January 18, 2018

Economists never understood how the price mechanism works

Comment on David Glasner on ‘Milton Friedman and the Phillips Curve’


The economists’ idea of the price mechanism is encapsulated in the Totem of the Micro, i.e. supply-curve-demand-curve-equilibrium. Because each of the three elements is a NONENTITY and the generalization for the whole economy is a Fallacy of Composition, price theory will forever remain one of the most laughable constructs in the history of wannabe science. It is not really funny, though, because the paradigmatic case of the Phillips curve proves how the scientific incompetence of economists ruins the economy.

The basic idea of the working of the price mechanism goes a follows “In other words, you can’t make the economy as a whole better off just by printing money. Or can you? Actually you can, and Friedman himself understood that you can, but he argued that the possibility of making the economy as a whole better of (in the sense of increasing total output and employment) depends crucially on whether inflation is expected or unexpected. Only if inflation is not expected does it serve to increase output and employment.” (Glasner)

Exactly the opposite is, in fact, the case, a one-off or permanent or accelerating macroeconomic price increase does NOT increase employment but unemployment. In other words, economists got the Phillips curve catastrophically wrong.#1, #2

In order to see this one has to go back to the axiomatic foundations and to replace microfoundations by true macrofoundations.#3 The elementary version of the correct (objective, systemic, behavior-free, macrofounded) Employment Law is shown on Wikimedia.#4

From this equation follows:
(i) An increase of the expenditure ratio ρE leads to higher employment L (the Greek letter ρ stands for ratio).
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase of the factor cost ratio ρF=W/PR leads to higher employment.

The complete employment equation contains in addition profit distribution, the public sector, and foreign trade.

Item (i) and (ii) cover the familiar arguments about aggregate demand. The factor cost ratio ρF as defined in (iii) embodies the macroeconomic price mechanism. The fact of the matter is that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R. Or, the other way round, overall employment DECREASES if the average price P INCREASES relative to average wage rate W.#5 Roughly speaking, inflation is BAD for employment and this is the OPPOSITE of what microfounded economics teaches and what supply-demand-equilibrium economists still believe since Friedman’s proto-scientific rubbish was applauded by the dull members of the American Economic Association.

Egmont Kakarot-Handtke

#1 NAIRU, wage-led growth, and Samuelson’s Dyscalculia
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 The macrofoundations approach starts with SYSTEMIC axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
#4 Wikimedia, Employment Law
#5 Attention: there are THREE types of inflation

For details of the big picture see cross-references Employment

January 14, 2018

Macro for retarded economists

Comment on Brian Romanchuk on ‘The Death of Mainstream Macro’

Blog-Reference and Blog-Reference and Blog-Reference and Blog-Reference on Jan 17 adapted to context

“Since every act of spending results in income for somebody else, total spending for the economy as a whole equals total income. This is true by definition and is a basic building block in macroeconomics.” (Cooper)

Both, orthodox and heterodox economists subscribe to this statement as the self-evident rock-bottom truth of all of economics. Too bad that this statement is materially/logically false.

The foundational error/mistake/blunder consists in the methodological fact that the two most important magnitudes of economics — profit and income — are ill-defined.#1 In order to see this one has to go back to the most elementary configuration, that is, the pure production-consumption economy which consists of the household and the business sector.#2

In this elementary economy, three configurations are logically possible: (i) consumption expenditures are equal to wage income C=Yw, (ii) C is less than Yw, (iii) C is greater than Yw.
  • In case (i) the monetary saving of the household sector Sm≡Yw−C is zero and the monetary profit of the business sector Qm≡C−Yw, too, is zero. The product market is cleared, i.e. X=O in all three cases.
  • In case (ii) monetary saving Sm is positive and the business sector makes a loss, i.e. Qm is negative.
  • In case (iii) monetary saving Sm is negative, i.e. the household sector dissaves, and the business sector makes a profit, i.e. Qm is positive.
It always holds Qm+Sm=0 or Qm=−Sm, in other words, at the heart of the monetary circuit is an identity: the business sector’s deficit (surplus) equals the household sector’s surplus (deficit). Put bluntly, loss is the counterpart of saving and profit is the counterpart of dissaving. This is the most elementary form of the macroeconomic Profit Law. It follows directly from the profit definition and the definition of household sector saving.

Loss or profit are NOT income. Only distributed profit is income. The profit theory is false since Adam Smith.#3 As a collateral damage, all I=S or IS-LM models are false.

Economists are too stupid for the elementary mathematics of accounting.#4 The statement total income equals total spending is simply false because of the all-important phenomenon of credit. Equipped with credit the household sector can spend MORE than its period income (= dissaving) or in the opposite case LESS (= saving). Total spending and total income are NEVER equal, the foundational intuition of macroeconomics is false ― and so is all the rest. Macroeconomics is dead since Keynes.#5

Egmont Kakarot-Handtke

#1 For details see ‘How the Intelligent Non-Economist Can Refute Every Economist Hands Down’ and ‘Keynes’ Missing Axioms’ Sec. 14-18
#2 The elementary production-consumption economy is given by three macro axioms: (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
#3 See ‘Essentials of Constructive Heterodoxy: Profit’ and cross-references Profit
#4 See ‘The Common Error of Common Sense: An Essential Rectification of the Accounting Approach
#5 How Keynes got macro wrong and Allais got it right

Related 'Economists never understood how the price mechanism works'. For details of the big picture see cross-references Keynesianism and cross-references Scientific Incompetence and cross-references Paradigm shift.


REPLY to Brian Romanchuk on Jan 14

You say “So you have proven that cash expenditures on investment by the business sector are truly an expense!”

I have proven nothing of the sort but I have indeed proven that macro is dead since Keynes and that you have not realized it until this very day.#1

#1 Note that nominal magnitudes Yw, C, Qm, Sm are normally NOT identical with cash payments. For the relationship between the nominal flow magnitudes and the stock of cash see The creation and value of money and near-monies.


COMMENT on Brian Romanchuk on Jan 15

Your discussion of macro is the usual echo chamber economics. You do not ask what the correct approach is but are content with stating that current macro is crap and watching what your clueless peers are doing and opportunistically waiting who fetches the most likes on Twitter or Facebook. You argue:

• “I had contact with hundreds of economists over the course of my career.” There is no use of talking with people who have not even realized that supply-demand-equilibrium is proto-scientific rubbish.

• “One of the requirements of being minimally competent was being able to read another researcher’s paper, and compare what they demonstrated within the body of the paper versus what the abstract says the paper accomplished.” This does not even prove minimal competency but only how low the scientific standards in economics are.

• “In summary, he [Krugman] argues that we could just use IS/LM … to analyse the policy response to the Financial Crisis.” If you have not realized until now that Krugman is not a scientist but a soapbox economist nothing can help you.#1, #2

• “The other line of defense of mainstream macro is that young researchers are doing all this amazing new work.” Macro is axiomatically false and the new generation is busily but senselessly digging at the same wrong place as the old generation.

• “One argument is that mainstream macro is more empirical.” Yes, but this does not help if the theory is axiomatically false, to begin with.

• “As should be clear, I pay almost no attention to the latest developments in mainstream macro. … Unless you are being paid to keep up with the latest research fads, it is probably safe to wait until some form of new consensus appears among researchers before actually reading the papers.” Very smart, indeed. What about getting off your ass and figuring things out for yourself?

“The highest ambition an economist can entertain who believes in the scientific character of economics would be fulfilled as soon as he succeeded in constructing a simple model displaying all the essential features of the economic process by means of a reasonably small number of equations connecting a reasonably small number of variables. (Schumpeter)

What is your simple macro model? If you cannot answer this question you are out of economics and out of the discussion.

#1 Krugman is not an economist
#2 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It


REPLY to Brian Romanchuk on Jan 15

Thank you for the reference to your Bitcoin articles.

I have only one thing to criticize: the issue is macro and with Bitcoin, you switch to partial analysis in good old Marshallian tradition. What your analysis, first of all, shows is that microeconomic price theory does not work and, worse, that the one-size-fits-all explanation with supply-demand-equilibrium explains, in fact, nothing and never has.#1 Neither has general equilibrium theory, the very core of economics. In other words, 200+ years after Adam Smith, economists still do NOT know how the price mechanism works.

You say “Note how I explain how ‘simple’ models fail when applied to the straightforward question of valuing Bitcoin. How well is a simple model going to do when applied to all prices?”

Indeed, the explanation of the price mechanism has to start from macrofoundations and NOT from microfoundations or partial analysis. So we are back at macro.#2

The elementary macroeconomic Law of Supply and Demand is shown on Wikimedia.#3

This price formula gets, of course, longer with the increasing complexity of the economy. All these details are not needed at the moment.

The elementary macroeconomic Law of Supply and Demand says:#1
(i) An increase of the expenditure ratio ρE=C/Y leads to a higher market clearing price (the Greek letter ρ stands for ratio). An expenditure ratio ρE greater than 1 indicates credit expansion, a ratio ρE less than 1 indicates credit contraction. Credit expansion/ contraction, in turn, affects the quantity of money.
(ii) An increase in the ratio of wage rate to productivity W/R leads to a higher market clearing price.

Roughly speaking, the macroeconomic Law of Supply and Demand explains the price level and its development over time. The equation contains only measurable variables and is therefore testable in principle. Starting with one product market, the way forward is differentiation.

The crucial differentiation is between primary markets (= perishable consumption goods from current production) and secondary markets (= durable goods). Both markets run on entirely different principles.#4 The formula above holds for the primary market.

In brief, the nominal anchor of the whole price system is unequivocally given with the macroeconomic Law of Supply and Demand. But from primary markets to secondary markets and then to Bitcoin is a longer analytical way.#5 In any case holds, if it isn’t macro-axiomatized it isn’t economics, and ― definitely ― microfounded price theory is dead.

#1 The monstrous utility-supply-demand-equilibrium failure
#2 This is the correct core of macroeconomic premises: (A0) The objectively given and most elementary systemic configuration of the (world-) economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
#3 Wikimedia, Law of Supply and Demand, pure production-consumption economy
#4 Primary and Secondary Markets
#5 The creation and value of money and near-monies

Lars Syll, fake scientist

Comment on Lars Syll’s ‘Is economics ― really ― a science?’

Blog-Reference and Blog-Reference

The state of economics is this: theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years.

The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong. As a result of the utter scientific incompetence of the representative economist, what has been achieved is the pluralism of provably false theories.#1

It is rather comical when folks that have produced nothing but proto-scientific rubbish talk about scientific methodology. Economic methodology is even more absurd than economics itself. Economic methodologists have not even spotted blatant methodological blunders like petitio principii or inconsistent definitions which are entirely sufficient to refute every approach on purely methodological grounds.#2, #3

The self-appointed methodologists Lars Syll is a case in point. He has one valid point, that is, Walrasian economics in the current incarnation of DSGE is false on all counts. That’s all. He never advanced to the insight that Keynesianism ― the approach he propagates ― is not significantly better. It cannot be said that he understands what science is all about and how this applies to economics.#4

To recall, the objective of economics is the true theory which, in turn, is the humanly best mental representation of reality: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)

Walrasian economics is materially and formally inconsistent, true but this holds also for Keynesianism, Marxianism, Austrianism ― and this is why economics is a failed science.#5

Lars Syll’s arguments against Walrasian Orthodoxy are rather silly:

• “… manifest inability to foresee the latest financial and economic crises.” To predict the future is, as a matter of principle, not the business of science but of charlatans.#6

• “Neither the economist, nor the deciding individual, can fully pre-specify how people will decide when facing uncertainties and ambiguities that are ontological facts of the way the world works.” Economics, properly understood, does NOT deal with the behavior of people but with the behavior of the economic system. Human Nature/motives/behavior/action is the business of Psychology/Sociology and other so-called social sciences. Economics is a system science.#7

• “There are no universal laws in economics.” There are no universal behavioral laws in economics. This is true but irrelevant because economics is NOT a science of behavior but a system science. To be sure, there are systemic laws but economists have not figured them out because they wasted 200+ years with folk psychology, i.e. with waffling about rationality, selfishness, utility maximization, rational expectations or uncertainty.

• “We have to build our models on assumptions that are not so blatantly in contradiction to reality.” Trivially true, but if Lars Syll knows how to do it why don’t he apply his superior methodology and shows the results? As J. S. Mill told the slyboots who never rose above the level of vacuous methodological blather “Doubtless, the most effectual mode of showing how the sciences of Ethics and Politics may be constructed, would be to construct them …”

At some point, though, orthodox and heterodox incompetence turns into self-deception and deception of the general public. This point is reached with the false claim that economics is a science as expressed in the title “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

At present, economics is not a science but what Feynman called a cargo cult science. Make no mistake, BOTH orthodox AND heterodox economics is integral part of the fake. One of the best examples is the scientific failure and self-appointed methodology loudspeaker Lars Syll.#8

Egmont Kakarot-Handtke

#1 Economics: a science without scientists
#2 Economics, methodology, morals ― a creepy freak-show
#3 Axiomatized nonentities and the failure of methodologists
#4 The irrelevance of economics
#5 Economists, stupid or corrupt or both?
#6 Science does NOT predict the future
#7 If it isn’t macro-axiomatized, it isn’t economics
#8 Nothing to choose between Orthodoxy and traditional Heterodoxy

Related 'Shocking: methodology is a tricky business' and 'Addendum to ‘Musings on Whether We Consciously Know More or Less than What Is in Our Models’ and 'Economics is NOT a misunderstanding but cargo cultic crap' and 'No trade-off, Kant said' and 'Why does Heterodoxy not abolish the fake Nobel?'. For details of the big picture see cross-references Failed/Fake scientists.


NOTE on Lars Syll’s ‘Neoclassical economics is great — if it wasn’t for all the caveats!’ on Jan 15 and Blog-Reference LPS

Lars Syll is a one-trick pony. The sum of his insight is that Neoclassical economics is a failure and Keynesianism is superior because its core assumption is ontological uncertainty which reduces economic knowledge ultimately to I know that I know nothing and anything goes, or, as Keynes put it, to “nothing is clear and everything is possible.”

Lars Syll never understood that science is not about unknown and unknowable unknowns but about certain knowledge. His hero is not Archimedes who figured out the Law of the Lever or Euclid who figured out that a-square + b-square = c-square but the waffling philosopher Socrates with his shallow wisdom and false humbleness of I know that I know nothing ― which, of course, is true of philosophers and heterodox economists.

For details see:
Lars Syll, fake scientist
Fact of life: your econ prof is scientifically incompetent
Say hello to Lars Syll, Keynes’ last parrot
Don Lars and the axiomatic windmill
Economics — the fly that cannot see the glass
Heterodoxy, too, is scientific junk
Throw them out! Orthodox and heterodox economists are unfit for science

REPLY to Kaivey on Jan 16

You say “Hi Egmont, what do you think of Single Payer and Britain’s National Health Service? … Do you think the government should renationalise the railways, and highly regulate or renationalise the energy industries?”

I think this is for the Legitimate Sovereign to decide. There is the political realm and the scientific realm and the economist qua scientist must uphold the strict separation of politics and science. This point has been made abundantly clear by J. S. Mill: “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.”#1

For non-economists, the most important thing to realize is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. This applies also to MMT. MMT policy proposals have no sound scientific foundation.#2

I have no truck with the political program of MMT. National Health, clearly, is a matter for the UK population to discuss and to decide and no economist has any mandate to interfere in the political process. Political economists like Krugman, Varoufakis, or Kelton have not to be praised for taking political sides but condemned for corrupting science.

The issue with MMT is not about good/bad politics but about true/false economic theory. MMTers do either not understand how the monetary economy works or they deceive their fellow citizens about the fact that Public Deficit = Private Profit and that, therefore, MMT policy ultimately benefits the one-percenters, contrary to the political claim that MMT is the champion of the ninety-nine-percenters.#4

The political economist = fake scientist is one of the most disgusting creeps in the Circus Maximus.

#1 The end of political economics
#2 MMT: The one deadly error/fraud of Warren Mosler
#3 MMT = proto-scientific junk + deception of the 99-percenters
#4 MMT and grassroots movements

January 12, 2018

Are MMTers stupid or corrupt or both?

Comment on Stephanie Kelton and Randall Wray on ‘Answers from the MMTers’


MMTers are beyond any doubt stupid, more specifically, scientifically incompetent. Put bluntly, they do not even get the elementary mathematics of national accounting right. For the full-spectrum refutation see Down with idiocy! and cross-references MMT.

The corruption of MMTers consists in the violation of scientific standards. Firstly, they pretend to fight for the benefit of the ninety-nine-percenters but in fact promote the cause of the one-percenters, see MMT = proto-scientific junk + deception of the 99-percenters

Secondly, MMTers affirm open discussion but block refutation, opposition, and questioning on their blogs/accounts.* Here are some recent  examples of blocking (Source Twitter)

The key message of MMT is that deficit spending solves almost all economic problems and government debt does not matter. Because it holds Public Deficit = Private Profit, MMTers are ― intentionally or unintentionally does not matter ― agenda-pusher for the one-percenters. Public debt matters enormously for the distribution of income and wealth.

Summary: With few exceptions, economists are either not aware of scientific standards or ignore/violate them. There is not much difference with regard to scientific competence respectively lack thereof between Orthodoxy and Heterodoxy.

Egmont Kakarot-Handtke

* Of course, propaganda, manipulation, and disinformation are not restricted to the proponents of MMT but widespread among both orthodox and heterodox economists. After all, economics started as Political Economy and is a cargo cult science since Adam Smith/Karl Marx. Which blogs promote serious research/discussion and which are mere propaganda outlets can only be found out by testing, that is, by submitting well-argued posts. From concrete experience over a longer time span follows this random selection of blogs that have blocked/deleted/manipulated challenging posts. If this not yet independently double-checked list contains errors/omissions a notification is welcome (handtke@axec.de).
Note that the blog owner is entitled to reject submissions for whatever reason. There is nothing illegal in selecting the content of one’s own blog. What is at issue is the violation of well-established and well-known scientific standards. Inviting discussion and then censoring critique/refutation is clearly against the idea of scientific discourse.

There are recurring publications of Top 100 blogs which, however, use popularity/prestige as main criteria and NOT genuine scientific quality. Whether blogs are manipulated is never asked or tested.

Blogs with a perfect track record of non-blocking/non-manipulation over a considerable time span have been

January 11, 2018

MMT = proto-scientific junk + deception of the 99-percenters

Comment on Stephanie Kelton and Randall Wray on ‘Answers from the MMTers’

Blog-Reference and Blog-Reference and Blog-Reference

Jared Bernstein posed some ‘Questions for the MMTers’ and offered a welcome opportunity for the loudspeakers of MMT to make their strong points. Needless to emphasize that they also repeated with enthusiasm their foundational error/mistake/blunder/fraud.

It is this: “There are three sectoral balances: a domestic private sector, a government sector, and a foreign sector. While any one of these can run a deficit (or surplus), the sum of the balances must sum to zero ― that is, they balance (for every deficit there is a surplus). In the US, the private sector almost always runs a surplus (“saves”) and the foreign sector has run persistent surpluses (the other side of the coin to our current account deficits) since the days of Reagan. That means ― by simple identity ― that our government sector runs deficits.”

The fact of the matter is that there are FOUR macroeconomic sectors (household sector, business sector, government sector, and Rest of the World) but in the MMT presentations one sector is missing, more specifically, the balance of the business sector = profit is nowhere to be seen.#1

MMT is built upon this tripartite macroeconomic balances equation (I−S)+(G−T)+(X−M)=0.#2 Why are two sectors ― the household and the business sector ― lumped together to the “private sector”?

Now, the balance of the household sector is saving/dissaving and the balance of the business sector is profit/loss. By lumping the two sectors together profit vanishes from sight.

The axiomatically correct fourpartite balances equation reads (I−S)+(G−T)+(X−M)−(Qm−Yd)=0 with Qm monetary profit and Yd distributed profit. And from this equation follows Public Deficit = Private Profit given the balances of the household sector and the Rest of the World.

The correct equation tells everybody that MMTers relentless propagation of deficit spending for social purposes is nothing but agenda pushing for the one-percenters. The problem of MMT policy is NOT overheating or inflation, the real problem is distribution.

MMTers are either stupid because they do not know what profit is, or corrupt because they deceive the ninety-nine-percenters or a mixture of both.#3 Jared Bernstein failed to ask the crucial question.#4

Egmont Kakarot-Handtke

#1 Down with idiocy!
#2 Wikipedia, Modern Monetary Theory
#3 MMT and grassroots movements
#4 Full spectrum refutation: cross-references MMT

TWITTER coincidence on Jan 11

Source: Twitter

Related MMT: The one deadly error/fraud of Warren Mosler and MMT and the promotion of Wall Street socialism and MMT is ALWAYS a bad deal for the 99-percenters

REPLY to Ralph Musgrave on Jan 12

You say “Egmont Kakarot-Handtke argues above that because MMTers lump the household and business sectors together into one “private sector”, this hides the alleged fact that the bulk of a public sector deficit flows to the business sector rather than the household sector.”

Actually, I say that the lumping together of the household sector and the business sector to the “private sector” is for macroeconomics what is called an accounting fraud on the firm’s level.#1

Of course, it could also be an error/mistake/blunder but this is improbable because the hiding of the fact that Public Deficit = Private Profit, i.e. Qm=G−T given the other balances, is necessary to sell MMT policy measures as a social benefit.#2 And this, in turn, is necessary because MMT is NOT economics but campaign support for Warren Mosler’s candidacy for governor of the US Virgin Islands as announced on Jan 11.

This, of course, holds also for MMT’s alleged full employment policy.#3

So, Ralph Musgrave, Kelton, Mitchell, Tcherneva, Wray, Fullwiler, Forstater, Kaboub, Pettifor, Keen, Tymoigne, Willingham, Grumbine and all the MMT rest cannot be taken seriously as economists but at best as useful idiots for Warren Mosler.

#1 Down with idiocy!
#2 Keynes, Lerner, MMT, Trump and exploding profit
#3 Full employment through the price mechanism

Related 'Krugman and the scientific implosion of economics' and 'Barkley Rosser, petty scientist'. For details of the big picture see cross-references Failed/Fake scientists and cross-references The representative economist

REPLY to Matt Franko on Jan 12

You say “All Warren has ever said he wants out of this is a chance to see his nations economy run at its full potential for once in his life”

I am enthusiastic about what Berlusconi, Trump, Mosler etc. promise to do for the little man and the forgotten worker but I do not understand why these folks always have to cook the macroeconomic and microeconomic books first.

Perhaps the MMT academics can explain why they violate scientific standards and promote money-making of the Bunga-Bunga one-percenters?

January 9, 2018

Economics for believers

Comment on Andrew Anderson on Daniel José Camacho on ‘The deficit doesn’t matter: thinking morally about the economy with Stephanie Kelton’


The Lord spoke out of the bush and handed over these
Twelve Economics Commandments:

1. Never cite the Bible or other religious texts in an economic argument.

2. Maintain the strict separation of science and religion under all circumstances.

3. Maintain the strict separation of science and politics under all circumstances.#1

4. Do not dabble in Psychology, Sociology, Anthropology, History, Political Science, Social Philosophy, or any other of the so-called social sciences.

5. Do not believe: prove.

6. Figure out how the actual economic system works and communicate your results in the format of a materially/formally consistent theory.

7. Absolutely refrain from storytelling, metaphors, analogies, narratives, gossip, insinuation, second-guessing, filibuster, propaganda, disinformation, and other rhetorical means.

8. Do not apply Methodological Individualism/Microfoundations.#2

9. Do not moralize. The subject matter of economics is IS not OUGHT. How the Good Society can be realized has to be determined in the political sphere. See 3.

10. Be, first of all, aware that there are knowledge and opinion, science and non-science, scientific standards/ethics and anything-goes, true and false with nothing in-between. The ethics of science is objectivity, i.e. material and formal consistency. The objective of economics is the true theory.

11. Rest assured that those who violate scientific standards/ethics go to hell and will be tortured in all eternity with the senseless blather of Walrasianism, Keynesianism, Marxianism, Austrianism, and Pluralism.#3

12. Make no mistake: alone scientists will go to heaven. As you can easily imagine, the Lord will not share eternity with morons, imbeciles, agenda-pushers, blatherers, believers, and fake scientists.

Egmont Kakarot-Handtke

#1 The strict separation of the scientific realm and the political realm is necessary because politics always and everywhere corrupts science. This point has been made abundantly clear by J. S. Mill: “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 details see Throw them out! Orthodox and heterodox economists are unfit for science and The end of political economics
#2 If it isn’t macro-axiomatized, it isn’t economics
#3 Economics is not a science, not a religion, but proto-scientific rubbish

Related 'MMT and grassroots movements' and 'The irrelevance of populism for economics'.

January 8, 2018

Microfoundations R.I.P.

Comment on Simon Wren-Lewis on ‘Why the microfoundations hegemony holds back macroeconomic progress’

Blog-Reference and Blog-Reference

Economics of the last 200 years is the most embarrassing failure in the history of modern science.

The goal of economics is to figure out how the actual economic system works and to communicate the results in the format of a materially and formally consistent theory.

Methodologically, there seem to be two ways to attack the problem: microfoundations or bottom-up and macrofoundations or top-down. Economists made the wrong methodological choice 140+ ago. Since Jevons/Walras/Menger they are on the wrong track because NO way leads from the second-guessing of Human Nature/motives/behavior/action to the understanding of how the economic system works.

Economics is a failed science because the definition of the subject matter is false: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” (Arrow)#1

There is, as a matter of methodological principle, NO such thing as a microfounded economics. Unfortunately, Keynes messed up the macrofoundations approach and After-Keynesians have not figured out until this day where things went wrong.#2

Wren-Lewis’ attempt to go from DSGE Modeling to Structural Econometric Modeling is bound to fail. Nothing less than a paradigm shift will do.#3, #4 The microfoundations approach and its scientifically incompetent proponents have to be solemnly buried next to the Flat-earth and Phlogiston folks.#5

Egmont Kakarot-Handtke

#1 Microfoundations are formally given with this set of verbalized axioms “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states. (Weintraub) Every model that applies just one of the axioms is a priori false.
#2 Where modern macroeconomics went wrong
#3 True macrofoundations: the reset of economics
#4 The new macroeconomic paradigm
#5 If it isn’t macro-axiomatized, it isn’t economics