An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
You say: “Within modern conventional economics, there is an aversion to discussing the division of national income. (Back when economics was ‘political economy,’ this was not the case.) Standard mainstream models assume that wages and prices are determined by marginal considerations, and so the ratio between wages and prices is fixed by the shape of the production function. Conversely, post-Keynesian economics is entirely based on wage and profit shares. Although I did not discuss pricing in the articles, I would refer the reader back to my (three part) primer on the Kalecki Profit Equation.”
There are three lethal facts to note with regard to your approach:
• The profit theory is false since Adam Smith and because of this, distribution theory is false, too. This includes Post-Keynesianism.#1, #2, #3, #4
• Your ‘very simple economic model, in which there is just a business sector and a household sector’ is a good start except for the fact that ‘Profits are equal to the dividends paid’.#5
• Because profit is ill-defined, income is ill-defined, and by consequence, saving is ill-defined. Monetary profit, to begin with, is NOT a flow of income like wage income but the difference of flows. Distributed profit is income but profit is NOT income. Distributed profit and profit is NOT the same thing. By consequence, total income is NOT the sum of wages and profits, which in turn means that there is NO “profit share of income” and by consequence no “wage share of income”. #6
This means that the sequel to your inflation post is also vacuous blather because all is based on false premises. Your profit theory is provably false.#7 Therefore, your distribution and inflation theory is false. What you still have to realize is that Orthodoxy is dead and traditional Heterodoxy including Post-Keynesianism is dead and that the necessary paradigm shift means to leave this heap of proto-scientific garbage behind and to move on to Constructive Heterodoxy.#8
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory? https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741
#2 Ricardo, too, got profit theory wrong. Sad! https://axecorg.blogspot.com/2018/02/ricardo-too-got-profit-theory-wrong-sad.html
#3 The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489792
#4 Why Post Keynesianism Is Not Yet a Science https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1966438
#5 The Emergence of Profit and Interest in the Monetary Circuit https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1973952
#6 There is NO such thing as a “labor share of income” https://axecorg.blogspot.com/2018/09/there-is-no-such-thing-as-labor-share.html
#7 Truth by definition? The Profit Theory is axiomatically false for 200+ years https://axecorg.blogspot.com/2018/07/truth-by-definition-profit-theory-is.html
#8 For details see cross-references Constructive Heterodoxy http://axecorg.blogspot.com/2018/09/essentials-of-constructive-heterodoxy.html
You say: “Fine. When you can convince the accounting profession that paying dividends is an expense, I’ll re-write my text. Deal?”
I wonder, what makes you think that my mission is to convince economists in general and you in particular. The representative economists is a failed/fake scientist and has to be expelled from the sciences as fast as possible. His final resting place is the farthest corner of the Flat-Earth-Cemetery.
My mission is NOT to convince you of anything but to prove that you are too stupid for the elementary mathematics that underlies profit- and distribution theory.
For the correct treatment of distributed profit in National Accounting see
The Common Error of Common Sense: An Essential Rectification of the Accounting Approach
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2124415 For the correct treatment of profit and distributed profit in distribution theory see
Income Distribution, Profit, and Real Shares https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2012793
Think the link is missing http://www.bondeconomics.com/2018/09/inflation-and-income-shares.html?m=1. :)
ReplyDeleteBrian Romanchuk
ReplyDeleteYou say: “Within modern conventional economics, there is an aversion to discussing the division of national income. (Back when economics was ‘political economy,’ this was not the case.) Standard mainstream models assume that wages and prices are determined by marginal considerations, and so the ratio between wages and prices is fixed by the shape of the production function. Conversely, post-Keynesian economics is entirely based on wage and profit shares. Although I did not discuss pricing in the articles, I would refer the reader back to my (three part) primer on the Kalecki Profit Equation.”
There are three lethal facts to note with regard to your approach:
• The profit theory is false since Adam Smith and because of this, distribution theory is false, too. This includes Post-Keynesianism.#1, #2, #3, #4
• Your ‘very simple economic model, in which there is just a business sector and a household sector’ is a good start except for the fact that ‘Profits are equal to the dividends paid’.#5
• Because profit is ill-defined, income is ill-defined, and by consequence, saving is ill-defined. Monetary profit, to begin with, is NOT a flow of income like wage income but the difference of flows. Distributed profit is income but profit is NOT income. Distributed profit and profit is NOT the same thing. By consequence, total income is NOT the sum of wages and profits, which in turn means that there is NO “profit share of income” and by consequence no “wage share of income”. #6
This means that the sequel to your inflation post is also vacuous blather because all is based on false premises. Your profit theory is provably false.#7 Therefore, your distribution and inflation theory is false. What you still have to realize is that Orthodoxy is dead and traditional Heterodoxy including Post-Keynesianism is dead and that the necessary paradigm shift means to leave this heap of proto-scientific garbage behind and to move on to Constructive Heterodoxy.#8
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741
#2 Ricardo, too, got profit theory wrong. Sad!
https://axecorg.blogspot.com/2018/02/ricardo-too-got-profit-theory-wrong-sad.html
#3 The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489792
#4 Why Post Keynesianism Is Not Yet a Science
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1966438
#5 The Emergence of Profit and Interest in the Monetary Circuit
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1973952
#6 There is NO such thing as a “labor share of income”
https://axecorg.blogspot.com/2018/09/there-is-no-such-thing-as-labor-share.html
#7 Truth by definition? The Profit Theory is axiomatically false for 200+ years
https://axecorg.blogspot.com/2018/07/truth-by-definition-profit-theory-is.html
#8 For details see cross-references Constructive Heterodoxy
http://axecorg.blogspot.com/2018/09/essentials-of-constructive-heterodoxy.html
Brian Romanchuk
ReplyDeleteYou say: “Fine. When you can convince the accounting profession that paying dividends is an expense, I’ll re-write my text. Deal?”
I wonder, what makes you think that my mission is to convince economists in general and you in particular. The representative economists is a failed/fake scientist and has to be expelled from the sciences as fast as possible. His final resting place is the farthest corner of the Flat-Earth-Cemetery.
My mission is NOT to convince you of anything but to prove that you are too stupid for the elementary mathematics that underlies profit- and distribution theory.
For the correct treatment of distributed profit in National Accounting see
The Common Error of Common Sense: An Essential Rectification of the Accounting Approach
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2124415
For the correct treatment of profit and distributed profit in distribution theory see
Income Distribution, Profit, and Real Shares
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2012793
Quod erat demonstrandum.
Egmont Kakarot-Handtke
“The representative economists is a failed/fake scientist and has to be expelled from the sciences as fast as possible.“
ReplyDeleteThey earn BAs... so they aren’t in Sciences to begin with...