tag:blogger.com,1999:blog-5908830827135060852.post5789438313101204206..comments2023-06-09T08:10:33.673-04:00Comments on Bond Economics: MMT Is Not Just "Theory X"Brian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger59125tag:blogger.com,1999:blog-5908830827135060852.post-89058769023905060992018-01-28T19:30:04.059-05:002018-01-28T19:30:04.059-05:00 I ran into someone on Twitter that said that ther... I ran into someone on Twitter that said that there was a modern “Quantity theory of Money” that goes beyond the simplistic belief that velocity is constant, that it is allegedly more sophisticated than that. Thing is, if we define the QTtoM to just be “too much money chasing goods”, any theory that is based on aggregate demand qualifies. That’s then meaningless, since it is too broad.<br /><br />I was about to write an article on the limitations of mathematical inflation models. I’ll have to see what I wrote there, since I have forgotten that. Thanks for digging that up... 🙂Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-32285794248124306692018-01-28T17:28:23.327-05:002018-01-28T17:28:23.327-05:00Yeah true, I don't know enough about what peop...Yeah true, I don't know enough about what people think of the Quantity Theory to hitch any wagons to it.<br /><br />I would say that the MMT inflation story puts macro demand-pull inflation broadly as a result of 'net-financial-assets' vs the emergent 'savings desire' of the population (which can vary between countries, depends on the currency itself, and certainly changes with the business-cycle), with caveats that inventory & employment are shock-absorbers that fluctuate before prices. It seems kind of like a quantity theory.<br /><br />I don't know if MMT has any unique take on cost-push type inflation. And Mosler is really trying to talk & think about how the government is truly price-setter, which to me sounds like his answer for 'built-in' kind of inflation (government trying to index salaries to previous inflation, etc), which is really the only type we see in the absence of full-employment max-demand environment (where you get large-scale demand-pull inflation and labor cost-push).<br /><br />Then there are plenty of nuances as you say, and verbal explanations of phenomena, such as your article: http://www.bondeconomics.com/2015/08/comments-on-contemporary-inflation.htmlgusnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-49720569169790051282018-01-27T13:33:09.739-05:002018-01-27T13:33:09.739-05:00The problem is that the Quantity Theory of Money i...The problem is that the Quantity Theory of Money implies that there is a strong relationship between the “money supply” and the price level. The MMT view on inflation is not that simplistic. I do not think there is a snappy summary of “the MMT view” on what determines inflation; the post-Keynesian answer is “it’s complicated” (as per Marc Lavoie’s survey in his textbook); the MMT answer is probably even more complicated.<br /><br />For a lot of people, if there is no reductionist mathematical model for inflation, there is no theory of inflation. I tend not to have a lot of respect for such people. Give me *any* mathematical model for inflation, and I could find a counter-example in the data.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-41299258678337451882018-01-27T13:00:07.068-05:002018-01-27T13:00:07.068-05:00"(The loopiest recent variant of this was tha..."(The loopiest recent variant of this was that "MMT is just the Quantity Theory with bonds as part of the money supply." My head hurts just thinking about that assertion.)"<br /><br />While I agree that's quite reductive, I don't think it's *too* far off. I ended up at something pretty similar when I tried to come up with the most condensed essence of modern MMT, at least when trying to get through to a Krugman or SWL type:<br />https://www.reddit.com/r/mmt_economics/comments/565eim/what_is_the_essence_of_modern_mmt/<br /><br />Even Larry Summers was telling people in 2016 that t-bills were basically equivalent to reserves & printing money (in post-IOR world), before trump won and he started politically railing against government debt again.gusnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-76490720598217875572018-01-15T00:35:22.099-05:002018-01-15T00:35:22.099-05:00This has been a good article and a good discussion...This has been a good article and a good discussion. Now I'm intrigued. I get the impression that MMT is about applying the sophisticated ideas of double entry bookkeeping to macro-economic analysis. One of the things that has always bothered me about macro is that so much of it didn't make accounting sense. Every entity in the economy can be described using double entry bookkeeping, but somehow the aggregate can not. At some point the mysticism creeps in.<br /><br />I'll have to read more.<br /><br />Also, I'm guessing that money supply as now discussed is probably less important than something about money flow. That (I−S)+(G−T)+(X−M)=0 looks a lot like Kirchoff's Law or an accountant's desideratum. I think too many have been looking at the flow of electrons while the flow of electric current is quite different and more important. I'm guessing that some new understandings will emerge from MMT.Kaleberghttps://www.blogger.com/profile/05283840743310507878noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-40576288457165505512018-01-13T15:10:49.304-05:002018-01-13T15:10:49.304-05:00Brian Romanchuk
You say “If you think we can only...Brian Romanchuk<br /><br />You say “If you think we can only define things one way, your investment in higher education was sadly wasted.”<br /><br />Lack of definitions is NOT the problem. Just the opposite. In the political realm, at Trump University, or in the Station for Mentally Deranged you can define anything in multiple ways. Not so in science. If you leave science and rename MMT to MMB ― Modern Monetary Blather ― you can define anything in any way and are safe from criticism and refutation.<br /><br />My higher education tells me that you are 2000+ years behind the curve “There are always many different opinions and conventions concerning any one problem or subject-matter …. This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides ... was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other …” (Popper) <br /><br />Egmont Kakarot-HandtkeAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-89739144784147541352018-01-13T12:41:36.404-05:002018-01-13T12:41:36.404-05:00Correction:
In the second paragraph, "becaus...Correction:<br /><br />In the second paragraph, "because each term is a difference" should read<br /><br />"because each term-group is a difference".Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-6217593699604314822018-01-13T12:26:35.317-05:002018-01-13T12:26:35.317-05:00again (I−S)+(G−T)+(X−M)=0
It seems to me that, be...again (I−S)+(G−T)+(X−M)=0<br /><br />It seems to me that, because each term is a difference, we are describing an observed <i> change </i> in something. That 'something' may be profit but I think it is 'money supply'.<br /><br />The equation includes three macroeconomic sectors, which (combined) presumably hold all the money supply available to the single macro-economy.<br /><br />What if we allowed the money supply in the macro-economy to expand? Would that be profit to one (or more) of the sectors? What might be the source of a money supply expansion? Should the sum of changes for the three sectors still equal zero?<br /><br />I like to think that only government can expand the money supply in a fiat economy. I like to think that banks are controlled by government (however indirectly) and that banks create fiat money. <br /><br />The first-spender of newly created money can be any of the three sectors. I guess we could say that newly created money will eventually create a profit for someone. I prefer to say that newly created money will eventually find an owner (and come to long-term quiescence).<br /><br />I like to write<br /><br />(I−S)+(G−T)+(X−M)= change in money supply. <br /><br />Then, to learn how the money supply has actually grown, we need to distinguish between borrowing from the private sector and borrowing from one's self (as when government borrows from banks). Only borrowing-from-one's-self results in long term increases in the money supply.<br /><br />It is not enough to measure the terms in the equation and expect to learn how the macro-economic money supply has grown.<br /><br />Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-24563052317157815112018-01-13T09:00:32.860-05:002018-01-13T09:00:32.860-05:00Look, it’s pretty simple. If there is one firm in ...Look, it’s pretty simple. If there is one firm in the company, it attempts to maximise GAAP profits, and the natuonal accountants attempt to approximate GAAP notions in the standard definitions. Your definition gives the wrong answer.<br /><br />If you think we can only define things one way, your investment in higher education was sadly wasted.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-79038028944653418132018-01-13T06:41:34.434-05:002018-01-13T06:41:34.434-05:00Brian Romanchuk
Let us agree on the following
• ...Brian Romanchuk<br /><br />Let us agree on the following<br /><br />• There is micro and macro and the MMT balances equation is macro. So all your references to the behavior of firms and individuals and GAAP accounting principles are entirely beside the point.<br /><br />• Macro is false since Keynes due to the Fallacy of Insufficient Abstraction. MMT has inherited Keynes methodological blunder. It is a historical fact that the Keynesian Revolution, i.e. the move from microfoundations to macrofoundations, i.e. the replacement of micro axioms by macro axioms, i.e. the paradigm shift, failed.<br /><br />• If my argument sounds bizarre to you this has nothing to do with language or terminology but with the plain FACT that economics has failed in the last 200+ years to get the definition of the foundational concepts income and profit right.#1 MMT is NO exception. The actual state of economics is like medieval physics before the foundational concept of energy was properly defined and fully understood.#2 If this is not bizarre, what is?<br /><br />• The question is not at all how my argument sounds but whether it is true or false. I wonder how long it takes MMTers to stop talking methodological nonsense and in earnest try to disprove the axiomatically correct balances equation.<br /><br />• The whole issue boils down to this: Which one of the two macroeconomic relationships is true MMT=(I−S)+(G−T)+(X−M)=0 or AXEC=(I−S)+(G−T)+(X−M)−(Qm−Yd)=0?<br /><br />We both know the simple answer: the AXEC equation is true and the MMT equation is rather bizarre because it applies to a zero profit economy. And this means that MMT policy proposals have NO sound scientific foundations.#3 Not one of them.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 The Profit Theory is False Since Adam Smith<br />https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741<br /><br />#2 “Thousands upon thousands of scholars, as well as thousands of statesmen and men of affairs, have contributed their efforts to the attempt to understand the course of events of the economic world. And today this field of investigation is being cultivated more extensively, than ever before. How is it, then, that in all these years, and with all the undoubted talent that has been lavished upon it, the subject of economics has advanced so little?” (Schoeffler)<br /><br />#3 MMT = proto-scientific junk + deception of the 99-percenters<br />https://axecorg.blogspot.de/2018/01/mmt-proto-scientific-junk-deception-of.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-83960557535579325842018-01-12T07:06:56.884-05:002018-01-12T07:06:56.884-05:00In particular, your arguments that your theory is ...In particular, your arguments that your theory is “axiomatically correct” are completely wrong. You’re just taking a different definition of aggregate profits, which is perhaps defensible. However, your definition is incompatible with known micro behaviour. If you want to get all axiom-y, you are actually on very shaky ground. Since there are typically only a few large firms dominating many industries, a theory that does not predict firm-level behaviour will have problems once we break GDP on any industrial basis.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-43798227764397053642018-01-12T07:00:50.965-05:002018-01-12T07:00:50.965-05:00Everybody else knows the difference, so it’s not l...Everybody else knows the difference, so it’s not like I’m showing off.<br /><br />As should be clear, I read your stuff once. I was not happy with it, and I am not going through the exercise again. Your answer tells me what I believed: your definition gives the wrong answer at the firm level.<br /><br />Even heterodox economists appear to subscribe to a version of micofoundations: firms attempt to maximise something resembling GAAP profits. (This micro argument is probably more complicated than that, but that’s my approximation. Get a post-Keynesian text on micro if you want a cleaner answer.) The national accounting measure is an attempt to approximate aggregate GAAP, and is assumed to be what the aggregate business sector would appear to be optimising.<br /><br />Your theory is that microfoundations is wrong, we should use another definition of national accounting profits as an analytical tool. That is, it does not matter what individual firms want to do, aggregate behaviour follows different dynamics. (The heterodox microfoundations haters would actually love that argument. )<br /><br />Unfortunately, this is not that radical. Economists have been arguing over the best definition of national accounting profits for a long time. Nobody looks at cash accounting, because that is obviously wrong at the firm level. Perhaps you are right: maybe it is a mistake to not examine cash accounting at the aggregate level. However, it appears hard to square your accounting methodology with data at the industry level, although I admit have not seen any need to do so.<br /><br />But guess what? Even if your new definition became accepted, it’s just changing a couple of not-very-important terms in various accounting identities. MMTers would just adjust their verbal description to take into account the extra terms.<br /><br />However, nobody is going to listen to you since you are using terminology in a bizarre fashion, and you are asserting that a relatively minor definitional change is a scientific revolution. I slag off mainstream economics, but I have worked around it for long enough to be able to gauge the relative importance of theoretical issues.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-74985385349009013572018-01-11T06:46:37.720-05:002018-01-11T06:46:37.720-05:00You’re making a huge assumption: that there is a s...You’re making a huge assumption: that there is a single mathematical model that describes the macroeconomy, solely based on weak analogies to physics. What if I told you that it was possible to demonstrate that no such model exists?<br /><br />We know that firms are trying to maximise some variant of GAAP profits, not a national accounts definition. I’m self-employed, and I can quite confidently tell you that the aggregate profit numbers do not help me, only my GAAP profits.<br /><br />I see that you could not answer my simple mathematical question about your definition.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-27783054430119217122018-01-11T05:46:12.186-05:002018-01-11T05:46:12.186-05:00Brian Romanchuk
Science is about universals. The ...Brian Romanchuk<br /><br />Science is about universals. The Law of Gravitation is not different in Newton’s Cambridge, in the US, or in China but holds throughout the universe. However, when it comes to measurement, some practical problems arise because different countries measure mass or length in different units.<br /><br />Therefore, the first and foremost task of science is to define the foundational concepts and their dimension (e.g. mass, length) consistently and with the utmost precision. This is the precondition of testing which is the final arbiter in science. In order to get rid of different national definitions of dimensions, in physics, natural units are used which are “physical units of measurement based only on universal physical constants”. (Wikipedia)<br /><br />Analogously, economics has to establish a consistent set of foundational economic concepts (e.g. income, profit, employment etc) and then to figure out how they are related (e.g. Profit Law, Employment Law). How is this done? “The only way to arrive at coherent languages is to set up axiomatic systems implicitly defining the basic concepts.” (Schmiechen)<br /><br />Economics has failed already at this first step. Profit is ill-defined since Adam Smith, and MMT is no exception. The scientific incompetence of economists stinks to the high heavens. Physics students all over the world can tell you precisely what energy is but economics students look up the definition of profit in their national tax code. This tells the general public everything about the absurdity of the claim that economics is a science.<br /><br />Your reference to GAAP is a case in point. We are dealing here with the MMT balances equation which is a macroeconomic relation and macroeconomic magnitudes are measured by national accounting. Here the practical problem arises that different countries have historically developed their own systems. The problem of unification has been addressed by the United Nations System of National Accounts.#1, #2<br /><br />The GAAP has the practical purpose of determining profit for taxing American firms. It has NO scientific content whatsoever. When we are talking about macroeconomic profit the GAAP is absolutely IRRELEVANT.<br /><br />The axiomatically correct balances equation reads (I−S)+(G−T)+(X−M)=(Qm−Yd). The MMT balances equation reads (I−S)+(G−T)+(X−M)=0. As everybody can see, monetary profit Qm and distributed profit Yd is MISSING in the foundational equation of MMT.<br /><br />MMTers have not realized until this day that the most important real-world economic magnitude ― profit ― is absent in their “theory”. They even think they can look it up in the GAAP. More proof of manifest idiocy is not needed.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 United Nations, 2008 <br />https://unstats.un.org/unsd/nationalaccount/sna2008.asp<br /><br />#2 The Common Error of Common Sense: An Essential Rectification of the Accounting Approach<br />https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2124415AXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-86320604870588989072018-01-10T15:38:53.858-05:002018-01-10T15:38:53.858-05:00Ahem. In the real world, businesses are supposed t...Ahem. In the real world, businesses are supposed to want to maximise GAAP. In practice, they usually target some variation of GAAP. So if we want to capture observed behaviour, we should be looking at GAAP.<br /><br />However, corporations want to minimise the profits they report to the government. So they try to find techniques to drive as big a wedge between GAAP profits and what is reported for income tax.<br /><br />Meanwhile, national atatisticians need to find measures of profits that look as much as possible like GAAP, yet are consistent with the entire set of national accounts. The fact that most large corporations are multinationals makes this obviously complicated.<br /><br />However, you are talking about toy models. Most of us who build models attempt to define profits so that they align with the national accounts. The exact definition depends on the model used, as would be clear to anyone who actually understands how mathematical models work.<br /><br />So a question for you. If I have a firm with a $100 wage expense in 2017 (paid out of “cash”), sent my invoice of $200 to the client of Dec 31, 2017 (with the (obvious) expectation that I will be paid in 2018), what is my ‘E.K.-H. Profit” in 2017?Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-66674867711097594242018-01-10T14:49:21.370-05:002018-01-10T14:49:21.370-05:00Brian Romanchuk
I asked you to state “in a few cl...Brian Romanchuk<br /><br />I asked you to state “in a few clear sentences and a neat equation what the MMT definition of profit is.”<br /><br />You merely give the question back “What ‘profits’ do you want to know about?” In other words, you have no idea what profit is.<br /><br />So, here we go, profit for dummies.<br /><br />For the determination of monetary profit of the economy as a whole one has to start with the most elementary case of a pure production-consumption economy without investment, government, and foreign trade.#1 In this elementary economy three configurations are logically possible: (i) consumption expenditures are equal to wage income C=Yw, (ii) C is less than Yw, (iii) C is greater than Yw.<br /><br />In case (i) the monetary saving of the household sector Sm≡Yw−C is zero and the monetary profit of the business sector Qm≡C−Yw, too, is zero.<br /><br />In case (ii) monetary saving Sm is positive and the business sector makes a loss, i.e. Qm is negative.<br /><br />In case (iii) monetary saving Sm is negative, i.e. the household sector dissaves, and the business sector makes a profit, i.e. Qm is positive.<br /><br />It always holds Qm+Sm=0 or Qm=−Sm, in other words, loss is the counterpart of saving and profit is the counterpart of dissaving. This is the most elementary form of the Profit Law. Total profit is scattered among the firms that comprise the business sector.<br /><br />Profit for the economy as a WHOLE has NOTHING to do with productivity, the wage rate, the working hours, exploitation, competition, innovation, capital, power, monopoly, waiting, risk, greed, the smartness of capitalists, or any other subjective factors. Total profit/loss is objectively determined in the most elementary case by the change of the household sector’s debt. <br /><br />Monetary profit/loss is measurable with the accuracy of two decimal places.<br /><br />Needless to emphasize that the complexity of the monetary economy can now be successively increased. Accordingly Qm=−Sm+Yd+I+(G−T)+(X−M) is the Profit Law for an open economy (X−M) with a government sector (G−T) and with business investment I and distributed profit Yd.<br /><br />This equation tells everybody that Public Deficit = Private Profit and this, in turn, tells everybody that MMT’s relentless propagation of deficit spending for social purposes is nothing but agenda pushing for the one-percenters.<br /><br />So, a MMTer is either stupid because he does not know what profit is, or corrupt because he deceives the ninety-nine-percenters.#2 Take your pick.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X. For a start it holds X=O. Note that ALL variables are measurable.<br /><br />#2 MMT is ALWAYS a bad deal for the 99-percenters<br />https://axecorg.blogspot.de/2017/12/mmt-is-always-bad-deal-for-ninety-nine.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-91096161109380179872018-01-10T12:55:12.899-05:002018-01-10T12:55:12.899-05:00This discussion is entertaining to read and it loo...This discussion is entertaining to read and it looks as though it could go on for ever. Why must you be so polite Brian? Egmont does not seem to have any problem calling any number of people stupid.<br /><br />Well, I guess it is usually good policy to take the high road in this sort of thing. Jerry Brownnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-55734627352627759342018-01-10T12:33:15.181-05:002018-01-10T12:33:15.181-05:00What "profits" do you want to know about...What "profits" do you want to know about? GAAP profits? [GAAP = Generally Accepted Accounting Principles] Profits according to tax law? Profits (which has a half-dozen variants) in national accounting standards? As defined in simple macro models?<br /><br />The basic premise is that profits = (Revenues) - (Expenses), but the devil is in the details of the definition of "revenues" and "expenses." If you look at GAAP, the definitions turn into a very thick book of accounting guidelines. Good luck with turning that book into, er, axioms...Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-52282498110007858012018-01-10T11:53:30.013-05:002018-01-10T11:53:30.013-05:00Brian Romanchuk
Come to the point and tell everyb...Brian Romanchuk<br /><br />Come to the point and tell everybody in a few clear sentences and a neat equation what the MMT definition of profit is instead of complaining that MMT is not just ‘Theory X’.<br /><br />“In modern science, the term ‘theory’ refers to scientific theories, a well-confirmed type of explanation of nature [or sub-systems like the economy for example], made in a way consistent with scientific method, and fulfilling the criteria required by modern science.” (Wikipedia)<br /><br />The criteria of modern science are material and formal consistency “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)<br /><br />MMT is no valid theory because it lacks logical consistency and MMTer cannot even tell what profit is.<br /><br />Egmont Kakarot-HandtkeAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-8298700568447432402018-01-10T06:47:13.056-05:002018-01-10T06:47:13.056-05:00Do you want to know why I tried explaining how to ...Do you want to know why I tried explaining how to write modern English properly? To be blunt, to a modern reader of English, you sound borderline clinically insane. Your word choices help reinforce that impression. If English is your second language, you probably will miss the subtleties involved. I was trying to nudge you in a direction that might allow other people to take you seriously. That perhaps was a waste of time. If you insist on sounding like a loon, be my guest.<br /><br />1) I don’t care how you think “science” operates, but in mathematics, every competent mathematician knows that we can change definitions, and go off in new directions, even while sticking with the same foundational axioms (such as those that define the real line). You cannot use results from one set of definitions to “prove” the other false.<br /><br />2) The same English word can have multiple meanings, even within mathematics. You have to understand context.<br /><br />3) Every credible MMT writer has indicated that MMT is part of the post-Keynesian tradition — assuming that one means “broad tent post-Keynesianism” and not “narrow tent post-Keynesianism” (as defined by Marc Lavoie). So congratulations on your reading skills.<br />Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-31319505282219108632018-01-10T05:01:54.268-05:002018-01-10T05:01:54.268-05:00Brian Romanchuk
At the beginning of every scienti...Brian Romanchuk<br /><br />At the beginning of every scientific investigation stands the following question “What are the propositions which may reasonably be received without proof? That there must be some such propositions all are agreed, since there cannot be an infinite series of proof, a chain suspended from nothing. But to determine what these propositions are, is the opus magnum of the more recondite mental philosophy.” (J. S. Mill)<br /><br />The foundational propositions are called in methodology axioms. Every scientific discipline is ultimately based on axioms.<br /><br />In economics we have Walrasian microfoundations and Keynesian macrofoundations. Both are clearly defined and provably false. So what is needed is a paradigm shift. As Keynes put it “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight ― as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics.”#1<br /><br />MMT claims to be a new approach, aka paradigm, and has published its foundational assumptions, aka axioms, on Wikipedia.#2. And what do we see here? the sectoral balances equation which is false since Keynes wrote I=S on p. 63 of the GT.<br /><br />So, MMT is not a new paradigm but Post Keynesian rubbish. Keynes did not understand what profit is, and the abysmally incompetent After-Keynesians did not realize the foundational blunder in the last 80 years.<br /><br />What is the last refuge of morons? It is Humpty Dumpty wordplay “’When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that's all’.”<br /><br />This is NOT how science works. The freedom or arbitrariness of definition is a methodological illusion. It applies only to the first definition. Subsequently, one has to make sure that every new definition is consistent with the preceding ones. Formal consistency is indispensable.<br /><br />The MMT balances equation is provably false. Because the foundational assumptions, aka axioms, are false the whole analytical superstructure of MMT is false. MMT policy guidance has NO sound scientific foundations.#3<br /><br />Needless to emphasize that the Trump University economists Romanchuk, Kelton, Mosler, Mitchell, Tcherneva, Wray, Fullwiler, Forstater, Kaboub, Pettifor, Keen, Tymoigne, Willingham, Grumbine etcetera, who do not even get the elementary mathematics of macroeconomic accounting right and do not know what profit is, are too stupid for the opus magnum, that is, for the formulation of a consistent set of foundational propositions, aka axioms, of the hallucinatory new paradigm called MMT.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 New Economic Thinking: the 10 crucial points<br />https://axecorg.blogspot.de/2017/07/new-economic-thinking-10-crucial-points.html<br /><br />#2 Wikipedia, Modern Monetary Theory <br />https://en.wikipedia.org/wiki/Modern_Monetary_Theory<br /><br />#3 MMT: The one deadly error/fraud of Warren Mosler<br />https://axecorg.blogspot.de/2017/11/mmt-one-deadly-errorfraud-of-warren.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-77842895404150416542018-01-09T17:40:55.386-05:002018-01-09T17:40:55.386-05:00Egmont,
As is clear, you are having a difficult t...Egmont,<br /><br />As is clear, you are having a difficult time with English. What I wrote was very clear, and I will repeat.<br /><br />In modern English convention, “axiom” is reserved for foundational assumptions. Lesser assumptions are just labelled “assumptions.”<br /><br />No matter how earth-shattering you think your work is, the convention in mathematics is that you have to let other people decide that. At best, your analysis is a curiosity. The assumptions used in a curiosity does not rate the term “axiom.” Furthermore, the definition of profit is a definition, and is labelled as such in English.<br /><br />If you actually understood mathematics, you would realise that one can change definitions, and then create a new chain of logic. Rather than wasting your time saying that a definition is wrong - which is logically impossible - you would explain how your set of definitions gets more useful results. It might actually induce someone to read your output.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-32834699241467039082018-01-09T13:43:43.252-05:002018-01-09T13:43:43.252-05:00"(I−S)+(G−T)+(X−M)=0"
Term G (Governmen..."(I−S)+(G−T)+(X−M)=0"<br /><br />Term G (Government spending) can be considered as annual movement of sand (each grain of sand = one dollar). <br /><br />Term T (Taxes received by government) can be considered as sand received by government each year.<br /><br />The combination (G-T) represents the annual change in a huge pile of sand controlled by government.<br /><br />The remaining terms of the equation represent inflow or outflow of sand from the private and external sectors of the economy.<br /><br />When the combined flow is equated to zero, the assigned change in the total macro sand pile is zero. This effectively defines the macro money supply as being constant. Which is obviously incorrect.<br /><br />The money supply does grow, which is what I think E K-H is trying to say.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-58073767227979247982018-01-09T10:54:17.644-05:002018-01-09T10:54:17.644-05:00Brian Romanchuk
You say ”I’m trained as a mathema...Brian Romanchuk<br /><br />You say ”I’m trained as a mathematician, not a ‘scientist,’ and your writing style is mangling *modern* mathematical conventions.”<br /><br />Frankly, is is a matter of indifference what your training was. Perhaps Wikipedia can bring you up to speed with regard to axiomatization: “The Zermelo-Fraenkel axioms, the result of the axiomatic method applied to set theory, allowed the ‘proper’formulation of set-theory problems and helped to avoid the paradoxes of naïve set theory. One such problem was the Continuum hypothesis. Zermelo–Fraenkel set theory with the historically controversial axiom of choice included is commonly abbreviated ZFC, where C stands for choice. … Today ZFC is the standard form of axiomatic set theory and as such is the most common foundation of mathematics.”<br /><br />You say “I cannot see how a ‘definition’ (of profits) turns into an ‘axiom.’” Nobody can see a definition turning into an axiom because this is a hallucination of your own making.<br /><br />The three macroeconomic axioms for the elementary production-consumption economy are given by (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X. And the profit definition reads Qm≡C−Yw.<br /><br />You say “But for our purposes, MMT uses standard national accounting, which is a formal framework developed earlier, and is still under revision. National accounting provides an internally-consistent set of definitions for defining aggregates.”<br /><br />Again, the formal framework of standard national accounting is inconsistent. For the proof see The Common Error of Common Sense: An Essential Rectification of the Accounting Approach<br />https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2124415<br /><br />Because of this, the MMT balances equation (I−S)+(G−T)+(X−M)=0 is false. A mathematician worth his salt sees this immediately. Profit is the balance of the business sector and it is MISSING in the equation.<br /><br />Your reference to the SFC modelling literature is pointless because if the foundational concepts profit and income are ill-defined the models are only good for the wastebasket. This applies all MMT models.<br /><br />MMT policy guidance lacks sound scientific foundations.<br /><br />Egmont Kakarot-HandtkeAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-53775339457457287462018-01-09T06:56:31.628-05:002018-01-09T06:56:31.628-05:00In case it was not obvious, I was writing about th...In case it was not obvious, I was writing about the English conventions in 2018, not 1728. If you wish to hop into your time machine, your English might fit in much better. However, most non-pseuds use “formal” (or something similar) instead of “axiomatic”. Look, if you want to sound like a bad translation of a 19th century continental European, be my guest. In any event, I cannot see how a “definition” (of profits) turns into an “axiom.” I’m trained as a mathematician, not a “scientist,” and your writing style is mangling *modern* mathematical conventions.<br /><br />Hoever, you raised a good point earlier - why doesn’t MMT *formalise* its arguments? Since I am not the person to write such a textbook — it would be a textbook of “Romanchian economics” (a frightful concept) — not necessarily MMT. There is one in the works for late 2018.<br /><br />But even then, you would be disappointed. One could summarise a significant portion of heteredox macro as — mathematical models of the macroeconomy fail. Why write out a formal description that you know does not work? <br /><br />But for our purposes, MMT uses standard national accounting, which is a formal framework developed earlier, and is still under revision. National accounting provides an internally-consistent set of definitions for defining aggregates. <br /><br />The closest you can find to a mathematical description is tge SFC modelling literature, which MMT inheits from. A purist would argue that the treatment in Godley and Lavoie is not formal enough. However, any competent mathematician can fill in the missing formalism. (I have strong enough credentials in applied mathematics to make that claim, thank you very much.) <br /><br />However, the mathematical treatment is too straightforward, and does not capture the notion of model uncertainty. I did some analysis a few months ago that might better capture the notion of model uncertainty.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.com