To this day‡, economists have produced NOT ONE textbook that satisfies scientific standards

Comment on Peter Dorman on ‘Introductory Econ Textbooks: A Different Take on the Issues’

Blog-Reference and Blog-Reference and Blog-Reference Mar 19 and Blog-Reference Mar 22

Peter Dorman summarizes: “Mankiw lays out three alternatives, teaching the mainstream and suppressing your own views, teaching minority or fringe views (i.e. your own), or not teaching introductory econ at all. … Whenever possible, I point out where other disciplines differ, and while I encourage students to judge for themselves, I don’t pressure them into adopting any one point of view. This is called critical thinking, and it barely exists in the world of economics textbooks, which proselytize shamelessly.”

No, this is NOT critical thinking. This is post-modern anything-goes, i.e., the pluralism of provably false theories. Economics is scientifically indefensible: “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)

And this is the crux of the matter: economists do not have the true theory. This is where we stand today: provably false
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

Economics is what Feynman called cargo cult science, and the textbooks reflect this. Economics needs a Paradigm Shift. #1 Since Samuelson started the textbook industry in 1948, economists have produced NOT ONE textbook that satisfies scientific standards.#2 For generations, economics students swallow proto-scientific garbage without batting an eyelid. Not very smart, these folks. #3

Needless to emphasize that there have been multiple attempts to improve the situation. The latest initiative comes from MMT. MMT claims to be the new approach that beats failed Orthodoxy. This is accurate with regard to the long-overdue shift from microfoundations to macrofoundations. Microfounded approaches are dead already since Walras/Jevons/ Menger. #4 The problem is that economists messed up the shift from microfoundations to macrofoundations.

MMT is NO exception. And the proof is in the new MMT Textbook, more specifically in the premises of MMT. #5 The premises are laid out on pp. 13-16 and pp. 83-86.

“One of the most basic propositions in macroeconomics that MMT emphasizes is the notion that at the aggregate level, total spending equals total income and total output.” (p. 14)

Unfortunately, the most basic proposition in macroeconomics is false since Keynes and MMTers have not realized it to this day. Here is the short proof that economists in general and MMTers, in particular, get the elementary mathematics that underlies macroeconomics wrong.

(i) The elementary production-consumption economy is given 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.

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

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

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

(v) 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. Both Q and S are measurable with the precision of two decimal places.

For the elementary investment economy holds Q≡I−S. For the elementary investment economy, the government holds Q≡(I−S)+(G−T). And so on with growing complexity.*

In sum: (1) profit is NOT income, i.e. a flow, but a balance, i.e. the difference of flows,#6 (2) distributed profit Yd is income and adds up with wage income Yw to total income, (3) total income is NEVER equal to total spending, (4) in the most elementary case, the difference between total spending of the household sector C and total wage income Yw is saving/dissaving, (5) profit/loss of the business sector is the mirror image of dissaving/ saving of the household sector, i.e Q≡−S, (6) saving and investment are causally INDEPENDENT and NEVER equal, (7) all I=S/IS-LM models are false since Keynes/Hicks, (8) Keynesianism, Post-Keynesianism, New Keynesianism and all variants are scientifically worthless, (9) the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is false because it lacks the balance of the business sector Q, (10) because profit is false, the whole of MMT is false, (11) because the theory is false, MMT policy guidance has no sound scientific foundations.

What holds for the new MMT Textbook holds mutatis mutandis for ALL predecessors, including Peter Dorman’s Microeconomics and Macroeconomics: A Fresh Start.

Egmont Kakarot-Handtke


#1 New Economic Thinking: The 10 crucial points
#2 The father of modern economics and his imbecile kids
#3 There is NO such thing as “smart, honest, honorable economists”
#4 The problem with macro in two words
#5 William Mitchell, L. Randall Wray, and Martin Watts Macroeconomics
#6 The Profit Theory is False Since Adam Smith

Related 'False on principle' and 'Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist' and 'Nothing to choose between Orthodoxy and traditional Heterodoxy' and 'Heterodoxy ― an axiomatic failure just like Orthodoxy' and 'Economists’ three-layered scientific incompetence' and 'Textbooks and the mental cloning of dumb economists' and 'Refuting MMT’s  Macroeconomics Textbook' and 'Economics textbooks ― tombstones at the Flat-Earth-Cemetery' and 'All behavior-based economic textbooks are false' and 'Occasional Tweets #210103: Economics textbooks to throw away' and 'The new economic Paradigm requires a new textbook'.

* Graphic AXEC143d

***

REPLY to Barkley Rosser on Mar 19

Above, Peter Dorman recounts: “We just saw a ‘Nobel’ prize awarded to an economist, Bill Nordhaus, whose primary claim to fame is an application of the welfare framework to climate change. Nearly every economist working on climate issues adopts the same approach. It would not be an exaggeration, however, to say that the vast majority of climate scientists regard their work as nuts.”

It is a plain fact that economics textbooks are the main medium for the faithful reproduction of nutters. #1

Everybody who ever accepts microfoundations #2 and supply-demand-equilibrium proves their scientific incompetence conclusively.

As Hahn put it in 1980: “I often wonder whether other subjects suffer as much from textbook writers.” Certainly not, because in the genuine sciences, nutty textbook writers like Samuelson are not awarded fake Nobels.

#1 Fact of life: your econ prof is scientifically incompetent

#2 Microfoundations are given with this or a similar behavioral axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

***

‡ "To this day" means precisely June 25, 2020. See Amazon.de, BoD, Amazon.com, etc.

***

Twitter Jan 19, 2020

Refuting MMT’s Macroeconomics Textbook

Comment on Bill Mitchell on ‘Macroeconomics ― MMT Textbook’*

Blog-Reference and Blog-Reference Mar 14 and Blog-Reference

MMT is, of course, accurate as far as the refutation of Orthodoxy/Neoclassics is concerned. Standard economics is scientifically indefensible. There is no need for further discussions about the current state of economics. This is where we stand today: provably false
• profit theory, for 200+ years,
• microfoundations, for 150+ years,
• macrofoundations, for 80+ years,
• the application of elementary logic and mathematics since the founding fathers.

However, the critique of Orthodoxy has run its course: “… it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug)

MMT claims to be a new theory that beats Orthodoxy. This is accurate with regard to the shift from microfoundations to macrofoundations. Microfounded approaches are dead already since Walras/Jevons/Menger. The problem is that economists, in their incurable scientific incompetence, messed up the indispensable Paradigm Shift from microfoundations to macrofoundations.

MMT is NO exception. And the proof is in the new MMT Textbook, more specifically in the premises of MMT. It holds what Keynes observed with regard to Orthodoxy: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.”

The premises of MMT Macroeconomics are laid out on pp. 13-16 and pp. 83-86.

“By placing government, as the currency issuer, at the centre of the monetary system, the MMT approach immediately focuses on how a government spends, and how this spending influences … macroeconomic aggregates …” (p. 13)

This is methodologically false. Macroeconomics starts with what Keynes called the ‘monetary theory of production’. The most elementary economy consists of the household sector, the business sector, and the central bank. Government and foreign trade are included at a later stage. For the central bank holds that it “can never run out of its own currency.”

“One of the most basic propositions in macroeconomics that MMT emphasizes is the notion that at the aggregate level, total spending equals total income and total output.” (p. 14)

Unfortunately, the most basic proposition in macroeconomics is false since Keynes and MMTers have not realized it to this day.

Here is the short proof that economists in general and MMTers, in particular, get the elementary mathematics that underlies macroeconomics wrong.

(i) The elementary production-consumption economy is given 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.

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

(iii) The monetary profit of the business sector is defined (in simplified notation) as Q≡C−Yw,

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

(v) Ergo Q≡−S.

The balances add up to zero. The counterpart of the household sector's saving S is the business sector's loss −Q. The counterpart of household sector dissaving (-S) is business sector profit Q. Both Q and S are measurable with the precision of two decimal places.

For the elementary investment economy holds Q≡I−S.

For the elementary investment economy, the government holds Q≡(I−S)+(G−T). If I and S are taken out of the picture for a moment, one gets Public Deficit = Private Profit.

In sum: (1) profit is NOT income, i.e. a flow, but a balance, i.e. the difference of flows, (2) distributed profit Yd is income and adds up with wage income Yw to total income, (3) total income is NEVER equal to total spending, (4) in the most elementary case, the difference between total spending of the household sector C and total wage income Yw is saving/ dissaving, (5) profit/loss of the business sector is the mirror image of dissaving/saving of the household sector, i.e Q≡−S, (6) saving and investment are causally INDEPENDENT and NEVER equal, (7) all I=S/IS-LM models are false since Keynes/Hicks, (8) Keynesianism, Post-Keynesianism, New Keynesianism and all variants are scientifically worthless, (9) the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is false because it lacks the balance of the business sector Q, (10) because profit is false, the whole of MMT is false, (11) because the theory is false, MMT policy guidance has no sound scientific foundations. #1

MMT theory is provably false. MMT policy serves the Oligarchy. Since Samuelson started the textbook industry in 1948, economists have produced NOT ONE textbook that satisfies scientific standards. #2 For generations, economics students swallow proto-scientific garbage without batting an eyelid. Not very smart, these folks. #3

Egmont Kakarot-Handtke


* Mitchell, Wray, Watts Macroeconomics
#1 For the full-spectrum refutation of MMT, see cross-references MMT
#2 The father of modern economics and his imbecile kids
#3 There is NO such thing as “smart, honest, honorable economists”

Related 'Macroeconomics: Drain the scientific swamp' and 'The miracle cure of economists’ micro-macro schizo' and 'Is Nick Rowe stupid or corrupt or both?' and 'Keynesians ― terminally stupid or worse?' and 'MMT = Modern Monetary Trash' and 'Both mainstream economics and MMT are axiomatically false' and 'DSGE and profit―forget it! MMT and profit―forget it!' and 'Fact of life: your econ prof is scientifically incompetent' and 'Dear idiots, time to get saving and investment straight (II)' and 'Both mainstream economics and MMT are axiomatically false' and 'The Levy/Kalecki Profit Equation is false' and 'Wikipedia and the promotion of economists’ idiotism (I)' and 'Wikipedia and the promotion of economists’ idiotism (II)' and 'Wikipedia, economics, scientific knowledge, or political agenda pushing?' and 'MMT and the magical profit disappearance'. For details of the big picture, see cross-references Econ 101/Old Curriculum/New Curriculum and cross-references Accounting.

***

REPLY to Brian Romanchuk on Mar 14

You ask: “Have you managed to convince anyone that your definition, oops, “axiom,” [sic.] of profits is correct?”

The ‘axiom of profits’ exists only in your confused mind.

The macroeconomic AXIOMS are enumerated above under (i). The profit DEFINITION is given under (iii). There is a difference between an axiom and a definition. #1

There is also a difference between ‘to refute’ and ‘to convince’. Bill Mitchell and you are REFUTED, and whether you are convinced of it is a matter of indifference. Nobody has any ambition to convince methodologically undereducated Flat-Earthers. #2 Refutation is sufficient.


#1 From false micro to true macro: the new economic paradigm
#2 Post Keynesianism, science, and universal idiocy

***

REPLY to Brian Romanchuk on Mar 15

You ask: “So, you have no links to *anyone* who agrees with you? These paradigm shifts are pretty darn slow, eh?”

The point at issue is: “One of the most basic propositions in macroeconomics that MMT emphasizes is the notion that at the aggregate level, total spending equals total income and total output.” (Mitchell et al., p. 14)

This “most basic proposition” is provably false. #1 Because of this, the whole analytical superstructure is false. Because of this, MMT is proto-scientific garbage. Because of this, MMT policy has NO sound scientific foundations. Because of this, MMT is a political fraud.

The ‘most basic propositions’ are called axioms in methodology: “The attempt is made to collect all the assumptions, which are needed, but no more, to form the apex of the system. They are usually called the ‘axioms’ (or ‘postulates’, or ‘primitive propositions’; …). The axioms are chosen in such a way that all the other statements belonging to the theoretical system can be derived from the axioms by purely logical or mathematical transformations.” (Popper) #2

As Aristotle put it: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.”

This was 2300+ years ago; however, economists in general and you, in particular, still don’t get it. Indeed, pretty darn slow, these economists.

The point at issue is that MMT is proto-scientific garbage and that MMTers are either stupid or corrupt or both. The new MMT Macroeconomics Textbook is the incontrovertible proof.

It holds as a general rule: The time it takes economists to realize that they are refuted on all counts is a simple metric of their scientific incompetence. #3

#1 Macroeconomics for retarded economists

#2 How to restart economics

#3 The clock runs down on economics

***

REPLY to Brian Romanchuk on Mar 16

There is only one question to answer: Which sectoral balances equation is true/false?

(i) (I−S)+(G−T)+(X−M)=0

(ii) (I−S)+(G−T)+(X−M)−(Q−Yd)=0

If you cannot answer this question, you are unfit for economics/science. This, of course, also holds for the authors of the new MMT Macroeconomics Textbook.

There is no need for you to wreck your tiny brain with writing “a text that may be labelled a ‘review’”. Here is the final evaluation of William Mitchell, L. Randall Wray, and Martin Watts’s Macroeconomics: proto-scientific garbage.

***

Graphic AXEC152

***

Graphic AXEC128, AXEC129mch The Humpty Dumpty Fallacy

Occasional Tweets: Economics ― not one textbook satisfies scientific standards

 

#FailedFakeScience#Walrasianism, #Keynesianism, #Marxianism, #Austrianism, #MMT, and #Pluralism are axiomatically false & materially/formally inconsistent & ALL got #Profit wrong. Economic policy guidance NEVER has had sound scientific foundations. ⇒https://t.co/Gw6Qa1Dijg pic.twitter.com/BBYYqNIqZU

— E.K-H (@AXECorg) November 3, 2022

For more about textbooks see AXECquery. 

The new economic Paradigm requires a new textbook

Comment on Bill Mitchell on ‘US Federal Reserve statement signals a new phase in the paradigm shift in macroeconomics’

Blog-Reference

Bill Mitchell summarizes current events “Regular readers will know that for the last few years I have been documenting the way that the dominant paradigm in macroeconomics (New Keynesianism) is slowly disintegrating as the dissonance between its empirical predictions and reality becomes too great to ignore and justify. … Last week, the US Federal Reserve Bank Chairman, Jerome Powell made a path breaking speech ― New Economic Challenges and the Fed’s Monetary Policy Review ― at the annual economic policy symposium sponsored by the Federal Reserve Bank of Kansas City at Jackson Hole. On the same day, the Federal Reserve Bank released a statement ― Federal Open Market Committee announces approval of updates to its Statement on Longer-Run Goals and Monetary Policy Strategy. We have now entered a new phase of the paradigm shift in macroeconomics.”

Bill Mitchell feels validated “This has progressively opened the door for Modern Monetary Theory (MMT), the emerging rival paradigm.” Mainstream economics has failed “But we are making progress.”

“And, if you scanned the textbook market in macroeconomics looking for guidance to all of this, then you would find only ONE offering that allows you to understand all of this ― yes ― Macroeconomics (William Mitchell, L. Randall Wray, and Martin Watts). Small sales pitch ― but that is the fact.”

Yes, a Paradigm Shift is going on, but it is not headed toward MMT. Yes, mainstream textbooks are obsolete #1, #2, #3 but this does not mean that the new MMT textbook is scientifically acceptable. The fact of the matter is that the foundational MMT sectoral balances equation is provably false.#4 Because of this, the analytical superstructure of MMT is false and as a consequence, the new MMT macroeconomics textbook is scientifically worthless.

The Paradigm Shift moves from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.#5

The good news for teachers and students is that the axiomatically correct textbook Sovereign Economics is now available.#6

Egmont Kakarot-Handtke

#1 To this day, economists have produced NOT ONE textbook that satisfies scientific standards

#2 Economics textbooks ― tombstones at the Flat-Earth-Cemetery

#3 Textbooks and the mental cloning of dumb economists

#4 Wikipedia, economics, scientific knowledge, or political agenda pushing?

#5 Refuting MMT’s Macroeconomics Textbook

#6 Sovereign Economics Amazon.de, BoD, etc.

***

***

REPLY to Tom Hickey on Sep 2

Bill Mitchell commented on the FED’s announcement of a new monetary strategy: “We have now entered a new phase of the paradigm shift in macroeconomics.” And “Jerome Powell’s speech at Jackson Hole was described by a Reuters report (August 28, 2020) ― With new monetary policy approach, Fed lays Phillips curve to rest ― in this way: ‘One of the fundamental theories of modern economics may have finally been put to rest.’

This may be politically true but is scientifically false because the Phillips curve had been put to rest already in 2012.#1

The folks at the FED are a bit slow, worse, they still do not get the point.

The axiomatically correct macroeconomic Employment Law states that in order to increase employment, wages must go UP, and/or prices must go DOWN. To push inflation is pure idiocy. 

Yes, for the micro-brains of economists this appears counter-intuitive. But then, microeconomics is long dead. The Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations is an accomplished fact.#2

#1 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster, see Links on the Phillips Curve

#2 Cross-references Paradigm Shift

Coming soon: the canonical economics textbook

Comment on Asad Zaman on ‘Project: A heterodox macro textbook’

Blog-Reference

Surprisingly, Keynes’ lasting scientific contribution relates to methodology. He spoke it out loud so that every fellow economist could hear it: Throw over the classical axioms and put theoretical economics on new foundations: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.” (1973, p. xxi)

With the revolutionary shift in mathematics and physics from Euclidean to non-Euclidean axiomatics (Hilbert, Einstein) before his eyes, Keynes called his fellow economists to arms: “Something similar is required to-day in economics.” (1973, p. 16)

Consequently, Keynes formulated the foundational syllogism of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, p. 63)

This elementary two-liner is conceptually and logically defective because Keynes did not come to grips with profit and therefore “discarded the draft chapter dealing with it.” (Tómasson et al., 2010, p. 12) As a result, all I=S models including the Keynesian multiplier are false (2014) and with it the whole Post-Keynesian theoretical superstructure.

To see the enormity of intellectual failure one has to let this sink in: Keynes had no idea of the fundamental concepts of our discipline, viz. profit and income. This did not hinder him to push his economic policy agenda. As a matter of fact, Keynes’ policy proposals NEVER had a sound theoretical foundation but were at best commonsensical.

After-Keynesians did not realize until this day that there is something fundamentally wrong with Keynes’ two-liner and I=S but still hallucinate about ex-ante/ ex-post.#1

In the neoclassical synthesis of Samuelson, Keynes’ new non-Euclidean axioms and the old Euclidean axioms of marginalism were cobbled together. Textbooks consisted of two well-balanced halves: micro and macro. Needless to emphasize that both halves did not fit together. Never mind the half-wits of Econ 101 swallow every rubbish.

The inconsistency was never resolved but gradually all returned to the pre-Keynesian formal foundations of marginalism. As Krugman put it “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”

Now, it can be shown that the axiomatic foundations of the neoclassical paradigm are methodologically inadmissible.#2 Needless to emphasize that the promoters of the New Classical Counter-Revolution missed the point. Never mind the half-wits of Econ 101 swallow even DSGE.

So, we have two indicators of the intellectual incapacity of present-day economists: Keynesians are for more than 80 years in the dark. Sorta-kinda Neoclassicals are for more than 150 years in the dark. Because they have disqualified themselves neither Keynesians nor Neoclassicals can be taken seriously. This applies to all textbooks.

Now comes the heterodox textbook. What are the premises heterodox macroeconomics is based upon? It cannot be maximization-and-equilibrium and it cannot be Y=C+I, that much is evident.#3

As I put it on my website: The canonical textbook is still to be written.#5 Here is the litmus test: tell me what profit is, and I tell you whether you succeed or fail like all textbooks since Samuelson’s first edition of 1948.#3

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL

#1 I=S: Mark of the Incompetent
#2 Addendum to ‘Musings on Whether We Consciously Know More or Less than What Is in Our Models’
#3 How to restart economics
#4 AXECwiki
#5 False on principle

Related 'The canonical macroeconomic model' and 'Economics textbooks ― tombstones at the Flat-Earth-Cemetery'. For details of the big picture see cross-references Econ 101/Old Curriculum/New Curriculum and cross-references Paradigm Shift.

***

ADDENDUM Jul 9, 2020

BOD, Amazon, etc

Occasional Tweets: Economic textbooks ― pulp science

 

#Economics#Walrasianism, #Keynesianism, #Marxianism, #Austrianism, #MMT are mutually contradictory, axiomatically false, and materially/formally inconsistent.

To this day‡, economists have produced NOT ONE textbook that satisfies scientific standardshttps://t.co/Gw6Qa1CKtI pic.twitter.com/NR6pMV7oJD

— E.K-H (@AXECorg) November 26, 2021

For details of the big picture see cross-references Econ 101/Old Curriculum/New Curriculum.

Occasional Tweets: It is time to dump the textbooks in the garbage

 

#Econ#Economics is #FailedFakeScience. The various #MicroFoundations approaches are axiomatically false. So are Keynesian #MacroFoundations. For the inescapable #ParadigmShift to the true set of macroeconomic #Axioms see cross-referenceshttps://t.co/rf8n0xkhRA pic.twitter.com/628rt3kRgs

— E.K-H (@AXECorg) January 9, 2023

All behavior-based economic textbooks are false

Comment on John Komlos on ‘A new real-world economics textbook’

Blog-Reference

Mainstream economics is known for a long time to be dead and in need of a Paradigm Shift “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990)

John Komlos echoes this insight “… how misleading it can be to apply oversimplified models of perfect competition to the real world. The math works well on college blackboards but not so well on the Main Streets of America.”

However, “The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy.” (Feynman)

John Komlos takes up the challenge. His textbook “… demonstrates how we should take into account the inefficiencies that arise due to asymmetric information, mental biases, unequal distribution of wealth and power, and the manipulation of demand.”

This is laudable, except for one point: John Komlos’ approach is behavior-centered like the mainstream approach, only the behavioral premises have been changed and are certainly more ‘realistic’. However, John Komlos remains in the old economics-is-a-social-science paradigm. This is a lethal blunder because economics is a systems science. Economics is NOT about how people behave but how the economic system behaves. Human behavior is the subject matter of psychology and sociology and history and political science but NOT of economics.

Why do economists cling so tenaciously to the behavioral approach? Because they are political agenda pushers and NOT scientists. And politics is about the control of behavior. Economic incentives are but one form of behavioral control.

It is a scientific fact that economics as social science has to this day not figured out what macroeconomic profit — the foundational concept of economics — is. The behavioral approach is a methodological failure. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent.#1, #2

What economics needs is a Paradigm Shift from behavioral microfoundations to structural macrofoundations.#3

This Paradigm Shift and its far-reaching consequences can be studied with Sovereign Economics. This textbook contains the axiomatically true theory as an indispensable prerequisite of economic policy guidance.

“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)

John Komlos’ textbook is an outstanding example of educated common sense. The fact of the matter is, though, that neither orthodox nor heterodox economists have realized to this day what science is all about.

Egmont Kakarot-Handtke


#1 Economics is a disgrace ― now more than ever
#2 Wikipedia, economics, scientific knowledge, or political agenda pushing?
#3 Your economics is refuted on all counts: here is the real thing

Occasional Tweets: Scientifically, economic textbooks have always been worthless

 

#Economics#Walrasianism, #Keynesianism, #Marxianism, #Austrianism, #MMT are mutually contradictory, axiomatically false, and materially/formally inconsistent.

To this day‡, economists have produced NOT ONE textbook that satisfies scientific standardshttps://t.co/Gw6Qa1CKtI

— E.K-H (@AXECorg) November 20, 2021

For more about textbooks see AXECquery. 

Occasional Tweets: The futile attempt to recycle economics textbooks

 

#Economics#FailedScience#FakeScience

Scientifically, economic textbooks have always been worthlesshttps://t.co/oeJi6gICRf

— E.K-H (@AXECorg) May 14, 2022

For more about textbooks see AXECquery. 

Occasional Tweets: Economics textbooks to throw away

 

#Walrasianism, #Keynesianism, #Marxianism, #Austrianism, #MMT are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of #Profit wrong.

Textbooks and the mental cloning of dumb economistshttps://t.co/RdX4CjcW91

— E.K-H (@AXECorg) January 3, 2021

For more about economic textbooks, see AXECquery. 

Textbooks and the mental cloning of dumb economists

Comment on Lars Syll on ‘Economics textbooks transmogrifying truth — wages and unemployment’

Blog-Reference and Blog-Reference

Lars Syll summarizes: “Unfortunately, Jones macroeconomics textbook is not the only one containing this kind of utter nonsense on Keynes. Similar distortions of Keynes’s views can be found in, e.g., the economics textbooks of ‘New Keynesian’ economists like Greg Mankiw and Paul Krugman.”

Economics textbooks are false from Samuelson’s classic to this day.#1 Not only because of occasional distortions but because both Walrasian microfoundations and Keynesian macrofoundations are axiomatically false. Therefore, it does not suffice to rectify occasional distortions and misrepresentations.

One can readily agree with Lars Syll, “Keynes in General Theory devoted substantial attention to the subject of wage rigidities; he certainly did not hold the view that wage rigidities were ‘the reason … for the high unemployment of the Great Depression’.” This, though, cannot alter the fact that Keynes’ employment theory as a whole is provably false.

Keynes’s critique of Orthodoxy was always spot on, but from this does not follow that his own approach was much better. Keynes based macroeconomics on logically and conceptually defective foundations, and neither After-Keynesians nor Post Keynesians nor New Keynesians nor Anti-Keynesians have realized his foundational blunder in 80+ years.

Keynes defined the formal core of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This syllogism is defective because Keynes never came to grips with profit: “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.)

Keynes had NO idea of the fundamental concepts of economics, viz., profit and income. Because profit is ill-defined, the whole theoretical superstructure of Keynesian macroeconomics falls apart: (i) all I=S/IS-LM models are provably false; (ii) the investment multiplier is formally defective; (iii) the error/mistake in Keynes’ profit theory remained undetected; (iv) the error/mistake in Keynes’ employment function remained undetected.#2

The rectification of Keynes’s false employment function gives the correct relationship between wages and unemployment.#3 The price mechanism does NOT work as supposed, that is, a reduction of the average wage rate does NOT increase employment for the economy as a whole. The correct systemic Employment Law says exactly the opposite.

From this follows for economic policy that the third tool, in addition to monetary and fiscal policy, is needed. What has to be achieved is a rectification of the price mechanism. This has nothing to do with stickiness or frictions or other imperfections. Fact is: the perfectly working price mechanism INCREASES unemployment in the economy because there is a positive feedback loop built right into the core of the market economy. Macro-economically, it is NOT wage rate down ― employment up, but it is wage rate down ― employment down. This and NOT stickiness is the crux.

Textbook economics has not gotten the price mechanism right to this day. Supply-demand-equilibrium is simply a bad joke. Economic policy advice has never had sound scientific foundations. Applied textbook economics, both in the Walrasian and Keynesian versions, ruins the economy.

Egmont Kakarot-Handtke


#1 The father of modern economics and his imbecile kids
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 Toward a non-Neanderthal employment policy

Related 'The GDP-death-blow for the economics profession' and 'Microfoundations have been for 150+ years: high time to move on' and 'To this day*, economists have produced NOT ONE textbook that satisfies scientific standards' and 'All behavior-based economic textbooks are false' and 'Economics textbooks ― tombstones at the Flat-Earth-Cemetery' and 'The new economic Paradigm requires a new textbook'

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Graphic AXEC106k

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Twitter/X Sep 6, 2024 Not only are economics textbooks false

Key Issues: Economic textbooks ― learning without understanding

I often wonder whether other subjects suffer as much from textbook writers. (Hahn, 1980, p. 127)

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We all teach our students about optimization, equilibrium, and market efficiency. (Mankiw, 2006, p. 35)

That is, economists have persisted with a model that is theoretically flawed and systematically contradicted by the empirical evidence. (Kirman, 2010, p. 512)

It may be distasteful for recently trained economists to admit that there is a lot of silly philosophy underlying ordinary neoclassical economics, but I think such is the case. (Boland, 1992, p. 203)

This is the type of economist that 150 years ago Carlyle caricatured as parrots that only knew the words demand and supply. (Beker, 2012, p. 115)

The existing profit literature is riddled with problems and inconsistencies that have troubled every recent observer; one need only consult any standard text to find the self-contradictory smorgasbord that is served up to students of economics to understand the dimensions of the problem. (Obrinsky, 1981, pp. 491-492), for details see Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist URL

To be quite blunt, all existing ‘lessons’ taught in standard economics texts should be either abandoned or tested empirically, but should never be accepted as a basis for modeling. (McCauley, 2006, pp. 6-7)

If we honestly told students that these are the underlying stories behind the analysis, most of them would ask, "Why are you teaching us this? This is not the way the economy works." (Colander, 1995, p. 178), for the correct account see How to get rid of Supply-Demand-Equilibrium URL or The Structural Price Mechanism URL

A story about Adam Smith, the invisible hand, and the merits of markets pervades introductory textbooks, classroom teaching, and contemporary political discourse. The intellectual foundation of this story rests on general equilibrium, not on the latest mathematical excursions. (Ackerman, 2004, p. 21)

The fact that it has not been possible to build a process for the formation of equilibrium prices is disastrous when it is recalled that the fundamental task of theory is precisely to make coordination in the market intelligible. (Benetti and Cartelier, 1997, p. 213), for error correction see The Ideal Economy URL

At long last, it can be said that the history of general equilibrium theory from Walras to Arrow-Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin. (Blaug, 2001, p. 160)

The standard textbook introduces macroeconomic concepts via the national income identity. Thus total production, or gross domestic product (GDP), is defined as the sum of all expenditures on goods and services or, alternatively, as the sum of all incomes paid for the production of goods and services. (Godley and Lavoie, 2007, p. 4), for the correction see The Common Error of Common Sense URL

To this day, the IS-LM model remains the interpretation of Keynes offered in the most widely used intermediate-level macroeconomics textbooks. (Mankiw, 2006, p. 31), for error correction see Why Post-Keynesianism is not Yet a Science URL and Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It URL

This dynamic adjustment story may or may not be true; in its simple form, it is believed by only a few economists. We taught it nonetheless because, given the assumptions, it is a logically consistent story, and for most students, it meets the "Yeah, it makes sense" criterion. (Colander, 1995, pp. 169-170)

Even "dirty pedagogy" should be internally consistent. It can be exceedingly vague, but it should not be logically wrong as the standard AS/AD model is. Teaching the standard inconsistent model discourages students from questioning the workings of the model. That may not bother those students who are interested in getting their grade and getting out of the course. But it decidedly turns off the good students, the ones we all want to encourage. (Colander, 1995, p. 179)

What is sadly lacking from all these articles ... is theory. Indeed, most of the analyses would presumably flunk any macroeconomics principles class. In any case, they would flunk mine. Given that most of the articles were written by notable economists, one wonders what on earth is being taught by the less notable in macro courses. (Wray, 1991, p. 952)

So the textbooks are wrong. (Keen, 2011, p. 19)

What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work: were it engineering, the bridge would collapse. (McCauley, 2006, p. 17)

..., before accepting the conclusions of any economist’s model as applicable to the real world, the careful student should always examine and be prepared to criticize the applicability of the fundamental postulates of the model; for, in the absence of any mistake in logic, the axioms of the model determine its conclusions. (Davidson, 2002, p. 41)

Standard economics textbooks are explicitly or implicitly based on indefensible behavioral axioms. From Samuelson's 1948 textbook onwards, there has not been one with a correct profit theory.

Rather surprisingly, therefore, the nature of profits remains something of a mystery in contemporary economics; indeed, in the realm of "advanced" theory — namely, the perfectly competitive general equilibrium models — profits have disappeared altogether. This is clearly an unsatisfactory situation. (Obrinsky 1981, p. 491) 

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Standard textbooks, including the neo- and new-variants, reflect and reinforce the stagnation of contemporary economics at the proto-scientific level. Supply-demand-equilibrium is the counterpart of an epicycle. Whether it meets for most students the "Yeah, it makes sense" criterion is a matter of indifference. Whether there has been a thorough peer review, proofreading, and quality control is of secondary importance. The criteria that are ultimately decisive in theoretical economics are material and formal consistency. Economic textbooks miss these primary criteria. The student is, therefore, at some point in his education confronted in earnest with the true/false question. This, not the exam, is the crucial test. Students of economics, teachers, and textbook writers fail in unison to see the task that is before them.

The canonical textbook is still to be written (see Coming soon: the canonical economics textbook). New as of June 2020, Sovereign Economics.


References
Ackerman, F. (2004). Still Dead After All These Years: Interpreting the Failure of General Equilibrium Theory. In F. Ackerman and A. Nadal (Eds.), The Flawed Foundations of General Equilibrium, pages 14–32. London, New York: Routledge.
Beker, V. A. (2012). Rethinking Macroeconomics in the Light of the U.S. Financial Crisis. real-world economics review, 60: 120–138. URL
Benetti, C., and Cartelier, J. (1997). Economics as an Exact Science: the Persistence of a Badly Shared Conviction. In A. d’Autume and J. Cartelier (Eds.), Is Economics Becoming a Hard Science?, 204–219. Cheltenham, Brookfield, VT: Edward Elgar.
Blaug, M. (2001). No History of Ideas, Please, We’re Economists. Journal of Economic Perspectives, 15(1): 145–164.
Boland, L. A. (1992). The Principles of Economics. Some Lies My Teacher Told Me. London, New York: Routledge.
Colander, D. (1995). The Stories We Tell: A Reconstruction of AS/AD Analysis. Journal of Economic Perspectives, 9(3): 169–188. URL
Davidson, P. (2002). Financial Markets, Money, and the Real World. Cheltenham, Northampton: Edward Elgar.
Godley, W., and Lavoie, M. (2007). Monetary Economics. An Integrated Approach to Credit, Money, Income, and Wealth. Houndmills, Basingstoke, New York: Palgrave Macmillan.
Hahn, F. H. (1980). General Equilibrium Theory. Public Interest. Special Issue: The Crisis in Economic Theory, 123–138.
Keen, S. (2011). Debunking Economics. London, New York: Zed Books, rev. edition.
Kirman, A. (2010). The Economic Crisis is a Crisis for Economic Theory. CESifo Economic Studies, 56(4): 498–535. DOI
Mankiw, N. G. (2006). The Macroeconomist as Scientist and Engineer. Journal of Economic Perspectives, 20(4): 29–46. URL
McCauley, J. L. (2006). Response to "Worrying Trends in Econophysics". EconoPhysics Forum, 0601001: 1–26. URL
Obrinsky, M. (1981). The Profit Prophets. Journal of Post Keynesian Economics, 3(4): 491–502. URL
Wray, L. R. (1991). Saving, Profits, and Speculation in Capitalist Economies. Journal of Economic Issues, 25(4): 951–975. URL

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Related Political Economics and Objective Principles of Economics URL. What, first of all, has to be rewritten is the pivotal chapter of any economic textbook — the chapter that deals with the elementary price mechanism; see The Law of Supply and Demand: Here It Is Finally URL.


© 2013_11 EKH, except original quotes

Economics textbooks ― tombstones at the Flat-Earth Cemetery

Links on Peter Dorman on ‘CORE and Periphery in the Reform of Econ 101’

Blog-Reference and Blog-Reference

“I often wonder whether other subjects suffer as much from textbook writers.” (Hahn, 1980)

► CORE: more lipstick on the dead economics pig
► To this day, economists have produced NOT ONE textbook that satisfies scientific standards
► Refuting MMT’s Macroeconomics Textbook
► Economists have no brain
► False on principle
► Where economics went wrong (II)
► The father of modern economics and his imbecile kids

► For details of the big picture see cross-references Econ 101/Old Curriculum/New Curriculum

Egmont Kakarot-Handtke

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REPLY to Owen Paine on Jun 13

You say “And yes the core text is a big step.”

NO. In the section ‘9.6 Wages, profits, and unemployment in the whole economy’ the determination of macroeconomic profit is provably false. The axiomatically correct macroeconomic Profit Law reads Q≡Yd+I−S+(G−T)+(X−M).

Because the foundational concept of economics, i.e. profit, is ill-defined the CORE textbook is scientifically worthless.#1

That the whole thing is not more than proto-scientific garbage, storytelling, gossip, and name-dropping may be gleaned from such references as

“Arguably the most famous scientific controversy of all time was between Sir Isaac Newton and Gottfried Leibniz over who invented calculus.

Newton first used calculus methods in a manuscript published in 1666. The methods were used in his book Mathematical Principles of Natural Philosophy, which was published in 1687. He completed his book on calculus, Method of Fluxions, in 1671, but did not publish it until 1736.

Newton’s supporters accused Leibniz of plagiarism in his work on calculus. By the time of his death, his reputation was in decline and he died in poverty. His reputation has subsequently been rebuilt by both mathematicians and philosophers.

Modern historians accept that Newton and Leibniz invented calculus independently, at about the same time. Therefore, to decide whom to name the calculus supplements after, we tossed a coin. Leibniz won.”

The fact is that modern historians have found out that Newton was a fraudster.#2

More exercises in the erection of False-Hero Memorials can be found in the section ‘Great economists’.#3

#1 CORE: more lipstick on the dead economics pig

#2 Kollerstrom, N. (2018). The Dark Side of Isaac Newton: Science’s Greatest Fraud? Pen and Sword Books.

#3 For details, see cross-references Failed/Fake Scientists

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