Working paper at SSRN
Abstract Between Keynes’s verbalized theory and its formal basis persist a lacuna. The conceptual groundwork is too small and not general. The quest for a comprehensive formal basis is guided by the question: what is the minimum set of foundational propositions for a consistent reconstruction of the monetary economy? We start with three structural axioms. The claim of generality entails that it should be possible to prove that Keynes’s formalism is a subset of the structural axiom set. The axioms are applied to a central part of the General Theory in order to achieve consistency and generality.
Showing posts sorted by relevance for query title:keynes. Sort by date Show all posts
Showing posts sorted by relevance for query title:keynes. Sort by date Show all posts
May 15, 2011
August 13, 2025
Occasional Xs: Since Keynes' I=S, economists get saving and profit wrong (III)
#Economics#AllYouNeedToKnow
— AXEC (@EgmontHandtke) August 13, 2025
“It is the rate of investment which governs the rate of saving, and not vice versa.” (Joan Robinson)
NO, it is NOT the case that investment governs saving or that saving governs investment or that both are equal by definition. Both are independent… pic.twitter.com/BatM5SHRPW
February 8, 2014
Mr. Keynes, Prof. Krugman, IS-LM, and the end of economics as we know it {53}
Working Paper at SSRN
Abstract Krugman has recently revitalized IS-LM with a number of succinct analytical pieces on his blog. The reverberations were remarkable. Economists, however, are known often not grasp the full content of their own and, a fortiori, of others' models. This happened to Keynes in the days of high theory and to Krugman these days. Keynes applied a defect formalism, which is here replaced by objective-structural axioms. This yields the correct relationship between retained profit, saving, and investment which in turn makes it clear after the event that the IS-part of the IS-LM construct had been logically defective ab initio.
Abstract Krugman has recently revitalized IS-LM with a number of succinct analytical pieces on his blog. The reverberations were remarkable. Economists, however, are known often not grasp the full content of their own and, a fortiori, of others' models. This happened to Keynes in the days of high theory and to Krugman these days. Keynes applied a defect formalism, which is here replaced by objective-structural axioms. This yields the correct relationship between retained profit, saving, and investment which in turn makes it clear after the event that the IS-part of the IS-LM construct had been logically defective ab initio.
July 17, 2013
Keynes, Hayek, Kant
Comment on Fred Zaman on 'Rethinking Keynes’ non-Euclidian theory of the economy'
Blog-Reference
In the glorious days of economics, the great thinker Hayek was quipped by the great thinker Keynes: “... a remorseless logician can end up in Bedlam.” (Keynes, cited in Moggridge 1976, p. 36)
Economists in those days already were confused confusers (2013). This is not a lament but a statement of fact. Neither Keynes nor Hayek had a clear idea of the foundational concepts of income and profit. That's easy to prove.
We perfectly agree with Kant’s dictum: “Theory without empirical content is hollow. Empirical observations without [good & falsifiable] theory are directionless.”
Theory, though, starts with axioms, as Kant would have told you also.
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2013). Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series, 2207598: 1–16. URL
Moggridge, D. E. (1976). Keynes. London, Basingstoke: Macmillan.
Blog-Reference
In the glorious days of economics, the great thinker Hayek was quipped by the great thinker Keynes: “... a remorseless logician can end up in Bedlam.” (Keynes, cited in Moggridge 1976, p. 36)
Economists in those days already were confused confusers (2013). This is not a lament but a statement of fact. Neither Keynes nor Hayek had a clear idea of the foundational concepts of income and profit. That's easy to prove.
We perfectly agree with Kant’s dictum: “Theory without empirical content is hollow. Empirical observations without [good & falsifiable] theory are directionless.”
Theory, though, starts with axioms, as Kant would have told you also.
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2013). Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series, 2207598: 1–16. URL
Moggridge, D. E. (1976). Keynes. London, Basingstoke: Macmillan.
August 16, 2021
Occasional Tweets: The futile attempt to recycle Keynes (I)
#Economics#FailedScience#FakeScience#Economists#StupidOrCorruptOrBoth#Keynes messed up #MacroFoundations because he was too stupid for elementary #Algebra.
— E.K-H (@AXECorg) August 16, 2021
Keynes ― the poster boy for the weakness of the economist’s mindhttps://t.co/RgruUzd0gx pic.twitter.com/oqS7PbPJUx
For more about Keynes see AXECquery.
November 21, 2016
Keynes’ message for contemporaries
Comment on Asad Zaman on ‘Reading Keynes’
Blog-Reference
You say: “I am planning a sequence of posts on re-reading Keynes, where I will try to go through the General Theory. ... Secondarily, I hope to be able to summarize Keynes’ insights to make them relevant and useful to a contemporary audience. Thirdly, there are many experts, especially Paul Davidson, on this blog, who will be able to prevent me from making serious mistakes in interpretation.”
Interpretation of Keynes cannot be the goal because we had already a grand debate about ‘what Keynes really meant’ some time ago. The result was inconclusive, to say the least. There are two reasons for this:
(i) “But Keynes, too, sometimes gave the impression of not having fully grasped the logic of his own system.” (Laidler, 1999, p. 281)
(ii) “For Keynes as for Post Keynesians, the guiding motto is ‘it is better to be roughly right than precisely wrong!’” (Davidson, 1984, p. 574)
Because roughly right is equivalent to roughly wrong, everybody can interpret into Keynes what he likes. And this is what actually happened. The simple fact of the matter is that Keynes and the Post Keynesians got macro wrong.#1 Keynesianism is a halfway house. And from this follows that the only worthwhile goal is to finalize the Keynesian Revolution.#2
The one message of Keynes that is still valid is this: “The [neo-]classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight ― as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.” (1973, p. 16)
Keynes pointed the way but did not follow it himself. No re-interpretation can alter the fact that Keynes' macrofoundations are provably false.#3
Egmont Kakarot-Handtke
References
Davidson, P. (1984). Reviving Keynes’s Revolution. Journal of Post Keynesian Economics, 6(4): 561–575. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. London, Basingstoke: Macmillan.
Laidler, D. (1999). Fabricating the Keynesian Revolution. Cambridge: Cambridge University Press.
#1 How Keynes got macro wrong and Allais got it right and Post Keynesianism, science, and universal idiocy and Why Post Keynesianism Is Not Yet a Science
#2 Finalizing the Keynesian Revolution
#3 From false micro to true macro: the new economic Paradigm
Blog-Reference
You say: “I am planning a sequence of posts on re-reading Keynes, where I will try to go through the General Theory. ... Secondarily, I hope to be able to summarize Keynes’ insights to make them relevant and useful to a contemporary audience. Thirdly, there are many experts, especially Paul Davidson, on this blog, who will be able to prevent me from making serious mistakes in interpretation.”
Interpretation of Keynes cannot be the goal because we had already a grand debate about ‘what Keynes really meant’ some time ago. The result was inconclusive, to say the least. There are two reasons for this:
(i) “But Keynes, too, sometimes gave the impression of not having fully grasped the logic of his own system.” (Laidler, 1999, p. 281)
(ii) “For Keynes as for Post Keynesians, the guiding motto is ‘it is better to be roughly right than precisely wrong!’” (Davidson, 1984, p. 574)
Because roughly right is equivalent to roughly wrong, everybody can interpret into Keynes what he likes. And this is what actually happened. The simple fact of the matter is that Keynes and the Post Keynesians got macro wrong.#1 Keynesianism is a halfway house. And from this follows that the only worthwhile goal is to finalize the Keynesian Revolution.#2
The one message of Keynes that is still valid is this: “The [neo-]classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight ― as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.” (1973, p. 16)
Keynes pointed the way but did not follow it himself. No re-interpretation can alter the fact that Keynes' macrofoundations are provably false.#3
Egmont Kakarot-Handtke
References
Davidson, P. (1984). Reviving Keynes’s Revolution. Journal of Post Keynesian Economics, 6(4): 561–575. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. London, Basingstoke: Macmillan.
Laidler, D. (1999). Fabricating the Keynesian Revolution. Cambridge: Cambridge University Press.
#1 How Keynes got macro wrong and Allais got it right and Post Keynesianism, science, and universal idiocy and Why Post Keynesianism Is Not Yet a Science
#2 Finalizing the Keynesian Revolution
#3 From false micro to true macro: the new economic Paradigm
February 26, 2018
Forget Keynes
Comment on Asad Zaman on ‘Understanding Macro: The Great Depression’
Blog-Reference and Blog-Reference on Feb 28 and Blog-Reference on Mar 5 adapted to context
There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Political economics has produced NOTHING of scientific value in the last 200+ years. This is the track record: provably false
• profit theory, for 200+ years,
• Walrasian microfoundations (in particular equilibrium), for 150+ years,
• Keynesian macrofoundations (in particular I=S/IS-LM), for 80+ years.
Heterodoxy claims that Orthodoxy from Walras/Marshall to DSGE is false. This, of course, is true. However, Heterodoxy claims also that Keynesian economics is a valid replacement for Orthodoxy. This is provably false. Keynesianism, too, is proto-scientific garbage.#1
Asad Zaman argues: “Lord John Maynard Keynes invented the entire field of macroeconomics in response to the Great Depression in 1929, which could not be understood according to economic theories dominant until then.”
Keynes, too, was an incompetent scientist and if there ever was a political agenda pusher then he. Keynes saw the necessity of a Paradigm Shift but he messed up the move from microfoundations to macrofoundations.
Fact is: Walrasianism, Keynesianism, Marxianism, Austrianism are mutually contradictory, axiomatically false, materially/formally inconsistent and ALL approaches got profit theory, employment theory, and the theory of money wrong.
Asad Zaman argues: “It should be immediately obvious that active government involvement in creating full employment helps the bottom 90%. It is slightly less obvious that monetary expansion, which may create inflation, is also helpful to the poorer segment of society. This is because the poor are generally borrowers of money, so the value of their debt in real terms becomes reduced. Similarly, easy money makes it easier for them to borrow. At the same time, Keynesian policies hurt the top 1%.”
The claim that Keynes fought for the cause of ninety-nine-percenters and against the one-percenters is false. In effect, the opposite is true.#2
Heterodoxy’s repetitive critique of Orthodoxy has run into a dead end. Heterodoxy, too, is scientifically worthless political economics.#3 It is time to forget the whole proto-scientific garbage and to move on: “The moral of the story is simply this: 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)
Time to bury failed/fake scientists for good and to leave the creepy intellectual graveyard of orthodox and heterodox economics behind.
Egmont Kakarot-Handtke
#1 For details see
► Keynes’ intellectual nonexistence
► How Keynes got macro wrong and Allais got it right
► Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#2 For details see
► Who or what exactly did Keynes save?
► Keynes, Lerner, MMT, Trump and exploding profit
► Fiscal policy and the Humpty Dumpty Fallacy
#3 Economics: communication without content
Related 'How Keynes messed macro up' and 'Keynesianism: The triumph of blathering over thinking' and '#DrainTheScientificSwamp' and 'Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need' and 'From Keynes’ fatal blunder to the true economic model' and 'MMT and the canonical macroeconomic model' and 'In the grand scheme of things, Lord Keynes was only a small-time crook' and 'Ch. 13, The indelible scientific disgrace of economics, in Sovereign Economics. For details of the big picture see cross-references Keynesianism and cross-references Failed/Fake Scientists and cross-references Constructive Heterodoxy.
Blog-Reference and Blog-Reference on Feb 28 and Blog-Reference on Mar 5 adapted to context
There is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Political economics has produced NOTHING of scientific value in the last 200+ years. This is the track record: provably false
• profit theory, for 200+ years,
• Walrasian microfoundations (in particular equilibrium), for 150+ years,
• Keynesian macrofoundations (in particular I=S/IS-LM), for 80+ years.
Heterodoxy claims that Orthodoxy from Walras/Marshall to DSGE is false. This, of course, is true. However, Heterodoxy claims also that Keynesian economics is a valid replacement for Orthodoxy. This is provably false. Keynesianism, too, is proto-scientific garbage.#1
Asad Zaman argues: “Lord John Maynard Keynes invented the entire field of macroeconomics in response to the Great Depression in 1929, which could not be understood according to economic theories dominant until then.”
Keynes, too, was an incompetent scientist and if there ever was a political agenda pusher then he. Keynes saw the necessity of a Paradigm Shift but he messed up the move from microfoundations to macrofoundations.
Fact is: Walrasianism, Keynesianism, Marxianism, Austrianism are mutually contradictory, axiomatically false, materially/formally inconsistent and ALL approaches got profit theory, employment theory, and the theory of money wrong.
Asad Zaman argues: “It should be immediately obvious that active government involvement in creating full employment helps the bottom 90%. It is slightly less obvious that monetary expansion, which may create inflation, is also helpful to the poorer segment of society. This is because the poor are generally borrowers of money, so the value of their debt in real terms becomes reduced. Similarly, easy money makes it easier for them to borrow. At the same time, Keynesian policies hurt the top 1%.”
The claim that Keynes fought for the cause of ninety-nine-percenters and against the one-percenters is false. In effect, the opposite is true.#2
Heterodoxy’s repetitive critique of Orthodoxy has run into a dead end. Heterodoxy, too, is scientifically worthless political economics.#3 It is time to forget the whole proto-scientific garbage and to move on: “The moral of the story is simply this: 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)
Time to bury failed/fake scientists for good and to leave the creepy intellectual graveyard of orthodox and heterodox economics behind.
Egmont Kakarot-Handtke
#1 For details see
► Keynes’ intellectual nonexistence
► How Keynes got macro wrong and Allais got it right
► Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#2 For details see
► Who or what exactly did Keynes save?
► Keynes, Lerner, MMT, Trump and exploding profit
► Fiscal policy and the Humpty Dumpty Fallacy
#3 Economics: communication without content
Related 'How Keynes messed macro up' and 'Keynesianism: The triumph of blathering over thinking' and '#DrainTheScientificSwamp' and 'Refutation of Asad Zaman’s heterodox methodology: all arguments you ever need' and 'From Keynes’ fatal blunder to the true economic model' and 'MMT and the canonical macroeconomic model' and 'In the grand scheme of things, Lord Keynes was only a small-time crook' and 'Ch. 13, The indelible scientific disgrace of economics, in Sovereign Economics. For details of the big picture see cross-references Keynesianism and cross-references Failed/Fake Scientists and cross-references Constructive Heterodoxy.
March 3, 2025
Occasional Xs: Since Keynes' I=S, economists get saving and profit wrong (II)
#Economics#AllYouNeedToKnow
— AXEC (@EgmontHandtke) March 3, 2025
There is a grave error in Richard Wagner's attached statement on retirement saving.
It is NOT the case that saving governs investment or that investment governs saving or that both are equal by definition. Both are independent and they together… pic.twitter.com/euV9jsq8Nn
September 12, 2022
Occasional Tweets: The futile attempt to recycle Keynes (X)
#Economics#FailedScience#FakeScience#Keynes was too stupid for the elementary #Algebra of #MacroFoundations and too incompetent for #Science. Thusly, he messed up #MacroEconomics. After-Keynesians don't get it to this day.
— E.K-H (@AXECorg) September 12, 2022
Forget Keyneshttps://t.co/T6Y8aFo72J pic.twitter.com/KEIo6gsPGQ
January 24, 2022
Occasional Tweets: The futile attempt to recycle Keynes (V)
#Economics#FailedScience#FakeScience#Keynesianism has been buried long ago at the Flat-Earth-Cemetery. #Keynes was too stupid for #Science. #Economists still don't get it.
— E.K-H (@AXECorg) January 24, 2022
Forget Keyneshttps://t.co/T6Y8aFo72J pic.twitter.com/5hSvD9MYrh
For more about Keynesianism see AXECquery.
February 4, 2023
Occasional Tweets: Forget Keynes and Marx and all the rest
#Economics is NOT #Science. To this day, #Economists have not figured out how the #Economy works bc most of them are NOT #Scientists but #AgendaPushers/#Clowns in the political #CircusMaximus.
— E.K-H (@AXECorg) February 4, 2023
Keynes―Marx―Profit: The abysmal scientific failure of economicshttps://t.co/ps2MeC9d4M
July 30, 2022
Occasional Tweets: The futile attempt to recycle Keynes (IX)
#Economics#FailedScience#FakeScience#Keynesianism has been buried long ago at the Flat-Earth-Cemetery. #Keynes was too stupid for the elementary #Algebra of #MacroFoundations and too incompetent for #Science.
— E.K-H (@AXECorg) July 30, 2022
Forget Keyneshttps://t.co/T6Y8aFo72J pic.twitter.com/7VFH5f7sZh
November 14, 2018
Keynes, Kalecki, MMT, and the accidental invention of the perpetual profit machine
Comment on Lars Syll on ‘Kalecki on wage-led growth’
Blog-Reference
Like Keynes, Kalecki got profit wrong. Lars Syll and the rest of retarded After-Keynesians have not realized anything to this day.#1
Keynes defined the formal foundations of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This elementary syllogism is conceptually and logically defective because Keynes never came to grips with profit. (Tómasson et. al)
The elementary version of the axiomatically correct macroeconomic Profit Law, which is measurable with the precision of two decimal places, reads Qm≡I−Sm with Qm as monetary profit of the business sector and Sm as monetary saving of the household sector. And this means that since Keynes/Hicks all I=S/IS-LM models are false.
Keynesian macroeconomics is proto-scientific garbage. Because the profit theory is false, the rest is false including, of course, employment theory and the theory of money.#2
Kalecki’s profit theory is not any better.#3, #4 And therefore, his employment theory, too, is provably false.
The axiomatically correct employment theory tells one that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R. So, there are two policy levers, and what has to be done is to combine demand-led and wage-led expansion in order to get out of unemployment.
The post-Keynesian preoccupation with demand is ultimately counterproductive because each increase in deficit spending increases macroeconomic profit. From the axiomatically correct macroeconomic Profit Law Qm≡(I−Sm)+(G−T)+(X−M)+Yd follows inter alia Public Deficit = Private Profit.#5
Keynes, Kalecki, MMTers, and Lars Syll are seen as Progressives who promote policies that benefit WeThePeople. This is just one more propaganda swindle in the long history of political economics. These fake Progressives have never done anything else than push the agenda of the Oligarchy. After all, this is what all economists do since Adam Smith/Karl Marx.#6, #7
Egmont Kakarot-Handtke
#1 Demand-led and wage-led growth
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 Truth by definition? The Profit Theory has been axiomatically false for 200+ years
#4 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
#5 Keynes, Lerner, MMT, Trump, Biden, and exploding profit
#6 Mission impossible: economists join WeThePeople
#7 Why do workers not tar and feather economists?
Blog-Reference
Like Keynes, Kalecki got profit wrong. Lars Syll and the rest of retarded After-Keynesians have not realized anything to this day.#1
Keynes defined the formal foundations of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This elementary syllogism is conceptually and logically defective because Keynes never came to grips with profit. (Tómasson et. al)
The elementary version of the axiomatically correct macroeconomic Profit Law, which is measurable with the precision of two decimal places, reads Qm≡I−Sm with Qm as monetary profit of the business sector and Sm as monetary saving of the household sector. And this means that since Keynes/Hicks all I=S/IS-LM models are false.
Keynesian macroeconomics is proto-scientific garbage. Because the profit theory is false, the rest is false including, of course, employment theory and the theory of money.#2
Kalecki’s profit theory is not any better.#3, #4 And therefore, his employment theory, too, is provably false.
The axiomatically correct employment theory tells one that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R. So, there are two policy levers, and what has to be done is to combine demand-led and wage-led expansion in order to get out of unemployment.
The post-Keynesian preoccupation with demand is ultimately counterproductive because each increase in deficit spending increases macroeconomic profit. From the axiomatically correct macroeconomic Profit Law Qm≡(I−Sm)+(G−T)+(X−M)+Yd follows inter alia Public Deficit = Private Profit.#5
Keynes, Kalecki, MMTers, and Lars Syll are seen as Progressives who promote policies that benefit WeThePeople. This is just one more propaganda swindle in the long history of political economics. These fake Progressives have never done anything else than push the agenda of the Oligarchy. After all, this is what all economists do since Adam Smith/Karl Marx.#6, #7
Egmont Kakarot-Handtke
#1 Demand-led and wage-led growth
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 Truth by definition? The Profit Theory has been axiomatically false for 200+ years
#4 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example
#5 Keynes, Lerner, MMT, Trump, Biden, and exploding profit
#6 Mission impossible: economists join WeThePeople
#7 Why do workers not tar and feather economists?
Related 'Keynesianism as ultimate profit machine' and 'It’s the price and profit mechanism, stupid!'.
For details of the big picture see cross-references Profit and cross-references Employment.
***
Wikimedia AXEC145 The public-deficit component of the macrofounded Profit Law
November 8, 2021
Occasional Tweets: Some folks are still stuck with Keynes
#Economics#FailedScience#FakeScience#Keynes messed up #MacroEconomics because he was too stupid for elementary #Algebra. The General Theory is proto-scientific garbage.
— E.K-H (@AXECorg) November 8, 2021
Forget Keyneshttps://t.co/T6Y8aFo72J pic.twitter.com/XioQE35YLk
For details of the big picture see cross-references Keynesianism.
July 11, 2021
Keynes―Marx―Profit: The abysmal scientific failure of economics
Comment on Michael Roberts/Tom Hickey on ‘Marx’s reproduction schema’*
Michael Roberts summarizes: “… for Marx, under capitalism, … investment growth depends on profitability, …” and “for Marx, savings are profits because workers do not save, so there is a class aspect to his reproduction model.”
Tom Hickey cites Keynes: “The Engine which drives Enterprise is not Thrift, but profit.” (Treatise on Money, 1931)
OK folks, and what does profit depend on? The fact of the matter is that neither Marx nor Keynes had any idea of what profit is. And that is rather bad for any economist who claims to do science.#1, #2
The macroeconomic 3-sector Profit Law reads Q≡(G−T)+(I−S)+Yd.#3 This formula tells one, among many other important things, that monetary profit Q depends on investment I.#4 And there you have it: investment depends on profit, and profit depends on investment. In systems theory, this is called a positive feedback loop. And every half-wit knows by now that positive feedback is what destabilizes a system and eventually destroys it. The big insight about Capitalism is that at its heart there is a positive feedback loop. And this explains the economic system's dynamic and crises.
How does MMT fit in? The Profit Law implies Public Deficit (G−T)>0 = Private Profit Q. Thus, the MMT policy of deficit-spending/money-creation is a free lunch for the Oligarchy. While investment i.e. a growing real capital stock is the life elixir of Early Capitalism, growing public debt is the life elixir of Late Capitalism.#5
This, then, is the scandal of 200+ years of economics. Economics is all in one: scientific failure and political fraud because Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent, and ALL got profit wrong.
Because of this, economic policy guidance NEVER has had sound scientific foundations. It has ALWAYS been brain-dead agenda-pushing of political clowns. Left-right-center does not matter. Time to bury Marx and Keynes and MMT and all the rest at the Flat-Earth Cemetery.
Egmont Kakarot-Handtke
* Michael Roberts blog
***
Wikimedia AXEC172
November 24, 2016
Who or what exactly did Keynes save?
Comment on Asad Zaman on ‘Methodology for (Re)-Reading Keynes’
Blog-Reference
Asad Zaman says: “It is always useful to absorb the insights of our predecessors, before trying to build upon them. Such a methodology is essential for the advancement, progress, and accumulation of knowledge. Our current stock of human knowledge is based on the collected insights and labors of hundreds of thousands of scholars, accumulated over the centuries. We would return to the stone ages if we were to reject it as being full of contradictions and errors (which it is). Instead, progress occurs by absorbing the past accumulated wisdom, and trying to remove the errors, or add missing insights, building on our heritage, rather than discarding it and starting over from scratch.” (See intro)
Asad Zaman’s complete lack of logic is again and again astounding. The fact that he is in charge of the WEA curriculum is a sure indicator of the imminent intellectual demise of RWER-Heterodoxy.
Imagine for one moment the famous dialogue between Galileo and Simplicio. Galileo, of course, refutes the Geo-centric theory which prevailed about 1500 years and Simplicio argues (in Asad Zaman’s words) “We would return to the stone ages if we were to reject it as being full of contradictions and errors (which it is).” We know today that Galileo’s rejection of 1500 years of orthodox astronomy did NOT lead to the stone age but to modernity.
Asad Zaman obviously does not understand the concept of a paradigm shift. He argues: “Our current stock of human knowledge is based on the collected insights and labors of hundreds of thousands of scholars, accumulated over the centuries.” This is true for the genuine sciences but NOT for economics because economics is a failed science like Ptolemaic astronomy.
It is remarkable for a heterodox economist to defend “our heritage” because to do the paradigm shift, to replace the obsolete Orthodoxy, to discard the worthless heritage, has always been the mission and raison d’être of Heterodoxy. As Joan Robinson put it: “Scrap the lot and start again.”#1
With regard to the current stock of economic knowledge it has often been observed: “Thousands upon thousands of scholars, as well as thousands of statesmen and men of affairs, have contributed their efforts to the attempt to understand the course of events of the economic world. And today this field of investigation is being cultivated more extensively, than ever before. How is it, then, that in all these years, and with all the undoubted talent that has been lavished upon it, the subject of economics has advanced so little?” (Schoeffler)
In order to understand the failure of economics in general and Keynesianism in particular one has, first of all, to realize that there is political economics and theoretical economics. The founding fathers called themselves political economists, that is, they left no doubt that their main business was agenda pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing).
Keynes was first and foremost a political economist. Theoretical economics was a means to his political ends. Yet, it holds: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
Keynes NEVER had the true theory but many fast-changing opinions. Keynesianism has never been more than educated common sense.
Keynes’ approach has already been dead in the cradle. He 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.#2
But things are even worse. Because economists in general and Keynesians, in particular, do not understand profit they do not understand what deficit spending really means: “When government is added to the pure consumption economy then it holds under the condition of zero investment of the business sector and zero saving of the household sector Qm≡G−T, that is, the overall monetary profit of the business sector is positive if the government sector runs a deficit and negative if the government sector runs a surplus.”#3 In simple terms: Public Deficit = Private Profit. This is, in a nutshell, the current business model of the United States.
We cannot read Keynes’ mind and cannot know whether he wanted to save workers from unemployment, or whether he wanted to save Great Britain from decline, or whether he wanted to save Europe from another war, or whether he wanted to save capitalism from secular stagnation. Whatever Keynes intended is irrelevant. Because he did not understand the elementary economic relationship between deficit and profit, Keynes de facto initiated the greatest profit boost in the history of humankind.#4 The actual distributional problems Post Keynesians so often point their fingers on are ultimately the handiwork of Keynes.
The absurdity of political economics consists in the fact that Keynes has always been praised from the left-wing of the political spectrum and condemned from the right-wing. This proves that the one thing that is equally distributed among economists is idiocy. Nobody has done more for the one-percenters than Keynes.
Economics will not become a science before the present generation of Walrasians, Keynesians, Marxians, Austrians, and all their offshoots have been retired.
Egmont Kakarot-Handtke
#1 From false micro to true macro: the new economic paradigm
#2 For details of the big picture see cross-references Keynesianism
#3 Wikipedia and the promotion of economists’ idiotism (I)
#4 Keynesianism as ultimate profit machine
Related 'Economists: the Trumps of science' and 'The economist as stand-up comedian' and 'Keynes’ message for contemporaries' and 'How Keynes got macro wrong and Allais got it right' and 'The economic machine is broken? Don’t call the heterodox repairman!'. For details of the big picture see cross-references Keynesianism.
Blog-Reference
Asad Zaman says: “It is always useful to absorb the insights of our predecessors, before trying to build upon them. Such a methodology is essential for the advancement, progress, and accumulation of knowledge. Our current stock of human knowledge is based on the collected insights and labors of hundreds of thousands of scholars, accumulated over the centuries. We would return to the stone ages if we were to reject it as being full of contradictions and errors (which it is). Instead, progress occurs by absorbing the past accumulated wisdom, and trying to remove the errors, or add missing insights, building on our heritage, rather than discarding it and starting over from scratch.” (See intro)
Asad Zaman’s complete lack of logic is again and again astounding. The fact that he is in charge of the WEA curriculum is a sure indicator of the imminent intellectual demise of RWER-Heterodoxy.
Imagine for one moment the famous dialogue between Galileo and Simplicio. Galileo, of course, refutes the Geo-centric theory which prevailed about 1500 years and Simplicio argues (in Asad Zaman’s words) “We would return to the stone ages if we were to reject it as being full of contradictions and errors (which it is).” We know today that Galileo’s rejection of 1500 years of orthodox astronomy did NOT lead to the stone age but to modernity.
Asad Zaman obviously does not understand the concept of a paradigm shift. He argues: “Our current stock of human knowledge is based on the collected insights and labors of hundreds of thousands of scholars, accumulated over the centuries.” This is true for the genuine sciences but NOT for economics because economics is a failed science like Ptolemaic astronomy.
It is remarkable for a heterodox economist to defend “our heritage” because to do the paradigm shift, to replace the obsolete Orthodoxy, to discard the worthless heritage, has always been the mission and raison d’être of Heterodoxy. As Joan Robinson put it: “Scrap the lot and start again.”#1
With regard to the current stock of economic knowledge it has often been observed: “Thousands upon thousands of scholars, as well as thousands of statesmen and men of affairs, have contributed their efforts to the attempt to understand the course of events of the economic world. And today this field of investigation is being cultivated more extensively, than ever before. How is it, then, that in all these years, and with all the undoubted talent that has been lavished upon it, the subject of economics has advanced so little?” (Schoeffler)
In order to understand the failure of economics in general and Keynesianism in particular one has, first of all, to realize that there is political economics and theoretical economics. The founding fathers called themselves political economists, that is, they left no doubt that their main business was agenda pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing).
Keynes was first and foremost a political economist. Theoretical economics was a means to his political ends. Yet, it holds: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
Keynes NEVER had the true theory but many fast-changing opinions. Keynesianism has never been more than educated common sense.
Keynes’ approach has already been dead in the cradle. He 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.#2
But things are even worse. Because economists in general and Keynesians, in particular, do not understand profit they do not understand what deficit spending really means: “When government is added to the pure consumption economy then it holds under the condition of zero investment of the business sector and zero saving of the household sector Qm≡G−T, that is, the overall monetary profit of the business sector is positive if the government sector runs a deficit and negative if the government sector runs a surplus.”#3 In simple terms: Public Deficit = Private Profit. This is, in a nutshell, the current business model of the United States.
We cannot read Keynes’ mind and cannot know whether he wanted to save workers from unemployment, or whether he wanted to save Great Britain from decline, or whether he wanted to save Europe from another war, or whether he wanted to save capitalism from secular stagnation. Whatever Keynes intended is irrelevant. Because he did not understand the elementary economic relationship between deficit and profit, Keynes de facto initiated the greatest profit boost in the history of humankind.#4 The actual distributional problems Post Keynesians so often point their fingers on are ultimately the handiwork of Keynes.
The absurdity of political economics consists in the fact that Keynes has always been praised from the left-wing of the political spectrum and condemned from the right-wing. This proves that the one thing that is equally distributed among economists is idiocy. Nobody has done more for the one-percenters than Keynes.
Economics will not become a science before the present generation of Walrasians, Keynesians, Marxians, Austrians, and all their offshoots have been retired.
Egmont Kakarot-Handtke
#1 From false micro to true macro: the new economic paradigm
#2 For details of the big picture see cross-references Keynesianism
#3 Wikipedia and the promotion of economists’ idiotism (I)
#4 Keynesianism as ultimate profit machine
Related 'Economists: the Trumps of science' and 'The economist as stand-up comedian' and 'Keynes’ message for contemporaries' and 'How Keynes got macro wrong and Allais got it right' and 'The economic machine is broken? Don’t call the heterodox repairman!'. For details of the big picture see cross-references Keynesianism.
***
Peter Bofinger, Feb 18, Fridays for Keynesianism |
| Source: Social Europe |
February 12, 2023
Occasional Tweets: Keynes messed up macroeconomics but After-Keynesians have not noticed anything to this day
#Keynes got macroeconomic #Profit wrong bc he was too stupid for elementary #Algebra.
— E.K-H (@AXECorg) February 12, 2023
As a consequence, the whole of #MacroEconomics is scientifically worthless. #AfterKeynesians NEVER got it.
Cross-Referenceshttps://t.co/TGTkAwX778 pic.twitter.com/h7BZdCWffq
November 16, 2021
Occasional Tweets: The futile attempt to recycle Keynes (II)
The history of economic thought is the history of scientific failure. #Keynes messed up #MacroEconomics 80+ years ago because he was too stupid for elementary #Algebra.
— E.K-H (@AXECorg) November 16, 2021
In the grand scheme of things, Lord Keynes was only a small-time crookhttps://t.co/qD8aPg7TXv pic.twitter.com/B8oOBke1Pk
September 26, 2016
How Keynes got macroeconomics wrong and Allais got it right
Comment on Lars Syll on ‘Good advice to aspiring economists’
Blog-Reference and Blog-Reference on Sep 28 and Blog-Reference on Nov 28 and Blog-Reference on Dec 2, 2019, adapted to context and Blog-Reference on Dec 4
Keynes based macroeconomics on logically and conceptually defective foundations and neither Post Keynesians nor New Keynesians nor Anti-Keynesians have realized his foundational blunder in 80+ years (2014).
Keynes defined the formal core of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, 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., 2010, p. 12)
Keynes had NO idea of the fundamental concepts of economics, viz. profit and income. Because profit is ill-defined the whole theoretical superstructure of macroeconomics is false, in particular, ALL I=S/IS-LM models (2011; 2013).
Allais clearly identified Keynes major fault: “... mais son [Keynes’] insuffisance logique ne lui a pas permis de résoudre les problèmes que son intuition lui avait fait entrevoir.” (1993, p. 70). In other words, Keynes saw the problems but could not solve them because of his logical insufficiency.
The correct relationship is given by Qre≡I−S (Allais, 1993, p. 69) Legend: Qre retained profit, S household sector's saving, I business sector's investment expenditures.
It is pretty obvious from this equation that I and S are NEVER equal, neither ex-ante nor ex-post. The argument that I=S is merely an accounting identity proves only that, as a general rule, economists are too stupid to understand the elementary mathematics of accounting (2012). Allais understood it.
Egmont Kakarot-Handtke
References
Allais, M. (1993). Les Fondements Comptable de la Macro-Économie. Paris: Presses Universitaires de France, 2nd edition.
Kakarot-Handtke, E. (2011). Squaring the Investment Cycle. SSRN Working Paper Series, 1911796: 1–25. URL
Kakarot-Handtke, E. (2012). The Common Error of Common Sense: An Essential Rectification of the Accounting Approach. SSRN Working Paper Series, 2124415: 1–23. URL
Kakarot-Handtke, E. (2013). Settling the Theory of Saving. SSRN Working Paper Series, 2220651: 1–23. URL
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. 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
Related 'Wikipedia and the promotion of economists’ idiotism' and 'Macro for dummies' and 'Rectification of MMT macro accounting' and 'A tale of three accountants' and 'Review of the economics troops' and 'Keynesianism as ultimate profit machine' and 'Profit and the collective failure of economists' and 'Wikipedia and the promotion of economists’ idiotism (II)' and 'Flow-Balance-Inconsistency ― inscription on the gravestone of economics' and 'The GDP-death-blow for the economics profession'. For details of the big picture see cross-references Refutation of I=S and cross-references Accounting.
Blog-Reference and Blog-Reference on Sep 28 and Blog-Reference on Nov 28 and Blog-Reference on Dec 2, 2019, adapted to context and Blog-Reference on Dec 4
Keynes based macroeconomics on logically and conceptually defective foundations and neither Post Keynesians nor New Keynesians nor Anti-Keynesians have realized his foundational blunder in 80+ years (2014).
Keynes defined the formal core of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (1973, 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., 2010, p. 12)
Keynes had NO idea of the fundamental concepts of economics, viz. profit and income. Because profit is ill-defined the whole theoretical superstructure of macroeconomics is false, in particular, ALL I=S/IS-LM models (2011; 2013).
Allais clearly identified Keynes major fault: “... mais son [Keynes’] insuffisance logique ne lui a pas permis de résoudre les problèmes que son intuition lui avait fait entrevoir.” (1993, p. 70). In other words, Keynes saw the problems but could not solve them because of his logical insufficiency.
The correct relationship is given by Qre≡I−S (Allais, 1993, p. 69) Legend: Qre retained profit, S household sector's saving, I business sector's investment expenditures.
It is pretty obvious from this equation that I and S are NEVER equal, neither ex-ante nor ex-post. The argument that I=S is merely an accounting identity proves only that, as a general rule, economists are too stupid to understand the elementary mathematics of accounting (2012). Allais understood it.
Egmont Kakarot-Handtke
References
Allais, M. (1993). Les Fondements Comptable de la Macro-Économie. Paris: Presses Universitaires de France, 2nd edition.
Kakarot-Handtke, E. (2011). Squaring the Investment Cycle. SSRN Working Paper Series, 1911796: 1–25. URL
Kakarot-Handtke, E. (2012). The Common Error of Common Sense: An Essential Rectification of the Accounting Approach. SSRN Working Paper Series, 2124415: 1–23. URL
Kakarot-Handtke, E. (2013). Settling the Theory of Saving. SSRN Working Paper Series, 2220651: 1–23. URL
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. 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
Related 'Wikipedia and the promotion of economists’ idiotism' and 'Macro for dummies' and 'Rectification of MMT macro accounting' and 'A tale of three accountants' and 'Review of the economics troops' and 'Keynesianism as ultimate profit machine' and 'Profit and the collective failure of economists' and 'Wikipedia and the promotion of economists’ idiotism (II)' and 'Flow-Balance-Inconsistency ― inscription on the gravestone of economics' and 'The GDP-death-blow for the economics profession'. For details of the big picture see cross-references Refutation of I=S and cross-references Accounting.
***
Wikimedia AXEC172
Wikimedia AXEC143d
January 24, 2023
Occasional Tweets: Since Keynes' I=S, economists get saving and profit wrong (I)
The 3-sector #ProfitLaw Q≡(G−T)+(I−S)+Yd implies #PublicDeficitIsPrivateProfit. So, #DeficitSpendingMoneyCreation is a #FreeLunch for the #Oligarchy. #WeThePeople owes the #PublicDebt and #Oligarchy owns the #FinancialAssets.⇒https://t.co/ZbUnNmFNso
— E.K-H (@AXECorg) January 24, 2023
For more about saving see AXECquery.
***
Wikimedia AXEC172
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