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Unterabschnitt: Structural Axiomatic Economics

(Egmont Kakarot-Handtke* etc.)

 
*) Institute of Economics and Law, University of Stuttgart /
Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
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 sector’s stock of money
ΔO = change of inventory
ΔQfi = business sector’s financial profit
ΔSfi = financial saving (/dissaving) — equals business sector’s 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
The Pure Consumption Economy1:    
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!):
 QmC-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)  
  Anmerkung: Die Original-Phillips-Kurve stammt von dem Neuseeland-stämmigen Ökonomen und Erfinder A.W.H. Phillips (1958). Er baute auch den hydraulischen Analog­computer MONIAC, mit dem sich (wie hier) eine grafisch-technische makroökonomische Simulation vorführen lässt. Eine Live-Demonstration in Cambridge findet sich hier.
[HTML] Access Statistics for Egmont Kakarot-Handtke. LogEc, Services based on the RePEc data set.

(1983-86,…)  

[Abstract only]   Egmont Handtke: The Papers of Nicholas Kaldor. NK/3/30/97.  1 file in envelope; paper. Janus Cambridge catalogues, 1983
[Google Faksimile] 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

[Google Faksimile] 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
[Google Faksimile] 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
[Google Faksimile] 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] 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 firm’s 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 Eichner’s 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
[PDF] Xavier Gabaix, David Laibson: The Seven Properties of Good Models[!]. 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
[PDF] 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
[PDF] 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
[PDF] 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 Minsky’s 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 goods–producing 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 firmsThe Levy Economics Institute of Bard College, Working Paper No. 753, February 2013
[PDF] 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
[Google Faksimile] 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
[abstract only] 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
[PDF] Supplementary Reading Material in Economics. Part B: Introductory Macroeconomics (Class XII).  Central Board of Secondary Education , India, 2008–2014
[PDF] 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
[HTML] 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
[HTML] 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
[PDF] 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 Marx’s 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.
Nowadays very few people would maintain that the falling rate of profit theory is valid in historical time given its logical problems and given that it was conceived on the basis of a competitive process. In Marx’s own framework where the dynamic process is regulated by competition between capitals, involving heavy fluctuations in prices, the business cycle cum technical change, highlighted the permanent subaltern position of wage labour. But to day this position is not acceptable. The competitive process, even if it exists, is one of many other processes taking place alongside it. As a consequence to argue that a fall in wages is an indication of the restoration of accumulation and profitability is profoundly misleading
University of Sydney. NSW 2006 Australia, 12.8.2010

2003  

[PDF] 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 function–supply function–equilibrium. Structural axiomatization provides the complete and consistent picture of interrelated product market events. MPRA Paper 46912, 2003 (revised 21.5.2013);  [PDF] Last modified(?) version. 27.9.2015

2010  

[PDF] 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.
[abstract] Egmont Kakarot-Handtke: Axiomatic Basics of e-Economics[!] (introduction only, sketch, part of a book?). MPRA Paper 24331, 9.8.2010;  [PDF] 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)

2011  

[PDF] Egmont Handtke: Zur axiomatischen Fundierung der General Theory[wichtig !]. 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;  [HTML] 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
[PDF] 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;  [HTML] RWER issue 56: Egmont Kakarot Handtke. Real-World Economics Review Blog Comments on RWER issue no. 56,  11.3.2011
[PDF] 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
[PDF] Egmont Kakarot-Handtke: Keynes’s missing axioms (original, MPRA 32249); Keynes’s missing axioms[wichtig !] (revised version). Between Keynes’s 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 Keynes’s formalism is a subset of the structural axiom set. The axioms are applied to a central part of the General Theory in order to achieve consistency and generality. MPRA Paper 43856, 14.5.2011, revised 11.8.2011, posted 18.1.2013;  [PDF] Egmont Kakarot-Handtke: Keynes’s 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
[PDF] 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.
[HTML] 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.
[PDF] Egmont Kakarot-Handtke: What is Wrong With Heterodox Economics? Kalecki’s Profit Theory as an Example[!]. Kalecki’s 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 Kalecki’s alternative approach points in the right direction but unfortunately shares a crucial conceptual error with standard economics. MPRA Paper 32549, 18.5.2011
[PDF] Egmont Kakarot-Handtke: Beginning, crises, and end of the money economy in three consistent steps[wichtig !] (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 economy’s 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)
[PDF] 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 Schumpeter’s 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. ButSchumpeter’s 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. Schumpeter’s description of the stationary circular flow has been formalized and turned into a simple model. MPRA Paper 32641, 29.5.2011
[PDF] Egmont Kakarot-Handtke: The wondrous effortlessness of unifying circuit-, money-, price- and distribution theory. MPRA Paper 31279, 5.6.2011;  [PDF](Revised version:) The coherency of money, profit, price, and distribution[wichtig !] (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
[PDF] 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
[HTML] 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
[Google Faksimile] 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.  [Google Faksimile] Nick Potts: 1 A Sad Story. An Introduction to and Commentary on the Debate.  [Google Faksimile] Andrew J. Kliman: 2 Simultaneous Valuation vs. the Exploitation Theory of Profit.  [Google Faksimile] Simon Mohun: 3 On the TSSI and the Exploitation Theory of Profit.  [Google Faksimile] Andrew J. Kliman: 4 Deriving a Negative PNP.  [Google Faksimile] Roberto Veneziani: 5 Exploitation, Profits, and Time.  [Google Faksimile] Andrew J. Kliman, Alan Freeman: 6 Replicating Marx: A Reply to Mohun.  [Google Faksimile] Simon Mohun, Roberto Veneziani: 7 The Incoherence of the TSSI: A Reply to Kliman and Freeman.  [Google Faksimile] Alan Freeman, Andrew J. Kliman: 8 Simultaneous Valuation vs. the Exploitation Theory of Profit: A Summing Up.  [Google Faksimile] Andrew J. Kliman, Alan Freeman: 9 The Truthiness of Veneziani's Critique of Marx and the TSSI.  [Google Faksimile] Simon Mohun, Roberto Veneziani: 10 The Temporal Single-System Interpretation: Underdetermination and Inconsistency.  [Google Faksimile] Alan Freeman, Andrew J. Kliman: 11 No Longer a Question of Truth? The Knell of Scientific Bourgeois Marxian Economics and a Positive Alternative.  [Google Faksimile] Robert Paul Wolff: 12 Once More unto the Breach, Dear Friends, Once More.  [Google Faksimile] Chris Byron, Alan Freeman, Andrew J. Kliman: 13 Physicalism and the Exploitation Theory of Profit are Incompatible: A Response to Robert Paul Wolff.  [Google Faksimile] Robert Paul Wolff: 14 Response to Professors Freeman and Kliman and Mr. Byron.  [Google Faksimile] Andrew J. Kliman, Robert Paul Wolff: 15 Subsequent Dialogue between Kliman and Wolff
[PDF] Egmont Kakarot-Handtke: Exploitation and its unintended outcomes. An axiomatic obituary for Marx’s surplus value (revised version). The present paper scrutinizes the logical foundation of Marx’s 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
[PDF] 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;  [PDF] Unemployment out of nowhere[wichtig !] (revised version). MPRA Paper 32896, 15.7.2011;  [HTML] 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;  [HTML] A.W. Phillips: The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957. Economica 25(100), November 1958 (Reprinted 26.3.2007)
[PDF] 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, saving–dissaving, liquidity–illiquidity, rates of interest, leverage, allocation, prices, profits, unit of account, and employment. MPRA Paper 32536, 26.7.2011;  [PDF] 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, saving–dissaving, liquidity–illiquidity, 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 saving–dissaving 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 saving–dissaving process, but from the monetization of nonfinancial assets. MPRA Paper 32542, 2.8.2011
[PDF] 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
[HTML] 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
[PDF] Egmont Kakarot-Handtke: Squaring the investment cycle[wichtig !] (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 saving–investment, of profit–loss, of money–credit, and of internal–external 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
[PDF] 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
[PDF] 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
[PDF] 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
[PDF] 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 Ricardo’s 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;  [PDF] Paolo Trabucchi: Ricardo: ‘real’ or supposed vices? A Comment on Kakarot-Handtke’s paper. ECONOMIC THOUGHT, WORLD ECONOMICS ASSOCIATION, 2011?
[PDF] Egmont Kakarot-Handtke: The wine maker’s 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)
[abstract] 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;  [PDF] Egmont Kakarot-Handtke: The propensity function … (full text). MPRA Paper 34051, 11.10.2011
[PDF] 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
[PDF] Egmont Kakarot-Handtke: The Value of Water and Diamonds: Back to Square One. Taking the water–diamond 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. Walras’s 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
[PDF] 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)

2012, 2011/2013  

[PDF] 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;  [PDF] (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

2012  

[PDF] 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 sector’s 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
[PDF] 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 paper’s 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] The Emergence of Profit and Interest in the Monetary Circuit[wichtig!]. 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 paper’spurpose is to overcome this. This is done by setting the circulation approach on general structural axiomatic foundationsWorld Economic Review 2: 106-118, WORLD ECONOMICS ASSOCIATION, 2013;  [HTML] Abstract and Review. WORLD ECONOMICS ASSOCIATION, 2012
[HTML] Victor J. Aguilar: Reply to Egmont Kakarot-Handtke. Blog Axiomatic Theory of Economics, 2012
[PDF] Egmont Kakarot-Handtke: Income distribution, profit, and real shares[wichtig!]. 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
[PDF] 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 (1923–2010) und Alfred E. Ott (1929–1994). Metropolis-Verlag, Marburg, 2012. MPRA Paper 44313, 9.3.2012.
Die wichtigsten Einzelresultate der vorliegenden Untersuchung sind:
• Aus den drei strukturellen Axiomen folgen die Bestimmungsgrößen des Gewinns, der Geldmenge, des markträumenden Preises und der Verteilung des Realprodukts für die reine Konsumökonomie.
• Der Gewinn ist durch den Ausgaben- und den Ausschüttungs­quotienten bestimmt.
• Die Entwicklung der Geldmenge ist durch den Ausgabenquotienten bestimmt.
• Der markträumende Preis ist durch den Ausschüttungs­quotienten und die Lohnstückkosten bestimmt.
• Der Anteil der Lohneinkommens­empfänger am Output wird durch den Ausschüttungs­quotienten und das Ausgabenverhalten der Empfänger von Lohneinkommen und Gewinnaus­schüttung bestimmt, d. h. von ihrem spezifischen Ausgabenquotienten.
• Der Reallohn und die Verteilung des Outputs werden in der Einkommens- und Konsumsphäre bestimmt und nicht in der Produktionssphäre.
• Modelle, welche die Definition Einkommen ≡ Löhne + Gewinne verwenden, sind a priori gegenstandslos, weil Gewinn und Gewinnaus­schüttung nicht dasselbe ist.
• Existenz und Höhe des Gewinns sowie die Verteilung des Outputs sind nicht mit dem Marginalprinzip erklärbar.
[PDF] 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
[Abstract] Nuno Ornelas Martins: Mathematics, science and the Cambridge tradition. Blog WORLD ECONOMICS ASSOCIATION, 28.3.2012
[PDF] 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
[PDF] 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;  [PDF] Wynne Godley, Marc Lavoie: Monetary Economics. An Integrated Approach to Credit, Money, Income, Production and Wealth[wichtig !]. 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
[PDF] 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
[PDF] Egmont Kakarot-Handtke: General Formal Foundations of the Virtuous Deficit–Profit 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 Fisher’s debt deflation theory into the context of the consistent structural axiomatic approach. MPRA Paper 42912, 29.11.2012
[PDF] Egmont Kakarot-Handtke: Make a bubble, take a free lunch, break a bank[wichtig !]. 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
[PDF] Egmont Kakarot-Handtke: Keynes’s employment function and the gratuitous Phillips curve disaster[wichtig !]. 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 Keynes’s ideas immediately invited bastardizations. One of them, the Phillips curve synthesis, proved to be fatal. This paper identifies Keynes’s 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    

with LΘ = labor supply
. MPRA Paper 43111, 6.12.2012;  [PDF] 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 Keynes’s ideas immediately invited bastardizations. One of them, the Phillips curve synthesis, turned out to be fatal. This paper identifies Keynes’s 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;  [PDF] 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.  [HTML] John Quiggin: New Old Keynesianism[!]. 23.1.2013: “Olli Ranta”: [⇒]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 didn’t. 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
[Abstract only] 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

2013  

[PDF] 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
[PDF] 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
[PDF] Egmont Kakarot-Handtke: Walras’s law of markets as special case of the general Triangle Theorem: a laconic proof. Also as Walras’s 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 Walras’s 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)
[PDF] 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)
[HTML] 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 humanity’s 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 I’ll 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
[Abstract only] 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;  [PDF] Hafiz Abdur Rahman, Mazana Armstrong, DeTao Mao, José R. Martí: Full Article Text. 2008 IEEE Electrical Power & Energy Conf., 2008;  [HTML] 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 (Thévenin-Äquivalent oder Ersatzspannungsquelle) ist. de.wikipedia.org, 27.2.2015
[pdf] Egmont Kakarot-Handtke: Why Post Keynesianism is Not Yet a Science[wichtig !]. 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
[PDF] 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
[PDF] 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
[PDF] 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
[PDF] 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
[PDF] Egmont Kakarot-Handtke: Understanding Profit and the Markets: The Canonical Model [!][wichtig !]. 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 economy’s elementary building blocks. MPRA Paper 48691, 27.7.2013 (revised 11.6.2014)
[PDF] 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
[PDF] 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
[PDF] Egmont Kakarot-Handtke: Redemption and Depression[!]. According to prevailing methodological criteria, standard economics is definitively refuted. Joan Robinson’s 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)
[PDF] 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)
[PDF] 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 Keen’s alternative to the standard approach on sound foundations. MPRA Paper 51659, 22.11.2013;  [HTML] Egmont Kakarot-Handtke: Debunking squared. The prominent definition of income as: “Total income = Wages plus Profits” (Keen, Keynes, etc.) is demonstrably false. AXECwiki, 2013
[PDF] 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
[HTML] ‘philosophicalecon’: The Corporate Profit Equation Derived, Explained, Tested: 1929-2013[wichtig !]. I’m 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 doesn’t imply dissaving. Investing means the creation of new wealth that didn’t 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
[PDF] Egmont Kakarot-Handtke: Say’s Law: A Rigorous Restatement. Say’s 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 Say’s Law. MPRA Paper 52550, 28.12.2013

2014  

[PDF] 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;  [HTML] “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
[PDF] 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
[PDF] 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
[PDF] Egmont Kakarot-Handtke: The Logic of Value and the Value of Logic[wichtig !] (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 Jevons’s 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)
[HTML] 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
[PDF] 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 theory’s 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
[PDF] 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;  [PDF] Journal Article. real-world economics review 67, Issue no. 67, pp. 2–16, 9.5.2014
[PDF] 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
[PDF] 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
[HTML] Ausschuss für Evolutorische Ökonomik, Mitglieder. K: Dipl.-Vw. Egmont Kakarot-Handtke, München. 21.3.2014
[HTML] Economic Logic. More than 100 references to papers authored by “Economic Logician”. Econ Academics.org, Blog aggregator for economics research, March 2014
[PDF] 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
[PDF] 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
[PDFL] 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, Sraffa’s 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
[PDF] Alain Parguez: The Solution of the Paradox of Profits[wichtig!]. 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 paradoxIn: Richard Arena, Neri Salvadori (eds.): Money Credit and the Role of the State. Essays in honour of Augusto Graziani. ASHGATE, chapter 15, pp. 255–268 (pdf 277–290), 13.7.2004
[PDF] 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
[Abstract only] 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;  [PDF] Full Journal Article Text[wichtig!];  [HTML] Abstract & Corresponding Discussion Paper. E. Kakarot-Handtke: Keen’s 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
[HTML] 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 Kalecki’s 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
[HTML] 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
[HTML] 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
[HTML] Steve Roth: How Accounting “Constrains” Economicsn. Accounting, and accounting identities, impose a constraint on our economic reasoning and predictions. Accounting can’t tell us whether a piece of economic reasoning is right. It can only tell us if it’s 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
[HTML] V. Ramanan: Kalecki’s Profit Equation[!]. Constructing a full Transactions Flow Matrix from a simplified National Income Matrix with modifications: firms retain earnings, and there are interest payments. Kalecki’s 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 Fed’s Flow of Funds Statistic, undistributed profits is called ‘Total Internal Funds. Blog The Case For Concerted Action, 12.3.2012
[HTML] 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
[HTML] 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
[HTML] 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 Kalecki’s 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
[HTML] 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 there’s less consumption spending, there’s more investment spending (because that’s 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
[HTML] 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
[HTML] V. Ramanan: Paradox Of Profits?[wichtig !] 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);  [HTML] 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
[PDF] 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
[HTML] Marxism holds new appeal. From the forthcoming (June 2014) The Social Thought of Karl Marx. SAGE Publications, Inc.
•Justin P. Holt: Communism and Economics.
Egmont Kakarot-Handtke: Profit for Marxists.
•Raju Das: The Relevance of Marxist Academics.
•James Tyner, Joshua Inwood: Violence as Fetish: Geography, Marxism, and Dialectics.
•Jeffrey Kopstein, Michael Bernhard: Post-Communism, the Civilizing Process, and the Mixed Impact of Leninist Violence.
•Vladimir Popov: Socialism is Dead, Long Live Socialism!
•Imanol Galfarsoro interviews Santiago Zabala, co-author of Hermeneutic Communism.
•Julia Lovell reviews The Oxford Handbook of the History of Communism. Marx was right: Sean McElwee on five surprising ways Karl Marx predicted 2014. While Marx’s prediction of our political future was finally discredited with the fall of communism, is his view of our economic future being validated? Doug Henwood, Tyler Cowen, Brad DeLong and more debate. Communism saved the American worker: Communism may never have worked here, but capitalism isn’t working as well without a rival economic system. Who are the new socialist wunderkinds of America? Young people have become increasingly politicised — and increasingly radical. For those too young to remember the Cold War but old enough to be trapped by the Great Recession, Marxism holds new appeal. Josh Eidelson on the Tea Party’s “absurd” socialism obsession: Actual Marxist Benjamin Kunkel sounds off. Jesse Myerson on 7 huge misconceptions about communism (and capitalism). A look at how ALL of #Obama's ideas are rooted in Marxism.
Blog BOOKFORUM, 2.4.2014
[PDF] 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
[PDF] 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
[HTML] Simon Wren-Lewis: Savings Equals Investment? Blog mainly macro, 14.1.2012
[HTML] 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
[HTML] 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. Fullbrook’s anthology, A Guide to What’s 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
[HTML] 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
[PDF] Jonathan Barzilai: Inapplicable operations on ordinal, cardinal, and expected utility[wichtig !]. 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 utility’s scale construction rule is self-contradictory. real-world economics review 63, pp. 118 ff.  25.3.2013;  [PDF] 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
[PDF] Jonathan Barzilai: Demand theory is founded on errors[wichtig !]. The issue is applicability of mathematical operations. More on Hicks’s and Samuelson’s 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;  [HTML] 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
[HTML] 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
[PDF] 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
[PDF] Egmont Kakarot-Handtke: The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment[wichtig !]. 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.
[PDF] 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
[HTML] 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 hair’s breadth[wichtig !]. 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
[HTML] 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
[HTML] 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”[wichtig !]. 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
[HTML] 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
[PDF] 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;  [PDF] Last Modified Version[!]. 24.9.2015
[HTML] 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][Amazon] 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 liberalismthe 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.
[PDF] 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
[HTML] Dean Baker: Full employment: The recovery’s missing ingredient. real-world economics review   4.11.2014
[HTML] 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 Samuelson’s 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
[HTML] admin: Saving=Investment Fallacy. A Scientific Economic Paradigm Project, 14.11.2014
[PDF] 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
[HTML] Merijn Knibbe: The real winner: economics which takes money and debt serious. real-world economics review   27.11.2014
[HTML] Lars Syll: Economics without aspirations. Robert Lucas: Theories embedded in general equilibrium dynamics of the sort that they don’t 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
[PDF] 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)
[HTML] 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

[HTML] 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.
• Einige der Folgerungen:
Profit Law: Gewinn oder Verlust des Geschäftssektors insgesamt hängt nur vom Ausgabenanteil am verfügbaren Arbeitseinkommen und dem Anteil des ausgeschütteten Gewinns am Gesamtgewinn ab — und nichts sonst (Gesamteinkommen ist der Skalenfaktor)
• das Profit Law gilt, unabhängig von den Eigentumsrechten, in kapitalistischen wie in kommunistischen Wirtschaftssystemen
• nicht ausgeschütteter Gewinn erhöht direkt den Geldbestand des Geschäftssektors
• das strukturell-axiomatische Gesetz von Angebot und Nachfrage besagt, dass der markträumende Preis dem Produkt von Ausgabenanteil, den Kosten einer Arbeitseinheit und dem ausgeschütteten Gewinn gleicht
• die Geldmenge ist nicht unter den Determinanten des Preises (Say'sches Theorem gilt nicht)
• bei Haushaltsgleichgewicht und Markträumung wird der reale? Lohn von den Produktions­bedingungen und der Einkommens­verteilung bestimmt — dagegen nicht von den Angebots- und Nachfrage-Bedingungen am Arbeitsmarkt
• Wenn die Konsumausgaben ebenso hoch sind wie die Arbeitseinkommen, kann der Gewinn immer nur null sein — was auch immer sonst geplant oder gewünscht wird
• die Einnahmen des Geschäftssektors können i.Allg. nur dann größer als die Kosten sein, wenn die Konsumausgaben höher sind als die Arbeitseinkommen
• damit Gewinn überhaupt im Kreislauf entstehen kann, muss der Haushaltssektor mindestens einmal ein Defizit gehabt haben, also mehr ausgegeben als eingenommen haben (d.h. einen Kredit aufgenommen haben)
• Gewinn wird i.Allg. durch die Schulden des Haushaltssektors bestimmt
• Lohn ist das Faktoreinkommen der eingesetzten Arbeit
Gewinn ist kein Faktor­einkommen
• (da Kapital in der hier betrachteten reinen Konsumwirtschaft nicht existiert, lässt sich der Gewinn nicht funktionell einem Kapital zuordnen)
• da der Gewinn keinen realen Gegenpart in Form eines Stückchens am Produktionskuchen besitzt, hat er nur einen monetären Gegenpart
Existenz und Größe des Gesamtgewinns hängen nicht von gewinn-maximierendem Verhalten oder überhaupt der Effizienz des Geschäftssektors ab, sondern werden ausschließlich vom Verhältnis der Konsumausgaben zum Arbeits­einkommen bestimmt
• der Wert des Produktions­ergebnisses weicht i.Allg. von der Summe der Faktoreinkommen ab — dies kennzeichnet eine monetäre Geldwirtschaft
• dass die Summe der bereitgestellten Güter und Dienstleistungen immer mit der Summe der Faktoreinkommen übereinstimmen soll, ist der Fehler aller Wertlehren (Adam Smith → David Ricardo → Karl Marx)
• der monetäre Gewinn wäre nur dann gleich dem ausgeschütteten Gewinn, wenn die Konsumausgaben mit dem Gesamteinkommen übereinstimmen (was in Gleichgewichts­modellen implizit angenommen wird) — in der realen Welt stimmen Konsumausgaben nicht mit dem Gesamteinkommen überein, also sind Gewinn und ausgeschütteter Gewinn praktisch nie gleich
• die übliche Annahme Gesamteinkommen = Arbeitsentgelt + Gewinne ist fehlerhaft, weil Gewinn und ausgeschütteter Gewinn nicht das Gleiche sind
• die Beschäftigung hängt in der einfachen Konsumwirtschaft ab vom Konsumanteil der Haushalte an ihrem verfügbaren Einkommen (entspricht Keynes' effective demand) und dem auf dem Markt gebildeten Preis
• wenn der Markt geräumt wird (Verkaufsanteil an der Produktion = 1≈100%) und das Budget der Haushalte ausgeglichen ist (Ausgaben=Einnahmen, d.h. Konsumanteil = 100%), bedeutet ein höherer Kostenanteil eine höhere Beschäftigung; dabei geht die Beschäftigungs­kurve gegen unendlich — es gibt also weder eine „natürliche Arbeitslosenrate” noch irgendein Gleichgewicht bei Unter­beschäftigung
• bei fixiertem Kostenanteil sieht die Beschäftigungs­kurve bei ansteigendem Konsumanteil ähnlich aus
• wenn man vorläufig mikroökonomisches Marktversagen oder Reibungen ausklammert, kann zwar jedes Beschäftigungs­niveau im Prinzip erreicht werden, aber es gibt keine „Gleichgewichtskräfte”, die zu der erforderlichen Variablen-Konstellation hinführen
• ist der Konsumanteil der Privathaushalte größer als 1 (> 100%), bremst ein ausgeglichener Staatshaushalt die ansteigende Beschäftigung etwas; ist er kleiner als 1 (100%), mildert ein ausgeglichener Staatshaushalt den Beschäftigungs­rückgang — beides umso mehr, je größer der Staatshaushalt ist
• eine gleichzeitige Veränderung der Faktorkosten-Relation kann diese Budgeteffekte konterkarieren — z.B. ein Preisanstieg oder ein Produktivitäts­anstieg
• ein Staatsdefizit wirkt bei insgesamt ausgeglichenen Privathaushalten als großer Antrieb für die Beschäftigung
• ein Staatsdefizit erhöht i.Allg. den Gesamtgewinn des Geschäftssektors, welcher aber auch durch den Sparanteil der Privathaushalte (weniger steigert den Gewinn) und die Investitionsquote sowie die Relation Exporte/Importe beeinflusst wird
• in einer Ökonomie mit positiven Gewinnen und vollständiger Gewinn­ausschüttung wird durch einen Wechsel von der privaten zur öffentlichen Produktion die sich selbst erhaltende Wechselwirkung zwischen Gewinn und ausgeschüttetem Gewinn unterbrochen: der Gewinn schrumpft auf null
• sind sowohl der Gesamthaushalt des Privatsektors als auch der Staatshaushalt ausgeglichen, wird der gesamte Gewinn ausgeschüttet

2015  

[HTML] Lars P. Syll: ‘New Keynesian’ haiku economics. “Stuck with crazy models”? Absolutely!. Blog LARS P. SYLL, 13.1.2015
[PDF] 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
[HTML] "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
[PDF] 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
[PDF] 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
[HTML] 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
[HTML] 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
[HTML] Lars P. Syll: Abba Lerner on Functional Finance and Ricardian Equvalence. . Blog LARS P. SYLL, 18.2.2015
[HTML] 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
[HTML] Lars P. Syll: The real limit of public debt. . Blog LARS P. SYLL, 21.2.2015
[PDF] Egmont Kakarot-Handtke: Essentials of Constructive Heterodoxy: Aggregate Demand[wichtig !]. 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
[PDF] Lars Syll: Piketty finally admits marginal productivity theory is wrong. In yours truly’s 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. It’s 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
[PDF] José A. Tapia: Money and Say’s law: on the macroeconomic models of Kalecki, Keen, and Marx. Kalecki’s model of aggregate income and aggregate spending, and their dynamic relations was very likely influenced by Marx’s schemes of reproduction. This paper argues, first, that in both Kalecki’s model and in Marx’s simple reproduction, money and credit play no role, so that rather than a monetary economy, these models portray a barter economy which follows Say’s law. Second, that Steve Keen’s 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 Marx’s 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;  [HTML] Egmont Kakarot-Handtke: Still in the woods. Comment on Tapia on “Money and Say’s 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 Say’s Law in Kalecki’s, Keen’s, and Marx’s 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 Say’s Law. Minsky is contained in my profit equation as a limiting case for YD=0 and S=0. The employment “equation contains Keen’s relationship beween changes of employment and changes of debt.” But Tapia ends here and leaves Heterodoxy in the woods.  22.2.2015
[HTML] 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
[PDF] Egmont Kakarot-Handtke: Essentials of Constructive Heterodoxy: Profit[wichtig !]. 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
[PDF] 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
[HTML] Jon Elster: On deductivist modeling leading economics astray. Blog  LARS P. SYLL , 20.3.2015
[HTML] Lars P. Syll: Reality killed the Washington Consensus. Blog  LARS P. SYLL , 20.3.2015
[HTML] 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
[PDF] 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. Paper’s 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.
[HTML] Yi Wen, Maria Arias (St. Louis Fed): Money hoarding — an explanation of today’s low inflation. Blog  LARS P. SYLL , 25.3.2015
[PDF] Victor Aguilar: Review of Varoufakis’ and Arnsperger’s “What Is Neoclassical Economics?”. A short review of Varoufakis’ and Arnsperger’s paper to see if we can sort out who is telling the truth and who is telling lies. EconoPhysicsForum, 27.3.2015
[HTML] Simon Wren-Lewis: Do not underestimate the power of microfoundations. Blog mainly macro, 3.4.2015
[HTML] Merijn Knibbe: What’s 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 — it’s all there. Real-World Economics Review Blog,  28.3.2015
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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;  [HTML] Egmont Kakarot-Handtke: Methodology — Marx, too, messed it up. Comment on Lars Syll on “On dogmatism in economics”. 17.4.2015
[PDF] 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
[HTML] Simon Wren-Lewis: Received wisdom in macroeconomics. Blog mainly macro, 27.4.2015
[PDF] 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
[HTML] 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
[HTML] 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
[HTML] Lars Syll: Seven principles to guard you against economics silliness7 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
[HTML] 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
[HTML] David Ruccio: Economics and the value of art. Neoclassical economists don’t have a lot to say about the value of art. The Wall Street Journal observes that yesterday’s 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 world’s 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.
[PDF] 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
[HTML] 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
[HTML] 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: it’s about society, the real world. Real-World Economics Review Blog,  20.5.2015
[HTML] "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
[HTML] 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
[PDF] Zoltan Jakab, Michael Kumhof: Banks are not intermediaries of loanable funds — and why this mattersIn 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
[HTML] 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
[HTML] 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
[HTML] 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. It’s 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 doesn’t 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
[HTML] 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
[HTML] Egmont Kakarot-Handtke: The Context-Dependency of Human (Economic) Behaviour. . Real-World Economics Review Blog,  12.6.2015
[PDF] 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 Keen‘s 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
[HTML] Egmont Kakarot-Handtke: Keenonomics, aggregate demand/change of debt, and some misleading critique. Severin Reissl in a recent critique of Steve Keen’s approach argues from Stützel’s 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 sector’s investment expenditures are never equal to the household sector’s saving and their difference is always equal to the business sector’s retained profit. But Keen's assertion that there is a straightforward connection between aggregate demand and the change of the household sector’s debt is absolutely correct for the pure consumption economy. Real-World Economics Review Blog,  16.6.2015;  [HTML] Merijn Knibbe: Why Steve Keen is even more right than he thinks. Keen couldn’t convince his audience of the importance of private debt: they kept coming back to “one person’s debt is another person’s asset, therefore the level of debt doesn’t 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
[PDF] Egmont Kakarot-Handtke: Major Defects of the Market Economy[wichtig !]. 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).  [PDF] Egmont Kakarot-Handtke: Major Defects of the Market Economy (preview). MPRA Paper 65666, 17.7.2015
[HTML] 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;  [abstract only] Paul Beaudry, Dana Galizia, Franck Portier: DP10645  Reviving the Limit Cycle View of Macroeconomic Fluctuations (abstract only). Centre for Economic Policy Research, June 2015
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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 Friedman’s wisdom to be adopted by policymakers, while Samuelson and Solow’s 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;  [abstract] James Forder: Macroeconomics and the Phillips Curve Myth OXFORD UNIVERSITY PRESS, 9.10.2014
[HTML] David Ruccio: What a $12 Minimum Might Mean. Until recently, we were certain what would happen with an increase in the minimum wage. Now, it’s 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
[HTML] “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 Keynes’s 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
[HTML] 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
[HTML] Mark Thoma: ‘Freshwater's Wrong Turn’. Sometimes, the academics don’t 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
[HTML] Egmont Kakarot-Handtke: Modern moronomic theory. Comment on Bill Mitchell on “Saturday Quiz – August 1, 2015 – answers and discussion”. AXEC 2.8.2015
[HTML] 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
[HTML] 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
[HTML] 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 don’t). 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
[HTML] 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 people’s 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
[HTML] 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
[HTML] 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
[HTML] 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. Solow’s 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
[HTML] “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
[HTML] 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
[HTML] 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
[HTML] John Komlos: A critique of Samuelson’s and Nordhaus’s Principles of Economics. Real-World Economics Review Blog,  25.8.2015
[HTML] 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;  [HTML] Egmont Kakarot-Handtke: Much change, no progress. Comment on Simon Wren-Lewis on “The day macroeconomics changed”. 28.8.2015
[HTML] 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
[HTML] 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;  [HTML] 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
[HTML] 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
[HTML] Mark Thoma: The Fed Must Banish the 1970’s Inflation Devil. Inflation remains below the Fed’s 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
[HTML] 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
[HTML] Dean Baker: Biggest lesson from Financial Crisis: Wall Street gets what it wants. Real-World Economics Review Blog,  18.9.2015
[HTML] 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
[HTML] 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
[HTML] David Glasner: Keynes and Accounting Identities[wichtig!]. I had criticized Keynes’s reliance on accounting identities. The contemporary economist Ralph Hawtrey was “sharply critical of Keynes’s 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 isn’t 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 don’t believe that the validity of theories depends on how terms are defined.”.  Uneasy Money , 20.10.2015
[HTML] 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: Keynes’s 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 bank’s 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
[HTML] 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 one’s skills or labour at an economic rate of profit, given one’s 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
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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 harmlessE. 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
[HTML] 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 Egmont’s 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
[PDF] 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

2016  

[HTML] 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 neededH. Henderson: See our expert seminar/official UN report on “Reforming Electronic Markets and Trading Real-World Economics Review Blog,  7.1.2016
[HTML] Egmont Kakarot-Handtke: Which breakdown?[wichtig!] 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
[HTML] 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-man’s 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
[HTML] Chris Dillow: Against Anti-Economics. We have to complain about ideologically-motivated attacks on conventional economics. E. Kakarot-Handtke: It’s not the ideology, it’s 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
[HTML] 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. Zaman’s 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;  [HTML] 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
[HTML] 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
[HTML] 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
[HTML] "Ikonoclast": Turnbull opposes affordable housing. From Egmont Kakarot-Handtke, “Mathematical Proof of the Breakdown of Capitalism”:
“… the elementary consumption economy exclusive of profit distribution is a zero-sum game with time as the nth player. It is neither productive nature nor human effort nor greed which brings profit into existence. It is temporal asymmetry that creates this optical illusion.”
a) Capitalist production systems demonstrably have the power to destroy the livable environment, if misused.
b) The self-guiding capitalism does not have enough “look-ahead” (think with a maze-searching metaphor) to determine if it has chosen a dead-end path
c) Path reversal upon discovery of an unambiguous dead-end depends on not having passed the point of no return to go back to a viable path
d) Capitalist apologetics denies the existence of dead-ends and points of no return
. Blog  John Quiggin , 21.2.2016
[PDF] 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
[PDF] 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
[PDF] Lars Syll: How to get published in ‘top’ journals. Citing Paul Halmos:
  If you think that your paper is vacuous,
  Use the first-order functional calculus.
  It then becomes logic,
  And, as if by magic,
  The obvious is hailed as miraculous
.
Real-World Economics Review Blog, 20.3.2016
[HTML] Menzie Chinn: Thinking about Wages, Inflation and Productivity… and Capital’s Share. The WSJ reports: “... firms will react to higher labor costs by raising prices, pushing inflation above the central bank’s 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 Foundation’s 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
[HTML] 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 don’t understand economies? We must ask ourselves not just why we’ve underperformed around the Great Recession and recovery, but also why we’ve been at full employment only around a third of the time since 1980. What’s 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 wrongOn The ECONOMY  JARED BERNSTEIN BLOG, 21.6.2016
[PDF] Asad Zaman: ET1% — Economic Theory of the top 1%. Comment on Lars Syll’s „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
[HTML] Raphaële Chappe: General Equilibrium Theory: Sound and Fury, Signifying Nothing[wichtig !]? 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 Keynes’s 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
[HTML] 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
[HTML] 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, it’s 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 can’t 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
[HTML] 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
[HTML] 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 can’t ensure that overall economic equilibrium is restored because the level of employment depends on aggregate demand, and if aggregate demand is insufficient, wage cutting won’t 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
. From this follows: (i) An increase of ρE leads to higher employment. (ii) Increasing I positively influences employment. (iii) An increase of ρF leads to higher employment. The complete, testable equation contains in addition profit distribution, public deficit spending, and import/export. (i) and (ii) cover Keynes’s aggregate demand. The factor cost ratio ρF embodies the price mechanism (works very different from what is usually assumed). Overall employment increases if the average wage rate W increases relative to P and R. So unemployment is never the result of downward sticky wages but of upward sticky wages! Egmont Kakarot-Handtke (2.10.): Economics as incantation of nonentities. Applying constrained optimization or rational expectations or equilibrium violates scientific standards
. Blog  Uneasy Money , 28.9.2016
[HTML] 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
[HTML] 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
[HTML] 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 Samuelson’s 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. Samuelson’s 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
[HTML] Peter Dorman: It's Red Friday and Time to Discuss the Role of Exploitation in Profit. You should read Fred Moseley’s case for the labor theory of value and the problems he has with Branko Milanovic’s 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;  [HTML] The thing with profit and exploitation[wichtig !]. Comment on Peter Dorman on ‘It’s 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;  [HTML] 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
[HTML] 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 Mankiw’s latest opinion piece: “Don’t 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 Mankiw’s 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 Keynes’s 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 sector’s deficit (surplus) equals the household sector’s 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
[HTML] 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
[HTML] 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

2017  

[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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
[HTML] 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 sector’s increase of debt. Keynes’ foundational identity “Income = value of output” is false.  Blog  Mike Norman Economics , 30.7.2017
[HTML] 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
[HTML] 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 sector’s 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


AXEC® A New Paradigm  

[HTML] The AXEC Website. Content. Copyright. AXEC
[HTML] 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
[HTML] Egmont Kakarot-Handtke: Profit — microeconomy vs. macroeconomy[wichtig !]. 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.
But the profit of the whole business sector cannot be explained by these factors. Macroeconomically, in the case of a pure consumption economy, the total profit of the business sector is determined by • a) the relation of consumption expenditure to total income • b) the distributed profits.
National accounting reveals: this is true with the accuracy of 2 decimal places. Profit is a factor-independent residual. It has nothing to do with the behavioral concept of marginal productivity. It follows that the familiar theories of income distribution and wealth distribution are wrong
. AXEC
[HTML] 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 wrongAXEC, 2010
[HTML] 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 sector’s investment expenditures and household sector’s monetary saving plus distributed profits of the business sector). AXEC, 2013

AXEC® 2014  

[Abstract only] Egmont Kakarot-Handtke: Lost and found: Recovering missing links.
15.11. It's all in the structural employment equation — end of discussion: Comment on “The low wages fallacy”.
12.11. From anything goes to nothing goes right: Comment on “Mainstream macroeconomics distorts our understanding of economic reality”.
7.11. From opinion recycling to real scientific progress: A general comment.
4.11. Economic theory — as false as ever: Comment on Peter Temin and David Vines's “Keynes — more important than ever”.
Blog AXECwiki, 4.11.-15.11.2014
[Verzeichnis] [HTML] (Egmont Kakarot-Handtke:) AXEC® Home. AXEC: New Foundations of Economics, 2013/2014?  [HTML] Axioms. A set of 6 axioms.;  [HTML] 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.”  [HTML] Profit. About the fundamental economic concepts income and profit.;  [HTML] Prospect. “If you have more than proto-scientific opinions about how the economy works, we possibly can do some new economic thinking together.”;  [HTML] Identity. ®AXEC's mission.;  [HTML] AXECwiki. (citations).;  [HTML] 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.”
[HTML] axec.org: AXEC New Foundations of Economics. AXEC provides the correct formal foundations of theoretical economics. webwiki.com, 2013;  [HTML] 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.” ;  [HTML] 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.”;  [HTML] 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.”;  [HTML] 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.”
[HTML] AXEC: Eureka... AXEC, 2014?;  [HTML] 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;  [HTML] Geometrical Exposition of Structural Axiomatic Economics. AXEC;  [HTML] Neither Orthodoxy nor Heterodoxy. AXEC;  [HTML] Economy and Profit. AXEC;  [HTML] Material and logical consistency. AXEC;  [HTML] AXEC's mission. AXEC
[HTML] Egmont Kakarot-Handtke: Archive Oct 2014. AXEC: New Foundations of Economics.  [Paper] The profit theory is false since Adam Smith. What about the true distribution theory? Working paper.  19.10.2014
[PNG-Bild] Egmont Kakarot-Handtke: WikipediA: AXEC09.png. Monetary profit: Qm ≡ YD + I - Sm  WIKIMEDIA COMMONS, 15.11.2014
[HTML] 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
[HTML] 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. It’s 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
[HTML] Egmont Kakarot-Handtke: Archive Dec 2014. AXEC: New Foundations of Economics.  [Comment] From opinion recycling to real scientific progress. A general comment on [The Slack Wire]-blog's content.  31.12.2014;  [Comment] No choice. Comment on ‘Mainstream macroeconomics distorts our understanding of economic reality’.  31.12.2014;  [Comment] Scientific thinking: Aristotle is right, Leijonhufvud is wrong. Comment on ‘Mainstream macroeconomics distorts our understanding of economic reality’.  31.12.2014;  [Comment] Deflation, saving, and employment. Comment on ‘Why does aggregate demand collapse?’.  31.12.2014;  [Comment] The universal Profit Law and the multitude of unique historical circumstances. Comment on ‘Piketty and the elasticity of substitution;’.  31.12.2014;  [Comment] Deconfusing confused confusers. Comment on ‘Economic Realism’.  31.12.2014;  [Comment] Still alive in some heads: equilibrium. Comment on ‘Still dead after all these years — general equilibrium theory’.  31.12.2014;  [Comment] First fundamental law vs. Fundamental theorem of income distribution. Comment on RWER issue 69 on Piketty's Capital.  31.12.2014;  [Comment] 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;  [Comment] From behavior to structure. Comment on ‘Why does aggregate demand collapse?’.  31.12.2014;  [Comment] Listen to the EconoPhysicists. Modern macroeconomics and the perils of using “Mickey-Mouse” models.  31.12.2014;  [Comment] Shocking: methodology is a tricky business. Comment on ‘Study the shocks’.  31.12.2014;  [Comment] 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;  [Comment] 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;  [Comment] Throwing soap bubbles at time wasters. Comment on ‘Microfounded DSGE models — a total waste of time!’.  31.12.2014;  [Comment] Stop talking, start thinking. Comment on ‘Seven things that economists could usefully do or call for over the next several years’.  31.12.2014;  [Comment] Funny folks in the big omnibus. Comment on ‘Macroeconomic aspirations’.  31.12.2014;  [Comment] Nonentity: the emptiness of economic thinking. Comment on ‘Still dead after all these years — general equilibrium theory’.  31.12.2014;  [Comment] From theory collapse to economic collapse. Comment on ‘Why does aggregate demand collapse?’.  31.12.2014;  [Comment] Economics: science for the confused. Comment on ‘DSGE is a plutocratic tool’.  31.12.2014;  [Comment] Agenda pushers, hijackers, and scientists. Comment on ‘DSGE is a plutocratic tool’.  31.12.2014;  [Comment] Moral incompetence or scientific incompetence? Comment on ‘University economics departments must share the blame’.  31.12.2014;  [Comment] The pluralism of nonsense is still nonsense. Comment on ‘Pluralism is not enough’.  31.12.2014;  [Comment] Pluralism and the thickness of confusion. Comment on ‘Pluralism is not enough’.  31.12.2014;  [Comment] Pluralism and truth. Comment on ‘Pluralism is not enough’.  31.12.2014;  [Comment] Pluralism and the long shadow of Bentham. Comment on ‘Pluralism is not enough’.  31.12.2014;  [Comment] EconoPhysics and pluralism. Comment on ‘Pluralism is not enough’.  31.12.2014;  [Comment] Prophets of Preemptive Vanitization. Comment on ‘Proper use of math in economics’.  31.12.2014;  [Comment] History and methodology: no trouble of any sort. Comment on ‘Proper use of math in economics’.  31.12.2014
[HTML] 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

AXEC® 2015  

[HTML] Egmont Kakarot-Handtke: Archive Jan 2015. AXEC: New Foundations of Economics.  [Comment] Looking for suitable alternatives. Comment on ‘Marginalising Heterodoxy hampers good teaching in economics’.  30.1.2015;  [Comment] Wanted: The true theory. Comment on ‘Economics curriculum reformulation’.  29.1.2015;  [Comment] Naive arithmetic. Comment on ‘NAIRU — more religion than science’.  28.1.2015;  [Paper] Essentials of Constructive Heterodoxy: Say's Law. Working paper.  28.1.2015;  [Comment] No religion, merely incompetence. Comment on ‘NAIRU — more religion than science’.  27.1.2015;  [Comment] Substandard thinkers. Comment on ‘Who is bullshiting who here?’.  26.1.2015;  [Comment] The prophets of wish-wash, ignoramus et ignorabimus, and preemptive vanitization. Comment on ‘On abstraction and idealization in economis’.  23.1.2015;  [Comment] Beauty or horseshit? Comment on ‘On abstraction and idealization in economics’.  20.1.2015;  [Comment] 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;  [Comment] Lost and found. Comment on ‘Brad DeLong and the true nature of neoclassical economics’.  19.1.2015;  [Comment] 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;  [Comment] 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;  [Comment] More error than trial. Comment on ‘“New Keynesian” haiku economics’.  14.1.2015;  [Comment] Keeping the focus on the basic issue. Comment on modern-cikande on ‘Saving Equals Investment?’  13.1.2015;  [Comment] Of birds and worms. Comment on ‘“New Keynesianism” — neat, plausible and wrong’.  12.1.2015;  [Comment] Economists for all seasons or just confused confusers? Comment on ‘Krugman & Wren-Lewis flim-flamming on heterodox assaults on mainstream economics’.  11.1.2015;  [Comment] Groundhog Day (economics). Comment on ‘Extraordinarily absurd things called “Keynesian”’.  9.1.2015;  [Paper] Essentials of Constructive Heterodoxy: the market. Working paper.  9.1.2015;  [Comment] The Profit Law. Comment on ‘Ditch marginal productivity theory once and for all’.  5.1.2015;  [Comment] Stop the Zombie wars. Comment on ‘Economic realism’.  5.1.2015;  [Comment] From obscurity to enlightenment. Comment on ‘Axiomatic economics — total horseshit’.  3.1.2015;  [Comment] Total scientific Dadaism. Comment on ‘Axiomatic economics — total horseshit’.  2.1.2015;  [Comment] Humbleness does not help, but scientific imagination could. Comment on ‘The hubris of economics’.  1.1.2015;  [Comment] Lacking the Midas touch of science. Comment on ‘Real world filters and economic models’.  1.1.2015;  [Comment] Objection, your Honour! There is objective truth in economics. Comment on ‘Understanding capitalism’.  1.1.2015;  [Comment] What economists need now: the correct theory. Comment on Paul Davidson.  1.1.2015;  [Comment] No idealization, only misunderstanding and misconstrual. Comment on ‘The Invisible Hand — a brilliant idealization proved wrong by reality’.  1.1.2015;  [Comment] Economists do not solve problems, they are the problem. Comment on ‘Economists — not mathematics — solve economic problems’.  1.1.2015;  [Comment] Economic theory — as false as ever. Comment on ‘Keynes — more important than ever’.  1.1.2015;  [Comment] The axiomatic method is impeccable. Comment on ‘Debreu and the Bourbaki delusion of deductive-axiomatic economics’.  1.1.2015
[HTML] Egmont Kakarot-Handtke: Archive Feb 2015. AXEC: New Foundations of Economics.  [Comment] Replacing sand by granite. Comment on ‘Macroeconomic foundations made of sand’.  28.2.2015;  [Comment] Questions and answers about economics. Comment on ‘I am a know-nothing’.  28.2.2015;  [Paper] Essentials of Constructive Heterodoxy: money, credit, interest. Working paper.  28.2.2015;  [Comment] Real wages: toward an explanation. Comment on ‘Falling real wages in the USA 2007—2014’.  28.2.2015;  [Comment] United in the social science delusion. Comment on ‘Microfoundations — contestable incoherence’.  26.2.2015;  [Comment] Heterodoxy, too, is still in the wood. Comment on ‘Money and Say’s law: on the macroeconomic models of Kalecki, Keen, and Marx’.  22.2.2015;  [Comment] The real limit of Heterodoxy. Comment on ‘The real limit of public debt’.  21.2.2015;  [Comment] Educating economists? Yes, but where is the scientific stuff? Comment on ‘Greece and educating economists’.  20.2.2015;  [Comment] How to solve almost any problem. Comment on ‘Lucas’ bridge and the Ricardian equivalence fairy-tale’.  19.2.2015;  [Comment] Multiplying confusion. Comment on ‘Abba Lerner on Functional Finance and Ricardian equivalence’.  18.2.2015;  [Comment] Nobody understands debt — including the shrinks. Comment on ‘Debt myths debunked’.  18.2.2015;  [Comment] The true nature of economists' confusion. Comment on ‘The true nature of public debt’.  15.2.2015;  [Comment] Better precisely right than roughly wrong. Comment on ‘Public debt and Keynes’ paradox of thrift’.  13.2.2015;  [Paper] Essentials of Constructive Heterodoxy: aggregate demand. Working paper.  13.2.2015;  [Comment] What does a market really look like? Comment on ‘Finding equilibrium’.  11.2.2015;  [Comment] From false to true. Comment on ‘Finding equilibrium’.  8.2.2015;  [Comment] Who rides the debt-tiger cannot dismount. Comment on ‘The Hayekization of modern society’.  7.2.2015;  [Comment] Forget equilibrium. Comment on ‘Finding equilibrium’.  5.2.2015;  [Comment] Economists — sloppy, stupid, or scientifically incompetent?. Comment on ‘Greg Mankiw on loanable funds — so wrong, so wrong’.  3.2.2015;  [Comment] Deflation: better take the correct formulas. Comment on ‘Will the ECB push Europe over the deflation cliff?’.  3.2.2015
[PDF] 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
[Abstract only] Egmont Kakarot-Handtke: Real wages: towards an explanation. Comment on “Falling real wages in the USA 2007—2014”. 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
[Abstract only] Egmont Kakarot-Handtke: Yes, Orthodoxy is incoherent but, unfortunately, Heterodoxy also. Comment on ‘A perverse intellectual hierarchy’. Blog AXEC, 1.3.2015
[HTML] Egmont Kakarot-Handtke: Archive Mar 2015. AXEC: New Foundations of Economics.  [Paper] How to get rid of supply-demand-equilibrium. Working paper. 31.3.2015;  [Comment] Going beyond ink-blot association. Comment on ‘Causes and Effects of Wage Growth’.  31.3.2015;  [Comment] Black holes and white noise. Comment on ‘What’s inside the neoliberal mind? Part 2 — Marketfundamentalist Marxism, kind of’.  30.3.2015;  [Paper] Confused confusers: how to stop thinking like an economist and start thinking like a scientist. Working paper. 29.3.2015;  [Comment] Forget Krugman, forget Keynes, forget economists. Comment on ‘Why Paul Krugman is no real Keynesian’.  27.3.2015;  [Comment] Confounding the Quantity Theory and Say's Law. Comment on ‘Money hoarding — an explanation of today’s low inflation’.  26.3.2015;  [Comment] Kaput toys. Comment on Nick Rowe on ‘Wren-Lewis Takes a Stab at It’.  25.3.2015;  [Comment] Beyond methodological madness. Comment on ‘On the value of theoretical models in economics’.  25.3.2015;  [Comment] Vacuonomics II. Comment on ‘A Quick Point on Models’.  23.3.2015;  [Paper] The profit theory is false since Adam Smith. What about the true distribution theory? Working paper. 23.3.2015;  [Comment] Principal problem solved. Comment on ‘The principal problem of Political Economy’.  21.3.2015;  [Paper] Primary and secondary markets. Working paper. 20.3.2015;  [Comment] 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;  [Paper] Objective principles of economics. Working paper. 20.3.2015;  [Comment] Vacuonomics. Comment on ‘Is the Walrasian Auctioneer microfounded?’.  19.3.2015;  [Paper] Essentials of Constructive Heterodoxy: employment. Working paper. 14.3.2015;  [Comment] From proto-science to science. Comment on ‘What is science?’.  12.3.2015;  [Comment] Economists: stop dreaming and waffling and do your scientific homework. Comment on ‘America can be a full-employment economy once again’.  10.3.2015;  [Paper] Essentials of Constructive Heterodoxy: profit. Working paper. 9.3.2015;  [Comment] Complexity, scientific incompetence, and the art of asking the right questions. Comment on ‘Economic Ignorance?’.  3.3.2015;  [Comment] Yes, Orthodoxy is incoherent but, unfortunately, Heterodoxy also. Comment on ‘A perverse intellectual hierarchy’.  1.3.2015
[HTML] Simon Wren-Lewis: Is the Walrasian Auctioneer microfounded?. Blog mainly macro, 18.3.2015
[HTML] 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
[HTML] 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 ‘What’s 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 today’s low inflation”. Blog AXEC, 26.3.-2.4.2015
[HTML] Egmont Kakarot-Handtke: Archive Apr 2015. AXEC: New Foundations of Economics.  [Comment] Rubberneck's reality. Comment on ‘Gödel’s theorems and the limits of reason’.  30.4.2015;  [Paper] Essentials of Constructive Heterodoxy: behavior. Working paper. 30.4.2015;  [Paper] Essentials of Constructive Heterodoxy: institutions. Working paper. 30.4.2015;  [Paper] The Propensity Function as general formalization of Economic Man/Woman. Working paper. 29.4.2015;  [Comment] Make no mistake: there can be only one true theory. Comment on ‘Received wisdom in macroeconomics’.  27.4.2015;  [Comment] The synthesis of institution and math. Comment on ‘Wicksell on the use of mathematics in economics’.  27.4.2015;  [Comment] Walrasian double-blunder. Comment on ‘On the irrelevance of general equilibrium theory’.  26.4.2015;  [Comment] The insignificance of Gödel's theorem for economics. Comment on ‘Gödel’s theorems and the limits of reason’.  23.4.2015;  [Paper] When Ricardo saw profit, he called it rent: on the vice of parochial realism. Working paper. 22.4.2015;  [Paper] The emergence of profit and interest in the monetary circuit. Working paper. 21.4.2015;  [Comment] Economists kill the economy. Comment on ‘Reality killed the Washington Consensus’.  20.4.2015;  [Paper] The structural price mechanism. Working paper. 20.4.2015;  [Comment] Marginalism is the landmark of scientific incompetence. Comment on ‘Limits of marginal productivity theory’.  19.4.2016;  [Comment] It’s the price and profit mechanism, stupid! Comment on Simon Wren-Lewis on ‘Its ideology, stupid’.  19.4.2016;  [Comment] Where advanced Heterodoxy — represented by Steve Keen — took the wrong turn. Comment on Lars Syll on ‘Physics and economics’.  19.4.2016;  [Comment] Stylized facts and vacuous interpretations. Comment on ‘The IMF on Investment since 2008’.  19.4.2015;  [Comment] Economics vs. Sociology. Comment on ‘On dogmatism in economics’.  19.4.2015;  [Paper] Say's Law: a rigorous restatement. Working paper. 19.4.2015;  [Paper] The Law of Supply and Demand: here it is finally. Working paper. 18.4.2015;  [Comment] Unfit in all dimensions. Comment on ‘Models, math and macro’.  18.4.2015;  [Comment] Mortifying scientific headstands. Comment on ‘The Coase Theorem’.  17.4.2015;  [Paper] Essentials of Constructive Heterodoxy: money, credit, interest. Working paper. 17.4.2015  [Comment] Science or Circus Maximus? Comment on ‘Economists — arrogant and self-congratulatory autists’.  16.4.2015;  [Comment] Methodology — Marx, too, messed it up. Comment on ‘On dogmatism in economics’.  15.4.2015;  [Paper] Why Post Keynesianism is not yet a science. Working paper. 15.4.2015  [Comment] Reduced-form bricolage and sticky brains. Comment on ‘Sticky Prices, Financial Frictions, and the Ben Bernanke Puzzle’.  14.4.2015;  [Comment] The intelligent student's predicament. Comment on ‘Is there anything worth keeping in standard microeconomics?’.  14.4.2015;  [Comment] Methodology as Force Majeure. Comment on ‘Do not underestimate the power of microfoundations’.  12.4.2015;  [Comment] Bygones are bygones. Comment on ‘On the irrelevance of general equilibrium theory’.  12.4.2015;  [Comment] Angels-on-a-pinpoint scholasticism. Comment on ‘The Bernanke-Summers imbroglio’.  11.4.2015;  [Comment] MIT dilettantes II. Comment on ‘Bernanke-Summers Debate II: Savings glut, investment shortfall, or Monty Python?’.  10.4.2015;  [Comment] No difference. Comment on ‘What’s the difference between heterodox and orthodox economics’.  10.4.2015;  [Comment] MIT dilettantes. Comment on ‘The inbred Bernanke-Summers debate on secular stagnation’.  8.4.2015;  [Paper] The common error of common sense: an essential rectification of the accounting approach. Working paper. 8.4.2015;  [Comment] Lazy or stupid or both? Comment on ‘Modern macroeconomics — an intellectually lazy ideology’.  6.4.2015;  [Paper] Economics for economists. Working paper. 2.4.2015;
[HTML] J.W. Mason: The IMF on Investment since 2008. . Blog The Slack Wire, 19.4.2015
[HTML] 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
[HTML] Egmont Kakarot-Handtke: Archive May 2015. AXEC: New Foundations of Economics.  [Comment] At the Robinson Line. Comment on ‘Consistency and validity is not enough!’.  31.5.2015;  [Kommentar] Hold the handle, not the blade. Comment on “Debunking the use of mathematics in economics;”. 29.5.2015;  [Kommentar] Poor philosophy, poor science, poor job. Comment on “Adam Smith’s visible hand”. 28.5.2015;  [Kommentar] Who said what to whom — and does it matter? Comment on “Keynes ‘hadn't got round to it’”. 28.5.2015;  [Kommentar] The intelligent layperson's guide through vacuonomics Comment on “Consistency and validity is not enough”. 26.5.2015;  [Paper] Redemption and depression. Working paper. 26.5.2015;  [Paper] Settling the theory of saving. Working paper. 26.5.2015;  [Paper] Keynes’s missing axioms. Working paper. 26.5.2015;  [Paper] Intertwined real and monetary stochastic business cycles. Working paper. 26.5.2015;  [Kommentar] From one roadside ditch straight into the other. Comment on “Modelling consistency and real world non-coherence in mainstream economics”. 24.5.2015;  [Paper The calculating auctioneer, enlightened wage setters, and the fingers of the Invisible Hands. Working paper. 24.5.2015;  [Paper] Increasing returns and stability. Working paper. 24.5.2015;  [Paper] The value of water and diamonds: back to square one. Working paper. 24.5.2015;  [Paper] General formal foundations of the virtuous deficit-profit symmetry and the vicious debt deflation. Working paper. 23.5.2015;  [Kommentar] If anyone has better foundational equations, please come forward. Comment on “Why the ergodic theorem is not applicable in economics”. 21.5.2015;  [Kommentar] Modern economics is dead. Comment on Mark Blaug on “Modern economics is sick”. 20.5.2015;  [Kommentar] Mathiness and the Ur-blunder. Comment on “Paul Romer on math masquerading as science”. 20.5.2015;  [Kommentar] Profit (not mathematics) is the key. Comment on “The fetishism of mathematics”. 20.5.2015;  [Kommentar] The science that never was. Comment on “Paul Romer on math masquerading as science”. 18.5.2015;  [Paper] Essentials of Constructive Heterodoxy: financial markets. Working paper. 17.5.2015;  [Kommentar] Market blunder. Comment on “Economics and the value of art”. 17.5.2015;  [Kommentar] What scientists in all ages knew. Comment on “Why the ergodic theorem is not applicable in economics”. 16.5.2015;  [Kommentar] No license for drivel. Comment on Fred Zaman on “Why the ergodic theorem is not applicable in economics”. 14.5.2015;  [Kommentar] Formal and verbal description of the evolving economy. Comment on “Why the ergodic theorem is not applicable in economics”. 13.5.2015;  [Kommentar] Einstein, Mill and the Starting Problem. Comment on “Why the ergodic theorem is not applicable in economics”. 12.5.2015;  [Kommentar] Physics as obsessive windmill. Comment on “Why the ergodic theorem is not applicable in economics”. 11.5.2015;  [Kommentar] Science and travesty. Comment on “Why the ergodic theorem is not applicable in economics”. 11.5.2015;  [Kommentar] What economics is not about. Comment on “Why the ergodic theorem is not applicable in economics”. 11.5.2015;  [Paper] Toolism! A critique of EconoPhysics. Working paper. 11.5.2015;  [Kommentar] The Big Bang Theory of economics. Comment on “Why the ergodic theorem is not applicable in economics”. 10.5.2015;  [Paper] Matter matters: productivity, profit, and non-marginal factor prices. Working paper. 9.5.2015;  [Kommentar] Troubles with logic? Comment on “On the irrelevance of general equilibrium theory”. 8.5.2015;  [Kommentar] Framing the economic discourse. Comment on “Seven principles to guard you against economics silliness”. 8.5.2015;  [Kommentar] Framing the economic discourse. Comment on “Seven principles to guard you against economics silliness”. 8.5.2015;  [Kommentar] Heterodoxy simply does not apply ergodicity. Comment on “Why the ergodic theorem is not applicable in economics”. 7.5.2015;  [Kommentar] What are Walrasians waiting for? Comment on “On the irrelevance of general equilibrium theory”. 7.5.2015;  [Kommentar] The epic ping-pong of empty problem and vacuous solution. Comment on “Transaction Cost Confusion”. 6.5.2015;  [Paper] Exchange in the monetary economy. Working paper. 6.5.2015;  [Kommentar] Walras's vacuonomics. Comment on “Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the economic statisticians and rent incomes”. 6.5.2015;  [Kommentar] 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;  [Kommentar] From PsySoc to SysHum. Comment on “Rational expectations — totally incredible bogus”. 5.5.2015;  [Kommentar] Economics is not what most economists think it is. Comment on “Coase and Reality”. 4.5.2015;  [Kommentar] Freaky games. Comment on “Coase and Reality”. 3.5.2015;  [Kommentar] Neither truth nor beauty. Comment on “Rational expectations — totally incredible bogus”. 3.5.2015
[HTML] Egmont Kakarot-Handtke: Archive Jun 2015. AXEC: New Foundations of Economics.  [Comment] Economics, Gödel, and a would-be field day for math-Luddites. Comment on ‘It’s all over — Gödel’s incompleteness theorems’.  30.6.2015;  [Kommentar] 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;  [Paper] Major defects of the market economy. Working paper. 29.6.2015;  [Kommentar] The trouble with counting to 3. Comment on Blissex on “Keenonomics, aggregate demand/change of debt, and some misleading critique”. 27.6.2015;  [Kommentar] Value — the Bermuda triangle for economic theories. Comment on “Economic Value is not Price”. 28.6.2015;  [Kommentar] When numbers don't add up. Comment on Merijn Knibbe on “Keenonomics, aggregate demand/change of debt, and some misleading critique”. 22.6.2015;  [Kommentar] 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;  [Kommentar] Information and ignorance. Comment on “Information Matters?”. 20.6.2015;  [Kommentar] Flight of ideas and the dead end of all econtalk. Comment on “Anti-Keynesianism — in most cases a sign of ignorance”. 19.6.2015;  [Kommentar] From true/false to garbage-wrestling and back. Comment on “Speak for yourself, or why anti-Keynesian views survive”. 18.6.2015;  [Kommentar] Keenonomics, aggregate demand/change of debt, and some misleading critique. Blog reference. 17.6.2015;  [Kommentar] Lost between pure fiction and parochial realism. Comment on “Why economic models constantly crash”. 16.6.2015;  [Kommentar] Heterodoxy at the crossroads. Comment on Rhonda Kovac on “The Context-Dependency of Human (Economic) Behaviour”. 16.6.2015;  [Kommentar] McCloskey and the lizard's tail. Comment on “Silly economics”. 15.6.2015;  [Kommentar] Warning: Einstein can be hazardous to heterodox methodology. Comment on “Econometrics — rhetorics and realit”. 15.6.2015;  [Kommentar] The art of start. Comment on Bruce Edwards on “The Context-Dependency of Human (Economic) Behaviour”. 14.6.2015;  [Kommentar] A farewell to PsySoc economics. Comment on “The Context-Dependency of Human (Economic) Behaviour”. 13.6.2015;  [Kommentar] Wake up: economics is not a science of behavior. Comment on Rhonda Kovac on “The Context-Dependency of Human (Economic) Behaviour”. 12.6.2015;  [Kommentar] Sloppiness as economic methodology. Comment on “Ditch ‘ceteris paribus’!”. 11.6.2015;  [Kommentar] Around the world: storytelling vs. science. Comment on “What is it about German economics?”. 10.6.2015;  [Kommentar] Ditch it all. Comment on “Ditch ‘ceteris paribus’!”. 9.6.2015;  [Kommentar] The guessing game. Comment on “Repeat after Me: Inflation’s the Cure not the Disease”. 7.6.2015;  [Kommentar] Tricky business. Comment on “JKH on the Keynesian Cross and Accounting Identities”. 6.6.2015;  [Kommentar] Poisoned, hanged, and shot. Comment on “Austerity policies — prescribing rat poison for ailing economies”. 6.6.2015;  [Kommentar] The answer is: No. Comment on “Ditch ‘ceteris paribus’!”. 6.6.2015;  [Kommentar] Methiness. Comment on “Ditch ‘ceteris paribus’!”. 5.6.2015;  [Kommentar] Objective Principles. Comment on “Modelling consistency and real world non-coherence in mainstream economics”. 4.6.2015
[HTML] 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
[HTML] 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
[HTML] Egmont Kakarot-Handtke: Archive Jul 2015. AXEC: New Foundations of Economics.  [Comment] Yes, it's scientific junk, so leave it behind for good. Comment on ‘On the poverty of microfoundationalist fantasies’.  31.7.2015;  [Comment] How to save the economy from storytelling economists. Comment on ‘The F story about the Great Inflation’.  30.7.2015;  [Comment] Storytelling and facts. Comment on Blissex on ‘The F story about the Great Inflation’.  29.7.2015;  [Comment] Stop guessing, start thinking. Comment on ‘The guessing game’.  28.7.2015;  [Comment] Oh no! How could this happen? Comment on ‘IS-LM vs. Minsky’.  28.7.2015;  [Comment] What comes after debunking? Comment on ‘Why Real Business Cycle models can’t be taken seriously’.  27.7.2015;  [Comment] The end of storytelling. Comment on ‘The F story about the Great Inflation’.  26.7.2015;  [Comment] Stubbornly in the wrong research program. Comment on Fredrick Welfare on ‘The Keynes-Ramsey-Savage debate on probabilit’.  25.7.2015;  [Comment] We simply do not know — so let us move on. Comment on ‘The Keynes-Ramsey-Savage debate on probability’.  24.7.2015;  [Comment] How to consistently start off on the wrong foot. Comment on ‘The Keynes-Ramsey-Savage debate on probability’.  23.7.2015;  [Paper] Make a bubble, take a free lunch, break a bank. Working paper.  22.7.2015;  [Paper] Beginning, crises, and end of the money economy. Working paper.  22.7.2015;  [Paper] The coherency of money, profit, price, and distribution. Working paper.  22.7.2015;  [Paper] Unemployment out of nowhere. Working paper.  22.7.2015;  [Paper] Exploitation and its unintended outcomes: an axiomatic view of Marx's surplus value. Working paper.  22.7.2015;  [Paper] 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;  [Paper] Uniform profit ratios. Working paper.  22.7.2015;  [Paper] Geometrical exposition of structural axiomatic economics (I): fundamentals. Working paper.  22.7.2015;  [Paper] Geometrical exposition of structural axiomatic economics (II): qualitative and temporal aggregation. Working paper.  22.7.2015;  [Paper] What is wrong with heterodox economics? Kalecki's profit theory as an example. Working paper.  22.7.2015;  [Paper] The wine maker's business and the logical origin of interest in the monetary economy. Working paper.  22.7.2015;  [Paper] Taxes, profits, and employment: a structural axiomatic analysis. Working paper.  22.7.2015;  [Paper] The truly General Theory of Employment: how Keynes could have succeeded. Working paper.  22.7.2015;  [Comment] Cartoon science. Comment on Henry on ‘Ignoring elementary economics’.  21.7.2015;  [Comment] Knowledge vs. Belief. Comment on ‘The marginalisation of morality’.  18.7.2015;  [Comment] The case for pure economics. Comment on ‘On the Euro Summit’s Statement on Greece: First thoughts’.  15.7.2015;  [Comment] Sexit. Comment on/Kommentar zu ‘Griechenland-Krise: Deutsche Ökonomen schlagen gegen Krugman zurück’.  14.7.2015  [Comment] 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;  [Comment] Profit theory and distribution formulas. Comment on ‘Some important limitations of income inequality data’.  11.7.2015;  [Comment] Extremely long roots. Comment on ‘Schäuble goes Matrix’.  11.7.2015  [Comment] Mental messies and loose losers. Comment on ‘Keenonomics, aggregate demand/change of debt, and some misleading critique’.  10.7.2015;  [Comment] The economics of here and now. Comment on ‘An inconvenient historical truth’.  9.7.2015;  [Comment] Separation of politics and economics. Comment on Blissex on ‘Euro — the antithesis of democracy’.  8.7.2015  [Comment] How to get out of psychology/sociology/wish-wash. Comment on ‘Economic Value is NOT Price’.  7.7.2015;  [Comment] In science, NO is the answer. Comment on Paul Schächterle on ‘In Greece, NO is the answer’.  7.7.2015;  [Comment] Heterodoxy's big fat Greek error. Comment on Paul Schächterle on ‘In Greece, NO is the answer’.  7.7.2015  [Comment] Beware of the 9th circle. Comment on Paul Schächterle on ‘In Greece, NO is the answer’.  6.7.2015;  [Comment] True/false is different from good/bad. Comment on ‘In Greece, NO is the answer’.  6.7.2015
[HTML] Egmont Kakarot-Handtke: Archive Aug 2015. AXEC: New Foundations of Economics.  [Comment] Disoriented and lost in folk psychology. Comment on stevepostrel on ‘Romer v. Lucas’.  31.8.2015;  [Comment] ICYMI Old-Post-New Keynesian models. 30.8.2015;  [Comment] Always clueless, never speechless. Comment on ‘U.S. Inflation Developments’.  30.8.2015;  [Comment] The philosophy of know-nothingers. Comment on Tom Hickey on ‘What can economists know?’.  30.8.2015;  [Comment] Schumpeter's two axioms of discourse. Comment on ‘Axiomatic economics — total horseshit’.  29.8.2015;  [Comment] Whatever it is, let's call it conservatism. Comment on David Glasner on ‘Romer v. Lucas’.  28.8.2015;  [Comment] Much change, no progress. Comment on ‘The day macroeconomics changed’.  28.8.2015;  [Comment] Pygmy economics. Comment on graccibros and Ishi Crew on ‘Quick thoughts on the stock market and the economy’.  27.8.2015;  [Comment] The heterodox perspective becomes dominant. Comment on BC on ‘Quick thoughts on the stock market and the economy’.  27.8.2015;  [Comment] Quick rethinking of the stock market. Comment on ‘Quick thoughts on the stock market and the economy’.  26.8.2015;  [Comment] Common non-sense. Comment on ‘On not understanding the quantity theory of money’.  26.8.2015;  [Comment] False on principle. Comment on ‘A critique of Samuelson’s and Nordhaus’s Principles of Economics.  25.8.2015;  [Comment] An epic detour. Comment on ‘Has macroeconomics — really — progressed?’.  25.8.2015;  [Comment] It’s the wage-price-productivity mechanism, stupid! Comment on ‘The Fed Looks Set to Make a Dangerous Mistake’.  24.8.2015;  [Comment] United in confusion. Comment on ‘Lucas’ caricature of economic science’.  23.8.2015;  [Comment] Buridan’s ass economics. Comment on ‘Krugman is right — public debt is good!’.  22.8.2015;  [Comment] Sticky brains. Comment on ‘Evidence for Sticky Wages’.  21.8.2015;  [Comment] No foundations. Comment on ‘Lucas’ caricature of economic science’.  21.8.2015;  [Comment] Economics and the litmus test of science. Comment on ‘Romer v. Lucas’.  21.8.2015;  [Comment] The Napoleon game. Comment on ‘General equilibrium theory — a gross misallocation of intellectual resources and tim’.  21.8.2015;  [Comment] Potemkonomics. Comment on ‘Reform and Revolution in Macroeconomics’.  20.8.2015;  [Comment] Which revolution? Comment on ‘Reform and Revolution in Macroeconomics’.  20.8.2015;  [Comment] Unsmart allocators. Comment on ‘General equilibrium theory — a gross misallocation of intellectual resources and time’.  20.8.2015;  [Comment] Nine views are nine too much. Comment on ‘Forder: Nine Views of the Phillips Curve’.  18.8.2015;  [Comment] The moral of the story. Comment on ‘Robert Solow kicking Lucas and Sargent in the pants’.  17.8.2015;  [Comment] 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;  [Comment] Hmmm? Comment on ‘Some Issues Re-visited’.  15.8.2015;  [Comment] Stupid or duplicitous? Both! Comment on Kristjan on ‘What is it with economists and accounting identities?’.  15.8.2015;  [Comment] Either stupid or duplicitous. Comment on ‘What is it with economists and accounting identities?’.  14.8.2015;  [Comment] How to stop idiot-breeding. Comment on ‘Economics departments — breeding generation after generation of idiot savants’.  14.8.2015;  [Comment] No future for the representative economist. Comment on ‘The Future of Work: Why Wages Aren't Keeping Up’.  13.8.2015
[HTML] 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: “Don’t 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 Debreu’s 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
[HTML] 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;  [HTML] 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 incomebut 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; [HTML] Egmont Kakarot-Handtke: “The point of my post is not to ‘engage in a discussion’ but to inform you that . … 13.9.2015;  [HTML] Egmont Kakarot-Handtke: Know it’s wrongť. 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; [HTML] ‘Talldave’: “If utility cannot be part of an economic theory, then you can’t study economics at all.” 14.9.2015;  [HTML] Egmont Kakarot-Handtke: The very real problem of the representative economistť. 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
[HTML] Egmont Kakarot-Handtke: Archive Sep 2015. AXEC: New Foundations of Economics.  [Comment] How Orthodoxy buffaloed Heterodoxy. Comment on ‘Deductivism — the original sin of “modern” economics’.  30.9.2015;  [Comment] Exponentially growing junk. Comment on Asad Zaman on ‘Capitalism in the 21st Century’.  30.9.2015;  [Comment] Nowhere land. Comment on Merijn Knibbe on ‘The return of “land” in macro economic discourse. Wonkish’.  28.9.2015;  [Comment] Doomed and damned. Comment on Peter Radford on ‘Beating dead horse?’.  26.9.2015;  [Comment] Heterodoxy, too, is scientific junk. Comment on ‘What went wrong with economics?’.  23.9.2015;  [Comment] E-money. Comment and correction on ‘As Predicted BOE Head Economist and Time 100 Most Influential Suggests E-Dollar Concept’.  23.9.2015;  [Comment] The Coppola method: Adam Smith reincarnated? Comment on ‘What is lending good for? The Frances Coppola view.’.  22.9.2015;  [Comment] PsySoc — the scourge of economics. Comment on ‘The fundamental truth about American economic growth’.  22.9.2015;  [Comment] Economics is an abysmal failure of reason. Comment on ‘What went wrong with economics?’.  21.9.2015;  [Comment] Economists vs. Economics. Comment on Dani Rodrik on ‘Economists vs. Economics’.  19.9.2015;  [Comment] 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;  [Comment] Predictably confused. Comment on ‘Sir David Hendry on the inadequacies of DSGE models’.  18.9.2015;  [Comment] 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;  [Comment] Beat me! An invitation nobody can refuse. Comment on Nanikore on ‘How economists argue’.  17.9.2015;  [Comment] Confounding sociology and economics. Comment on michael burke on ‘Marxism Revisited’.  17.9.2015;  [Comment] A question of principle(s). Comment on Geoff Davis on ‘Are all models wrong?’.  17.9.2015;  [Comment] Corbynomics. ICYMI (Scott Fullwiler).  16.9.2015;  [Comment] Bound to crash. Comment on Steve Keen on ‘Why China had to crash: Part 2’.  16.9.2015;  [Comment] How to minimize political confusion. Comment on Peter Radford on ‘Let’s all blame capitalism’.  15.9.2015;  [Comment] The very real problem of the representative economist. Comment on Talldave on ‘The very real problem of wage inequality’.  15.9.2015;  [Comment] The very real problem of zero scientific utility. Comment on ‘The very real problem of wage inequality’.  11.9.2015;  [Comment] Back to science. Comment on ‘Unemployment — a long run’.  11.9.2015;  [Comment] The happy end of the social science delusion. Comment on ‘Are all models wrong?’.  10.9.2015;  [Comment] Two steps towards truth. Comment on ‘Are all models wrong?’.  9.9.2015;  [Comment] Like an ant on the Möbius strip. Comment on ‘The Fed Must Banish the 1970’s Inflation Devil’.  9.9.2015;  [Comment] Lack of understanding. Comment on ‘Revealed Preferences: Fed Inflation Target Edition’.  8.9.2015;  [Comment] Trapped in false alternatives. Comment on ‘Validity is NOT enough’.  8.9.2015;  [Comment] Confounding Is and Ought: the economist as moralist. Comment on ‘What Happened to the Moral Center of American Capitalism?’.  7.9.2015
[HTML] 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
[HTML] 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;  [HTML] 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 Krugman’s 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;  [HTML] 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
[HTML] 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; [HTML] 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; [HTML] 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; [HTML] 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; [HTML] 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
[HTML] 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; [HTML] 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; [HTML] 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; [HTML] 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; [HTML] 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
[HTML] 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; [HTML]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.”  [HTML] 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 economynot equilibrium. The NEF blog, 12.10.2015
[HTML] Egmont Kakarot-Handtke: Archive Oct 2015. AXEC: New Foundations of Economics.  [Comment] Getting out of mumbonomics. Comment on ‘Postmodern discourse mumbo jumbo’.  31.10.2015;  [Comment] The key relationship between employment and growing/shrinking debt. Comment on Steve Keen on ‘The unnatural rate of interest’.  30.10.2015;  [Comment] Stop knowing nothing, start knowing something. Comment on Lars Syll on ‘Macroeconomic uncertainty’.  29.10.2015;  [Comment] Accounting basics. Comment on FedUp of Oct 24 on ‘Keynes on the Theory of Interest’.  28.10.2015;  [Comment] I=S: Mark of the Incompetent. Comment on JKH and Roger Farmer on ‘Demand Creates its Own Supply’.  28.10.2015;  [Comment] Fundamentally flawed. Comment on Roger Farmer on ‘Demand Creates its Own Supply’.  27.10.2015;  [Comment] Moronomics. Comment to Paul Schächterle on ‘Economics, concepts, language and the progress of science’.  27.10.2015;  [Comment] Is Keynes acceptable? Comment on Lars Syll on ‘Did Keynes “accept” the IS-LM model?’.  26.10.2015;  [Comment] Incoherence as second nature. Comment on ‘Economics, concepts, language and the progress of science’.  26.10.2015;  [Comment] Interest and profit. Comment on ‘Keynes on the Theory of Interest’.  24.10.2015;  [Comment] Not yet in and not yet out of the wood. Comment on Lars Syll on ‘Phelps’ smackdown on Lucas’ rational expectations’.  22.10.2015;  [Comment] End of confusion. Comment on ‘Keynes and Accounting Identities’.  22.10.2015;  [Comment] Keynes and the logical brilliance of Bedlam. Comment on ‘Keynes and Accounting Identities’.  21.10.2015;  [Comment] Misled by ordinary intuition and common sense. Comment on Edward Fullbrook on ‘The Counterintuitive Problem’.  19.10.2015;  [Comment] Economics in self-paralysis. Comment on Lars Syll on ‘Representative agent models — macroeconomic foundations made of sand’.  19.10.2015;  [Comment] Crisis, cranks, and scientists. Comment on David Ruccio on ‘A gathering storm?’.  17.10.2015;  [Comment] Misplaced augurs of doom. Comment on David Ruccio on ‘A gathering storm?’.  16.10.2015;  [Comment] The Science-of-Man fallacy. Comment on ‘Don’t throw away Angus Deaton with the bathwater of the Riksbank prize — he’s good!’.  15.10.2015;  [Comment] The irrelevance of economics. Comment on ‘On the irrelevance of formal logic in economics’.  14.10.2015
[HTML] 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 they’re 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 we’re not to funnel money one way from credit creation to accumulation, how do we cause surplus money to circulate instead? If we don’t like permanently expanding debt that’s 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
[HTML] 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; [HTML] 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; [HTML] Egmont Kakarot-Handtke: The Science-of-Man fallacy. Comment on “Don’t throw away Angus Deaton with the bathwater of the Riksbank prize — he’s 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; [HTML] Egmont Kakarot-Handtke: Misplaced augurs of doom. Comment on David Ruccio on “A gathering storm?”  Doomsday fear mongering is not the economist’s 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; [HTML] 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
[HTML] 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
[HTML] 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;  [HTML] 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;  [HTML] The x-th reinvention of evolutionary economics. Comment on “We Had It All Wrong. Adam Smith Isn’t 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;  [HTML] 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;  [HTML] 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). Krugman’s 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 Keynes’s 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;  [HTML] 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;  [HTML] 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
[HTML] Egmont Kakarot-Handtke: Archive Nov 2015. AXEC: New Foundations of Economics.  [Comment] The tragedy of Heterodoxy. Comment on ‘Confusing statistics and research’.  30.11.2015;  [Comment] 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;  [Comment] New curriculum: cross-references. Core. Application. Outlook.  30.11.2015;  [Comment] Axiomatization: cross-references. Posts. Related. Cross-references. New Foundations.  30.11.2015;  [Comment] Refutation of I=S: cross-references. Posts. Refutation 1. Refutation 2. Related. Working papers — formal proof. New paradigm.  30.11.2015;  [Comment] Profit: cross-references. Posts and abstracts. Working papers.  30.11.2015;  [Comment] Debt: cross-references. Posts. Working papers.  30.11.2015;  [Comment] Political economics: cross-references. Posts. Working papers.  30.11.2015;  [Comment] Incompetence: cross-references.  30.11.2015;  [Comment] Employment: cross-references. Posts. Working papers.  30.11.2015;  [Comment] Not a science of behavior: cross-references. Posts.  30.11.2015;  [Comment] Distorted reality: cross-references. Posts.  30.11.2015;  [Comment] Pluralism: cross-references. Posts. Debate.  30.11.2015;  [Comment] Proto-science: cross-references.  30.11.2015;  [Comment] Kalecki: cross-references. Posts. Working paper.  30.11.2015;  [Comment] Mathiness: cross-references. Posts. Related.  30.11.2015;  [Comment] Methodology: cross-references. Posts. Debate.  30.11.2015;  [Comment] Marshall's “Burn the mathematics”: cross-references. Posts. Debate. Related.  30.11.2015;  [Comment] The failure of Heterodoxy: cross-references. Posts.  30.11.2015;  [Comment] Political economics and intellectual corruption. Comment on ‘Econometrics and the “empirical turn” in economics’.  28.11.2015
[HTML] 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 can’t 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;  [HTML] 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;  [HTML] 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;  [HTML] 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;  [HTML] 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;  [HTML] 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 sector’s 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;  [HTML] 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;  [HTML] There is no like/dislike button in science. Comment on Nanikore on “Some unfounded expectations of economic theory’. Krugman’s 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;  [HTML] 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 sector’s cost/profit situation ρ, the real ρX and the nominal ρE side of the product market, and the income distribution ρD describes how the economy evolves over time as an open system. More than 200 years of economists’s scientific failure did not help much to end poverty. 10.11.2015
[HTML] David Glasner: Once Upon a Time When Keynes Endorsed the Fisher Effect. Keynes’s 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. Keynes’s theorem of covered interest arbitrage in the Tract is a straightforward application of Fisher’s 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 can’t be both a price (interest rate) giver and a quantity (amount of debt) giver. Blog  Uneasy Money , 30.11.2015
[PDF] 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
[HTML] 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
[HTML] 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 Keynes’s and Godley and Lavoie’s 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 sector’s and government sector’s) and overall profit/loss of the business sector. The market economy breaks down as soon as overall (household and government sector’s) 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
[abstract] 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 world—their 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
[HTML] 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.
[HTML] Egmont Kakarot-Handtke: Archive Dec 2015. AXEC: New Foundations of Economics.  [Comment] Conceptual blunder. Comment on ‘Clarence Ayres on the economic concept of capital’.  31.12.2015;  [Comment] Still on the wrong track. Comment on ‘Striving for Balance in Economics: Towards a Theory of the Social Determination of Behavior’.  30.12.2015;  [Comment] The existence of economic laws and the nonexistence of behavioral laws. Comment on ‘The non-existence of economic laws’.  29.12.2015;  [Comment] Austerity and the utter scientific ignorance of economists. Comment on ‘Exploring one set of reasons why austerity happened’.  29.12.2015;  [Comment] 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;  [Comment] Worthless Canadian model bricolage. Comment on Nick Rowe on ‘Tight money as binding output quota, and upward-sloping IS curves’.  28.12.2015;  [Comment] Deficit spending, helicopter money, and profit. Comment on ‘Randall Wray attacks “debt-free-money cranks” based on sloppy arguments’.  27.12.2015;  [Comment] Methodological retards. Comment on ‘Economists and methodology’.  26.12.2015;  [Comment] Confused confusers. Comment on Eric Lonergan on ‘Sitting on cathedral steps’.  26.12.2015;  [Comment] Another X-mas fantasy about IS curves. Comment on Nick Rowe on ‘Upward-sloping IS curves: simple version’.  23.12.2015;  [Comment] Money and debt in six elementary steps. Comment on ‘Randall Wray attacks “debt-free-money cranks” based on sloppy arguments’.  23.12.2015;  [Comment] Money, cranks, and morons. Comment on Norbert Häring on ‘Randall Wray attacks “debt-free-money cranks” based on sloppy arguments’.  22.12.2015;  [Comment] Quixotic Keynes exegesis. Comment on ‘Keynes on the Theory of the Rate of Interest’.  20.12.2015;  [Comment] Towards the true economic theory. Comment on ‘What we do in life echoes in eternity’.  19.12.2015;  [Comment] How the intelligent non-economist can refute every economist hands down. Comment on ‘Dani Rodrik’s blind spot’.  16.12.2015;  [Comment] 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;  [Comment] Nothing to choose. Comment on ‘Dani Rodrik’s smorgasbord view of economic models’.  15.12.2015;  [Comment] Useful idiots and poor scientists. Comment onFred Welfare on ‘Dani Rodrik’s smorgasbord view of economic models’.  15.12.2015;  [Comment] Monetary policy: no sound theoretical foundation. Comment on Ann Pettifor on ‘Central bank policy rates and the real economy’.  14.12.2015
[HTML] 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.  [HTML] 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;  [HTML] 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;  [HTML] 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.  [HTML] Worthless Canadian model bricolage. Comment on Nick Rowe on “Tight money as binding output quota, and upward-sloping IS curves”. AXEC 28.12.2015;  [HTML] 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;  [HTML] Methodological retards. Comment on Simon Wren-Lewis on “Economists and methodology”. 26.12.2015;  [HTML] Confused confusers. Comment on Eric Lonergan on “Sitting on cathedral steps”. 26.12.2015;  [HTML] Another X-mas fantasy about IS curves. Comment on Nick Rowe on “Upward-sloping IS curves: simple version”. 23.12.2015;  [HTML] 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;  [HTML] Money, cranks, and morons. Comment on Norbert Häring on “Randall Wray attacks ‘debt-free-money cranks’ based on sloppy arguments”. 22.12.2015
[HTML] 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 enduringD. 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 fool’s 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 capitalD. 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

AXEC® 2016  

[HTML] Egmont Kakarot-Handtke: The future of economics: why you will probably not be admitted to it, and why this is a good thing[wichtig !]. 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
[HTML] 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)
[HTML] 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
[HTML] 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;  [PDF] 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
[HTML] Egmont Kakarot-Handtke: Archive Jan 2016. AXEC: New Foundations of Economics.  [Comment] 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;  [Comment] The economist’s hajj from Mordor to Mecca. Comment on ‘Economics — still in the land of Mordor’.  30.1.2016;  [Comment] How Heterodoxy keeps the Naked-Emperor-Zombie alive. Comment on Asad Zaman on ‘Fundamental Flaws of Conventional Economics’.  30.1.2016;  [Comment] How to restart economics. Comment on Jeff on ‘Is there a core of heterodox economics that we can all believe in?’.  29.1.2016;  [Comment] End of a storyteller. Comment on ‘Krugman — a Vichy Left coward?’.  28.1.2016;  [Comment] Economists and methodology: the horror of all horrors. Comment on ‘Deduction — induction — abduction’.  27.1.2016;  [Comment] 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;  [Comment] 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;  [Comment] Time to come up to speed. Comment on UnlearningEcon of Jan 23 on ‘Against anti-economics’.  23.1.2016;  [Comment] Full methodological illiteracy. Comment on ‘Axiomatic economics — the Bourbaki-Debreu delusion’.  21.1.2016;  [Comment] Economists’ slapstick methodology. Comment on ‘Axiomatics — the economics fetish’.  21.1.2016
[HTML] 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 Tobin’s 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
[HTML] Egmont Kakarot-Handtke: Archive Feb 2016. AXEC: New Foundations of Economics.  [Comment] 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 Keynes’s 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) ;  [Comment] Postmodernism — the philosophy of scientific write-offs. Comment on Robert R Locke on ‘The problem of postmodernism in American economics: an historian’s perspective’.  26.2.2016;  [Comment] ISLM is dead and waiting to be buried. Comment on Nick Rowe on ‘‘ISLM pictures with interest on money’.  26.2.2016;  [Comment] Scientists do not predict. Comment on Lars Syll on ‘Macroeconomic machine dreams’.  26.2.2016;  [Comment] How to creatively destruct Orthodoxy. Comment on ‘The problem of postmodernism in American economics: an historian’s perspective’.  24.2.2016;  [Comment] Economics — the fly that cannot see the glass. Comment on ‘On the non-existence of economic laws’.  22.2.2016;  [Comment] Krugman and the scientific implosion of economics. Comment on ‘Krugman versus Sanders’.  22.2.2016;  [Comment] Causa finita. Comment on ‘How could “testing axioms” be controversial?’.  21.2.2016;  [Comment] Caught in secular intellectual stagnation. Comment on ‘What’s wrong with heterodox economics’.  19.2.2016;  [Comment] Economists’ perennial trouble with accounting. Comment on ‘Hey Joe, banks can’t lend out reserves’.  19.2.2016;  [Comment] How economics finally became a science. Comment on Geoff Davies on ‘Capitalism’s growth problem’.  19.2.2016;  [Comment] What heterodox economists are embarrassed to admit. Comment on ‘What mainstream economists are embarrassed to admit’.  17.2.2016;  [Comment] 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;  [Comment] Political economics: a playground for scientific deadbeats. Comment on ‘What mainstream economists are embarrassed to admit’.  15.2.2016;  [Comment] Success is the best method. Comment on ‘Why science necessarily involves a logical fallacy’.  14.2.2016;  [Comment] The still unfinished Keynes. Comment on ‘The most important book in the history of economics’.  13.2.2016;  [Comment] On economists’ stupidity. Comment on ‘Paul Krugman: On Economic Stupidity’.  13.2.2016;  [Comment] Accounting for dummies. Comment on Liam on ‘Why is slow growth a problem?’.  12.2.2016;  [Comment] Have data, lack theory. Comment on David Ruccio on ‘Why is slow growth a problem?’.  11.2.2016;  [Comment] Economists cannot think as well as we thought. Comment on ‘Markets Don't Work as Well as We Thought’.  11.2.2016;  [Comment] Economists’ three-layered scientific incompetence. Comment on ‘Project: A heterodox macro textbook’.  9.2.2016;  [Comment] Coming soon: the canonical economics textbook. Comment on ‘Project: A heterodox macro textbook’.  6.2.2016;  [Comment] The nothing-to-choose dilemma. Comment on ‘Walrasian economic theory &msdash; little better than nonsense’.  5.2.2016;  [Comment] Wren-Lewis’s methodological double whammy. Comment on ‘Whatever happened to the General Theory?’.  3.2.2016;  [Comment] Economists are a menace to their fellow citizens. Comment on ‘Economics is Changing’.  3.2.2016;  [Comment] What comes next? Comment on ‘Theories of Knowledge’.  3.2.2016;  [Comment] Incompetence — the original sin in economics. Comment on ‘Deductivism — the original sin in economics’.  2.2.2016;  [Comment] Heterodoxy and the nullity of dead horse beating. Comment on ‘Revealed preference and the fundamental flaws of conventional economics’.  1.2.2016
[HTML] Egmont Kakarot-Handtke: Archive Mar 2016. AXEC: New Foundations of Economics.  [Comment] Profit, marginalism, and other anomalies. Comment on Larry Summers on ‘Corporate profits are near record highs. That’s a problem’.  31.3.2016;  [Comment] 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;  [Comment] Your profit theory is false. Comment on Justin Fox on ‘When Workers Get More of the Income Pie’.  30.3.2016;  [Comment] There is no truth in political economics. Comment on Asad Zaman on ‘On the Truth of Scientific Theories’.  30.3.2016;  [Comment] The futility of testing economics blather. Comment on ‘ Scott Sumner on’.  30.3.2016;  [Comment] Stanley Fischer: Rewarding scientific incompetence. Comment on ‘Reflections on Macroeconomics Then and Now’.  28.3.2016;  [Comment] Economics: neither craft nor science. Comment on ‘Economics is more a craft than a science — The Washington Post’.  26.3.2016;  [Comment] The three fundamental economic laws. Comment on Lars Syll on ‘Science and truth’.  25.3.2016;  [Comment] Economics between truth and blather. Comment on ‘MMT and mainstream macro’.  24.3.2016;  [Comment] Macro of and for the scientifically blind and deaf. Comment on Simon Wren-Lewis on ‘’.  23.3.2016;  [Comment] 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;  [Comment] Vain hopes in the ruins of economics. Comment on Noah Smith on ‘New paradigms in economic theory? Not so fast.’  21.3.2016;  [Comment] Helicopter money — a free lunch for the one-percenters. Comment on Erwan Mahé on ‘The arrival of helicopter money’.  19.3.2016;  [Comment] Hayek was not an economist. Comment on Maria Alejandra Madi on ‘Economic discourse and the market’.  18.3.2016;  [Comment] The FED should first of all get economics right. Comment on ‘The Fed Should Allow Wages to Rise’.  17.3.2016;  [Comment] “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;  [Comment] Lucas: Confession of a scientific write-off. Comment on ‘Robert Lucas the storyteller’.  16.3.2016;  [Comment] Toward the true economic axioms[!]. Comment on ‘The gross substitution axiom’.  15.3.2016;  [Comment] Trump and the weaponizing of economics. Comment on ‘Paul Krugman: Trump Is No Accident’.  14.3.2016;  [Comment] Economics and the weapons of mass distraction. Comment on Peter Radford on ‘Why Trump?’  14.3.2016;  [Comment] It’s the price mechanism, stupid! Comment on Bradford DeLong on ‘Ordoliberalismus and Ordovolkismus’.  13.3.2016;  [Comment] Low-IQ economics: the beginner’s guide. Comment on Thomas Palley on ‘Self-Protectionist Moment: Paul Krugman protects himself and the establishment’.  12.3.2016;  [Comment] Wage, profit, and the counter-intuitive labor market. Comment on David Ruccio on ‘How the reserve army works’.  11.3.2016;  [Comment] Sick or false? Comment on Asad Zaman on ‘Market Fundamentalism’.  10.3.2016;  [Comment] Sickness and remedy. Comment on Lars Syll on ‘Modern economics is sick’.  10.3.2016;  [Comment] Why economics is a failed science: the 25 best explanations/excuses. Comment on ‘Krugman’s textbook — mistaking the map for the territory’.  9.3.2016;  [Comment] The labor market and the consistent failure of 101-economics. Comment on ‘What’s Up with Wage Growth?’.  8.3.2016;  [Comment] Economics and the social science delusion. Comment on Maria Alejandra Madi on ‘The formal and the substantive meanings of “economics”’.  8.3.2016;  [Comment] From Orthodoxy, to Heterodoxy, to Sysdoxy. Comment on Noah Smith on ‘Occult Mysteries of the Heterodox’.  6.3.2016;  [Comment] Finalizing the Keynesian Revolution. Comment on Lars Syll on ‘Mainstream economics — a wildly inconsistent project’.  6.3.2016;  [Comment] Lawson’s fundamental methodological error and the failure of Heterodoxy. Comment on ‘Critical realism and scientific explanation’.  4.3.2016;  [Comment] Just one more orthodox absurdity. Comment on Noahpionion on ‘Occult Mysteries of the Heterodox’.  4.3.2016;  [Comment] How to rise above Moronomics. Comment on Noahpionion on ‘Occult Mysteries of the Heterodox’.  3.3.2016;  [Comment] The unveiled mystery of economic blather. Comment on Noahpionion on ‘Occult Mysteries of the Heterodox’.  2.3.2016;  [Comment] Orthodoxy? — NO,   Heterodoxy? — NO:   Scrap ALL this crap!. Comment on Noahpinion on ‘Occult Mysteries of the Heterodox’.  1.3.2016
[HTML] Egmont Kakarot-Handtke: Archive Apr 2016. AXEC: New Foundations of Economics.  [Comment] Rubberneck's reality. Comment on ‘Gödel’s theorems and the limits of reason’.  30.4.2016;  [Comment] Essentials of Constructive Heterodoxy: behavior. Working paper at SSRN.  30.4.2016;  [Comment] Essentials of Constructive Heterodoxy: institutions. Working paper at SSRN.  30.4.2016;  [Comment] The Propensity Function as general formalization of Economic Man/Woman. Working paper at SSRN.  29.4.2016;  [Comment] Make no mistake: there can be only one true theory. Comment on ‘Received wisdom in macroeconomics’.  27.4.2016;  [Comment] The synthesis of institution and math. Comment on ‘Wicksell on the use of mathematics in economics’.  27.4.2016;  [Comment] Walrasian double-blunder. Comment on ‘On the irrelevance of general equilibrium theory’.  26.4.2016;  [Comment] The insignificance of Gödel's theorem for economics. Comment on ‘Gödel’s theorems and the limits of reason’.  23.4.2016;  [Comment] When Ricardo saw profit, he called it rent: on the vice of parochial realism. Working paper at SSRN.  22.4.2016;  [Comment] The emergence of profit and interest in the monetary circuit. Working paper at SSRN.  21.4.2016;  [Comment] Economists kill the economy. Comment on ‘Reality killed the Washington Consensus’.  20.4.2016;  [Comment] The structural price mechanism. Working paper at SSRN.  20.4.2016;  [Comment] Stylized facts and vacuous interpretations. Comment on ‘The IMF on Investment since 2008’.  19.4.2016;  [Comment] Economics vs. Sociology. Comment on ‘On dogmatism in economics’.  19.4.2016;  [Comment] Say's Law: a rigorous restatement. Working paper at SSRN.  19.4.2016;  [Comment] The Law of Supply and Demand: here it is finally. Working paper at SSRN.  18.4.2016;  [Comment] Unfit in all dimensions. Comment on ‘Models, math and macro’.  18.4.2016;  [Comment] Mortifying scientific headstands. Comment on ‘The Coase Theorem’.  17.4.2016;  [Comment] Essentials of Constructive Heterodoxy: money, credit, interest. Working paper at SSRN.  17.4.2016;  [Comment] Science or Circus Maximus? Comment on ‘Economists — arrogant and self-congratulatory autists’.  16.4.2016;  [Comment] Methodology — Marx, too, messed it up. Comment on ‘On dogmatism in economics’.  15.4.2016;  [Comment] Why Post Keynesianism is not yet a science. Working Paper at SSRN.  15.4.2016;  [Comment] Reduced-form bricolage and sticky brains. Comment on ‘Sticky Prices, Financial Frictions, and the Ben Bernanke Puzzle’.  14.4.2016;  [Comment] The intelligent student's predicament. Comment on ‘Is there anything worth keeping in standard microeconomics?’  14.4.2016;  [Comment] The intelligent student's predicament. Comment on ‘Do not underestimate the power of microfoundations’.  12.4.2016;  [Comment] Bygones are bygones. Comment on ‘On the irrelevance of general equilibrium theory’.  12.4.2016;  [Comment] Bygones are bygones. Comment on ‘The Bernanke-Summers imbroglio’.  11.4.2016;  [Comment] MIT dilettantes II. Comment on ‘Bernanke-Summers Debate II: Savings glut, investment shortfall, or Monty Python?’  10.4.2016;  [Comment] From microfoundations to macrofoundations. Comment on Lars Syll on ‘New Keynesianism — an uncomfortable trade-off’.  10.4.2016;  [Comment] New age economics in 10 bullet points. Comment on Noah Smith on ‘A new age of econ imperialism is coming’.  9.4.2016;  [Comment] MIT dilettantes. Comment on ‘The inbred Bernanke-Summers debate on secular stagnation’.  8.4.2016;  [Comment] From mathiness to empiriness: forget it! Comment on Noah Smith on ‘A new age of econ imperialism is coming’.  8.4.2016;  [Comment] The monstrous utility-supply-demand-equilibrium failure. Comment on Edward Fullbrook on ‘The Fisher—Becker Curio.  6.4.2016;  [Comment] As Napoleon said: don’t listen to economists. Comment on Robert Waldmann on ‘Brad DeLong Marks His Beliefs about “The Return of Depression Economics” to Market’.  4.4.2016;  [Comment] The zombie wars are over. Comment on ‘Fiscal multiplier studies far worse than I thought’.  3.4.2016;  [Comment] Austrian blather. Reply to Major.Freedom on ‘Fiscal multiplier studies — it's far worse than I though’.  2.4.2016;  [Comment] 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. That’s a problem’.  1.4.2016
[HTML] Egmont Kakarot-Handtke: Archive May 2016. AXEC: New Foundations of Economics.  [Comment] Economics: From proto-science to freak show. Comment on anne on Links for 05-07-16.  9.5.2016  [Comment] Heterodoxy’s biggest mistake is to repeat Orthodoxy’s biggest mistake. Comment on Roger Farmer on ‘The biggest mistake in the history of macroeconomic thought’.  8.5.2016  [Comment] How to leave pulp economics behind. Comment on Noah Smith on ‘Brad DeLong pulpifies a Cochrane graph’.  7.5.2016  [Comment] Keynes, too, got the general theory of employment wrong. Comment on Lars Syll on ‘Price rigidities and unemployment’.  6.5.2016  [Comment] A science without scientists. Summary of comments on Barkley Rosser on ‘The Legacy of Joan Robinson’.  5.5.2016  [Comment] How to get out of the econ101 PsySoc woods. Comment on Asad Zaman: ‘The misconceived project of social science’.  4.5.2016  [Comment] The overdue public clarification of economics’ actual scientific state. Comment on Barkley Rosser on ‘The Legacy of Joan Robinson’.  4.5.2016  [Comment] Joan Robinson and the ‚throng of superfluous economists’. Comment on Barkley Rosser on ‘The Legacy of Joan Robinson’.  3.5.2016  [Comment] How Wicksell and the rest got inflation/deflation wrong. Comment on Stanley Fischer’s speech on ‘(Money), Interest and Prices: Patinkin and Woodford’.  20.5.2016
[HTML] Egmont Kakarot-Handtke: Archive June 2016. AXEC: New Foundations of Economics.  [Comment] 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
[HTML] Egmont Kakarot-Handtke: Archive October 2016. AXEC: New Foundations of Economics.  [Comment] 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 sector’s deficit (surplus) equals the household sector’s 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
“...capitalism breaks down — NOT for social reasons but for mathematical reasons.”  Egmont Kakarot-Handtke in  Mike Norman Economics , 9.7.2017
Joan Robinson said: “An excess of saving over the value of investment is therefore a loss to firms … and an excess of investment over saving is an undistributed profit to the firms”.
“The national accounts tell one important thing: Profit is NOT the income of capital but the mirror image of dissaving, i.e. the household sector’s increase of debt.”  Egmont Kakarot-Handtke in
ECONOSPEAK, 16.7.2017

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Adler, M.J.: (Luy16)
Admin: adm14 Adm14a adm15
Aguilar, V.J.: Agu12 Agu15
Andresen, T.: (Syl15o)
Andricopoulos:, A.: (WrL15b)
Aoyama, H.: (Tho15bk)
Arias, M.: WeA15
Armstrong, M.: RAM08
AXEC: AXE14 AXEC ww13 AXE14a
Ayres, C.: (Kni15c)
Baker, D.: Bak14 Bak15
Barzilai, J.: Kat12 Bar13 Bar14
Beaudry, P.: Tho15
Beckworth, D.: Bec15
‘Ben’: (Mea15)
Bentham, J.: (ToB1)
Bezemer, D.: ToB1
Bezroukov, N.: Bez15
“Blissex”: (Syl15o)
Bruun, C.: BHJ09
Caldentey, E.P.: CaV13
Carroll, C.: (WrL15d)
Chambers, C.P.: CES143
“cm”: (Tho15)
Cooper, P.: Coo10 Coo11 Coo11a Coo13
Coronado, J.: Cor16
Crook, C.: Cro15 (Ful15a)
D'Agata, A.: DAg06
Davar, E.: (Syl15k)
Davidson, P.: Syl15i
de la Fonteijne, M.R.: dlF13 dlF14
DeLong, J.B.: DeL15
Dillow, C.: Dil14 Dil15 Dil16
Dobusch, L.: (Cor16
Douglas, A.X.: Dou15 Dou15a
Dunning-Kruger: (KaH15k)
Echeniques, F.: CES14
“Editor”: Edi15
Edmonds, N.: (KaH15k)
(Syl15b)
Elster, J.: Els15
Farmer, R: Far15
Fix, B.: (AXEC15f)
Forder, J.: (WrL15c) (DeL15)
Fuhlrott, O.: Fuh14
Fujiwara, Y.: (Tho15bk)
Fullbrook, E.: Ful15
Fullwiler, S.: Ful15a
Gabaix, X.: GaL08
Galizia, D.: Tho15
Ganchev, G.: GTS14
Glasner, D.: Gla15 Gla15a Gla15b
Gorbatenko, D.: Gor15
Gossen, H.H.: (KaH11v)
Graeber, D.: (Syl15c)
Guerrien, B.: (Syl15d) (Ful15)
Habermas, J.: (Syl15r)
Halevi, J.: Hal10
Hall, T.: (Mas15)
Halmos, P.: (Syl16a)
Handtke, E.: Han83 Han11
Häring, N.: Kat12 (AXEC15n)
Harvey, A.T.: Har13
Henderson, H.: (Rei16)
Heyn-Johnsen, C.: BHJ09
Hoff, K.: HoS15 (rwe73)
“Ikonoclast”:Qui16
Iyetomiof, H.: (Tho15b)
Jakab, Z.: JaK15
“Jeff Z”: (adm14) (Zam16)
Jevons, W.L.: (KaH12f) (KaH11v)
“JF”: (Gla15)
‘justaluckyfool’: (rwe73)
Kaboub, F.: Kab00
Kakarot-Handtke, E.: KaH03 SITE Han07 AXEC AXEC2 KaH86 KaH10 KaH11 KaH11b KaH11c KaH11d KaH11e KaH11f KaH11g KaH11h KaH11i KaH11j KaH11k KaH11l KaH11m KaH11n KaH11o KaH11p KaH11q KaH11r KaH11s KaH11t KaH11u KaH11v KaH12 KaH12a KaH12b KaH12c KaH12d KaH12e (Mar12) KaH12f KaH12g KaH12h KaH12i KaH12j KaH12k KaH12l Kat12 (Bet12b) (Agu12) KaH13 KaH13a KaH13b KaH13c KaH13d KaH13e KaH13m KaH13g KaH13h KaH13i KaH13j KaH13k KaH13l KaH13l KaH14 KaH14a KaH14b (Syl14c) KaH14c KaH14d KaH14e KaH14f (dlF14) KaH14g (Mar14) KaH14h (Bar14) KaH14i KaH14j (Dil14) (Syl14) KaH14k (Syl14a) KaH14l (Syl14b) (Syl14c) (Syl14d) KaH14m (Bar14) (Kni14) (GTS14) KaH14n KaH14o AXEC14J AXEC14L (Zam14) (Zam14a) (Syl14f) (Art15) KaH15 KaH15a KaH15b KaH15c KaH15d (Kom15) KaH15e KaH15f (WrL15) (Agu15) (Mas15) (Ruc15) (Kni15) (Syl15d) (Ful15) (Els15) (WeA15) (Syl15a) (Syl15b) (Syl15c) Tap15 (Syl15d) (Syl15f) (Syl15g) (WrL15b) (Syl15h) (Syl15i) (Syl15j) (Wil15) AXEC15A AXEC15B AXEC15a AXEC15b AXEC15C AXEC15c AXEC15D AXEC15d AXEC15E AXEC15F KaH15g KaH15h (Ruc15a) KaH15i (Syl15k) (Ros15) (Syl15l) (Syl15m) (Syl15n) KaH15j KaH15k KaH15l (KaH15m) (Tho15) (Var15) (Zam15) (Syl15o) (Gla15) AXEC15e AXEC15f AXEC15G (Edi15) (Tho15a) (Syl15p) (Syl15e) (Ruc15c) (Dil15) (Dou15) (Dou15a) (Row15) (DeL15) (Sol15) (Bez15) (Bec15 (Kom15a) (Bak15a) (Tho15b) (Tho15c) (LaS15) (Tho15d) (Gla15b) (Kni15b) (Syl15r) KaH15i AXEC15H AXEC15I AXEC15J AXEC15g AXEC15h AXEC15r (Sum15) AXEC15i AXEC15j (Mea15) (Ruc15d) (Gla15a) (Gla15b) (Kni15c) AXEC15k (Far15) AXEC15l AXEC15m (Syl15t) KaH15m KaH15n (WrL15b) (rwe73) AXEC15n AXEC15o AXEC15p AXEC15q AXEC15K AXEC15L (Kni15c) AXEC16 (Syl16) (Rei16) AXEC16a AXEC16A (Qui16) (WrL16) (Dil16) (Zam16) (Cor16 AXEC16B AXEC16C
Kalecki, M.: Kal42 (Lev00) (Dil14) (wiki95) (ToB1) (Coo10) (Coo11) (phe13) (Ram14) (Tap15)
Kapeller, J.: Cor16
Katzner, D.: Kat12 (Bar13)
Keen, S.: Kee10 (KaH12e) (dlF14) (Dil14) (Rei15) (Tap15) (KaH15k)
Kelso, L.O.: (Luy16)
Keynes, J.M.: (ToB1) (KaH11c) (KaH12f) (KaH12k) (KaH12l) (KaH13f) (KaH13g) (Dil14) (Syl14f) (Tap15) (Syl15) (Kni15) (Ful15)
Kliman, A.(J.): PoK15
Komlos, J.: Kom15 Kom15a
Kovac, R.: (Ful15)
Kreps, D.: Syl15d
Kristjan: (JEC15)
Krugman, P.: (Syl14e) (Ros15) (Tho15a) (Dou15a) (Pal16)
Kumhof, M.: JaK15
Lavoie, M.: LaS15
Laibson, D.: GaL08
Lawson, T.: (KaH12f) (Ful15) (Syl15k)
Ledenyov, D.O: Led16
Ledenyov, V.O: Led16
Lee, F.S.: (Kab00)
Lerner, A.: (Syl15b)
Levy, J.: (Lev00) (phe13)
Levy, S.J.: Lev00
Lima, G.P.: Lim15
Lipsey, R.G.: (Syl15d)
Lonergan, E.: (Cro15) (AXEC15n) (Ram16) (WrL16)
Lucas, R.: (Syl14f) (WrL15d)
Luyima, S.P.: Luy16
“macroambie”: (Ruc15c)
Mao, D.: RAM08
Martí, J.(R.): RAM08
Martins, N.O.: Mar12 Syl14a
Marx, K.: (ToB1) (Hal10) (KaH11e) (KaH11i) (KaH12b) (AXEC13) (Mar14) (dlF14) (KaH14g) (Syl14) (Syl15f) (Kni15) (wiki94) (PoK15) (Tap15)
Mason, J.W.: Mas15 Mas15a
McCauley, J.L.: MCa06
McLeay, M.: (Syl15c)
Meadway, J.: Mea15
Meeropol, M.: (KaH15k)
Mian, A.: (Bar14)
Mill, J.S.: (KaH12f) (Dil16)
Minsky, H.: (Tap15) (Ros15)
Mitchell, B.: (AXEC15q)
“mnmecon”: KaH11j
Mohun, S.: PoK15
Motuz, L.: (Syl15l) (KaH15k) (Syl15t)
Mschlotzhauer: (Edi15)
Muellbauer, J.: (WrL15d)
Norman, M.: Nor12
Palley, T.: Pal16
Pareto, V.: (AXEC15k)
Parguez, A.: (Kab00) Par04
Pasinetti, L.: Pas93 Pas93a
Phillips, A.W.: KaH11j
‘philosophicalecon’: phe13
Piketty, T. (Syl15u)
Portier, F.: Tho15
Potts, N.: PoK15
Quiggin, J.: (Syl14b) (KaH12k)
Radford, P.: Rad15
Radia, A.: (Syl15c)
Rahman, H.A.: RAM08
Ramanan, W.: Ram12 (Nor12) (Rot13) Ram14 Ram16 (WrL16)
“Olli Ranta”: KaH12k
“reason”: (Tho15)
Reinert, E.S.: Rei16
Reissl, S.: Rei15 (KaH15k)
Rendahl, P.: (Syl15b)
Ricardo, D.: KaH11q
Richardson, D.R.: Ric15 (rwe73)
Robinson, J.: (Cor16
Rosser, B.: Ros15
Roth, N.L.: (Kni15c)
Roth, S.: Rot12 Rot13
Rowe, N.: Row15 (AXEC15n)
Samuelson, P. (ToB1)
Sandwichman: (KaH15k) (KaH15m)
Saraceno, F.: (Syl15g)
Sargent, T.J.: (WrL15d)
Schächterle, P.: (Zam14a) (Ful15) (Syl15l (KaH15k)
Schlefer, J.: (Syl14a)
Schumpeter, J.: (ToB1)
Sessions, D.C.: (Tho15)
Shmaya, E.: CES143
Smith, N.: Syl15h (Wil15)
Soddy, F.: (rwe73)
Solow, R.: (Syl14e) Sol15
Stavrova, E.: GTS14
Stiglitz, J.(E.): (Syl15o) HoS15 (rwe73)
Stockhammer, E.: LaS15
Stützel, W.: (Rei15) (KaH15k)
Sufi, A.: (Bar14)
Sumner, S.: Sum15
‘Talldave’: (Sum15)
Tapia, J.A.: Tap15
Taylor, D.: (Syl15l) (KaH15k) (Syl15t) (Kni15c)
"The Arthurian": (Art15)
Thomas, R.: (Syl15c)
Tobin, J.: (Ram16)
Tomasson, G.: ToB1
Trabucchi, P.: KaH11q
Tsenkov, V.: GTS14
van Eeghen, P.-H.: vEe14
Varoufakis, Y.: Var15
Veneziani, R.: PoK15
Vernengo, M.: CaV13
Weintraub, E.R.: (KaH14h) (Syl15p)
Wen, Y.: WeA15
Williamson, S.: Wil15
Wray, R. (AXEC15n)
Yamaguchi, K.: (Luy16)
Yellen: (Bar14)
Yoshikawa, H.: (Tho15bk)
     
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