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The CCC ― a monument of economists’ utter scientific incompetence Comment on Robert Vienneau on ‘Some Experts On The Cambridge Capital Controversy’*
David Ricardo defined economics back in 1821: “To determine the laws which regulate this distribution [between rent, profit, wages], is the principal problem in Political Economy.” (Principles, p. 5)
This problem has NOT been solved to this day. Economics is proto-scientific garbage since the founding fathers. Or, as Steve Keen summarized with regard to the Cambridge Capital Controversy: “Today economic theory continues to use exactly the same concepts which Sraffa’s critique showed to be completely invalid … There is no better sign of the intellectual bankruptcy of economics than this.”
The intellectual bankruptcy is all-embracing. The four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.
Because profit theory has always been false, distribution theory has always been false. There is NO need to elaborate again and again the defects of the diverse approaches. This is a senseless exercise. As Joan Robinson put it “Scrap the lot and start again.” In other words, what is needed is a paradigm shift. More specifically, economics has to move from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.#1, #2, #3, #4, #5
This is the correct core of macroeconomic premises: (A0) The most elementary systemic 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.
The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. it holds X=O. The monetary saving/dissaving of the household sector is defined as S≡Yw−C. The monetary profit/loss of the business sector is defined as Q≡C−Yw. Ergo Q+S=0 or Q=−S.
The balances add up to zero. The mirror image of household sector saving S is business sector loss −Q. The mirror image of household sector dissaving (-S) is business sector profit Q. Q=−S is the elementary version of the macroeconomic Profit Law.
The Profit Law implies: (1) the business sector’s revenues can only be greater than costs if, in the simplest of all possible cases, consumption expenditures C are greater than wage income Yw, (2) macroeconomic profit/loss Q does neither depend upon the agents’ personal qualities, motives, their ideas about what profit is, nor on profit-maximizing behavior, nor on the quantity of capital employed,#6 (3) in order that profit comes into existence for the first time in the elementary production-consumption economy, the household sector must run a deficit at least in one period, (4) this presupposes the existence of a credit-creating entity, (5) profit/loss is, in the most elementary case, determined by the increase/decrease of the household sector’s debt, (6) profit/loss Q is a factor-independent residual and qualitatively different from wage income Yw, (7) it is an elementary mistake to maintain that total income is the sum of wages and profits, (8) profit is NOT income, i.e. a flow, but a balance, i.e. the difference of flows, (9) distributed profit Yd is income and adds up with wage income Yw to total income. #7, #8, #9, #10
Bottom line: Profit theory and by consequence distribution theory is false from Adam Smith onward to the Cambridge Capital Controversy and beyond. Robert Vienneau has not realized anything and prolongs the worst performance in the history of modern science by recycling BS as expert knowledge.#11, #12
1 comment:
The CCC ― a monument of economists’ utter scientific incompetence
Comment on Robert Vienneau on ‘Some Experts On The Cambridge Capital Controversy’*
David Ricardo defined economics back in 1821: “To determine the laws which regulate this distribution [between rent, profit, wages], is the principal problem in Political Economy.” (Principles, p. 5)
This problem has NOT been solved to this day. Economics is proto-scientific garbage since the founding fathers. Or, as Steve Keen summarized with regard to the Cambridge Capital Controversy: “Today economic theory continues to use exactly the same concepts which Sraffa’s critique showed to be completely invalid … There is no better sign of the intellectual bankruptcy of economics than this.”
The intellectual bankruptcy is all-embracing. The four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational concept of the subject matter ― profit ― wrong.
Because profit theory has always been false, distribution theory has always been false. There is NO need to elaborate again and again the defects of the diverse approaches. This is a senseless exercise. As Joan Robinson put it “Scrap the lot and start again.” In other words, what is needed is a paradigm shift. More specifically, economics has to move from false Walrasian microfoundations and false Keynesian macrofoundations to true macrofoundations.#1, #2, #3, #4, #5
This is the correct core of macroeconomic premises: (A0) The most elementary systemic 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.
The focus is here on the nominal/monetary balances. For the time being, real balances are excluded, i.e. it holds X=O. The monetary saving/dissaving of the household sector is defined as S≡Yw−C. The monetary profit/loss of the business sector is defined as Q≡C−Yw. Ergo Q+S=0 or Q=−S.
The balances add up to zero. The mirror image of household sector saving S is business sector loss −Q. The mirror image of household sector dissaving (-S) is business sector profit Q. Q=−S is the elementary version of the macroeconomic Profit Law.
The Profit Law implies: (1) the business sector’s revenues can only be greater than costs if, in the simplest of all possible cases, consumption expenditures C are greater than wage income Yw, (2) macroeconomic profit/loss Q does neither depend upon the agents’ personal qualities, motives, their ideas about what profit is, nor on profit-maximizing behavior, nor on the quantity of capital employed,#6 (3) in order that profit comes into existence for the first time in the elementary production-consumption economy, the household sector must run a deficit at least in one period, (4) this presupposes the existence of a credit-creating entity, (5) profit/loss is, in the most elementary case, determined by the increase/decrease of the household sector’s debt, (6) profit/loss Q is a factor-independent residual and qualitatively different from wage income Yw, (7) it is an elementary mistake to maintain that total income is the sum of wages and profits, (8) profit is NOT income, i.e. a flow, but a balance, i.e. the difference of flows, (9) distributed profit Yd is income and adds up with wage income Yw to total income. #7, #8, #9, #10
Bottom line: Profit theory and by consequence distribution theory is false from Adam Smith onward to the Cambridge Capital Controversy and beyond. Robert Vienneau has not realized anything and prolongs the worst performance in the history of modern science by recycling BS as expert knowledge.#11, #12
Egmont Kakarot-Handtke
References
https://axecorg.blogspot.com/2019/04/the-ccc-monument-of-economists-utter.html
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