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Access Statistics for Egmont Kakarot-Handtke.
LogEc,
Services based on the RePEc
data set.
Einblenden von Stichworten und Kommentaren
| Summary | |
| C | = households' consumption expenditures = sales revenue |
| D | = dividend (part of distributed profit) |
| L | = working hours (LΘ = full employment labor supply) |
| N | = number of shares (part of distributed profit) |
| O | = output of the business sector |
| P | = price (level) |
| P* | = market clearing price (i.e. ρX = 1 and ρE=1) |
| Qm | or |
| Qfi | = monetary (financial) profit |
| Qre | = retained profit |
| R | = productivity |
| W | = wage rate |
| X | = quantity bought |
| Y | = total income of the household sector |
| YD | = distributed profit |
| YW | = wage income = costs |
| Zt | = representative variable (stock variable) |
| Zt | = change rate of representative variable (flow variable) |
| of Symbols: | |
| ΔMH | = increase in household sectors stock of money |
| ΔO | = change of inventory |
| ΔQfi | = business sectors financial profit |
| ΔSfi | = financial saving (/dissaving) — equals business sectors financial |
| loss (/profit) | |
| ρD | = distributed profit ratio = YD/YW |
| ρE | = expenditure ratio = C/Y (if ρE = 1, households' budget is balanced) |
| ρFC | = factor cost ratio = W/P·R |
| ρN | = employment ratio = L/LΘ (ρNΘ = full employment ratio) |
| ρU | = unit wage costs = W/R |
| ρV | = dividend-wage ratio = D/W |
| ρX | = sales ratio = X/O (if ρX = 1, market is cleared) |
| ρXC = consumption sales ratio, ρXI = investment sales ratio | |
| ω | = commodity market outcome ratio = ρE/ρX |
| ΠVt | = historical path operator (all path variables V are 1 for t = 0) |
| Spezifische Ausgabenquotienten in Zur axiomatischen Einheit... (2012): | |
| δD | = Ausgabenquotient der Empfänger von Gewinnausschüttung |
| δW | = Ausgabenquotient der Lohneinkommensempfänger |
| Axioms: | 1. Y=W·L+D·N |
2. O=R·L |
3. C=P·X |
4. Zt=Zt-1·(1+Zt) |
5. ΔQ=ΔQre+ΔQfi → ΔQfi≡C-YW≡P·X-W·L mit YW≡W·L |t |
6. ΔS=ΔSre+ΔSfi → ΔSfi≡Y-C≡ΔMH |t |
| Definitions: | ρE≡ | C | ρX≡ | X | ρD≡ | YD | ρF≡ | W | Period Kernel: | ρF·ρE·(1+ρD) | =1 |t |
Time Evolution (Path Core) |
: ΠFt· | ΠEt | · | 1 + ρD0·ΠDt | = 1 | |||||
| Y | O | YW | P·R | ρX | ΠXt | 1 + ρD0 |
| ‘Law’ of ... | Supply and Demand: |
Profit
(Y% depends
only on ρE and
ρD!):
Qm≡C-YW≡C-Y+YD≡ |
Savings: | Real Wage: | Triangle Theorem2: (the general case) | Walras' Theorem: (is special case) | ||||||||||
| P= | ρE | ·W·(1+ | D·N | ) |t | (ρE - | 1 | )·Y |t | ΔSfi≡-Qre |
W=P·R (if ρX=1, ρE≥1) |
ρX·ρE·ρD=1
→ |
ρX=ρE if ω=1 | |||||
| ρX | R | 1+ρD | ||||||||||||||
| Market clearing price is P*=W. The price level is not directly influenced by the money supply. Firms divide out the total profit (emanating from the money circuit) according to their competitiveness. Increasing employment depends more on an increasing factor cost ratio than on decreasing real wages. | ||||||||||||||||
| These variables are measurable in principle via the National Accounting. P* is equal to unit wage costs if the expenditure ratio is 1. Objective determinants of employment are effective demand, the actual outcome of price formation, and structural stress (business heterogeneity) — nothing else. In general between any 2 axiomatic variables only interdependencies exist, not causal relations. | |
|
1)
No investment industry, no government, no foreign trade.
2) Fixing one ratio makes the dependency between the other ratios deterministic. |
Foundational Formulas (graphic) |
![[Abstract only]](abstr.gif)
Egmont Handtke:
The Papers of Nicholas Kaldor.
NK/3/30/97. 1 file in envelope; paper.
Janus Cambridge catalogues,
1983
![[Google Faksimile]](GoogleBooks.gif)
Egmont Kakarot-Handtke: Geld ist Information —
Volkswirtschaftliche Aspekte der Bankautomation.
die
bank, 220(222),
1986.
Zitiert in: Hugo J. Hahn: Money Substitutes. S. 469ff. In:
Margret Fell, Hans Hablitzel, Michael Wollenschläger (Eds.):
Erziehung · Bildung · Recht (Google-Teilfaksimile).
Beiträge zu einem interdisziplinären und interkulturellen Dialog.
Festschrift für Philipp Eggers zum 65. Geburtstag am
9. Juli 1994.
Berlin: Duncker und Humblot, 1994.
| Begriffe: | ||
|---|---|---|
 Fallacy of composition |
≅ |
 Trugschluss der Zusammenrechnung,
Illusion der Addierbarkeit,Trugschluss vom Teil aufs Ganze |
|
Loanable funds theory |
≅ |
Theorie verleihbarer Geldmittel
(neoklassisch) |
|
Endogenous money |
≅ |
Umlaufende Geldmenge, die nicht
durch die Finanzhoheit der Zentralbank entsteht, sondern als
Ergebnis des Zusammenwirkens anderer Wirtschaftsvariablen |
Luigi Pasinetti:
Structural Economic Dynamics. A Theory of Economic
Consequences of Human Learning (Google-Teilfaksimile).
The present work is only concerned with the minimal
model — the one containing those elements, and only
those elements, which the theory cannot do without. More
complex models, extending the analysis to the phenomena of
capital accumulation and the use of natural resources, as
well as to the explicit and detailed analysis of the
typical institutions of industrialized societies, will
have to come later. But in order to underline the importance
of the further steps to be taken, a substantial chapter will
be devoted to major hints on the working of the institutions
of industrialized economic systems. A final chapter will be
devoted to basic implications concerning the relations
among different economic systems, the plurality of which is
shown to be a consequence of the institutional development
that has taken place.
CAMBRIDGE UNIVERSITY PRESS,
1993
Luigi L. Pasinetti:
Keynes and the Cambridge Keynesians. A ‘Revolution in
Economics’ to be Accomplished.
What was the Keynesian revolution in economics? Why did
it not succeed to the extent that Keynes and his close pupils
had hoped for? Keynes and the Cambridge Keynesians addresses
these and other questions by tracing the historical development
of Keynesian economics. The book is split into three parts. Part
I contains the author's Caffè Lectures on Keynes's
‘unaccomplished revolution’. Part II is a series of
biographical essays where the author, himself a witness and
participant of the group on which he writes, presents the
successful and unsuccessful endeavours of Keynes's most important
pupils: Richard Kahn, Joan Robinson, Nicholas Kaldor, Pierro Sraffa
and Richard Goodwin. Part III of the book looks to the future by
developing a conceptual analytical framework that makes sense of
Keynes's ‘revolution in economics’, discussing the
many ways in which the Keynesian way of
doing economics is incompatible with the
neoclassical tradition.
CAMBRIDGE UNIVERSITY PRESS,
1993
Utz-Peter Reich:
National Accounts and Economic Value: A Study in Concepts (Google-Teilfaksimile).
For the purpose of combining national accounts and the theory
of economic value, the main argument is the concepts of a theory
should comply with the standards of their measurement, which in
economics are those of accounting. It seems that the national accounts
do not submit to the marginal theory of value.
palgrave macmillan, S. 28/29,
2001
![[PDF]](pdf.gif)
Antonio D'Agata:
Entry and stationary equilibrium prices in a
post-keynesian growth model.
A peculiar feature of the post-keynesian growth
theory is its focus on the growth objective of the firm
and the price implications of this objective. The
post-keynesian view of price formation, as canonically
represented by the mark up theory, is essentially
different from the neoclassical one as the prices are
essentially long period prices and they reflects the
reproducibility of the firms activity.
The existing theories of formation of mark-up within a
post-keynesian context is essentially a partial
equilibrium theory. The aim of this paper is to develop
a simple model of mark up formation driven by the threat
of entry, very close in spirit to Steindl and Eichners
approach but within a full-fledged post-keynesian growth
model. We shall show that if the wage rate is given,
then the attainment of the full employment steady state
can be impeded by firms coordination failures in setting
prices. We show also that in order to ensure a full
employment growth there is room for coordinating
government policies, which essentially amounts to ensure
an “optimal” degree of competition in the
economy. If we allow flexibility of the wage rate, the
automatic adjustment of the economy towards the full
employment steady state as conceived by Kaldor can be
recovered, although, unlike his view, in this case the
labour market acts as a coordinating device.
D.A.P.P.S.I., Faculty of
Political Science, University of Catania,
2006
Xavier Gabaix, David Laibson:
The Seven Properties of Good Models![[!]](exclam.gif)
.
Models are significant as they are used to provide
a supposedly reliable description or representation of
the world. Most of the models that scientists attempt to
generate and analyze are based on assumptions that are
only believed to be true since such models would not
consider irregularities and inconsistencies with common
theory. This chapter introduces seven key properties,
whether they already be widely accepted or have yet to be
accepted at all, that a good economic
model should possess:
1) parsimony,
2) tractability,
3) conceptual insightfulness,
4) generalizability,
5) falsifiability,
6) empirical consistency, and
7) predictive precision.
For this analysis, it is argued that classical
optimization assumptions are not necessary in
coming up with economic models, and that these should be
regarded as hypotheses that require testing.
In: Andrew Caplin, Andrew Schotter (Eds.):
The Foundations of Positive and Normative Economics: A Hand
Book,
2008
Till van Treeck:
The political economy debate on ‘financialisation’ —
a macroeconomic perspective.
A number of important contributions to the political economy
literature have argued that changes in the financial sector have
been amongst the main reflections, or even the driving forces, of
recent transformations of capitalism in the rich countries. This
hypothesis has been referred to as financialisation. We argue in
this article that the interdisciplinary literature could be enriched
if the macroeconomic dimension of financialisation was more explicitly
taken into account. In particular, important macroeconomic constraints
regarding the determination of profits, in the face of a decreasing
importance of physical investment and an increased importance of
financial operations, are often not explicitly considered. We compare
our macroeconomic approach with contributions from different strands
in the existing literature, including empirical analyses of new
patterns of profit generation, the ‘varieties of capitalism’
approach, the British ‘social accounting’ literature, and
the French ‘regulationist’ literature. Our theoretical
framework is illustrated by means of an empirical comparison of the
effects of financialisation in the USA and in Germany.
IMK.
Working Paper Nr.
01/2008.
2008
Elisa Delpiazzo: 4.
The Accounting Framework: A 2003 Social Accounting Matrix.
...The capital owner earns distributed
profit feom enterprises... Enterprises pay
distributed profits and direct tax while
they save a part... Distributed profits
are computed as enterprise income (gross
operating surplus plus government subsidies to enterprises) minus
other enterprise payments (corporate tax, money payment to ROW,
and accumulated savings).
Universita' Cattolica del Sacro Cuore, Milano,
DocTA - Doctoral Theses Archive,
2011
Eugenio Caverzasi:
The Missing Macro Link.
This paper addresses the critique of the aggregational
problem attached to the financial instability hypothesis of
Hyman Minsky. The core of this critique is based on the
Kaleckian analytical framework and, in very broad terms, states
that the expenditure of firms for investment
is at the same time a source of income
for the firms producing capital goods. Hence, even if
investments are debt financed, as in Minskys analysis, the
overall level of indebtedness of the firm
sector remains unchanged, since the debts of investing
firms are balanced by the income of capital goodsproducing firms.
According to the critics, Minsky incurs a fallacy of composition
when he does not take this dynamic into account when applying his
micro analysis of investment at the macro level. The aim of this
paper is to clarify the consequences of
debt-financed investments over the financial structure of
an aggregate economy. Starting from the works of Michał
Kalecki and Josef Steindl, we developed a stock-flow consistent
analysis of a highly simplified economy under four different
financial regimes: (1) debt-financed with no distributed profits,
(2) debt-financed with distributed profits, (3) internally
financed with no distributed profits, and (4) internally financed
with distributed profits. The results of our investigation show
that debt-financed investments do not
lead to a worsening of the financial position of the firm
sector only if specific assumptions
are taken into account.
We tried to prove that the idea of an increase
in the indebtedness level of the firms sector, due to
debt-financed investment, does
not necessarily rely on a fallacy of
composition. To do so, we relied on the analysis of Kalecki
and Steindl, as well as on the accounting framework of SFC models.
Analyzing a simplified economy under different financing regimes,
we show that debt-financed investments
do not lead to a worsening in the
financial position of the firm sector only
assuming that firms do not distribute
profits or, if they do, that households have a
saving propensity of zero, and in both cases assuming that the net
interest rate paid to banks is negligible in size. On the contrary,
if profits are distributed and households
save a part of them, debt-financed investments lead
to a higher indebtedness level of
firms.
The
Levy Economics Institute of
Bard College, Working
Paper No. 753,
February 2013
Frits Bos:
Economic Theory and National Accounting.
This paper describes the relationship between economic theory
and national accounting. This relationship is often misunderstood,
by economic theorists and national accountants alike. Attention is
drawn to the consistency required in a national accounting system,
to national accounts statistics as a transformation of primary data
and to the fundamentally different valuation principles employed in
economic theory and national accounting (foreward looking, analytic
and general, versus backward looking, descriptive and
well-specified). Statistics Netherlands,
MPRA
Paper 5955,
1995
Frederick C. V. N. Fourie:
How to Think and Reason in Macroeconomics (Google-Teilfaksimile).
pp. 151 ff.: National accounting identities: uses and abuses.
Juta Education (Pty) Ltd., South Africa, 2nd edition,
2001
Ariane Dupont-Kieffer:
Lindahl and Frisch: Linking macroeconomics and national accounting
in the interwar years for economic policies and planning.
The specific Scandinavian contribution to national accounting
relates to the links knitted by Ragnar Frisch and Erik Lindahl
between macroeconomics and national accounts in the 1930's. They
share a common epistemological aim and a common theoretical
inheritance. Firstly they were both driven by the ambition to get
concepts and analytical framework for understanding business cycles
and for designing economic policies. This conceptual work is strongly
embodied to empirical investigations, national accounts being viewed
as the experimental basis for macroeconomics and the base for policy
and planning purposes. Secondly we will show that their common
methodological ambition was rooted in sharing of the legacy of
Wicksell's theoretical proposals. This could explain why Frisch and
Lindahl both distinguish real items from financial items, real from
financial accounts, real from financial economic circulation in order
to stress the impact of money on real economic phenomena. They also
attempted to carry on in their respective national accounts an ex
ante/ex post analysis in order to underline the role of the
agents' anticipations in the economic processes and cycles.
Journal of Economic and Social Measurement, vol. 37, no. 1,2, pp. 145-174,
2012
Supplementary Reading Material in Economics. Part B:
Introductory Macroeconomics (Class XII).
Central
Board of Secondary Education , India,
2008–2014
Financial Production, Flows and Stocks in the
System of National Accounts.
First, the conceptual elements of the central framework which
reflect its accounting structure are presented. This is followed by
a description of the coverage and accounting principles of the
central framework. The chapter then describes the integrated economic
accounts, which comprise a set of accounts that is central to
understanding the economic process. It concludes with an overview of
the three-dimensional (fromwhom-to-whom) accounts showing financial
transactions and stocks of financial assets which fully articulate
the intermediation process whereby a financial institution draws in
funds, repackages them and issues them as other instruments to other
units.
This overview of the financial corporations sector and its subsectors
within the framework of the 2008 SNA defines and describes financial
corporations, as well as the subsectors of the financial corporations
sector. The chapter also describes the various ways in which financial
corporations can be grouped for various purposes....
European Central Bank: Studies in Methods,
Handbook on National Accounting , Series F No. 113,
2014
Circular Flow Model, GDP & National Income Accounting.
National income accounting is a system of measurements which
allows for comparisons of the sizes of different economies, as well
as measurements of one economy's performance over time. These are
measurements of an economy's output and income on a macroeconomic
level. Given the wide variety of goods and services produced in a
modern economy, the total output cannot be measured simply by adding
together the number of units produced. Different goods and services
have different values, so national income accounting requires
measuring the value of production. Only final goods and services
(those available to the ultimate consumer) are counted. This avoids
double-counting, since the value of final goods and services
incorporates the cost of intermediate goods. Intermediate goods are
goods that are used in the production of other goods. GDP can be
computed by counting each stage of production, but only if the value
added at each stage is counted instead of the total value of the
output at each stage. Production is counted in GDP in the year it is
produced, regardless of when it is sold. If a sale takes place in a
later year, the later year's GDP will only reflect the income earned
at the time of the sale - not the full value of the good being sold.
The value of used goods is not included, since it does not represent
new production. The method used for including unsold production in
GDP is to measure changes in inventories. Inventory is production
that has not been sold. An increase in inventory would be an
investment; a decrease in inventory would be consumption.
Economics Online Tutor,
2017
Explanatory Notes on Main Statistical Indicators.
Total Income from Primary Distribution: Primary
distribution refers to the distribution of net results from production
activities among the owners of factors of production and the governments.
The net result from production activities is the value-added. Factors of
production include labour force, land and capital. Owners of labour force
gain remuneration by providing labour. Owners of land receive rents from
leasing of land. Owners of capitals get income of various forms depending
on the type of capital: owners of loan capital receive income from
interests. Share holders receive dividends or
non-distributed profits. Government either obtains production tax
or pays subsidies in participating directly or indirectly in the
production processes. Results of primary distribution generate the total
income from primary distribution of each sector, and the sum of the total
income of primary distribution of all sectors make up the Gross National
Income, or the Gross National Product.
Chinese Government,
2015
Joseph Halevi:
Capitalism and Post-Keynesian Economics:
Some Critical Observations.
There are in Marx 2 distinct
and non-compatible macroeconomic theories. The first,
of a Ricardian nature, is to be found in Volume One
of Capital and culminates in the well known chapter #25 on
the Reserve Army of Labour.
Its essential elements are reproduced in Wage Price and
Profit, a fact that has some importance. Wage Price and
Profit is Marxs speech at the founding meeting of the
First International. It can, therefore, be viewed as
expressing his core thought
when economic statements had to be stripped down to their
essential points. The second
approach is contained in Volume Two of Capital,
largely put together by Engels,
which gave rise to the most far reaching set of economic
debates within the Second International. The
centrepiece of Volume Two are the famous
schemes of reproduction leading
to the discussion of disproportionalities, of the
non-continuous character of trade cycle.
Egmont Kakarot-Handtke:
How to Get Rid of Demand-Supply-Equilibrium
for Good (revised/modified version).
The present paper provides a substantial reconceptualization
of the serial clearing of the product
market on the basis of structural axioms. This change
of premises is required simply because from the accustomed
premises only the accustomed conclusions can be derived and
these are known to be inapplicable in the real world. This
holds in particular for the still popular
idea that the working of a
market can be described in terms
of the triad demand functionsupply
functionequilibrium. Structural axiomatization
provides the complete and consistent picture of
interrelated product market
events.
MPRA
Paper 46912,
2003 (revised 21.5.2013);
Last modified(?) version.
27.9.2015
Gunnar Tomasson, Dirk J. Bezemer:
What is the Source of Profit and Interest? A Classical Conundrum
Reconsidered.
Classical political economy was underpinned by a shared
view of the economy as a circular flow. This begged the question
of how the value of produce can exceed the value of factor
inputs: the ‘Profit Puzzle’. This paper addresses the
intellectual history of the ‘Profit Puzzle’. It offers
three contributions. It advocates an understanding of the Profit
Puzzle as a monetary paradox arising from Say's
Law. It presents a comparative study of the analyses by
Marx, Kalecki, Keynes, Schumpeter and Samuelson. And it suggests
that the work of Bentham contained a
solution to the Profit Puzzle.
MPRA
Paper 21292,
29.1.2010.
Egmont Kakarot-Handtke:
Axiomatic Basics of e-Economics
(introduction only, sketch, part of a book?).
MPRA
Paper 24331,
9.8.2010;
Modified Version.
(Outline, Figures, Preface i–xiv. Content Pages
1–19. Notes 287–296).
Standard economic models are based on an axiom set that
epitomizes
the fundamental behavioral assumptions. The
present treatise moves these assumptions from the foreground
to the background. The suggested change of perspective is
guided by the question: what is the minimum
set of foundational propositions for a consistent
reconstruction of the evolving money economy?
We start with 4 non-behavioral axioms.
Subsequently their logical and factual implications are explored
and the building blocks of the general axiomatic model are
determined. The switch of the unifying principle
resolves the profit conundrum
— 'one of the most convoluted and muddled areas in economy
theory'. Hence structural axiomatization has
ramifications on larger parts of standard
economics. By virtue of the axiom set
evolution supersedes equilibrium
as central organizing idea.
MPRA
Paper 24978,
13.9.2010 (15.2.2013)
Egmont Handtke:
Zur axiomatischen Fundierung der General
Theory![[wichtig !]](LHand.gif)
.
Die Standardmodelle der Ökonomik basieren auf
Axiomen, die spezifische Verhaltensannahmen formalisieren.
Dieser Ansatz führt nicht zu überzeugenden
Resultaten. Der hier vorgeschlagene Perspektivenwechsel
ergibt sich aus der Frage: Welche und wie viele Axiome sind
mindestens für die formale Rekonstruktion der
evolvierenden Geldwirtschaft erforderlich? Wir beginnen
mit drei strukturellen Axiomen
von maximaler Einfachheit und Allgemeinheit und
bestimmen zuerst ihre logischen und faktischen
Implikationen. Der Allgemeinheitsanspruch beinhaltet,
dass es möglich ist, den
Keynesschen Ansatz als Grenzfall zu integrieren.
Da Keynes die General Theory formal unzureichend
fundiert hatte, geriet der von ihm propagierte
Paradigmenwechsel nach halbem Weg ins Stocken. Der
strukturell-axiomatische Ansatz kann die bestehenden
konzeptionellen Probleme lösen.
Keynes-Gesellschaft, Tagung 2011,
29.1.2011;
Bericht über die 7. wissenschaftliche Tagung der
Keynes-Gesellschaft.
„…Das Referat von Egmont K-Handtke diente dem
Ziel, das Verständnis der Theorie von Keynes dadurch zu
erleichtern und zu vertiefen, dass sie axiomatisch fundiert
wird. Diese Fundierung erwies sich
jedoch als sehr anspruchsvoll und
komplex, sodass mit diesem Referat erst erste Schritte
zu dem angestrebten Ziel gegangen werden konnten”.
Keynes-Gesellschaft,
21/22.2.2011
Egmont Kakarot-Handtke:
Scrap the lot and start again (revised version).
In the wake of the recent financial crisis
heterodox economists have taken
up a time-honored refrain and proposed
to abandon the axiomatic method. The present paper
argues that this proposal is
self-defeating.
MPRA
Paper 30281,
11.3.2011;
RWER issue 56: Egmont Kakarot Handtke.
Real-World Economics Review Blog
Comments on RWER issue no. 56,
11.3.2011
Egmont Kakarot-Handtke:
The pure logic of value, profit, interest (revised version).
Standard economic models are based on axioms that
epitomize
the fundamental behavioral assumptions. This approach is not
conductive to convincing results. The suggested change of
perspective is guided by the question: what is
the minimum set of propositions for the
consistent reconstruction of the evolving money
economy? We start with three structural axioms and determine
their real world implications. The claim of generality entails
that it should be possible to demonstrate that
well-understood parts of theoretical economics fit
consistently into the structural axiomatic framework. We
focus here on the
classical theory of value as expounded
by J.S. Mill.
MPRA
Paper 33849,
11.5.2011
Egmont Kakarot-Handtke:
Keyness missing axioms (original, MPRA 32249);
Keyness missing axioms
(revised version).
Between Keyness verbalized
theory and its formal basis persists a lacuna. The conceptual
groundwork is too small and not
general. The quest for a comprehensive formal basis is
guided by the question: what is the minimum
set of foundational propositions for a consistent
reconstruction of the money economy? We start with
3 structural axioms. The claim of
generality entails that it should be possible to prove that
Keyness formalism is a subset
of the structural axiom set. The axioms are
applied to a central part of the General
Theory in order to achieve consistency
and generality.
MPRA
Paper 43856,
14.5.2011, revised 11.8.2011, posted 18.1.2013;
Egmont Kakarot-Handtke:
Keyness missing axioms.
A first version of this paper was presented under the title
“Zur axiomatischen Fundierung der General
Theory” at the 2011 Annual Conference of the
Keynes-Gesellschaft .
MPRA
Paper 33692,
14.5.2011, posted 25.9.2011
Michał Kalecki:
A Theory of Profits.
Investigation of the determinants of
profit in short and long periods. We assume a closed
system and a balanced State Budget. Our aim is to examine the
problem of profits in a closed laissez-faire system.
Wages and doles
are fully spent on consumption; saving is neglected.
The ECONOMIC JOURNAL 52, No. 206,
Jun.-Sep. 1942.
WikipediA:
Michał Kalecki
was a Polish economist, “one of the most
distinguished economists of the 20th century”,
who developed many of the same ideas as Keynes —
before Keynes. In a paper from 1943, he predicted that
the full employment delivered by
Keynesian policy would eventually lead to a more
assertive working class and weakening of the social
position of business leaders, causing
the elite to use their political power
to force the displacement of the
Keynesian policy even though profits would be
higher than under a laissez faire system.
en.wikipedia.org,
24.6.2015.
Egmont Kakarot-Handtke:
What is Wrong With Heterodox Economics? Kaleckis Profit Theory
as an Example.
Kaleckis profit theory has
always been popular among heterodox economists as an
alternative approach to solve the paradox
of monetary profits. In the present paper his formula
‘The workers spend what they get,
the capitalists get what they spend’
is scrutinized for its logical and factual implications. The
analysis shows that Kaleckis alternative approach points in the
right direction but unfortunately shares a
crucial conceptual error with standard economics.
MPRA
Paper 32549,
18.5.2011
Egmont Kakarot-Handtke:
Beginning, crises, and end of the money
economy in three consistent steps
(revised version).
A crisis is but a crisis when the long run outlook is
definitively positive. Then a lower turning point must exist.
This implicates a vision or, in the ideal case, a formalized
theory of the money economys possible
end states.
This theory has to provide an endogenous
explanation of end states and crises. The equilibrium
approach excludes endogenous causes in principle. Thus
disturbances can only be explained by exogenous random shocks.
The structural axiomatic approach,
that is applied in the following, consistently
defines the potential systemic crisis
point and the conditions of an economic happy
end.
MPRA
Paper 33361,
29.5.2011 (revised 25.2.2012)
Egmont Kakarot-Handtke:
Schumpeter and the essence of profit (revised version).
Schumpeter had a clear vision of the developing economy,
but he did not formalize it. The quest for a germane formal
basis is in the following guided by the general question: what
is the minimum set of foundational propositions
for a consistent reconstruction of the
evolving money economy? We start with three structural
axioms. The claim of generality entails that it should be possible
to free Schumpeters approach from its
irksome Walrasian legacy and to give a
consistent formal account of the elementary
circular flow that served him as a backdrop for the analysis
of the entrepreneur-driven market system.
A positive expenditure-income asymmetry is
the ultimate structural originator of
profit. The entrepreneur does not create profit; he only
changes the distribution of profits among firms. Instead of the
firm, price, quantity, wage rate or employment, only the
expenditure ratio and the distribution
ratio are relevant for the profit. Schumpeter
maintained zero profit for the stationary economy and explained
the continuing positive profits with the
occurrence of disruptive entrepreneurs
carrying out new combinations. ButSchumpeters assertion
that there can be no profit in the stationary
circular flow is flawed as are any models with the zero
profit condition. The overall profit ratio is positive if the
expenditure ratio is > 1 or the distributed profit ratio is >
0, or both. Schumpeters description of the stationary circular
flow has been formalized and turned into a simple
model.
MPRA
Paper 32641,
29.5.2011
Egmont Kakarot-Handtke:
The wondrous effortlessness of unifying circuit-, money-, price-
and distribution theory.
MPRA
Paper 31279,
5.6.2011;
(Revised version:)
The coherency of money, profit, price, and
distribution
(revised version of: The wondrous effortlessness of unifying
circuit-, money-, price- and distribution theory).
When anything goes and nothing fits together this
can be euphemized as pluralism, blossoming with fresh ideas.
Lacking a common fixed point, discussions between various
schools of economic thought actually amount to a repetition
of contradicting views with more refined arguments. It seems
impossible to find an intersection of the different approaches.
Yet there must exist one because the subject matter is the
same. The difference of perspectives is
due to self-chosen fundamental
assumptions. What is called for is a minimalist common
set of assumptions. The present paper submits 3
structural axioms as an open formal platform.
MPRA
Paper 32275,
5.6.2011
Egmont Kakarot-Handtke:
Properties of an economy without human beings.
Standard economics starts with behavioral axioms and
arrives at conclusions about the equilibrium properties of
the economy as a whole at point t. The present paper employs
objective structural axioms and random changes in order to
determine the conditions for market clearing
and budget balancing in the pure consumption economy
until the limit t→∞. From the conditions of
stochastic supersymmetry 6 simple
behavioral rules are derived that guarantee the desired
outcome. These rules contrast with actual behavior and
this explains why the plans and expectations of economic man
are many times frustrated.
MPRA
Paper 32535,
13.6.2011
WikipediA:
Temporal single-system interpretation (TSSI)
of Karl Marx's value theory emerged in response to several
critiques that his theory was “split with internal
inconsistencies” and that it must be rejected or corrected.
Proponents of TSSI claim that when
Marx's theory is understood as ‘temporal’ and
‘single-system’, the internal inconsistencies
disappear. Critics of TSSI argue that
Marx intended to present ‘a structurally consistent’
model of value formation in a capitalist economy but that Marx's
formulations fail to do this.
en.wikipedia.org,
6.7.2015
Nick Potts, Andrew J. Kliman (eds.):
Is Marx's Theory of Profit Right? The Simultaneist-Temporalist
Debate (Google-Teilfaksimile).
The major contributions to a recent, decade-long
controversy over Karl Marx's theory
that exploitation of workers is the exclusive
source of capitalists' profit. All
contributions are presented in chronologcal order and without
amendment or revision. References to other works have been
moved from the end of individual texts to a consolidated
bibliography.
Lexington Books ,
2015.
Nick Potts: 1
A Sad Story. An Introduction to and Commentary on the
Debate.
Andrew J. Kliman: 2
Simultaneous Valuation vs. the Exploitation Theory of Profit.
Simon Mohun: 3
On the TSSI and the Exploitation Theory of Profit.
Andrew J. Kliman: 4
Deriving a Negative PNP.
Roberto Veneziani: 5
Exploitation, Profits, and Time.
Andrew J. Kliman, Alan Freeman: 6
Replicating Marx: A Reply to Mohun.
Simon Mohun, Roberto Veneziani: 7
The Incoherence of the TSSI: A Reply to Kliman and Freeman.
Alan Freeman, Andrew J. Kliman: 8
Simultaneous Valuation vs. the Exploitation Theory of Profit: A Summing Up.
Andrew J. Kliman, Alan Freeman: 9
The Truthiness of Veneziani's Critique of Marx and the TSSI.
Simon Mohun, Roberto Veneziani: 10
The Temporal Single-System Interpretation: Underdetermination
and Inconsistency.
Alan Freeman, Andrew J. Kliman: 11
No Longer a Question of Truth? The Knell of Scientific
Bourgeois Marxian Economics and a Positive Alternative.
Robert Paul Wolff: 12
Once More unto the Breach, Dear Friends, Once More.
Chris Byron, Alan Freeman, Andrew J. Kliman: 13
Physicalism and the Exploitation Theory of Profit are
Incompatible: A Response to Robert Paul Wolff.
Robert Paul Wolff: 14
Response to Professors Freeman and Kliman and Mr. Byron.
Andrew J. Kliman, Robert Paul Wolff: 15
Subsequent Dialogue between Kliman and Wolff
Egmont Kakarot-Handtke:
Exploitation and its unintended outcomes. An axiomatic
obituary for Marxs surplus value (revised version).
The present paper scrutinizes the
logical foundation of Marxs dialectic
analysis of the evolving money economy. The minimalistic
frame of reference is thereby given with the set of structural
axioms. It turns out, first, that the
commonplace notion of exploitation has to be
replaced by crossover exploitation
among capitalists and workers; second, that the
concept of surplus value cannot
explain
the existence and magnitude of overall
profits; finally, that the real shares
of output are determined in the spheres of income and
expenditure and not, as classical, Marxian and neoclassical
economists unanimously maintain, in the sphere of production.
MPRA
Paper 43923,
23.6.2011
Egmont Kakarot-Handtke:
Unemployment out of nowhere — a structural axiomatic
analysis of objective determinants.
Unemployment is usually explained with reference
to the equilibrium of supply and demand in the labour market.
This approach rests on specific behavioral assumptions that
are formally expressed as axioms. The standard set of axioms
is replaced in the present paper by a set
of structural axioms. This approach
yields the objective determinants of
employment. They consist of
effective demand, the actual
outcome of price formation,
structural stress as determined by the
heterogeneity within the business sector
and the income distribution.
Sudden changes of employment are
effected by latent relative
switchers that are hard to spot
empirically.
MPRA
Paper 32248,
14.7.2011;
Unemployment out of nowhere
(revised version).
MPRA
Paper 32896,
15.7.2011;
mnmecon:
An equation for the Phillips Curve.
The Phillips Curve equation often comes up in slightly
different forms. The basic features are an expression which
expresses the rate of inflation in year t, in terms of things
like the unemployment rate in year t, the inflation rate in
year t-1, the natural rate of unemployment, and a parameter
which shows the responsiveness.
mnmeconomics,
9.7.2011;
A.W. Phillips:
The Relation Between Unemployment and the Rate of Change
of Money Wage Rates in the United Kingdom, 18611957.
Economica 25(100),
November 1958 (Reprinted 26.3.2007)
Egmont Kakarot-Handtke:
Reconstructing the Quantity Theory (I)
(latest version, from 21.2.2013).
The quantity theory is disjunct to the hard core of
general equilibrium theory. It does not relate to the formal
foundations of standard economics and, vice versa, from the
behavioral axioms of standard economics a rationale for
using money cannot be derived. The present paper leaves the
standard axioms aside and reconstructs the
quantity theory from entirely new structural axiomatic
foundations. This gives a coherent
view of the interrelations of quantity
of money, transaction money, savingdissaving,
liquidityilliquidity, rates of interest,
leverage, allocation, prices, profits, unit of account, and
employment.
MPRA
Paper 32536,
26.7.2011;
Reconstructing the Quantity Theory (II).
Part (I) and (II) of this paper reconstruct the quantity
theory from structural axiomatic foundations. This yields a
coherent
view of the interrelations of quantity
of money, transaction money, savingdissaving,
liquidityilliquidity, rates of interest,
leverage, allocation, prices, profits, unit of account, and
employment. Part (II) focuses on the symmetric and asymmetric
process of nominal and real
savingdissaving and on the
monetization of nonfinancial assets.
The distinction between liquidity preferences
of individual households and the household sector as a whole proves to
be crucial. The commonplace correlation
between quantity of money and price does
not emerge in the savingdissaving
process, but from the monetization of
nonfinancial assets.
MPRA
Paper 32542,
2.8.2011
Egmont Kakarot-Handtke:
Uniform profit ratios.
The equalization of profit rates as
the outcome of free competition is one of the oldest
tenets in theoretical economics. Being intuitively convincing
its premises and implications,
though, are not well defined. As
Walras put it: ‘To state a theory is one thing; to prove
it is another.’ First of all a consistent concept of
profit is required. In the present paper the
structural axiom set is taken as
premise. Thereof the determinants of profit
and the profit ratio follow. This makes it possible to
definitively state the conditions for
uniform profit ratios in a hierarchical market
structure.
MPRA
Paper 32639,
8.8.2011
Economic growth.
Meanings. What creates growth: new technology; a
division of labour, allowing specialisation; new
production methods; increasing labour force; discovering
new raw materials. Change of a production possibility
frontier: loss or exhaustion of some of the scarce
resources; run out of resources; failure to invest;
erosion of infrastructure; natural disaster.
Investment and economic growth.
Asymmetric growth. Factor
mobility.
Economics Online,
2015
Egmont Kakarot-Handtke:
Squaring the investment cycle
(revised version).
The present paper replaces the standard behavioral
axioms by structural axioms and
applies these to the analysis of the
accumulation and decumulation of capital. This yields
a coherent view of the interrelations
of real and nominal savinginvestment,
of profitloss,
of moneycredit, and of
internalexternal financing.
The main result is that asymmetric
growth is indispensable for the viability of the market
system.
MPRA
Paper 33442 / SSRN-id1911796.pdf,
18.8.2011/Revised: 8.6.2014
Egmont Kakarot-Handtke:
Primary and Secondary Markets (revised version).
The present paper swaps the standard behavioral axioms
for structural axioms and applies the latter to the analysis
of the emergence from
the flow part of the economy. Real and nominal residuals
at first give rise to the accumulation of
the stock of money and the stock of commodities. These
stocks constitute the demand and supply side
of secondary markets. The pricing
in these markets is different from the
pricing in the primary markets. Winnings are
different from income or profits. The emergence of
secondary markets implies that the
plans of households and firms are
mutually incompatible.
MPRA
Paper 43337,
26.8.2011
Egmont Kakarot-Handtke:
Increasing returns and stability.
Increasing returns are an incontrovertible fact since
Adam Smith hailed them as the very originators of wealth,
yet they play havoc with general equilibrium. They fit, in
marked contrast, nicely into the structural axiomatic
framework. This indicates that it is worthwhile to replace
the behavioral axioms of standard economics by objective
structural axioms. These are in the present paper applied to
the question of how increasing returns
affect the systemic interrelations in the pure
consumption economy. To invite a reality check the
logical implications of the structural
employment equation are set in relation to 3 well-known
statistical relationships.
MPRA
Paper 33133,
2.9.2011
Egmont Kakarot-Handtke:
Qualitative and temporal aggregation.
Behavioral assumptions, rational or otherwise, are not
solid enough to be eligible as first principles of theoretical
economics. Hence all endeavors to lay the formal foundation on
a new site and at a deeper level actually need no further
vindication. The present paper suggests 3
non-behavioral axioms as groundwork and
applies them
to the analysis of
qualitative and temporal aggregation in the pure
consumption economy. It turns out that the
structural axiom set is self-similar
with regard to the differentiation of the
household- and business sector as well as to the
sequencing of time.
MPRA
Paper 33351,
12.9.2011
Egmont Kakarot-Handtke:
When Ricardo saw profit, he called it rent: on the vice of
parochial realism (revised version).
According to Ricardo the principal problem
in Political Economy is to determine
the laws which regulate the distribution of
profits, rents and wages. Ricardo
determined the respective shares in
real terms and to this end invented an
engine of analysis that became paradigmatic. The
present paper applies
a consistent real and monetary analysis,
which is based on a set of objective structural axioms, and
contrasts the results with Ricardos approach. The general result
is that real analysis misses economic
reality. The specific result is that rent
is a misnomer for the distributed profit of the land owning
firm.
MPRA
Paper 33668,
22.9.2011;
Paolo Trabucchi:
Ricardo: ‘real’ or supposed vices? A Comment on
Kakarot-Handtkes paper.
ECONOMIC THOUGHT,
WORLD ECONOMICS ASSOCIATION,
2011?
Egmont Kakarot-Handtke:
The wine makers business and the logical origin of
interest in the monetary economy
(revised version).
Any serious alternative to the standard approach
requires a distinct axiomatic
foundation. The crucial point is not axiomatization
per se but the real world content
of axioms. The purpose of the present paper is to make the
implications of the objective
structural axiom set concerning
the relation of profit, money, the
nominal/real rate of interest, and the
time structure of production
explicit and to contrast them with the familiar
conceptions.
MPRA
Paper 44092,
6.10.2011 (revised 20.2.2013)
Egmont Kakarot-Handtke:
The Propensity Function as General Formalization of Economic
Man/Woman (abstract only).
The purpose of the present paper is to demonstrate
how the interaction of the structural
axiomatic core and the behavioral propensity function
produces plausible outcomes in the product
market. The propensity function is a
compact formal expression of random, semi-random, and
deterministic behavioral assumptions. Its
two components are
direction and magnitude of the rate of
change of an elementary axiomatic variable. A
type-C propensity function is the
formal container for a familiar
conception that Samuelson identified
as qualitative prediction.
Two type-C functions are
sufficient to produce
stochastic stability and optimality in the
product market.
ResearchGate,
10/2011;
Egmont Kakarot-Handtke:
The propensity function … (full text).
MPRA
Paper 34051,
11.10.2011
Egmont Kakarot-Handtke:
Matter matters: productivity, resources, and prices.
Tastes and technology are the ultimate givens of
standard economics. Their interaction is mediated by
the marginal principle. This approach
is unsuitable to explain the nature
and magnitude of overall profits and their
distribution within the business sector. The present
paper therefore takes a quite different analytical route. The
standard behavioral axioms are replaced by
objective structural axioms and the standard production
function is replaced by a sequential
production function. From this new formal basis
two exemplary factor prices, the product
price, and the real wage are derived
under the conditions of market clearing and equal profit
ratios.
MPRA
Paper 34225,
20.10.2011
Egmont Kakarot-Handtke:
The Value of Water and Diamonds: Back to Square One.
Taking the waterdiamond paradox as a time-honored challenge,
at first the structural value theorem is
derived from the set of
structural axioms. This enables a reevaluation of classical and
neoclassical conceptions. Ricardo realized
that there are 2 entirely different kinds of
markets but excluded the secondary markets by defining commodity
in a restricted sense. Walrass markets are secondary markets by
construction. Primary markets thereby drop from sight. Since
secondary markets presuppose primary markets
the marginalistic approach is hanging in the air. The structural
axiomatic approach demonstrates that the pricing in
primary and secondary markets depends on
different principles.
SSRN
Social Science
Research Network, abstract_id=1954047,
3.11.2011
Egmont Kakarot-Handtke:
Trade, productivity, income, and profit: the comparative
advantage of structural axiomatic analysis (revised version,
2012).
The classical case of comparative
advantage is put into a new formal framework, that is,
the behavioral axioms of standard economics are replaced
by a set of structural axioms. This
enables a comprehensive analysis that takes the
effects on income and profit
explicitly into account. The axioms in combination with the
conditions of market clearing, budget balancing and initial zero
profit determine all measurable variables objectively. It is the
purpose of the present paper to formally
restate the notion of comparative advantage and
to ascertain whether this leads to a well-grounded new perspective
on this time-honored doctrine.
MPRA
Paper 43872,
12.12.2011 (last revised 19.1.2013)
Egmont Kakarot-Handtke:
Geometrical exposition of structural axiomatic economics
(I): Fundamentals.
Behavioral assumptions are not solid enough to be
eligible as first principles of theoretical economics.
Hence all endeavors to lay the formal foundation on a new
site and at a deeper level actually need no further
vindication. Part (I) of the structural axiomatic analysis
submits three nonbehavioral axioms as groundwork and
applies them to the simplest possible case of the pure
consumption economy. The geometrical
analysis makes the interrelations between income, profit and
employment under the conditions of market clearing
and budget balancing immediately
evident. Part (II) applies the differentiated axiom
set to the analysis of qualitative and temporal
aggregation.
MPRA
Paper 43269,
15.5.2012;
(II): qualitative and temporal aggregation.
Part (II) applies the differentiated axiom set to the
analysis of qualitative and temporal
aggregation.
MPRA
Paper 43725,
(14.9.2011) 19.2.2013
Egmont Kakarot-Handtke:
Taxes, profits, and employment: a structural axiomatic
analysis.
Standard economics is regarded as the theory of the
market system. Profit is the pivotal phenomenon of this
system. Contrary to expectations, though,
profit is neither well defined nor fully
understood. The frailty of the theoretical core is
passed on to the subfields. This paper provides
a consistent definition of profit
and applies it to the analysis of the
effects of the government sectors budget on employment and
the profitability of the business sector. Since the
formal point of departure is different from the standard
approach it is quite natural that we arrive at
new conclusions in some fundamental
issues.
MPRA
Paper 43581,
31.1.2012
Egmont Kakarot-Handtke:
The Emergence of Profit and Interest in the Monetary
Circuit.
Efficient progress of the monetary
theory of production (MTP) is hampered by an
unsatisfactory account of how profit and
interest emerge in the monetary circuit. As matter of
fact, this question puzzled already the classics. It seems
evident that it cannot be answered by applying the usual tools.
The present papers purpose is to
overcome the deadlock. This is done
by setting the circulation approach on
general structural axiomatic foundations.
University of Stuttgart, Institute
of Economics and Law,
6.2.2012;
![[PDF]](PDF.gif)
The Emergence of Profit and Interest in the Monetary
Circuit.
Efficient progress of the monetary theory of production
(MTP) is hampered by an unsatisfactory account
of how profit and interest emerge in the monetary circuit.
As matter of fact, this question puzzled already the classics.
It seems evident that it cannot be answered
by applying the usual tools. The
present paperspurpose is to overcome
this. This is done by setting the
circulation approach on general structural axiomatic
foundations.
World Economic
Review 2: 106-118, WORLD ECONOMICS ASSOCIATION,
2013;
Abstract and Review.
WORLD ECONOMICS ASSOCIATION,
2012
Egmont Kakarot-Handtke:
Income distribution, profit, and real shares.
This paper clarifies first the nature and significance of
financial profit by applying the structural axiom set as consistent
point of departure. As a crucial result the fundamental theorem of
income distribution emerges. It states: profit
is no factor income. Since the individual firm is blind to
this structural fact it subjectively interprets profit as some kind
of reward. As a matter of fact, firms do
not ‘make’ profit, they
only redistribute it among themselves. With profit consistently
defined it is possible to determine the nominal
and real shares of the elementary income categories
wage income and distributed
profit.
MPRA
Paper 43291,
2.3.2012
Egmont Kakarot-Handtke: [nur Deckblatt:
The axiomatic unity of circuit, money, price and distribution].
Zur
axiomatischen Einheit von Kreislauf-, Geld-, Preis- und
Verteilungstheorie.
This contribution establishes the axiomatic unity of
circuit, money, price and distribution theory. From the history of
economic methodology and from actual practice follows: one cannot not
axiomatize. The crucial question is not
axiomatization per se but the real world
content of axioms which is not guaranteed by simply applying
the method. Axioms can be empirically vacuous.
This holds for the behavioral axioms of standard economics. In marked
contrast, all structural axiomatic variables are
measurable in principle. No metaphysical
concepts like equilibrium are put into the
premises.
In:
Harald Enke, Adolf Wagner (Hrsg.): Zur Zukunft des Wettbewerbs.
Sonderdruck in memoriam Karl Brandt (19232010) und Alfred E. Ott
(19291994). Metropolis-Verlag, Marburg, 2012.
MPRA
Paper 44313,
9.3.2012.
Egmont Kakarot-Handtke:
Crisis and methodology: Some heterodox misunderstandings.
Whether justified by the concrete circumstances or not, an
economic crisis is, by simple association, taken as an implicit
refutation of the invisible hand vision and the underlying theory.
The fundamental heterodox critique locates the source of apparent
theoretical difficulties at the level of methodology. Although
acceptable in principle, this belief involves some actual
misunderstandings with regard to the respective roles
of deterministic laws and deductive reasoning. In order to clarify
these, the present paper revisits some key episodes in the history
of economic methodology.
real-world
economics
review 63,
25.3.2012
Nuno Ornelas Martins:
Mathematics, science and the Cambridge tradition. Blog
WORLD ECONOMICS ASSOCIATION,
28.3.2012
Egmont Kakarot-Handtke:
The rhetoric of failure: a hyper-dialog about method in
economics and how to get things going.
All are agreed that orthodox economics is
unsatisfactory but there is wide disagreement, especially
among heterodox critics, whether the problems lie at the
level of substantive theory or at the level of methodology.
This paper gives first an overview of
the methodological questions at issue. The
frame of reference includes J.S. Mill, Jevons, Popper,
Keynes, and Lawson. Drawing on the conclusions, the
domain of economics is
subsequently refocused.
Human behavior is moved from the
center to the periphery. From
elementary systemic properties the
relation of income and profit
is then consistently derived.
This solves the profit conundrum.
MPRA
Paper 43276,
28.4.2012
Egmont Kakarot-Handtke:
The common error of common sense:
An essential rectification of the accounting
approach.
This paper takes the explanatory superiority of the integrated
monetary approach for granted. It will be demonstrated that
the accounting approach could do even better,
provided it frees itself from theoretically ill-founded notions like
GDP and other artifacts of the equilibrium approach.
National accounting as such does not provide
a model of the economy but rather is the numerical
reflex of the underlying theory. It is this theory that will be
scrutinized, rectified, and ultimately replaced in what follows. The
formal point of reference is “Monetary
Economics” by Wynne Godley and Marc
Lavoie.
The
Levy Economics Institute of
Bard College, Working
Paper No. 731,
Sept. 2012;
Wynne Godley, Marc Lavoie:
Monetary Economics. An Integrated Approach to Credit, Money,
Income, Production and Wealth.
A sketch of the book. Balance Sheets, Transaction
Matrices and the Monetary Circuit. The Simplest Model with
Government Money. Government Money with Portfolio Choice.
Long-term Bonds, Capital Gains and Liquidity Preference.
Introducing the Open Economy. A Simple Model with Private Bank
Money. Time, Inventories, Profits and Pricing. A Model with
Private Bank Money, Inventories and Inflation. A Model with
both Inside and Outside Money. A Growth Model Prototype. A More
Advanced Open Economy Model. General Conclusion.
palgrave macmillan ,
2007
Egmont Kakarot-Handtke:
Intertwined real and monetary stochastic business cycles.
There is no such thing as a real economy. The task,
therefore, is to consistently reconstruct the
fluctuations of employment and output from the interactions
of real and nominal variables. The
present paper does exactly this. No nonempirical
concepts like utility, equilibrium, rationality, decreasing
returns or perfect competition are applied.
The analysis runs rigorously in objective structural axiomatic terms.
Therefrom follows that it is the factor cost
ratio, i.e. the relation of the nominal variables wage rate
and price and the real variable productivity that, for any given
level of effective demand, drives the fluctuations
of employment and output.
MPRA
Paper 42793,
22.11.2012
Egmont Kakarot-Handtke:
General Formal Foundations of the Virtuous DeficitProfit Symmetry
and the Vicious Debt Deflation.
A comprehensive dynamic model of
the monetary economy that produces the key characteristics
of a debt deflation has been presented
recently by Steve Keen as an alternative
to conventional approaches. His model is
based on a double-entry bookkeeping methodology but
lacks an acceptable profit theory. In
this respect it is not different from familiar approaches. Clearly,
a deficient profit theory prevents a proper understanding of how the
real world economy works. The present paper takes
an entirely different route and places
the core of Fishers debt deflation theory
into the context of the consistent
structural axiomatic approach.
MPRA
Paper 42912,
29.11.2012
Egmont Kakarot-Handtke:
Make a bubble, take a free lunch, break a bank.
Standard economics is known to be
incapable of integrating the real and the
monetary sphere. The ultimate reason is that the whole
theoretical edifice is built upon a set of behavioral axioms.
Therefore, the formal starting point is moved to
structural axioms.
This makes it possible to formally track the
complete process of value creation and
destruction in the asset market and its consequences for
the household and business sector. From the set of
structural axioms emerge the well-known
phenomena of a bubble from free lunches through
appreciation to defaults due to a lack of
potential next buyers.
MPRA
Paper 42996,
1.12.2012
Egmont Kakarot-Handtke:
Keyness employment function and the gratuitous Phillips
curve disaster.
Keynes had a lot of plausible things to say about
unemployment and its causes. His mercurial mind, though,
relied on intuition which means that he could not prove
his diverse opinions convincingly. This explains why
Keyness ideas immediately
invited bastardizations. One of
them, the Phillips curve synthesis, proved to be fatal. This
paper identifies Keyness undifferentiated
employment function as weak spot. The
structural employment function
(structural Phillips curve), on the other hand,
works in inflationary and deflationary environments and
supersedes the bastard Phillips
curve. It will be rigorously demonstrated why
there is no trade-off between
price inflation and unemployment.
The correct Phillips curve is given with this Structural
Phillips Curve:
| unemployment u = 1 - | · | ╭ | Investm. expendit. | + | ╮ | · | if WC = WI = W, ρXC =1; with ρFC ≡ | ||||||
| 1 | | | I | ρE·YD | | | 1 | W | |||||||
| 1 - ρE·ρFC | | | PI·RI | PC·RC | | | LΘ | PC·RC | |||||||
| Multiplier | ╰ | ╯ | |||||||||||
Egmont Kakarot-Handtke:
Keynes's Employment Function and the Gratuitous
Phillips Curve Disaster.
Keynes had many plausible things to say about
unemployment and its causes. His ‘mercurial mind,’
though, relied on intuition, which means that he could not
strictly prove his hypotheses. This explains why Keyness
ideas immediately invited bastardizations. One of them, the
Phillips curve synthesis, turned out to be fatal. This paper
identifies Keyness undifferentiated employment function as a
sore spot. It is replaced by the structural employment function,
which also supersedes the bastard Phillips curve. The paper
demonstrates in a formal and rigorous manner
why there is no trade-off between
price inflation and unemployment.
The
Levy Economics Institute of
Bard College, Working
Paper No. 773,
Aug. 2013;
Review of
Keynes's Employment Function and the Gratuitous
Phillips Curve Disaster.
Levy Economics Institute of Bard College
Summary,
Vol. 23, No. 1, pp. 26 f.:
Egmont Kakarot-Handtke, University of Stuttgart,
presents an alternative to Keynes's
employment function and to what he describes as the
“bastard” Phillips curve. Kakarot-Handtke observes
that while Keynes had a number of interesting things to say
about unemployment, he often relied on intuition rather than
articulating a rigorous prof. This left the door open for
economists to offer their own, sometimes spurious,
interpretation of Keynes's work. The Phillips curve is one
example of a misinterpretetion of
Keynes's ideas that was eventually used to
undermine Keynesian economics. Kakarot-Handtke
identifies Keynes's undifferentiated employment funtion as one
such weak spot that has led to misinterpretation.
Kakarot-Handtke laments that so many economists remain
wedded to economic theories built on behavioral assumtions
of utility maximization and profit maximization by individual
agents. His work is informed by the conviction that economics
must be non-behavioral, and must emphasize the interdependence
of the real and nominal variables that make up the monetary
economy. His first step is to provide the non-Euclidean axioms
that Keynes called for but did not himself provide. He then
turns to a discussion of Keynes's approach
to Says law. The author noted that Keynes's acceptance
of the most important policy implication of Say's law was that,
in the presence of unemployment, workers must
accept a lower price for their labor.
This recipe for unemployment, the author argues,
rests on a fallacy of composition.
He states the proposition of overall market clearing in a
structural axiomatic form, showing that Say's regime —
the core of general equilibrium theory — can be produced
from objective conditions, making behavioral assumptions
unnecessary. He addresses the question of
how employment affects profit by
demonstrating that, no matter whar the level of employment or
the wage rate, the profit ratio remains
constant. Firms are therefore indifferent to the level
of employment. Here, the author introduces a
single behavioral assumption to move the model in the
right direction: firms prefer to be larger rather than smaller
if the profit ratio remains the same. Thus,
firms will hire workers until the supply of
labor is cleared. This condition ensures full
employment in Say's regime. Because of flexibility of product
market prices, all levels in output are completely absorbed.
Kakarot-Handtke concludes that Say's regime
provides an elementary, objective, explicit, and
benchmark economy it is
free of marginalistic assumptions and
takes the place of the general equilibrium model. He then
applies these insights to explore their implications for
Keynes's approach. In Say's world, there is no employment
function. Keynes introduced the employment
function as an inverse of the aggregate supply function.
Employment is thus dependent on effective demand. This crucial
departure from Say's law made price
the independent variable. Thus, by implication,
employment depends on consumption expenditure,
price, and productivity (with consumption expenditure
representing effective demand)
Moving from the structural employment function to the Phillips
curve, Kakarot-Handtke argues that Keynes's lack of a robust
employment function would prove to be an important deficiency.
The original Phillips curve described the
relationship between the unemployment rate and the rate of change
in the wage rate. The original work by William Phillips
made no claims about a link between employment
und inflation. It was Paul Samuelson and Robert Solow who
made inflation equal to the rate of wage growth, less the rate of
production growth. The spurious trade-off
between inflation and unemployment did not prevent
this (bastard) Phillips curve from
having wide influence in public policy.
It was eventually discredited, much to
the injury of the Keynesian paradigm.
The final element of Kakarot-Handtke's analysis is to combine the
employment function, multiplier, and Phillips curve to account for
investment as the second important component of
effective demand. He then develops a
structural Phillips curve that has the formal status as a
theorem, contains 12 observables, and recovers the original
Phillips curve &mdaash; which, he concludes, is a substantial
improvement over the bastard Phillips curve.
Working Paper No. 773,
August 2013.
John Quiggin:
New Old Keynesianism.
23.1.2013: “Olli Ranta”:
![[⇒]](RHand.gif)
The above article is a great
example, how even very basic economic theories can sometimes be
improved. Kakarot-Handtke writes
down all those little definitions and basic
relations that Say and Keynes should have written but
didnt. The first surprise is that they are
the same except that Keynes has
the direction right in one dependency. Behavior is only
indirectly assumed in the form of multipliers with unknown
values. Then the author runs the arithmetic from equations in
a closed 2 goods economy including the
amount of work done and unemployment.
The latter shows that an increase in
wages will increase employment exactly
as Phillips found empirically.
But an increase in prices causes a
decrease in employment as occurred after the oil
shock in the 1970's. Since Samuelson and
others had just assumed
that inflation is same as wage
rise, they blew the credibility of
the Keynesian theory.
23.1.2013: “dsquared”: The so called
‘microfoundations’ are really not very founded in
microeconomics. Blog
Out of the CROOKED TIMBER,
22.1.-29.1.2013
Egmont Kakarot-Handtke:
Primary and Secondary Markets (abstract).
The classics took
production and accumulation as their
analytical starting point; the neoclassics,
exchange. Exchange implies behavioral
assumptions and notions like rationality, optimization, and
equilibrium. It is widely recognized that this
approach has led into a cul-de-sac. To change a theory
means to change its premises, or to "throw
over" the axioms (Keynes). The present paper swaps
the standard behavioral axioms for structural
axioms and applies the latter to the analysis of the
emergence of secondary markets from the flow
part of the economy. Real and nominal residuals at first
give rise to the accumulation of the stock of
money and the stock of commodities. These stocks
constitute the demand-and-supply side of
secondary markets. The pricing
in these markets is different from the
pricing in the primary markets. Realized
appreciation in the secondary markets is
different from income or profit. To treat primary and
secondary markets alike is therefore a category mistake. Vice
versa, to take a set of objective
propositions as the analytical starting point yields
a comprehensive and consistent theory of market
exchange and valuation.
IDEAS,
Dec. 2012
Egmont Kakarot-Handtke:
Confused confusers. How to stop thinking like an economist and
start thinking like a scientist.
The present paper takes it as an indisputable fact that
subjective-behavioral thinking leads,
for deeper methodological reasons, with inner necessity to
inconclusive filibustering about the agents economic conduct and
therefore has to be replaced by something
fundamentally different. The key argument runs as follows:
(a) the subjective-behavioral approach can
not, as a matter of principle, afford a
correct profit theory, (b) without a
correct profit theory it is impossible
to comprehend how the monetary economy works, (c) without this knowledge
economic policy proposals are
unjustifiable, (d) thinking like an
economist may be hazardous to the
economy.
MPRA
Paper 44046,
28.1.2013
Egmont Kakarot-Handtke:
Settling the theory of saving.
There is no way around it: each theory rests on a tiny set of
foundational propositions. Standard economics rests on behavioral
axioms. After a long intellectual detour it should be clear by now
that behavioral axioms are the
wrong formal departure point. Being beyond
repair, they have to be replaced by objective structural axioms.
This paper deals with saving and its
relation to investment and profit. It starts from the
fact that there is no such thing as a real economy. Hence
economic phenomena are only explicable as
the outcome of the interaction of real and nominal
variables.
MPRA
Paper 44479,
19.2.2013
Egmont Kakarot-Handtke:
Walrass law of markets as special case of the general Triangle
Theorem: a laconic proof. Also as
Walrass law of markets as special case of the general period
core system.
From the set of the first three structural axioms follows
the – economic – triangle theorem (period core system).
It asserts that the product of the 3 key
ratios, which characterize the firm, the market outcome,
and the income distribution, is always equal
to unity.
The theorem contains only unit-free variables, is testable in
principle, and involves no behavioral assumptions. The
differentiated triangle theorem applies to an arbitrary number of
firms. Therefrom Walrass Law can
be derived without
recourse to demand and supply functions or the notion of
equilibrium.
MPRA
Paper 44547,
22.2.2013 (revised 3.10.2013)
Egmont Kakarot-Handtke:
The Calculating Auctioneer, Enlightened Wage Setters, and the Fingers
of the Invisible Hand.
The formal foundations of theoretical economics must be nonbehvioral and epitomize the
interdependence of real and nominal
variables that constitutes the monetary
economy. This is a cogent conclusion from the persistent
collapse of behavioral and real models. Conceptual rigor demands,
first, to take objective-structural axioms
as a formal point of departure and, secondly, to clarify the
interrelations of the fundamental
concepts income and profit. The present paper
reconstructs the characteristic properties of
a Walrasian economy in
structural axiomatic terms, generalizes them
and explores the consequences for our understanding
of the working of the economy we happen to live in.
MPRA
Paper 44977,
12.3.2013 (revised 5.10.2013)
J. W. Mason:
The Puzzle of Profits.
It is a puzzle with Marx Vol. II how capitalists end up with
more value than they start with, trading commodities only for other
commodities of equal value. The capitalist enters the market and
buys some commodities for a certain sum of money. Later, he sells
some commodities, and has a larger sum of money. How can this
increase exist? How can someone enter the market with money and,
after some series of exchanges, exit with more money?
The normal case today is the large-scale collective process of
discovery, which is then privately appropriated. So when Marx says
the source of profits is the fact that labor can produce more than
the value of labor power, lying behind this is the fact that, due
to humanitys collective creative efforts, we are continuing to
find new ways to shape the world to our use. There is another way
of looking at this: in terms of the extension of cooperation and
the division of labor, that Ill take this up in a following post.
This answer leaves the big questions hanging: Why is there a
surplus? How do capitalists claim it? What does it mean to say the
surplus is the product of labor? Why are workers able to produce
more than they require, nor why they don't keep that excess
production.
Comment by Egmont Kakarot-Handtke: „Total income is
the sum of wage income and distributed
profit and not of wage
income and profit. ... With regard to the
foundational concepts income and profit Heterodoxy
still subscribes to the conventional error.”
Monetary profit in the pure consumption economy reads:
Qm=C-Y+Yd. All these variables are
measurable. Read my paper
Profit for Marxists.
Blog
J. W. Mason,
22.10.2013
Hafiz Abdur Rahman, Mazana Armstrong, José Martí:
I2Sim: A matrix-partition based framework for critical
infrastructure interdependencies simulation.
In this paper, we present a new approach for interdependency
simulation that we implemented in our infrastructure interdependency
simulator (I2Sim). This is based on matrix partition-based technique
named multi-area Thevenin equivalent (MATE). The MATE model has been
used for large-scale real-time power system simulation and is an
efficient alternative to the existing agent-based critical
infrastructure simulation frameworks. Another distinguishing feature
of I2Sim is that it is based on a cell-channel model where
interdependencies among different infrastructures can be represented
through a formal technique that is based on the extension of the
Loentief input-output model. We present the implementation
architecture of I2Sim.
ResearchGate ,
2008;
Hafiz Abdur Rahman, Mazana Armstrong, DeTao Mao, José R. Martí:
Full Article Text.
2008 IEEE Electrical Power & Energy Conf.,
2008;
WikipediA:
Thévenin-Theorem besagt für lineare
elektrische Netzwerke, dass jede mögliche Kombination von
Spannungsquellen, Stromquellen und Widerständen
bezüglich zweier Klemmen elektrisch äquivalent zu
einer Reihenschaltung aus einer Spannungsquelle und einem
Widerstand (Thvenin-quivalent oder Ersatzspannungsquelle)
ist.
de.wikipedia.org,
27.2.2015
Egmont Kakarot-Handtke:
Why Post Keynesianism is Not Yet a Science.
In a programmatic article Alfred Eichner explained, from
a Post Keynesian perspective, why neoclassical economics is not
yet a science. This was some time ago and one would expect that
Post Keynesianism, with a heightened
awareness of scientific standards, has
done much better than alternative approaches in the meantime.
There is wide agreement that this is not the
case. Explanations, though, differ widely. The present
— strictly formal — inquiry
identifies an elementary logical flaw. This strengthens
the argument that the Post Keynesian motto ‘it is better to
be roughly right than precisely wrong!’ is methodologically
indefensible. (2011).
ECONOMIC ANALYSIS AND POLICY, Vol. 43(1), March 2013
Alan Taylor Harvey:
Productivity, unemployment and the Rule of Eight.
Productivity is a central issue in the economy, but
its causes are very poorly understood. The term "multi-factor
productivity", for example, is attached to the greatest part
of productivity gains year after year, but its definition
remains amorphous. In this paper, we display the
clear correlation between the unemployment
rate and changes in productivity in the medium and
longer term. We distill this relationship to the
"Rule of Eight" — Eight minus
the unemployment rate equals the change in
productivity. We then contend that the
causation runs from
unemployment to productivity and discuss why this must
be so, particularly focusing on 2 considerations: (1) In the
real world, as a factor becomes more scarce, its use is
husbanded, so when labor is scarce, its use
is optimized, and (2) the rising
marginal cost curve (which is the idea underlying the
orthodox belief in declining
productivity as labor is increased) does
not correctly describe the
real world of most firms.
Finally we look at how the inverse relationship between the
unemployment rate and productivity changes
affects how we think about inflation,
and in particular, the use of orthodox analytical
tools of NAIRU and the Phillips Curve.
That is, because productivity growth is higher during periods of
low unemployment, and goods and services are being produced with
fewer hours of labor, the price of goods
(all other things equal) should tend to
fall. This should reduce inflationary
pressure, rather than exacerbate it as the 2 conceptual
tools predict.
real-world
economics review, Issue no. 63,
25.3.2013
Joseph L. McCauley:
Response to “Worrying Trends in Econophysics”.
This article is a response to the recent “Worrying
Trends in Econophysics” critique written by four respected
theoretical economists [1]. Two of the four have written books
and papers that provide very useful critical analyses of the
shortcomings of the standard textbook economic model,
neo-classical economic theory [2,3] and have even endorsed my
book [4]. Largely, their new paper reflects criticism that I
have long made [4,5,6,7,] and that our group as a whole has more
recently made [8]. But I differ with the authors on some of their
criticism, and partly with their proposed remedy.
MPRA Paper 2129,
PHYSICA A, Vol. 371, No. 2,
15.11.2006
Egmont Kakarot-Handtke:
Toolism! A Critique of Econophysics.
Economists are fond of the physicists powerful tools. As a
popular mindset Toolism is as old as economics but the transplants
failed to produce the same successes as in their aboriginal
environment. Economists therefore looked more and more to the math
department for inspiration. Now the tide turns again. The ongoing
crisis discredits standard economics and offers the chance for a
comeback. Modern econophysics commands the most powerful tools and
argues that there are many occasions for their application. The
present paper argues that it is not a change of tools that is
most urgently needed but
a paradigm change.
MPRA
Paper 46630,
30.4.2013
Egmont Kakarot-Handtke:
How to Get Rid of
Supply–Demand–Equilibrium.
This paper provides a substantial reconceptualization of
the serial clearing of the product market
on the basis of structural axioms. The change of premises is
required simply because from the accustomed premises only the
accustomed conclusions can be derived and these are known to be
inapplicable in the real world. This holds in particular for the
still popular idea that the working of
a market can be described
in terms of the triad
supply-function–demand-function–equilibrium.
Structural axiomatization provides the complete and consistent
picture of interrelated product market events.
SSRN
Social Science
Research Network, abstract_id=2263172,
10.5.2013
Egmont Kakarot-Handtke:
Understanding Profit and the Markets: The Canonical Model
.
Neither Walrasians nor Keynesians have a clear idea of
the fundamental economic concepts income and profit, nor
of the interdependence of qualitatively different markets. Critique
of these approaches is necessary but not overly productive. A real
breakthrough requires a new set of premises because no way leads
from the accustomed behavioral assumptions to the understanding of
how the economy works. More precisely, the hitherto accepted
behavioral axioms have to be replaced by
structural axioms. Starting from new formal foundations,
this paper gives a comprehensive and consistent
account of the objective interrelations of the monetary economys
elementary building blocks.
MPRA
Paper 48691,
27.7.2013 (revised 11.6.2014)
Esteban Pérez Caldentey, Matías Vernengo:
Wage and Profit-led Growth: The Limits to
Neo-Kaleckian Models and a Kaldorian Proposal.
Levy Economics Institute of Bard College
Summary,
Vol. 23, No. 1, pp. 24 f., Working Paper No. 775,
September 2013
Egmont Kakarot-Handtke:
The Structural Price Mechanism
(revised 25.2.14).
Standard economics rests on behavioral assumptions that are
formally expressed as axioms. With the help of additional assumptions
like perfect competition and equilibrium a price vector is established
that displays a host of desired properties. This approach is tightly
stuck in a cul-de-sac. Conceptual rigor demands to
discard the subjective-behavioral axioms and
to take objective-structural axioms as the
point of departure. The present paper reconstructs
the price system in structural axiomatic terms
for the most elementary economic configuration. The generalization of
the structural price mechanism supplants the collapsed Walrasian and
Keynesian attempts to formulate a consistent price
and value theory.
MPRA
Paper 50585,
11.10.2013
Egmont Kakarot-Handtke:
Redemption
and Depression.
According to prevailing methodological criteria, standard
economics is definitively refuted. Joan Robinsons
wake-up call “Scrap the lot and start
again” has therefore lost nothing of its original
freshness and urgency. Yet, how can the restart succeed? This inquiry
builds on structural axioms. First,
conceptual consistency is assured and the confusion about profit and
income is dissolved. The question of interest is then
how a recession or depression develops
as the result of the normal functioning of the
monetary economy. This involves the
identification of positive feedback. A very
effective mechanism consists of the circular
interaction of profit and distributed profit.
MPRA
Paper 50924,
24.10.2013 (revised 8.6.2014)
Egmont Kakarot-Handtke:
The Ideal Economy: A Prototype.
Standard economics starts with behavioral assumptions that
are formally expressed as axioms. This approach met with little
scientific success but still enjoys some popularity for lack of a
convincing alternative. To replace the
subjective formal foundations by objective structural axioms
is the first task of this paper. To give a correct
account of how the monetary economy works is the second. This
entails an explanation of the continuous clearing
of both the product and the labor market
in the random consumption economy, that is, of how the economy could
establish ongoing full
employment and price stability in principle.
MPRA
Paper 51582,
19.11.2013 (revised 8.6.2014)
Egmont Kakarot-Handtke:
Debunking Squared.
Steve Keen has debunked a good
part of standard economics. However, he has
left standing the theory of profit. This is
unfortunate, because the theory of profit is the pivot of all of
theoretical economics. This tightly focused paper clarifies the
factual relation of profit and income,
which should be helpful to put Keens alternative to the standard
approach on sound foundations.
MPRA
Paper 51659,
22.11.2013;
Egmont Kakarot-Handtke:
Debunking squared.
The prominent definition of income as:
“Total income =
Wages plus Profits” (Keen, Keynes, etc.)
is demonstrably false.
AXECwiki,
2013
S Jay Levy:
Profits: The Views of Jerome Levy and
Michal Kalecki.
Jerome Levy began the derivation of the profits identity
and his serious interest in economics in 1908. Kalecki derived
that identity about 30 years later. Levy “[…]
employed people because he expected to make a profit …
spending $1,000 for rent, merchandise, and wages with the
expectation of getting $1,100 back. He
put $1,000 into circulation but wasn't sure
where the other $100 came from. He set out to find the
answer. Levy viewed the profits identity as
applying to any economy
(socialist or capitalist).
Jerome Levy Economics Institute,
Working Paper No. 309,
August 2000
‘philosophicalecon’:
The Corporate Profit Equation Derived, Explained, Tested:
1929-2013.
Im going to derive and explain the Kalecki-Levy Corporate
Profit equation, and then demonstrate its truth empirically using
data collected by the BEA. Hoarding is a zero sum game: my saving
will necessarily come at the cost of your dissaving. Investment
is a positive sum game: in exchange for building me a new home,
you will get the money back. The overall economy (considered in
aggregate) can only save by investing (I=S).
Dividing the economy into 4 aggregate entities: Saving = Household
Saving + Corporate Saving + Government Saving + Rest of World
Saving. Corporate Saving = Corporate Profit Dividends.
Kalecki-Levy profit equation: Corporate
Profit = Investment + Dividends Household
Saving Government Saving Rest of World Saving.
The Kalecki-Levy profit equation describes a
required result. The entire process
is a wash for profit — what the corporate sector gains in
lower taxes, it will lose in lower revenue. Borrowing doesnt imply
dissaving. Investing means the creation of new wealth that didnt
previously exist. Government is different in that it (normally) can
create money directly (infinite capacity to borrow and dissave).
Confirming the profit equation empirically
(although it's true by definition) can provide us with a second
check.
PHILOSOPHICAL ECONOMICS,
24.11.2013
Egmont Kakarot-Handtke:
Says Law: A Rigorous Restatement.
Says Law has passed through
various conceptual frameworks. As the next logical step, this paper
provides a rigorous restatement in structural
axiomatic terms. The main reason is that previous attempts
have been methodologically unsatisfactory. Standard economics rests
on behavioral assumptions that are expressed as axioms. Axioms are
indispensable to build up a theory that epitomizes formal and material
consistency. The crucial flaw of the standard approach is that
human behavior does not lend itself to axiomatization. Small wonder
that the accustomed attempt to explain how the economy works met
with scant success. This battered also the discussion about Says
Law.
MPRA
Paper 52550,
28.12.2013
Egmont Kakarot-Handtke:
Mathematical Proof of the Breakdown of Capitalism.
The existence proof of general equilibrium, which is based
on subjective-behavioral axioms, is replaced by the
existence proof of a final turning
point, which is based on objective-structural axioms.
The final turning point is characterized by an
irreversible switch from profits to losses for the
business sector as a whole and marks the
beginning of the breakdown of the monetary
economy. This has nothing to do with any market failures
or irrationalities. The final turning point can be
preceded by an arbitrary number of
temporary profit/loss reversals and is in
full accordance with the households optimal intertemporal consumption
plans.
MPRA
Paper 52910,
13.1.2014;
“Economic Logician”:
Capitalism's rapture.
Economics is based on a small set of very powerful axioms that
are the foundation of utility theory, general equilibrium theory, and
more. Experiments have contradicted every one of these axioms one way
or the other. We still keep them because they seem to apply most of
the time, and the occasional violation does not invalidate the general
picture. But it is good to keep an eye on their validity and think about
alternative scenarios, especially if they bring us better theories.
Egmont Kakarot-Handtke starts afresh with 4 accounting identities and
definitions. From this he builds an elaborate theory that demonstrates
that capitalism is on the verge of collapsing.
Blog
Economic Logic.
30.1.2014
Egmont Kakarot-Handtke:
Pareto-Efficiency, Hayek's Marvel, and the Invisible Executor.
This non-technical contribution to the RWER-Blog deals with
the interrelations of market clearing, efficient
information processing through the price system, and
distribution. The point of entry is a transparent example of
Pareto-efficiency taken from the popular book ‘How Markets
Fail’.
MPRA
Paper 53056,
20.1.2014
Egmont Kakarot-Handtke:
Exchange in the Monetary Economy.
It is clear by now that pure exchange models are
useless. For 2 reasons. First, because exchange is the
other side of specialization in production, and, second,
because a direct exchange of goods does not take place in
the monetary economy. The decisive
drawback of
conventional exchange models,
though, is that they
cannot explain profit.
Standard economics rests on behavioral assumptions that are
expressed as axioms. The ultimate reason for the failure of
conventional exchange theory is that human behavior and
axiomatization are disjunct. Notable progress can be made
by replacing the subjective-behavioral axioms by
objective-structural axioms.
MPRA
Paper 53437,
29.1.2014
Egmont Kakarot-Handtke:
The Logic of Value and the Value of Logic
(revised version).
Jevons composed his
value theory of nonenties. These
creatures are elusive. Subsequent formal refinements did not
eliminate the fundamental flaw but made it only harder to detect.
A vacuous formal structure is one that cannot be interpreted in
some domain. For want of any correspondence in the monetary
economy Jevonss approach could not produce viable results.
Roughly speaking, Jevons made value dependent
on subjective factors. This paper gives a rigorous formal
proof that value is determined by objective
conditions. Within the structural-axiomatic framework
there is no formal spare room for the
major behavioral nonentities utility,
optimization, rational expectations, and equilibrium.
MPRA
Paper 53877,
21.2.2014 (revised 25.2.2014)
Lars P. Syll:
Top 20 Heterodox Economics Books.
Kakarot-Handtke: cites Georgescu-Roegen about
axiomatization. The merits of axiomatization are above all
words of praise. He also cites Tony Lawson about failure of
economists to match their deductive-axiomatic methods with
their subject. Blog
LARS P. SYLL,
28.2.2014
Piet-Hein van Eeghen:
Why DSGE analysis cannot accurately model financial-real
sector interaction.
How financial-real sector interaction is theoretically
modelled depends on something surprisingly simple: the shape of
the theorys coordination conditions as consisting of its market
clearing conditions and budget equations. The paper demonstrates
how resource-constrained, dynamic optimisation
requires a set of such conditions which
make it impossible for DSGE analysis
accurately to capture financial-real sector interaction. The paper
derives an alternative set of coordination conditions which it
rigorously grounds in the nature of monetary exchange under a fiat
money regime, thereby developing the outlines
of an alternative framework for macro-monetary theory.
real-world
economics
review 67,
Issue no. 67, pp. 17–40,
9.5.2014
Egmont Kakarot-Handtke:
Loanable Funds vs. Endogenous Money: Krugman is Wrong,
Keen is Right.
In a recent article, Keen resumes the debate with
Krugman about the effects of debt upon the economy. It is
hard to see how the question can be settled as long as all
participants apply their idiosyncratic models. Hence the
issue boils down, as Krugman rightly put it, to the
deeper question: “how should one
do economics.” Sketched with a broad brush,
the consensus is that Orthodoxy has failed and that
Heterodoxy has no convincing alternative to offer.
The conceptual consequence of the present paper is to
restart from a firm common
formal ground. This relocation
makes the debate solvable.
MPRA
Paper 53385,
3.2.2014;
Journal Article.
real-world
economics
review 67,
Issue no. 67, pp. 2–16,
9.5.2014
Egmont Kakarot-Handtke:
Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics
as We Know It.
Krugman has recently revitalized IS-LM with a number
of succinct analytical pieces on his blog. The reverberations
were remarkable. Economists, however, are known often not to
grasp the full content of their own and, a fortiori, of
others models. This happened to Keynes in the days of high
theory and to Krugman in these days. Keynes applied a defect
formalism, which is here replaced by objective-structural
axioms. This yields the correct relationship between retained
profit, saving, and investment which in turn makes it clear
after the event that the IS-part of the IS-LM construct never
could bear any substantive theoretical load.
MPRA
Paper 53608,
11.2.2014
Egmont Kakarot-Handtke:
The Truly General Theory of Employment: How Keynes Could
Have Succeeded.
There is not much use to attack standard economics
because deep in his heart the representative economist
long knows that he is tied to a degenerating research
program. The problem is, rather, that it seems to be
exceedingly difficult to build up a convincing alternative.
Keynes, for one, tried and was
successful — albeit not fully. Unfortunately, he
got some basics wrong. The
conceptual consequence of the present paper is to discard
the accustomed subjective-behavioral axioms and to take
objective-structural axioms as the
formal point of departure for the analysis of employment
as the main practical issue of
economics.
MPRA
Paper 54367,
12.3.2014
Ausschuss für Evolutorische Ökonomik, Mitglieder.
K: Dipl.-Vw. Egmont Kakarot-Handtke, München.
21.3.2014
Economic Logic.
More than 100 references to papers authored by
“Economic Logician”.
Econ
Academics.org, Blog aggregator for economics research,
March 2014
Charlotte Bruun, Carsten Heyn-Johnsen:
The Paradox of Monetary Profits:
An Obstacle to Understanding Financial and Economic Crisis?
The paradox of monetary profits has been a recurrent theme
in macroeconomics since the problem was first formulated by Marx.
Capitalists as a whole can at most get
from workers, what they already
paid out in wages. Marx did not solve this
problem, and neither did Keynes, who had to face the problem in
‘The General Theory’. A consequential logical conclusion
to Keynes treatment of the problem, leaves his concept of aggregate
income indeterminate — based on imaginary magnitudes. Both Marx
and Keynes tried to solve the problem by addressing
current transaction flows, which is also the approach taken by
more recent contributors. Another solution
to the problem is to regard monetary profits as a
flow arising from changes in stock magnitudes — more
specifically the monetary valuation of real capital performed at
financial markets. Besides solving the paradox of monetary profits,
this solution also provides us with a very
strong connection between the real and the
financial spheres. The monetary
profit inducing capitalist production,
emanates from the sphere of finance.
In a world of fundamental uncertainty this gives us an
explanation of, not only what may drive
financial booms and busts, but also how these
movements on financial markets are related
to the real sphere of production.
SSRN
Social Science
Research Network, id1726756,
Economics,
Discussion Paper Nr. 2009-52,
3.12.2009
Steve Keen:
Solving the Paradox of Monetary Profits.
Bruun and Heyn-Johnsen (2009) state the paradox that
economics has failed to provide a
satisfactory explanation of how monetary profits are
generated, even though the generation of a physical
surplus is an established aspect of non-neoclassical economics.
They emphasise that our ability to
explain phenomena like the Global
Financial Crisis (GFC) will be limited while ever we are
still unable to explain this fundamental aspect of capitalism.
In fact this paradox can be solved
very simply, using insights from what
is known as ”Circuit Theory.
In this paper the author shows how monetary profits are generated,
and introduces a multisectoral dynamic disequilibrium monetary
model of production.
Economics,
Discussion Paper Nr. 2010-2,
4.1.2010
Fadhel Kaboub:
Conversation with Alain Parguez.
About Keynes, Neoclassical Synthesis, Lucas, conflicting
interpretations of the General Theory, rational expectations,
microeconomics vs. macroeconomics, inconsistency of neoclassical
economics. Marx (I) contradicts the essentiality
of money. Fundamental propositions and policy implications of
the monetary circuit theory, similarities
and differences with the Post Keynesians, Sraffas
model cannot be mixed with Keynes', theories must be
internally and externally consistent, importance of the history of
economics, growth requires sufficient aggregate demand,
the long-run increase in household indebtedness
sustained the system, a growing ratio of household debt
relative to household income, barriers to economic development in
underdeveloped countries, unions are not strong in many European
countries, inequalities are higher in the European Union than in the U.S.,
the 35 hours/week law has caused a fall in the disposable income of many,
since the ECB is in charge of the Euro monetary policy, there is no
harmonization of fiscal policy, the monetary union has been a pure
elitist and technocratic ideology, as existence condition of science
there must be some truth and the principle of contradiction applies,
we cannot reject the very notion of logic. Frederic
Lee argues that microeconomics can be defined in other than
neoclassical ways. “It is possible to develop a Post Keynesian
price-output model of the economy that is quite different from the
neoclassical general equilibrium model.” But Post Keynesian
macroeconomics cannot be reduced to Post Keynesian microeconomics.
Oeconomicus, Volume IV,
Fall 2000
Alain Parguez:
The Solution of the Paradox of Profits.
The 3 fundamental characteristics of
profits: (I) Profits must exist for
firms as a whole and they must be accounted at
the macro-economic level; (II) profits are
generated in their money form
as a share of receipts in money; (III)
profits are instantaneously transformed into real
wealth as firms spend that share of
receipts to acquire in full property a share of the available output. The
necessary existence of profits does not contradict the full
destruction of money in the reflux stage as long as profits can be
exacted in money form.
As soon as the labor postulate holds,
characteristic II is violated since firms cannot
catch receipts greater than their wage bill.
Characteristic III is violated because there are
no monetary profits to be transformed into
capital (the realized value of output equals workers' consumption).
Characteristic I is ultimately violated: since
firms cannot accumulate capital, the existence
condition of the capitalist mode of production is
denied. To get rid of the paradox, either the labor postulate is
denied, or there is some possibility of reconciling the postulate with the
existence of profits. 3 possible solutions of the
paradox.
In: Richard Arena, Neri Salvadori (eds.): Money Credit and the
Role of the State. Essays in honour of Augusto Graziani.
ASHGATE,
chapter 15, pp. 255268 (pdf 277290),
13.7.2004
Marcel de la Fonteijne:
The Monetary Profit Paradox and a Sustainable Economy —
A Fundamental Approach.
Main goal of this paper is to clarify the
paradox of monetary profit. The definitions and formulas
introduced will make it simple and straight forward to understand
the paradox. In order to understand from where the profits or monetary
profits of capitalists and firms emerge I examined the phrase of Marx,
“Die Gesamtklasse der Kapitalisten kann nichts aus der
Zirkulation herausziehen, was nicht vorher hineingeworfen war.”
and classified it as very confusing. I will
show where this confusion comes from and show how to cope with
problems alike in a systematic way by using definitions and formulas.
As a bonus these formulas give us insight under
which conditions the economy can be sustainable and that the
relation between monetary profit for firms and savings for household
defines a very limited solution space in
which the economy can operate in a sustainable way and yet
only considering the boundary condition for firm profit and household
savings. It will also give us a clue where the
motivation for participating in the economy
comes from.
MPRA
Paper 55235,
8.10.2013
Marcel R. de la Fonteijne:
An Inconsistency in Using Stock Flow Consistency in Modelling the
Monetary Profit Paradox (abstract).
In order to understand the sources of profits or monetary
profits of capitalists and firms, the author examines the phrase
of Marx: 'Die Gesamtklasse der Kapitalisten kann nichts aus der
Zirkulation herausziehen, was nicht vorher hineingeworfen war.'
(The class of capitalists cannot extract from the circulation what
has not previously been thrown in.) Steve Keen studied the monetary
paradox and contrary to circuitists he came to the conclusion that
capitalists can make a monetary profit with the possibility to earn
enough to repay their debt, with positive balances for all actors.
The author demonstrates that Keen made a
fundamental mistake and is using the Stock Flow Consistency
Principle in an inconsistent way by combining it
with behavioral equations in a dynamic
model. The solution presented here shows not only
problems with the numbers but
also with the method. This solution
resolves a dispute between Keen and circuitists and implies that,
in a Wicksellian pure credit economy, it
remains impossible for all actors to gain a monetary
profit.
Economics No. 2014-15,
26.3.2014;
Full Journal Article Text;
Abstract &
Corresponding Discussion Paper.
E. Kakarot-Handtke: Keens profit puzzle has been solved
already (2011). dlF: Without resolving the paradox, I showed that
Keen with his mistake cannot explain the monetary profit paradox. I wrote
myself a still unpublished paper on the paradox. K-H: if the
profit theory is wrong, the rest of an economic approach is worthless.
Keen, Bezemer, Bruun & Heyn-Johnsen, you and some others ask the
right question. Your paper must boil down to the profit formula
Qm=C-Y+D·N.
Economics No. 2014-15
Peter Cooper:
Fiscal Policy and the Rate of Profit.
Correctly interpreting Marx' ‘law of the tendential fall in
the rate of profit’. The impact of fiscal policy on profitability
can be considered in terms of Kaleckis profit
equation: aggregate profit is the sum of capitalist expenditures
(CP + I), government net expenditure (BD) and net exports (NX)
minus worker saving (SW). Under unemployment and excess capacity,
the budget deficit will add to the numerator of the profit expression
without adding to the costs of fixed capital investment K. Therefore the
budget deficit boosts the average rate of profit and improves investment
prospects for the private sector. A fiscal policy,
used to maintain profitability consistent with
sustainable capitalist growth is a viable social alternative,
provided the government is the monopoly issuer of its
own flexible exchange-rate fiat currency.
Heteconomist,
17.10.2010
Peter Cooper:
Misinterpreting the Sectoral Balances.
“As with any identity, the sectoral balances
equation shows a relationship that
must hold by definition, but says nothing in
itself about causation.”.
Heteconomist,
13.2.2011
Peter Cooper:
Identities Do Not Imply Equilibrium.
Accounting identities are true by definition. Identities say
nothing about causation. In order to build a theory on the basis of
accounting identities, it is necessary to make behavioral(?) assumptions
that are testable. S=I is an
identity (always true).
Sd=Id is an
equilibrium requirement for a desired saving
and a desired investment: if desires go unrealized there will be
disequilibrium and an impetus for changed behavior.
Heteconomist,
6.3.2011
Steve Roth:
How Accounting “Constrains ” Economicsn.
Accounting, and accounting identities, impose a constraint on
our economic reasoning and predictions. Accounting cant tell us
whether a piece of economic reasoning is right. It can only tell us if
its wrong. There are many of economic ideas out there that conform to
accounting identities and balances, but are nevertheless wrong.
Accounting tells us nothing about how people will behave. The
only way to increase private savings (the stock of net financial assets)
without changing imports is to increase exports or run government deficits.
Accounting is a constraint on economics,
not economies.
Asymptosis Blog,
1.2.2012
V. Ramanan:
Kaleckis Profit Equation.
Constructing a full Transactions Flow
Matrix from a simplified National Income Matrix with
modifications: firms retain earnings, and
there are interest payments. Kaleckis
profit equation: firms
retained earnings is related to the
government deficit!
Rewritten after Godley/Lavoie (2012):
retained
earnings of firms are equal to the investment
of firms plus the government deficit minus household saving.
In contrast to neo-liberal thinking: the larger
the government deficit, the larger the retained earnings of firms; and
the larger the saving of households, the smaller the retained earnings
of firms. Retained earnings add to firms' net worth like household saving
adds to households' net worth. In the Feds Flow of Funds Statistic,
undistributed profits is called
‘Total Internal Funds’. Blog
The Case For Concerted Action,
12.3.2012
V. Ramanan:
The Monetary Economics Of Sovereign Government Rating.
If a government (outside monetary unions) can make a draft at the
central bank, why do rating agencies rate governments creditworthiness?
Description of the dynamics of defaults and
restructurings by going through some monetary economics of open
economies. Carmen Reinhart and Kenneth Rogoff (2009) argued that indeed
governments do default in debt denominated in
the domestic and foreign currencies. At the other extreme, the
Chartalists argue that governments with ‘sovereign
currencies’ cannot “run out of money” and hence
fiscal policy has no monetary constraints. S&P published an article
showing the importance it gives to the external sector. This post will
look at a mechanism on how a government will finally
end up defaulting. Blog
The Case For Concerted Action,
5.5.2012
Mike Norman:
Ramanan — Income ≠ Expenditure? [Steve Keen].
Ramanan criticizes Steve Keen's view that aggregate income is not
identical to aggregate expenditure in a closed economy.
Mike Norman Economics ,
6.10.2012
Peter Cooper:
Some Intuition on the Profit Equation, Courtesy of Kalecki.
In a closed economy with only capitalists and workers, in which
workers do not save, Kalecki's profit equation shows that
profit is the sum of
capitalist consumption and private investment. In Kaleckis simplest
model, there are 2 components of aggregate demand — investment (I) and
consumption (C = CW + CP) — and 2 income (Y)
categories: wages (W) and profit (P). Then Y =
CW + CP + I and Y = W +
P. Substituting W for CW: P = CP + I.
The more the capitalists spend as a class, the more profit they will make.
Kalecki (1939) divides the simplified economy into 3 departments: producing
investment goods (Dpt.1), capitalist consumption goods (Dpt.2), and worker
consumption goods (Dpt.3). We can add up the output values of departments 1
and 2 to arrive at the profit value. Kalecki: “Fluctuations in
production and profits depend on the fluctuations in capitalists
consumption and investment”. Kalecki implicitly describes a multiplier
process in which finally the increase in profits will be equal to the
increase in expenditure on investment and capitalist consumption. In a more
elaborate model
profit will be the sum of: capitalist expenditures,
the budget deficit and net exports, minus worker saving.
Causation will run from the autonomous expenditures to profit.
Heteconomist,
15.3.2013
Steve Roth:
No: Less Consumption Does Not Cause More
Investment.
Despite decades of debunking, this widespread
misconception remains ubiquitous. My simple explanation starts
with: GDP = Consumption Spending + Investment
Spending; Consumption Spending = Spending on
goods that will be consumed within the period;
Investment Spending = Spending on goods that
will endure beyond the period. Yes, in (accounting) retrospective: if
theres less consumption spending, theres more investment spending
(because thats how we tally things up, after they happened). But
if there is less consumption spending, there will not be more
investment spending. Don't confuse a
backward-looking, historical, accounting statement with
a forward-looking, causal, predictive
statement. Likewise wrong is
thinking that less consumption spending means
there will be a higher proportion of investment
spending. Ramanan: I think that this
wrong belief is based on the silly production
function approach where output is determined by a production
function and so more consumption implies less investment.
Ramanan: Stock-flow consistency is
not just accounting relationships, but also how the flows and stocks
move forward in time.
Asymptosis Blog,
3.5.2013
WikipediA:
Operating surplus
is a national accounting concept: it is the measure of
entrepreneurial income — the surplus
accruing from production before deducting land rent and interest
income. Operating surplus does not necessarily refer to
all gross profit income realized in an economy: they are
also realized from
all kinds of property transactions
which do not involve new production.
en.wikipedia.org,
30.6.2014
V. Ramanan:
Paradox Of Profits?
Post-Keynesians unnecessarily worry a lot about the paradox of
profits. This post is on my thoughts on the paradox. In my view,
there is no paradox at all. It is simply the case
of not looking at all the parts of the system of
national accounts/flow of funds.
The Case For Concerted Action,
22.3.2014 (last updated 13.11.2015);
Paradox Of Profits?, Part 2.
The previous post viewed the paradox of profits as the
confusion between production firms
operating surplus and surplus on the
financial account of the system of national accounts.
At the beginning of the monetary ‘circuit’, firms inject an amount
of money M and can only recover a maximum of M. Here let us think of an
economy with no money or banks initially and
suddenly one producer makes cakes, and
the banking system opens simultaneously.
Firms inventories are backing the loan amount. Firms now can distribute
dividends. They can pay interest to banks. Dividends will buy more cakes and
make more profits for firms. Fixed capital formation can also be added.
The Case For Concerted Action,
25.3.2014
Egmont Kakarot-Handtke:
Profit for Marxists.
Marxian economics and standard
economics are widely different yet they share a
central weakness: the respective profit
theories are demonstrably false — each one in
its own characteristic way. Roughly speaking,
Marx tried to explain profit by objective
factors while standard economics
cites subjective factors. For different reasons,
neither route led to satisfactory results. The conclusion is
straightforward: one has to do better. The conceptual
consequence is to first reconstruct
profit theory from a solid basis with no regard to
either Marxian or standard premises. In order to succeed,
objective-structural axioms
have to be taken as formal point of departure.
MPRA
Paper 54800,
27.3.2014
Marxism holds new appeal. From the forthcoming (June 2014)
The Social Thought of Karl Marx. SAGE Publications, Inc.
Egmont Kakarot-Handtke:
Objective Principles of Economics.
Economists have the habit of solving the wrong
problems. They speculate circumstantially about the
behavior of agents and do not come to grips with the
behavior of the monetary economy. This is the
consequence of the methodological imperative that all
explanations must run in terms of the actions and
reactions of individuals. The critical point is that
no way leads from the understanding
of the interaction of the individuals
to the understanding of the working
of the economy as a whole. The solution
consists in moving from subjective-behavioral axioms
to objective-structural axioms, i.e. from past to
future.
MPRA
Paper 55031,
3.4.2014
Egmont Kakarot-Handtke:
Towards Full Employment Through Applied Algebra and
Counter-Intuitive Behavior.
It is common knowledge that neither Walrasians nor
Keynesians nor Marxians nor Institutionialists nor Austrians
nor Sraffaians came to grips with profit. The reason is a
defective formal basis. In the present paper the
formal foundations are first
renewed. When the profit theory is
false the rest of an approach is questionable. What is reexamined
next because of its vital practical implications is the
theory of employment. One remarkable
result is that the popular recipe to
eliminate unemployment, viz. downward wage rate
flexibility, is self-defeating
because it does not take the
objective systemic properties of the monetary
economy into account.
MPRA
Paper 56749,
18.6.2014
Lars Syll:
Dumb and dumber in modern macroeconomics —
the ‘New Keynesian’ version.
Arguments by Simon Wren-Lewis
(“rational expectations in particular only
works to use your own thought processes as a guide
to how people in general might behave, if you think
other people are essentially like yourself.”),
Paul Krugman (“I am basically a
maximization-and-equilibrium kind of guy.”,
“ Personally, I consider myself a proud
neoclassicist.”), Lars Syll:
“New Classical and ‘New Keynesian’
macroeconomics […] have firm anchorage in
preference-based microeconomics”, Robert
Solow (“The almost quasi-religious
insistence that macroeconomics has to have
microfoundations […] has put a blind eye to
the weakness of the whole enterprise of trying to
depict a complex economy based on an all-embracing
representative actor equipped with superhuman
knowledge, forecasting abilities and forward-looking
rational expectations.”.
Real-World Economics Review Blog,
7.5.2014
Donald Katzner (chat with
Norbert Häring,
Jonathan Barzilai,
and Egmont Kakarot-Handtke):
A Neoclassical Curmudgeon Looks at Heterodox Criticisms of
Microeconomics.
The purpose of this paper is to open a dialogue with
heterodox economists about what, from a neoclassical perspective,
is valid in heterodox criticisms of neoclassical microeconomics.
Many heterodox criticisms of neoclassical microeconomics are valid
to a neoclassicist; but some are not. Examples of both are
given, mostly taken from E. Fullbrooks anthology, A Guide to
Whats Wrong with Economics. And neoclassical reasons
for a lack of validity where that arises are provided. Both
criticisms and the judgment of their validity can be subjective or
objective.
WORLD ECONOMICS ASSOCIATION,
20.11.2012
Theory of Demand.
Demand is what consumers are willing and able to buy at
a given price in a given time period. Effective
Demand is when a desire to buy a product is backed up by an
ability to pay for it.
Latent demand is when there is willingness
to buy but lack of the purchasing power. The (neoclassical)
Law of Demand: as prices fall, demand
expands — and vice versa. The individual demand reflects
the value one places on a product, linked to
utility.
tutor2u
SUBJECTS Economics,
2015
Jonathan Barzilai:
Inapplicable operations on ordinal, cardinal, and expected
utility.
By formally defining the relevant mathematical spaces
and models we show that the operations of addition and
multiplication, and the concepts that depend on these
operations, are not applicable on ordinal, cardinal, and
expected utility. Furthermore, expected utilitys scale
construction rule is self-contradictory.
real-world
economics
review 63, pp. 118 ff.
25.3.2013;
Donald Katzner:
Ordinal utility and the traditional theory of consumer
demand: response to Barzilai.
In an earlier issue of this Journal, Jonathan Barzilai,
in his paper “Inapplicable Operations on Ordinal,
Cardinal, and Expected Utility”, has raised important
issues regarding ordinal utility, and correctly clarified the
meaning of the general notion of ordinality in terms of the
mathematical theory of measurement. In that process, he has
also subjected the traditional theory of consumer demand to
serious attack. The essence of Barzilai's attack consists of
the claims that: 1. The function values of the utility function
in that theory are ordinal and cannot, according to the
mathematical theory of measurement, be subjected to arithmetic
operations. 2. Both Hicks in Value and Capital and
Samuelson in his Foundations of Economic Analysis base
their discussions of the theory of consumer demand on
differentiable, ordinal utility functions and the method of
Lagrange multipliers. The purpose of this paper is to
demonstrate that these claims are based on a
misunderstanding of the theory of consumer
demand and the work of Hicks and Samuelson,
and that the conclusion that that theory is
logically flawed and invalid is unjustified. The
misunderstanding arises in that, contrary to what is ordinarily
done, Barzilai wants to use the theory-of-measurement notion of
ordinal utility as the basis for the traditional theory of
consumer demand.
real-world
economics
review 67, pp.130 ff.,
9.5.2014
Jonathan Barzilai:
Demand theory is founded on errors.
The issue is applicability of mathematical operations. More
on Hickss and Samuelsons errors. Demand theory ignores the
fundamental issue of the conditions for applicability of the
operations of algebra and calculus. Demand theory must show that the
conditions for applying the Implicit Function Theorem are
satisfied.
real-world
economics
review 68, pp. 62 ff.
21.8.2014;
Egmont Kakarot-Handtke:
Barzilai and the crumbling the unsafe citadel.
The unifying bond of heterodox economists is the conviction
that there is something fundamentally wrong with
Orthodoxy. Is Heterodoxy better? There is something
fundamentally wrong with equilibrium
economics. The criteria of theoretical economics are
formal and material consistency. A theory can be rejected either
on empirical or on logical grounds alone. Barzilai has brought down
the entire theoretical superstructure of marginalism from exchange
to growth and distribution by exposing the
fundamental formal flaw of utility theory. The orthodox
citatel has never been safe and Barzilai has provided the ultimate
formal proof.
Real-World Economics Review Blog
Comments on RWER issue no. 68,
12.9.2014
Christopher P. Chambers, Federico Echenique, Eran Shmaya:
The Axiomatic Structure of Empirical Content.
We define the empirical content of an economic theory
as the least restrictive observationally
equivalent theory. We show that the empirical content
of a theory is captured by a certain kind of axiomatization,
with axioms that are universal negations of conjunctions of
atomic formulae.
The American Economic Review,
104(8),
August 2014
Egmont Kakarot-Handtke:
The Law of Supply and Demand:
Here It Is Finally.
There is no such thing as a law of human or social
behavior. The conceptual consequence of the present paper is
therefore to discard the subjective-behavioral axioms and to
take objective-structural axioms as new
formal foundations.
The central piece of economic theory is the interaction of
demand and supply which determines prices and quantities.
Demand and supply in turn are determined by subjective factors.
In the structural axiomatic paradigm the Law
of Supply and Demand follows from objective factors alone.
The Law consists of measurable variables and is testable in
principle. The results prove the superiority of the new
paradigm.
MPRA
Paper 58004,
18.8.2014
Egmont Kakarot-Handtke:
The Three Fatal Mistakes of Yesterday Economics: Profit, I=S,
Employment.
Axiomatization is the prime task of theoretical
economics. Without correct axioms, no correct theory.
Without correct theory, no understanding of how the
economy works. Without empirically corroborated
understanding, no useful economic policy advice. Yet,
much more important than any political reputation of
economics is indeed: without correct axioms, no
acceptance as science. There is no way around it,
neither for Orthodoxy nor for Heterodoxy. The conceptual
consequence of this paper is to discard the
subjective-behavioral axioms and to take
objective-structural axioms as the formal point of
departure. This enables the rectification of the most
fatal analytical mistakes of conventional economics.
EconoPhysicsForum,
9.9.2014.
Egmont Kakarot-Handtke:
The Synthesis of Economic Law, Evolution, and History.
It has long been criticized that history is almost
entirely absent from orthodox economics. This deficiency is
due to the fact that equilibrium and time
make an odd couple. Because equilibrium is one of the
crucial hard-core propositions of the research program it
cannot be abandoned.
This impedes the treatment of time in a methodologically
acceptable manner. The orthodox approach is based on
indefensible axioms which are in this paper replaced by
objective structural axioms. This
enables the synthesis of
timeless economic laws, randomness, and
goal-oriented human action, which are the essential
elements of a formally consistent historical account.
MPRA
Paper 55031,
24.9.2014
Chris Dillow:
Kalecki on weg-led growth.
What is to the advantage of a single entrepreneur
does not necessarily benefit all entrepreneurs. A
precondition for an equilibrium is that the part of
production which is not consumed by workers should be
acquired by capitalists for their increased profits; in
other words, the capitalists must spend immediately all
their additional profits on consumption or investment.
It is true that increased profitability stimulates
investment but higher profitability is not going to last.
Kakarot-Handtke: Michaŀ Kalecki —
The man who missed it by a hairs breadth.
A partial wage cut could increase employment in one firm.
It would be a fallacy of composition
to maintain that this holds for the economy as a whole.
Kalecki was the first to take overal
profit explicitly into the picture but got the
relationship between profit and distributed profit wrong.
Keynes wrestled to solve the Profit Puzzle up till the
semi-final versions of his GT but in the end gave up.
Keen did not get it right either. Blog
LARS P. SYLL,
3.10.2014
Lars P. Syll:
Thomas Piketty, Anwar Shaikh and Heather Boushey at The New School.
Kakarot-Handtke: The profit theory is false since Adam
Smith. What can you expect from distribution theory? Syll:
“Neoclassical marginal productivity theory is a collapsed theory
from a both historical and […] theoretical point of
view”. Kakarot-Handtke: Marx also got it wrong.
“All major economic schools lack a consistent profit theory and
therefore all distribution theories are hanging in
the air. Piketty is no exception.”. Blog
LARS P. SYLL,
6.10.2014
Lars P. Syll: Jonathan Schlefer:
Inequality and the culprit economists overlook —
their own wage theory.
Jonathan Schlefer: Though many economists today
are sounding the alarm over rising income inequality, one
culprit somehow has been overlooked: their own
wage theory which holds that
competitive labor markets are self-regulating,
and each worker is paid his/her productive worth. Thus
unions, minimum wages, or any other interference cause unemployment.
In reality, the habits and customs of the
people determine the wage structure, but the sum of the
slices of the pie cannot be bigger than the pie.
Kakarot-Handtke: there is no “share of profit in
income” but there is “a share of distributed profit
in income”.
The distribution of the period output
has nothing to do with any
marginal product of labor or capital.
Alternative approaches of Keynes or Kalecki or Kaldor or Keen
are not substantially better. The actual state of economics is
a scientific vacuum. Blog
LARS P. SYLL,
12.10.2014
Lars P. Syll:
Kalecki and the loanable funds doctrine.
Investment, once carried out, automatically provides
the savings necessary to finance it. Profits in a given
period are the direct outcome of capitalists consumption
and investment. A consequence is that the
rate of interest cannot be determined by the demand for and
supply of new capital because investment ‘finances
itself.’. Blog
LARS P. SYLL ,
13.10.2014.
• Egmont Kakarot-Handtke: Kalecki got it wrong,
Allais got it right
• economists still have no clear idea of the fundamental
concepts income and profit
• the New Palgrave Dictionary: “A satisfactory theory
of profits is still elusive.”
• this results in a defective loanable funds theory
• Kalecki dug at the right site regarding to saving and
investment, but not deep enough
• the financing relationships (credits, bonds, stocks, etc)
within and between the sectors is related to the flow magnitudes
saving and investment
• what Kalecki really got wrong was the relationship between
profit, distributed profit, and retained profit
Egmont Kakarot-Handtke:
The Profit Theory is False Since Adam Smith. What About
the True Distribution Theory?
All popular schools lack a consistent profit theory.
Economists have no true conception of the most important
phenomenon in their universe. This methodological defect
persists since Adam Smith. Therefore, the theories of
income and wealth distribution are wrong by logical
implication. If the conclusions of a theory do not find any
counterpart in reality the fault lies in the premises. In
order to rectify distribution theory it is necessary to
substitute the conventional subjective-behavioral axioms by
objective-structural axioms. A major result of the present
paper is that distribution is
not governed by marginal
productivity but by the distributed
profit ratio.
SSRN
id2511741,
21.10.2014;
Last Modified Version.
24.9.2015
Lars P. Syll:
Post-Keynesian economics — an introduction.
Kakarot-Handtke: Let Post-Keynesianism rest
in peace. Comment on ‘Post-Keynesian economics —
an introduction‘. Blog
LARS P. SYLL,
22.10.2014;
![[Book]](book.gif)
![[Amazon]](amazon.gif)
John Quiggin:
Zombie Economics: How Dead Ideas Still Walk Among Us
[Taschenbuch].
In the graveyard of economic
ideology, dead ideas still stalk the land.
The recent financial crisis laid bare
many of the assumptions behind market liberalism —
the theory that market-based solutions are
always best, regardless of the problem. For decades,
their advocates dominated mainstream economics, and their
influence created a system where an
unthinking faith in markets
led many to view speculative investments as
fundamentally safe. The crisis seemed to have killed off
these ideas, but they
still live on in the minds of many
— members of the public, commentators, politicians,
economists, and even those charged with cleaning up the mess.
In "Zombie Economics", John Quiggin explains how these dead
ideas still walk among us — and why
we must find a way to
kill them once and for all if we
are to avoid an even bigger financial
crisis in the future. "Zombie Economics" takes the
reader through the origins, consequences, and implosion of
a system of ideas whose time has
come and gone. These beliefs
— that deregulation had conquered the financial cycle,
that markets were always the best judge of value, that
policies designed to benefit the rich made everyone better
off — brought us to the brink of disaster once before,
and their persistent hold on many threatens to do so again.
Because these ideas will never die unless there is an
alternative, "Zombie Economics" also looks ahead at
what could replace market liberalism,
arguing that a simple return to traditional
Keynesian economics and the politics of the welfare
state will not be enough —
either to kill dead ideas, or prevent future crises. In a new
chapter, Quiggin brings the book up to date with
a discussion of the re-emergence of
pre-Keynesian ideas about austerity
and balanced budgets as a response to recession.
Princeton University Press; Auflage: Reprint.
ISBN 978-0691154541, 22.10.2012.
275 Seiten, 14,13€=5,1¢/Seite.
Egmont Kakarot-Handtke:
Economics for Economists.
The characteristic capability of science — to
turn whatever it might touch into knowledge — seems
to have eluded economics. Currently,
economists do not understand how the
economy works. To get out of the
cul-de-sac requires a paradigm shift. It consists in
replacing behavioral axioms by structural axioms. The
subject matter of theoretical
economics is not human behavior but
systemic behavior. From the structural analysis
follows a new Law of Supply and Demand
and a new Profit Law for the economy as a whole. The
conventional supply-demand-equilibrium approach is refuted.
This implies that the reliance on the spontaneous order
metaphor is unfounded.
MPRA
Paper 59659,
3.11.2014
Dean Baker:
Full employment: The recoverys missing ingredient.
real-world
economics
review
4.11.2014
Asad Zaman:
Why does aggregate demand collapse?
Keynes noted that Aggregate Demand fell in wake of the
financial crisis and suggested that fiscal and monetary policy
might restore it. The shortfall of aggregate demand leads to
unemployment. The Great Recession following the recent Global
Financial Crisis has reinforced this lesson: unemployment
persists at high levels, without any change in the productive
capacityy. Why did not the self regulating market restore
equilibrium? Comment by Davidson: Do not
confuse Samuelsons misinterpretation for what Keynes
actually said. Samuelson said he
found the General Theory
“unpalatable” and merely assumed it was
a Walrasian system that was slow to adjust to an exogenous change in
demand. I pointed out that the drop in aggregate demand
depends on Saving finding a place in liquid assets and the
“essential properties” (Keynes). Comment
by Kakarot-Handtke: Keynesianism has to be
developed further. The popular idea of the functioning of
the price mechanism is mistaken. The profit
mechanism is decisive, not the
price mechanism. Even if the adaptations are
perfectly flexible, they cannot turn the losses from
insufficient aggregate demand into profit and thus cannot
prevent the self-dissolution of the economy. The
Supply-demand-equilibrium has to be replaced by the correct
price theory, and employment depends on aggregate demand and
the interplay of the price mechanism.
Real-World Economics Review Blog
7.11.2014
Gancho Ganchev, Vladimir Tsenkov, Elena Stavrova:
Exploring the Relationship between Credit and Nominal GDP.
The functions of money as medium of exchange and unit of
account are closely related to the problems of relative prices
formation and the value of money itself. Rejecting the classical
dichotomy, we can assume some interaction between the real and
the monetary sectors. Following the new trends in monetary theory
we focus on the nominal macroeconomic parameters. In particular,
econometric research is carried out in order to reveal the
relationship between the nominal GDP growth and the total credit
in the countries of Central and Eastern Europe. The objective is
to measure the level of dependency and the nature of the
relationship between these important macroeconomic variables.
According to Keynes increased bank lending should really add to
domestic demand (Kakarot-Handtke).
Conf. SUERF, “Growth in Europe”, Milan,
24.11.2014
Merijn Knibbe:
The real winner: economics which takes money and debt serious.
real-world
economics
review
27.11.2014
Lars Syll:
Economics without aspirations.
Robert Lucas: Theories embedded in general equilibrium
dynamics of the sort that they dont let us think about the U.S.
experience in the 1930s or financial crises and their real
consequences. The Keynesian replacement apparatus cannot do it either.
No one knows how to take that theory to successful answers to the
real effects of monetary instability.
Egmont Kakarot-Handtke: Neither orthodox nor heterodox
economists understand the most important economic phenomena: profit
and income. Blog
LARS P. SYLL,
10.12.2014
Egmont Kakarot-Handtke:
Onblog Economics Muddle Busting.
The representative economist does not understand the two
most important phenomena in the economic universe: profit and income.
Because of this economists have nothing to offer in the way of a
scientifically founded advice. Therefore, the contributions to
economic blogs cannot claim to offer more than personal opinion. Of
opinions, though, economics always had plenty. What is needed is
knowledge — scientific knowledge, that is. With the outline of
the correct economic paradigm at hand it is straightforward to refute
obsolete approaches. For this purpose the economics blogs are ideal.
A selection of recent comments is reproduced
in the present paper.
MPRA
Paper 60543,
11.12.2014, (last modified 28.9.2015)
Asad Zaman:
“The failure of economics is due to the use of axiomatic
method”.
Mathematics and Science use entirely different
methodologies. Use of the axiomatic method for science proved
to be a complete failure. Scientific laws are established on
basis of empirical evidence and guesses. The observational and
empirical aspect of science means that it cannot be axiomatic.
Progress in science resulted switching to an observational and
inductive process which led to scientific laws (which could
never be proven). Paul Schächterle: whether an
axiom is true or not cannot be determined through logic.
Kakarot-Handtke: yes, and it is the first task of every
science to find the true axioms. Don't just say that something
is wrong, but replace it by something better. No
way leads from any behavioral assumption to the
understanding of how the economy works. Subjective-behavioral
axioms have to be replaced by objective-structural axioms. The
behavioral assumption of constrained optimization is in no
way fundamental to economics.
Real-World Economics Review Blog,
22.12.2014
Oskar Fuhlrott:
Politische Ergebnisse der strukturell-axiomatischen
Ökonomie.
Kakarot-Handtkes strukturell-axiomatisches
Ökonomiemodell determiniert eine Reihe von
wirtschaftspolitisch und gesellschaftspolitisch
bedeutsamen Aussagen, die zum Teil durchaus nicht-intuitiv
sind, aber meist mit schon früher durch die
Keynesianische Makroökonomie bekannten
Zusammenhängen übereinstimmen. Wirklich neu
ist das makroökonomische Zustandekommen und die Rolle
des Gewinns als monetäre Größe. Und
natürlich die Reduzierung auf nur wenige strukturelle
Axiome.
April 2014.
Lars P. Syll:
‘New Keynesian’ haiku economics.
“Stuck with crazy models”? Absolutely!. Blog
LARS P. SYLL,
13.1.2015
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: The Market.
The consensus is that orthodox economics is a failure in 3
dimensions: conceptual, methodological, and empirical. Heterodoxy
has meticulously sorted out the multitude of errors, mistakes,
and distortions. Yet, this alone does not help out of stagnation.
Economists have now to go into constructive mode. The
most urgent task is to
replace the misleading supply-demand equilibrium
representation of the market. The
reconstruction of the centerpiece
of the market system from scratch paves
the way to the new paradigm. Nobody can talk about the market system
without a correct idea of how the market works. Heterodox economists
must take the innovative lead.
MPRA
Paper 61236,
11.1.2015
"The Arthurian":
The first of the great powers to reduce private debt will be
the world's next hegemon.
Kakarot-Handtke:
Growing debt is bad, but shrinking debt is
worse.
The New Arthurian Economics,
15.1.2015
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: Say's Law.
The core problem of economics is that the representative
economist never managed to keep political and theoretical economics
properly apart. The mixture is toxic indeed. As Joan Robinson said
about what parades as economics: Scrap the lot and start again.
Yet, the question then arises where to start. To solve the Starting
Problem — first formulated by J. S. Mill — is the
all-dominant initial step of a paradigm shift. The most urgent task
of a constructive Heterodoxy is to rethink pivotal
concepts like market, Say's Law, profit, etcetera. The
reconstruction of the theoretical superstructure from scratch is an
absolute methodological necessity.
MPRA
Paper 61670,
28.1.2015
Daniil Gorbatenko:
Why Economists Should Abandon Marginalism.
Marginalism is widely considered to be the
cornerstone and an indispensable part of the modern
economic theory but is it really compatible with
what we know about economic realities? In this paper,
we attempt to demonstrate that marginalism severely
distorts them without providing offsetting benefits
because whatever ostensible
benefits it provides can be delivered by
a theory that does not involve it.
We propose that such a theory should involve
subjectivism without marginalism for consumer choice
and the Kirznerian analysis of entrepreneurship
instead of marginal product reasoning. The principle of
scientific rigor requires that we use in formulating our
theories ideas that do not distort the phenomena under
analysis. The use of marginalism in economics clearly
violates this criterion, and thus the marginalist
approach should be excluded from economic analysis.
SSRN
Philosophy & Methodology of
Economics eJournal,
4.2.2015
Egmont Kakarot-Handtke:
Who rides the debt-tiger cannot dismount.
Comment on Wolfgang Streeck's ‘The Hayekization
of modern society’
AXEC: New Foundations of Economics,
7.2.2015
Lars P. Syll:
Public debt and Keynes' paradox of thrift.
The reactions of the amount of one's consumption on
the incomes of others makes it impossible for all individuals
simultaneously to save any given sums. Every such attempt to
save more by reducing consumption will so affect incomes that
the attempt necessarily defeats itself. Blog
LARS P. SYLL,
13.2.2015
Lars P. Syll:
Abba Lerner on Functional Finance and Ricardian Equvalence.
. Blog
LARS P. SYLL,
18.2.2015
admin (Kakarot-Handtke):
Facts and Economic Science.
It is clear that economics is in chaos when there are
significant disagreements about basic facts of economics.
There is an abundance of statistical data presented by the
media, but there are few agreed facts.
A Scientific
Economic Paradigm Project,
20.2.2015
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: Aggregate
Demand.
Heterodoxy has left not one stone unturned and has
unraveled a plethora of errors/mistakes/contradictions of
Orthodoxy. The outcome of this prolonged critical and
self-critical process is that there is actually no
acceptable and accepted theoretical economics. The need
of a paradigm shift is irrefutable. There is less need of
further debunking exercises. For Constructive Heterodoxy
follows that the subjective axiomatic foundation of
Orthodoxy has to be replaced. All
economic conceptions have to be consistently
reconstructed. What comes to mind first are phenomena
like market, profit, money, employment or
aggregate demand. The latter is
dealt with in the following.
MPRA
Paper 62146,
14.2.2015
Lars Syll:
Piketty finally admits marginal productivity theory is wrong.
In yours trulys article “Piketty and the limits of
marginal productivity” the author of “Capital in the
Twenty-First Century” is criticized for
not being prepared to fully take the
consequences of marginal productivity
theory — and the alleged close
connection between productivity and
remuneration
postulated in mainstream income distribution theory — over and
over again being disconfirmed both by history
and, as shown already by Sraffa in the 1920s and in the
Cambridge capital controversy in the 1960s, also
from a theoretical point of view.
Its pleasing to now see that Piketty has taken this critique to
heart. In an interview in Potemkin Review he now
admits that marginal productivity
explanations of income is wanting, not only for those at the
very top, but, generally.
Real-World Economics Review Blog,
16.1.2015
José A. Tapia:
Money and Says law: on the macroeconomic models of
Kalecki, Keen, and Marx.
Kaleckis model of aggregate income and aggregate
spending, and their dynamic relations was very likely
influenced by Marxs schemes of reproduction. This paper
argues, first, that in both
Kaleckis model and in
Marxs simple reproduction, money
and credit play no role, so that rather than a
monetary economy, these models portray a barter economy
which follows Says law. Second, that Steve Keens recent
proposition that aggregate demand is the
sum of income plus the change in debt is a step
toward an aggregate macroeconomic model in which the market
economy is portrayed in a more realistic way. Third, that
Marxs expanded reproduction scheme somewhat forces the
consideration of money in the model, which makes evident
that hoarding is a basic mechanism for the creation of
excess supply. Fourth, that a proper macroeconomic model
that portrays the market economy without abstracting
essential characteristics of it must not ignore (1) money,
fulfilling its role of purchasing power reservoir, and (2)
credit, as a two-edged tool that
creates purchasing power in the short
run and macroeconomic strain in
the long run.
real-world
economics
review 70,
19.2.2015;
Egmont Kakarot-Handtke:
Still in the woods.
Comment on Tapia on
“Money and Says law: on the macroeconomic models of
Kalecki, Keen, and Marx”.
There is an absolute theoretical necessity for someone like Tapia
to clarify the interrelations between aggregate income, aggregate
demand, money, credit, profit, and Says Law in Kaleckis,
Keens, and Marxs respective approaches. The profit theories of
the top 20 heterodox economists are quite different and all false.
I have demonstrated this in a formally rigorous way for Marx,
Keynes, Kalecki, and Keen. I also showed the correct heterodox
version of Says Law. Minsky is contained in my profit
equation as a limiting case for YD=0 and S=0.
The employment “equation contains Keens relationship
beween changes of employment and changes of debt.”
But Tapia ends here and leaves Heterodoxy in the
woods.
22.2.2015
John Komlos et al.:
America can be a full-employment economy once again.
What is full employment? Here is where the complications
begin. Those in charge of the concept believe that full employment
is simply unattainable. They give rationalizations formalized
under the umbrella concept of the „natural rate of
unemployment”. The Fed has put the natural rate of unemployment
at about 5.2 percent. By this logic, we are nearing full employment.
Nobel laureate William Vickrey referred to the
natural rate of unemployment as “one
of the most vicious euphemisms ever coined”.
We must reject that concept. In 1944 the
unemployment rate was 1.2 percent. Current labor market
institutions will not deliver a true full-employment economy.
Given the substantial increase in productivity per hour since the
1930s it is about time that we reduce the number
of hours worked per day. It is up to us to stop dreaming and
start acting to overcome the obstacles created by a “jobless
recovery” .
Real-World Economics Review Blog,
6.3.2015
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: Profit.
The goal of theoretical economics is to explain how
the actual economy works. Since Adam Smith economists have
consistently failed to clarify the nature and magnitude of
overall profit. No economist, though, would deny that profit
is an important phenomenon. Yet, obviously economists are
still mired in utter confusion about the most fundamental
concept of their discipline. Hence, in the strict sense,
there is no valid economics. From all this follows for a
methodologically ambitious Constructive Heterodoxy that the
accustomed foundations of Orthodoxy have to be replaced.
In technical terms this is what a paradigm
shift is all about.
MPRA
Paper 62694,
7.3.2015
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: Employment.
Orthodox economics is founded on behavioral assumptions.
This has been the wrong starting point because no way leads
from there to an understanding of how the economic system works.
Critical Heterodoxy is one step ahead insofar as it does not
accept the green cheese assumptionism of optimization and
supply-demand-equilibrium, yet this is not sufficient to
establish a superior paradigm. What we have at the moment is a
plurality of debunked theories. This is not a tenable situation.
Consequently, Constructive Heterodoxy is focused on the formally
consistent reconstruction of central economic phenomena like
market, money, profit, and — in this paper —
employment.
MPRA
Paper 62795,
12.3.2015
David Ruccio:
The principal problem of Political Economy.
The discussion of capital and labor shares puts
the issue of class at the top of the agenda.
We can clearly see that, in recent decades, the profit share has been
rising and the labor share has been falling. In other words, labor
has been losing out to capital — and we need to focus on solving
that class problem. Some of the share of income accruing to capital
(say: the top one percent) is also distributed to a small portion of
income-earners in the corporate (both financial and nonfinancial)
sector. If we therefore added the top-one-percent to corporate profits,
and at the same time subtracted it from the compensation of employees,
the divergence between the capital and labor
shares would be even greater — and the class problem would
be even more acute. Class remains the “principal problem of
Political Economy”.
Real-World Economics Review Blog,
20.3.2015
Gerson P. Lima:
Supply and Demand Is Not a Neoclassical Concern.
The central point of this paper is the demonstration
that there is a real world supply and
demand theory, supported by an estimate of the US
aggregate supply curve. The fundamental idea is that demand
and supply interaction is the smallest economic act, an act
without which there would be no economics. Papers first
point is that what neoclassical textbooks
call supply and demand is just a disguising device
created to justify a given goal and stresses
three mistakes that
plague all profit maximisation
models thus condemning the neoclassical approach to
unfeasibility: the notions of competition
and equilibrium and the econometrics
of disequilibrium data. The second point is the
proposal of rescuing and improving the
approach to the supply and demand theory prevailing
before the upsurge of the neoclassical
doctrine.
Fundamental assumptions are three; first,
supply and demand generates price and
production of all relevant products and services, being
thus the immediate cause of all economic outcomes:
(un)employment, income, tax receipts, etc., and their social
consequences on education, wealth distribution, and so forth.
Second, supply and demand interplay depends
on several exogenous factors, mainly
human ontological behaviour, economic policy
and natural resources; exogenous phenomena, especially
the economic policy, command supply and demand and supply, and
demand commands the economy.
Third, production takes time;
quantities produced and sold are never equal;
disequilibrium is the usual
status of the supply and demand interaction and
therefore the entire economy.
Econometrics of the experiment
described deals with disequilibrium without using the
time series method and gives support to the proposed economic
structure and theory.
MPRA
Paper 63135,
21.3.2015.
Yi Wen, Maria Arias (St. Louis Fed):
Money hoarding — an explanation of todays low inflation.
Blog
LARS P. SYLL ,
25.3.2015
Victor Aguilar:
Review of Varoufakis and Arnspergers “What Is Neoclassical
Economics?”.
A short review of Varoufakis and Arnspergers paper to see if
we can sort out who is telling the truth and who is telling lies.
EconoPhysicsForum,
27.3.2015
Merijn Knibbe:
Whats inside the neoliberal mind? Part 2 —
Marketfundamentalist Marxism, kind of.
The latest ECB
Economic Bulletin is profoundly researched when it comes
to neoclassical models — but lacks a proper diagnosis
of the present situation. A
recent high quality paper shows that money matters,
another blow to the idea of Ricardian equivalence. Reforms
are defined as confidence boosting by default, as in
this recent article, where reforms of labour markets are
seen as a panacea. It is even possible to read it as a tract
from an unreformed Marxist economist: class struggle, surplus
value, a rigid division of classes into labourers on one side
and capital owners on the other side, the declining rate of
profit and a labour theory of value — its all there.
Real-World Economics Review Blog,
28.3.2015
Merijn Knibbe:
‘DSGE’ macro models criticism: a limited round-up.
Part 1. Money.
This succinct round-up will only provide some resources. It
pays explicit attention to economic statistics
which are usually much more consistent with
Post-Keynesian and sometimes classical and Austrian
economics than with neoclassical
‘macro’.
Real-World Economics Review Blog,
7.4.2015
Lars Syll:
On the irrelevance of general equilibrium theory.
The problem with perfect competition is not its lack
of realism; it is its irrelevancy.
Real-World Economics Review Blog,
13.4.2015
Stephen Williamson:
Sticky Prices, Financial Frictions, and the Ben Bernanke Puzzle.
Issues on financial stability and monetary policy raised by Ben
Bernanke. Lucas and sticky prices. Noah Smith is confused about the
genesis of sticky-price New Keynesian (NK) models.
He tells us that “sticky-price models have become the dominant
models used at central banks”. Blog
New Monetarist Economics,
14.4.2015
Edward Fullbrook:
“Is there anything worth keeping in standard microeconomics?”.
About three excellent economists who came from mathematics:
J.M. Keynes, B. Gurrien and Tony Lawson.
Real-World Economics Review Blog,
14.4.2015
David Glasner:
JKH on the Keynesian Cross and Accounting Identities.
I have not yet reached common ground about how to
understand the simple Keynesian model, but I am grateful to
JKH for engaging me in this discussion. He has forced me to
think more carefully about my objections to forcing the
basic Keynesian model to conform to the standard national
income accounting identities. JKH insists that after
investment expenditure will generate an equivalent amount of
income, this accrues to factors of production instantaneously.
I find it reasonable that there is a lag between expenditure
on goods and services and the accrual of income to factors of
production. If you define income and expenditure not to be
identical, then savings and investment are also not identical.
The propensity to consume determines the equilibrium; the lag
structure determines the sequence of adjustments, following a
change in a spending parameter, from one equilibrium to
another.
Uneasy Money ,
14.4.2015
Lars P. Syll:
On dogmatism in economics.
Abstraction is the most valuable ladder of any science.
Standard economics has identified itself with dogmatism. And
this is a privilegium odiosum that has dwarfed the
understanding of the economic process wherever it has been
exercised.
Real-World Economics Review Blog
17.4.2015;
Egmont Kakarot-Handtke:
Methodology — Marx, too, messed it up.
Comment on Lars Syll on
“On dogmatism in economics”.
17.4.2015
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: Institutions.
What do economists understand about the economy if
they do not understand the profit phenomenon? Next to
nothing. Therefore, the very first task in theoretical
economics is to clarify the difference between profit and
wage income and their respective determinants. It was
Ricardo who tackled the problem first, but neither
Orthodoxy nor Heterodoxy solved it until this day. The need
for a paradigm shift is indisputable. The
new structural axiomatic approach is more
comprehensive as it embraces the
consistent interaction of real and nominal variables
of the monetary economy and the economic consequences of
alternative variants of
institutions.
MPRA
Paper 63935,
26.4.2015
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: Behavior.
For a host of compelling methodological reasons,
homo oeconomicus has to be replaced. This is
consensus, the open question is how this could be
accomplished. What is required first is the separation of
the formal foundations into a structural
and a behavioral part. This paper introduces
the propensity function as general
formalization of Economic Man/Woman.
The propensity function is a compact formal expression of
random, semi-random, and deterministic behavioral assumptions.
It is shown how, in a random environment,
target-oriented behavior produces
stochastic stability and optimality in the product
market. With homo oeconomicus the conception of
simultaneous equilibrium, too, vanishes.
MPRA
Paper 64035,
30.4.2015
Lars Syll:
Rational expectations — totally incredible bogus.
Those who want to build macroeconomics on microfoundations
usually maintain that the only robust policies and institutions
are those based on rational expectations and representative actors.
Roman Frydman showed that models founded on the
rational expectations hypothesis are inadequate as representation
of economic agents decision making.
Real-World Economics Review Blog,
4.5.2015
Peter Radford:
Transaction Cost Confusion.
Transaction costs were invented by Ronald Coase to help
explain why we see business firms littering the economic landscape
when orthodox economic theory argues that the marketplace is the
superior and unequalled coordinator of economic activity. .
Real-World Economics Review Blog,
5.5.2015
Lars Syll:
Seven principles to guard you against economics silliness.
7 principles by Noah Smith. Credentials are not an
argument. “All theories are wrong” is false.
“We have theories for that” is not good enough.
Argument by accounting identity almost never works. The
Efficient Markets Hypothesis does not automatically render
all models useless. Models that only fit one piece of the
data are not very good models. The message is not the
messenger. Blog
LARS P. SYLL,
8.5.2015
Lars P. Syll:
Why the ergodic theorem is not applicable in economics.
P. Davidson: Keynes claim that some events could
have no probability ratios assigned to them can be represented
as rejecting the belief that some observed economic phenomena
are the outcomes of any stochastic process: probability
structures do not even fleetingly exist for many economic
events.
Real-World Economics Review Blog,
8.5.2015
David Ruccio:
Economics and the value of art.
Neoclassical economists dont have a lot to say about
the value of art. The Wall Street Journal observes that
yesterdays sale of other paintings reveals something else:
Some paintings act like object lessons in tracking the global
migration of wealth. The ever-expanding bubble in high-end art
is predicated on the extraordinary amount of surplus that is
being captured by a tiny number of individuals at the very top
of the worlds distribution of income. The
number of people who, by the metric of the Forbes list,
could easily afford to pay $179
million for a Picasso has increased more
than fourfold since the painting was last on the market.
Recent art auctions, along with real-estate and fine-wine
markets, serve as a window on the grotesque
levels of economic inequality.
Real-World Economics Review Blog,
15.5.2015.
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: Financial Markets.
What stands before all eyes as failed Orthodoxy is
ultimately caused by the wrong answer to Mill's Starting Problem.
It is now pretty obvious that one cannot put
utility maximization, equilibrium, well-behaved production
functions, ergodicity or any other physical or psychological
or sociological or behavioral assumption into
the premises. No way leads from such premises to
the explanation of how the actual market economy works. The
logical consequence is to discard them. Having first secured a
superior formal starting point, the present paper addresses the
question of how the various types of
financial markets emerge from the elementary
monetary circuit.
MPRA
Paper 64426,
17.5.2015
David Ruccio:
The fetishism of mathematics.
The old-fashioned positivist philosophy of science is:
mathematics is the “hard stuff” that “real
scientists” do — and, when they do it correctly,
they contribute to “progress”. The
theory of capital is the most
controversial topic in the history of economic thought because
the theory of capital is the theory of
profits — and therefore an answer to the question,
do the capitalists deserve the profits they get? Romer wants us
to focus on problems (such as the growth in the market for mobile
phones) and not to ask what capital itself is
and what role it plays in various forms and stages of
capitalist development. The only way he
can attempt to deflect us from those difficult but important
questions seems by invoking the fetishism of mathematics.
Real-World Economics Review Blog,
19.5.2015
Lars P. Syll:
Modelling consistency and real world non-coherence in
mainstream economics.
Tony Lawson: In modern mainstream economics
the category equilibrium has nothing to do with the features
of the real economy. The meaning of equilibrium is not at all
a claim about the world but merely a property that a set of
equations may or may not possess. When mainstream economists
question whether an equilibrium ‘exists’ they
merely ask whether a set of equations has a solution.
But economics is not pure mathematics or logics: its about
society, the real world.
Real-World Economics Review Blog,
20.5.2015
"Sandwichman":
Keynes "hadn't got round to it".
Roy Harrod: As for "the modern type of dynamic theory,"
(that is, 'growth' theory), Keynes "hadn't got round to it".
Leon Keyserling in 1965 "saw at an early stage the importance
of enlarging the [Keynesian] ideas to embrace not only the
prevention of depression but the maintenance of an adequate
rate of economic expansion." All this had nothing to do with
Keynes's own views. As outlined in his 1943 Treasury memorandum
and re-iterated in a 1945 letter, he regarded the investment
policy only as first aid: "In U.S. it almost certainly will not
do the trick. Less work is the ultimate solution (a 35 hour week
in U.S. would do the trick now)." Keynes's analysis was not
"extended" nor "enlarged" by modern dynamic growth theory. The
analysis was — in Solow's apt phrase — shunted aside
for a tautological model, just as the policy goal of full
employment was shunted aside for the indistinct slogan of
"growth".
Blog
ECONOSPEAK,
25.5.2015
Barkley Rosser:
On Missing Minsky.
It would have been great to have had Hy Minsky
around these last few years to comment on what has gone on.
Paul Krugman on comments by Gavyn Davis on discussions at a
recent IMF conference on macroeconomic policy notes that
there seem to be 3 periods of note: a
Minsky period of increasing vulnerability of the
financial system to crash before the crash,
a Bagehot period during the crash,
and a Keynes period after the
crash. Krugman: we supposedly understand the second two, but
existing official models do not sufficiently explain the
Minsky period, the runup, how things got so fragile that
they could collapse so badly. Part of the problem for
Krugman and also the IMF crowd with Minsky is that it is
indeed hard to fit his view into a nice formal model. Aside
from what Keen has done, there are other ways to model
the missing Minsky more
formally. Blog
ECONOSPEAK,
2.6.2015
Zoltan Jakab, Michael Kumhof:
Banks are not intermediaries of loanable funds —
and why this matters.
In the intermediation of loanable funds model of
banking, banks accept deposits of pre-existing real
resources from savers and then lend them to borrowers. In the
real world, banks provide financing through money creation.
That is they create deposits of new money through lending, and
in doing so are mainly constrained by profitability and
solvency considerations. This paper contrasts simple
intermediation and financing models of banking. Compared to
otherwise identical intermediation models, and following
identical shocks, financing models predict
changes in bank lending that are far larger, happen much
faster, and have much
greater effects on the real
economy.
BANK OF ENGLAND Working Paper Nr. 529.
May 2015
Lars Syll:
Loanable funds.
In the mainstream loanable funds theory the amount of
loans and credit available for financing investment is
constrained by how much saving is available. Saving is the
supply of loanable funds, investment is the demand for
loanable funds and assumed to be negatively related to the
interest rate. Jakab and Kumhof demonstrate many problems
with the standard presentation and formalization of the
loanable funds theory. The causal story told is “a
dog called saving wagged its tail labelled investment.”
Loanable funds theory essentially reduces modern monetary
economies to something akin to barter systems. The age-old
belief that Central Banks control the money supply has come
to be questioned and replaced by an “endogenous”
money view — the same will happen to the view that
Central Banks determine “the” rate of interest.
Contrary to the loanable funds theory, finance precedes
investment and saving (Keynes, Minsky). Blog
LARS P. SYLL,
2.6.2015
Clive Crook:
Monetary Policy for the Next Recession.
QE isn't unconventional any longer: it mostly worked. But
imagine a big new financial shock: possibly the U.S., Europe and
Japan would fall back into recession. Bringing fiscal expansion
to bear in a sustained and effective way proved difficult after
2008. Attention needs to turn to a new kind of unconventional
monetary policy: helicopter money.
Most people think that notion is crazy. ‘Overt monetary
financing’ is closer to what is required. It is not that
crazy — lately, more economists have been
advocating it, and they're right. If central banks need to
expand demand, let them send a check to every
citizen. Much of this would be spent, boosting demand.
What, then, is the objection?
Eric Lonergan: usual criticisms are based on
misunderstandings. Standard accounting terms lose their
conventional meanings when applied to central banks. Money isn't
an ordinary liability. Nobody is owed and nothing ever has to be
paid back. Only now for the central bank (with increased supply
of money) it is difficult to control interest
rates. Lonergan: what the central bank
can do is: 1) raise the rate of interest on reserves;
2) issue debt or sell bonds on its balance sheet
(practically the same thing); 3) raise reserve requirements (if
used at all); 4) other regulatory changes that increase private
sector demand for reserves or raise the spread of market interest
rates. Political objection: sending checks is a hybrid of monetary
and fiscal policy (fiction: that monetary policy isn't political
— this has become harmful). Today, central banks are
dangerously under-equipped. Blog
BloombergView,
31.5.2015
Scott Fullwiler:
What Is Helicopter Money, Anyway?
Clive Crook wrote an article on things that have been
central to MMT for years. It provides a clear example for
illustrating differences between MMT and most other economists
with regard to how they view the macroeconomic policy mix.
Most economists think that thanks to monetary policy, the
world avoided another Great Depression. Crook says, “Now
imagine a big new financial shock. Its quite possible that all
three economies” (U.S., Europe, and Japan) “would
fall back into recession. What then?” The “obvious
answer” is fiscal policy, but there are political
difficulties with more debt. The public at large doesnt realize
that the vast majority of run up in
debt has been due to the automatic
stabilizers of fiscal policy that place a floor under the
economy rather than actual active use of fiscal policy to
stimulate. Crook discusses the new kind of “helicopter
money” (send a check to every citizen) as the better
solution. I think that helicopter money is in fact a fiscal
operation: the Fed then is selling securities or the
interest rate would fall back to zero. In the absence of the
Treasury selling securities, the Fed would have to. (a) the
act of creating a deficit — raising the net financial
wealth of the non-government sector — is
fiscal policy. (b) the act of
announcing and then supporting an interest rate target with
security sales — which has no effect on the net
financial wealth — is monetary
policy. Whether the Treasury or the Fed cuts the
checks, (a) fiscal policy, and (b) is monetary policy.
New Economic Perspectives,
2.6.2015
Lars P. Syll:
Ditch ‘ceteris paribus’!
Neoclassical economists usually set up “as
if” models based on a set of tight axiomatic assumptions
from which consistent and precise inferences are made:
if the axiomatic premises are true, the conclusions
necessarily follow. But if the models are to be relevant, we
also have to argue that their precision and rigour still holds
when they are applied to real-world situations. The logic of
idealization is a poor guide for action in real-world systems,
in which concepts and entities are without clear boundaries and
continually interact and overlap. Blog
LARS P. SYLL,
4.6.2015
Egmont Kakarot-Handtke:
The Context-Dependency of Human (Economic) Behaviour.
.
Real-World Economics Review Blog,
12.6.2015
Severin Reissl:
The Return of Black Box Economics — a Critique of
Keen on Effective Demand and Changes in Debt.
In a paper for the Review of Keynesian Economics,
Steve Keen recently provided a
restatement of his claim that
“effective demand equals income plus the change in
debt”. The aim of the present article is to provide a
detailed critique of Keens argument using an analytical
framework pioneered by Wolfgang Stützel which has recently
been developed further. Using this framework, it is shown that
there is no strictly necessary
relationship whatsoever between effective demand and
changes in the level of gross debt. Keen's proposed relation
is shown not to hold under all circumstances, and it is
demonstrated that where it does hold this is
due to variations in the ‘velocity of
debt’-variable he introduces. This variable, however,
lacks theoretical underpinning. The
article also comments on Keen's proposal that trade in financial
assets should be included in effective demand, arguing that this
undermines the concept of effective demand itself. It is also
shown that many weaknesses in Keen's argument stem from a lack
of terminological clarity which originates in his interpretation
of the works of Hyman Minsky.
IMK.
Working Paper Nr.
149.
April 2015
Egmont Kakarot-Handtke:
Keenonomics, aggregate demand/change of debt, and some
misleading critique.
Severin Reissl in a recent critique of Steve Keens
approach argues from Stützels
unacceptable version of balance mechanics.
Stützel did not get the interconnection between the
circular flow, the creation of credit/money, and balance
mechanics exactly right. The
crippling methodological defect of the
microeconomic approach is that partial truths are
habitually but illegitimately generalized. Most conclusions
of standard supply-demand-equilibrium analysis are false when
generalized. Reissl's balance mechanics
contains a fundamental conceptual error/mistake that
invalidates all I=S-models without
exception. Reissl — just like Keen, etc. —
got the pivotal distinction between income and profit wrong.
The business sectors investment expenditures are never
equal to the household sectors saving and their difference is
always equal to the business sectors retained profit.
But Keen's assertion that there is a
straightforward connection between aggregate
demand and the change of the household sectors debt is
absolutely correct for the pure
consumption economy.
Real-World Economics Review Blog,
16.6.2015;
Merijn Knibbe:
Why Steve Keen is even more right than he thinks.
Keen couldnt convince his audience of the
importance of private debt:
they kept coming back to
“one persons debt is another persons asset,
therefore the level of debt doesnt matter”. Keen
states nothing special, as he uses the same method as the
National Accounts. They also explain household demand
(including demand for financial assets) by
adding net change of debt to disposable
income. Keen's statement is in fact plain,
old-fashioned accounting. The ignorants have been educated
based upon representative consumers and hyperrationality
and perfect foresight and Ricardian equivalence but not
based upon learning how to measure and
estimate economic reality.
Real-World Economics Review Blog,
28.10.2011
Egmont Kakarot-Handtke:
Major Defects of the Market Economy.
When we characterize an argument that has no sound
theoretical foundation as political, then what has been
produced by economists so far is political economics.
However, since the Classics and Marx all major economic
schools have defended the claim that they were
doing science. This claim has been
convincingly rebutted. So, the task is
still before us. The way forward is to move from behavioral
to structural economics. In what we should be mostly
interested are not so much the behavioral defects of economic
agents but the structural defects of the market
system and how to repair them.
Available at
SSRN,
28.6.2015.
Defects #1…8 (price, profit, stress, efficiency, monetary
order, growth, employment, distribution).
Egmont Kakarot-Handtke:
Major Defects of the Market Economy (preview).
MPRA
Paper 65666,
17.7.2015
Mark Thoma:
‘Stability of a Market Economy’.
There are two polar views about the
functioning of a market economy.
On the one hand, there is the view that such a system is
inherently stable, with market
forces tending to direct the economy to a smooth growth
path. On the other hand, there is the view that the market
economy is inherently unstable,
and that left to itself it will repeatedly go through
periods of socially costly booms and busts, with recurrent
periods of sustained high levels of unemployment. Blog
Economist's View ,
4.7.2015;
Paul Beaudry, Dana Galizia, Franck Portier:
DP10645 Reviving the Limit Cycle View of Macroeconomic
Fluctuations (abstract only).
Centre for Economic Policy Research,
June 2015
Yanis Varoufakis:
As it happened — Yanis Varoufakis intervention
during the 27th June 2015 Eurogroup Meeting.
Can democracy and a monetary union coexist?
This is the pivotal question that the Eurogroup has
decided to answer by placing democracy in the too-hard
basket.
Real-World Economics Review Blog,
29.6.2015
Asad Zaman:
Speculative Financial Attacks.
An enormous shadow banking system has come
into existence which creates massive amounts of credit
without any regulatory restrictions. At a time of the
global financial crisis, the value of financial
instruments was more than 10 times the world GDP.
Daily trade in foreign exchange is around $4 trillion,
while actual merchandise trade is only $50 billion.
This huge excess clearly represents speculation and
gambling, rather than currency exchange for the needs
of trade.
Egmont Kakarot-Handtke: With the deficits of the
private/public households, the profits of the business
sector increased exactly in step, and this led
to the spectacular increase of financial wealth.
Real-World Economics Review Blog,
1.7.2015
Lars Syll:
Euro — the antithesis of democracy.
Remarkable contributions by Joseph Stiglitz, Trond
Andresen, “Blissex”, Egmont Kakarot-Handtke.
Real-World Economics Review Blog,
7.7.2015
Simon Wren-Lewis:
The F story about the Great Inflation.
The Phillips curve
had been interpreted by Samuelson and Solow as implying
a trade-off between inflation
and unemployment. Friedman added that inflation also
depended on inflation expectations. But
why did it take over 10 years for Friedmans wisdom to be adopted
by policymakers, while Samuelson and Solows alleged mistake seems
to have been adopted quickly? None of that matters, because
this folk story is simply untrue. James
Forder in his book presents an exhaustive study of this folk
story.
Blog
mainly macro,
26.7.2015;
James Forder:
Macroeconomics and the Phillips Curve Myth.
OXFORD UNIVERSITY PRESS,
9.10.2014
David Ruccio:
What a $12 Minimum Might Mean.
Until recently, we were certain what would happen
with an increase in the minimum wage.
Now, its a guessing game. Uncertainty about
its possible effects has become reason enough to oppose
increasing the minimum wage.
Comment by Kakarot-Handtke:
economists lack the correct labor market
theory and even the correct theory
of market interactions. An increase of the expenditure
ratio leads to higher employment;
increasing investment expenditures
raise employment; an increase
of the factor cost ratio leads to
higher employment → a
higher average wage rate leads to
higher employment; a product price
increase leads to lower
employment.
Real-World Economics Review Blog,
27.7.2015
“Editor”:
Euro area unemployment rate at 11.1% and EU at 9.6% in June 2015.
MSchlotzhauer: As deflation settles in
permanently, we are dealing with the new
reality that unemployment will get higher over time.
Why are we still measuring the success of our economies
based on indicators from outdated models?
E. Kakarot-Handtke: Economic theory once claimed that
the price mechanism leads to the full employment of all
factors. This was implicitly dropped with the concept of a
natural unemployment (around 5%). Now, you tell us that the
good times of natural unemployment are gone. An unemployment
rate of 11% tells everybody that we are back at Keyness
problem of the 1930s. The price mechanism
does not work as standard economists from Adam Smith
to Hayek wanted us to believe.
The urgently needed change means to leave the false orthodox
employment theory and to advance to the correct heterodox
employment theory.
Real-World Economics Review Blog,
31.7.2015
WikipediA:
Saltwater and freshwater economics
denominate two mildly opposing macroeconomic school groups.
The saltwater schools (University of California, Berkeley, Brown
University, Harvard University, University of Pennsylvania, Princeton
University, Columbia University, and Yale University — i.e.
located near US east or west coast) were integrated into mainstream
economics. The freshwater schools (universities in Pittsburgh, Chicago,
Rochester, and Minneapolis — i.e. located nearer to the Great
Lakes) base macroeconomics on how individuals and institutions interact
in markets and on how they make decisions under uncertainty.
en.wikipedia.org,
11.11.2015
Mark Thoma:
‘Freshwater's Wrong Turn’.
Sometimes, the academics dont understand what
they are saying.
The terms 'freshwater' and 'saltwater' were used
to divide the macroeconomic
schools in the USA according to their
geographical centers: 'freshwater' schools were located
nearer to the Great Lakes
(Carnegie Mellon, Chicago, Minnesota, Rochester) —
'saltwater' schools located near the
east and west coast of the U.S. (Berkeley, Brown,
Harvard, Pennsylvania, Princeton, Columbia).
Blog
Economist's View ,
2.8.2015
Egmont Kakarot-Handtke:
Modern moronomic
theory.
Comment on Bill Mitchell on
“Saturday Quiz August 1, 2015 answers and discussion”.
AXEC
2.8.2015
Lars Syll:
Macroeconomic ad hocery.
With a contribution by Egmont Kakarot-Handtke:
Weintraub's propositions HC1 to HC5. “All of
microeconomics is false because the axiomatic hard
core is false.”. Blog
LARS P. SYLL,
4.8.2015
Chris Dillow:
‘The Sad Death of Free Market Pessimism’.
Why are rightists economic optimists? I get the
impression that it is left-liberal economists who are more
worried by secular stagnation whilst rightists are more
sanguine about it. But there is no necessary logical
connection between optimism and pro-capitalism. Free market
pessimism is a view that seems to have faded. Blog
Economist's View ,
5.8.2015
Alexander X. Douglas:
Accounting for ****.
Looking at the treatment of national accounting in the
textbooks, the following error is being taught: their loanable
funds model is based on the idea that (Mankiw:) “when the
government spends more than it taxes, the resulting deficit
lowers national saving”. Why do they think that government
deficits reduce national savings? The idea is that if G increases
then Y C G will have to decrease. But one could argue that Y
must increase, since G is a component of Y. Their example funds
have flowed out of public savings, but there is no accounting for
where they have gone. Where does this bizarre
accounting come from? Even though the textbooks go on to
talk about funds, the accounting is all in terms of real
goods. Loanable funds make sense in a possible world where the
government taxes and borrows corn and eats it rather than spending
it. Mainstream economists fail to
recognise the difference between money and corn.
They argue that deficits do burden future generations (even
though they patently dont). Whenever there is negative public or
private saving, the debits flow into a
‘mystery account’. But nothing ever flows
out of the mystery account.
Egmont Kakarot-Handtke:Accounting matters because it
provides a reality check for economic theories: Economic phenomena
are only explicable as the outcome of the interaction of real
(invisble) and nominal variables (easily related to national
accounting). All real models of
intertemporal shifting of consumption are
pointless. In the monetary economy the process
of saving and dissaving is independent from real output in
different periods. Blog
Origin of Specious.
Philosophy and economics, mostly.
5.8.2015
Alexander X. Douglas:
Macroeconomic Theory and Operational Reality.
Many textbooks present models that ignore important institutional
facts. There is the cursed ‘loanable funds’
model: when the government borrows savings, these savings are no
longer available to private investors, and a supply-demand analysis shows
that the price of borrowing (the interest rate) must go up.
The Bank of England sets its
policy interest rate and lets the amount of reserves needed for lending
float at that rate. There are always as many ‘loanable funds’
available for lending as there is demand for loans at the rate set. The
loanable funds analysis seems to suggest that austerity
is a good thing, reducing deficits.
Excess loanable funds then would be simply
removed from the market, driving the equilibrium interest rate to zero,
making the argument against austerity. You need models compatible with
operational reality. One of Krugman's better models simply plots the
desired surplus/deficit positions of the government sector and the
non-government sector against GDP. It shows how
fiscal expansion by the government can increase
GDP, if desired savings by the non-government
sector remain the same. A fiscal expansion will push up the GSFB+ curve.
This is a much better argument against austerity than the flawed
‘liquidity trap’ argument. The real constraint on government
deficit spending is inflation. Informed readers would realise that the
rate of interest on Treasury bonds of all maturities is a function of
the policy rate set by the central bank plus peoples predictions about
that policy rate. Fullwiler's model allows various possible results of
policy choices to be thought through clearly.
Egmont Kakarot-Handtke: Economists think
they can explain economic phenomena by painting a
supply-demand-equilibrium cross. Already
Schumpeter doubted about the scientific content of this. McCauley
(2006): “Economists have not understood how to model markets
mathematically in an empirically correct way.” The microeconomic
ss-dd cross is built on nonentities like
utility, equilibrium, well-behaved production functions, decreasing
returns, rational expectations, simultaneous adaptation, etc. The
same holds for macroeconomic versions like IS-LM. It is one of the first
tasks of Constructive Heterodoxy to deliver the
correct formal depiction of a market. Blog
Origin of Specious.
Philosophy and economics, mostly.
6.8.2015
Nick Rowe:
On defining "recession".
The precise definition of "recession" seems to be
topical in Canada right now. We gain absolutely nothing by
adopting some arbitrary cutoff to convert a continuous
variable into a binary variable. Let's call the two quarter
negative GDP growth thing the "quick and dirty" definition
of a recession. Blog
Worthwile Canadian Initiative ,
7.8.2015
Lars Syll:
Economics departments — breeding generation after
generation of idiot savants.
Tony Lawson traced the irrelevance of modern economics
to the failure of economists to match their deductive-axiomatic
methods with their subject. In pure mathematics and logics we do
not have to worry about external validity. But economics is about
the real world. COGEE commission: “… graduate
programs may be turning out a generation with
too many idiot
savants skilled in technique but innocent of real
economic issues.” E. Kakarot-Handtke: Orthodox
economics has been developed by engineers, physicists and the like.
The EconoPhysics try to apply the tools that they have become
acquainted with in their courses to economics. Economists
independently of their background have suffered in the past from
a lack of scientific instinct, creativity, imagination and
serendipity
K-H: Orthodoxy is based on the set of premises HC1 to HC5.
Heterodoxy has now to move to an entirely new set of foundational
propositions. Students first of all need a methodologically
acceptable curriculum.
Real-World Economics Review Blog,
11.8.2015
Robert Solow:
‘The Future of Work: Why Wages Aren't Keeping Up’.
In the American labor market in the last few decades
there has been the failure of real wages and benefits to keep
up with the increase in productivity. Imay have fallen because
the social bargaining power of labor has diminished. Another
change: the proportion of part-time workers has been rising.
Kakarot-Handtke: The representative economist has not
realized that the overall interdependencies establish a
positive feedback loop between ‘the’
product and ‘the’ labor market. Solows piece
contains at least 3 errors/mistakes, relating to employment-,
distribution-, and profit theory. An increase of the expenditure
ratio — even if initiated by credit expansion —
leads to higher employment. Blog
Economist's View ,
13.8.2015
“JEC”:
What is it with economists and accounting
identities?
First rule of thumb: accounting identities do not
constrain behavior; they constrain
accounting. Second rule of thumb: accounting
identities are not enforced by mechanisms (like price
changes); they are enforced by
accounting. If you say that accounting identities
are preserved by some process of adjustment, you have
lost the thread. Keep in mind: 1)
exchanges of financial assets for other
financial assets are not net financial flows —
they net to zero. 2) money is a financial
asset, just like e.g. bonds and promissory notes.
That's how accounting identities work: they are preserved
in all states of the world. The deeper cause of the
problems many economists have with
accounting identities: they look like equilibrium
conditions. But every logically conceivable
transaction preserves the accounting identities — there
is no "mechanism" necessary for pushing it
towards some "equilibrium" state.
Egmont Kakarot-Handtke: Confused confusers economists
messed up accounting, too. This holds e.g. for balance of
payments accounting, but goes deeper. The most basic accounting
identity is about income, and
economists got it badly wrong. Keynes never came to grips with
profit. The formally correct
accounting identity for the closed economy is:
(profit
equation).
Kristjan: Government deficit equals private sector
surplus in a closed economy. Blog
Mean Squared Errors,
13.8.2015
J. Bradford DeLong:
Must-Read: James Forder.
There is a mythical story that the discovery of the
‘Phillips curve’ was an inspiration to
inflationist policy. Forder notes “that the
expression ‘Phillips curve’ was
applied in” [9] “distinct
and inconsistent ways”.
Blog
Brad DeLong's Grasping Reality ,
17.8.2015
Mark Thoma:
‘Reform and Revolution in Macroeconomics’.
Prior to the crisis, theoretical questions
about deep recessions induced by financial panics were ignored
or shunted off to the side (they seemed to lack empirical relevance).
Simon Wren-Lewis argues there was ample reason to ask these questions
if there had been more attention to empirical evidence.
E. Kakarot-Handtke: Which revolution? Comment on
‘Reform and Revolution in Macroeconomics’. All
theories/models that take at least one of the
following concepts into the premises are
scientifically worthless: utility, expected utility,
rationality/bounded rationality, equilibrium, constrained optimization,
well-behaved production functions/fixation on decreasing returns,
supply/demand functions, simultaneous adaptation, rational expectation,
total income=value of output/I=S, real-number quantities/prices, and
ergodicity. Economists have no clue how to do economics without these
concepts and are not up to the challenge. Blog
Economist's View ,
19.8.2015
John Komlos:
A critique of Samuelsons and Nordhauss Principles of Economics.
Real-World Economics Review Blog,
25.8.2015
Simon Wren-Lewis:
The day macroeconomics changed.
The Boston Fed conference in 1978 was the day that
Lucas and Sargent changed how
macroeconomics was done. It is the day
that macroeconomics started to go wrong.
But I believe that Cowles Commission type models and SEM
type models, together with the single equation econometric
estimation, still have a lot to offer.
Carroll and Muellbauer have done work which shows that you have
to think about credit conditions if you want to explain the
pre-crisis time series.
My approach: if I cannot understand something, it is best to
assume it does not exist. Blog
mainly macro,
27.8.2015;
Egmont Kakarot-Handtke:
Much change, no progress.
Comment on Simon Wren-Lewis on
“The day macroeconomics changed”.
28.8.2015
David Beckworth:
Revealed Preferences: Fed Inflation Target Edition
During the last 6 years, the Fed's core PCE deflator, has
averaged 1.5% growth — well below the Fed's explicit target
of 2% inflation. Graphics: evolution of the Fed's forecasts for
the current year, 1-year ahead, and 2-years ahead. The Fed's
preferences show: they want and expect an
inflation upper bound of 2%. Figure: core PCE inflation
and the timing of the Fed's QE programs. It suggsts that the
Fed tends to start QE programs after core inflation had been
drifting away from the 2% upper bound. When inflation was falling
the Fed started increasing its share of treasury securities and
vice versa. They are doing a bang up job keeping core inflatio
in its target corridor. Comment by Kakarot-Handtke:
Central bankers never really understood inflation. Their naive
quantity theory seemed to work satisfactorily in everyday
situations. In the unemployment/deflation
problem, the price mechanism does not
work as standard economics suggests. The wage rate is the
numéraire of the price system. Blog
Macro Market Musings,
4.9.2015
Mark Thoma:
Deflation and Money.
The blog cites from Hiroshi Yoshikawa, Hideaki Aoyama,
Yoshi Fujiwara, Hiroshi Iyetomiof:
Deflation
and Money: “[…]
the results we obtained have confirmed that aggregate prices
significantly change […] as the level of real output changes.
The correlation between aggregate prices and money, on the other hand,
is not significant. The major factors affecting aggregate prices other
than the level of real economic activity are the exchange rate and the
prices of raw materials represented by the price of oil. Japan
suffered from deflation for more than a decade beginning at the end of
the last century. More recently, Europe faces a threat of deflation.
Our analysis suggests that it is difficult to combat
deflation only by expanding the money supply.”
Comment by Kakarot-Handtke: The price theory is wrong.
The correct formula for the market clearing price roughly says: the
consumer price index declines if (i) the average expenditure ratio
falls, (ii) the wage rate falls, (iii) the productivity increases, and
(iv) the employment in the investment good industry shrinks relative to
the employment in the consumption goods industry. The
quantity of money could play an indirect
role via the expenditure ratio and the employment relation of
the investment goods and the consumption goods industry. In general,
if wage increases — for the business
sector as a whole — lag behind
productivity increases, deflation occurs.
Blog
Economist's View,
5.9.2015;
Egmont Kakarot-Handtke:
Deflation? Uupps, price theory, too, is wrong.
“The core of the unemployment/deflation problem is
that the price mechanism does not work as standard
economics claims.” Crucial: the wage rate is the
numéraire of the price system. If at all, the
quantity of money plays an indirect role via the expenditure
ratio and the employment relation of the investment good and the
consumption good industry. Rule of thumb:
if wage increases
(for the business sector as a whole)
lag behind productivity increases,
then deflation occurs.
The pivotal relationship of how the price
mechanism works is given by the relative changes of average
price/wage/productivity. It is now time to finally solve the Phillips
curve puzzle. “The effective alternative
to monetary and fiscal policy fixes is to
put the price mechanism to
work.”
Blog
AXEC: New Foundations of Economics.
5.9.2015
Nikolai Bezroukov:
Financial skeptic. Notes on
neoliberal forced cruise to Frugality Island for 401K Lemmings.
Comment on “Deflation and Money”. Comment on
“U.S. Inflation Developments”.
Blog
Softpanorama,
6.9.2015
Mark Thoma:
The Fed Must Banish the 1970s Inflation Devil.
Inflation remains below the Feds two percent target, and
that argues against a rate increase. But labor markets appear to
be tightening and that is raising worries that higher inflation
is just ahead. Blog
Economist's View ,
18.9.2015
Michael Burke:
Marxism Revisited.
There are countless theories as to the causes, consequences, and possible
remedies for the recent crisis of the capitalist economic system. Karl Marx
argued that crises would occur when workers would be oppressed beyond their limits.
Marxist ideas are strongly supported by empirical evidence as well as standard
capitalist economic theories. Neoclassical theories tell us that all workers will
automatically find work in a dynamic free market economy. The reality shows high
unemployment rates (23% in the USA, discouraged workers included). Comment by
EKH: Marx was a sociologist first and an economist second. He stated the
invalid law of the falling profit rate.
Valid economic analysis tells us that any monetary economy moves to the high
brink of breakdown as soon as the
growth of overall public/private debt reverses.
Real-World Economics Review Blog,
16.9.2015
Dean Baker:
Biggest lesson from Financial Crisis: Wall Street gets what it wants.
Real-World Economics Review Blog,
18.9.2015
Marc Lavoie, Engelbert Stockhammer:
Wage-led growth.
Wages are a cost of production as well as a source of
demand. Our interpretation of the available evidence is that
domestic demand regimes are likely to be
wage led in most economies. Recent empirical studies
show that the world economy overall is in a wage-led demand
regime and if all countries pursue
pro-labour distributional policies simultaneously,
even countries that are profit-led will experience increases
in aggregate demand. By contrast, if all countries are
pursuing an export-led strategy,
only half of them can be successful, as all
countries cannot be simultaneously net exporters.
Distributional policies to increase the wage share and reduce
wage dispersion are increasing or establishing minimum wages,
strengthening social security systems, improving union
legislation and increasing the reach of collective bargaining
agreements. “[…] whether actual demand
regimes are wage led or profit led is subject to an ongoing
academic debate.” Kakarot-Handtke: This
can be quickly resolved: “A positive
relationship between an increasing wage rate, various
demand components, and employment is exactly
what the structural axiomatic employment function
asserts”. It is testable
that a general increase of the wage rate increases the factor
cost ratio. The outcome is what the recent empirical studies
show. It is also what the original Phillips
curve means: that you can explain
stagflation. Blog
LARS P. SYLL,
2.10.2015
Mark Thoma:
‘In Search of the Science in Economics’.
Noah Smith: “[…] discuss the idea that
economics is only a social science and should
discard its mathematical pretensions and return to a more
literary approach.”
In his roundtable, Robert Lucas defends
macroeconomics against the charge that it is
“valueless, even harmful”, and that the tools
economists use are “spectacularly useless”.
Kakarot-Handtke: citing Klant (1994): “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.”
Formalization/mathiness is
not justified if the formal logic is
vacuous, i.e. the basic/primitive/elementary concepts have
no empirical content. Citing Hilbert (2005): “The procedure
of the axiomatic method […] amounts to a deepening of the
foundations of the individual domains of knowledge”.
Citing Georgescu-Roegen (1971): “My point is that wholesale
arithmetization is impossible, that there is valid knowledge even
without arithmetization, and that mock arithmetization is dangerous
if peddled as genuine.” And (1979): “There are
endeavors that now pass for the most desirable kind of economic
contributions although they are just plain mathematical exercises,
not only without any economic substance but also without
mathematical value.” Roger Feynman (1974) called this
“ cargo cult science,” resembling “science, but
is only pseudoscience due to a lack of ‘a kind of scientific
integrity, a principle of scientific thought that corresponds to a
kind of utter honesty’ on the part of the
scientist.” Blog
Economist's View ,
14.10.2015
David Glasner:
Keynes and Accounting Identities.
I had criticized Keyness reliance on accounting identities. The
contemporary economist Ralph Hawtrey was “sharply critical of Keyness
tendency to argue from definitions rather
than from causal relationships.”
Glasner: “Keynes was unable to distinguish the
necessary accounting identity of savings and investment
from the contingent equality of savings
and investment as an equilibrium condition.”
“[…] the accounting identity tells you
nothing about how the system evolves over
time. For that you need a behavioral theory […]”.
Comment by Kakarot-Handtke: Keynes' “[…] fault is in the
premise ‘income = value of output’. This equality
holds initially only in the
limiting case of zero profit in both the consumption and investment
good industry. Hence, Keynes formally dealt with a zero
profit economy without being aware of it”. Thus also
the multiplier formula is provably false. The root
cause is a lack of understanding of profit,
carrying over to national accounting.
From Allais: Investment = spontaneous Saving + Profit
not distributed. Thus saving and investment
are never equal. The deeper
reason for economists's assumption of equality is a false profit theory.
Anders: if aggregate income isnt equal to expenditure, where does the
surplus (deficit) go (come from)? K-H: if Yd=0. Then
monetary profit Qm is equal to the difference between investment I
and monetary saving Sm.
The proof that all I=S models are false
is in the national accounts. “[…] if one business starts to make
a profit and the other makes a complementary loss, the profit of the business
sector as a whole is still zero just as in the initial case. Obviously, this
does not explain how the business sector has managed to make
overall positive profits over several centuries.”
“[…] for the pure consumption economy: monetary profit for the
business sector as a whole Qm is equal to dissaving; and monetary
loss is equal to monetary saving Sm (under the condition of product
market clearing, that is, no inventory
investment/disinvestment).’ “Profit
is a phenomenon that can only emerge in a monetary
economy […] real models cannot explain
profit.” In an investment economy, the accounting identity says
Qm = I - Sm. Glasner: “I am skeptical about
your claim that a theory can be dismissed simply because of an incorrect
definition. […] I dont believe that the validity of theories depends on
how terms are defined.”.
Uneasy Money ,
20.10.2015
David Glasner:
Keynes on the Theory of Interests.
Keynes: aggregated savings and investment are identically equal.
Irving Fisher: the interest rate equilibrates savings and investment.
“Keynes denied forthrightly the notion that the rate of interest is in
any way determined by the real forces of what in Fisherian terms are known
as the impatience to spend income and the opportunity to invest it.”
Comment by Kakarot-Handtke: Keyness elementary accounting identities
are false. Keynes' elementary multiplier follows
from the saving-equals-investment condition and the consumption function.
“Because I=S is provably false it follows that the complementary
story of the interest rate mechanism is false
[…]” There are TWO rates of interest (for overdrafts and
deposits). The banking sector produces money (= deposits) and credit (=
overdrafts) out of nothing. Both sides of banks balance sheet and profit
are closely intertwined. Therefore, if the profit theory is false then
the interest theory is false. In the elementary
case “the real rate of interest is OBJECTIVELY
determined by the respective productivities in the consumption good sector
and the banking sector” but in reality is “ a bit more
complex”. The “households can accumulate their period savings on
a zero interest deposit account as long as they wish, no matter what the
actual rate for overdrafts/loans is.” The intertemporal allocation of
consumption expenditures is independent from the rate of interest.
“The quantity of money is endogenously determined.”
K-H: there is no need of liquidity preference, animal spirits, or
confidence in the face of an uncertain and unknown future. The growth of
real and nominal wealth emerges immediately from saving, investment, and
profit. Keynesian economics is about the monetary production economy.
Monetary profit Qm=C-Yw; together with monetary
saving Sm=Yw-C this gives Qm=-Sm.
Inventory changes occur if the quantity produced and the quantity sold are
different. The inclusion of inventory changes does not alter the fact that
saving and investment are NEVER equal. Thus the familiar story of the
interest mechanism cannot be true. The accounting approach deals with
nominal magnitudes and never with real magnitudes (hence ‘unit’
invariably means ‘monetary unit’). Keynes and many others got
the distinction between profit and income wrong. The dissaving of the
American consumer (=growth of private debt) is beneficial for the world
economy. Freedom of definition is restricted by the requirement of
consistency.
Uneasy Money ,
22.10.2015
Merijn Knibbe:
Economics, concepts, language and the progress of science.
After 1700 an increasing share of the population became dependent
on wage labour and hence could become unemployed. Keynes thought the
non-monetary analysis of unemployment by Pigou
was crap: it is about wagelabour — people work for money.
D. Taylor: The term ‘unemployment’ reduces to the
inability to sell ones skills or labour at an economic rate of profit,
given ones levels of access to demand, technology and capital.
E. Kakarot-Handtke: Economics gave the impression of scientific
progress while it has not moved one millimeter above the proto-scientific
level of Adam Smith. The representative economist cannot tell the
difference between the fundamental concepts profit and income.
Economists are unable to apply a coherent language.
Real-World Economics Review Blog,
23.10.2015
Roger Farmer:
Demand Creates its Own Supply.
I am attuned to the debate over the connection between savings
and investment. In an economy without government and foreign trade, income
earned by the factors of production is earned from producing either
consumption goods or investment goods and YN = CN +
IN. In order to move from nominal to real values,
we need to deflate the equation by a nominal index.
Keynes in his General Theory suggested dividing both sides by a measure
of the money wage, which leads to the identity GDP =
consumption + investment. Then Keynes introduced a theory of aggregate
supply (asserts that firms will increase or decrease the number of employed
workers in order to produce as many goods as demanded = Says Law) and a
theory of aggregate demand. Keynes turned Say's proposition on its head:
Demand creates its own supply: as long as there is
involuntary unemployment, everything demanded will be supplied.
Keynes did not believe that sticky wages were central to his argument.
Following the debate between Noah Smith and Jo Michell on the equality of
savings and investment, let us move to the Keynesian theory of aggregate
demand. Keynes claimed that aggregate expenditure on consumption goods, by
a community of people, will increase when the income of the community
increases (but less than proportionally): C = a + bY. Keynes: investment is
highly unstable, driven by animal spirits. Noting planned values by the
subscript P, we have: X = C + I, XP = C + IP, X =
(a+I) + bY, XP = (a+IP) + bY. Then X = Y, but only in
the equilibrium XP = Y. I - IP = goods produced,
but not sold. Every dollar not spent is saved: S = Y C. Then S = IP.
Income and employment make that savings is equal to investment in equilibrium
→ demand creates its own supply. Kakarot-Handtke: Keynesian
economics begins with a basic definition that is provably false.
Keynes' centerpiece 2-liner “Income = value of
output = consumption + investment. Saving = income - consumption. Therefore
saving = investment.” is conceptually and logically
defective. The fault is in the premise “income
= value of output”. The root cause is a complete lack
of understanding of what profit is. Although it is always true that
Qm = Yd + I - Sm, saving
and investment are NEVER equal.
Roger Farmer's Economic Window,
24.10.2015
Lars Syll:
Macroeconomic uncertainty.
Why did the financial crisis of 2007-08 hit most laymen and economists
with surprise? The answers ranges from the exaggerated mathematization of
economics, to irrational and corrupt politicians. But the root of the problem
ultimately goes back to how we look upon the data we are handling. Dynamic
Stochastic General Equilibrium, New Synthesis, New Classical and New
‘Keynesian’ are treated as if drawn from a known
‘data-generating process’. This mythical ‘data-generating
process’ should describe the variables of our evolving economies as
drawn from an urn containing stochastic probability functions with known means
and variances. Keynes: but often we simply do not know. Many activities,
relations, processes and events are of the Keynesian uncertainty-type. Some
macroeconomists pretend that uncertainty can be reduced to risk.
“Fooling people into believing that one can cope with an unknown economic
future in a way similar to playing at the roulette wheels, is a sure recipe for
only one thing — economic catastrophe!”
‘rttck’: Banks always fail down in the end, because there
are no efficient (financial-)markets in the longer run. “Since 1980 (and
1999) banking is a betting industry working against their customers using their
capital.” E. Kakarot-Handtke: Stop knowing nothing, start
knowing something. Neither the economist, nor the deciding individual, can
fully pre-specify how people will decide when facing uncertainties and
ambiguities. We have rising unemployment and some economists say that the wage
rate must be lowered, while others say it must be raised.
“Orthodoxy means knowing nothing and
Heterodoxy means being proud of knowing
nothing.”. Blog
LARS P. SYLL,
28.10.2015
Lars Syll:
Some unfounded expectations of economic theory.
J. Habermas: The laws stated by standard economics have little
information content. Theories of rational choice claiming empirical-analytic
knowledgeare open to the charge of Platonism. E. Kakarot-Handtke: the
hard-core propositions of standard economics are taken to be true and
irrefutable by their adherents. Habermas, Albert, Robinson, and Syll have to
be criticized for elaborating endlessly on model Platonism and not putting
economics on new rock-solid axiomatic foundations. Blog
LARS P. SYLL,
9.11.2015
Lars Syll:
Mainstream economics — nothing but pseudo-scientific cheating.
Many mainstream economists try to advance Science through the use of
‘as if’ modeling assumptions and ‘successive
approximations’. Use of simplifying or unrealistic assumptions in
modeling empirical sciences is OK if the assumptions
made are not unrealistic in the wrong way or for the
wrong reasons. If the assumptions made are known to be
descriptively totally unrealistic (‘rational
expectations’) they are totally worthless for making empirical inductions.
“Theories are difficult to directly confront with reality. Economists
therefore build models of their theories’
[…] ‘representations that are directly examined and manipulated to
indirectly say something about the target systems.” “[…]
robust theorems are exceedingly rare or non-existent in macroeconomics.”
Constructing minimal macroeconomic ‘as if’ models or using
microfounded macroeconomic models as ‘stylized facts’ somehow
‘successively approximating’ macroeconomic reality, is rather
unimpressive. “Many of the model assumptions standardly made by neoclassical
macroeconomics are restrictive rather than harmless”
E. Kakarot-Handtke: Do not moralize — simply beat them.
A. Konnopka: The fundamental problem with mainstream economics is the use
of wrong mathematics, i.e. using the form y = f(x) due
to an undynamic view on the economic world. Instead, economy must be seen thru
the eyes of complexity theory involving phenomena like interdependencies and
feedback loops, using the form xn+1 =
f(xn), which in most cases cannot be
approximated by y = f(x) mathematics. Mainstream economics has generated
an intellectual parallel universe.
Real-World Economics Review Blog,
16.11.2015
Lars Syll:
The model of all economic models (wonkish).
Mainstream economists want
agents acting in an optimizing (rational) way to satisfy given,
stable and well-defined goals. They ground their models on a set
of core assumptions (CA) — describing the agents as
‘rational’ actors — and a set of auxiliary
assumptions (AA). Together CA and AA make up
an ur-model (M) of all mainstream neoclassical economic
models. The core assumptions
typically consist of: CA1
Completeness — rational actors are able to
compare different alternatives and decide which one(s) s/he
prefers; CA2 Transitivity
— if the actor prefers A to B, and B to C, he must also
prefer A to C; CA3
Non-satiation — more is preferred to less;
CA4 Maximizing expected
utility — in choice situations under risk
(calculable uncertainty) the actor maximizes expected utility;
CA5 Consistent efficiency
equilibria — the actions of different
individuals are consistent, and the interaction between them
results in an equilibrium. This means instrumental
rationality — choosing consistently the preferred
alternative (best consequences given his goals). The model also
typically has a set of auxiliary
assumptions, spatio-temporally specifying
the kind of social interaction: AA1 who are the
actors and where and when do they act;
AA2 which specific goals do they have; AA3
what are their interests; AA4 what kind of expectations
do they have; AA5 what are their feasible actions;
AA6 what kind of agreements can they enter into;
AA7 how much and what kind of information do they
possess; AA8 how do the actions of the different
individuals/agents interact with each other. By a
reductionist-individualist methodological approach, macroeconomic
phenomena are given microfoundations. Mainstream neoclassical
economists usually use these axiomatic core assumptions to set
up further ‘as if’ models.
As the real world is fuzzy, vague and
indeterminate, these axiomatic-deductivist systems are a poor
guide for action in real-world systems, and the law-like core
assumptions are highly questionable.
Most mainstream economic models are abstract, unrealistic and
presenting mostly non-testable hypotheses.
If theories and models do not tell us anything of the world we
live in, then why should we waste time on them?
E. Kakarot-Handtke: The fatal methodological fault of
orthodox and heterodox economists is the
social science delusion. There is no elementary and evident
proposition about human behavior, except that it is target-oriented.
The vacuousness of the constrained optimization axiom is
not the fault of the axiomatic-deductive
method. Both orthodox and heterodox economists are without
a sound theoretical foundation.
Larry Motuz: Human behavior is targets-oriented —
specify them and measure them.
Dave Taylor: The answer to whether Lars was attacking
economists axioms or the “deduction from names” method
itself: in a changing world, both! This undermines
Egmonts taking the
axiomatic-deductive method as
itself axiomatic and his insistence on the
need for structural axioms in the form of equations insufficient.
K.-H.: Statements about how the economy works have to be (i)
logically coherent and (ii) in principle
directly or indirectly comparable with facts.
To say that economics cannot (in principle) satisfy logical and
material consistency is to say that economics cannot be a science.
K.-H.: For the economy as an open system, the concept of
equilibrium is inapplicable and the whole neoclassical axiom set is
inadmissible.
Real-World Economics Review Blog,
5.12.2015
Egmont Kakarot-Handtke:
How the intelligent non-economist can refute every economist hands-down.
Most non-economists tend to think that economists know what
they are talking about when they use specific terms like income,
profit, capital, market equilibrium, and so on. This is not the
case. What follows from the well-documented fact that
the representative economist has no idea
of what profit is? Quite simple: if the
core concept profit is false then the whole economic theory/model
is false. This holds for the Walrasian, the Keynesian, the Marxian,
and the Austrian approach.
EconoPhysicsForum,
17.12.2015
Erik S. Reinert:
Capitalism collapses when money flows to the financial sector per se.
“It is normal that capital floods to the newest and most
profitable industries that display the highest rate of technical change
and growth”. But when money flows to the financial sector per se,
as if finance were an industry, capitalism collapses. We should
understand the need to control the financial
sector. E. Kakarot-Handtke: Which
breakdown? For the breakdown, no crisis and no
criminals and no banksters are needed.
H. Henderson: See our expert seminar/official UN report on
“Reforming Electronic
Markets and Trading”.
Real-World Economics Review Blog,
7.1.2016
Egmont Kakarot-Handtke:
Which breakdown?
Comment on Erik S. Reinert on
“Capitalism collapses when money
flows to the financial sector per se”. “Capitalism breaks
down because of immanent logical necessity
(no crisis and no criminals and no banksters needed)
as soon as private and/or public households
start to redeem their debt in the
aggregate”. This results from the correct profit theory.
The intellectual breakdown of economists long precedes the factual
breakdown of the market economy.
AXEC
7.1.2016
Simon Wren-Lewis:
Heterodox economists and mainstream eclecticism.
Some of the heterodox economists require mainstream economics to
be beyond redemption. You have to microfound an aggregate macro model,
and that requires a lot of skill and practice. Heterodox economists
misdirect their fire when they accuse mainstream macro of being
inescapably narrow in its assumptions.
Ramanan: “That you have to microfound it
is a dogma of the subject.”
E. Kakarot-Handtke: Confused Orthodoxy vs. confused Heterodoxy.
Comment on “Heterodox economists and mainstream eclecticism”.
Scientific research is in fact a continuous discussion of the
formal consistency (relating to the logical
cohesion) and material consistency
(agreement of observations with theories). Popper: science is an upward
spiraling two-step process of conjecture and either refutation or
eventual admittance. A proof of one inconsistency is
sufficient for the rejection of the whole theory/model. Logical
consistency of a theory/model is secured by applying the
axiomatic-deductive method. Syll's mistake
consists in not only rejecting orthodoxy, but also the axiomatic-deductive
method. Inconsistency cannot be idealized as pluralism or eclecticism.
The Orthodox microfoundation approach is axiomatically flawed, and
because of this ALL variants of DSGE models are false.
K-H: Lars Syll creatively destructs Wren-Lewis. Comment on
“Heterodox economists and mainstream eclecticism”.
1. Destruction: There is no such thing as an equilibrium
in the economy.
2. Keynesian Revolution 2.0: There is no remedy except to throw over the
axiom.
3. Creation: The new set of hard core propositions must not
contain the concepts of equilibrium and constrained optimization —
it is macrofounded instead of microfounded.
K-H: Lousy scientists. Comment on “Wren-Lewis and the Rodrik
smorgasbord view of economic models”. We should not permanently
keep the issue safely in the no-mans land between true/false, where
“nothing is clear and everything is possible.” (Keynes).
Popper's ‘conventionalist stratagem’ amounts to the
application of all possible communicative means to prevent a clear-cut
true/false outcome. Wren-Lewis and Rodrik are not the exception but the
rule.
Merijn Knibbe: There is no research program to
even measure utility. Orthodox models do not know unemployment.
Government consumption (education and the like) is generally treated as
‘wasteful’. The definition of capital in the models is not
consistent with the definition of capital in statistics (distinguishing
between produced and unproduced capital). Whatever variable you look at,
the models are deeply, deeply flawed.
Blog
mainly macro,
15.1.2016
Chris Dillow:
Against Anti-Economics.
We have to complain about
ideologically-motivated attacks on conventional economics.
E. Kakarot-Handtke: Its not the ideology,
its the methodology! Economics in effect
stagnates since Adam Smith. At the moment, orthodox economics does not
satisfy scientific criteria, neither does Heterodoxy. See
Lars Syll creatively destructs Wren-Lewis.
K.-H.: What is economics? Economists never came to grips with
profit and hence fail to capture the essence of the market economy.
K.-H.: What are economists? J.S. Mill: “A scientific
observer […] is not an adviser for practice.”
K.-H.: “people who are utterly confused about the pivotal concept
of their discipline claim to be scientists and tell politicians and the
general public how to run the economy.”
Blog
Stumbling and Mumbling,
19.1.2016
Asad Zaman:
Is there a core of heterodox economics that we can all believe in?
In January 1997, several prominent macro-economists presented
their takes on the issue of “Is There a Core of Practical
Macroeconomics That We Should All Believe?” In their papers,
we find a host of confusions and contradictions. After the Global
Financial Crisis, none of the core beliefs appear to be tenable. Only
the emergence of an alternative paradigm can dislodge prevailing
paradigms. For building consensus, we should start with moral
considerations, history, and the scope of the government.
E. Kakarot-Handtke:
Economists do not understand how the market system works. Every thinking
economist is heterodox by default, but how do we proceed from here?
In theoretical economics, scientific standards are to be observed.
The task of economics is not to explain social sciences, but to find out
how the actual economy works. Zamans proposals remain in the sphere of
political economics.
‘Jeff’:
Fundamental laws of economics. 1) Total private purchases = total
revenue from private sources. 2) Demand = money supply of unsatiated +
satiation requirements of any earning over the satiation cutoff. 3) When
profit motive aligns with the common good, free markets work well, and
when they are counter to the public good, government action is required.
4) Supply curves are usually well behaved and less supply is offered
to the marketplace on price decreases. 5) There is no a-priori equilibrium
point.
Real-World Economics Review Blog,
25.1.2016;
Egmont Kakarot-Handtke:
How to restart economics. A Comment on Jeff on “Is
there a core of heterodox economics that we can all believe in?”
AXEC: New Foundations of Economics,
29.1.2016
Asad Zaman:
Fundamental Flaws of Conventional Economics.
I recently asked if there is a “CORE of heterodox
economics”. But before constructing an alternative paradigm,
we must clear away the debris of the ruins of the conventional
paradigm. When the errors of the conventional approach become obvious,
we should not waste time with new proofs that they are fallacious.
Logical positivism: scientific knowledge should only be based on
observations (facts) and logic. But the foundations of economics
were never revisited. Positivist foundations for econometrics have led
to a seriously defective methodology. Conventional economic theory is
a normative theory (concept of ‘scarcity’), and not a
positive one. Empirical Failures: 1) Economic theory
of consumer behavior is completely wrong as a descriptive
theory. 2) Economic theory of the firm is completely
wrong as a description of firm behavior.
3) Economic theory of price determination via
equilibrium between supply and demand is
completely wrong. 4) Why should we discuss theories which take
all 3 of these basic building blocks for granted?
We must answer the following questions: 1. Why did logical positivism
become so popular? Why do most heterodox economists
still believe in some key propositions of
logical positivism? 4. As
preferences are internal to the heart and
unobservable, they cannot be used in scientific
theories — Samuelson's idea of using the observable
Choices instead cannot eliminate the unobservable preference from
economic theories.
Real-World Economics Review Blog,
29.1.2016
Jose Coronado:
What's Wrong with Heterodox Economics?
In a paper by Leonhard Dobusch and Jakob Kapeller,
citation practices and their
relationship with the performance of economic journals are
discussed. Heterodox and orthodox journals are
biased in favor of 3 citation methods. “The problem
boils down to
a) choosing between acknowledging a pluralistic approach of economic
inquiry and distancing ourselves from mainstream economics,
or b) use a language that allows us to communicate to orthodox
economists but shuts down attempts to find completely new ways to
carry out economic research.” This leads to a
self-marginalization of heterodox economists
and makes it hard for the profession to acknowledge the existence of
bad practices.
Citing Joan Robinson about teaching a student: Before ever he does
ask, he has become a Professor, and so sloppy habits
of thought are handed on from one generation to the
next.”
Julian Wells advocates an “automatic rejection of any
work that depends on estimating multiple regression equations”.
E. Kakarot-Handtke: in principle, the
proof of one inconsistency should be enough
to refute orthodox economics. A new economic paradigm has to be free
of the basic assumptions of orthodoxy. EKH: Standard economic
theory is provably false (e.g. maximization,
supply-demand-equilibrium).
New School Economic Review ,
19.2.2016
"Ikonoclast":
Turnbull opposes affordable housing.
From Egmont Kakarot-Handtke, “Mathematical Proof of the
Breakdown of Capitalism”:
Dimitri O. Ledenyov, Viktor O. Ledenyov:
Precise measurement of macroeconomic variables in time domain
using three dimensional wave diagrams.
The Article considers a research problem on the
precise measurement of the macroeconomic
variables changes in the time domain in the macroeconomics
science. We propose to use the three dimensional (3D) wave diagram
in the macroeconomics science for the first time, aiming to
accurately characterize and to clearly visualize
the GIP(t)/GDP(t)/GNP(t)/PPP(t) dependences changes in the
time domain. We explain that the three dimensional (3D) wave
diagram in the macroeconomics science has been created, using the
theory on the continuous-time waves with the rotating polarization
vector in the electrodynamics science. We show that the three
dimensional (3D) wave diagram in the macroeconomics science can be
used to accurately characterize and finely display the GIP(t),
GDP(t), GNP(t), PPP(t) dependences changes in the time domain in
the two possible cases:
1) the continuous-time waves of GIP(t), GDP(t), GNP(t), PPP(t) and
2) the discrete-time waves of GIP(t), GDP(t), GNP(t), PPP(t).
We conclude that an introduction of the three dimensional (3D) wave
diagram in the macroeconomics science can help to solve a challenging
research problem on the precise measurement of the macroeconomic
variables changes in the time domain.
MPRA
Paper 69609,
22.2.2016
Thomas Palley:
Self-Protectionist Moment: Paul Krugman protects himself and the
establishment.
Paul Krugman's new article (“A Protectionist
Moment?”) inadvertently spotlights all that is wrong with
the economics profession through the lens of the trade debate.
The economics elite is moving to reinvent itself with a
combination of minor backpedaling and its own studies
acknowledging damage by the globalization. The policy
recommendation is we must stay the course because we are now
locked-in and have few options. Critical economists like Robert
Scott of the Economic Policy Institute have persistently tallied
the economic costs of globalization to the US economy for over
two decades.
Real-World Economics Review Blog
11.3.2016
Lars Syll:
How to get published in ‘top’ journals.
Citing Paul Halmos:
Menzie Chinn:
Thinking about Wages, Inflation and Productivity and Capitals Share.
The WSJ reports: “... firms will react to higher
labor costs by raising prices, pushing inflation above the central
banks 2% target.” Cast in a slightly different light:
Ceteris paribus, lower productivity growth does imply faster
inflation. Unit labor costs cannot continue to rise faster than prices
indefinitely. The Heritage Foundations James Sherk has recently argued
that real compensation and productivity track each other very
well.
Comment by E.K-H, 10.6.: Economists' profit and market theory
have fatal defects. They have to be replaced the formally and empirically
correct price, employment, and profit theory
as sketched here. Profit and profit distribution as well as profit and
investment constitute a self-reinforcing feedback loop.
What holds for the profits on the firms level (productivity or low wages
or market power) does NOT hold for the economy as a WHOLE.
The ultimate cause of unemployment is economists' incompetence.
Blog
Econbrowser,
8.6.2016
Jared Bernstein:
Do economists understand economies?
Almost a decade after a deep recession that “no one
saw coming”, Greg Mankiw presents five different diagnoses,
ranging from mismeasurement to weak demand to “policy
missteps”. “I have no idea which one is right”.
Could it be the case that economists dont understand economies?
We must ask ourselves not just why weve underperformed around
the Great Recession and recovery, but also why weve been at
full employment only around a third of the time since 1980.
Whats gone wrong? — Old habits correlations die hard.
The word ‘temporary’ doesn't mean what you think it
means. The assumption that more international trade is always a
plus has led many economists to miss problems in global macro.
Finance is much more than an intermediary. Many politically
motivated bad ideas posed as economic analysis. Fiscal austerity
explains the slow recovery. Dean writes: “We lost a huge
amount of demand when the housing bubble collapsed and there is
nothing to replace it”.
Comment by E. Kakarot-Handtke: The fatal fault lies in the fact that
most economists argue from the micro level
upwards to the economy as a whole. And here the
fallacy of composition regularly slips
in. We need a formally and empirically correct price, employment,
and profit theory. My complete and testable employment theory is
systemic and entirely free of behavioral assumptions. The factor
cost ratio embodies the price mechanism. Contrary to conventional
wisdom, overall employment INCREASES if the average wage rate W
INCREASES relative to average price P and productivity R. The
correct profit equation (without
import/export and government) reads: monetary profit =
distributed profit + investment expenditure - monetary
saving. OVERALL profit and by consequence the
income distribution has NOTHING to do with
productivity or low wages or market power, which affect
only the DISTRIBUTION of overall profit BETWEEN firms.
Economists got the Phillips curve and the concept of the
‘natural rate of unemployment’ provably wrong.
On The
ECONOMY
JARED BERNSTEIN BLOG,
21.6.2016
Asad Zaman:
ET1% — Economic Theory of the top 1%.
Comment on Lars Sylls „Mainstream economics — a
pointless waste of time”.
The elite, the top 1%, are faced with the necessity of
creating theories which show that policies which favor their
interests are actually benefical for all,
or for a majority. Let us label a theory
to be ET1% — an Economic
Theory of the top 1% — if it shows a policy to be
favorable for the majority, when in fact the policy actually
favors the top 1%. Now if we consider
conventional economic theory, it is easy to show that nearly all
of it is ET1% — it is DESIGNED to prove that policies which
favor the top 1% are beneficial for all.
It is clear that ET1% does extremely well what it is
designed to do: to deceive the majority into agreeing with,
accepting, and voting for policies which actually harm their
own interests, and help the top 1% get even richer. My earlier
post on the The Keynesian Revolution and the Monetarist
Counter-Revolution clarifies this perspective on economic
theories in the historical context of the 20th century.
Comment by Larry Motuz: &bdsquo;D: Consider the QTM quantity
theory of money. By declaring money to be a veil, we make it
impossible to think about the power of money creation, and how
it enriches the wealthy, at the expense of the rest.”
Money is not a veil if only because what one can afford to
purchase has no relationship at all to what one can afford to
purchase.
Comment by E.K.-H.::
I would like to know which one of the four different heterodox
profit theories is correct.
Monetary profit is objective. Value is a subjective concept.
It is structure first and behavior second. This is why economics
has to be based upon objective-structural axioms.
.
Real-World Economics Review Blog,
30.6.2016
Raphaële Chappe:
General Equilibrium Theory: Sound and Fury, Signifying
Nothing?
Does general equilibrium theory sufficiently enhance our
understanding of the economic process to make the entire exercise
worthwhile, if we consider that other forms of thinking may have
been ‘crowded out’ as a result of its being the
‘dominant discourse’? What, in the end, have we really
learned from it?
By being compatible with so many possibilities,
the theory lacks explanatory relevance,
providing instead a language through which one can say both too
much and too little. It lacks completely any important aspects of
real-world markets. General equilibrium theory
does not in itself offer much
insight.
Comment by E.K-H: As a matter of principle, there is no
need to refute every single proposition of an elaborated
theoretical superstructure — it suffices to ‘throw
over’ the axioms. But this destructive first step must be
followed by a constructive second step. At first economists
have to throw over Weintraub's orthodox set of six axioms.
The methodological revolution in economics consists in the
switch from
behavior-centered bottom-up (subjective)
microfoundations to structure-centered
top-down (objective) macrofoundations. But Keyness two
erroneous macroeconomic equations (Y=C+I, S=Y-C) have to be
replaced. For the elementary pure consumption economy,
three objective structural axioms
suffice: A1. YW=W·L, A2.
O=R·L, A3. C=P·X. In contrast to human
behavior, the monetary economy has an
underlying structure which is given
in the most elementary case by A1 to A3. Our task is to define
the foundations of a materially and formally consistent economic
paradigm.
Blog
Institute for New Economic Thinking ,
16.8.2016
Adair Turner:
Demystifying Monetary Finance.
The debate about so-called helicopter money is burdened by
deep fears and unnecessary confusions: some worry that monetary
finance is bound to produce hyperinflation; others argue that,
in terms of increasing demand and inflation, it would be no more
effective than current policies. Both cannot be right.
The serious argument against monetary finance lies not in the
technicalities of future implicit taxes, but in the danger that
if we break the taboo and treat monetary finance as an acceptable
option, politicians will be tempted to draw again and again from
the well of monetary finance.
Comment by E.K-H: Walrasians argue from unacceptable
microfoundations, and Keynesians argue from false
macrofoundations. Unemployment is ultimately
the result of theory failure. In order to achieve
full employment, using
the price mechanism greatly reduces the
known drawbacks of deficit spending/helicopter
money. Blog
Institute for New Economic Thinking ,
17.8.2016
David Ruccio:
Phlogiston, the identification problem, and the state of macroeconomics.
Mainstreamer Paul Romer criticizes that
macroeconomics “has gone backwards” for
more than 3 decades. The identification problem:
with a supply-and-demand model of a market, it is not enough, in
attempting to identify the two different supply and demand equations, to
solely use observations of different quantities and prices. In particular,
its impossible to estimate a downward slope (of the demand curve) and an
upward slope (of the supply curve) with one linear regression line
involving only two variables: both supply and demand curves can be shifting
at the same time. Romer: many mainstream economists rely on models that
require and presume exogenous shocks — imaginary shocks, which
„occur at just the right time and by just the right amount”
(hence phlogiston) — to generate the desired results. The issue with
phlogiston is that it cant be directly measured. Nor can many of the other
effects invoked by mainstream economists. Modern mainstream economics has
two identification problems — one in the imaginary solution of the
models, the other with the imagined purity of the mathematics. What is
often taken to be the cutting edge of modern macroeconomics has become
increasingly flawed for more than 3 decades.
Comment by E. Kakarot-Handtke: Methodologically, the
maximization-and-equilibrium approach has
always been axiomatically unacceptable, but
economists swallowed it. The microfoundations
approach has already been dead in the
cradle. Tthe present generation of economists cannot make a significant
contribution about how the actual economy works.
Real-World Economics Review Blog,
22.9.2016
Marc Lavoie:
Rethinking Macroeconomic Theory Before the Next Crisis.
While many countries throughout the world have faced severe
financial crises over the last decades, and while the Japanese
stagnation and the 1997 Asian financial crisis did induce some
additional interest for the introduction of banking and finance in
macroeconomic theory, it is only with the advent of the US subprime
financial crisis that macroeconomic and monetary theories put
forward by mainstream economists have started to be questioned.
Comment by E.K-H: Stigum (1991): “In order to tell the
politicians and practitioners something about causes and best means,
the economist needs the true theory
or else he has not much more to offer than educated common sense or
his personal opinion.” Without the true theory, economists do
not understand how the actual monetary economy works. Keynes
discarded the draft chapter dealing with profit. Desai in the
Palgrave: “A satisfactory theory of profits is still
elusive”. There is trouble ahead for ALL of economics.
Blog
Institute for New Economic Thinking ,
23.9.2016
David Glasner:
Price Stickiness Is a Symptom not a Cause.
“The role of price stickiness or price rigidity
in accounting for involuntary unemployment is an old and
complicated story.” Economists before Keynes agreed about
the Great Depression that, in principle, if workers were willing
to accept a large enough cut in their wages, they could all get
reemployed. Economists like Ludwig von Mises attributed high
unemployment to an unwillingness of workers to accept wage cuts
and to various other legal barriers preventing the price
mechanism from operating to restore equilibrium in the normal
way. Keynes argued that something wrong with standard
microeconomics: price adjustments cant ensure that overall
economic equilibrium is restored because the level of employment
depends on aggregate demand, and if aggregate demand is
insufficient, wage cutting wont increase aggregate demand. If
all trading takes place at the equilibrium set of prices, the
economy will be in equilibrium as long as the underlying
“fundamentals” of the economy do not change. But in
a decentralized economy, no one knows what the equilibrium prices
are. There is no proof showing the conditions under which a
simple rule “raise the price in a market with an excess
demand and decrease the price in a market with an excess
supply” will in fact lead to the convergence of the whole
system to equilibrium. The real problem is that trading takes
place at disequilibrium prices and there is no mechanism by
which to discover what the equilibrium prices are. The casual
assumption that microeconomics somehow has a privileged and
secure theoretical position compared to macroeconomics and that
macroeconomic propositions are only valid insofar as they can
be reduced to more basic microeconomic principles is entirely
unjustified. So the assumption that “price stickiness”
prevents an economic system from moving automatically to a new
equilibrium after being subjected to some shock or disturbance
reflects either a misunderstanding or a semantic confusion. It
is the fact that individuals are engaging in transactions at
disequilibrium prices that prevents the system from moving
toward equilibrium. Term like “sticky prices”
represent an uncritical transfer of partial-equilibrium
microeconomic thinking to a problem that requires a system-wide
macroeconomic approach.
Egmont Kakarot-Handtke (1.10.): A brief rectification of
employment theory. Natural empirical tests during
the Great Depression amount to a clear refutation of
commonplace employment theory. A paradigm shift is needed. The
pure consumption economy with 3 axioms is the most elementary
economic configuration. Its employment equation is
| L= | 1 | · | I | with ρE≡ | C | , ρFC≡ | W | , W=WC=WI |
| 1-ρE·ρF | PI·RI | Y | PC·RC |
Brian Romanchuk:
Fun With Accounting Identities.
An article with the flamboyant title “The final
implosion of MMT” by Egmont Kakarot-Handtke caught my eye.
I think it provides another useful example of national accounting
works (or does not work...). His incorrect argument: “In the
most elementary pure consumption economy three configurations are
logically possible: (i) consumption expenditures are equal to wage
income, (ii) C is less than Yw, (iii) C is greater than
Yw. In case (ii) monetary saving Sw is
positive and the business sector makes a loss, i.e. Qw
is negative.”
The problem is that he has confused cash flow for profits.
In a two sector economy, if one sector has a financial
surplus, the other sector has to have a corresponding deficit,
since the sum of financial flows has to equal zero. A financial
flow is not the same thing as profits. For an economy divided
between a household sector and a business sector, there are two
main cash flows out of businesses that are not expenses, and which
create a wedge between cash flow and profits: (1) Dividend
payments are flows to the household sector that are not
expenses. (2) Capital expenditures by businesses are an
outward cash flow by businesses that do not immediately give rise
to an expense (but depreciation expenses in the future). These two
exceptions drive a lot of the action in the national accounts.
In particular dividends pose a lot of potential theoretical
difficulties. This is a rather silly example, but it underlines
why we always have to keep the cases of these flows in our
minds.
Bond Economics,
1.11.2016
Zidong An, Prakash Loungani:
Battling Unemployment: A Clear Win for the ‘Cycs’.
Two gangs of economists have been warring over the cause of
high unemployment in the United States. Paul Krugman, the ringleader
of the ‘cycs’ said the cause was cyclical — specifically,
inadequate aggregate demand; the ‘strucs’ blamed a host of structural
factors for the increase and predicted that unemployment would not
decline unless these were addressed. The evidence shows the cycs'
have been proved largely right.
Comment by E.K-H:
a sketch of the correct employment theory, starting from
the most elementary version of the objective
structural employment equation. Blog
Econbrowser,
3.11.2016
Peter Dorman:
The Hard Core of Neoclassical Economics.
Hypothesis: Neoclassical economics has evolved to serve an
ideological function which is promoted through incentives, the
selection of new adepts, and a conceptual hegemony: the purpose of
economics is to solve economic problems with minimum recourse to
politics.
Comment by AXEC/E.K-H.: Samuelson laid the foundations of
what developed into DSGE, which represents the momentary mainstream.
We know by now that DSGE in all its variants is an abysmal failure.
Now there is no such thing as an economics that fits the scientific
criteria of material and formal consistency. Some smart person
should have realized that it is inadmissible to take equilibrium
into the premises (petitio principii). The formal foundations
foundations of Keynesianism are conceptually and logically defective,
because Keynes missed a correct concept of profit. In Samuelsons
synthesis the defective Walrasian microfoundations and the defective
Keynesian macrofoundations were cobbled together. The two well
-balanced halves micro and macro did not logically fit together.
Samuelsons supply-demand-equilibrium will forever stand out as the
silliest model. His micro axioms are inconsistent, his macro axioms
are inconsistent, and thus synthesis of the two sets is als
inconsistent. Samuelson never figured out the methodological hard
core of economics. Blog
ECONOSPEAK,
5.11.2016
Peter Dorman:
It's Red Friday and Time to Discuss the Role of Exploitation in Profit.
You should read Fred Moseleys case for the labor theory of
value and the problems he has with Branko Milanovics interpretation
of it. This may seem like an exercise in Marxist antiquarianism, but
the underlying questions are important. My own view is that Fred is
absolutely correct in arguing for the centrality
of a theory of profit in any analysis of capitalist economies.
The time may also be coming to revisit the debate
between Marx and Proudhon over the issue of
profit and exploitation. Proudhon argued
for economies of scale, according to which workers would receive their
marginal products, but the sum did not exhaust the value of production.
Reformulating Proudhon for a more complex vision of the economy, one
that is multi-peaked and requires discovery and planning as well as
scale, is an important task. Blog
ECONOSPEAK,
25.11.2016;
The thing with profit and exploitation.
Comment on Peter Dorman on ‘Its Red Friday and
Time to Discuss the Role of Exploitation in Profit’.
General public is surprised: economists have NO idea about how
the monetary economy works. Whatever economists have said for or
against capitalism, communism or socialism
has been based upon provable false theories
about how the monetary economy works. Both orthodox and heterodox
economists believe that there is a fundamental antagonism between
capitalists and workers. But this rests on an optical illusion which
derives from the theory of the firm: an individual firm can increase
profit by lowering the wage rate. But as the FALLACY OF COMPOSITION
shows, this is NOT true for the economy as a whole. In the elementary
case, there is the unintended effect that if firm A
makes a profit by lowering the wage rate, firm B (=
the rest of the economy) makes a loss under
the initial macroeconomic condition that
total consumption expenditure is equal to total
wage income. Then the real wage of the workers of firm A
decreases and that of the workers of the rest of the economy increases.
The consequence is a redistribution of profit
between firms and a redistribution of output
between households. Thus CLASSES with a common interest DO NOT EXIST.
Profit of all capitalists together does not change. The real share of
output of all workers together does not change. Instead of a naive
exploitation we have a crossover exploitation.
AXEC: New Foundations of Economics.
26.11.2016;
Blog
Comments on: Egmont Kakarot-Handtke — The thing with profit
and exploitation.
Tom Hickey: &ldsquo;My point is that profit theory is
something worth debating, since economists don't agree on it and there
is good reason to think that it is a key piece in the puzzle.”
Profit from ownership of capital does look a lot like rents from land
ownership in that neither involve work and appear to expropriate value
above production cost. But “I don't think that EKH's argument is
obvious flawed”. The &ldsquo;division of surplus value is not
simply expropriation from labor by capital but more complicated since
different interests with different and fluctuating levels of power are
operative.”
EKH: 3 intertwined things have to be analytically kept apart:
(i) theory of Value, (ii) theory of Profit for the economy as a whole,
(iii) distribution of overall profit between sub-sectors and individual
firms. Law of Value: relative prices are
inverse to the productivities. This Law replaces the
Labour Theory of Value. In the pure consumption economy, OVERALL
profit depends on the expenditure ratio and the distributed profit ratio.
“The classical/neoclassical and Keynesian/Post-Keynesian Theories
of Value/Profit are provable false.”
Blog
Mike Norman Economics ,
26.11.2016
Peter Dorman:
The Identity-Equals-Causation Fallacy, Yet
Again.
For many economists, a trade deficit simply reflects the
net inflow of finance. You can see this in Gregory Mankiws latest
opinion piece: “Dont Worry About the Trade Deficit”.
It explains that the money leaving the country on the current
account (via trade) equals the money entering the country on the
capital account (via financial flows), and that the latter drives
the former. Mankiw is telling a story of causation over time,
what is identity instead. One way of looking at the current
account—capital account identity does not cause the other.
The international position of the US economy (measured either way)
is caused by the balance of all the influences on trade and finance.
The relative importance of these influences is empirically
determined, not by theoretical causal factors. The flaws in
Mankiws analysis come from a basic misunderstanding of
Econ 101.
Comment by AXEC/E.K-H.: The discussion shows that economists
still do not understand the mathematics of accounting.
Dorman gives as interrelation of balances: The trade balance equals
the sum of: the difference between the savings and private investment,
and the difference between the taxes and government spending
(NX ≡ (S-I) + (T-G)). If the trade balance is zero one arrives
at the good old I≡S of Keyness General Theory, which is false
since its inception but only Allais has realized it. Keynes' two
equations for the national income do not contain profit. At the heart
of national income accounting is an identity: the business sectors
deficit (surplus) equals the household sectors surplus (deficit).
Thus loss is the counterpart of saving and profit is the counterpart
of dissaving. When foreign trade is added, then — under the
condition of zero investment of the business sector and zero saving
of the household sector — the monetary profit of the business
sector is positive if the rest of the world runs a deficit, and
negative if the rest of the world runs a surplus (Qm=X-M).
There is an interrelation between the balances of the business
sector, the household sector, the government sector and the rest of
the world: Qm ≡
(I-Sm)+(G-T)+(X-M) for an open economy without
distributed profit. Blog
ECONOSPEAK,
3.12.2016
Peter Cooper:
Short & Simple 4:
Total Spending Equals Total Income.
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. Spending and the receipt of income occur every time
a good or service is bought and sold. No matter what the spending,
and no matter who does the spending, the amount spent will go to
somebody else as income. Comment by E.K-H: This statement is
materially/logically false. Blog
heteconomist,
10.12.2016
Peter Cooper:
The Monetary Circuit & Compatibility of Marx, Kalecki
and Keynesian Macro.
There appears to be a considerable degree of compatibility
between Marx and various Kalecki- and Keynes-influenced approaches
to macroeconomics. Here compatibility simply suggests that it is
possible to see them all as fitting within an overarching, open
analytical framework. In this post, the compatibility is
considered in relation to the private-sector monetary circuit of
a capitalist economy.
Comment by E.K-H: The “compatibility between Marx and
various Kalecki- and Keynes-influenced approaches to
macroeconomics” consists in the falsehood of
all these approaches. The four main approaches to economics
Walrasianism, Keynesianism, Marxianism, Austrianism are mutually
contradictory and axiomatically false. Debunking is necessary but
insufficient. We have to replace false Walrasian microfoundations
and false Keynesian/Marxian macrofoundations by entirely new
macrofoundations. What heteconomist offers
is as inconsistent as one can
get. Blog
heteconomist,
12.12.2016
Lars P. Syll:
The true nature of saving.
Comment by AXEC/E.K-H: Keynes had no idea of
profit and income. The correct profit equation for the investment
economy: Qm
≡ Yd + I - Sm (it gets
a bit longer when government and foreign trade is included).
The difference between investment and saving plus distributed
profit determines monetary profit.
Saving is never equal to
investment: the whole discussion, whether the Wicksellian
interest rate mechanism or the Keynesian income mechanism
establishes equality/equilibrium of saving and investment, is
entirely vacuous. It follows that (i) all I=S/IS-LM models
from Keynes/Hicks to the present are provable false; (ii) the
loanable funds/natural interest rate theory is provable false;
(iii) the classical and Keynesian profit theories are provable
false. Blog
Mike Norman Economics ,
9.1.2017
Mike Norman:
Lars P. Syll — Economics — an empty and inexact science.
AXEC/E.K-H on Lars Syll on Economics — an empty
and inexact science: Traditional Heterodoxy has NO alternative to offer
but is since 200+ years also in the story-telling business. Blog
Mike Norman Economics ,
13.4.2017
Noah Smith:
Why the 101 model doesn't work for labor markets.
A lot of people have trouble wrapping their heads around the
idea that the basic "Econ 101" model — the
single-market supply-and-demand model — doesn't work for
labor markets.
The labor market cannot be described in terms of
a "labor supply curve" and a "labor demand curve".
Demand curves aren't directly
observable. There's an identification problem with the curves.
The reason: because almost everything in the economy gets produced
with labor, if you find a whole bunch of new workers, they're also
a whole bunch of new customers, and the stuff they buy requires
more workers to produce. If you raise the minimum wage, the
increased income to those with jobs will also boost labor demand
indirectly. Labor is a crucial input in
so many markets that it needs to be dealt with
by analyzing all markets at once. Other reasons why the
Econ 101 theory isn't a good fit for labor markets:
1. Supply-and-demand graphs are for one single commodity; labor is
highly heterogeneous.
2. Supply-and-demand graphs are static models; because of labor
laws and implicit contracts, labor markets involve lots of
forward-looking behavior.
3. Supply-and-demand graphs are frictionless; labor markets
obviously involve large search frictions, for a number of reasons.
"The labor demand curve" is ontologically suspect — it
doesn't exist, it's not an actual thing.
Comment by AXEC/E.K-H: The Econ 101 labor market theory is
based on Weintraub's 5 axioms (microfoundation). About the
correct employment equation.
Blogspot
Noahpinion
Economics, nerdery, and distraction from productive activity ,
14.4.2017
David Andolfatto:
On the want of U.S. government debt.
Narayana Kocherlakota laid out why, presently, the U.S.
government should be issuing more debt, using the proceeds to cut
taxes, finance infrastructure spending, or both. It's a policy that
many economists have been advocating for some time. And while I
generally support the policy, I thought it would be useful,
nevertheless, to reflect on some possible counterarguments. Why a
deficit-financed tax cut or deficit-finance infrastructure spending
is a good idea. While the debt-to-GDP ratio (D/Y) is presently high
by historical standards, it's not unmanageable. The key is the
trajectory over time. D/Y cannot grow forever. Usually, a bad event
triggers a large increase in the public debt. Now for a couple of
counterarguments, one economic and one political.
MacroMania,
28.4.2017
Simon Wren-Lewis:
Raising the inflation target.
The argument for a higher inflation target is straightforward,
once you understand that the most effective and reliable monetary
policy instrument is to influence the real interest rate in the
economy, which is the nominal interest rate less expected inflation,
and that nominal short term interest rates have a floor near zero.
AXEC/E.K-H: The argument for a higher inflation target is
not straightforward, once you understand two things.
First interest theory
is axiomatically false. Because of this
monetary policy never had sound scientific
foundations. Second the same holds
for fiscal policy. The alternative is to
directly influence the macroeconomic price
mechanism, i.e. increase the average wage rate such that its
rate of change is greater than the rate of change of productivity.
Employment is co-determined by the relationship between average wage
rate, price and productivity. The proposal to increase price
inflation is the direct result of the complete lack of understanding
how the market economy works.
Blog
mainly macro,
16.6.2017
Nick Rowe:
Equalising the twin markups in a monopolistically competitive macroeconomy.
The first markup is the markup of Price over Marginal Cost,
required for individual firms' profit-maximisation
(P/M·C = [1/(1-1/e) with e =
elasticity of an individual firm's demand curve). The second
markup is the markup of Average Total Cost over Marginal Cost
(firms enter or exit the industry until profits are zero).
AXEC/E.K-H: Since marginalism is dead and the Walrasian axioms
are false, your treatment of profit is false.
In the most elementary pure consumption economy it always holds
Qm=-Sm (the
elementary Profit Law: loss is the counterpart of
saving and profit is the counterpart of dissaving). As capitalists
may consume too and workers may save too, the Profit Law turns to
Qm≡Yd-Sm.
Blog
Worthwile Canadian Initiative ,
29.6.2017
Mike Norman:
Chris Dillow — The crisis of positive-sum capitalism.
AXEC/E.K-H on Chris Dillow on 'The crisis of positive-sum capitalism':
Capitalism is neither a positive-sum nor a zero-sum game. From
three macro axioms (Yw=WL,
O=RL, C=PX),
two conditions (X=O,
C=Yw) and two definitions
(Qm≡C-Yw,
Sm≡Yw-C)
follows immediately
Qm≡-Sm,
i.e. the business sector's deficit (surplus) equals the household
sector's surplus (deficit). The pure consumption economy is a
zero-sum game. The Profit Law for the full economy:
Qm≡-Sm+I
+Yd+(G-T)+(X-M). The counterpart of an increased
public deficit (G-T) is either increased saving of the household
sector Sm or increased profit of the business sector
Qm or some combination of the two. Blog
Mike Norman Economics ,
9.7.2017
Mike Norman:
Tim Johnson — Why mathematics has not been effective in economics.
AXEC/E.K-H on Tim Johnson on 'Why mathematics has not been
effective in economics': What is missing among economists is a
proper understanding of what science is all about. Every
theory/model that contains a nonentity is a priori false.
There are no behavioral invariances. Economists overlook that
their subject matter is the structure and behavior of the
economic system and not questions about Human
Nature/motives/behavior/action. The correct approach is not
microfoundations but macrofoundations. Economics is not a
social science but a systems science.
Neil Wilson: Economics uses mathematics in the same way
medieval religions use Latin: to give an air of mystery and power.
AXEC/E.K-H: The problem of economists consists in the
incapacity to apply the straightforward arithmetic of accounting.
Drawing the balances is an ex-post exercise that is
not backed by a real world transaction. Profit is not
the income of capital but the mirror image of dissaving, i.e. the
household sectors increase of debt. Keynes foundational identity
“Income = value of output” is false. Blog
Mike Norman Economics ,
30.7.2017
Chris Dillow:
Fiscal Policy with a flat Phillips curve.
Agreeing that the Phillips curve is flat, low unemployment is
not stoking up wage inflation. But what are the policy implications
of this? Thinking of the concept of the structural budget deficit
(how much the government would borrow if the output gap were zero),
I suspect it has implications for fiscal policy. But what if the
output gap tells us nothing about future growth or inflation?
AXEC/E.K-H: The fact that the Phillips curve now seems to be
flat only tells one that it has been misspecified all along.
The Phillips curve has to be formulated not
as a behavioral relationshi but as a
structural-systemic relationship. The correct relationship
covers known arguments about how effective demand affects employment
as well as it embodies the macroeconomic price mechanism
Blog
Stumbling and Mumbling,
13.8.2017
David Andolfatto:
A monetary-fiscal theory of inflation.
AXEC/E.K-H: In Andolfatto's model deflation/inflation is in
line with the commonplace Quantity Theory which holds that a smaller
or broader composite called ‘quantity of money’
determines the price level. The familiar models are axiomatically
false. monetary theory has to be based upon
entirely new macrofoundations. The average stock of
transaction money as M=k·Yw,
with k determined by the payment pattern. The transaction formula reads
M=(k/ρE)·P·O,
and this yields the commonplace correlation between quantity of money
M and price P, but with M as the dependent variable. The market
clearing price is P=(ρE)·
(W/R). The ratio ρE establishes the link
between the product market and the money/capital market. If we have
deficit spending (ρE > 1), this yields a price
hike. If deficit spending
is repeated, the price remains on the elevated level but there is no
inflation — no matter how long the household sectors debt increases.
Inflation only occurs if the wage rate W increases in
successive periods faster than productivity R, which can happen at
any employment level. The current deflationary trend is caused by
the fact that wages lag behind productivity growth.
Goverments/central banks have to engineer a coordinated world wide increase
of the average wage rate.
MacroMania,
6.8.2017
Egmont Kakarot-Handtke:
The elementary economy.
Axioms define a paradigm. 6 axioms, 7 variables:
total income, wage rate, labor input, dividend, number of shares,
output, productivity, consumption expenditure, price, quantity
bought, profit (total, monetary, nonmonetary), saving.
AXEC
Egmont Kakarot-Handtke:
Profit — microeconomy vs. macroeconomy.
Microeconomically, profit
could depend on:
• exploitation of the workforce
• innovation
• risk-taking
• capital accumulation
• monopolistic practices
• market imperfections
• the combination of the factors of production
• wage rate and employment
• the talent of managers and the motivation of the workforce
• aggressive expansion at home and abroad
• bamboozling the consumer
• speculation, financial manipulation, fraud, cheating
• corruption, cronyism, gaming the system
• the loss of other firms.
EKH:
AXEC: Profit is the Key.
A long list of what the profit of a single firm depends on. They
do play a role for the distribution of profits between firms. By looking
at the economy as a whole, total profit of the
business sector is (in the elementary case)
determined by the relation
of consumption expenditure to total income and
by distributed profits in the period
under consideration. This can be verified with the accuracy of two
decimal places in the national accounting. Our structural axiom set
implies Qm ≡
C-Y+D·N (in the elementary case).
Profit is a factor-independent residual
and qualitatively different from wage income.
There is a close relation between profit/loss and the
expansion/contraction of credit for the economy as a whole. There is
no antagonism between total wages and total
profits. The systemic distribution of output has
nothing to do with the behavioral
marginal productivity. The microeconomic
observations of innovation and efficiency are
irrelevant for the profit of the business sector as a
whole. The familiar theories of income distribution
and wealth distribution are wrong.
AXEC,
2010
EKH:
Profit: One way to get it right, many ways to get it
wrong.
The monetary profit for the
business sector as a whole in the case of an
investment economy is
Qm ≡ YD + I -
Sm (the difference of business sectors
investment expenditures and household sectors monetary saving
plus distributed profits of the business sector).
AXEC,
2013
Egmont Kakarot-Handtke:
Lost and found: Recovering missing links.
![[Verzeichnis]](dir.gif)
(Egmont Kakarot-Handtke:)
AXEC® Home.
AXEC:
New Foundations of Economics,
2013/2014?
Axioms.
A set of 6 axioms.;
Terms of use.
“® The AXEC axiom set and its
logical implications is protected by
trademark. If you plan to apply it to the solution of theoretical
and practical problems or on any other occasion whatever in order to
generate income, profit, or scientific prestige please send a notification to
permission@axec.de.”
Profit.
About the fundamental economic concepts income and profit.;
Prospect.
“If you have more than proto-scientific opinions
about how the economy works, we possibly can do some new
economic thinking together.”;
Identity.
®AXEC's mission.;
AXECwiki.
(citations).;
Legal.
“Any duplication or use of objects such as images,
diagrams, sounds or texts in other electronic or printed
publications is not permitted without AXEC's agreement.”
axec.org:
AXEC New Foundations of Economics.
AXEC provides the correct formal foundations of
theoretical economics.
webwiki.com,
2013;
Formalization.
“Until recently, students of economics had only
the choice between the empty formalism of Orthodoxy and the
platitudinous common sense of Heterodoxy. Neither of them
achieved anything noteworthy of scientific value.
Formalization is not a major
problem of economics. Economists are the main problem
of economics because they do not
understand how to apply formalization properly.”
;
About Textbooks.
“Standard textbooks […] reflect and
reinforce the stagnation of contemporary economics on a
proto-scientific level.” “The only criteria
that count in theoretical economics are material and
formal consistency. Economic textbooks miss these
criteria.”;
Debate on IS-LM.
“Keynes's profit theory is wrong. The correct
relation reads Qret≡I-S, i.e.
retained profit is equal to the
difference of investment and saving. Since retained
profit for the economy as a whole is always different from
zero […] investment and saving
is […] never equal.”;
Continued Debate on Profit.
Comment by C. Masson on Assets and Debt.
EKH:
“a) Book-keeping is an ex post reflection of market
transactions therefore it cannot be used to explain what
happens in the real world markets.
(b) Book-keeping deals only with nominal magnitudes.
Important real quantities like employment or output are
invisible.
(c) The book-keeping approach is disconnected from price
theory, i.e. from the core of theoretical economics.
(d) The book-keeping approach cannot explain why a single
firm has the correct impression that an increase in
productivity or a wage cut increases profit while this
is not true for the economy as a whole.”
One “way leads from the interaction of prices and
quantities in the markets to the resulting nominal
magnitudes of book-keeping. The structural axiom set
captures real variables, prices and nominal variables and
their logical connection.” Since “changes of
the household and business sector's stocks of money are
defined symmetrically”, it “follows that
deposits (= central bank liabilities) and overdrafts
(= central bank assets) are always equal.”
“[…] it is a logical consequence of the
structural axiom set and the definition of money”
It further “follows that financial saving (19) and
retained profit (17) always move in opposite directions,
i.e. Qret+Sfi=0, i.e. the changes
of assets and liabilities always add up to zero.”
“[…] the IS-equality evidently cannot
hold.”
AXEC:
Eureka...
AXEC,
2014?;
The elementary economy
Nobody can do science without some clearly stated
premises. The AXEC axiom set is new in theoretical
economics. Each single axiom is objective and
elementary.
AXEC;
Geometrical Exposition of Structural Axiomatic Economics.
AXEC;
Neither Orthodoxy nor Heterodoxy.
AXEC;
Economy and Profit.
AXEC;
Material and logical consistency.
AXEC;
AXEC's mission.
AXEC
Egmont Kakarot-Handtke:
Archive Oct 2014.
AXEC: New Foundations of Economics.
![[Paper]](paper.gif)
The profit theory is false since Adam Smith. What about the
true distribution theory?
Working paper.
19.10.2014
![[PNG-Bild]](png.gif)
Egmont Kakarot-Handtke:
WikipediA:
AXEC09.png.
Monetary profit: Qm ≡ YD + I -
Sm
WIKIMEDIA COMMONS,
15.11.2014
Admin:
Saving=Investment Fallacy.
“Saving=Investment” as taught in basic textbooks
is a fallacy which can be traced to Keynes.
A Scientific
Economic Paradigm Project,
14.11.2014
Lars P. Syll:
Axiomatic economics — total horseshit.
Studying mathematics and logics is interesting and fun.
It sharpens the mind. In pure mathematics and logics we do not
have to worry about external validity. But economics is not
pure mathematics or logics. Its about society. The real world.
Forgetting that, economics is really in dire straits.
A comment by E.K-H.. Blog
LARS P. SYLL,
28.12.2014
Egmont Kakarot-Handtke:
Archive Dec 2014.
AXEC: New Foundations of Economics.
![[Comment]](comment.gif)
From opinion recycling to real scientific progress.
A general comment on
[The Slack Wire]-blog's content.
31.12.2014;
No choice.
Comment on
‘Mainstream macroeconomics distorts our understanding of
economic reality’.
31.12.2014;
Scientific thinking: Aristotle is right, Leijonhufvud is wrong.
Comment on
‘Mainstream macroeconomics distorts our understanding of
economic reality’.
31.12.2014;
Deflation, saving, and employment.
Comment on
‘Why does aggregate demand collapse?’.
31.12.2014;
The universal Profit Law and the multitude of unique historical
circumstances.
Comment on
‘Piketty and the elasticity of substitution;’.
31.12.2014;
Deconfusing confused confusers.
Comment on
‘Economic Realism’.
31.12.2014;
Still alive in some heads: equilibrium.
Comment on
‘Still dead after all these years general equilibrium theory’.
31.12.2014;
First fundamental law vs. Fundamental theorem of income distribution.
Comment on
RWER issue 69 on Piketty's Capital.
31.12.2014;
The profit theory is false since Adam Smith. What can you
expect from distribution theory?.
Comment on
RWER issue 69 on Piketty's Capital.
31.12.2014;
From behavior to structure.
Comment on
‘Why does aggregate demand collapse?’.
31.12.2014;
Listen to the EconoPhysicists.
Modern macroeconomics and the perils of using
“Mickey-Mouse” models.
31.12.2014;
Shocking: methodology is a tricky business.
Comment on
‘Study the shocks’.
31.12.2014;
Between the devil and the deep blue sea: on framing false alternatives.
Comment on
‘The DSGE emperor has no clothes. But he does have a hat.
And a rabbit.’.
31.12.2014;
Yes, orthodox economics is poor science, but can Heterodoxy raise hope?
Comment on
‘Modern macroeconomics and the perils of using
“Mickey Mouse” models’.
31.12.2014;
Throwing soap bubbles at time wasters.
Comment on
‘Microfounded DSGE models — a total waste of time!’.
31.12.2014;
Stop talking, start thinking.
Comment on
‘Seven things that economists could usefully do or
call for over the next several years’.
31.12.2014;
Funny folks in the big omnibus.
Comment on
‘Macroeconomic aspirations’.
31.12.2014;
Nonentity: the emptiness of economic thinking.
Comment on
‘Still dead after all these years — general equilibrium
theory’.
31.12.2014;
From theory collapse to economic collapse.
Comment on
‘Why does aggregate demand collapse?’.
31.12.2014;
Economics: science for the confused.
Comment on
‘DSGE is a plutocratic tool’.
31.12.2014;
Agenda pushers, hijackers, and scientists.
Comment on
‘DSGE is a plutocratic tool’.
31.12.2014;
Moral incompetence or scientific incompetence?
Comment on
‘University economics departments must share the blame’.
31.12.2014;
The pluralism of nonsense is still nonsense.
Comment on
‘Pluralism is not enough’.
31.12.2014;
Pluralism and the thickness of confusion.
Comment on
‘Pluralism is not enough’.
31.12.2014;
Pluralism and truth.
Comment on
‘Pluralism is not enough’.
31.12.2014;
Pluralism and the long shadow of Bentham.
Comment on
‘Pluralism is not enough’.
31.12.2014;
EconoPhysics and pluralism.
Comment on
‘Pluralism is not enough’.
31.12.2014;
Prophets of Preemptive Vanitization.
Comment on
‘Proper use of math in economics’.
31.12.2014;
History and methodology: no trouble of any sort.
Comment on
‘Proper use of math in economics’.
31.12.2014
Egmont Kakarot-Handtke:
The universal Profit Law and the multitude of unique historical
circumstances.
Comment on ‘Piketty and the elasticity of
substitution‘
AXEC: New Foundations of Economics,
31.12.2014
Egmont Kakarot-Handtke:
Archive Jan 2015.
AXEC: New Foundations of Economics.
Looking for suitable alternatives.
Comment on
‘Marginalising Heterodoxy hampers good teaching in economics’.
30.1.2015;
Wanted: The true theory.
Comment on
‘Economics curriculum reformulation’.
29.1.2015;
Naive arithmetic.
Comment on
‘NAIRU — more religion than science’.
28.1.2015;
Essentials of Constructive Heterodoxy: Say's Law.
Working paper.
28.1.2015;
No religion, merely incompetence.
Comment on
‘NAIRU — more religion than science’.
27.1.2015;
![[Comment]](comment.gif")
Substandard thinkers.
Comment on
‘Who is bullshiting who here?’.
26.1.2015;
The prophets of wish-wash, ignoramus et ignorabimus, and
preemptive vanitization.
Comment on
‘On abstraction and idealization in economis’.
23.1.2015;
Beauty or horseshit?
Comment on
‘On abstraction and idealization in economics’.
20.1.2015;
Income, profit, distributed profit: a radical simplification.
Comment on
‘The first of the great powers to reduce private debt will
be the world's next hegemon’.
19.1.2015;
Lost and found.
Comment on
‘Brad DeLong and the true nature of neoclassical economics’.
19.1.2015;
Refocusing the debt/profit issue.
Comment on
‘The first of the great powers to reduce private debt will
be the world's next hegemon’.
18.1.2015;
Growing debt is bad, but shrinking debt is worse.
Comment on
‘The first of the great powers to reduce private debt will
be the world's next hegemon’.
15.1.2015;
More error than trial.
Comment on
‘“New Keynesian” haiku economics’.
14.1.2015;
Keeping the focus on the basic issue.
Comment on modern-cikande on
‘Saving Equals Investment?’
13.1.2015;
Of birds and worms.
Comment on
‘“New Keynesianism” — neat, plausible and wrong’.
12.1.2015;
Economists for all seasons or just confused confusers?
Comment on
‘Krugman & Wren-Lewis flim-flamming on heterodox assaults
on mainstream economics’.
11.1.2015;
Groundhog Day (economics).
Comment on
‘Extraordinarily absurd things called “Keynesian”’.
9.1.2015;
Essentials of Constructive Heterodoxy: the market.
Working paper.
9.1.2015;
The Profit Law.
Comment on
‘Ditch marginal productivity theory once and for all’.
5.1.2015;
Stop the Zombie wars.
Comment on
‘Economic realism’.
5.1.2015;
From obscurity to enlightenment.
Comment on
‘Axiomatic economics — total horseshit’.
3.1.2015;
Total scientific Dadaism.
Comment on
‘Axiomatic economics — total horseshit’.
2.1.2015;
Humbleness does not help, but scientific imagination could.
Comment on
‘The hubris of economics’.
1.1.2015;
Lacking the Midas touch of science.
Comment on
‘Real world filters and economic models’.
1.1.2015;
Objection, your Honour! There is objective truth in economics.
Comment on
‘Understanding capitalism’.
1.1.2015;
What economists need now: the correct theory.
Comment on Paul Davidson.
1.1.2015;
No idealization, only misunderstanding and misconstrual.
Comment on
‘The Invisible Hand — a brilliant idealization proved
wrong by reality’.
1.1.2015;
Economists do not solve problems, they are the problem.
Comment on
‘Economists — not mathematics — solve economic
problems’.
1.1.2015;
Economic theory — as false as ever.
Comment on
‘Keynes — more important than ever’.
1.1.2015;
The axiomatic method is impeccable.
Comment on
‘Debreu and the Bourbaki delusion of deductive-axiomatic
economics’.
1.1.2015
Egmont Kakarot-Handtke:
Archive Feb 2015.
AXEC: New Foundations of Economics.
Replacing sand by granite.
Comment on
‘Macroeconomic foundations made of sand’.
28.2.2015;
Questions and answers about economics.
Comment on
‘I am a know-nothing’.
28.2.2015;
Essentials of Constructive Heterodoxy: money, credit, interest.
Working paper.
28.2.2015;
Real wages: toward an explanation.
Comment on
‘Falling real wages in the USA 20072014’.
28.2.2015;
United in the social science delusion.
Comment on
‘Microfoundations — contestable incoherence’.
26.2.2015;
Heterodoxy, too, is still in the wood.
Comment on
‘Money and Says law: on the macroeconomic models of
Kalecki, Keen, and Marx’.
22.2.2015;
The real limit of Heterodoxy.
Comment on
‘The real limit of public debt’.
21.2.2015;
Educating economists? Yes, but where is the scientific stuff?
Comment on
‘Greece and educating economists’.
20.2.2015;
How to solve almost any problem.
Comment on
‘Lucas bridge and the Ricardian equivalence fairy-tale’.
19.2.2015;
Multiplying confusion.
Comment on
‘Abba Lerner on Functional Finance and Ricardian equivalence’.
18.2.2015;
Nobody understands debt — including the shrinks.
Comment on
‘Debt myths debunked’.
18.2.2015;
The true nature of economists' confusion.
Comment on
‘The true nature of public debt’.
15.2.2015;
Better precisely right than roughly wrong.
Comment on
‘Public debt and Keynes paradox of thrift’.
13.2.2015;
Essentials of Constructive Heterodoxy: aggregate demand.
Working paper.
13.2.2015;
What does a market really look like?
Comment on
‘Finding equilibrium’.
11.2.2015;
From false to true.
Comment on
‘Finding equilibrium’.
8.2.2015;
Who rides the debt-tiger cannot dismount.
Comment on
‘The Hayekization of modern society’.
7.2.2015;
Forget equilibrium.
Comment on
‘Finding equilibrium’.
5.2.2015;
Economists — sloppy, stupid, or scientifically incompetent?.
Comment on
‘Greg Mankiw on loanable funds — so wrong,
so wrong’.
3.2.2015;
Deflation: better take the correct formulas.
Comment on
‘Will the ECB push Europe over the deflation cliff?’.
3.2.2015
Egmont Kakarot-Handtke:
Essentials of Constructive Heterodoxy: Money, Credit, Interest.
The goal of theoretical economics is to explain how
the monetary economy works. The fatal methodological defect
of Orthodoxy is that it is based on behavioral axioms. Yet,
no specific behavioral assumption whatever can serve as a
starting point for economic analysis. From this follows for
Constructive Heterodoxy that the subjective axiomatic
foundations have to be replaced. This amounts to a
paradigm shift. Nobody can rest
content with a pluralism of false theories. Based on a set
of objective axioms, all economic
conceptions have to be reconstructed from scratch.
In the following this is done for the theory of money.
MPRA
Paper 62471,
28.2.2015
Egmont Kakarot-Handtke:
Real wages: towards an explanation.
Comment on “Falling real wages in the USA
20072014”. The average real wage
depends on productivity R, the
expenditure ratio (ρE
> 1 means overall credit expansion), the
relative size of the investment good industry
Li/Lc, and the ratio
of distributed profit Yd to wage income:
Formel.
Blog
AXEC,
28.2.2015
Egmont Kakarot-Handtke:
Yes, Orthodoxy is incoherent but, unfortunately, Heterodoxy
also.
Comment on ‘A perverse intellectual
hierarchy’.
Blog
AXEC,
1.3.2015
Egmont Kakarot-Handtke:
Archive Mar 2015.
AXEC: New Foundations of Economics.
How to get rid of supply-demand-equilibrium.
Working paper.
31.3.2015;
Going beyond ink-blot association.
Comment on
‘Causes and Effects of Wage Growth’.
31.3.2015;
Black holes and white noise.
Comment on
‘Whats inside the neoliberal mind? Part 2 —
Marketfundamentalist Marxism, kind of’.
30.3.2015;
Confused confusers: how to stop thinking like an economist
and start thinking like a scientist.
Working paper.
29.3.2015;
Forget Krugman, forget Keynes, forget economists.
Comment on
‘Why Paul Krugman is no real Keynesian’.
27.3.2015;
Confounding the Quantity Theory and Say's Law.
Comment on
‘Money hoarding — an explanation of todays low
inflation’.
26.3.2015;
Kaput toys.
Comment on Nick Rowe on
‘Wren-Lewis Takes a Stab at It’.
25.3.2015;
Beyond methodological madness.
Comment on
‘On the value of theoretical models in economics’.
25.3.2015;
Vacuonomics II.
Comment on
‘A Quick Point on Models’.
23.3.2015;
The profit theory is false since Adam Smith. What about the
true distribution theory?
Working paper.
23.3.2015;
Principal problem solved.
Comment on
‘The principal problem of Political Economy’.
21.3.2015;
Primary and secondary markets.
Working paper.
20.3.2015;
As Keynes and my taxi driver said: We simply do not know.
Comment on
‘Jon Elster on deductivist modeling leading economics astray’.
20.3.2015;
Objective principles of economics.
Working paper.
20.3.2015;
Vacuonomics.
Comment on
‘Is the Walrasian Auctioneer microfounded?’.
19.3.2015;
Essentials of Constructive Heterodoxy: employment.
Working paper.
14.3.2015;
From proto-science to science.
Comment on
‘What is science?’.
12.3.2015;
Economists: stop dreaming and waffling and do your scientific homework.
Comment on
‘America can be a full-employment economy once again’.
10.3.2015;
Essentials of Constructive Heterodoxy: profit.
Working paper.
9.3.2015;
Complexity, scientific incompetence, and the art of asking the right questions.
Comment on
‘Economic Ignorance?’.
3.3.2015;
Yes, Orthodoxy is incoherent but, unfortunately, Heterodoxy also.
Comment on
‘A perverse intellectual hierarchy’.
1.3.2015
J.W. Mason:
A Quick Point on Models.
The test of a good model is whether it usefully captures some
of the regularities in the concrete phenomena. A lot of debate has
focused on whether there really is a physical quantity of capital.
We observe ‘capital" as a set of money claims. Their aggregate
value varies in relation to other observable monetary aggregates
over time and space. A component of that variation corresponds to
the behavior of a physical stock. We can describe it using models of
capital as physical stock. Other components require different models.
Egmont Kakarot-Handtke: Economists are convinced that what
they do is science. Keynes's two-liner about ‘saving =
investment’ holds only in the limiting case of zero profit.
When profit is not correctly defined, income is not correctly
defined, then saving is not correctly defined, and then distribution
is not correctly defined. Economic models do not satisfy the most
elementary methodological requirements.
Thornton Hall: “The actual analogous situation in
economics is not IS-LM, but, eg, an analysis of steel production in
an economy that has no iron.” If A (no iron), then B (no steel).
Although regularity has been observed, steel production cannot be
understood as the sum of mechanical ‘If A, then B’
propositions because steel production is a human activity.
Blog
The Slack Wire,
21.3.2015
Egmont Kakarot-Handtke:
AXEC: New Foundations of Economics.
2.4. Economics for economists.
31.3. How to get rid of supply-demand-equilibrium.
31.3. Going beyond ink-blot association:
Comment on ‘Causes and Effects of Wage Growth’
30.3. Black holes and white noise. Comment on ‘Whats inside
the neoliberal mind? Part 2 — Marketfundamentalist Marxism,
kind of’
29.3. Confused confusers: how to stop thinking like an economist
and start thinking like a scientist.
27.3. Forget Krugman, forget Keynes, forget economists. Comment on
‘Why Paul Krugman is no real Keynesian”
26.3. Confounding the Quantity Theory and Say's Law. Comment on
‘Money hoarding — an explanation of todays low
inflation”.
Blog
AXEC,
26.3.-2.4.2015
Egmont Kakarot-Handtke:
Archive Apr 2015.
AXEC: New Foundations of Economics.
Rubberneck's reality.
Comment on
‘Gödels theorems and the limits of reason’.
30.4.2015;
Essentials of Constructive Heterodoxy: behavior.
Working paper.
30.4.2015;
Essentials of Constructive Heterodoxy: institutions.
Working paper.
30.4.2015;
The Propensity Function as general formalization of Economic Man/Woman.
Working paper.
29.4.2015;
Make no mistake: there can be only one true theory.
Comment on
‘Received wisdom in macroeconomics’.
27.4.2015;
The synthesis of institution and math.
Comment on
‘Wicksell on the use of mathematics in economics’.
27.4.2015;
Walrasian double-blunder.
Comment on
‘On the irrelevance of general equilibrium theory’.
26.4.2015;
The insignificance of Gödel's theorem for economics.
Comment on
‘Gödels theorems and the limits of reason’.
23.4.2015;
When Ricardo saw profit, he called it rent: on the vice of parochial realism.
Working paper.
22.4.2015;
The emergence of profit and interest in the monetary circuit.
Working paper.
21.4.2015;
Economists kill the economy.
Comment on
‘Reality killed the Washington Consensus’.
20.4.2015;
The structural price mechanism.
Working paper.
20.4.2015;
Marginalism is the landmark of scientific incompetence.
Comment on
‘Limits of marginal productivity theory’.
19.4.2016;
Its the price and profit mechanism, stupid!
Comment on Simon Wren-Lewis on
‘Its ideology, stupid’.
19.4.2016;
Where advanced Heterodoxy — represented by
Steve Keen — took the wrong turn.
Comment on Lars Syll on
‘Physics and economics’.
19.4.2016;
Stylized facts and vacuous interpretations.
Comment on
‘The IMF on Investment since 2008’.
19.4.2015;
Economics vs. Sociology.
Comment on
‘On dogmatism in economics’.
19.4.2015;
Say's Law: a rigorous restatement.
Working paper.
19.4.2015;
The Law of Supply and Demand: here it is finally.
Working paper.
18.4.2015;
Unfit in all dimensions.
Comment on
‘Models, math and macro’.
18.4.2015;
Mortifying scientific headstands.
Comment on
‘The Coase Theorem’.
17.4.2015;
Essentials of Constructive Heterodoxy: money, credit, interest.
Working paper.
17.4.2015
Science or Circus Maximus?
Comment on
‘Economists — arrogant and self-congratulatory autists’.
16.4.2015;
Methodology — Marx, too, messed it up.
Comment on
‘On dogmatism in economics’.
15.4.2015;
Why Post Keynesianism is not yet a science.
Working paper.
15.4.2015
Reduced-form bricolage and sticky brains.
Comment on
‘Sticky Prices, Financial Frictions, and the Ben Bernanke
Puzzle’.
14.4.2015;
The intelligent student's predicament.
Comment on
‘Is there anything worth keeping in standard microeconomics?’.
14.4.2015;
Methodology as Force Majeure.
Comment on
‘Do not underestimate the power of microfoundations’.
12.4.2015;
Bygones are bygones.
Comment on
‘On the irrelevance of general equilibrium theory’.
12.4.2015;
Angels-on-a-pinpoint scholasticism.
Comment on
‘The Bernanke-Summers imbroglio’.
11.4.2015;
MIT dilettantes II.
Comment on
‘Bernanke-Summers Debate II: Savings glut, investment
shortfall, or Monty Python?’.
10.4.2015;
No difference.
Comment on
‘Whats the difference between heterodox and orthodox
economics’.
10.4.2015;
MIT dilettantes.
Comment on
‘The inbred Bernanke-Summers debate on secular stagnation’.
8.4.2015;
The common error of common sense: an essential rectification
of the accounting approach.
Working paper.
8.4.2015;
Lazy or stupid or both?
Comment on
‘Modern macroeconomics — an intellectually lazy ideology’.
6.4.2015;
Economics for economists.
Working paper.
2.4.2015;
Egmont Kakarot-Handtke:
Stylized facts and vacuous interpretations. Comment on
JW Mason on ‘The IMF on Investment since 2008’.
The correct employment equation for the
investment economy is:
employment increases with investment expenditures, increasing
expenditure ratio and increasing factor cost ratio under the
condition of product market clearing, if price and productivity
in the consumption and investment good industry as well as
distributed profit remain unaltered.
AXEC: New Foundations of Economics,
19.4.2015
Egmont Kakarot-Handtke:
Archive May 2015.
AXEC: New Foundations of Economics.
At the Robinson Line.
Comment on
‘Consistency and validity is not enough!’.
31.5.2015;
Hold the handle, not the blade.
Comment on
“Debunking the use of mathematics in economics;”.
29.5.2015;
Poor philosophy, poor science, poor job.
Comment on
“Adam Smiths visible hand”.
28.5.2015;
Who said what to whom — and does it matter?
Comment on
“Keynes ‘hadn't got round to it’”.
28.5.2015;
The intelligent layperson's guide through vacuonomics
Comment on
“Consistency and validity is not enough”.
26.5.2015;
Redemption and depression.
Working paper.
26.5.2015;
Settling the theory of saving.
Working paper.
26.5.2015;
Keyness missing axioms.
Working paper.
26.5.2015;
Intertwined real and monetary stochastic business cycles.
Working paper.
26.5.2015;
From one roadside ditch straight into the other.
Comment on
“Modelling consistency and real world non-coherence in mainstream economics”.
24.5.2015;
The calculating auctioneer, enlightened wage setters, and the
fingers of the Invisible Hands.
Working paper.
24.5.2015;
Increasing returns and stability.
Working paper.
24.5.2015;
The value of water and diamonds: back to square one.
Working paper.
24.5.2015;
General formal foundations of the virtuous deficit-profit symmetry
and the vicious debt deflation.
Working paper.
23.5.2015;
If anyone has better foundational equations, please come forward.
Comment on
“Why the ergodic theorem is not applicable in economics”.
21.5.2015;
Modern economics is dead.
Comment on Mark Blaug on
“Modern economics is sick”.
20.5.2015;
Mathiness and the Ur-blunder.
Comment on
“Paul Romer on math masquerading as science”.
20.5.2015;
Profit (not mathematics) is the key.
Comment on
“The fetishism of mathematics”.
20.5.2015;
The science that never was.
Comment on
“Paul Romer on math masquerading as science”.
18.5.2015;
Essentials of Constructive Heterodoxy: financial markets.
Working paper.
17.5.2015;
Market blunder.
Comment on
“Economics and the value of art”.
17.5.2015;
What scientists in all ages knew.
Comment on
“Why the ergodic theorem is not applicable in economics”.
16.5.2015;
No license for drivel.
Comment on Fred Zaman on
“Why the ergodic theorem is not applicable in economics”.
14.5.2015;
Formal and verbal description of the evolving economy.
Comment on
“Why the ergodic theorem is not applicable in economics”.
13.5.2015;
Einstein, Mill and the Starting Problem.
Comment on
“Why the ergodic theorem is not applicable in economics”.
12.5.2015;
Physics as obsessive windmill.
Comment on
“Why the ergodic theorem is not applicable in economics”.
11.5.2015;
Science and travesty.
Comment on
“Why the ergodic theorem is not applicable in economics”.
11.5.2015;
What economics is not about.
Comment on
“Why the ergodic theorem is not applicable in economics”.
11.5.2015;
Toolism! A critique of EconoPhysics.
Working paper.
11.5.2015;
The Big Bang Theory of economics.
Comment on
“Why the ergodic theorem is not applicable in economics”.
10.5.2015;
Matter matters: productivity, profit, and non-marginal factor prices.
Working paper.
9.5.2015;
Troubles with logic?
Comment on
“On the irrelevance of general equilibrium theory”.
8.5.2015;
Framing the economic discourse.
Comment on
“Seven principles to guard you against economics silliness”.
8.5.2015;
Framing the economic discourse.
Comment on
“Seven principles to guard you against economics silliness”.
8.5.2015;
Heterodoxy simply does not apply ergodicity.
Comment on
“Why the ergodic theorem is not applicable in economics”.
7.5.2015;
What are Walrasians waiting for?
Comment on
“On the irrelevance of general equilibrium theory”.
7.5.2015;
The epic ping-pong of empty problem and vacuous solution.
Comment on
“Transaction Cost Confusion”.
6.5.2015;
Exchange in the monetary economy.
Working paper.
6.5.2015;
Walras's vacuonomics.
Comment on
“Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the
economic statisticians and rent incomes”.
6.5.2015;
What you always wanted to know about rent and profit.
Comment on
“'Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney,
the economic statisticians and rent incomes”.
5.5.2015;
From PsySoc to SysHum.
Comment on
“Rational expectations — totally incredible bogus”.
5.5.2015;
Economics is not what most economists think it is.
Comment on
“Coase and Reality”.
4.5.2015;
Freaky games.
Comment on
“Coase and Reality”.
3.5.2015;
Neither truth nor beauty.
Comment on
“Rational expectations — totally incredible bogus”.
3.5.2015
Egmont Kakarot-Handtke:
Archive Jun 2015.
AXEC: New Foundations of Economics.
Economics, Gödel, and a would-be field day for math-Luddites.
Comment on
‘Its all over — Gödels incompleteness
theorems’.
30.6.2015;
The double crisis and the real question.
Comment on
“As it happened — Yanis Varoufakis intervention during
the 27th June 2015 Eurogroup Meeting”.
30.6.2015;
Major defects of the market economy.
Working paper.
29.6.2015;
The trouble with counting to 3.
Comment on Blissex on
“Keenonomics, aggregate demand/change of debt, and some misleading critique”.
27.6.2015;
Value — the Bermuda triangle for economic theories.
Comment on
“Economic Value is not Price”.
28.6.2015;
When numbers don't add up.
Comment on Merijn Knibbe on
“Keenonomics, aggregate demand/change of debt, and some
misleading critique”.
22.6.2015;
More than two centuries of waffling in the dark.
Comment on Nick Edmonds on
“Keenonomics, aggregate demand/change of debt, and some
misleading critique”.
21.6.2015;
Information and ignorance.
Comment on
“Information Matters?”.
20.6.2015;
Flight of ideas and the dead end of all econtalk.
Comment on
“Anti-Keynesianism — in most cases a sign of ignorance”.
19.6.2015;
From true/false to garbage-wrestling and back.
Comment on
“Speak for yourself, or why anti-Keynesian views survive”.
18.6.2015;
Keenonomics, aggregate demand/change of debt, and some misleading critique.
Blog reference.
17.6.2015;
Lost between pure fiction and parochial realism.
Comment on
“Why economic models constantly crash”.
16.6.2015;
Heterodoxy at the crossroads.
Comment on Rhonda Kovac on
“The Context-Dependency of Human (Economic) Behaviour”.
16.6.2015;
McCloskey and the lizard's tail.
Comment on
“Silly economics”.
15.6.2015;
Warning: Einstein can be hazardous to heterodox methodology.
Comment on
“Econometrics — rhetorics and realit”.
15.6.2015;
The art of start.
Comment on Bruce Edwards on
“The Context-Dependency of Human (Economic) Behaviour”.
14.6.2015;
A farewell to PsySoc economics.
Comment on
“The Context-Dependency of Human (Economic) Behaviour”.
13.6.2015;
Wake up: economics is not a science of behavior.
Comment on Rhonda Kovac on
“The Context-Dependency of Human (Economic) Behaviour”.
12.6.2015;
Sloppiness as economic methodology.
Comment on
“Ditch ‘ceteris paribus’!”.
11.6.2015;
Around the world: storytelling vs. science.
Comment on
“What is it about German economics?”.
10.6.2015;
Ditch it all.
Comment on
“Ditch ‘ceteris paribus’!”.
9.6.2015;
The guessing game.
Comment on
“Repeat after Me: Inflations the Cure not the Disease”.
7.6.2015;
Tricky business.
Comment on
“JKH on the Keynesian Cross and Accounting Identities”.
6.6.2015;
Poisoned, hanged, and shot.
Comment on
“Austerity policies — prescribing rat poison for ailing
economies”.
6.6.2015;
The answer is: No.
Comment on
“Ditch ‘ceteris paribus’!”.
6.6.2015;
Methiness.
Comment on
“Ditch ‘ceteris paribus’!”.
5.6.2015;
Objective Principles.
Comment on
“Modelling consistency and real world non-coherence in
mainstream economics”.
4.6.2015
Egmont Kakarot-Handtke:
Mental messies and loose losers. Comment on
‘Keenonomics, aggregate demand/change of debt,
and some misleading critique’.
Economics is no longer about the true economic theory,
all one has to do is to avoid a crystal-clear refutation. But
the freedom of definition applies only to the first definition.
Every additional definition has to be consistent with the
preceding ones. Let us sketch a common conceptual ground of all
of economics: Monetary profit of the
business sector as a whole is defined as
difference between consumption expenditures
and wage costs. Monetary saving of
the household sector is defined as
difference between total income and
consumption expenditure. Then saving
is equal to loss, or, dissaving
is equal to profit. The root cause of the most
severe errors in economics is a complete lack of understanding
of what profit is (since Adam Smith).
AXEC: New Foundations of Economics,
10.7.2015
Egmont Kakarot-Handtke:
Profit theory and distribution formulas. Comment on
‘Some important limitations of income inequality data’.
Blair Fix: “realized that corporate profits are
not really a type of personal income.”
Kakarot-Handtke: the “ structural-axiomatic approach
starts with the equation total income is wage income plus
distributed profit”.
AXEC: New Foundations of Economics,
11.7.2015
Egmont Kakarot-Handtke:
Archive Jul 2015.
AXEC: New Foundations of Economics.
Yes, it's scientific junk, so leave it behind for good.
Comment on
‘On the poverty of microfoundationalist fantasies’.
31.7.2015;
How to save the economy from storytelling economists.
Comment on
‘The F story about the Great Inflation’.
30.7.2015;
Storytelling and facts.
Comment on Blissex on
‘The F story about the Great Inflation’.
29.7.2015;
Stop guessing, start thinking.
Comment on
‘The guessing game’.
28.7.2015;
Oh no! How could this happen?
Comment on
‘IS-LM vs. Minsky’.
28.7.2015;
What comes after debunking?
Comment on
‘Why Real Business Cycle models cant be taken seriously’.
27.7.2015;
The end of storytelling.
Comment on
‘The F story about the Great Inflation’.
26.7.2015;
Stubbornly in the wrong research program.
Comment on Fredrick Welfare on
‘The Keynes-Ramsey-Savage debate on probabilit’.
25.7.2015;
We simply do not know — so let us move on.
Comment on
‘The Keynes-Ramsey-Savage debate on probability’.
24.7.2015;
How to consistently start off on the wrong foot.
Comment on
‘The Keynes-Ramsey-Savage debate on probability’.
23.7.2015;
Make a bubble, take a free lunch, break a bank.
Working paper.
22.7.2015;
Beginning, crises, and end of the money economy.
Working paper.
22.7.2015;
The coherency of money, profit, price, and distribution.
Working paper.
22.7.2015;
Unemployment out of nowhere.
Working paper.
22.7.2015;
Exploitation and its unintended outcomes: an axiomatic view of Marx's surplus value.
Working paper.
22.7.2015;
Schumpeter and the essence of profit.
Working paper. A positive profit for the business sector as
a whole is the precondition for the existence of the market
system.
22.7.2015;
Uniform profit ratios.
Working paper.
22.7.2015;
Geometrical exposition of structural axiomatic economics (I):
fundamentals.
Working paper.
22.7.2015;
Geometrical exposition of structural axiomatic economics (II):
qualitative and temporal aggregation.
Working paper.
22.7.2015;
What is wrong with heterodox economics? Kalecki's profit theory
as an example.
Working paper.
22.7.2015;
The wine maker's business and the logical origin of interest in
the monetary economy.
Working paper.
22.7.2015;
Taxes, profits, and employment: a structural axiomatic analysis.
Working paper.
22.7.2015;
The truly General Theory of Employment: how Keynes could have succeeded.
Working paper.
22.7.2015;
Cartoon science.
Comment on Henry on
‘Ignoring elementary economics’.
21.7.2015;
Knowledge vs. Belief.
Comment on
‘The marginalisation of morality’.
18.7.2015;
The case for pure economics.
Comment on
‘On the Euro Summits Statement on Greece: First thoughts’.
15.7.2015;
Sexit.
Comment on/Kommentar zu
‘Griechenland-Krise: Deutsche Ökonomen schlagen gegen
Krugman zurück’.
14.7.2015
How to save Greece and Europe at the same time.
Comment on
‘Employment in selected Eurozone countries. No austerity or
neoliberal miracles’.
13.7.2015;
Profit theory and distribution formulas.
Comment on
‘Some important limitations of income inequality data’.
11.7.2015;
Extremely long roots.
Comment on
‘Schäuble goes Matrix’.
11.7.2015
Mental messies and loose losers.
Comment on
‘Keenonomics, aggregate demand/change of debt, and some
misleading critique’.
10.7.2015;
The economics of here and now.
Comment on
‘An inconvenient historical truth’.
9.7.2015;
Separation of politics and economics.
Comment on Blissex on
‘Euro — the antithesis of democracy’.
8.7.2015
How to get out of psychology/sociology/wish-wash.
Comment on
‘Economic Value is NOT Price’.
7.7.2015;
In science, NO is the answer.
Comment on Paul Schächterle on
‘In Greece, NO is the answer’.
7.7.2015;
Heterodoxy's big fat Greek error.
Comment on Paul Schächterle on
‘In Greece, NO is the answer’.
7.7.2015
Beware of the 9th circle.
Comment on Paul Schächterle on
‘In Greece, NO is the answer’.
6.7.2015;
True/false is different from good/bad.
Comment on
‘In Greece, NO is the answer’.
6.7.2015
Egmont Kakarot-Handtke:
Archive Aug 2015.
AXEC: New Foundations of Economics.
Disoriented and lost in folk psychology.
Comment on stevepostrel on
‘Romer v. Lucas’.
31.8.2015;
ICYMI Old-Post-New Keynesian models.
30.8.2015;
Always clueless, never speechless.
Comment on
‘U.S. Inflation Developments’.
30.8.2015;
The philosophy of know-nothingers.
Comment on Tom Hickey on
‘What can economists know?’.
30.8.2015;
Schumpeter's two axioms of discourse.
Comment on
‘Axiomatic economics — total horseshit’.
29.8.2015;
Whatever it is, let's call it conservatism.
Comment on David Glasner on
‘Romer v. Lucas’.
28.8.2015;
Much change, no progress.
Comment on
‘The day macroeconomics changed’.
28.8.2015;
Pygmy economics.
Comment on graccibros and Ishi Crew on
‘Quick thoughts on the stock market and the economy’.
27.8.2015;
The heterodox perspective becomes dominant.
Comment on BC on
‘Quick thoughts on the stock market and the economy’.
27.8.2015;
Quick rethinking of the stock market.
Comment on
‘Quick thoughts on the stock market and the economy’.
26.8.2015;
Common non-sense.
Comment on
‘On not understanding the quantity theory of money’.
26.8.2015;
False on principle.
Comment on
‘A critique of Samuelsons and Nordhauss Principles of
Economics’.
25.8.2015;
An epic detour.
Comment on
‘Has macroeconomics — really — progressed?’.
25.8.2015;
Its the wage-price-productivity mechanism, stupid!
Comment on
‘The Fed Looks Set to Make a Dangerous Mistake’.
24.8.2015;
United in confusion.
Comment on
‘Lucas caricature of economic science’.
23.8.2015;
Buridans ass economics.
Comment on
‘Krugman is right — public debt is good!’.
22.8.2015;
Sticky brains.
Comment on
‘Evidence for Sticky Wages’.
21.8.2015;
No foundations.
Comment on
‘Lucas caricature of economic science’.
21.8.2015;
Economics and the litmus test of science.
Comment on
‘Romer v. Lucas’.
21.8.2015;
The Napoleon game.
Comment on
‘General equilibrium theory — a gross misallocation of
intellectual resources and tim’.
21.8.2015;
Potemkonomics.
Comment on
‘Reform and Revolution in Macroeconomics’.
20.8.2015;
Which revolution?
Comment on
‘Reform and Revolution in Macroeconomics’.
20.8.2015;
Unsmart allocators.
Comment on
‘General equilibrium theory — a gross misallocation
of intellectual resources and time’.
20.8.2015;
Nine views are nine too much.
Comment on
‘Forder: Nine Views of the Phillips Curve’.
18.8.2015;
The moral of the story.
Comment on
‘Robert Solow kicking Lucas and Sargent in the pants’.
17.8.2015;
Sales talk vs. Science.
Comment on Brad DeLong on
‘“We Always Thanked Robert Lucas for Giving Us a...
Monopoly” Over Valuable Macroeconomics’.
16.8.2015;
Hmmm?
Comment on
‘Some Issues Re-visited’.
15.8.2015;
Stupid or duplicitous? Both!
Comment on Kristjan on
‘What is it with economists and accounting identities?’.
15.8.2015;
Either stupid or duplicitous.
Comment on
‘What is it with economists and accounting identities?’.
14.8.2015;
How to stop idiot-breeding.
Comment on
‘Economics departments — breeding generation after
generation of idiot savants’.
14.8.2015;
No future for the representative economist.
Comment on
‘The Future of Work: Why Wages Aren't Keeping Up’.
13.8.2015
Egmont Kakarot-Handtke:
What comes after the methodological Pyrrhic Wars?
Comment on Aguilar on “Critique of Tony Lawson on
Neoclassical Economics”.
Iditotic empiricism: the
philosopher Bacon on the Copernican hypothesis:
“Dont theorize but open your eyes and observe without
prejudice, and you cannot doubt that the Sun moves and that
the Earth is at rest.” One of the best examples of
idiotic deductivism is Debreus
General Equilibrium Theory. Science is defined by the
synthesis of sound empiricism and genial
deductivism. Both orthodox and heterodox economics is
stuck at exactly this: no new axioms — no
future.
EconoPhysicsForum,
3.9.2015
Scott Sumner:
The very real problem of inequality.
Krugman's graph (growth of productivity, real average compensation,
and real median compensation, 1973–2014).
Table: Shares of GDI Including Government, 1929–2013 (Net Operating
Surplus of Private Enterprises, Government, Depreciation, Labor
Compensation). The essential force is inequality within labor.
Blog
TheMoneyIllusion,
10.9.2015;
Egmont Kakarot-Handtke:
The very real problem of zero scientific utility.
Comment on Scott Sumner on
“The very real problem of inequality”.
Your data-decorated distribution theory is a cartoon.
(i) There is no such thing as
‘a share of profit in income’
but there is ‘a share
of distributed profit in income’. It
can not be functionally
attributed to capital.
Distribution theory is fundamentally flawed since more than 200 years.
(ii) There is a difference between profit and income.
(iii) Keynes wrestled to solve the Profit Puzzle but in the end he gave up.
(iv) When profit is not correctly defined, income
is not correctly defined, and then
saving is not correctly
defined.
(v) Since the 1930s economists have not realized that all IS-LM
models are logically defective.
11.9.2015;
Egmont Kakarot-Handtke:
“The point of my post is not to ‘engage in
a discussion’ but to inform you that . …
13.9.2015;
Egmont Kakarot-Handtke:
Know its wrong.
Comment on Scott Sumner on “The very real problem of
inequality”. All these items are economic
nonentities: utility, expected utility,
rationality/bounded rationality/animal spirits, equilibrium,
constrained optimization, well-behaved production
functions/fixation on decreasing returns, supply/demand functions,
simultaneous adaptation, rational expectation, total income = value
of output/I=S, real-number quantities/prices, and ergodicity. It
follows that your approach is methodologically
unacceptable and this implies the distribution theory as a
logical part thereof.
13.9.2015;
‘Talldave’:
“If utility cannot be part of an economic theory,
then you cant study economics at all.”
14.9.2015;
Egmont Kakarot-Handtke:
The very real problem of the representative economist.
Comment on Talldave on “The very real problem of
inequality”. Economists usually have an explanation for the
failure of economics: it is the fault of their specific subject matter.
The representative economist has not grasped until today what science
is about. Crucial is to start from correct
premises. A subjective concept like utility does not fit here.
Economics must be made completely independent of
psychological assumptions (Slutzky).
15.9.2015
Egmont Kakarot-Handtke:
Archive Sep 2015.
AXEC: New Foundations of Economics.
How Orthodoxy buffaloed Heterodoxy.
Comment on
‘Deductivism — the original sin of “modern”
economics’.
30.9.2015;
Exponentially growing junk.
Comment on Asad Zaman on
‘Capitalism in the 21st Century’.
30.9.2015;
Nowhere land.
Comment on Merijn Knibbe on
‘The return of “land” in macro economic discourse.
Wonkish’.
28.9.2015;
Doomed and damned.
Comment on Peter Radford on
‘Beating dead horse?’.
26.9.2015;
Heterodoxy, too, is scientific junk.
Comment on
‘What went wrong with economics?’.
23.9.2015;
E-money.
Comment and correction on
‘As Predicted BOE Head Economist and Time 100 Most
Influential Suggests E-Dollar Concept’.
23.9.2015;
The Coppola method: Adam Smith reincarnated?
Comment on
‘What is lending good for? The Frances Coppola view.’.
22.9.2015;
PsySoc — the scourge of economics.
Comment on
‘The fundamental truth about American economic growth’.
22.9.2015;
Economics is an abysmal failure of reason.
Comment on
‘What went wrong with economics?’.
21.9.2015;
Economists vs. Economics.
Comment on Dani Rodrik on
‘Economists vs. Economics’.
19.9.2015;
Economics: ‘a tale told by an idiot, full of sound
and fury’?.
Comment on Dean Baker on
‘Biggest lesson from Financial Crisis: Wall Street gets what
it wants’.
19.9.2015;
Predictably confused.
Comment on
‘Sir David Hendry on the inadequacies of DSGE models’.
18.9.2015;
How to start off at the right foot.
Comment on Bill Mitchell on
‘When one false starting premise leads to progressive
confusion’.
18.9.2015;
Beat me! An invitation nobody can refuse.
Comment on Nanikore on
‘How economists argue’.
17.9.2015;
Confounding sociology and economics.
Comment on michael burke on
‘Marxism Revisited’.
17.9.2015;
A question of principle(s).
Comment on Geoff Davis on
‘Are all models wrong?’.
17.9.2015;
Corbynomics.
ICYMI (Scott Fullwiler).
16.9.2015;
Bound to crash.
Comment on Steve Keen on
‘Why China had to crash: Part 2’.
16.9.2015;
How to minimize political confusion.
Comment on Peter Radford on
‘Lets all blame capitalism’.
15.9.2015;
The very real problem of the representative economist.
Comment on Talldave on
‘The very real problem of wage inequality’.
15.9.2015;
The very real problem of zero scientific utility.
Comment on
‘The very real problem of wage inequality’.
11.9.2015;
Back to science.
Comment on
‘Unemployment — a long run’.
11.9.2015;
The happy end of the social science delusion.
Comment on
‘Are all models wrong?’.
10.9.2015;
Two steps towards truth.
Comment on
‘Are all models wrong?’.
9.9.2015;
Like an ant on the Möbius strip.
Comment on
‘The Fed Must Banish the 1970s Inflation Devil’.
9.9.2015;
Lack of understanding.
Comment on
‘Revealed Preferences: Fed Inflation Target Edition’.
8.9.2015;
Trapped in false alternatives.
Comment on
‘Validity is NOT enough’.
8.9.2015;
Confounding Is and Ought: the economist as moralist.
Comment on
‘What Happened to the Moral Center of American Capitalism?’.
7.9.2015
Egmont Kakarot-Handtke:
E-money. Comment and correction on
‘As Predicted BOE Head Economist and Time 100 Most
Influential Suggests E-Dollar Concept’.
My article from 1986 was about the general case of a
full replacement of bank money, notes and coins by E-money,
with E-money managed by a central bank. The case of a private
issuance of E-money was not considered at all, here Bitcoin
deserves the credits. For all practical purposes, the concrete
institutional implementation of E-money is indeed of primary
importance.
23.9.2015
Egmont Kakarot-Handtke:
Heterodoxy, too, is scientific junk. Comment on
‘What went wrong with economics?’.
Orthodoxy has failed on both material and formal consistency.
Does Heterodoxy satisfy the indispensable methodological criteria?
The profit theories of Keynes, Kalecki, Minsky, Keen, Marx are all
different and incorrect. There can be only one objective Profit Law
for the economy as a whole. Kalecki
derives the following accounting identity:
P+W=CW+CP+I which can be simplified to
P=CP+I (the famous profits equation).
Minsky: “The simple equation 'profit equals investment' is the
fundamental relation for … a capitalist economy with a
sophisticated, complex financial structure.”
Keen: “Total income = Wages plus Profits.”
As heterodox economists have no idea of what profit is, they fail
to capture the essence of the market economy.
AXEC: New Foundations of Economics,
23.9.2015;
Doomed and Damned. Comment on Peter Radford on
‘Beating dead horse?’.
You argue: “Yes Krugman can be
annoying with his emphasis on his version of the
Hicks version of Keynes.” The real problem is that
Krugmans arguments have no valid theoretical foundation.
Krugman seemingly speaks in the name of science, but this is a flagrant
abuse of the authority of genuine science which depends on rigorous
logical and empirical proof. Neither falsification nor annoyance has
ever stopped economists from promoting their junk.
26.9.2015;
Nowhere land. Comment on Merijn Knibbe on
“The return of ‘land’ in macro economic discourse.
Wonkish”.
The misrepresentation of land in economic theory started
already with Ricardo's concept of rent. Because economists never
understood what profit is, the concept of rent has been misleading,
and distribution theory had no foundation. The standard
supply-demand-equilirium analysis is not applicable. Needed is the
distinction between monetary profit and nonmonetary profit, as well
as is the distinction between monetary and nonmonetary saving.
28.9.2015
Egmont Kakarot-Handtke:
Exponentially growing junk. Comment on Asad Zaman on
‘Capitalism in the 21st Century’.
The trivial content of the diverging growth
rates argument is that the whole thing ends up either at 0
(negative rate) or 100% (positive rate) — simple math, not
theory. One needs an understanding of what profit and interest is and
how they interact. The mash-up of politics and science resulted in
exponentially growing scientific junk.
AXEC: New Foundations of Economics,
30.9.2015;
How Orthodoxy buffaloed Heterodoxy. Comment on
“Deductivism — the original sin of ‘modern’
economics”.
In economics the tension between deductive and inductive modes
has often been misinterpreted as alternative. Science is defined by
both material and formal consistency.The fundamental error/mistake of
Orthodoxy comes in when HC2, HC4, and HC5 are inadmissible as axioms.
The behavioral assumption of constrained optimization is silly. The
failure of economics is not explicable by Deductivism but is the
result of pervasive methodological incompetence.
30.9.2015;
Coming to terms with formalization. Comment on
“Limits of formalization in economics”.
The only acceptable general proposition about human behavior
is that it is target-oriented. Keynes's approach is superior because
it had been based on objective structural relationships — but
he implicitly formalized a zero profit economy. Formalization has
worked everywhere, except in economics.
1.10.2015;
Clueless at the dead spot. Comment on Thornton Hall on
“Deductivism — the original sin of ‘modern’
economics”.
Standard economics as codified in peer-reviewed texts is a
failed approach. How to deal with the mess? Orthodoxy and Heterodoxy
provide of a heap of models that do not satisfy the scientific
criteria of formal and material consistency.
2.10.2015;
Coming to terms with formalization (II). Comment on
“Limits of formalization in economics”.
Keynes's approach was methodologically superior because it
has been based on objective structural relationships: “Income
= value of output = consumption + investment. Saving = income -
consumption. Therefore saving = investment.” But without
realizing it, he implicitly formalized a zero profit economy
— which cannot exist in reality. Faulty
conceptualisation, not formalization, is
the ultimate cause of failure. Orthodox formalization has
been built upon nonentities like utility, equilibrium, and useless
axioms about human behavior. They missed the salient point of
methodology.
3.10.2015
Egmont Kakarot-Handtke:
How to be a good scientist. Comment on
“How to be a good scientist”.
Because economists do not understand what profit is, they do
not understand how the market system works (supply-demand-equilibrium
is a ridiculous construct). Political economists are incompetent
and their approaches lack formal and material consistency.
AXEC: New Foundations of Economics,
4.10.2015;
Objective determinants of profit and interest. Comment on
Peter Radford on “Interest Rates”.
The profitability of a single bank depends on the spread
between the rate it receives on the asset side and the interest it
pays on the liability side (plus nonmonetary profit/loss from changes
of value) — not on the absolute height of the
interest rate as set by the central bank. If the spread (times volume)
covers exactly the costs, the profit of the bank is zero. The term
structure of assets and liabilities influences the spread. By setting
the actual rate to zero, the central bank immediately helps all banks
with an incongruent term structure (in order to minimize their risks).
To avoid the fallacy of composition, theoretical economics has to
start with the economic system as a whole and the
creation/destruction of money by the consolidated banking sector.
“The development of the respective
stocks of credit/debt
crucially depends on saving/dissaving of
private/public households.” The
nominal rate of loan interest depends in the most elementary
zero-profit case on the (average) wage rate and
the productivity of the banking sector — then the interest on
deposits is zero: the money of savers is not needed. Where the profit
theory is false, interest theory is false, too.
6.10.2015;
Redefining economics. Comment on Lars Syll on
“Probability and economics”.
Heterodoxy has to stick to the scientific method, which is
well-defined. Heterodoxy has to get out of the so-called social
sciences because there is no precise knowledge about human
behavior.
8.10.2015;
Coming to terms with formalization (II). Comment on
“Limits of formalization in economics”.
The fundamental question of logical positivism — how
can science be demarcated from non-science? — is still at
the center of epistemology and methodology. Newton introduced the
‘occult’ concept of gravity but at the same time he
deduced a testable formula from the set of axioms which he stated.
“Orthodoxy is based on nonentities like utility, equilibrium,
and others, which have the same real world content as angels or the
Easter Bunny[…]”.
9.10.2015;
Passionate belief is no substitute for knowledge. Comment on Asad Zaman on
“The rise and fall of logical positivism”.
The role of empirical verification/falsification. Science
is about true/false. Heterodoxy has to establish material and
formal consistency.
10.10.2015
James Meadway:
The fragile state of the world economy.
The International Monetary Fund (IMF) and the Bank of
International Settlements warn about the fragile state of
the world economy. Together with the collapse of a major
debt bubble in the “emerging markets”, a
“trilogy” of debt crisis could appear. The 3rd
wave is now approaching the Global South, especially China.
Without massively expanding the availability of
credit in China, the Great Recession
of 2008-9 would have been significantly worse. At the same
time, the Global North has scarcely recovered from its own
successive debt crises. The sheer size and complexity of the
British financial system exposes the
whole economy to an exceptional level of
risk.
The NEF blog,
12.10.2015;
‘Ben’:
“We simply cannot come out of another 2008 (which will be
coming soon, no doubt) and just let it pass all over again. We need
genuine reform of our economic system — bigger than what was seen
during the Thatcher-Reagan years.
But with useless governments, flawed economic models
and the wealthy having far too much power, the default
mindset of deregulation, austerity and trickle-down will last for far,
far too long.”
Egmont Kakarot-Handtke:
The proto-scientific state of economics.
Comment on James Meadway on
“The very real problem of wage inequality”.
Financial fragility is real but only a surface phenomenon.
Even if the financial sector's institutional setup were perfect,
economic crises would occur: the eventual
breakdown is literally built into
the monetary economy — not
equilibrium.
The NEF blog,
12.10.2015
Egmont Kakarot-Handtke:
Archive Oct 2015.
AXEC: New Foundations of Economics.
Getting out of mumbonomics.
Comment on
‘Postmodern discourse mumbo jumbo’.
31.10.2015;
The key relationship between employment and growing/shrinking debt.
Comment on Steve Keen on
‘The unnatural rate of interest’.
30.10.2015;
Stop knowing nothing, start knowing something.
Comment on Lars Syll on
‘Macroeconomic uncertainty’.
29.10.2015;
Accounting basics.
Comment on FedUp of Oct 24 on
‘Keynes on the Theory of Interest’.
28.10.2015;
I=S: Mark of the Incompetent.
Comment on JKH and Roger Farmer on
‘Demand Creates its Own Supply’.
28.10.2015;
Fundamentally flawed.
Comment on Roger Farmer on
‘Demand Creates its Own Supply’.
27.10.2015;
Moronomics.
Comment to Paul Schächterle on
‘Economics, concepts, language and the progress of science’.
27.10.2015;
Is Keynes acceptable?
Comment on Lars Syll on
‘Did Keynes “accept” the IS-LM model?’.
26.10.2015;
Incoherence as second nature.
Comment on
‘Economics, concepts, language and the progress of science’.
26.10.2015;
Interest and profit.
Comment on
‘Keynes on the Theory of Interest’.
24.10.2015;
Not yet in and not yet out of the wood.
Comment on Lars Syll on
‘Phelps smackdown on Lucas rational expectations’.
22.10.2015;
End of confusion.
Comment on
‘Keynes and Accounting Identities’.
22.10.2015;
Keynes and the logical brilliance of Bedlam.
Comment on
‘Keynes and Accounting Identities’.
21.10.2015;
Misled by ordinary intuition and common sense.
Comment on Edward Fullbrook on
‘The Counterintuitive Problem’.
19.10.2015;
Economics in self-paralysis.
Comment on Lars Syll on
‘Representative agent models — macroeconomic foundations
made of sand’.
19.10.2015;
Crisis, cranks, and scientists.
Comment on David Ruccio on
‘A gathering storm?’.
17.10.2015;
Misplaced augurs of doom.
Comment on David Ruccio on
‘A gathering storm?’.
16.10.2015;
The Science-of-Man fallacy.
Comment on
‘Dont throw away Angus Deaton with the bathwater of the
Riksbank prize — hes good!’.
15.10.2015;
The irrelevance of economics.
Comment on
‘On the irrelevance of formal logic in economics’.
14.10.2015
David F. Ruccio:
A gathering storm?
There are warnings about a global economic
meltdown due to new sources of instability. They are coming
from quarters that are anything but radical. And theyre all saying
nearly the same: Monetary policy is
increasingly ineffective. Central banks are
largely impotent. IMF: impossible amounts of debt that will never be
repaid. Creditors are way too overextended. Finance
capital is out of control. Growth
everywhere is threatened. The search for profits mainstream economists
and policymakers hoped would lead the recovery after 2007-08, together
with the desperate measures central bankers have adopted, now seems to
be undermining that fragile recovery.
Comment by Kakarot-Handtke: What is
missing is a theoretically sound account of the famous ‘long
run’. The classics and Marx based their projections on the law of
the falling profit rate — quite different from the current
bubble/crash panic talk. All crisis projections are journalistic
extrapolations of surface phenomena. Economic crises
are lastly the result of a total lack of
understanding of how the economy works (foremost the employment
theory).
Comment by Pavlos:
Money flows unidirectionally from credit to profits, producing permanent
deficit and expanding debt. “{…] we need alternatives.
If were not to funnel money one way from credit creation to accumulation,
how do we cause surplus money to circulate
instead? If we dont like permanently expanding debt thats also our money
stock, what other monetary regime do we set
up?”
Comment by Kakarot-Handtke: we have still “to figure out
what an economy looks like that is free of major
crises in a way that is scientifically more convincing than general
equilibrium theory”.
Real-World Economics Review Blog,
16.10.2015
Egmont Kakarot-Handtke:
New thinking, new teaching. Comment on
“Real world economists and the economics curriculum”.
Keynes: something is deeply wrong with economics. But
“Because neither Keynes nor his followers nor his
opponents understood that deficit spending has
a one-to-one positive side-effect on the overall profit of
the business sector, Keynesian policy is ultimately
responsible for the extreme distortion of income
and wealth distribution that we see today.” Without
the correct economic theory, economists produce the problems they
are supposed to solve.
AXEC: New Foundations of Economics,
13.10.2015;
Egmont Kakarot-Handtke:
The irrelevance of economics. Comment on
’On the irrelevance of formal logic in economics’.
Klant (1994): “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.’ Toulmin is utterly wrong when he speaks of the
irrelevance of formal logic. But formal logic is vacuous if the
basic/primitive/elementary concepts have no empirical content.
We have to realize that all theories/models are false that are
built upon the following economic nonentities: utility, expected
utility, rationality/bounded rationality/animal spirits,
equilibrium, constrained optimization, well-behaved production
functions/fixation on decreasing returns, supply/demand
functions, simultaneous adaptation, rational expectation, total
income=value of output/I=S, real-number quantities/prices, and
ergodicity. That formalization has hitherto been without effect
is due to the scientific incompetence of
economists.
14.10.2015;
Egmont Kakarot-Handtke:
The Science-of-Man fallacy. Comment on
“Dont throw away Angus Deaton with the bathwater of the
Riksbank prize — hes good!”
Angus Deaton practices essentially sociology, a
so-called social science. Pareto gives us the
Science-of-Man fallacy in a nutshell. The real matter is that
economics is a complex system or more precisely a complex hybrid
human/system entity. The economic system is the foreground
— and not the human component. The
economic system logic is different from the behavioral logic of
humans.
15.10.2015;
Egmont Kakarot-Handtke:
Misplaced augurs of doom. Comment on David Ruccio on
“A gathering storm?”
Doomsday fear mongering is not the economists business.
Missing is a theoretically sound account of the famous
‘long run’. All crisis projections are just
journalistic extrapolations of surface phenomena. Economic crises
are the result of a total lack of understanding of how the
economy works (foremost: employment theory). Keynes could not
solve it satisfactorily, neither could the Post-Keynesians.
“[…] economists should be
worried about that they bear the intellectual
responsibility for the next occurrence of mass
unemployment.”.
16.10.2015;
Egmont Kakarot-Handtke:
Crisis, cranks, and scientists. Comment on David Ruccio on
“A gathering storm?”
The collective scientific knowledge of economists can
usually tell with a sufficiently high degree of certainty how
the economy works. In crises, suggestive quick fixes are applied
like deficit spending or helicopter money. “When a
Heterodox economist sees a meltdown coming three ideas immediately
cross his mind: (i) confirmation: Orthodoxy is indeed a failed
approach; (ii) regret: Heterodoxy has failed to
come up in due time with the superior paradigm, and (iii)
to go with panic makers and cranks is not exactly what Heterodoxy
is meant to be.” Heterodoxy aims at an economy that is free
of major crises in a way that is scientifically more convincing
than general equilibrium theory.
17.10.2015
Egmont Kakarot-Handtke:
Cross-references.
Paradigm shift, New curriculum, Axiomatization, Refutation
of I=S, Profit, Debt, Political economics, Incompetence, Employment,
Not a science of behavior.
AXEC
1.11.2015
Egmont Kakarot-Handtke:
No trade-off, Kant said. Comment on
“The most devastatingly important trade-off in mainstream economics”.
There is no trade-off in science: formal and material consistency, both
are required. Kant: “There is nothing as practical as a good theory.”
The crux of Orthodoxy stems not from formal logic validity, but from the set of
unacceptable premises. As soon as Heterodoxy agrees on superior axioms, Heterodoxy
will outperform Orthodoxy in logical consistency.
AXEC: New Foundations of Economics,
7.11.2015;
Debunking the natural rate of interest.
Comment on
“The Well-Defined, but Nearly Useless, Natural Rate of Interest’.
The Walrasian and the Keynesian approaches are inconsistent and
thus cannot explain how the monetary economy works. Starting with the pure
consumption economy, under the objective condition of zero profit in the firms,
the price of the consumption good is equal to unit wage costs, and ditto for the
rate of interest on the asset side of the bank's balance sheet. If wage rates are
set equal for simplicity, then the real interest rate is objectively determined
by the production conditions in their industries. In the more complex investment
economy, normally the household sector is the lender and the business sector is
the borrower, having two rates of interest Ja and Jl.
From the employment equation for the investment economy follows: (i) an increase
of the expenditure ratio leads to higher employment; (ii) increasing investment
expenditures exerts a positive influence on employment; (iii) an increase of the
factor cost ratio leads to higher employment. Thus an increase
of the average wage rate relative to price and productivity leads to higher
employment. If the functional relations f(Ja) and
f(Jl) are reliable and if the price mechanism works such that
ρF is roughly constant, then the central
bank is in the position to establish full employment by
fine-tuning the two interest rates. The concept of the
natural rate has been fallacious from the
start.
7.11.2015;
The x-th reinvention of evolutionary economics. Comment on
“We Had It All Wrong. Adam Smith Isnt the True Father of Economics”.
Current Walrasianism is the wrong approach. But ‘Society is an Organism’
is also a failed approach since Veblen founded the subdiscipline of evolutionary economic.
Economics has to develop its own methodology.
6.11.2015;
Are economists methodological retards?
Economics has not advanced at all compared to
the contemporaneous evolution of physics. We know little more now about
‘how the economy works’ than after Adam Smith. Krugman defined
neoclassical economics as maximization-with-equilibrium. Thus it
is based on two nonentities. Economics is at fault due to a lack of
clearness and of generality in the premises, in not having a consistent definition
of the pivotal concepts income and profit, failing to capture the essence of the
market economy.
6.11.2015;
A new more Keynesian employment theory.
Comment on Lars Syll on “Larry Summers — ‘New Keynesian’
economics needs to be replaced”.
The whole of economics has to be based on an entirely
new set of foundational propositions (paradigm shift).
Krugmans two nonentities, maximization and equilibrium, have to be left out of
the formal foundations. Starting from
purely objective structural premises, we have: (i) an increase of the expenditure
ratio leads to higher employment. An expenditure ratio > 1 indicates credit
expansion, a ratio < 1 indicates credit contraction/debt repayment of private
households; (ii) increasing investment expenditures exerts a positive influence on
employment, a slowdown of growth does the opposite; (iii) an increase of the factor
cost ratio leads to higher employment. This implies that a higher average wage rate
leads to higher employment; (iv) the complete employment equation contains in
addition: profit distribution, public deficit spending, and the trade balance with
the rest of the world. (i) and (ii) constitute a Keynesian
multiplier. The factor cost ratio of (iii) embodies the price mechanism which
does not work as the standard economists believe. Overall employment increases
if the average wage rate increases relative to average price and productivity.
The factor cost ratio is what is
missing in Keyness original employment function. The overall systemic
interdependencies establish a positive feedback loop between ‘the‘ product and ‘the
labor market. The market system is
no equilibrium system. Interest comes into the picture as soon as the
relationships between investment and the lending rate, and the expenditure ratio an
the deposit rate is formally established.
5.11.2015;
Hayek: mad, bad, or just another incompetent economist?
Comment on David S. Wilson on ‘The Road to Ideology. How Friedrich
Hayek Became a Monster’.
David S. Wilson's misunderstandings: science is about knowledge and
economics is a not a science yet. What have Krugman, Wren-Lewis, Keen and Hayek
in common? They are political economists, and neither has a scientifically valid
theory about how the economy works, satisfying the criteria of material and formal
consistency.
4.11.2015;
Pointer: Theory of interest.
Comment on Peter Radford on ‘Interest rate mania’.
The underlying intuition of the interest rate as equilibrating/equalizing
saving and investment is utterly false. We have an analytical
interest rate black hole.
3.11.2015
Egmont Kakarot-Handtke:
Archive Nov 2015.
AXEC: New Foundations of Economics.
The tragedy of Heterodoxy.
Comment on
‘Confusing statistics and research’.
30.11.2015;
Paradigm shift: cross-references.
Foundations. Related to market. Related to Say's
Law/Walras's Law/Exchange. Related to employment. Related to
money. Related to behavior. Related to resources. Related to
distribution. Related to value. Related to business cycle, debt,
breakdown. Related to institution, government, etc. Related to
profit. New paradigm. Refutations.
30.11.2015;
New curriculum: cross-references.
Core. Application. Outlook.
30.11.2015;
Axiomatization: cross-references.
Posts. Related. Cross-references. New Foundations.
30.11.2015;
Refutation of I=S: cross-references.
Posts. Refutation 1. Refutation 2. Related. Working papers
— formal proof. New paradigm.
30.11.2015;
Profit: cross-references.
Posts and abstracts. Working papers.
30.11.2015;
Debt: cross-references.
Posts. Working papers.
30.11.2015;
Political economics: cross-references.
Posts. Working papers.
30.11.2015;
Incompetence: cross-references.
30.11.2015;
Employment: cross-references.
Posts. Working papers.
30.11.2015;
Not a science of behavior: cross-references.
Posts.
30.11.2015;
Distorted reality: cross-references.
Posts.
30.11.2015;
Pluralism: cross-references.
Posts. Debate.
30.11.2015;
Proto-science: cross-references.
30.11.2015;
Kalecki: cross-references.
Posts. Working paper.
30.11.2015;
Mathiness: cross-references.
Posts. Related.
30.11.2015;
Methodology: cross-references.
Posts. Debate.
30.11.2015;
Marshall's “Burn the mathematics”: cross-references.
Posts. Debate. Related.
30.11.2015;
The failure of Heterodoxy: cross-references.
Posts.
30.11.2015;
Political economics and intellectual corruption.
Comment on
‘Econometrics and the “empirical turn” in
economics’.
28.11.2015
Egmont Kakarot-Handtke:
How economic thinkers think they think about interest. Comment on
“Thinking about Interest and Irving Fisher”.
The current state of the theory of interest: Keynes imagined that by
identifying and explaining the liquidity premium on cash, he had thereby
explained the real yield on holding physical capital assets. Has Irving
Fisher ever asserted that the rate of interest is determined by equilibrating
savings and investment? Knut Wicksell argued that the rate of interest is
responsible for equalizing savings and investment. Conclusion: “The
determination of the rate of interest cant be confined to a single
market.” Because the Walrasian and the Keynesian approaches are
fundamentally flawed, the theory of interest also
is. Blog
AXEC: New Foundations of Economics,
18.11.2015;
The substandard standards of distribution theory. Comment on
“Beyond the standard explanation”.
Scientific explanation consists of the true theory.
Neither Orthodoxy nor Heterodoxy has come close to the true theory;
with respect to the criteria of material and formal consistency. The standard
explanation of distribution consists of the marginal principle, which follows
logically from behavioral assumption of constrained optimization.
Standard distribution theory is false. One has to
fully replace the premises of marginalism (HC1 to HC5). The root defect of all
distribution theories is equalizing income with profit.
17.11.2015;
Heterodoxy as superior alternative. Comment on
“Deductivist modeling leading economics astray”.
There is an informal fallacy “arguing that an event or situation
necessarily arose because someone intentionally acted to cause it.”
“Economics is a strange mixture of analytical and animistic thinking.”
Orthodoxy explains the economy with the interactions of an entity called
homo oeconomicus and an entity called Invisible Hand. But there is
no such thing as certain, true, and primary premises about human behavior.
Economics is not a social science — the
subject matter of economics is the economy.
AXEC: New Foundations of Economics,
16.11.2015;
A new fall back into old thinking.
Comment on
“Methodological foundations of heterodox economics’.
Post-Keynesians claim to know, e.g. that the sum of the sectoral balances
is zero. Yet, this is inherent in the elementary mathematics of accounting.
Keynes had messed up the sectoral balance approach with his
saving = investment.
16.11.2015;
Pseudo-voodoo-moron-proto-mumbonomics.
Comment on Peter Radford on
“Republican Pseudo-Economics’.
Republican pseudo-economics is a political side issue, the real problem
is that economics is a pseudo-science, missing the scientific criteria of
material and formal consistency.
13.11.2015;
Prediction does not work? Try retrodiction first.
Comment on Lars Syll on
“Macroeconomic forecasting’.
Scientists use the word prediction in a quite different sense from
everyday usage. While the future is ‘unpredictable’ certain aspects may be
‘predictable’ with high precision (conditional
predictions). There are no laws of human behavior, yet there are
structural laws of the economic system. The fundamental economic law contains
the interrelation between the consolidated business sectors cost/profit
situation ρF, the real ρX and the nominal
ρE side of the product market, and the income distribution
ρD. This law allows for retrodiction,
i.e. measuring the ratios and deducing the mathematical result, testable in
every single period. We can make a precise conditional
prediction but the future conditions are not
known. Conditional predictions meet all scientific criteria.
12.11.2015;
Do not moralize — simply beat them.
Comment on
“Mainstream economics — nothing but pseudo-scientific cheating’.
With respect to the five Hard Core propositions of Mainstream Economics,
“Mainstream economics building on such a modeling strategy does not produce
science.” (Musgrave). Heterodoxy has until now no alternative to standard
economics that satisfies the criteria of material and formal consistency. The
criterion of theoretical economics has always been true/false and not good/bad.
12.11.2015;
There is no like/dislike button in science.
Comment on Nanikore on
“Some unfounded expectations of economic theory’.
Krugmans economics is based on maximization-with-equilibrium. Both,
constrained optimization and equilibrium, are nonentities. Each student of economics
should realize that all theories/models are false that are
built upon the following concepts: utility, expected utility,
rationality/bounded rationality/animal spirits, equilibrium, constrained optimization,
well-behaved production functions/fixation on decreasing returns,
supply/demand functions, simultaneous adaptation, rational expectation, total
income=value of output/I=S, real-number quantities/prices, and ergodicity.
We have to replace all nonentities with concepts that have a
counterpart in reality. Incompetent economists ultimately bear the responsibility for
the social devastation of unemployment since the Great Depression.
11.11.2015;
Profit and the poverty of economics.
Comment on
“Neoclassical distribution theory’.
Distribution theory suffers from the known fact that
economists cannot tell the difference between income, profit, distributed profit and
retained profit. Defenders and attackers of the market economy have no idea of what
they are talking about. The fundamental economic law contains the
interrelation between the
consolidated business sectors cost/profit situation ρ
David Glasner:
Once Upon a Time When Keynes Endorsed the Fisher Effect.
Keyness rejection of the Fisher Effect is difficult to
understand. In his Tract on Monetary Reform Keynes had himself
reproduced the Fisher Effect without crediting the idea to Fisher.
Fisher derived the distinction between real and money rates of
interest as a formal theorem. Keyness theorem of covered interest
arbitrage in the Tract is a straightforward application of Fishers
analysis.
Egmont Kakarot-Handtke: The Fisher Effect is
a design flaw of the monetary order,
which is not consciously designed but the
outcome of piecemeal institutional change in historical time. The
Fisher Effect violates the principle of the neutrality of money.
We set the analytical framework as the elementary consumption
economy. In the consumption good producing firm, for the case of
market clearing, the market clearing price equals unit wage costs
W/the productivity in consumption good production Rc.
Assume W doubles: in real terms, the situation remains unchanged.
But in the historically given monetary order, neither the asset
nor the liability side of the balance of the banking industry is
properly adapted. In a well-designed monetary order, the
interest rate would remain absolutely
constant no matter what the rate of inflation is. The
Fisher Effect is only an artifact.
E. K.-H.: Central banks cant be both a price (interest
rate) giver and a quantity (amount of debt) giver. Blog
Uneasy Money ,
30.11.2015
David R. Richardson:
What does ‘too much government debt’ mean in a
stock-flow consistent model?
In the popular literature on debt and deficits the bulk of
the commentary seems to be concern about the size of either the
debt or the deficits that ‘create’ the debt, with a
range of concern from mild to hysterical. The purpose of yet another
article on this topic is that there seems to be
little by way of a clear exposition of how debt
and deficits arise and why they may well be benign. The
difference is that here the discussion is explicitly put into the
framework of a stock-flow consistent
model. This paper critically evaluates the proposition
that government debt and deficits are
harmful to the economy in the way
suggested by mainstream authors such as Reinhart
and Rogoff (2009 and 2010). To address the proposition that
there will be undesirable consequences as a result of increases in
government debt the paper will: • critically examine the
view that too much government debt has the consequences suggested
in mainstream analysis, and • ask what exactly could be
meant by too high a level of debt and the market response to
that. It must be stressed that all the
discussion here relates to independent economies with
sovereignty over their
fiscal and monetary systems.
real-world
economics
review 73,
11.12.2015
Eric Lonergan:
Sitting on cathedral steps.
Two types of defifitions: label definitions of a set of
abstract properties as a ‘type 1’ definition and
distinct sets of measured objects in economic statistics
‘type 2’. Eexample: analysis of money to illustrate
how these two forms of definition are frequently conflated.
Empirical economics is destined to imperfection. There is no
straightforward map from our theoretical concepts to the things
we can measure.
philosophy of money ,
24.12.2015
Comments on rwer issue no. 73.
Comment on David R. Richardson on
“What does ‘too much government debt’ mean in a
stock-flow consistent model?” Kakarot-Handtke:
“It is shrinking debt which
eventually explodes the market
economy”.
Yes, representative agent models are worse
than dilettantish. Every economic model has to satisfy
stock-flow consistency. But there is a
logical flaw in how Godley and Lavoie define stock-flow consistency.
“The fatal flaw of Keyness and Godley and Lavoies approach
is that the underlying profit theory is
false.” The real crux of the debt problem lies in
the stock-flow relationship between change of debt (household
sectors and government sectors) and overall profit/loss of the
business sector. The market economy
breaks down as soon as overall (household
and government sectors) debt is redeemed.
‘justaluckyfool’: According to Frederick
Soddy, household debt can not ever be fully
redeemed because to redeem that debt,
new debt must be created: Household debt
!= deposits. Because Household debt does not equal the deposit,
the only means for the private sector to redeem its debt is to
increase its debt. Government sectors debt
redemption could occur and may be beneficial for the market
economy. Why do you deny Frederick Soddy his due?
Real-World Economics Review Blog,
11.12.2015
Karla Hoff, Joseph E. Stiglitz:
Striving for Balance in Economics: Towards a Theory of the
Social Determination of Behavior [abstract only].
This paper is an attempt to broaden the standard economic
discourse by importing insights into human behavior not just from
psychology, but also from sociology and anthropology. Whereas the
concept of the decision-maker is the rational actor in standard
economics and, in early work in behavioral economics, the
quasi-rational actor influenced by the context of the moment of
decision-making, in some recent work in behavioral economics the
decision-maker could be called the enculturated actor. This
actor's preferences and cognition are subject to two deep social
influences: (a) the social contexts to which he has become exposed
and, especially accustomed; and (b) the cultural mental models
— including categories, identities, narratives, and
worldviews — that he uses to process information. We trace
how these factors shape individual behavior through the endogenous
determination of both preferences and the lenses through which
individuals see the worldtheir perception, categorization, and
interpretation of situations. We offer a
tentative taxonomy of the social determinants of behavior
and describe results of controlled and natural
experiments that only a broader view of
the social determinants of behavior can plausibly explain. The
perspective suggests new tools to promote well-being and economic
development.
NBER Working Paper No. 21823,
the NATIONAL BUREAU of ECONOMIC RESEARCH,
December 2015
Egmont Kakarot-Handtke:
Wages and profits are NOT the components of income.
Comment on David Ruccio on
“Wages, profits, and inequality”.
AXEC
11.12.2015.
Egmont Kakarot-Handtke:
Archive Dec 2015.
AXEC: New Foundations of Economics.
Conceptual blunder.
Comment on
‘Clarence Ayres on the economic concept of capital’.
31.12.2015;
Still on the wrong track.
Comment on
‘Striving for Balance in Economics: Towards a Theory of
the Social Determination of Behavior’.
30.12.2015;
The existence of economic laws and the nonexistence of behavioral laws.
Comment on
‘The non-existence of economic laws’.
29.12.2015;
Austerity and the utter scientific ignorance of economists.
Comment on
‘Exploring one set of reasons why austerity happened’.
29.12.2015;
Economics is NOT a science of behavior.
Comment on
‘Striving for Balance in Economics: Towards a Theory of the Social Determination of Behavior’.
29.12.2015;
Worthless Canadian model bricolage.
Comment on Nick Rowe on
‘Tight money as binding output quota, and upward-sloping
IS curves’.
28.12.2015;
Deficit spending, helicopter money, and profit.
Comment on
‘Randall Wray attacks “debt-free-money cranks”
based on sloppy arguments’.
27.12.2015;
Methodological retards.
Comment on
‘Economists and methodology’.
26.12.2015;
Confused confusers.
Comment on Eric Lonergan on
‘Sitting on cathedral steps’.
26.12.2015;
Another X-mas fantasy about IS curves.
Comment on Nick Rowe on
‘Upward-sloping IS curves: simple version’.
23.12.2015;
Money and debt in six elementary steps.
Comment on
‘Randall Wray attacks “debt-free-money cranks”
based on sloppy arguments’.
23.12.2015;
Money, cranks, and morons.
Comment on Norbert Häring on
‘Randall Wray attacks “debt-free-money cranks”
based on sloppy arguments’.
22.12.2015;
Quixotic Keynes exegesis.
Comment on
‘Keynes on the Theory of the Rate of Interest’.
20.12.2015;
Towards the true economic theory.
Comment on
‘What we do in life echoes in eternity’.
19.12.2015;
How the intelligent non-economist can refute every economist hands down.
Comment on
‘Dani Rodriks blind spot’.
16.12.2015;
It is shrinking debt which eventually explodes the market economy.
Comment on David R. Richardson on
‘What does “too much government debt” mean
in a stock-flow consistent model?’.
16.12.2015;
Nothing to choose.
Comment on
‘Dani Rodriks smorgasbord view of economic models’.
15.12.2015;
Useful idiots and poor scientists.
Comment onFred Welfare on
‘Dani Rodriks smorgasbord view of economic models’.
15.12.2015;
Monetary policy: no sound theoretical foundation.
Comment on Ann Pettifor on
‘Central bank policy rates and the real economy’.
14.12.2015
Egmont Kakarot-Handtke:
Still on the wrong track.
Comment on Karla Hoff and Joseph E. Stiglitz on
“Striving for Balance in Economics: Towards a Theory of the
Social Determination of Behavior”.
AXEC
30.12.2015.
Austerity and the utter scientific ignorance of economists.
Comment on Simon Wren-Lewis on “Exploring one set of
reasons why austerity happened”. Overall
employment increases if the average wage rate increases
relative to average price and productivity.
AXEC
29.12.2015;
The existence of economic laws and the nonexistence of
behavioral laws.
Comment on Lars Syll on “The non-existence of economic
laws”.
AXEC
29.12.2015;
Economics is NOT a science of behavior.
Comment on Karla Hoff and Joseph E. Stiglitz on
“Striving for Balance in Economics: Towards a Theory of the
Social Determination of Behavior”.
AXEC
29.12.2015.
Worthless Canadian model bricolage.
Comment on Nick Rowe on “Tight money as binding
output quota, and upward-sloping IS curves”.
AXEC
28.12.2015;
Deficit spending, helicopter money, and
profit.
Comment on Norbert Häring on
“Randall Wray attacks ‘debt-free-money cranks’
based on sloppy arguments”
27.12.2015;
Methodological retards.
Comment on Simon Wren-Lewis on
“Economists and methodology”.
26.12.2015;
Confused confusers.
Comment on Eric Lonergan on “Sitting on cathedral
steps”.
26.12.2015;
Another X-mas fantasy about IS curves.
Comment on Nick Rowe on “Upward-sloping IS curves:
simple version”.
23.12.2015;
Money and debt in six elementary
steps.
Comment on Norbert Häring on “Randall Wray
attacks ‘debt-free-money cranks’ based on sloppy
arguments”.
23.12.2015;
Money, cranks, and morons.
Comment on Norbert Häring on “Randall Wray
attacks ‘debt-free-money cranks’ based on sloppy
arguments”.
22.12.2015
Merijn Knibbe:
Clarence Ayres on the economic concept of capital.
C. Ayres: ‘The theory of economic progress
(1944)’. Economists understand capital
as kind of a moral while they use prices to measure this
moral value. They do not pay attention to the difference
between the asset and the liability side of the balance sheet
and obfuscate the two.
Capital and labor are complements by virtue of their
conceptional character as intellectual abstractions. For
classical theory, capital means two things: the physical
equipment of industry, and the funds by which control is
exercised.
E. Kakarot-Handtke: Conceptual blunder. The
representative economist is entirely responsible for his own
confusion. The confusion already started with the elementary
concepts income and profit. Why has Heterodoxy has not come
forward with a consistent set of concepts? The general
conceptual confusion is still
enduring.
D. Taylor: Heterodoxy has not
come forward with a consistent set of concepts because it
is hooked on a false empiricism.
The fallacy of Humean empiricism has been to go by
appearances, discounting the invisible: not attempting to
discover intended meanings, errors and falsifications.
E. Kakarot-Handtke: Economics as fools paradise.
“The utter foolishness of
Heterodoxy consists in
idealizing its own unresolved contradictions
as pluralism.” Economics is not a social science
and not a natural science but a system science.
Norman L. Roth: For some classicals, ‘capital’
is not a substance that can be ‘accumulated’.
“But Marx wrote a huge obscurantist ‘scientific’
rant on the topic”, without even attempting to define
capital.
D. Taylor: The nature of the obfuscation about Capital
is pretty fundamental: not
distinguishing reserves of resources
from their fictitious and unstable
monetary valuation, not even as
complementary (orthogonal) dimensions of a two-dimensional entity.
Egmont too is getting more than a bit boring.
Real-World Economics Review Blog,
31.12.2015
Egmont Kakarot-Handtke:
The future of economics: why you will probably not be admitted to
it, and why this is a good thing.
Comment on Clarence Ayres on the economic concept of
capital. There are 4 sects of economics to
be abandonded: Walrasians, Keynesians, Marxians, and Austrians.
Instead, the minimalist economic configuration is defined by 3 equations:
(i) wage income is equal to wage rate times working hours;
(ii) output is equal to productivity times working hours;
(iii) consumption expenditure is equal to price times quantity
bought/sold.
The market clearing price always equals the unit wage costs (1).
Labor gets the whole product. Changes in the system are always
reflected by the market clearing price.
3 further axioms handle the changes in (iv) the wage rate, (v)
productivity and (vi) labor input.
The product market is cleared and the budget is balanced but the
economy is not moved towards some
equilibrium. Utility maximization and all forms of
the marginal principle play no role at all for the price
determination. Also all marginalist
distribution models are false.
In a next analytical step
the phenomena of inventory changes, profit/loss,
and the increase/decrease of the stocks of money and debt have to be
analyzed.
AXEC
3.1.2016
Ssemakula Peter Luyima:
New Creative Economic Theory Will transform the Third
World:
AXEC provides the correct formal foundations of theoretical economics.
The Kelso-Adler theory of economic justice and its
three principles (Input: Participative
Justice; Feedback: Social Justice; Out-take: Distributive Justice).
The word MuRatopia is originally coined by Kaoru Yamaguchi in
his book: Beyond Walras, Keynes and Marx — Synthesis in
Economic Theory Toward a New Social Design, 1988.
Kakarot-Handtkes axiom set allows for the
elementary MuRatopian Creative economy.
His Geometrical exposition of structural axiomatic Economics paper
explains how the market system works.
Ssemakula intergrated his work to promote the idea for a
new structural law of supply and demand.
HubPages ,
4.1.2016 (updated)
Lars P. Syll:
The best advice I ever got as a scientist.
Syll: Popper's advice “try to construct
alternative theories — alternatives even to those theories
which appear to you inescapable”.
Kakarot-Handtke: Switch into constructive gear. As the open
door for Heterodoxy is open, all that has to be done is, as Popper
said, to go into constructive mode. Blog
LARS P. SYLL,
4.1.2016
Egmont Kakarot-Handtke:
Which breakdown?
Comment on Erik S. Reinert on
“Capitalism collapses when money
flows to the financial sector per se”. “Capitalism breaks
down because of immanent logical necessity
(no crisis and no criminals and no banksters needed)
as soon as private and/or public households
start to redeem their debt in the
aggregate”. This results from the correct profit theory.
The intellectual breakdown of economists long precedes the factual
breakdown of the market economy.
AXEC
7.1.2016;
Axiomatized nonentities and the failure of methodologists.
On “Krugman on models (II)”. Krugman confessed
that he “takes the maximization-and-equilibrium world as a
starting point”. But there is no such thing as an equilibrium
in the economy. With this failure, the whole formal basis breaks
apart as well as the whole theoretical superstructure. No economics
paper that applies the rationality principle, constrained
optimization, or equilibrium should be accepted.
6.1.2016
Egmont Kakarot-Handtke:
Archive Jan 2016.
AXEC: New Foundations of Economics.
Economists cannot do the simple math of profit — better
keep them out of politics.
Comment on
‘Paul Krugman, Bernie Sanders, and the Experts’.
31.1.2016;
The economists hajj from Mordor to Mecca.
Comment on
‘Economics — still in the land of Mordor’.
30.1.2016;
How Heterodoxy keeps the Naked-Emperor-Zombie alive.
Comment on Asad Zaman on
‘Fundamental Flaws of Conventional Economics’.
30.1.2016;
How to restart economics.
Comment on Jeff on
‘Is there a core of heterodox economics that we can all
believe in?’.
29.1.2016;
End of a storyteller.
Comment on
‘Krugman — a Vichy Left coward?’.
28.1.2016;
Economists and methodology: the horror of all horrors.
Comment on
‘Deduction — induction — abduction’.
27.1.2016;
Every thinking economist is heterodox by default, but how do
we proceed from here?
Comment on
‘Is there a core of heterodox economics that we can all
believe in?’.
25.1.2016;
The three pillars of English philosophy: Individualism,
Darwinism, Political Economics.
Comment on
‘David Sloan Wilson on economics and new developments in
evolutionary theory’.
24.1.2016;
Time to come up to speed.
Comment on UnlearningEcon of Jan 23 on
‘Against anti-economics’.
23.1.2016;
Full methodological illiteracy.
Comment on
‘Axiomatic economics the Bourbaki-Debreu delusion’.
21.1.2016;
Economists slapstick methodology.
Comment on
‘Axiomatics — the economics fetish’.
21.1.2016
V. Ramanan:
National Accounting As Atheism.
Eric Lonergan has a post tiled “Accounting as religion:
Buffett, Derrida, and MMT”, declaring “money is not a
liability of the state”. I am going to make an argument like
James Tobins brilliant 1963 paper
Commercial
Banks As Creators Of ‘Money’. Example of an Open
Economy where liabilities have been dollarized. There would be a
self-inconsistency if money were not a liability of the state. The
potential for liability dollarization makes accounting items such as
currency notes, reserve balances at the central bank etc. a
liability.
The Case For Concerted Action,
17.1.2016
Egmont Kakarot-Handtke:
Archive Feb 2016.
AXEC: New Foundations of Economics.
Going beyond sitcom economics.
Comment on Lars Syll on
‘Bernie Sanders and the Verdoorn law’.
28.2.2016.
• The most elementary version of the correct employment equation is
given here
• (i) an increase of the expenditure ratio ρE leads
to higher employment (credit expansion:
ρE > 1; credit contraction/debt repayment:
ρE < 1)
• (ii) increasing investment expenditures I leads to
higher employment; slowdown of growth leads
to lower employment
• (iii) an increase of the factor cost ratio ρF =
W/P·R leads to higher employment
• the complete employment equation contains in addition: profit
distribution, public deficit spending, and import/export (all of them
are measurable and testable variables)
• the multiplier is different from Keyness flawed multiplier
(difference consists in ρF)
• the increase of the wage rate must overcompensate the retrograde
effects of productivity and price increases (no Verdoorn effect)
;
Postmodernism the philosophy of scientific write-offs.
Comment on Robert R Locke on
‘The problem of postmodernism in American economics: an historians perspective’.
26.2.2016;
ISLM is dead and waiting to be buried.
Comment on Nick Rowe on
‘ISLM pictures with interest on money’.
26.2.2016;
Scientists do not predict.
Comment on Lars Syll on
‘Macroeconomic machine dreams’.
26.2.2016;
How to creatively destruct Orthodoxy.
Comment on
‘The problem of postmodernism in American economics: an historians perspective’.
24.2.2016;
Economics — the fly that cannot see the glass.
Comment on
‘On the non-existence of economic laws’.
22.2.2016;
Krugman and the scientific implosion of economics.
Comment on
‘Krugman versus Sanders’.
22.2.2016;
Causa finita.
Comment on
‘How could “testing axioms” be controversial?’.
21.2.2016;
Caught in secular intellectual stagnation.
Comment on
‘Whats wrong with heterodox economics’.
19.2.2016;
Economists perennial trouble with accounting.
Comment on
‘Hey Joe, banks cant lend out reserves’.
19.2.2016;
How economics finally became a science.
Comment on Geoff Davies on
‘Capitalisms growth problem’.
19.2.2016;
What heterodox economists are embarrassed to admit.
Comment on
‘What mainstream economists are embarrassed to admit’.
17.2.2016;
Economics, too, has been almost ruined by the bigots of common sense.
Comment on Geoff Davies on
‘“Observation is theory-laden” —
fashionable philosophical rubbish’.
16.2.2016;
Political economics: a playground for scientific deadbeats.
Comment on
‘What mainstream economists are embarrassed to admit’.
15.2.2016;
Success is the best method.
Comment on
‘Why science necessarily involves a logical fallacy’.
14.2.2016;
The still unfinished Keynes.
Comment on
‘The most important book in the history of economics’.
13.2.2016;
On economists stupidity.
Comment on
‘Paul Krugman: On Economic Stupidity’.
13.2.2016;
Accounting for dummies.
Comment on Liam on
‘Why is slow growth a problem?’.
12.2.2016;
Have data, lack theory.
Comment on David Ruccio on
‘Why is slow growth a problem?’.
11.2.2016;
Economists cannot think as well as we thought.
Comment on
‘Markets Don't Work as Well as We Thought’.
11.2.2016;
Economists three-layered scientific incompetence.
Comment on
‘Project: A heterodox macro textbook’.
9.2.2016;
Coming soon: the canonical economics textbook.
Comment on
‘Project: A heterodox macro textbook’.
6.2.2016;
The nothing-to-choose dilemma.
Comment on
‘Walrasian economic theory &msdash; little better than nonsense’.
5.2.2016;
Wren-Lewiss methodological double whammy.
Comment on
‘Whatever happened to the General Theory?’.
3.2.2016;
Economists are a menace to their fellow citizens.
Comment on
‘Economics is Changing’.
3.2.2016;
What comes next?
Comment on
‘Theories of Knowledge’.
3.2.2016;
Incompetence — the original sin in economics.
Comment on
‘Deductivism — the original sin in economics’.
2.2.2016;
Heterodoxy and the nullity of dead horse beating.
Comment on
‘Revealed preference and the fundamental flaws of conventional
economics’.
1.2.2016
Egmont Kakarot-Handtke:
Archive Mar 2016.
AXEC: New Foundations of Economics.
Profit, marginalism, and other anomalies.
Comment on Larry Summers on
‘Corporate profits are near record highs. Thats a problem’.
31.3.2016;
Show first your economic axioms or get out of the discussion.
Comment on Mart Malakoff on
‘On the Truth of Scientific Theories’.
31.3.2016;
Your profit theory is false.
Comment on Justin Fox on
‘When Workers Get More of the Income Pie’.
30.3.2016;
There is no truth in political economics.
Comment on Asad Zaman on
‘On the Truth of Scientific Theories’.
30.3.2016;
The futility of testing economics blather.
Comment on
‘ Scott Sumner on’.
30.3.2016;
Stanley Fischer: Rewarding scientific incompetence.
Comment on
‘Reflections on Macroeconomics Then and Now’.
28.3.2016;
Economics: neither craft nor science.
Comment on
‘Economics is more a craft than a science The Washington Post’.
26.3.2016;
The three fundamental economic laws.
Comment on Lars Syll on
‘Science and truth’.
25.3.2016;
Economics between truth and blather.
Comment on
‘MMT and mainstream macro’.
24.3.2016;
Macro of and for the scientifically blind and deaf.
Comment on Simon Wren-Lewis on
‘’.
23.3.2016;
How to get out of the morass of ignorance.
Comment on Noah Smith on
‘New paradigms in economic theory? Not so fast.’
22.3.2016;
Vain hopes in the ruins of economics.
Comment on Noah Smith on
‘New paradigms in economic theory? Not so fast.’
21.3.2016;
Helicopter money — a free lunch for the one-percenters.
Comment on Erwan Mahé on
‘The arrival of helicopter money’.
19.3.2016;
Hayek was not an economist.
Comment on Maria Alejandra Madi on
‘Economic discourse and the market’.
18.3.2016;
The FED should first of all get economics right.
Comment on
‘The Fed Should Allow Wages to Rise’.
17.3.2016;
“As goes GM, so goes America” — A rather
ordinary fallacy of composition.
Comment on David Ruccio on
‘For years I thought what was good for our country was
good for General Motors, and vice versa’.
17.3.2016;
Lucas: Confession of a scientific write-off.
Comment on
‘Robert Lucas the storyteller’.
16.3.2016;
Toward the true economic axioms.
Comment on
‘The gross substitution axiom’.
15.3.2016;
Trump and the weaponizing of economics.
Comment on
‘Paul Krugman: Trump Is No Accident’.
14.3.2016;
Economics and the weapons of mass distraction.
Comment on Peter Radford on
‘Why Trump?’
14.3.2016;
Its the price mechanism, stupid!
Comment on Bradford DeLong on
‘Ordoliberalismus and Ordovolkismus’.
13.3.2016;
Low-IQ economics: the beginners guide.
Comment on Thomas Palley on
‘Self-Protectionist Moment: Paul Krugman protects himself
and the establishment’.
12.3.2016;
Wage, profit, and the counter-intuitive labor market.
Comment on David Ruccio on
‘How the reserve army works’.
11.3.2016;
Sick or false?
Comment on Asad Zaman on
‘Market Fundamentalism’.
10.3.2016;
Sickness and remedy.
Comment on Lars Syll on
‘Modern economics is sick’.
10.3.2016;
Why economics is a failed science: the
25 best explanations/excuses.
Comment on
‘Krugmans textbook — mistaking the map for the
territory’.
9.3.2016;
The labor market and the consistent failure of 101-economics.
Comment on
‘Whats Up with Wage Growth?’.
8.3.2016;
Economics and the social science delusion.
Comment on Maria Alejandra Madi on
‘The formal and the substantive meanings of “economics”’.
8.3.2016;
From Orthodoxy, to Heterodoxy, to Sysdoxy.
Comment on Noah Smith on
‘Occult Mysteries of the Heterodox’.
6.3.2016;
Finalizing the Keynesian Revolution.
Comment on Lars Syll on
‘Mainstream economics — a wildly inconsistent project’.
6.3.2016;
Lawsons fundamental methodological error and the failure
of Heterodoxy.
Comment on
‘Critical realism and scientific explanation’.
4.3.2016;
Just one more orthodox absurdity.
Comment on Noahpionion on
‘Occult Mysteries of the Heterodox’.
4.3.2016;
How to rise above Moronomics.
Comment on Noahpionion on
‘Occult Mysteries of the Heterodox’.
3.3.2016;
The unveiled mystery of economic blather.
Comment on Noahpionion on
‘Occult Mysteries of the Heterodox’.
2.3.2016;
Orthodoxy? — NO, Heterodoxy? — NO:
Scrap ALL this crap!.
Comment on Noahpinion on
‘Occult Mysteries of the Heterodox’.
1.3.2016
Egmont Kakarot-Handtke:
Archive Apr 2016.
AXEC: New Foundations of Economics.
Rubberneck's reality.
Comment on
‘Gödels theorems and the limits of reason’.
30.4.2016;
Essentials of Constructive Heterodoxy: behavior.
Working paper at SSRN.
30.4.2016;
Essentials of Constructive Heterodoxy: institutions.
Working paper at SSRN.
30.4.2016;
The Propensity Function as general formalization of Economic Man/Woman.
Working paper at SSRN.
29.4.2016;
Make no mistake: there can be only one true theory.
Comment on
‘Received wisdom in macroeconomics’.
27.4.2016;
The synthesis of institution and math.
Comment on
‘Wicksell on the use of mathematics in economics’.
27.4.2016;
Walrasian double-blunder.
Comment on
‘On the irrelevance of general equilibrium theory’.
26.4.2016;
The insignificance of Gödel's theorem for economics.
Comment on
‘Gödels theorems and the limits of reason’.
23.4.2016;
When Ricardo saw profit, he called it rent: on the vice
of parochial realism.
Working paper at SSRN.
22.4.2016;
The emergence of profit and interest in the monetary circuit.
Working paper at SSRN.
21.4.2016;
Economists kill the economy.
Comment on
‘Reality killed the Washington Consensus’.
20.4.2016;
The structural price mechanism.
Working paper at SSRN.
20.4.2016;
Stylized facts and vacuous interpretations.
Comment on
‘The IMF on Investment since 2008’.
19.4.2016;
Economics vs. Sociology.
Comment on
‘On dogmatism in economics’.
19.4.2016;
Say's Law: a rigorous restatement.
Working paper at SSRN.
19.4.2016;
The Law of Supply and Demand: here it is finally.
Working paper at SSRN.
18.4.2016;
Unfit in all dimensions.
Comment on
‘Models, math and macro’.
18.4.2016;
Mortifying scientific headstands.
Comment on
‘The Coase Theorem’.
17.4.2016;
Essentials of Constructive Heterodoxy: money, credit, interest.
Working paper at SSRN.
17.4.2016;
Science or Circus Maximus?
Comment on
‘Economists — arrogant and self-congratulatory
autists’.
16.4.2016;
Methodology — Marx, too, messed it up.
Comment on
‘On dogmatism in economics’.
15.4.2016;
Why Post Keynesianism is not yet a science.
Working Paper at SSRN.
15.4.2016;
Reduced-form bricolage and sticky brains.
Comment on
‘Sticky Prices, Financial Frictions, and the Ben Bernanke Puzzle’.
14.4.2016;
The intelligent student's predicament.
Comment on
‘Is there anything worth keeping in standard microeconomics?’
14.4.2016;
The intelligent student's predicament.
Comment on
‘Do not underestimate the power of microfoundations’.
12.4.2016;
Bygones are bygones.
Comment on
‘On the irrelevance of general equilibrium theory’.
12.4.2016;
Bygones are bygones.
Comment on
‘The Bernanke-Summers imbroglio’.
11.4.2016;
MIT dilettantes II.
Comment on
‘Bernanke-Summers Debate II: Savings glut, investment
shortfall, or Monty Python?’
10.4.2016;
From microfoundations to macrofoundations.
Comment on Lars Syll on
‘New Keynesianism — an uncomfortable trade-off’.
10.4.2016;
New age economics in 10 bullet points.
Comment on Noah Smith on
‘A new age of econ imperialism is coming’.
9.4.2016;
MIT dilettantes.
Comment on
‘The inbred Bernanke-Summers debate on secular stagnation’.
8.4.2016;
From mathiness to empiriness: forget it!
Comment on Noah Smith on
‘A new age of econ imperialism is coming’.
8.4.2016;
The monstrous utility-supply-demand-equilibrium failure.
Comment on Edward Fullbrook on
‘The FisherBecker Curio’.
6.4.2016;
As Napoleon said: dont listen to economists.
Comment on Robert Waldmann on
‘Brad DeLong Marks His Beliefs about “The Return
of Depression Economics” to Market’.
4.4.2016;
The zombie wars are over.
Comment on
‘Fiscal multiplier studies far worse than I
thought’.
3.4.2016;
Austrian blather.
Reply to Major.Freedom on
‘Fiscal multiplier studies — it's far worse
than I though’.
2.4.2016;
How the American working class can bring
overall profits down to zero without bloody revolution.
Comment on anne on Larry Summers on
‘Corporate profits are near record highs. Thats a
problem’.
1.4.2016
Egmont Kakarot-Handtke:
Archive May 2016.
AXEC: New Foundations of Economics.
Economics: From proto-science to freak show.
Comment on anne on Links for 05-07-16.
9.5.2016
Heterodoxys biggest mistake is to repeat Orthodoxys biggest mistake.
Comment on Roger Farmer on
‘The biggest mistake in the history of macroeconomic thought’.
8.5.2016
How to leave pulp economics behind.
Comment on Noah Smith on
‘Brad DeLong pulpifies a Cochrane graph’.
7.5.2016
Keynes, too, got the general theory of employment wrong.
Comment on Lars Syll on
‘Price rigidities and unemployment’.
6.5.2016
A science without scientists.
Summary of comments on Barkley Rosser on
‘The Legacy of Joan Robinson’.
5.5.2016
How to get out of the econ101 PsySoc woods.
Comment on Asad Zaman:
‘The misconceived project of social science’.
4.5.2016
The overdue public clarification of economics actual
scientific state.
Comment on Barkley Rosser on
‘The Legacy of Joan Robinson’.
4.5.2016
Joan Robinson and the ‚throng of superfluous economists’.
Comment on Barkley Rosser on
‘The Legacy of Joan Robinson’.
3.5.2016
How Wicksell and the rest got inflation/deflation wrong.
Comment on Stanley Fischers speech on
‘(Money), Interest and Prices: Patinkin and Woodford’.
20.5.2016
Egmont Kakarot-Handtke:
Archive June 2016.
AXEC: New Foundations of Economics.
Getting out of IS-LM = Getting out of despair.
Comment on Nick Rowe on On Olivier Blanchard on IS-LM and
Teaching Intermediate Macro. And my despair. and on Oliver Blanchard
on How to Teach Intermediate Macroeconomics after the Crisis?
IS-LM has always been methodologically unacceptable. Keynes' s
elementary syllogism is conceptually defective. As a result, all I=S
models and the Keynesian multiplier are false. The Keynesian premises
have to be replaced by:
A0) The objectively given and most elementary configuration of the
economy consists of the household and the business sector (initially
one giant fully integrated firm).
A1) Yw=W·L: wage income Yw is equal to
wage rate W times working hours L.
A2) O=R·L: output O is equal to productivity R times working
hours L,
A3) C=P·X: consumption expenditure C is equal to price P times
quantity bought/sold X.
Saving and investment are NEVER equal. NO IS-curve ever existed.
The Monetary
profit = distributed profit - monetary saving + investment
expenditures.
This is measurable with two decimal places. From the differentiated
axiom set A1 to A3 follows the structural employment equation, which
is complementary to the structural Phillips curve. The ratio
ρF embodies the price mechanism. The structural
employment equation fully replaces what Blanchard advertises as his
updated IS-LM-Phillips-curve model.
6.6.2016
Egmont Kakarot-Handtke:
Archive October 2016.
AXEC: New Foundations of Economics.
The final implosion of MMT. Comment on Senexx on
‘Budget surpluses are not national saving’.
MMTers, like most of the economists, get accounting
habitually wrong. By juxtaposing government and non-government,
the fatal accounting error/mistake is obfuscated, thus losing
the differentiation between business sector and household sector,
and also profit as important magnitude.
In a pure consumption economy 3 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 (i) the monetary saving of the
household sector (Sm=YW-C) is zero and the
monetary profit of the business sector (Qm=C-YW)
is zero, too. In (ii) monetary saving Sm is
positive and the business sector makes a loss. In (iii)
monetary saving Sm is negative and the business sector
makes a profit. In national income accounting an
identity holds: (a) the
business sectors deficit (surplus)
equals the household sectors surplus (deficit). When
government is added (and households don't save), then (b)
budget deficits (Cg > T)
and household sector dissaving
(-Sm) are the 2 sources of
overall monetary profit in a
closed economy. MMT's defective accounting
equations have to be replaced by the
correct accounting equations (a) and
(b).
31.10.2016
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