sector’s dissaving, or the business sector’s loss is equal to the household sector’s saving.

(i) Now, if the government runs a deficit in period 1, total expenditures are C+G, the market-clearing price rises, and the business sector makes a profit Q=G. The output O is redistributed between the household and the government sector. This amounts to taxation in real terms, which is brought about by the price increase.

(ii) The banking system consists alone of the central bank. So, profit takes the form of deposits at the CB. The business sector’s deposits are equal to the government’s overdrafts. For a start, there is no interest on deposits/overdrafts.

There is no longer deficit spending. The price returns to its original level.

This intermediary time lasts from period 2 to t−1, and the government’s debt is simply rolled over. If employment and/or productivity increase, the economy grows.

(iii) In period t, the debt is redeemed. The government taxes the household sector, total expenditures reduce to C−T with T=G, the market-clearing price falls, and the business sector makes a loss of −G. After the government’s repayment, both overdrafts and deposits at the CB are again zero.

As a result, the grandchildren are hit by taxes T but get the whole output O. The business sector’s loss in period t is equal to its profit in t=1. The real taxation happened in t=1, but nominal taxation is deferred to period t.

If the interest rate on overdrafts is, for simplicity, equal to the interest rate on deposits, the government sector taxes the household sector, and the interest payments go to the business sector respectively the firms’ owners a.k.a one-percenters.

The taxation/redistribution over the indefinite intermediary time and the final taxation and redemption in period t could be avoided by immediate nominal taxation in period t=1. Immediate taxation settles ALL issues of intertemporal redistribution and is, from the perspective of the ninety-nine-percenters, preferable to deficit spending and deferred taxation.

From the government’s perspective, stealth taxation through deficit spending is preferable because nominal taxation vanishes behind the time horizon. From the business sector’s perspective, profits now and losses behind the time horizon are also preferable.

So, let the next administration worry about permanently growing public debt. #2

Egmont Kakarot-Handtke


#1 On the saying “We owe the debt to ourselves”
#2 Keynes, Lerner, MMT, Trump and exploding profit

***

REPLY to Simon Wren-Lewis on Jan 25

You sum up: “In policy terms I think it is the last nail in the coffin of what Paul Krugman calls the deficit scolds. Those who argued for austerity because of the burden on future generation, although on weak ground even if r > g, find their argument collapses if g > r.”

Paul Krugman (i) confuses some issues and (ii) lets some negative facts simply disappear by dividing them by infinity.

If the present government deficit spends 100 on current output on behalf of the present generation, then in some future period t, the debt of 100 has to be redeemed. Now Krugman argues that if GDP is currently x and in period t has grown to 1000x, then the burden in terms of Debt-to-GDP is greatly reduced and in the course of time approaches zero. This is undoubtedly true, but misses the point. The debt burden is not reduced by one penny, but only optically by putting it in relation to an arbitrary denominator. If the economy shrinks instead, the relative debt burden increases. And this collapses the argument of Paul Krugman. 

Because nobody can say whether the economy is bigger or smaller in a future period t the whole argument degenerates to an exercise in pointless speculation.

The real problem with government deficit spending is the distributional effect. In crude terms, because of Public Deficit = Private Profit, the Oligarchy gets a free lunch from the government. This, in turn, generates interest income for an indefinite time, i.e., the government taxes WeThePeople and hands the interest over to the Oligarchy. Finally, in some period t, it is NOT the future “generation” who redeems the debt. Instead, the government taxes the future WeThePeople and hands the money over to the future Oligarchy, which has inherited the financial assets = public liabilities.

In sum: compared to immediate taxation, deficit-spending is a bad deal for WeThePeople and a good deal for the Oligarchy.

The intentionally or unintentionally overlooked distributional effect of public deficit-spending is the last nail in the coffin of the soapbox economist Paul Krugman.

***

AXEC141e

MMT: The art of shooting oneself in the head

Comment on Kaivey on ‘Michael Hudson: Oligarchy will never cancel the debt’

Blog-Reference

“Here is maverick economics Professor Michael Hudson on MMT, taken from his book J is for Junk Economics (p.155-7). Hudson is supportive of the theory and the economic policies which it implies.”#1

On the other hand, Michael Hudson maintains: “Every society in history for the last 4,000 years has found that the debts grow more rapidly than people can pay,” he says. “The problem is a small oligarchy of 10 percent of the population at the top to whom all of these net debts are owed. You want to annul the debts to the top 10 percent. That’s what they’re not going to do. The oligarchy is running things. They would rather annul the bottom 90 percent's right to live than annul the money that’s due to them. They would rather strip the planet and shrink the population and be paid rather than give up their claims. That’s the political fight of the 21st century.” (See Intro)

Michael Hudson is either a lousy economist or a schizo.

The macroeconomic Profit Law is given as Q≡Yd+(I−S)+(G−T)+(X−M) and reduces to Q=(G−T) for Yd, I, S, X, M = 0. The reduced Profit Law says that the profit of the business sector Q is equal to the deficit (G−T) of the public sector. In a nutshell: Public Deficit = Private Profit. In other words, permanent deficit spending is a permanent free lunch for the Oligarchy.

Roughly speaking, the MMT policy of deficit-spending/money-creation produces a growing public debt which is, by and large, held by the Oligarchy. And the Oligarchy agrees on rolling over the debt again and again, but does not agree to annul it: “That’s what they’re not going to do.” No, this is the very definition of debt that it has to be repaid eventually. In the meantime, the creditor gathers interest income.

Michael Hudson’s economic schizophrenia consists of promoting MMT and thereby permanently feeding the Oligarchy through deficit-spending and then complaining that 10 percent of society is “running things”.#2

MMTers are too stupid to realize that it is MMT policy itself that empowers the Oligarchy continually.#3

Egmont Kakarot-Handtke


#1 Nick Johnson, Michael Hudson on Modern Monetary Theory
#2 MMT: A free lunch for the Oligarchy
#3 Keynes, Lerner, MMT, Trump, Biden, and exploding profit

***

REPLY to Kaivey on Jan 11

You say: “The government doesn’t charge interest on the government created deficit money, so people can store it without worrying about the interest. So, what’s the problem with some people using it as their savings, even if they are very rich?”

OK, let us go step by step into the political details.

(i) The government follows MMT advice and initiates deficit-spending/money-creation for some worthy social purpose.

(ii) According to the reduced Profit Law, profit of the business sector Q is equal to the deficit (G−T) of the public sector, i.e., Public Deficit = Private Profit.

(iii) Only the central bank exists. Profit takes the form of deposits at the central bank. The central bank pays no interest on deposits.

(iv) Does the business sector keep idle balances at the CB? Hardly. One possibility is profit distribution. Let us assume that all profits are distributed to the firms’ owners, i.e., the Oligarchy. The business sector’s deposits at the central bank go down, and the Oligarchy’s deposits go up.

(v) Does the Oligarchy keep idle balances at the CB? Hardly. They take the money and finance foundations, media, political parties, universities, think tanks, members of the legislative/executive, charities, and a horde of social media trolls. The Oligarchy does not invest in business but in political power.

(vi) The media/academics/trolls then get very busy and tell the world that MMT is a good thing, that it eliminates unemployment and other social woes, that public debt is an asset, that the state cannot go broke, that budget balancers are either yokels or sadists, that MMTers are the real Progressives, that MMT is a scientific breakthrough, and that nobody has to worry about children and grandchildren because they owe the ever-increasing public debt to themselves.

(vii) Eventually, these political investments bear fruit, managed populism pressures for deficit-spending, the “people” get what they want, and the cycle starts again at (i). The whole thing is a positive feedback loop.

Your idea that the Oligarchy puts their distributed profits as savings in a zero-interest account is, of course, possible in principle. This presupposes, though, that the Oligarchy is even more stupid than you, which, however, is an extremely unrealistic assumption.

***

REPLY to Kaivey on Jan 13

You play dumb: “You say the debt has to repaid one day, but why? Some people even say that government deficit spending is ‘debt free’ money.”

Debt has to be repaid because this is the very definition of debt. Otherwise, it is a gift.

The MMT salespeople are hell-bent on selling deficit-spending/money-creation and when people have second thoughts about exploding public debt they are told that this (i) is not a debt at all but savings, (ii) will not be repaid anyway, (iii) is for a good social purpose and only bad people are against helping the unemployed and the poor and the vulnerable, (iv) that the Oligarchy will never cancel the debt, (v) a debt jubilee will eventually solve all problems.

All this is self-contradictory blather.

Your role as a member of the MMT sales team is to play down the negative consequences of MMT policy for the ninety-nine-percenters and to distract from the fact that the one-percenters/Wall Street/Oligarchy are attempting to get the institutional profit-generator treasury/central bank politically into their hands and to execute the Functional-Finance program of permanent deficit-spending/money-creation, which is nothing but a program of permanent self-alimentation.

Take notice all morons from the Walrasian, Keynesian, Marxian, Austrian, and MMT schools, macroeconomic profit does not come from the exploitation of workers or the value creation of entrepreneurs, but from deficit-spending of the household and government sector. Your profit theories are false since Adam Smith. Your ideas about Capitalism and Socialism are proto-scientific garbage. Your economic policy proposals are a political fraud.

Econogenics in action

Comment on Barkley Rosser on ‘How Shocking Was Shock Therapy?’

Blog-Reference

Barkley Rosser reports: “Very important was that it [Poland] did not undo its generous social safety net, especially its generous pension system. This was a central issue in the 1993 election, with both Blacerowicz and Sachs unhappy about this outcome. I remember well the 1994 ASSA convention at which Sachs gave a major speech in which he basically whined about this election outcome and essentially accused the Polish people of being a bunch of spoiled brats for wanting to hang onto their supposedly overly generous pension system.”

Note first of all that the organization of the Polish economy is the business of the Legitimate Sovereign of Poland. The economic stand-up comedian Jeffrey Sachs does NOT by any stretch of the imagination come close to something resembling a Legitimate Sovereign. So, his whining at the ASSA convention about the Polish people is a non-event, except perhaps for the retarded members of the American Economic Association.

What economists have not fully realized to this day is that they have no mandate to dabble in politics because (i) this violates the principle of the separation of politics and science, (ii) they lack the true theory of how the economy works.

That economists, in their utter incompetence, make matters worse is a regularly repeated experience throughout history: “Late in life, … Napoleon claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner)

To this day, economists do not know how the economy works. Employment Theory and Profit Theory are provably false. #1, #2 The belief that economists can make a contribution to social welfare is patently absurd. It is just the opposite. #3

Well-informed people know by now that economists are not trustworthy scientists but stupid/corrupt agenda pushers. #4

Egmont Kakarot-Handtke


#1 Macro for dummies
#2 Rethinking the Profit Law
#3 How to minimize econogenic outcomes
#4 Trust in economics as a science?

***

REPLY to Barkley Rosser on Jan 11

You say: “Example: relation between wages and employment. Sure, sometimes higher wages are associared wirh higher employment, but sometimes not. Very complicated, with you not remotely getting any of that, just repeating your same old nonsense.”

After 200+ years of research, this is what the representative economist has to say about one of the most fundamental relations of his subject matter. And he does not even realize that this absolutely vacuous statement is the open declaration of scientific bankruptcy. #1

As Feynman made clear: “By having a vague theory it is possible to get either result. ... It is usually said when this is pointed out, ‘When you are dealing with psychological matters things can’t be defined so precisely’. Yes, but then you cannot claim to know anything about it.”

And that is the simple fact of the matter: economists do not know anything about how the economy works. It’s all wish-wash. From this, though, follows that economists are not qualified to give economic policy advice.

“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 a true theory. Their good luck is that in the political realm, scientific qualities are not in great demand, but propaganda and entertainment qualities are.

So, at an early stage in the development of their discipline, economists threw scientific principles out of the window and started think-tanking for some businessman/billionaire or some three-letter government agency. The Cowles Foundation for Research in Economics is one prominent example of this, and it produced the General Equilibrium Theory and many Nobel Laureates.

It is common knowledge by now that GE is one of the worst scientific failures of all time. However, what is conveyed to the general public is the impression that it has been rigorously proved by the finest thinkers with the most advanced mathematical tools that the market economy is a stable system and produces maximum welfare.

The Cowles Foundation is only the tip of the iceberg. It is unknown at present to what degree economics has degenerated to mere journalism/propaganda/agenda-pushing. It is a bad omen, indeed, that fake scientists like Paul Krugman are considered thought-leaders. #2

If there is still some scientific spirit around in the profession, you have not been blessed with it. That much is absolutely certain.


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

***

REPLY to Barkley Rosser on Jan 12

Tobin said: “We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price.”

You say: “Sure, sometimes higher wages are associared wirh higher employment, but sometimes not.”

The macroeconomic Employment Law states unambiguously: “Overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.”#1

The Employment Law consists of measurable variables and is testable. 

After 200+ years of blather, the representative economist does not know one of the most fundamental relations of his subject matter. Because of this, his policy advice is counterproductive.

Economists are a hazard to humanity. Economic crises are econogenic. The difference between iatrogenic and econogenic is that doctors are sued, but economists are not.

#1 No doubts about wage-led growth

***

REPLY to Barkley Rosser on Jan 15

A funny economist you are, indeed. You are very vague about the all-decisive relationship between wage rate and employment, but you are absolutely certain about MbS’s role in the Khashoggi affair: “He is guilty guilty guuilty”.

It is quite obvious that you are not a qualified scientist but some retarded political agenda pusher.

While the scientist seeks a clear true/false answer to a given problem, the political economist tries to keep everything in the bottomless swamp of inconclusive blather. 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) This methodological message was not lost on fake scientists. They deliberately keep everything in the swamp of inconclusiveness where “nothing is clear and everything is possible” (Keynes).

You argue: “Funny how you declare something is an absolute ‘Employment Law,’ but then admit that it is ‘testable,’ which suggests the possibility that it might not be true. As a matter of fact, the relationship between wages and employment is one that has had so much empirical testing that I have lost count, and, sorry, but there is no agreed upon conclusion, with this getting into all sorts of messes over data ets and econometric techniques, and on and on.”

Funny that you seem to never have heard of Popper’s: “A theory that is non-refutable is not scientific.”#3 So, testable is a quality criterion that every theory must meet. #4 

The Employment Law is a macroeconomic relationship. What indeed has been tested ad nauseam is microeconomic relationships. The inconclusive results of this wrong approach say NOTHING about the validity of the macroeconomic relationship, which states unambiguously: “Overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.” This tells one that wage-cutting was the wrong policy in the Great Depression. Thank you, economists! 

So why do you not simply try to empirically refute the macroeconomic Employment Law?

I see, your main job as a scientist and economist is foreign policy, and your most urgent task is to punish MbS: “I think being prevented from becoming the King of Saudi Arabia will be for him the worst punishment.”

That’s academic economics after 200+ years of “scientific” research.

#1 John Hicks, fake scientist

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

#3 See summary charts

#4 Go! ― test the Profit and Employment Law

***

REPLY to Barkley Rosser on Jan 16

You say: “As it is, it is hard to get a clean test of what you claim is your Law, although it was previously formulated by Keynes, whom you mostly disparage.”

The point at issue is neither “my Law” nor the psychological profiling of Keynes. Economics is about how the economy works and not gossiping about economists.

The point at issue is that Keynesian macroeconomics is provably false. More precisely, Keynes’ Profit Theory is proto-scientific garbage. Because the foundational concepts profit/income/saving are ill-defined, the whole analytical superstructure, including employment theory, is false. #1, #2

To summarize that Keynes was an incompetent scientist who did not understand the foundational concept of his subject matter ― profit ― is a statement of fact.

But Keynes is history, and the actual scientific embarrassment is that After-Keynesians have not spotted Keynes’s inexcusable blunder to this day.

It is NOT a disparagement to summarize that economics is a failed/fake science and that contemporary economists are incompetent scientists. That economists are stupid/corrupt agenda pushers since Adam Smith/Karl Marx is a historical fact.

Your posts just prove the rule.

#1 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster

#2 For more details, see cross-references Keynesianism

***

REPLY to Barkley Rosser on Jan 16

You say: “BTW, if your macro version of the law is a true testable law, then tell us about all the tests that have been done that verify it, making sure that there are none that question those tests.”

In your economic incompetence, you have not realized that the macroeconomic version of employment theory is embodied in the Phillips Curve. The Phillips Curve has been thoroughly tested and refuted. This is an indirect corroboration of the axiomatically correct Employment Law.

As it happens, there is a new San Francisco Fed study out, and I commented on the issue. See False economic theory makes bad economic policy; Comment on Mish Shedlock on ‘Yet Another Fed Study Concludes Phillip’s Curve is Nonsense’

Mish Shedlock summarizes: “Proponents of the Phillips Curve keep looking for ways in which it works. Yet, another study concludes it doesn’t. The Phillips Curve, an economic model developed by A. W. Phillips purports that inflation and unemployment have a stable and inverse relationship. This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.”

The Phillips Curve (better: bastard Phillips Curve) is the centerpiece of standard employment theory. Economists have gotten employment theory wrong for 200+ years. The Phillips Curve has always been the highly visible landmark of economists’ scientific incompetence.

“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)

The materially/formally inconsistent Phillips Curve has to be replaced by the correct macroeconomic Employment Law. For details see

• NAIRU, wage-led growth, and Samuelson’s Dyscalculia

• Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster

• NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy

• Full employment, the Phillips Curve, and the end of Gaganomics

***

REPLY to Barkley Rosser on Jan 18

Let us put things into perspective.

In my 2012 working paper, I showed in detail the defects of the bastard Phillips Curve and the standard employment theory. #1 Relating to a recent San Francisco Fed study, a commentator summarized: “Various studies have proven the theory [Phillips Curve] is bogus.” This is a corroboration of the critical part of my working paper.

In about the same period, you wasted your time reading the international press and doing some foreign policy agenda-pushing, e.g., “MbS Must Go”.

You are still under the illusion that dabbling in politics is the right and duty of an economist.

To this day, your Profit Theory and Employment Theory are false. This, though, does not matter in an environment with rather low scientific standards.

Your academic colleague and MMT agenda pusher, Stephanie Kelton, is currently actively deceiving the general public. #2 What about a “Kelton Must Go” from Barkley Rosser?

#1 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster

#2 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick

***

Graphic AXEC106l