Must-read.
Bill lays it out and lays it on. Not about MMT. but rather heavy criticism of the economics profession and its defense of capital (ownership) against workers (ordinary people).
Bill doesn't use the term but its about economic rent and rent extraction through power.
Bill Mitchell – billy blogWhy economists kept getting the policies right!
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
15 comments:
“Which, by the way left me heaps of time to read real stuff – philosophy, politics, sociology, psychology, history, anthropology,“
LOL those disciplines aren’t real... they are typically taught via liberal art methodology...
Bill Mitchell says that economists are fake scientists ― true, but MMTers are NOT different
Comment on Bill Mitchell on ‘Why economists kept getting the policies right!’
Bill Mitchell gives an inside report of academic economics: “But if you have been inside the profession all your life, as I have, then you get a pretty good feel for what is going on. And it is not what the rest of you think.”
“Economists are not fellow travellers ‘on a mission from god to do god’s work’ …” … “They are part of the capitalist establishment designed to safeguard capital and its profits and keep the working class in its place so that challenges are confined to disputes about wages and conditions around the margin, but, never question the basis of the system ― the ownership of the material means of production and the capacity of those unequal ownership relations to extract surplus value as profits from forcing workers to work longer than they have to to produce their (social) subsistence.” … “the development of neoclassical economics, from which the modern day Monetarism and New Keynesian economics emerged was no accident ― no scientific event.”
True, since the founding fathers, economists were not so much scientists as political agenda pushers: “Economists were hired by industrialists to come up with a body of work that made capitalism appear fair. It was in the second half of the C19th when Marxist thought was spreading among workers and the intellectual class and manifesting into social and political instability as evidenced by the ― Revolutions of 1848 ― and later, the ― 1871 Paris Commune ― among other uprisings.”
And he concludes: “Economists were part of that conspiracy to obfuscate the inner workings of capitalism. And it has been that way ever since.”
Except …
“Me, I was an aberration. A black sheep. That got through this system because my mathematics and mathematical statistics was first-rate and I could jump their hoops with ease.”
And now it turns out that Bill Mitchell and the MMTers got it right: “The author notes how everyone is jumping on the big deficits bandwagon now and no-one is talking much about the public debt issue any more.”#1
This is true, MMT has now become official doctrine.#2, #3, #4
While Bill Mitchell asserts that economists have always been “… part of the capitalist establishment designed to safeguard capital and its profits …” he tries to make the impression that he and MMTers and genuine Progressives are different.
This is NOT the case.
The 3-sector macroeconomic Profit Law Q≡(G−T)+(I−S)+Yd implies Public Deficit = Private Profit. So, the MMT policy of deficit-spending/money-creation is a free lunch for the Oligarchy. Private financial wealth grows in lockstep with public debt. For public debt holds: #OligarchyOwnsIt and #WeThePeopleOwesIt. Public debt as interest cash cow produces perpetual income for the Oligarchy that is taxed from WeThePeople.#5
COV19 is a godsend for the Oligarchy: more deficit-spending/money-creation produces a profit explosion. Best of all, it can be propagandized as a benefit for WeThePeople. Fact is, though, that in real terms, WeThePeople pay for the economic relief package through stealth taxation.
If anything, Bill Mitchell/MMTers/Progressives are “part of the capitalist establishment”.#6, #7 Like the rest of economists from Adam Smith onward, economists are NOT on a “mission from god to do god’s work”. Economics is failed/fake science. Economists are NOT scientists but clowns and useful idiots in the political Circus Maximus. MMTers are NO exception.
Egmont Kakarot-Handtke
References
“Economists are NOT scientists but clowns “
That’s a figure of speech ... figurative language....
What is their deficiency in literal language?
Matt Franko
The deficiency of MMTers in literal language is that they are too stupid for the elementary algebra that underlies macroeconomics.
Proof of MMT's inconsistency
https://axecorg.blogspot.com/2021/03/occasional-tweets-210315-proof-of-mmts.html
Egmont Kakarot-Handtke
Bill is well trained in Mathematics....
Matt Franko
I said that MMTers (the social media trolls, the academics in general, and Bill Mitchell, in particular) are too stupid for the elementary algebra that underlies macroeconomics and that the MMT sectoral balances equation is provably false. Every MMTer can check the proof.#1-#4
You argue: “Bill is well trained in Mathematics....”
If so, he knows that science is about material/formal consistency and proof. So, he should be able to understand the proof of the inconsistency of the foundational MMT sectoral balances equation. And, as an academic, he should know that science defines itself by the high standards of scientific ethics.
According to these standards, he is obliged to check the proof of the inconsistency of MMT as soon as it comes to his notice and to either point to the exact location where the proof is faulty or to openly confirm the refutation of MMT so that others are no longer misled.
Neither Bill Mitchell nor any other MMTers have done the right thing to this day. MMTers have disqualified themselves and therefore have to be expelled with shame and disgrace from the scientific community.#5
Egmont Kakarot-Handtke
#1 Wikipedia, economics, scientific knowledge, or political agenda pushing? ⇒ Section Provably False/MMT
https://axecorg.blogspot.com/2020/06/wikipedia-economics-scientific.html
#2 Proving Bill Mitchell wrong ― burying MMT for good
https://axecorg.blogspot.com/2021/02/proving-bill-mitchell-wrong-burying-mmt.html
#3 Modern Moronomic Theory
https://axecorg.blogspot.com/2015/08/modern-moronomic-theory.html
#4 Proof of MMT's inconsistency
https://axecorg.blogspot.com/2021/03/occasional-tweets-210315-proof-of-mmts.html
#5 Wikimedia, Fire Economists
https://commons.wikimedia.org/wiki/File:AXEC144c.png
Typo correction: Neither Bill Mitchell nor any other MMTer has done ...
Sorry!
Bill has never addressed your critique on his blog?
Or did he ban you?
Peter Pan
You ask: “Bill has never addressed your critique on his blog?”
Obviously, you still do not understand how economics works although Bill Mitchell has given you a clear description. Economics does not work according to the principles of science. And this is long known: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941)
Economists violate scientific standards from Adam Smith/Karl Marx onward and this is why Walrasianism, Keynesianism, Marxianism, Austrianism, and other long-refuted proto-scientific garbage is still around.#1 What we have is the pluralism of false theories.
Bill Mitchell knows this but claims that MMT is different. That is NOT the case. MMT is refuted but MMTers push it “as if nothing had happened”. Academic economics is politically corrupted and MMT is an integral part of it.#2
Egmont Kakarot-Handtke
#1 The history of economic thought is the history of scientific failure
https://axecorg.blogspot.com/2021/01/occasional-tweets-210109.html
#2 Political fraud and the silence of academia
https://axecorg.blogspot.com/2021/01/political-fraud-and-silence-of-academia.html
Bill should adhere to his declared standards.
"Bill has never addressed your critique on his blog?"
Egmonts profit law is correct, and MMT sectoral balance equation is wrong. One only need look at the way the stock markets behave throughout history depending on whether federal goverments run deficits or surpluses (longer term) and when taxes are higher than normal (April which leads to sell in May and go away) and it becomes obvious government spending feeds into property, and taxation (destruction of money) sucks it back out. The Clinton surplus led to the dot.com bust as it sucked money out of the system and private sector debt couldn't make up the difference.
Look at how much spending was done by government after the GFC, and then again after Covid. What did the stock markets do after? Money must flow into property for it has nowhere else to go other than be destroyed (taxes or paying down debt). If governments reduce spending, then only private sector debt expansion can make up the difference.
The process is quite obvious once you think about it. Government pays Joe Citizen $1000, Joe C spends it all at Walmart, Walmart use some of it for wages etc, the rest is profit (they distribute some, use some for fixed investments). Stock owners may spend some or reinvest their profits back into stocks. Workers from Walmart spend their wages at McDonalds, and the same thing happens. Workers from McDonalds spend their wages at Walmart and round and round we go. Each transaction some of the money spent is splintered off into property ownership which inflates it. Money is like metal filings and property is like magnets.
Egmonts profit law is the perfect equation that demonstrates this in action. Put the equation into a spreadsheet and then add government spending and watch how it flows into profits. Enter in some debt (-Sm) and watch too how that flows into profits. It can't go anywhere else.
@ Dean
Bond Economics, Primer: The Kalecki Profit Equation (Part I), Brian Romanchuk
Primer: The Kalecki Profit Equation (Part II)
I have 3 problems not addressed in these papers:
1st - It assumes capitalists do not spend; clearly they do (yachts, jewelry etc). Where does their ability "in aggregate" to consume come from (what increases the total stock of money of capitalists if it is not from other capitalists?)
2nd - It assumes cash on hand to begin with. From the business perspective as a whole, when it makes its very first investment, where does the cash come from to purchase those investments? If credit is sourced from within the business sector itself, where is the increase in the monetary wealth of the business sector as a whole when that credit is paid back?
3rd - Obviously there is an increase in real wealth, i.e. investments create fixed capital (and of course increased productivity), which is viewed as having value to capitalists on their balance sheets; but if capital needed to be liquidated, who is buying it? If fixed capital is being bought by other businesses (including scrap merchants) then it does not increase the monetary wealth of the business sector as a whole. If they sell it to government or households only then does their monetary wealth increase because the other sectors dissaved in money terms.
Investments only create profits because of a time lag between borrowing and repaying, so provided net investments are always increasing then the inevitable completion of the investment cycle is postponed. And granted, many recessions are preceded by a drop in net investments (including leading up to Feb 2020). But let us not confuse where the real source of this wealth "by investing in fixed capital" is coming from.
If you look at the national statistics for workers compensation of GDP for most developed nations, there has been a steady decline for 50 years, some at levels lower than just after WW2.
Whilst developed nations produce far in excess of everyone's needs (the average worker produces around 5 times in GDP to what a full-time welfare recipient receives), the ability to access this production is steadily in decline. The claims of owners of the means of production simply increases at the expense of workers.
If people claim we are the wealthiest we have ever been in history, then why are we having discussions and debates? Because there is a distribution issue, and this stems from a clear lack of understanding of what profits really are. People are trying to fix this distribution issue without knowing what is causing it. So the middle class assume property ownership is the answer, without realizing they are contributing to the problem.
Dean
Answers/continuing links to your 3 questions.
1 Capitalists' consumption
Profit follows from the Profit Law. It can be distributed or not. So one gets distributed profit Yd as a part of total income Y=Yw+Yd. Distributed profit, in turn, splits into consumption expenditures and saving of “capitalists”. See section 7 of
Essentials of Constructive Heterodoxy: Profit
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575110
2 Cash
You assume “cash on hand to begin with”. In a fiat money system, things start with zero cash. Money is created ex nihilo by the central bank for the financing of the wage bill.
How money emerges out of nothing ― the functional account
https://axecorg.blogspot.com/2017/07/how-money-emerges-out-of-nothing.html
3 Investments
You say “investments create fixed capital” and “Investments only create profits because of a time lag between borrowing and repaying”. For the exact relationship of investment expenditures and profits see
Squaring the Investment Cycle
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1911796
Egmont Kakarot-Handtke
Finally - the kind of discussion that should be taking place on an economics blog.
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