Sunday, July 16, 2017

Barkley Rosser — "Those Of You Who Are Old Enough Will Really Get This"

More for the record. Larry Summers and his uncles, Kenneth Arrow and Paul Samuelson, and the Cambridge capital debates and Joan Robinson.

"Those Of You Who Are Old Enough Will Really Get This"
J. Barkley Rosser | Professor of Economics and Business Administration James Madison University

1 comment:

AXEC / E.K-H said...

You are fired!
Comment on Barkley Rosser on ‘Those Of You Who Are Old Enough Will Really Get This’

(i) Barkley Rosser reports “I am adding yet more to my most recent two posts where I am complaining about this essentially side remark that Larry Summers made in his commemoration of his late uncle, Kenneth Arrow, in which he reports that at the party celebrating Arrow’s Nobel Prize in 1972, Summers’s other uncle, the late Paul Samuelson was supposedly ‘discussing how stupid Joan Robinson was’.”

The geniality of Joan Robinson is engraved in everlasting granite with this verdict about economics: “Scrap the lot and start again.”

To her fellow economists she referred as ‘throng of superfluous economists’. Indeed, this is their track record. PROVABLE false
• profit theory, since 200+ years,
• Walrasian microfoundations (including equilibrium), since 140+ years,
• Keynesian macrofoundations (including I=S, IS-LM), since 80+ years.

ALL theories/models that contain profit, maximization-and-equilibrium, or I=S/IS-LM are a priori false and this is more than 90 percent of the content of peer-reviewed economic quality journals and 100 percent of textbooks of renowned authors since 1947.

The throng of superfluous economists has not realized that the core of economics ― profit theory ― is false since Adam Smith.

(ii) Most famous example: Keynes.

This is the piece of evidence from the General Theory: “Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment.” (p. 63)

This two-liner is conceptually and logically defective because Keynes did not come to grips with profit.

“His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Because profit is ill-defined the whole theoretical superstructure of Keynesianism is false. This holds also for Walrasianism, Marxianism, Austrianism.

(iii) All errors and misinterpretations are eliminated by turning to mathematical formalism and graphical representation.

(a) National accounts, pure consumption economy, two sectors, initial period C=Yw, consumption expenditures = wage income

(b) National accounts, dissaving C > Yw, consumption expenditures greater than wage income, profit Qm = dissaving -Sm (with Qm≡C-Yw, Sm≡Yw-C, Qm+Sm=0 or Qm=-Sm)

(c) National accounts, saving C < Yw, consumption expenditures less than wage income, loss -Qm = saving Sm

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.

(iv) From the accounting graphics it is immediately obvious that Keynes’s foundational identity “Income = value of output” is false. This seemingly commonsensical identity is the biggest methodological blunder in all of economics because it led ― among other errors/mistakes ― to the treatment of profit as income of capital.

Because the profit theory is false since Adam Smith ― “... one of the most convoluted and muddled areas in economic theory: the theory of profit” (Mirowski) ― economics became the failed science that it is today.

(v) The scientific incompetence of the representative economist is documented by the fact that he cannot tell the difference between profit and income until this very day. The ‘throng of superfluous economists’ has NO idea of the foundational concepts of their subject matter. From the freshman to the Nobel Laureate it is just proto-scientific blather.

Joan Robinson realized this and told the world. Now it is time to get rid of these folks.

Egmont Kakarot-Handtke