No future for Socialism and Capitalism

Comment on Robert Wolff/Tom Hickey on ‘The Future of Socialism’

Blog-Reference

The philosopher Tom Hickey cites the Professor Emeritus of Afro-American Studies: “In what follows, I propose to take as my text a famous statement from Marx’s A Contribution to the Critique of Political Economy ― a sort of preliminary sketch of Das Kapital ― and see what it can tell us about the capitalism of our day. I shall try to show you that Marx was fundamentally right about the direction in which capitalism would develop, but that because of his failure to anticipate three important features of the mature capitalist world, his optimism concerning the outcome of that development was misplaced. Along the way, I shall take a fruitful detour through the arid desert of financial accounting theory. Here is the famous passage, from the preface of the Contribution, published in 1859: ‘No social order ever disappears before all the productive forces for which there is room in it have been developed, and new, higher relations of production never appear before the material conditions of their existence have matured in the womb of the old society.’”

It is pretty obvious that Marx’s description of Capitalism is sociological/historical/ philosophical. Marx claimed to do science but he was never more than a storyteller/ agenda-pusher and never understood how the economy works. More specifically, Marx never understood what profit is.#1, #2, #3 This he has in common with the rest of the economists.#4 Economics is a failed/fake science and Marx is an integral part of the mess: the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, etc. ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all have the foundational concept of the subject matter ― profit ― wrong.

From the most embarrassing failure in the history of modern science, it follows that all these incompetent sociological/historical/philosophical blatherers have to be buried for good at the Flat-Earth Cemetery.

To make matters short here, the macroeconomic Profit Law is given as Q≡Yd+(I−S)+(G−T)+(X−M). In the elementary case of a production-consumption economy, this reduces to Q≡−S, i.e. the mirror image of household sector saving S is business sector loss −Q. The mirror image of household sector dissaving (-S) is business sector profit Q. The point to grasp is that profit for the business sector as a whole has NOTHING to do with exploitation or class struggle but with deficit spending. Because Marx did not understand how the economy works his sociological/historical/philosophical storytelling about Capitalism was and is proto-scientific BS. His prophecies about the future of Capitalism are on the same level as tea leaves reading.

Capitalism and Socialism are monetary economies and subject to the same fundamental laws. The macroeconomic Profit Law holds for the USA, the USEu, Russia, and China and it is absolutely independent of the ownership of the firms, or of the self-identification as capitalistic or socialistic, or of other subjective factors. The macroeconomic Profit Law consists of precisely measurable variables and is testable.

The reduced macroeconomic Profit Law Q≡(I−S)+(G−T) tells one that profit in the monetary economy is positive (i) if business sector investment I is greater than household sector saving S and (ii) if the State runs a deficit, i.e. (G−T)>0.

Case (i) is characteristic of early Capitalism and case (ii) is characteristic of late Capitalism. Currently, the so-called free-market economy is on the full life support of the State. The macroeconomic Profit Law boils down to Public Deficit = Private Profit and thus the Oligarchy’s financial wealth and public debt (currently $22 trillion) grow in lockstep. Capitalism will break down as soon as the sum of (i) and (ii) turns negative and NOT because the “material conditions of their existence have matured in the womb of the old society” or because of a social/political revolution.#5

Neither orthodox nor heterodox economists understand to this day how the economy works and what profit is. Robert Wolff maintains “… I remain persuaded that Karl Marx has something important to teach us about the world in which we live today.” Nothing could be further from the truth but this is forever beyond the horizon of stupid/corrupt storytellers like Robert Wolff, Tom Hickey, and the rest of failed/fake economists. These folks have NO future as scientists.

Egmont Kakarot-Handtke


#1 Dear idiots, Marx got profit and exploitation wrong
#2 Karl Marx, fake scientist
#3 Profit for Marxists
#4 The Profit Theory is False Since Adam Smith
#5 Mathematical Proof of the Breakdown of Capitalism

Related 'Who is really a scientist?' and 'Socialism and scientific incompetence' and 'Capitalism, poverty, exploitation, and cross-over exploitation' and 'No exploitation, no classes'. For details of the big picture see cross-references Profit and cross-references Accounting and cross-references Political Economics/Stupidity/Corruption and cross-references Paradigm Shift.

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AXEC109i The Profit Theory is false since Adam Smith

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Twitter/X Dec 30, 2023

Who is really a scientist?

Comment on Barkley Rosser on ‘Who Is Really A Socialist?’

Blog-Reference

Forget the whole Capitalism/Socialism thing. Neither left-wing nor right-wing economists know how the economy works.

Because economists have to this day NO scientifically valid Profit-, Money-, Distribution- or Employment Theory, economic policy guidance from left-wing to right-wing has NEVER been more than brain-dead agenda pushing.

Economics is a failed science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent, and all got the foundational concept of the subject matter ― profit ― wrong.

As a result, since Adam Smith/Karl Marx economic policy guidance NEVER has had sound scientific foundations.#1 This, of course, holds also for Marxism and its derivatives.

• Marx’s profit theory is provably false.#2
• As a consequence, the concepts of exploitation and classes are false.
• Marx lacks the concept of cross-over exploitation.#3, #4
• Because the foundational concepts are false, Marx’s whole analytical superstructure is false.
• Because the theory is defective, Marxian economic policy guidance was bound to fail from the very beginning.
• After-Marxians have not spotted Marx’s foundational blunder to this day.#5

Marxians are scientifically incompetent just like non-Marxians and all together are only employable as clowns and useful idiots in the political Circus Maximus.

Forget the whole Capitalism/Socialism thing. Economists’ contributions to the development of the Good Society were just as helpful as those of Flat-Earthers.#6 All real progress in the last 200+ years has come from genuine scientists, not from political soapbox blatherers.

Egmont Kakarot-Handtke


#1 Karl Marx, fake scientist
#2 Profit for Marxists
#3 Capitalism, poverty, exploitation, and cross-over exploitation
#4 If we only had classes
#5 Economists simply don’t get it
#6 Econogenics in action

For the concept of cross-over exploitation see AXECquery.

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REPLY to Barkley Rosser on Feb 19

The so-called Russian Revolution was neither Russian nor a Revolution. It was a quite ordinary coup d’état engineered by foreign powers. It is well known that Lenin was sent with some starting capital in a sealed train from Zurich to Sweden/Russia courtesy of the Generalstab. The plan worked fine until the Peace of Brest-Litovsk.#1

All this had NOTHING AT ALL to do with Marx’s economic theory. This theory is proto-scientific garbage. However, it provides a justification for taking over the “commanding heights” of the state. Clearly, Marxism was used by Lenin as a pretext much like religion was used in the old days as a pretext for conquest.

Since Smith/Marx, the whole Capitalism/Socialism debate has NOTHING to do with science, that is, with the materially/formally consistent theory about how the economy works, but with brain-dead agenda pushing.

So, your question Who is really a Socialist? has as much economic/scientific content as Who murdered Mr. Khashoggi?


#1 "The Treaty of Brest-Litovsk was a peace treaty signed on March 3, 1918, between the new Bolshevik government of Russia and the Central Powers (German Empire, Austria-Hungary, Bulgaria, and the Ottoman Empire), that ended Russia’s participation in World War I.” (Wikipedia)

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REPLY to Barkley Rosser on Feb 20

You say: “… most economists think it is a big deal whether or not an economy is run as a command socialist system or a market capitalist system. They tend to behave very differently in well known ways.”

Capitalism and Socialism are (i) political belief systems (ii) economic theories. As political belief systems, they are on the same level as religious belief systems, that is, they are literary fabrications and storytelling or, as Marx called it, ideologies. The subject matter of ideologies are NONENTITIES (God, paradise, classes, supply-demand-equilibrium, world spirit, etcetera) but despite the fact that ideologies have no reality content, they are a big deal for most people.

Ideologies are the subject matter of Psychology, Sociology, Political Science, History etcetera. The well-known problem with History is that it is for the greater part literary fiction.

Economics, on the other hand, is a systems science and deals with how the actual economy works. Science materializes itself as true theory, with truth well-defined as material and formal consistency. Theory is different from storytelling. Theory has ninety-nine percent reality content, storytelling one percent.

Capitalism and Socialism are allegedly underpinned by true theory. This, though, is a bad joke. General Equilibrium Theory and Marxianism is proto-scientific garbage. So Capitalism and Socialism are ultimately vacuous belief systems.

The fact of the matter is that the monetary economy can be described by economic laws, the Profit Law for example. It is given as Q≡Yd+(X−M)+(G−T)+(I−S) and it holds for the USA, Russia, and China and it is absolutely independent of the ownership of the firms or from the self-identification as capitalistic or socialistic, or from the agenda pushers that occupy the political commanding heights.

For the past 200+ years, economists were so much occupied with political propaganda and agenda-pushing that they had no time for genuine scientific work. This is why Walrasianism, Keynesianism, Marxianism, and Austrianism are mutually contradictory, axiomatically false, and materially/formally inconsistent. Economics is a failed science, economists are not scientists but storytellers and useful political idiots.

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REPLY to Barkley Rosser on Feb 21, Cross-posting

Dear idiots, Marx got profit and exploitation wrong
Comment on Peter May on ‘A communist manifesto for money?’

Peter May recaps: “Marx is saying that money ― a monetary production economy ― is the basis for capitalism since capitalists use money to produce goods for sale for more money ― investment is for return, that is, profit. The profit comes from the wage being less than the market price of commodities produced by wage labor. The end-in-view is not to provide a rationale for abolishing money but rather for terminating the extraction of economic rent in the form of ‘surplus value,’ profit accruing from unpaid labor time.”

Marx’s definition of profit is ultimately based on the Labour Theory of Value which does not relate to the economy as a whole.#1 But Marx also applied macroeconomic reasoning: “How can they continually draw 600 p. st. out of circulation, when they continually throw only 500 p. st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.”

This, indeed, is the crux of Profit Theory. To come to the point, Marx got the answer wrong.#2 Here is the short proof.#3

(i) The objectively given and most elementary systemic configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm.

(ii) The elementary production-consumption economy is defined by three macroeconomic axioms: (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.

(iii) The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. X=O.

(iv) The monetary profit of the business sector is defined as Q≡C−Yw,

(v) The monetary saving of the household sector is defined as S≡Yw−C.

(vi) Ergo Q≡−S.

The balances add up to zero. The counterpart of household sector saving S is business sector loss −Q. The counterpart of household sector dissaving −S is business sector profit Q.

For a start, the household sector’s budget is balanced, i.e. C=Yw. From this follows that macroeconomic profit is zero. The market-clearing price is given by P=W/R and from this follows W/P=R, i.e. the real wage is equal to the productivity. The workers get the whole product.

Now, the owner of a single macroeconomics firm can do what he wants, i.e. lengthen the labor time or cut wages, nothing happens to profit and the real wage.#4 In Marx’s impeccable logic: “From nothing comes nothing. The capitalist class cannot draw more out of circulation than they throw into it.” They throw Yw in and get C out and because of C=Yw macroeconomic profit is zero.

The business sector can only get more out of the circulation if the household sector throws more in, that is, if the household sector deficit-spends/dissaves. This is what the most elementary version of the Profit Law says, i.e. Q≡−S. The logical minimum condition of deficit spending is a banking system that lends money to the households.

So, profit does NOT come from exploitation but, in the most elementary case, from the growth of the household sector’s debt. And this, in turn, means that Capitalism does not end with a revolution of the exploited workers but as soon as the growth of private and public debt ends.#5


#1 Basics of Value Theory
#2 Profit for Marxists
#3 Profit Theory in less than 5 minutes
#4 Capitalism, poverty, exploitation, and cross-over exploitation
#5 MMTers make capitalism work

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REPLY to Barkley Rosser, Calgacus on Feb 23 and Blog-Reference MNE

For monetary economies like the USA, USEu, Russia, China, the macroeconomic Profit Law reads Q≡Yd+(X−M)+(G−T)+(I−S) and it holds independently of whether these countries describe themselves as capitalistic/socialistic/mixed and independently of how the commanding heights of the economy are staffed.

The fact of the matter is that in most countries the deficit-spending of the government has become the major source of macroeconomic profit. This means that so-called free market economies like the USA are on full life-support of the state.

The all-decisive political decision in all monetary economies is between breakdown now or growing public/private debt with breakdown later and NOT between private or public ownership.

The composition of the government’s budget is of secondary importance. The economic minimum condition for the continuation of the political status quo is that the deficit is sufficient to produce an overall profit Q given the other sectoral balances. This is the implicit rationale of full employment policy since Keynes.#1, #2 Implicit because it is obvious that politicians/economists do not really understand how the monetary economy works. In the old days, deficit spending has been justified by the urgency of defense against hostile neighbors/Communism/Terrorism now it is justified by the urgency of the avoidance of human extinction.

For the survival of the so-called free-market economy, the allocation of the government’s budget between military or environmental/social spending is a matter of indifference. Politically, though, a Green New Deal sells better than a Space Force or tax reductions for the rich. Thus, the allocation problem boils down to a marketing pitch between the “good” environmental/social guys and the “bad” military/Oligarchy guys.

Independently of the allocation of the government’s budget, it is WeThePeople who is going to pay for it in real terms through either open or stealth taxation. Stealth taxation via the price mechanism is the Invisible-Hand outcome of deficit-spending/money-creation.

No matter under what cloak deficit-spending/money-creation appears it is NEVER for the benefit of WeThePeople as a whole but ― because of the Profit Law Public Deficit = Private Profit ― a free lunch for the Oligarchy. The macroeconomic Laws apply to all monetary economies no matter what stupid/corrupt economists blather about Capitalism/Socialism.


#1 Keynes, Lerner, MMT, Trump and exploding profit
#2 MMTers make Capitalism work

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REPLY to Barkley Rosser on Feb 24

You say: “… during the final years of the Bill Cllinton presidency at the end of the last century, the US government was rnning budget surpluses. But, guess what? Businesses were also enjoying high profits …”

You cannot even read a simple equation. The macroeconomic Profit Law is given by Q=Yd+(X−M)+(G−T)+(I−S) and it boils down to Public Deficit (G>T) = Private Profit Q if the other factors are taken out of the picture for a moment.#1

From the full-length equation follows that a government budget surplus is perfectly compatible with a high macroeconomic profit depending on the other components of the equation.

A refutation requires the test of the full-length equation. This is obvious to any remotely intelligent economics freshman.

How can you talk about capitalism and socialism without any idea about what profit is and how the monetary economy works?


#1 Wikimedia, Profit Law

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REPLY to Barkley Rosser on Feb 25

Your simpleminded distinction between Capitalism and Socialism is long outdated. Since the 1960s, the sub-sectors of the economy where the commanding heights are traditionally staffed with criminal/corrupt/unethical actors (weapons, drugs, money laundering, tax evasion, human trafficking, land theft, waste dumping, etcetera) have grown above-average. So, an updated classification of socio-economic systems should at least include Capitalism, Gangsterism, Socialism.

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REPLY Barkley Rosser on Feb 26

My idiosyncratic macroeconomic profit Law Q≡Yd+(X−M)+(G−T)+(I−S) holds for Capitalism, Gangsterism, Socialism just like Newton’s idiosyncratic Law of Gravity. Only the DISTRIBUTION of overall profit Q between the firms that compose the business sector is different in different national economies.

To the extent that firms of the legal economy are ultimately controlled by the mob, which is NOT visible to the naked eye, the superficial distinction between Capitalism and Socialism becomes progressively meaningless.

Lenin’s take-over of power is better characterized as the implementation of mob rule than socialism. I leave it to your historical erudition to figure out whether something similar has happened to countries that identify themselves as capitalistic or socialistic.

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NOTE on Barkley Rosser’s ‘Is Russia Becoming A Neo-Socialist NEP Economy?’ on Mar 16

The distinction between Capitalism/Socialism is obsolete. The updated distinction is Capitalism/Gangsterism/Socialism.

What does the Neo-Capitalist economy look like? The answer is not in the supply-demand-equilibrium textbooks but on the Internet: “When we look at western countries, especially the USA, we see what some call ‘crony capitalism’ with absolutely fantastic levels of corruptions, huge mega-corporations in control of entire segments of the economy, exports imposed by sanctions and threat of sanctions rather than competitive advantages, feudal labor laws, a ruthless imperialist/colonial policy of systematically robbing those who dare to live above resources the Empire needs or wants.”#1

Accordingly, the commanding heights of the economy are no longer occupied by capitalists/entrepreneurs but by actors/entertainers like Elon Musk.

Whether there is long-range central planning in Neo-Capitalism is unclear. However, the fact that the crucial qualification of presidents like Reagan or Trump or business leaders like Musk is media-suitability lets one guess that at least the casting is centralized in Hollywood.

Unfortunately, Barkley Rosser is stuck with the NEP in interwar Russia and somehow missed that there has been a NEP in the United States in the 1960s. As a result, the economy no longer resembles the classical description of free-market Capitalism.

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REPLY to Barkley Rosser on Mar 17

The economist as a scientist cannot say anything about the political system but he can say something about the economic system. The most important insight is that all monetary economies are governed by the same economic laws. For example, the macroeconomic Profit Law, i.e. Q≡Yd+(I−S)+(G−T)+(X−M), holds independently of whether an economy is capitalist or socialist. More specifically, this Law holds for the USA, Russia, China, the EU, etcetera.

The Law boils down to Q=(G−T), i.e. the profit of the business sector is equal to the deficit of the public sector.

For the USA, this means (i) the profitability of the so-called free market economy is maintained by the state’s permanent deficit spending, (ii) financial wealth grows in lockstep with public debt, (iii) the positive performance of the stock-market is maintained by the operations of the Central Bank.

In sum, the wealth-creation of the so-called free market economy depends on the joint operations of the Treasury/Central Bank. The state produces macroeconomic profit and this money is, in turn, partly used to control the state. The power-infighting between the different factions (military, CIA, FBI, organized crime, media, agriculture/industry/ banking, states, churches/religious groups/sects, political parties, domestic/foreign lobbies, wealthy individuals, etcetera) is NOT the subject matter of economics.

It is characteristic of economists from Paul Krugman to Barkley Rosser that they blather a lot about the ongoing political infighting but have no idea how the monetary economy works. With these unqualified personages, it is no wonder that economics is to this day a failed science.

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REPLY to Barkley Rosser on Mar 18

You say: “The US government ran a budget surplus during the last several years of the Clinton presidency, but, guess what? Corporate profits were at a record high.”

Have you never heard of vector addition?

The macroeconomic Profit Law, i.e. Q≡Yd+(I−S)+(G−T)+(X−M), consists of 4 vectors. The government vector reads Qg=(G−T), i.e. the deficit of the public sector adds to the profit of the business sector and the surplus of the public sector adds to the loss of the business sector, in short, Public Deficit = Private Profit. The negative gov vector, though, can be overcompensated by the other vectors, such that the vector sum is positive.

Your Clinton-era example is proof that you cannot even read a simple equation.

You talk about Capitalism/Socialism and do not understand the Profit Law. What about doing some scientific homework first?

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REPLY to Barkley Rosser on Mar 19

You say: “Your comment shows that you do not know what a fact is, much less broader empirical data.”

The macroeconomic Profit Law consists of measurable variables and is testable in the USA, Russia, China, the EU, etcetera with the precision of two decimal places. That makes it scientifically superior to your political blather about interwar Russia.

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REPLY to Barkley Rosser on Mar 20

You say: “Yes, the variables are measurable, and they are measured all the time, and your claims about what those measurements should show are blatantly false. Corporate profits were very high in the US in the late 1990s at the same time that the budget was running a surplus. Since you claim that that corporate profits equal budget deficit, you are wrong. Period.”

I said: “… the macroeconomic Profit Law, i.e. Q≡Yd+(I−S)+(G−T)+(X−M), holds independently of whether an economy is capitalist or socialist. ... The Law boils down to Q=(G−T), i.e. the profit of the business sector is equal to the deficit of the public sector. For the USA, this means (i) the profitability of the so-called free-market economy is maintained by the state’s permanent deficit spending, …”

For the record: you are wrong, I am right.

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Source Twitter Bloomberg Businessweek Mar 22

Source: Twitter

The Profit Theory is False Since Adam Smith

The real trouble with Capitalism: stupid/corrupt economists

Comment on Chris Dillow on ‘The trouble with capitalism’*

Blog-Reference and Blog-Reference (Link)

Chris Dillow quotes Martin Wolf: “What we increasingly seem to have … is an unstable rentier capitalism, weakened competition, feeble productivity growth, high inequality and, not coincidentally, an increasingly degraded democracy.”

Chris Dillow then sets out to explain the trouble with Capitalism: “The Bank of England has given us a big clue here. It points out that the rising profit share (a strong sign of increased monopoly) is largely confined to the US. In the UK, the share of profits in GDP has flatlined in recent years. Few, however, would argue that UK capitalism is less dysfunctional than its US counterpart. This suggests that the problem with capitalism is not increased monopoly. So what is it? Here, I commend some brilliant work by Michael Roberts. Many of the faults Martin discusses have their origin in a declining rate of profit ― a decline which became acute in the 1970s but which was never wholly reversed.”

The whole intellectual/moral misery of economists is contained in this paragraph. Chris Dillow’s explanation starts with the “share of profits in GDP” and ends with the “rate of profit”. Not only are these entirely different things but macroeconomic profit is not defined, to begin with. The simple reason is that neither Chris Dillow nor Martin Wolf nor Michael Roberts knows what profit is.#1 This sad fate they share with Walrasians, Keynesians, Marxians, Austrians, and MMTers. The dirty secret of economics is that since Adam Smith/Karl Marx economists do not know what profit is.#2, #3 And this means that economics is proto-scientific garbage but economists have not realized it to this day.

To make matters short, the axiomatically correct macroeconomic Profit Law is given by Q≡Qm+Qn with Qm≡Yd+(I−Sm)+(G−T)+(X−M) Legend: Qm monetary profit/loss of the business sector, Yd distributed profit, I investment expenditure, Sm monetary saving/dissaving of the household sector, G government expenditures, T taxes, X exports, M imports. Total profit Q is the sum of monetary and nonmonetary profit/loss. Roughly speaking, monetary profit Qm is determined by the excess of business sector investment over household sector saving, the government’s deficit and the excess of exports over imports. All variables are measurable with the precision of two decimal places. The Profit Law is testable and this settles all questions and ends all blather.

In the elementary case of the production-consumption economy, the Profit Law reduces to Q≡−S, i.e. the mirror image of household sector saving S is business sector loss (-Q). The mirror image of household sector dissaving (-S) is business sector profit Q. The point to grasp is that profit for the business sector as a whole depends on the deficit-spending of the household sector and NOT on the behavior or achievements of Capitalists. Because capital is zero in the elementary production-consumption economy, the concept of a profit rate is senseless.#4

With regard to the State, the Profit Law boils down to Q≡(G−T), i.e. Public Deficit = Private Profit. Public deficit-spending/money-creation is a free lunch program for the Oligarchy. The fact is that the so-called free market economy is on the life support of the State and Wall Street is on the life support of the Central Bank. Macroeconomic profit is in the main produced by public deficits. Financial wealth grows in lockstep with public debt. The Oligarchy, in turn, uses the opulent free lunches to corrupt what remains of the State’s legislative, executive, and judiciary institutions.

Despite the fact that Chris Dillow neither understands what profit is nor how the economy works he ends up with an almost correct summary: “Sadly, though, one effect of capitalism’s crisis has been, as Martin says, to so degrade democracy as to take intelligent economic policy off the agenda.” The fact is, though, that there NEVER has been such a thing as an “intelligent economic policy” because the Profit Theory is false for 200+ years. And this is alone the fault of scientifically incompetent economists.

Egmont Kakarot-Handtke


* Stumbling and Mumbling and Financial Times, Martin Wolf
#1 Profit analysis ― another exercise in economic deception
#2 The dirty secret of Capitalism: Economists have NO idea how Capitalism works
#3 For details of the big picture, see cross-references Profit
#4 There is NO such thing as a “labor share of income”

Related 'Links on “Capitalism. Time for a reset.”' and 'Econogenics in action' and 'Economists’ silly kindergarten games' and 'Macroeconomics: Economists are too stupid for science' and 'Econ 101: Economists flunk the intelligence test at the first hurdle' and 'Circus Maximus: Economics as entertainment, personality gossip, virtue signaling, and lifestyle promotion' and 'There is NO such thing as “smart, honest, honorable economists”' and 'The irrelevance of economics'.

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AXEC123e

Links on “Capitalism. Time for a reset.”

Comment on the new FT campaign*

Blog-Reference and Blog-Reference

Right policy depends on true theory. The reset of economic policy presupposes the reset of economic theory because the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Economics is a failed/fake/cargo-cult science to this day. The reset of economics requires a new set of axioms, i.e. the replacement of false Walrasian microfoundations and false Keynesian macrofoundations by true macrofoundations. Methodologically, this reset is called a Paradigm Shift. The FT is a bit late. The reset has already happened some time ago. See

► True macrofoundations: the reset of economics

For more details see:

► The real trouble with Capitalism: stupid/corrupt economists
► The dirty secret of Capitalism: Economists have NO idea how Capitalism works
► Economics: The greatest scientific fraud in modern times
► The only thing we can learn from economic models is what proto-scientific garbage looks like
► Macroeconomics: Economists are too stupid for science
► After 200+ years even economics becomes a science
► From false micro to true macro: the new economic Paradigm
► The new macroeconomic Paradigm
► The canonical macroeconomic model
► If it isn’t macro-axiomatized, it isn’t economics

Egmont Kakarot-Handtke


* Twitter, Laurie Mcfarlane, FT, The times they are a changin’
and campaign The Financial Times “The new agenda” by The Brooklyn Brothers

Related 'No future for Socialism and Capitalism' and 'Who is really a scientist?' and 'Profit and the Private-Property-Irrelevance Theorem' and 'MMTers make Capitalism work' and 'Economics: failure, fake, fraud' and 'Show first your economic axioms or get out of the discussion'.

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REPLY to S400 on Sep 22

You say: “State planning in China. Seem to work much better than the USAs planning.”

The USA needs no planning because MMTers keep Capitalism going with deficit-spending/money-creation.

► MMTers make Capitalism work

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AXEC121f

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#PointOfProof

Sep 20

Post missing

Zero-sum capitalism

Comment on Chris Dillow on ‘The crisis of positive-sum capitalism’

Blog-Reference and Blog-Reference and Blog-Reference

You say: “Is capitalism a positive-sum or zero-sum game? The answer is both: Smith and Marx both had a point.”

False answer. The correct answer is NEITHER because the profit theory is provably false since Adam Smith/Karl Marx.#1 And this 200+ years old blunder makes that economics will not even appear in a footnote of the history of sciences, or at best as a cautionary example.

In order to see this one has to go back to the most elementary economic configuration, that is, the pure production-consumption economy which consists only of the household and the business sector.

The elementary production-consumption economy is, for a start, defined by three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw) and two definitions (Qm≡C−Yw, Sm≡Yw−C) and from this follows IMMEDIATELY that Qm≡−Sm.#2

This equation says that the business sector’s deficit (surplus) equals the household sector’s surplus (deficit). Put bluntly, monetary loss is the counterpart of monetary saving and monetary profit is the counterpart of monetary dissaving. This is the most elementary form of the macroeconomic Profit Law. The elementary production-consumption economy clearly is a zero-sum system, i.e. Qm+Sm=0, but NOT a zero-profit game.

Profit for the economy as a WHOLE has NOTHING to do with productivity, the wage rate, the working hours, exploitation, competition, innovation, capital, power, monopoly, monopsony, waiting, risk, greed, the smartness/stupidity of capitalists, or any other subjective factors. Total profit/loss is in the most elementary case OBJECTIVELY determined with the precision of two decimal places by the change of the household sector’s debt.

The balances of the business sector, the household sector, the government sector, and the foreign trade sector are interrelated as follows Qm≡−Sm+I+Yd+(G−T)+(X−M), and this is the Profit Law for an open economy (X−M) with a government sector (G−T) and with business investment I and distributed profit Yd.

Let Yd, I, X, M be zero for the moment, so Qm≡−Sm+(G−T). Then, the counterpart of an increased public deficit (G−T) is either increased saving of the household sector Sm or increased profit of the business sector Qm or some combination of the two. In the past decades the US households increased their debt, that is, they were dissaving, i.e. Sm was negative (−(−Sm) gives +). So, BOTH the private and public households ran deficits. From the equation above follows that this boosted monetary profit Qm TWICE. And this is exactly what has been observed and criticized as a catastrophic deterioration of the income distribution.

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 stumble and mumble about capitalism as a zero-sum game.#3

Egmont Kakarot-Handtke


#1 The Profit Theory is False Since Adam Smith and Profit for Marxists
#2 For the complete verbal and graphics supported description of the elementary production-consumption economy see How the intelligent non-economist can refute every economist hands down
#3 For the far-reaching implications of systemic zero-sum see Mathematical Proof of the Breakdown of Capitalism.

Related 'Profit theory in less than 5 minutes' and 'Economists: scientists or political clowns?' and 'Profit and stupidity' and cross-references Profit

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COMMENT on Tom Hickey, peterc on Jul 10

Note that capitalism breaks down ― NOT for social reasons but for mathematical reasons.#1


#1 Mathematical Proof of the Breakdown of Capitalism

MMT, money, value, and transcendental Capitalism

Comment on Peter Cooper on ‘Currency Acceptance, Currency Value, and Transcending Capitalism’

Blog-Reference and Blog-Reference

Peter Cooper argues: “A currency’s role as public utility hinges on currency acceptance. A currency expresses (marxist) value in the sphere of commodity production so long as it represents an amount of socially necessary abstract labor. If so, it is relevant to distinguish two questions: (i) what drives acceptance of the currency? and (ii) what determines the value of the currency?”

Peter Cooper answers the question of acceptance: “Government has the authority to impose taxes (and other obligations) on members of the community and specify what will be accepted in payment. In principle, this authority is bestowed upon government by the community and, ideally, will be exercised in a democratically accountable way.”

This is not correct. Imagine an elementary production-consumption economy consisting of the household sector and the business sector.#1, #2, #3 The business sector pays the wage income Y_w with own IOUs, and the households, in turn, fully spend the IOUs for buying the consumption good output from the business sector, i.e. C=Y_w. The workers will accept the business sector’s IOU’s as payment if they can be reasonably sure that the creation/destruction of IOUs is fraud-safe. This can best be achieved if the business sector’s IOUs are replaced by the central bank’s generalized IOUs, i.e. by fiat money. The acceptance of fiat money does NOT depend on the taxing power of the state but on institutional safeguards.

Peter Cooper answers the question of value: “In Marx’s theory, ‘value’ (defined as socially necessary labor time) governs commodity production and exchange.”

This is not correct because Marx’s Theory of Value is provably false. Marx got profit, exploitation, and classes wrong.#4 To this day, Marx and Marxians lack the concept of cross-over exploitation.#5

From the true macrofoundations follows the macroeconomic Law of Supply and Demand as shown on Wikimedia.#6 It says:

(i) An increase of the expenditure ratio ρ_E≡C/Y_w leads to a higher market clearing price (the Greek letter ρ stands for ratio). An expenditure ratio ρ_E greater than 1 indicates deficit-spending/dissaving/credit-expansion, a ratio ρ_E less than 1 indicates saving/credit-contraction.

(ii) An expenditure ratio greater than 1 makes that macroeconomic profit, i.e. Q≡C−Y_w or Q≡(ρ_E−1)Y_w, is greater than zero.

(iii) Deficit spending, i.e. the move from ρ_E=1 to ρ_E greater than 1 causes a one-off price hike but NOT inflation.

From the macroeconomic Law of Supply and Demand follows the purchasing power of the wage a.k.a. the Value of Money as W/P=R in the elementary case of budget balancing, i.e. of C=Y_w or ρ_E=1. In other words, the Labour Theory of Value is false since the founding fathers. Value does NOT depend on socially necessary labor time.#7 The Value of Money depends on productivity R.

When the government sector is added the macroeconomic Profit Law reads Q≡(G−T)+(I−S) or Public Deficit (G−T) = Private Profit Q if I and S are taken out of the picture for a moment.

So, profit in transcendental Capitalism does NOT depend on the exploitation of the workers but on the deficit spending of the government sector and the household sector. Roughly speaking, transcendental Capitalism is state-sponsored.#8 The accumulated sponsoring is measured by the public debt which stands currently at $22 trillion. The so-called free-market economy is already for a long time on full life-support of the state.#9

Egmont Kakarot-Handtke


#1 This is the true core of macroeconomic premises: (A0) The objectively given and most elementary systemic configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Y_w=WL wage income Y_w is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
For a start X=O, i.e. market-clearing holds. The ratio ρ_E≡C/Y_w is called the expenditure ratio; ρ_E=1 indicates budget balancing of the household sector.
#2 True macrofoundations: the reset of economics
#3 MMT is dead
#4 The thing with profit and exploitation
#5 Capitalism, poverty, exploitation, and cross-over exploitation
#6 Wikimedia AXEC101 Law of Supply and Demand, elementary production-consumption economy
#7 Economics ― nothing but claptrap, twaddle, drivel, slip-slop, wish-wash, waffle, and proto-scientific garbage
#8 No future for Socialism and Capitalism
#9 Keynes, Lerner, MMT, Trump, Biden, and exploding profit

Related 'The objective value of money'. and 'MMT: fundamentally false' and 'Warren Mosler: scientific dilettante and political fraudster' and 'MMT: The fusion of Wall Street and Academia' and 'Rethinking the Profit Law' and 'Basics of Value Theory' and 'Mathematical Proof of the Breakdown of Capitalism'.

How to minimize political confusion

Comment on Peter Radford on ‘Let’s all blame capitalism’

Blog-Reference

“I realize it’s fun to be ideologically committed, and that a binary worldview make life simpler, but we need to get beyond that divide.”

Economics started as Political Economy and has never recovered from getting off at the wrong foot. Your fundamental error consists in depicting economics as a world view. On the surface it is and exactly this has always been its fundamental defect.

The binary code of world views is good/bad. Accordingly, the discussion since 200 years has been whether capitalism as a specific form of organizing the national/world economy is good/bad. This discussion has been complicated — to say the least — by mixing it up with the political issue of democracy/autocracy.

Your personal criterion reduces to good old individualistic utilitarianism: “My family was liberated by the Industrial Revolution. Capitalism, if that’s what we describe the basic economic model of the past two hundred years or so, has done me proud.” That is fine for the Radford family but begs the question.

The binary code of science is true/false. And the task of economics is not to produce a world view but to explain how the actual economy works. What we have at the moment is, broadly speaking, Walrasianism, Keynesianism, and a conglomerate of political/ sociological/historical/individual storytelling.

According to well-defined scientific criteria all these approaches are false. Because economists do not know how the monetary economy works the question whether capitalism is good/bad lacks any foundation whatsoever.

Until now economics consisted essentially in praising/blaming capitalism. This is a post-Enlightenment sequel to praising/blaming Catholicism/Protestantism/Islamism/Hinduism and other belief systems.

Going beyond this unsatisfactory state of affairs means in specific and concrete terms to advance from the proto-scientific state to the scientific state, in other words, to stop producing worthless opinions and to start producing valuable knowledge.

The pivotal question for Heterodoxy is not whether English capitalism has been good/bad for the Radford family but whether economics is true/false. As Schumpeter summed up the situation: “We are not yet out of the wood; in fact, we are not yet in it.”

The alternative between left/right has always been a political distraction, the real choice for every student of economics since Adam Smith has been between political junk and science. The sad state of economics proves that the representative economist has consistently preferred the former.

What is required most urgently in order to minimize political confusion among the general public and to secure a fresh start is an explicit dishonorable discharge of economics from the sciences.

Egmont Kakarot-Handtke

MMTers make Capitalism work

Comment on John Atcheson on ‘Let’s Just Admit It: Capitalism Doesn’t Work’

Blog-Reference

John Atcheson summarizes: “In short, we are essentially creating debt for future generations and calling it wealth creation.”

That, of course, is true because Public Deficit = Private Profit. But who is “We”?

“We” that are the Deficit Owls on Twitter, that is Stephanie Kelton et al. in the yellow press,#1 Warren Mosler et al. in the financial community,#2 Bill Mitchell et al. in academia,#3 that is the philosopher Tom Hickey in the econblogosphere, one Konrad in the spiritual parallel universe, that are the deficit-spenders/money-creators from the history of economic thought,#4 and many others. “We” that is first and foremost the MMT agenda pushers.#5

Capitalism works because of the macroeconomic Profit Law Q_m≡Y_d+(I−S_m)+(G−T)+(X−M) which, oddly enough, economists do not understand since the founding fathers.#6, #7 The Profit Law tells “Us” also that Capitalism will eventually break down.#8

The MMTers’ assertion that debt does not matter and that the sovereign money creator cannot go bust is somewhat beside the point. Capitalism lives literally on borrowed time.

Egmont Kakarot-Handtke


#1 The Kelton-Fraud
#2 MMT: The one deadly error/fraud of Warren Mosler
#3 Bill Mitchell, MMT’s fake scientist
#4 Keynes, Lerner, MMT, Trump and exploding profit
#5 For the full-spectrum refutation of MMT see cross-references MMT
#6 Truth by definition? The Profit Theory has been axiomatically false for 200+ years
#7 Wikipedia and the promotion of economists’ idiotism (II)
#8 Mathematical Proof of the Breakdown of Capitalism

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REPLY to Tom Hickey on Jul 19

“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 true theory states that macroeconomic profit is given by Q_m≡Y_d+(I−S_m)+(G−T)+(X−M).#1 Because all variables are measurable with the precision of two decimal places the Profit Law is testable.

The Profit Law is free of all Human-Nature factors.

The minimum condition for the monetary economy to work ― Capitalist, Socialist, Communist does NOT matter ― is that macroeconomic profit is greater than zero. Otherwise, the monetary economy breaks down.

According to the axiomatically correct Profit Law, one way to produce profit is deficit-spending/money-creation, i.e. Q_m=(G−T), i.e. Public Deficit = Private Profit.

• MMT’s economic policy guidance boils down to deficit-spending/money-creation.
• MMT agenda pushers promote the production of profit.
• Ultimately, MMT policy is causal for the unequal distribution of income/financial wealth.

It does not matter how MMTers see themselves or present themselves in public ― that’s all in the imagination ―, objectively they secure the perpetual self-financing of the Oligarchy.


#1 Wikimedia AXEC143d Profit Law and Sectoral Balances Equation

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Twitter/X Dec 15, 2024 Not bad, only six years behind the curve

Profit and the Private-Property-Irrelevance Theorem

Comment on Barkley Rosser on ‘Duncan Foley On Socialist Alternatives to Capitalism’

Blog-Reference and Blog-Reference

When proven to be a fake scientist without any understanding of the foundational economic concept of profit, Barkley Rosser answers: “But then, after all these denunciations, when we finally come to the grand presentation of his one and only true theory of profit, it turns out to be, as I said above, a minor accounting variation on Keynesian income and product accounts, a variation well known and long accounted for by the relevant economists who have a need to deal with this minor variation (all about retained earnings! the ultimate meaning of all economics!). It is a giant nothingburger involving no paradigm shift or anything at all of any serious interest to anybody.”

The surrealism of the matter is that the economist Barkley Rosser comments on Capitalism and Socialism and has no idea about what profit is. The fact is that he spent his academic life in behavioral economics which is not more than a mix of sociology/psychology/ anthropology for cargo cult scientists. Barkley Rosser never understood that economics is NOT a social science but a systems science.

Here are the facts. Economics is a scientific failure.#1 What first of all has to be done is the Paradigm Shift from microfoundations to macrofoundations.#2 From the correct axiomatic foundations then follows the macroeconomic Profit Law with increasing complexity:#3

• Q_m≡−S_m in the elementary production-consumption economy,
• Q_m≡I−S_m in the elementary investment economy (note I is NEVER equal S_m),
• Q_m≡(G−T)+I−S_m in the investment economy with government deficit/surplus,
• Q_m≡Y_d+(X−M)+(G−T)+I−S_m in the open economy with distributed profit.

Legend: Q_m monetary profit/loss, S_m monetary saving/dissaving, I investment expenditures, G government spending, T taxes, X export, M import, Y_d distributed profit.

Written as sectoral balances this gives (X−M)+(G−T)+(I−S_m)−(Q_m−Y_d)=0. The axiomatically correct sectoral balances equation compares to the false equation (X−M)+(G−T)+(I−S_m)=0 which goes back to Keynes and constitutes to this day the explicit formal foundation of Post-Keynesianism and MMT.#4

The Profit Law says in the most elementary version that profit for the economy as a whole is equal to dissaving, that is, it has NOTHING at all to do with exploitation, greed, constrained optimization, or any other psycho-social factors.#5 The comprehensive Profit Law consists exclusively of measurable variables, therefore, macroeconomic profit can be objectively determined with the precision of two decimal places.

The Profit Law holds for the monetary economy, no matter at which historical stage the economy actually is, and it is independent of the given legal order, in particular absolutely independent of the definition of property rights. In other words, the Profit Law holds for capitalist USA, communist Soviet Union, socialist/mixed Russia, and state/social China.

Because economists NEVER understood profit and have NEVER figured out the correct macroeconomic Profit Law, society is plagued for 200+ years with a brain-dead political discussion about Capitalism and Socialism and economic policy guidance that has NO sound scientific foundation.

For the welfare of society, failed/fake economists are worse than the Four Horsemen.

Egmont Kakarot-Handtke


#1 Economics: 200+ years of scientific incompetence and fraud
#2 True macrofoundations: the reset of economics
#3 Rethinking the Profit Law
#4 Rectification of MMT macro accounting
#5 Capitalism, poverty, exploitation, and cross-over exploitation

Immediately preceding Note on ‘Duncan Foley On Socialist Alternatives to Capitalism’.

Related 'Profit: after 200+ years still elusive' and 'Economists understand neither Capitalism nor Socialism'.

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Wikimedia AXEC109i

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REPLY to Barkley Rosser on May 3 and Blog-Reference MNE

Barkley Rosser is in great danger to lose his last two brain cells: “So. Thornton, Egmont has done you a favor and laid it all out, completely verifying everything I said. His system is a minor accounting variation on the basic Keynesian national income and accounting system, with only accounting for Y_d, distributed profit, as the difference.”

The axiomatically based macroeconomic Profit Law is NOT a variation of the Keynesian income and accounting system but the REFUTATION of the formal foundations of Keynesianism. Because the formal foundations are false the whole analytical superstructure of Keynesianism is false.

For details see:

• How Keynes got macro wrong and Allais got it right
• Keynes’s Missing Axioms
• The Common Error of Common Sense: An Essential Rectification of the Accounting Approach
• Why Post Keynesianism Is Not Yet a Science
• For the full-spectrum refutation of Keynesianism/Post-Keynesianism/MMT see cross-references Keynesianism

Keynes did NOT get profit right and every economist with more than two brain cells knows this: “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.)

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REPLY to Barkley Rosser on May 4 and Blog-Reference MNE

I have rated your scientific competence already with zero but now things are getting even worse.

It should NOT be too difficult even for a dim-witted economist to see the difference between the two balances equations:

(i) (X−M)+(G−T)+(I−S)−(Q−Y_d)=0, AXEC=axiomatically true,

(ii) (X−M)+(G−T)+(I−S)=0, Post-Keynesianism/MMT=false.

When simplified to the bare bones, i.e. X, M, G, T, Y_d all 0, then we have:

(iii) Q=I−S macroeconomic profit is given as the difference between investment and saving,

(iv) I=S saving equals investment.

Eq. (iv) is the Keynesian Ur-Blunder: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)

The comparison of (iii) and (iv) tells everybody that Keynes dealt with a zero-profit economy. Because a zero-profit economy is a NONENTITY the whole of the GT is proto-scientific garbage. Keynes, of course, never realized this, and neither did his dull followers up to the present, and neither did Barkley Rosser.

Conclusion: The formal foundations of macroeconomics are false since Keynes. All I=S/IS-LM models from Keynes/Hicks to Krugman#2 and all multiplier models#3 of the last 80 years are provably false.

#1 Getting out of IS-LM = Getting out of despair

#2 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It

#3 Advancing to the correct multiplier

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REPLY to Barkley Rosser, Sandwichman on May 5 and Blog-Reference MNE

The complete macroeconomic Profit Law is given with Q≡Q_m+Q_n≡Y_d+I−S_m+(X−M)+(G−T)+Q_n.

All variables are measurable with the precision of two decimal places. So, the axiomatically#1 correct Profit Law is a testable proposition.

A scientist would first of all check whether the equation is logically and empirically true. The discussion about Capitalism and Socialism is absolutely senseless as long as the pivotal economic magnitude of profit is not consistently defined and fully understood.

You, of course, are no scientists with the goal to figure out how the economy works but political agenda pushers who instead are preoccupied with the question of how best to suppress the unassailable proofs of your multidimensional incompetence.

The capitalist economy will break down for the same reason as the socialist economy, that is, because the Profit Law holds for ALL monetary economies independently of the definition of private/public property.#2

Marx got profit and exploitation and classes wrong.#3 His 200th birthday is the right date to bury him for good at the Cemetery for Failed/Fake Scientists.#4

#1 The true macrofoundations which fully replace the false Walrasian microfoundations and the false Keynesian macrofoundations are shown on Wikimedia.

#2 Mathematical Proof of the Breakdown of Capitalism

#3 Profit for Marxists

#4 Why is economics a total scientific failure?

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REPLY to Barkley Rosser on May 6

I wondered already a bit when you will come up with the most idiotic argument of all of economics. And here it is: “But the real bottom line for all your claims of having this great and true theory of profit is that is not at all a theory. It is a mere accounting identity …”

This argument features as item 17 on my comprehensive list of economists’ BS.#1

Your problem is that you do not know what a theory is and that you hallucinate that economic theory is about Human Nature/motives/behavior/action. This is the foundational blunder of standard economics as defined by Arrow: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” 

NO, economics is NOT about how humans behave#2 but about how the economic system behaves. Economic theory is about the properties of the monetary economy as a whole and the objective-structural relationships between the economic variables.

The core of structural relationships is given with what you and the rest of gossip economists falsely call accounting identities. When you look at the correct set of macroeconomic axioms#3 then you see that only the two nominal flow variables, i.e. Y_w and C reappear in National Accounting. This is of overriding importance for later testing. The fatal flaw of standard economics is that it takes subjective concepts like utility into the premises and these have not been testable for 150+ years and will not be testable in all eternity. This is why economics has never risen above the level of motive speculation, storytelling, vacuous blather, folk psychology, and gossiping.

Accounting identities are the structural hardcore of all of economics. The two fundamental accounting identities are profit Q≡C−Y_w and saving S≡Y_w−C, that is, Q≡−S. So, the elementary mathematics of accounting tells everybody that macroeconomic profit is in the most elementary case equal to dissaving, that is, the growth of household sector debt.

Economists, though, are too stupid for elementary mathematics and got macro accounting wrong. The epitome of incompetence is Keynes’ I=S. Yes, I=S is ‘merely’ an accounting identity but the point is that it is dead wrong, just like 2+2=5 is dead wrong. However, neither you nor the rest of cargo cult scientists have realized it since Keynes messed the macro accounting identities up.#4

Because of this, Keynesian ‘theory’, Post Keynesian ‘theory’, Modern Monetary ‘Theory’, and the story of Lenin’s NEP and your wife’s Russian relatives are pure proto-scientific garbage.

#1 Failed economics: The losers’ long list of lame excuses

#2 Overreach: Economists have their fingers in every pie except real economics

#3 (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.

#4 A crash course in macro accounting

#5 Poor Schumpeter — abused as a testimonial for MMT

Just one more day: How deficit spending postpones the breakdown of Capitalism

Comment on Bill Mitchell on ‘Japan Finance Minister getting paranoid about MMT’

Blog-Reference and Blog-Reference

MMT claims to be a theory, i.e. a materially/formally consistent mental representation of reality, and NOT a policy. “MMT should not been seen as a regime that you ‘apply’ or ‘switch to’ or ‘introduce’. As I have noted regularly, MMT is rather a lens which allows us to see the true (intrinsic) workings of the fiat monetary system. … The point is that MMT is agnostic about policy bar its preference for an employment buffer rather than an unemployment buffer to discipline inflation. … In general, it makes no sense to talk about an ‘MMT-type prescription’ or an ‘MMT solution’. To make that MMT understanding operational in a policy context, a value system or ideology must be introduced. MMT is not intrinsically ‘Left-leaning’.” (Mitchell)

This is a futile attempt to obfuscate MMT’s true agenda.

Scientifically, MMT is refuted on all counts.#1 MMT is axiomatically false, just like mainstream economics. However, there are degrees of falsehood and it is pretty obvious that MMT is superior to mainstream economics for the simple reason that it is impossible to surpass the idiocy of mainstream economics.#2 In methodological terms, economics has to be based on macrofoundations but mainstream economics is based on microfoundations. The bad luck of economics is that Keynes messed up the Paradigm Shift from microfoundations to macrofoundations.

So, Bill Mitchell is right: “The conclusion is obvious. … It is clear that the mainstream macroeconomic explanation of the relationships between fiscal deficits, interest rates, bond yields and inflation rates is unable to adequately capture the real world dynamics in Japan. Such a categorical failure to provide an explanation suggests that the mainstream theory is seriously deficient.”#3

Mainstream economics claims to have proved that the free market economy has some very desirable properties, first and foremost optimality, efficiency, and stability. Now, General Equilibrium Theory is based on microfoundations, which is to say that it is proto-scientific garbage and proves NOTHING. From axiomatically correct macrofoundations follows that the market economy is intrinsically unstable and that it will eventually break down. The ultimate reason lies in the macroeconomic Profit Law which is given by Q≡Yd+(I−S)+(G−T)+(X−M).

The reduced macroeconomic Profit Law Q≡(I−S)+(G−T) tells one that profit in the monetary economy is positive (i) if business sector investment I is greater than household sector saving S and (ii) if the state runs a deficit, i.e. (G−T) is greater than 0.

Case (i) is characteristic of early Capitalism and case (ii) is characteristic of late Capitalism. Currently, the so-called free market economy is on the full life support of the state. The macroeconomic Profit Law boils down to Public Deficit = Private Profit and thus the Oligarchy’s financial wealth and public debt (currently $22 trillion) grow in lockstep. Capitalism will break down as soon as the sum of (i) and (ii) turns negative. The same holds for Socialism.#4

As the example of Japan shows, the state and its Oligarchy are literally forced to run deficits in order to keep the economy going for just another day. However, it would certainly not be such a good idea to cause panic among the public in general and investors, in particular, by admitting that the government is riding a tiger and cannot dismount. This means that the government actually follows the MMT policy of permanent deficit-spending/money-creation while denying it publicly: “Money, Monetary Theory … MMT for short … this is often spoken about now by politicians, various people … I don’t think we need to explain the theory here … there are many people in the US – many officials including Larry Summers who are against it … But to do it in Japan … and think about that kind of reaction the market would have … I do not intend to make Japan an experimental site for it.”

This is the government's political fraud. The political fraud of MMTers consists of claiming that MMT policy is for the benefit of WeThePeople. #5 This is correct only in the trivial sense that everybody suffers if the economy breaks down. This, though, does not change the fact that MMT is NOT science but political agenda-pushing for the Oligarchy. In this respect, MMT is not different from mainstream economics. MMTers are no exception to the verdict that economists are either stupid, corrupt, or both.

The fact of the matter is that the so-called free-market economy and its Oligarchy are already for a long time on full life-support of the state and this is something that cannot be openly admitted. The MMT policy of permanent deficit-spending/money-creation prolongs the situation, it does NOT really solve any social/economic problems but only shifts them beyond the time horizon.#6

Egmont Kakarot-Handtke


#1 For the full-spectrum refutation of MMT see cross-references MMT
#2 To this day‡, economists have produced NOT ONE textbook that satisfies scientific standards
#3 MMT is better than mainstream economics but still not good enough
#4 No future for Socialism and Capitalism
#5 MMT and the Green New Deal: Where is the snag? (I)
#6 Some nasty MMT surprises behind the time horizon

Related 'MMT vs The Rest of Economics ― a Punch and Judy show' and 'If religion is opium of the people, economics is crack of the people' and 'Economics as storytelling and entertainment for the masses' and 'Economics debate ― just another variant of hardcore wrestling' and 'Econ 101: Economists flunk the intelligence test at the first hurdle' and 'The Palgrave Dictionary ― a comprehensive collection of False-Hero Memorials' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'Mathematical Proof of the Breakdown of Capitalism'.