Go! ― test the Profit and Employment Law Comment on Lars Syll on ‘When did you last hear an economist say something like this?’
Lars Syll quotes Einstein: “If the observations of the red shift in the spectra of massive stars don’t come out quantitatively in accordance with the principles of general relativity, then my theory will be dust and ashes.” (1920)
The problem with Lars Syll is that he suffers from ADHD (Attention Deficit Hyperblathering Disorder). Check-back question: When did Lars Syll as the heterodox chief proponent of ontological-uncertainty/anything-goes last formulate a testable proposition?
Here are the test challenges for the fake scientist Lars Syll:
Profit Law “… the macroeconomic Profit Law for the open economy with a government is given as Q=Qm+Qn with Qm=Yd+(I−Sm)+(G−T)+(X−M). Legend: Q total profit, Qm monetary profit/loss, Qn nonmonetary profit/loss, Yd distributed profit, Sm monetary saving/dissaving, I investment expenditures, G government spending, T taxes, X export, M import. Because all variables are measurable, the axiomatically correct Profit Law is testable.” #1, #2, #3, #4
Employment Law “There is no need, though, to discuss much about contradicting assertions because the Employment Law is testable. Therefore, an experimentum crucis that settles the matter is possible in principle.” #5, #6, #7
Needless to emphasize that the scientifically incompetent representative economist habitually ignores all test challenges.#8 Lars Syll is no exception. He knows very well that testing would turn his ramshackle Post-Keynesianism to dust and ashes.
Egmont Kakarot-Handtke
#1 Economists and their silly excuses https://axecorg.blogspot.com/2016/12/economists-and-their-silly-excuses.html
#2 The key to macro and Keen’s debt-employment model https://axecorg.blogspot.com/2017/02/the-key-to-macro-and-keens-debt.html
#3 Profit: after 200+ years, economists are still in the woods https://axecorg.blogspot.com/2018/06/profit-after-200-years-economists-are.html
#4 First Lecture in New Economic Thinking https://axecorg.blogspot.com/2017/05/first-lecture-in-new-economic-thinking.html
#5 You have the data, here is the Employment Law https://axecorg.blogspot.com/2015/01/you-have-data-here-is-employment-formula.html
#6 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2130421
#7 Essentials of Constructive Heterodoxy: Employment https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2576867
#8 Profit and the Private-Property-Irrelevance Theorem https://axecorg.blogspot.com/2018/05/profit-and-private-property-irrelevance.html
Sorry, your "profit law" is not testable as it is an identity, a particular labeling of accounting relations everyone accepts. Your problem is that your labels do not coincide with those legally in place for the national income and product accounts accepted by all accountants in the western world. So, looking at correctness being in conformity with universal practice, you are simply wrong.
OTOH, some of us have made empirical hypothese and then actually tested them. I have done so myself, but do not feel like spending time and space laying those out. Rathwr I remind you of experimental economics where empirical testing of hypotheses goes on all the time and is done in a seriously sceintific manner, although you simply ignore that with your narrow and repetitious blatherings.
Economists simply don’t get it Comment on Chris Dillow on ‘What’s behind the rising US profit share?’
Chris Dillow argues: “Diane Coyle says the fact that different countries have seen different changes in labour’s share of income in recent years ― with it falling in the US but not UK ― shows that ‘institutions are playing a big part’ in driving factor shares. This is true. But it’s only part of the story. I say so for a simple reason. Imagine aggregate wages were to fall for some reason ― technical change, globalization, whatever. Would this raise the profit share? Not necessarily. If every £1 fall in wages causes workers to cut their spending by £1, profits would also fall.”
False, profit would stay the same. The obvious fact of the matter is that economists do not understand to this day what profit is: “A satisfactory theory of profits is still elusive.” (Palgrave Dictionary, Desai, 2008) This is obviously disqualifying for economists in general and Chris Dillow, in particular.#1
Chris Dillow cites Kalecki and derives from “basic national accounts identities … an identity for profits: P=(C−W)+(I−D)+(G−T)+NX (i).”
This, of course, is proto-scientific rubbish because economists are too stupid for the elementary mathematics that underlies National Accounting.#2, #3, #4 Distribution theory has always been false because profit theory has always been false.
To make matters short, here is the axiomatically correct macroeconomic Profit Law: Qm=Yd+(I−Sm)+(G−T)+NX (ii). Legend: Qm monetary profit/loss, Yd distributed profit, I investment expenditures, Sm monetary saving/dissaving, G government spending, T taxes, NX export minus import. Total profit Q is the sum of monetary profit Qm and nonmonetary profit Qn, i.e. Q=Qm+Qn (iii).#5
Eq. (iii) determines the nominator of the so-called profit share and explains why it is rising. Roughly speaking, neither Diane Coyle’s institutions nor market power nor automation account for a rising profit share. The main drivers of increasing overall profit have been in the past decades the increasing deficit-spending of the government- and household sector which translates into ever-increasing public/private debt.#6
As Mirowski put it: “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” No surprise then, that neither Diane Coyle nor Chris Dillow ever understood how the economy works, what profit is, and why the profit share rises. This is the essential prerequisite of trash-blogging.
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741
#2 Profit: after 200+ years, economists are still in the woods https://axecorg.blogspot.com/2018/06/profit-after-200-years-economists-are.html
#3 Truth by definition? The Profit Theory is axiomatically false for 200+ years https://axecorg.blogspot.com/2018/07/truth-by-definition-profit-theory-is.html
#4 Wikipedia and the promotion of economists’ idiotism (II) https://axecorg.blogspot.com/2018/07/wikipedia-and-promotion-of-economists.html
#5 For details of the big picture see cross-references Profit http://axecorg.blogspot.com/2015/03/profit-cross-references.html
#6 Profit and the decline of labor’s nominal share (I) https://axecorg.blogspot.com/2017/08/profit-and-decline-of-labors-nominal.html
You say: “OTOH, some of us have made empirical hypothese and then actually tested them. I have done so myself, but do not feel like spending time and space laying those out. Rathwr I remind you of experimental economics where empirical testing of hypotheses goes on all the time and is done in a seriously sceintific manner, …”
Yes, this is exactly the definition of cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.” (Feynman) #1, #2, #3
What is missing is scientific competence. Science is committed to the growth of knowledge, and scientific knowledge is well-defined by material and formal consistency. Formal consistency is established by the axiomatic-deductive method, material consistency by state-of-art testing.
OTOH, anti-science is the promotion of confusion in the form of storytelling, senseless blather, gossip, disinformation, meta-communication, attention management, false-applause/real-suppression, trivial distraction, delirious prophecy, fake news, deceit, fraud, feeble jokes, etcetera.#4
Your contributions to economics perfectly fit the definition of cargo cult science.
Egmont Kakarot-Handtke
#1 Economics and scientific foolishness https://axecorg.blogspot.com/2016/10/economics-and-scientific-foolishness.html
#2 What is so great about cargo cult science? or, How economists learned to stop worrying about failure https://axecorg.blogspot.com/2017/05/what-is-so-great-about-cargo-cult.html
#3 The economist as standup comedian http://axecorg.blogspot.com/2016/11/the-economist-as-standup-comedian.html
#4 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2207598
By the way, Egmont, you are welcome to post on my "joke" posts but if you tread on my serious content I will delete your sorry ass faster than you can say "cargo cult science." Capisci?
It might well be that Feynman's view would not change if he were still around, but I must note that this quote from him predates when there was more than just a very small amount of experimental economics going on. Let me note a few things that have been found by prominent experimentalists.
Vernon Smith determined that if one wants to set up an auction that will converge rapidly on an equilibrium price, the double auction format does that much better than others, and indeed this has been adopted in practice with suvccessful results saving billions of dollars in governments selling spectrum rights and other things.
He also showed in experiments that the propensity of people to engage in speculation on assets leading to bubbles and crashes is not a matter of them not knowing the truee value of those assets. This propensity runs much deeper and is much more ubiquitous. I note that one of these results is often seen as defending markets (properly set up) while the other generally seen as shining a light ways that markets do not behave themselves so well.
Reinhard Selten suggested to Werner Guth that he should run experiments on what is known as the ultimatum game. This has now been verified by massive followup wxperiments as a deeply robust result about human behavior that goes agains standard economics assumptions about "rationality," namely that most people are willing to give up money in order to punish others whom they see as behaving in unfair activities.
Daniel Kahneman and Amost Tversky showed that most people experience loss aversion, which has siginificant implications for economic behavior. Richard Thaler extended this to show the widespread existence of the endowment effect, that once someone comes to own something they value it much more highly than before they owned it. This has substantial public policy implicatoins.
None of these experimental results are affexted in any way whatsoever by your profit theory. it is utterly irrelevant and vscuous. These results all have useful implications that have been followed up on in the real world.
I shall add one more that is not strictly experimental and arguably is not economics, coming from mathematicss actually, from game theory to be more precise, but which may be the most important finding by anybody remotely related to economics that there has ever been. This is Thomas Schelling's discovery of the concept of focal points in situations where there are multiiple game theoretic equilbiria, which allow for groups to move to a preferred equilibrium. The important real world application that Schelling himself played a crucial behind the scenes in bringing about was to establish internationally the focal point norm of no-first-use of nuclear weapons, which some argue is the moat important reason why no such use has happened and the human species remains alive. No shit. This also has nothing to do with your irrelevant profit theory, Egmont, nothing.
You report: “Reinhard Selten suggested to Werner Guth that he should run experiments on what is known as the ultimatum game. This has now been verified by massive followup wxperiments as a deeply robust result about human behavior that goes agains standard economics assumptions about ‘rationality,’ namely that most people are willing to give up money in order to punish others whom they see as behaving in unfair activities.”
Very interesting, indeed. It seems to escape you, though, that the whole issue of punishing and other games people play is the subject matter of psychology/sociology. The subject matter of economics ― get it ― is NOT how people behave but how the economy behaves. Economics is NOT a so-called social science but a system science.#1
The scientific incompetence of economists consists of not even realizing what their subject matter is. And this is why they have not figured out to this day what profit is. This is absolutely disqualifying for economists from Adam Smith onward to Barkley Rosser.
Your examples of the empirical work of V. Smith, Selten, Guth, Kahneman, Tversky, Thaler, Schelling tells everybody four essential things about economics: (i) that these so-called economists never understood what economics is all about, (ii) what the pivotal concept of their subject matter is, (iii), that the representative economist is a cargo cult scientist, and (iv) that the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud.
As long as economists have not tested the macroeconomic (= systemic) Profit Law and the Employment Law, economics remains what it is since 200+ years, i.e. a cargo cult science.
Fact is that there is NO greater embarrassment in the history of modern science than economics. And you are part of it.#2
Egmont Kakarot-Handtke
#1 See cross-references Not a Science of Behavior http://axecorg.blogspot.com/2015/12/behavior-cross-references.html
#2 Throw them out! Orthodox and heterodox economists are unfit for science https://axecorg.blogspot.com/2017/12/throw-them-out-orthodox-and-heterodox.html
Forget mainstream economics, scrap MMT, move on to the new paradigm Comment on Bill Mitchell on ‘The divide between mainstream macro and MMT is irreconcilable ― Part 2’
Stop beating mainstream economics ― it is long dead.#1 Bill Mitchell, though, does not get tired of enumerating, again and again, the flaws and idiocies of DSGE/RBC/New Keynesianism.
This is Bill Mitchell’s Groundhog Day indictment:#2
• “The problem is that their conclusion is flawed at the most elemental level …”
• “And so, mass unemployment was seen to be a problem of minimum wages, excessive trade union power, other legal constraints on wage cuts etc.”
• “New Keynesian specifications have to be overly simplistic and reliant on behavioural assumptions … that no self-respecting social scientist that actually studies human behaviour would consider to be credible in the least.” [“No science has been criticized by its own servants as openly and constantly as economics. The motives of dissatisfaction are many, but the most important pertains to the fiction of homo oeconomicus.” (Georgescu-Roegen, 1971)]
• “The mainstream proponents want to claim virtue based on the fact that their models are rigourous… but then respond to empirical anomalies with ad hoc (non rigourous) tack ons.”
• “The results they end up producing … are not ‘derivable’ from first-order, microfounded principles at all. Their claim to theoretical rigour fails.”
Yes, mainstream economics is a ludicrous, proto-scientific exercise. The axioms are false, the analytical superstructure is false, and from this follows that economic policy guidance NEVER had sound scientific foundations. Mainstream economics is refuted on all counts and therefore scientifically indefensible. Who still defends it is stupid or corrupt or both.
More is not to say about the failed/fake science economics.#3 And now the real task begins: “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)
Is MMT the new theory? No, because MMT, too, is axiomatically false.#4 Because of this, MMT policy guidance, too, has no sound scientific foundations.#5, #6
Egmont Kakarot-Handtke
#1 Stop beating mainstream economics ― it is long dead https://axecorg.blogspot.de/2018/04/stop-beating-mainstream-economics-it-is.html
#2 Reference to Arjun Jayadev/J. W. Mason ‘Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?’ https://www.ineteconomics.org/perspectives/blog/mainstream-macroeconomics-and-modern-monetary-theory-what-really-divides-them
#3 The biggest scientific mistake of the last centuries, and it has much to do with academic economists https://axecorg.blogspot.com/2018/08/the-biggest-scientific-mistake-of-last.html
#4 Both, mainstream economics and MMT are axiomatically false https://axecorg.blogspot.com/2018/09/both-mainstream-economics-and-mmt-are.html
#5 For the full-spectrum refutation of MMT see cross-references MMT http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#6 From false micro to true macro: the new economic paradigm http://axecorg.blogspot.com/2016/11/from-false-micro-to-true-macro-new.html
Both Mainstreamer and MMTer are either stupid or corrupt or both Comment on Bill Mitchell on ‘The divide between mainstream macro and MMT is irreconcilable ― Part 3’
In order to clarify the specifics of MMT, Bill Mitchell refers back to functional finance: “So his classic statement of functional finance: Government should adjust its rates of expenditure and taxation such that total spending in the economy is neither more nor less than that which is sufficient to purchase the full employment level of output at current prices. If this means there is a deficit, greater borrowing, ‘printing money,’ etc., then these things in themselves are neither good nor bad, they are simply the means to the desired ends of full employment and price stability …” and “But we do consider fiscal policy should be directed to advancing public purpose and the particular levels of resulting aggregates (for example, fiscal deficits/surpluses) are immaterial.”
This, clearly, is a statement about the objectives of economic policy. What everybody overlooks is that the economist as scientist is NOT entitled to policy agenda pushing. His sole task is to figure out how the actual economy works. So, economists are comparable to the physicists and engineers who figure out how a piece of metal can be made to defy gravity and to get off the ground and to safely land at the desired destination.
Economists as scientists have NO say about the destination. The destination is determined in the political process by the Legitimate Sovereign. So, political economics is a contradiction in itself.#1
Economists are NOT the Legitimate Sovereign as already J. S. Mill made abundantly clear: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”
For 200+ years economists overstep their competence. They have taken on the role as clowns and useful idiots in the political Circus Maximus and they have failed thoroughly as scientists. The four main approaches ― Walrasianism, Keynesianism/MMT, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit ― the pivotal concept of the subject matter ― wrong. With this pluralism of provably false theories, economists have not achieved anything of scientific value.
Bill Mitchell is right in pointing out that mainstream economics is but one big Fallacy of Composition.#2 But he fails to address the fact, that MMT is based upon provably false macrofoundations. With regard to economic policy he fails to address the fact that deficit-spending in the intellectual tradition of Keynes/Lerner has produced the insoluble distributional problems everybody has clearly before his eyes today.#3
So, with regard to scientific failure/corruption, there is NO difference between the mainstream and MMT.#4, #5 With regard to policy there seems to be a real difference. Mainstream economics is traditionally the mouthpiece of the one-percenters. MMT claims to be morally superior and to promote the cause of the ninety-nine-percenters.
This is an optical illusion. There is no real political difference either. Both Mainstreamer and MMTer are agenda-pusher for the oligarchy.#6, #7 The meager academic to-and-fro between Bill Mitchell and Jayadev/Mason has nothing at all to do with science but is a smokescreen for the ongoing joint political fraud which is the economist’s business since Adam Smith/Karl Marx.
Egmont Kakarot-Handtke
#1 The end of political economics https://axecorg.blogspot.com/2017/06/the-end-of-political-economics.html
#2 Reference to Arjun Jayadev/J. W. Mason ‘Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?’ https://www.ineteconomics.org/perspectives/blog/mainstream-macroeconomics-and-modern-monetary-theory-what-really-divides-them
#3 Keynes, Lerner, MMT, Trump and exploding profit https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#4 MMT, Bill Mitchell, and the lack of basic scientific integrity https://axecorg.blogspot.com/2018/08/mmt-bill-mitchell-and-lack-of-basic.html
#5 For the full-spectrum refutation of MMT see cross-references MMT http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#6 MMT: How WeTheOligarchy communicates with WeThePeople https://axecorg.blogspot.com/2018/09/mmt-how-wetheoligarchy-communicates.html
#7 MMT and grassroots movements https://axecorg.blogspot.com/2018/01/mmt-and-grassroots-movements.html
Good news for the one-percenters Comment on Alan Longbon ‘Good News: U.S. Government Posts A $214 Billion Deficit For August 2018, The U.S. Private Sector Posts A $214 Billion Surplus’
Alan Longbon rejoices: “The US budget deficit is $214 billion in August 2018; this is a net add of income to the private sector and a bumper month.” and “Professor Wynne Godley first comprehended the strategic importance of the accounting identity, which says that measured at current prices, the government’s budget balance, less the current account balance, by definition is equal to the private sector balance. GDP = Federal Spending [G]+ Non-Federal spending [P] + Net Exports [X].”
Unfortunately, the MMT balances equation is false. From the axiomatically correct Profit Law for the open economy with government and profit distribution, follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.
MMTer hide this distributional fact by lumping the business and the household sector together to the private sector and saying Public Deficit = Private Sector Surplus suggesting that private sector means WeThePeople. This is a verbal shell game. Given the saving/dissaving of the household sector = WeThePeople, the public deficit increases the macroeconomic profit of WeTheOligarchy one to one.#1, #2
Alan Longbon’s good news is MMT’s shot in the head of WeThePeople.
Egmont Kakarot-Handtke
#1 MMT and the single most stupid physicist https://axecorg.blogspot.com/2018/09/mmt-and-single-most-stupid-physicist.html
#2 Keynes, Lerner, MMT, Trump and exploding profit https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
Smart! How to make people fund their brain-washing Comment on Down with Tyranny on ‘Want To Sound Really Smart About Economic Issues? Read This’
Down with Tyranny argues: “When Blue America endorses a candidate, there are several ways we can be helpful to their campaigns, the most obvious being to help them raise campaign funds by connecting them to small dollar campaign contributors. This cycle one of the most valuable other ways we’ve helped candidates is by connecting them to Stephanie Kelton, America’s most brilliant economist.”
Stephanie Kelton argues: “Government debt is just the money the government spent into the economy and didn’t tax back. That’s all the national debt is. It’s a historical record of all of the times that they made a net deposit, spent more than they taxed out, and the bonds are the difference between those. One of the greatest cons ever perpetrated on the American people is this notion that the national debt belongs to us, that we are responsible in our individual capacity for a share of it.”
Everything is wrong with Stephanie Kelton’s economics:
• Her whole argumentation is based on MMT which is an economic theory that is refuted on all counts.#1
• MMT is scientifically worthless. It is political economics, in other words, agenda-pushing in the garb of academic authority.
• MMT and Stephanie Kelton claim to push the agenda of WeThePeople but in fact push the agenda of WeTheOligarchy.
• All MMT policy guidance boils down to deficit-spending/money-creation.
• Because the macroeconomic Profit Law states Public Deficit = Private Profit, MMT economic policy boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.
• All the social goodies MMTers promise are paid in real terms by WeThePeople themselves via stealth taxation.
• Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon.
• From the scientifically correct Profit Law follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.#2 MMTer hide this distributional fact by lumping the business and the household sector together to the private sector and saying Public Deficit = Private Sector Surplus suggesting that private sector means WeThePeople. This is a verbal shell-game.#3, #4
MMT is ― to use Stephanie Kelton’s own words ― “one of the greatest cons ever perpetrated on the American people”.#5
Egmont Kakarot-Handtke
#1 For the full-spectrum refutation of MMT see cross-references MMT http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#2 Keynes, Lerner, MMT, Trump and exploding profit https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#3 MMT is gangsta economics https://axecorg.blogspot.com/2018/07/mmt-is-gangsta-economics.html
#4 The Kelton-Fraud https://axecorg.blogspot.com/2018/07/the-kelton-fraud.html
#5 MMT and grassroots movements https://axecorg.blogspot.com/2018/01/mmt-and-grassroots-movements.html
MMT = Modern Monetary Trash Comment on Bill Mitchell on ‘Understanding what the T in MMT involves’
In his latest post#1, Bill Mitchell says: “… a Tweet the other day reminded me that there was still major misunderstandings of what Modern Monetary Theory (MMT) represents and that it was time to clarify some of those errors in comprehension. Specifically, there is a current out there that considers MMT to be incorrectly labelled because according to the argument there is no theory involved. It’s hard to imagine why anyone would think that but the fact that they do tells me that I should write this blog post. As I noted yesterday, our Macroeconomics textbook to be published by Macmillan Palgrave in February 2019 is full of theory. It has a lot of description, taxonomy, accounting, history, and philosophy, but also a lot of theory that ties some of those other components together in a meaningful way. The T in MMT is not a misnomer.”
Then he goes on to specify what a theory is and how scientific methodology relates to MMT. The first lethal error/blunder of Bill Mitchell is to maintain that economics is a social science. Here, MMT is in full accordance with mainstream economics. The fact of the matter is, though, that economics is a system science.#2
The second methodological error/blunder is that “There are no ‘laws’ in economics as their are in physics, for example.” This is true only insofar as there are NO behavioral laws. This, however, is irrelevant because economics is a system science and there are systemic laws of the monetary economy. Systemic laws are invariances (Nozick’s term) like physical laws but do not entail the physicists’ notion of causality.
The third methodological error/blunder consists of abandoning the concept of scientific truth which is well-defined since 2000+ years by material and formal consistency and to replace it by congruency.
All this is in line with J. S. Mill’s attempt to establish economics as “separate and inexact science” which, however, has never been anything else but a euphemism for failed/fake science.
Since the founding fathers, economics is a cargo cult science (Feynman’s term) and Bill Mitchell is in the state of self-delusion by maintaining he and his MMT colleagues are “standing on the shoulders of giants”.#3
Fact is that economists do not get the foundational concepts of profit/income/saving straight to this day. MMTers are no exception.#4
Bill Mitchell argues: “An oft-stated claim is that MMT is about accounting relationships. … Those who make that spurious claim about MMT often use the sectoral balances framework to make their point. They note that the basic sectoral balances relationship, which is a core part of the way an MMT economist analyses the world, is, at heart an accounting truism that has to be true because it is derived from a larger accounting framework – the nation’s National Accounts. That is true so far. While I know there is a debate in accounting about the theory of accounting, we will accept, here, that an accounting truism is one that has to be true (add up in this case) by the way we define it. It is not opinion or conjecture – it just has to be. So the statement: the Government deficit (surplus) equals the Non-government surplus (deficit) dollar-for-dollar is such a truism. It must be true.”
Unfortunately, it is false.#5 As Schumpeter once put it: “There is no more fertile source of error than apparently trivial premises.” Economics is no exception: “In fact, the history of every science, including that of economics, teaches us that the elementary is the hotbed of the errors that count most.” (Georgescu-Roegen)
Why the MMT benefactors of humanity never talk about profit Comment on John Weeks on ‘Why the public debt should be treated as an asset’
The most curious thing about economics is that most models ― Walrasian, Keynesian, Marxian, Austrian does not matter ― do NOT contain macroeconomic profit in explicit form. And when it appears occasionally it is misspecified.#1 This is why economics is a failed/fake science. MMT is no exception.
In John Weeks’ post about the mistreatment of public debt as perennial problem instead of a long-term benefit, the word profit does not appear once. The bottom line of his argument is that the public debt is not as massive as everybody thinks and on closer inspection, not a burden but, on the contrary, has a lot of advantages for WeThePeople. In detail he argues:
• People are told that public debt 1) must be repaid, 2) threatens the country with bankruptcy, and 3) is a burden on future generations. All these arguments are wrong.
• The British government can never default on its debt.
• A good portion of the national debt is held by the public sector, i.e. Bank of England, this is what the public sector owes itself.
• The interest paid on debt held by pension funds is income to retired households.
• At the end of 2016, private corporate and foreign gilts holders owned 41% of the UK’s national debt. Only the £524 billion of gilts held by foreign creditors could be considered a “burden” in that the associated interest payments are from UK taxpayers to non-UK creditors.
• A fair and progressive taxation system could ensure that interest payments to domestic bond holders don’t have negative redistribution effects.
• Sound management of the national debt means more public borrowing for investment and current expenditure, which is justified by the modest size of the effective debt.
The whole argument boils down to a plea for more deficit spending/money creation. This is what MMT policy guidance is all about.
Fact is:
• MMT is a macroeconomic theory that is refuted on all counts.#2
• John Weeks does not mention once the profit effect of deficit-spending/money-creation.#3
• From the scientifically correct Profit Law follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.#4
• MMT economic policy boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.#5
• All the social benefits MMTers promise are paid in real terms by WeThePeople themselves via stealth taxation.#6
• Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon. Public debt is NOT an asset but a time bomb.
MMT claims to push the agenda of WeThePeople but in fact pushes the agenda of WeTheOligarchy. MMT is failed/fake science and the proponents of MMT are NOT benefactors of humankind but quite ordinary political swindlers.#7
Egmont Kakarot-Handtke
#1 For details of the big picture see cross-references Profit http://axecorg.blogspot.com/2015/03/profit-cross-references.html
#2 For the full-spectrum refutation see cross-references MMT http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#3 Keynes, Lerner, MMT, Trump and exploding profit https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#4 Down with idiocy! https://axecorg.blogspot.com/2017/12/down-with-idiocy.html
#5 MMT: Redistribution as wellness program https://axecorg.blogspot.com/2017/10/mmt-redistribution-as-wellness-program.html
#6 MMT, money printing, stealth taxation, and redistribution https://axecorg.blogspot.de/2017/11/mmt-money-printing-stealth-taxation-and.html
#7 MMT: academic snake oil for the people https://axecorg.blogspot.com/2018/02/mmt-academic-snake-oil-for-people.html
I was just introduced to AXEC. Economics has already BEEN axiomatized -- this happened at the same time as the axiomatic revolution in mathematics, since economics is applied mathematics. There is no need to axiomatize, in economics, what should instead be the object of investigation. I think your complaint is with undergraduate economics and some graduate programs, but not with research economics, where it is getting harder to find an unjustified assumption.
And spreaders of dirty dossiers!
ReplyDeleteGo! ― test the Profit and Employment Law
ReplyDeleteComment on Lars Syll on ‘When did you last hear an economist say something like this?’
Lars Syll quotes Einstein: “If the observations of the red shift in the spectra of massive stars don’t come out quantitatively in accordance with the principles of general relativity, then my theory will be dust and ashes.” (1920)
The problem with Lars Syll is that he suffers from ADHD (Attention Deficit Hyperblathering Disorder). Check-back question: When did Lars Syll as the heterodox chief proponent of ontological-uncertainty/anything-goes last formulate a testable proposition?
Here are the test challenges for the fake scientist Lars Syll:
Profit Law “… the macroeconomic Profit Law for the open economy with a government is given as Q=Qm+Qn with Qm=Yd+(I−Sm)+(G−T)+(X−M). Legend: Q total profit, Qm monetary profit/loss, Qn nonmonetary profit/loss, Yd distributed profit, Sm monetary saving/dissaving, I investment expenditures, G government spending, T taxes, X export, M import. Because all variables are measurable, the axiomatically correct Profit Law is testable.” #1, #2, #3, #4
Employment Law “There is no need, though, to discuss much about contradicting assertions because the Employment Law is testable. Therefore, an experimentum crucis that settles the matter is possible in principle.” #5, #6, #7
Needless to emphasize that the scientifically incompetent representative economist habitually ignores all test challenges.#8 Lars Syll is no exception. He knows very well that testing would turn his ramshackle Post-Keynesianism to dust and ashes.
Egmont Kakarot-Handtke
#1 Economists and their silly excuses
https://axecorg.blogspot.com/2016/12/economists-and-their-silly-excuses.html
#2 The key to macro and Keen’s debt-employment model
https://axecorg.blogspot.com/2017/02/the-key-to-macro-and-keens-debt.html
#3 Profit: after 200+ years, economists are still in the woods
https://axecorg.blogspot.com/2018/06/profit-after-200-years-economists-are.html
#4 First Lecture in New Economic Thinking
https://axecorg.blogspot.com/2017/05/first-lecture-in-new-economic-thinking.html
#5 You have the data, here is the Employment Law
https://axecorg.blogspot.com/2015/01/you-have-data-here-is-employment-formula.html
#6 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2130421
#7 Essentials of Constructive Heterodoxy: Employment
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2576867
#8 Profit and the Private-Property-Irrelevance Theorem
https://axecorg.blogspot.com/2018/05/profit-and-private-property-irrelevance.html
Oh, another random irrelevant post by Egmont.
ReplyDeleteSorry, your "profit law" is not testable as it is an identity, a particular labeling of accounting relations everyone accepts. Your problem is that your labels do not coincide with those legally in place for the national income and product accounts accepted by all accountants in the western world. So, looking at correctness being in conformity with universal practice, you are simply wrong.
OTOH, some of us have made empirical hypothese and then actually tested them. I have done so myself, but do not feel like spending time and space laying those out. Rathwr I remind you of experimental economics where empirical testing of hypotheses goes on all the time and is done in a seriously sceintific manner, although you simply ignore that with your narrow and repetitious blatherings.
I am bitterly disappointed that "economics-loving masturbators" is not an item in the sign-carrier's list. :-(
ReplyDeleteEconomists simply don’t get it
ReplyDeleteComment on Chris Dillow on ‘What’s behind the rising US profit share?’
Chris Dillow argues: “Diane Coyle says the fact that different countries have seen different changes in labour’s share of income in recent years ― with it falling in the US but not UK ― shows that ‘institutions are playing a big part’ in driving factor shares. This is true. But it’s only part of the story. I say so for a simple reason. Imagine aggregate wages were to fall for some reason ― technical change, globalization, whatever. Would this raise the profit share? Not necessarily. If every £1 fall in wages causes workers to cut their spending by £1, profits would also fall.”
False, profit would stay the same. The obvious fact of the matter is that economists do not understand to this day what profit is: “A satisfactory theory of profits is still elusive.” (Palgrave Dictionary, Desai, 2008) This is obviously disqualifying for economists in general and Chris Dillow, in particular.#1
Chris Dillow cites Kalecki and derives from “basic national accounts identities … an identity for profits: P=(C−W)+(I−D)+(G−T)+NX (i).”
This, of course, is proto-scientific rubbish because economists are too stupid for the elementary mathematics that underlies National Accounting.#2, #3, #4 Distribution theory has always been false because profit theory has always been false.
To make matters short, here is the axiomatically correct macroeconomic Profit Law: Qm=Yd+(I−Sm)+(G−T)+NX (ii). Legend: Qm monetary profit/loss, Yd distributed profit, I investment expenditures, Sm monetary saving/dissaving, G government spending, T taxes, NX export minus import. Total profit Q is the sum of monetary profit Qm and nonmonetary profit Qn, i.e. Q=Qm+Qn (iii).#5
Eq. (iii) determines the nominator of the so-called profit share and explains why it is rising. Roughly speaking, neither Diane Coyle’s institutions nor market power nor automation account for a rising profit share. The main drivers of increasing overall profit have been in the past decades the increasing deficit-spending of the government- and household sector which translates into ever-increasing public/private debt.#6
As Mirowski put it: “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” No surprise then, that neither Diane Coyle nor Chris Dillow ever understood how the economy works, what profit is, and why the profit share rises. This is the essential prerequisite of trash-blogging.
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741
#2 Profit: after 200+ years, economists are still in the woods
https://axecorg.blogspot.com/2018/06/profit-after-200-years-economists-are.html
#3 Truth by definition? The Profit Theory is axiomatically false for 200+ years
https://axecorg.blogspot.com/2018/07/truth-by-definition-profit-theory-is.html
#4 Wikipedia and the promotion of economists’ idiotism (II)
https://axecorg.blogspot.com/2018/07/wikipedia-and-promotion-of-economists.html
#5 For details of the big picture see cross-references Profit
http://axecorg.blogspot.com/2015/03/profit-cross-references.html
#6 Profit and the decline of labor’s nominal share (I)
https://axecorg.blogspot.com/2017/08/profit-and-decline-of-labors-nominal.html
Sorry, Egmont. There, fixed it.
ReplyDeleteBarkley Rosser, Sandwichman
ReplyDeleteYou say: “OTOH, some of us have made empirical hypothese and then actually tested them. I have done so myself, but do not feel like spending time and space laying those out. Rathwr I remind you of experimental economics where empirical testing of hypotheses goes on all the time and is done in a seriously sceintific manner, …”
Yes, this is exactly the definition of cargo cult science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.” (Feynman) #1, #2, #3
What is missing is scientific competence. Science is committed to the growth of knowledge, and scientific knowledge is well-defined by material and formal consistency. Formal consistency is established by the axiomatic-deductive method, material consistency by state-of-art testing.
OTOH, anti-science is the promotion of confusion in the form of storytelling, senseless blather, gossip, disinformation, meta-communication, attention management, false-applause/real-suppression, trivial distraction, delirious prophecy, fake news, deceit, fraud, feeble jokes, etcetera.#4
Your contributions to economics perfectly fit the definition of cargo cult science.
Egmont Kakarot-Handtke
#1 Economics and scientific foolishness
https://axecorg.blogspot.com/2016/10/economics-and-scientific-foolishness.html
#2 What is so great about cargo cult science? or, How economists learned to stop worrying about failure
https://axecorg.blogspot.com/2017/05/what-is-so-great-about-cargo-cult.html
#3 The economist as standup comedian
http://axecorg.blogspot.com/2016/11/the-economist-as-standup-comedian.html
#4 Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2207598
By the way, Egmont, you are welcome to post on my "joke" posts but if you tread on my serious content I will delete your sorry ass faster than you can say "cargo cult science." Capisci?
ReplyDeleteEgmont,
ReplyDeleteThis will be my last comment on this thread.
It might well be that Feynman's view would not change if he were still around, but I must note that this quote from him predates when there was more than just a very small amount of experimental economics going on. Let me note a few things that have been found by prominent experimentalists.
Vernon Smith determined that if one wants to set up an auction that will converge rapidly on an equilibrium price, the double auction format does that much better than others, and indeed this has been adopted in practice with suvccessful results saving billions of dollars in governments selling spectrum rights and other things.
He also showed in experiments that the propensity of people to engage in speculation on assets leading to bubbles and crashes is not a matter of them not knowing the truee value of those assets. This propensity runs much deeper and is much more ubiquitous. I note that one of these results is often seen as defending markets (properly set up) while the other generally seen as shining a light ways that markets do not behave themselves so well.
Reinhard Selten suggested to Werner Guth that he should run experiments on what is known as the ultimatum game. This has now been verified by massive followup wxperiments as a deeply robust result about human behavior that goes agains standard economics assumptions about "rationality," namely that most people are willing to give up money in order to punish others whom they see as behaving in unfair activities.
Daniel Kahneman and Amost Tversky showed that most people experience loss aversion, which has siginificant implications for economic behavior. Richard Thaler extended this to show the widespread existence of the endowment effect, that once someone comes to own something they value it much more highly than before they owned it. This has substantial public policy implicatoins.
None of these experimental results are affexted in any way whatsoever by your profit theory. it is utterly irrelevant and vscuous. These results all have useful implications that have been followed up on in the real world.
I shall add one more that is not strictly experimental and arguably is not economics, coming from mathematicss actually, from game theory to be more precise, but which may be the most important finding by anybody remotely related to economics that there has ever been. This is Thomas Schelling's discovery of the concept of focal points in situations where there are multiiple game theoretic equilbiria, which allow for groups to move to a preferred equilibrium. The important real world application that Schelling himself played a crucial behind the scenes in bringing about was to establish internationally the focal point norm of no-first-use of nuclear weapons, which some argue is the moat important reason why no such use has happened and the human species remains alive. No shit. This also has nothing to do with your irrelevant profit theory, Egmont, nothing.
Barkley Rosser
ReplyDeleteYou report: “Reinhard Selten suggested to Werner Guth that he should run experiments on what is known as the ultimatum game. This has now been verified by massive followup wxperiments as a deeply robust result about human behavior that goes agains standard economics assumptions about ‘rationality,’ namely that most people are willing to give up money in order to punish others whom they see as behaving in unfair activities.”
Very interesting, indeed. It seems to escape you, though, that the whole issue of punishing and other games people play is the subject matter of psychology/sociology. The subject matter of economics ― get it ― is NOT how people behave but how the economy behaves. Economics is NOT a so-called social science but a system science.#1
The scientific incompetence of economists consists of not even realizing what their subject matter is. And this is why they have not figured out to this day what profit is. This is absolutely disqualifying for economists from Adam Smith onward to Barkley Rosser.
Your examples of the empirical work of V. Smith, Selten, Guth, Kahneman, Tversky, Thaler, Schelling tells everybody four essential things about economics: (i) that these so-called economists never understood what economics is all about, (ii) what the pivotal concept of their subject matter is, (iii), that the representative economist is a cargo cult scientist, and (iv) that the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud.
As long as economists have not tested the macroeconomic (= systemic) Profit Law and the Employment Law, economics remains what it is since 200+ years, i.e. a cargo cult science.
Fact is that there is NO greater embarrassment in the history of modern science than economics. And you are part of it.#2
Egmont Kakarot-Handtke
#1 See cross-references Not a Science of Behavior
http://axecorg.blogspot.com/2015/12/behavior-cross-references.html
#2 Throw them out! Orthodox and heterodox economists are unfit for science
https://axecorg.blogspot.com/2017/12/throw-them-out-orthodox-and-heterodox.html
The hardliners who made that banner remind me of all those who think selling one's time is the only way anyone can contribute to society
ReplyDeleteForget mainstream economics, scrap MMT, move on to the new paradigm
ReplyDeleteComment on Bill Mitchell on ‘The divide between mainstream macro and MMT is irreconcilable ― Part 2’
Stop beating mainstream economics ― it is long dead.#1 Bill Mitchell, though, does not get tired of enumerating, again and again, the flaws and idiocies of DSGE/RBC/New Keynesianism.
This is Bill Mitchell’s Groundhog Day indictment:#2
• “The problem is that their conclusion is flawed at the most elemental level …”
• “And so, mass unemployment was seen to be a problem of minimum wages, excessive trade union power, other legal constraints on wage cuts etc.”
• “New Keynesian specifications have to be overly simplistic and reliant on behavioural assumptions … that no self-respecting social scientist that actually studies human behaviour would consider to be credible in the least.” [“No science has been criticized by its own servants as openly and constantly as economics. The motives of dissatisfaction are many, but the most important pertains to the fiction of homo oeconomicus.” (Georgescu-Roegen, 1971)]
• “The mainstream proponents want to claim virtue based on the fact that their models are rigourous… but then respond to empirical anomalies with ad hoc (non rigourous) tack ons.”
• “The results they end up producing … are not ‘derivable’ from first-order, microfounded principles at all. Their claim to theoretical rigour fails.”
Yes, mainstream economics is a ludicrous, proto-scientific exercise. The axioms are false, the analytical superstructure is false, and from this follows that economic policy guidance NEVER had sound scientific foundations. Mainstream economics is refuted on all counts and therefore scientifically indefensible. Who still defends it is stupid or corrupt or both.
More is not to say about the failed/fake science economics.#3 And now the real task begins: “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)
Is MMT the new theory? No, because MMT, too, is axiomatically false.#4 Because of this, MMT policy guidance, too, has no sound scientific foundations.#5, #6
Egmont Kakarot-Handtke
#1 Stop beating mainstream economics ― it is long dead
https://axecorg.blogspot.de/2018/04/stop-beating-mainstream-economics-it-is.html
#2 Reference to Arjun Jayadev/J. W. Mason ‘Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?’
https://www.ineteconomics.org/perspectives/blog/mainstream-macroeconomics-and-modern-monetary-theory-what-really-divides-them
#3 The biggest scientific mistake of the last centuries, and it has much to do with academic economists
https://axecorg.blogspot.com/2018/08/the-biggest-scientific-mistake-of-last.html
#4 Both, mainstream economics and MMT are axiomatically false
https://axecorg.blogspot.com/2018/09/both-mainstream-economics-and-mmt-are.html
#5 For the full-spectrum refutation of MMT see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#6 From false micro to true macro: the new economic paradigm
http://axecorg.blogspot.com/2016/11/from-false-micro-to-true-macro-new.html
Both Mainstreamer and MMTer are either stupid or corrupt or both
ReplyDeleteComment on Bill Mitchell on ‘The divide between mainstream macro and MMT is irreconcilable ― Part 3’
In order to clarify the specifics of MMT, Bill Mitchell refers back to functional finance: “So his classic statement of functional finance: Government should adjust its rates of expenditure and taxation such that total spending in the economy is neither more nor less than that which is sufficient to purchase the full employment level of output at current prices. If this means there is a deficit, greater borrowing, ‘printing money,’ etc., then these things in themselves are neither good nor bad, they are simply the means to the desired ends of full employment and price stability …” and “But we do consider fiscal policy should be directed to advancing public purpose and the particular levels of resulting aggregates (for example, fiscal deficits/surpluses) are immaterial.”
This, clearly, is a statement about the objectives of economic policy. What everybody overlooks is that the economist as scientist is NOT entitled to policy agenda pushing. His sole task is to figure out how the actual economy works. So, economists are comparable to the physicists and engineers who figure out how a piece of metal can be made to defy gravity and to get off the ground and to safely land at the desired destination.
Economists as scientists have NO say about the destination. The destination is determined in the political process by the Legitimate Sovereign. So, political economics is a contradiction in itself.#1
Economists are NOT the Legitimate Sovereign as already J. S. Mill made abundantly clear: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”
For 200+ years economists overstep their competence. They have taken on the role as clowns and useful idiots in the political Circus Maximus and they have failed thoroughly as scientists. The four main approaches ― Walrasianism, Keynesianism/MMT, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got profit ― the pivotal concept of the subject matter ― wrong. With this pluralism of provably false theories, economists have not achieved anything of scientific value.
See part 2
Part 2
ReplyDeleteBill Mitchell is right in pointing out that mainstream economics is but one big Fallacy of Composition.#2 But he fails to address the fact, that MMT is based upon provably false macrofoundations. With regard to economic policy he fails to address the fact that deficit-spending in the intellectual tradition of Keynes/Lerner has produced the insoluble distributional problems everybody has clearly before his eyes today.#3
So, with regard to scientific failure/corruption, there is NO difference between the mainstream and MMT.#4, #5 With regard to policy there seems to be a real difference. Mainstream economics is traditionally the mouthpiece of the one-percenters. MMT claims to be morally superior and to promote the cause of the ninety-nine-percenters.
This is an optical illusion. There is no real political difference either. Both Mainstreamer and MMTer are agenda-pusher for the oligarchy.#6, #7 The meager academic to-and-fro between Bill Mitchell and Jayadev/Mason has nothing at all to do with science but is a smokescreen for the ongoing joint political fraud which is the economist’s business since Adam Smith/Karl Marx.
Egmont Kakarot-Handtke
#1 The end of political economics
https://axecorg.blogspot.com/2017/06/the-end-of-political-economics.html
#2 Reference to Arjun Jayadev/J. W. Mason ‘Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?’
https://www.ineteconomics.org/perspectives/blog/mainstream-macroeconomics-and-modern-monetary-theory-what-really-divides-them
#3 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#4 MMT, Bill Mitchell, and the lack of basic scientific integrity
https://axecorg.blogspot.com/2018/08/mmt-bill-mitchell-and-lack-of-basic.html
#5 For the full-spectrum refutation of MMT see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#6 MMT: How WeTheOligarchy communicates with WeThePeople
https://axecorg.blogspot.com/2018/09/mmt-how-wetheoligarchy-communicates.html
#7 MMT and grassroots movements
https://axecorg.blogspot.com/2018/01/mmt-and-grassroots-movements.html
Good news for the one-percenters
ReplyDeleteComment on Alan Longbon ‘Good News: U.S. Government Posts A $214 Billion Deficit For August 2018, The U.S. Private Sector Posts A $214 Billion Surplus’
Alan Longbon rejoices: “The US budget deficit is $214 billion in August 2018; this is a net add of income to the private sector and a bumper month.” and “Professor Wynne Godley first comprehended the strategic importance of the accounting identity, which says that measured at current prices, the government’s budget balance, less the current account balance, by definition is equal to the private sector balance. GDP = Federal Spending [G]+ Non-Federal spending [P] + Net Exports [X].”
Unfortunately, the MMT balances equation is false. From the axiomatically correct Profit Law for the open economy with government and profit distribution, follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.
MMTer hide this distributional fact by lumping the business and the household sector together to the private sector and saying Public Deficit = Private Sector Surplus suggesting that private sector means WeThePeople. This is a verbal shell game. Given the saving/dissaving of the household sector = WeThePeople, the public deficit increases the macroeconomic profit of WeTheOligarchy one to one.#1, #2
Alan Longbon’s good news is MMT’s shot in the head of WeThePeople.
Egmont Kakarot-Handtke
#1 MMT and the single most stupid physicist
https://axecorg.blogspot.com/2018/09/mmt-and-single-most-stupid-physicist.html
#2 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
Smart! How to make people fund their brain-washing
ReplyDeleteComment on Down with Tyranny on ‘Want To Sound Really Smart About Economic Issues? Read This’
Down with Tyranny argues: “When Blue America endorses a candidate, there are several ways we can be helpful to their campaigns, the most obvious being to help them raise campaign funds by connecting them to small dollar campaign contributors. This cycle one of the most valuable other ways we’ve helped candidates is by connecting them to Stephanie Kelton, America’s most brilliant economist.”
Stephanie Kelton argues: “Government debt is just the money the government spent into the economy and didn’t tax back. That’s all the national debt is. It’s a historical record of all of the times that they made a net deposit, spent more than they taxed out, and the bonds are the difference between those. One of the greatest cons ever perpetrated on the American people is this notion that the national debt belongs to us, that we are responsible in our individual capacity for a share of it.”
Everything is wrong with Stephanie Kelton’s economics:
• Her whole argumentation is based on MMT which is an economic theory that is refuted on all counts.#1
• MMT is scientifically worthless. It is political economics, in other words, agenda-pushing in the garb of academic authority.
• MMT and Stephanie Kelton claim to push the agenda of WeThePeople but in fact push the agenda of WeTheOligarchy.
• All MMT policy guidance boils down to deficit-spending/money-creation.
• Because the macroeconomic Profit Law states Public Deficit = Private Profit, MMT economic policy boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.
• All the social goodies MMTers promise are paid in real terms by WeThePeople themselves via stealth taxation.
• Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon.
• From the scientifically correct Profit Law follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.#2 MMTer hide this distributional fact by lumping the business and the household sector together to the private sector and saying Public Deficit = Private Sector Surplus suggesting that private sector means WeThePeople. This is a verbal shell-game.#3, #4
MMT is ― to use Stephanie Kelton’s own words ― “one of the greatest cons ever perpetrated on the American people”.#5
Egmont Kakarot-Handtke
#1 For the full-spectrum refutation of MMT see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#2 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#3 MMT is gangsta economics
https://axecorg.blogspot.com/2018/07/mmt-is-gangsta-economics.html
#4 The Kelton-Fraud
https://axecorg.blogspot.com/2018/07/the-kelton-fraud.html
#5 MMT and grassroots movements
https://axecorg.blogspot.com/2018/01/mmt-and-grassroots-movements.html
MMT = Modern Monetary Trash
ReplyDeleteComment on Bill Mitchell on ‘Understanding what the T in MMT involves’
In his latest post#1, Bill Mitchell says: “… a Tweet the other day reminded me that there was still major misunderstandings of what Modern Monetary Theory (MMT) represents and that it was time to clarify some of those errors in comprehension. Specifically, there is a current out there that considers MMT to be incorrectly labelled because according to the argument there is no theory involved. It’s hard to imagine why anyone would think that but the fact that they do tells me that I should write this blog post. As I noted yesterday, our Macroeconomics textbook to be published by Macmillan Palgrave in February 2019 is full of theory. It has a lot of description, taxonomy, accounting, history, and philosophy, but also a lot of theory that ties some of those other components together in a meaningful way. The T in MMT is not a misnomer.”
Then he goes on to specify what a theory is and how scientific methodology relates to MMT. The first lethal error/blunder of Bill Mitchell is to maintain that economics is a social science. Here, MMT is in full accordance with mainstream economics. The fact of the matter is, though, that economics is a system science.#2
The second methodological error/blunder is that “There are no ‘laws’ in economics as their are in physics, for example.” This is true only insofar as there are NO behavioral laws. This, however, is irrelevant because economics is a system science and there are systemic laws of the monetary economy. Systemic laws are invariances (Nozick’s term) like physical laws but do not entail the physicists’ notion of causality.
The third methodological error/blunder consists of abandoning the concept of scientific truth which is well-defined since 2000+ years by material and formal consistency and to replace it by congruency.
All this is in line with J. S. Mill’s attempt to establish economics as “separate and inexact science” which, however, has never been anything else but a euphemism for failed/fake science.
Since the founding fathers, economics is a cargo cult science (Feynman’s term) and Bill Mitchell is in the state of self-delusion by maintaining he and his MMT colleagues are “standing on the shoulders of giants”.#3
Fact is that economists do not get the foundational concepts of profit/income/saving straight to this day. MMTers are no exception.#4
Bill Mitchell argues: “An oft-stated claim is that MMT is about accounting relationships. … Those who make that spurious claim about MMT often use the sectoral balances framework to make their point. They note that the basic sectoral balances relationship, which is a core part of the way an MMT economist analyses the world, is, at heart an accounting truism that has to be true because it is derived from a larger accounting framework – the nation’s National Accounts. That is true so far. While I know there is a debate in accounting about the theory of accounting, we will accept, here, that an accounting truism is one that has to be true (add up in this case) by the way we define it. It is not opinion or conjecture – it just has to be. So the statement: the Government deficit (surplus) equals the Non-government surplus (deficit) dollar-for-dollar is such a truism. It must be true.”
Unfortunately, it is false.#5 As Schumpeter once put it: “There is no more fertile source of error than apparently trivial premises.” Economics is no exception: “In fact, the history of every science, including that of economics, teaches us that the elementary is the hotbed of the errors that count most.” (Georgescu-Roegen)
See Part 2
Why the MMT benefactors of humanity never talk about profit
ReplyDeleteComment on John Weeks on ‘Why the public debt should be treated as an asset’
The most curious thing about economics is that most models ― Walrasian, Keynesian, Marxian, Austrian does not matter ― do NOT contain macroeconomic profit in explicit form. And when it appears occasionally it is misspecified.#1 This is why economics is a failed/fake science. MMT is no exception.
In John Weeks’ post about the mistreatment of public debt as perennial problem instead of a long-term benefit, the word profit does not appear once. The bottom line of his argument is that the public debt is not as massive as everybody thinks and on closer inspection, not a burden but, on the contrary, has a lot of advantages for WeThePeople. In detail he argues:
• People are told that public debt 1) must be repaid, 2) threatens the country with bankruptcy, and 3) is a burden on future generations. All these arguments are wrong.
• The British government can never default on its debt.
• A good portion of the national debt is held by the public sector, i.e. Bank of England, this is what the public sector owes itself.
• The interest paid on debt held by pension funds is income to retired households.
• At the end of 2016, private corporate and foreign gilts holders owned 41% of the UK’s national debt. Only the £524 billion of gilts held by foreign creditors could be considered a “burden” in that the associated interest payments are from UK taxpayers to non-UK creditors.
• A fair and progressive taxation system could ensure that interest payments to domestic bond holders don’t have negative redistribution effects.
• Sound management of the national debt means more public borrowing for investment and current expenditure, which is justified by the modest size of the effective debt.
The whole argument boils down to a plea for more deficit spending/money creation. This is what MMT policy guidance is all about.
Fact is:
• MMT is a macroeconomic theory that is refuted on all counts.#2
• John Weeks does not mention once the profit effect of deficit-spending/money-creation.#3
• From the scientifically correct Profit Law follows (I−S)+(G−T)+(X−M)−(Q−Yd)=0 which boils down to Public Deficit = Private Profit.#4
• MMT economic policy boils down to the permanent growth of public debt which is nothing else than the permanent self-alimentation of the oligarchy.#5
• All the social benefits MMTers promise are paid in real terms by WeThePeople themselves via stealth taxation.#6
• Public debt is deferred taxation of WeThePeople which is simply pushed beyond the time horizon. Public debt is NOT an asset but a time bomb.
MMT claims to push the agenda of WeThePeople but in fact pushes the agenda of WeTheOligarchy. MMT is failed/fake science and the proponents of MMT are NOT benefactors of humankind but quite ordinary political swindlers.#7
Egmont Kakarot-Handtke
#1 For details of the big picture see cross-references Profit
http://axecorg.blogspot.com/2015/03/profit-cross-references.html
#2 For the full-spectrum refutation see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#3 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#4 Down with idiocy!
https://axecorg.blogspot.com/2017/12/down-with-idiocy.html
#5 MMT: Redistribution as wellness program
https://axecorg.blogspot.com/2017/10/mmt-redistribution-as-wellness-program.html
#6 MMT, money printing, stealth taxation, and redistribution
https://axecorg.blogspot.de/2017/11/mmt-money-printing-stealth-taxation-and.html
#7 MMT: academic snake oil for the people
https://axecorg.blogspot.com/2018/02/mmt-academic-snake-oil-for-people.html
I was just introduced to AXEC. Economics has already BEEN axiomatized -- this happened at the same time as the axiomatic revolution in mathematics, since economics is applied mathematics. There is no need to axiomatize, in economics, what should instead be the object of investigation. I think your complaint is with undergraduate economics and some graduate programs, but not with research economics, where it is getting harder to find an unjustified assumption.
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