Friday, December 22, 2017

Lars Syll — If only Trump had read Abba Lerner!


Keeper Lerner quote.

I would not limit it to Trump, but extend it to almost the entire economics profession and policy advisers. If they get it wrong, politicians are unlikely to get it right.

Lars Syll's Blog
If only Trump had read Abba Lerner!
Lars Syll

35 comments:

AXEC / E.K-H said...

Keynes, Lerner, MMT, Trump and exploding profit
Comment on Lars Syll’s ‘If only Trump had read Abba Lerner!’

Lars Syll quotes Abba Lerner approvingly: “The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce. If total spending is allowed to go above this there will be inflation, and if it is allowed to go below this there will be unemployment. The government can increase total spending by spending more itself or by reducing taxes so that taxpayers have more money left to spend. It can reduce total spending by spending less itself or by raising taxes so that taxpayers have less money left to spend …”

There are several errors/mistakes/blunders in this argument but the key point is that there is no such thing as the suggested symmetry of budget deficits and surpluses such that both cancel out over a reasonable time span. If this were the case nobody would worry about public deficits. But this, obviously, does not happen, public deficits increase incessantly and this, not deficits per se, makes people think that there must be something fundamentally wrong with the economy and with economics. And they are right.

Roughly speaking, the growing public debt has not eliminated unemployment and not increased inflation but has caused the explosion of profits and the huge changes in the distribution of income and financial wealth. No surprise, then, that Mr. Trump is an enthusiastic proponent of money printing and deficit spending.#1 More surprising is perhaps that the one-percenter Trump and the champions of the ninety-nine-percenters Keynes/Lerner/MMT are on the same page. The explanation of this weird coincidence is that Mr. Trump’s instinctive grasp of profit is better than that of economists.#2

In order to fully appreciate the proto-scientific state of both orthodox and heterodox economics, one needs the axiomatically correct theory. Because economics is a failed science it has to be reconstructed from scratch.

As the new analytical starting point, the pure production-consumption economy is defined with this set of macroeconomic axioms: (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.

Under the conditions of market clearing X=O and budget balancing C=Yw in each period the price is given by P=W/R (1), i.e. the market clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation see Wikimedia.#3

The price is determined by the wage rate, which takes the role of the nominal numéraire, and the productivity.

Monetary profit for the economy as a whole is defined as Qm≡C−Yw and monetary saving as Sm≡Yw−C. It always holds Qm+Sm=0, or Qm=−Sm, in other words, the business sector’s profit (loss) equals the household sector’s dissaving (saving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget balancing, total monetary profit is zero.

See part 2

AXEC / E.K-H said...

Part 2

In order that profit comes into the world, the household sector must run a deficit. This means, first of all, that profit for the economy as a whole has NOTHING to do with productivity, exploitation, risk-taking, innovation, monopoly power, etcetera. The familiar profit theories are nothing but an embarrassing Fallacy of Composition.

The axiomatically correct Profit Law is given for the general case as Qm=Yd+(I−Sm)+(G−T)+(X−M). Legend: Qm total monetary profit, Yd distributed profit, I investment expenditures, Sm monetary saving, G government expenditures, T taxes, X exports, M imports. Neither Walrasians, nor Keynesians, nor Marxians, nor Austrians got profit right until this very day. This is why economics is a failed science.

From the general macroeconomic Profit Law follows Qm=G−T if Yd, I, Sm, X, M = 0, that is, Public Deficit = Private Profit.

From false economic theory follows false economic policy. What Keynes,#4 Lerner, MMT,#5 and the other proponents of public (and private) deficit spending have in effect achieved ― whether intentionally or unintentionally does not matter ― is the profit explosion of the last decennia. It is absurd that scientifically incompetent economists see themselves, or at least present themselves, as friends of the people.#6 Nothing could be farther away from fact or truth.

Egmont Kakarot-Handtke

#1 Source Twitter
https://www.dropbox.com/s/yvvfjd1wdgsyelv/MMT%20Trump%20screenshot-twitter.com-2017-12-20-05-50-54-212.png?dl=0

#2 Austerity and the idiocy of political economists
https://axecorg.blogspot.de/2017/03/austerity-and-idiocy-of-political.html

#3 Wikimedia, Pure production-consumption economy
https://commons.wikimedia.org/wiki/File:AXEC31.png

#4 Keynesianism as ultimate profit machine
http://axecorg.blogspot.de/2015/07/keynesianism-as-ultimate-profit-machine.html

#5 MMT: The one deadly error/fraud of Warren Mosler
https://axecorg.blogspot.de/2017/11/mmt-one-deadly-errorfraud-of-warren.html

#6 MMT is ALWAYS a bad deal for the 99-percenters
https://axecorg.blogspot.de/2017/12/mmt-is-always-bad-deal-for-ninety-nine.html

Matt Franko said...

Where is Lars headline from a few years back “If only Obama had read Abba Lerner?” hmmmm

Political hack....

Matt Franko said...

“at the current prices would buy all the goods that it is possible to produce.”

If the underlying condition is surplus then you can never get to a point of “maximum possible to produce”...

This like the 3 guys watching a football game and the bowl of chips is empty and there is 2 five pound bags in the pantry and they are all 3 looking at each other saying “we are out of chips!”...

Tom Hickey said...

There is a long way to go before everyone in the world has reached the point where notional demand is satisfied. The limit on production is the available resources to meet that notional demand.

There's a lot of unmet notional demand and also lots of abundant idle resources to meet it, given that the real limitations are available resources and environmental constraints, chiefly negative externality.

In a market based system, turning notional demand into effective demand requires distribution of income sufficient to satisfy everyone

In a command (Planned) economy it just involves direction to produce sufficient goods to satisfy consumption desire.

This was difficult to impossible in an analog world, so the market was the most efficient solution, but so far it has not worked very well since the ability to produce has greatly outrun effective demand.

But in a digitized world, a command (planned) economy becomes possible.

Matt Franko said...

“The limit on production is the available resources”

The limit is knowledge.. the turd world are stupid and materially incompetent and unqualified... so they live in their shitholes hoping to emigrate to the west where we have more knowledge...

Tom Hickey said...

In a rational world, knowledge would be considered a free good, and technology would be shared.

Ideal society, that is, overwhelming dominance of positive factors and virtual elimination of negative ones, cannot be created overnight even with an advanced level of collective consciousness owing to physical limitations, but the ingredients are all all available now to do this fairly quickly.

The limitation is the level of collective consciousness and the will to act.

Matt Franko said...

“knowledge would be considered a free good”

The critical material systems knowledge to at least get the turd world out of the shitter is all open source...

Matt Franko said...

We should build the wall... then maybe necessity will have to take over...

Tom Hickey said...

As I said, this is a matter of collective consciousness. Cooperation needs to replace competition as a dominant cultural value, hence modality.

This shift requires expansion of awareness toward recognition and appreciation of greater universality.

On a rational (cognitive) level, it requires recognition of the superior rate of return on coordination over competition. Competition dominates the animal world. Humans became dominant owing to their ability to cooperate and coordinate. Superior human societies are based on the ability to coordinate.

On an affective level it involves expansion of love based on not only intellectual recognition of the unity of being but also feeling this unity of existence in the heart.

The alternative is conflict.

This requires a spiritual awakening.

Matt Franko said...

Tom how do explain this:

https://www.google.com/amp/amp.timeinc.net/fortune/2017/12/08/venezuela-hoed-shouders-fake-shampoo

The Venezuelans would rather buy cheap Chinese hacked knockoffs of the familiar US brands rather than make their own .... how f-ed up is that????

I made soap in 9th grade Chemistry class.... are they stupid or what!? Don’t even know 9th grade Chemistry... what a bunch of morons...

Tom Hickey said...

"The Venezuelans" are not homogenous. The country, like most countries, is divided into the haves and the have-nots. The haves, who are quite capable of addressing this, are against redistribution being imposed and they won't do it voluntarily either. Rather than cooperate and coordination, they would rather se the country plunged into chaos to give the US an excuse to step in. They tried the Brazilian gambit that removed Dilma, but it didn't not work in Venezuela. This is basically a civil war between the haves and have-nots.

The same thing is starting to happen in developed countries, the US, UK, and EZ. It's what brought Hitler and Mussolini to power. While it is not even an approximate comparison, nationalist populism is what brought Trump to power, too, and TPTB mount a soft coup that Trump has only avoided by compromising. In fact, some would say that the soft coup has been fairly successful in many ways unless Trump was just lying to his base, which is a distinct possibility.

Kaivey said...

Tom, that sounds like the Zeitgeist Movement by Peter Joseph. A really lovely guy, I so admire him. And he has an amazing intellect. His heart is in the right place, but I haven't put anything about him here yet as he is an Utopian. But that's one reason why I admire him so much, he goes on program after program with his utopian ideas and his passion never wanes. It's worth fighting for.

Greg said...

Matt

In the present system the "turd" world has to be in the shitter in order for the first world to get its ever increasing share. We can only have YUUUUGE success at the expense of losers.

We are playing a zero sum game..... unnecessarily

Matt Franko said...

Here this woman shoes you how to make soap:

https://youtu.be/qGfXLznJJY0


Just scale it up...

Matt Franko said...

Why don’t they just make some soap?

What is wrong with those people??? Why are they so stupid????

Matt Franko said...

Tom this is like Kaivey posted up this video while you were in transit of this hell hole in Indonesia that was over run with refuse... and the journo blamed it on “Capitalism!” ...

Meanwhile the moron Indonesia people have no bins and just throw the empty Hoed & Shoeders containers on the ground... LOL!!!

Then they look around and there is all of this garbage and go “wow how did that happen!?!?!”

It’s hard to understand how their incompetent brains work... maybe they all have mild mental retardation...

Matt Franko said...

According to Darwin, If we let these people in here it’s going to bring down our DNA ... we may soon be throwing stuff right on the ground and causing disease, etc... best build the wall now if that is the case...

Kaivey said...

Matt, if you read the article your will see that a mayor got elected who tried to clean up the city and put in place some sort of public service system, but the elite got him locked him in prison on charges that he insulted Islam. The US installed wing gangsters who run Indonesia have turned the country into one gigantic open mine to extract minerals and have also poured their pollution everywhere. But as Vltchek says, as far as the Western media is concerned, Indonesia is a capitalist success story. But who for, not the majority of people who live there.

Matt Franko said...

Kaivey, empty Hoed &Shouders bottles are not a byproduct of mining operations...

Matt Franko said...

Why doesn’t Puerto Rico have power restored by now:

http://www.newsweek.com/when-will-puerto-rico-have-power-half-island-still-without-electricity-after-716006


Too stupid to know how to do it?

Greg said...

Matt

Maybe the reason they dont have bins is that NO ONE comes to take away the bins!!

I was in India in 2012.....5 fucking years ago and one of the most populous southern territories was just beginning garbage collection service, GARBAGE COLLECTION was a new idea for them. This had nothing to do with the intelligence of the electorate it has to do with the interest of the ruling class to pay and provide the service.

Im quite certain the same issue is in place in Indonesia. Yes throwing it in a garbage can would keep the ground from looking cluttered....... for a while, until the can filled up and overflowed, then the second can, third can . Unless someone comes to pick it up and take it away for you you are only delaying the inevitable with a can.

And they probably drink out of bottles because thats the only source of safe drinking water, likely no decent water sanitization program if no garbage service. Your blaming the wrong people Matt, its the Rich in charge that are getting exactly what they want.

Calgacus said...

Well, the point is that one has to actually read Lerner to read Lerner. That is, think the thoughts he thought when he put them on paper. Lerner & the MMTers are indeed latter-day "worldly philosophers". And though it is not at all intrinsic to the concept of philosophy, the fact is that you have to read most good philosophy a few times to make head or tail of it. Some comments at Syll's blog & here are from those who clearly have some (re)reading to do.

Matt Franko said...

“Civil & criminal law are social institutions that manifest collective consciousness. “

Not to a libertarian...

Matt Franko said...

“Matt, its the Rich in charge”

The journo in the article wasn’t blaming the leadership he was blaming “Capitalism” which is a figure of speech...

Tom Hickey said...

“Civil & criminal law are social institutions that manifest collective consciousness. “

Not to a libertarian


As would say it is the difference between people that think scientifically and those that don't. What does thinking scientifically mean. Read Richard Feynman's "Cargo Cult Science." Rigor is applied to thinking to reduce the tendency to fool ourselves.

As I have said in the past, "collective consciousness" is a technical term in sociology that means the shared views that structure a society and is reflected in the culture (customs, traditions, values, etc.) and institutions (formal and informal arrangements regulating behaviors) of a society and their effects on group behavior in various areas, e.g., social, political and economic. For example, cultural custom was the basis for the later development of legal institutions, including positive law, adjudication of disputes, etc.

Collective consciousness is a foundational concept in sociology and one of the fundamental ideas that launched the discipline. See Collective Consciousness Defined: What It Is and How It Holds Society Together.

Collective consciousness has a somewhat different meaning in perennial wisdom, in that it is more amplified. A key principle of perennial wisdom is that knowledge is in accordance of the mode of the knower. This implies that knowledge is different in different states and stages in the development of awareness. One way to view this is based on the level of universality exhibited cognitively, affectively and behaviorally. This applies individually and collectively.

This is basic to the enduring question, what does it mean to live a good life in a good society, for example. The greater the capacity for universality, the greater the potential for harmony.

Tom Hickey said...

“Matt, its the Rich in charge”

The journo in the article wasn’t blaming the leadership he was blaming “Capitalism” which is a figure of speech...


Humans use abstraction to eliminate the need to spell everything out in exhaustive detail. It's how language works. When greater specificity is required, it is introduced as needed.

Capitalism means private ownership of the means of production. Those owing the means of production are "the rich." Duh.

Matt Franko said...

So Tom, you’re saying that if in a nation, the means of production is privately owned and somebody throws a food packaging on the ground that is caused by “capitalism” , but in another nation with public ownership of means of production somebody throws used packaging on the ground that is caused by what figure of speech?

Tom Hickey said...

In many countries, not the US, but in Europe, there are laws requiring firms that create externalities to fix them, like taking back packaging.

But basically, the unwritten rule of firms, whose objective is increasing shareholder value, is to capitalize the gains and socialize the externalities. They won't do it voluntarily and the only recourse is law and strict enforcement.

But in capitalist countries where class structure is based on wealth, the owners and the managers they hire to maximize owner share, the wealth control the political process and therefor the legislative process. The result is environmental degradation owing to negative externalities being socialized.

Not that people at large don't bear some responsibility in a representative republic. But firms argue that if they are required to deal with externalities, then cost will increase and this will be passed along to consumers via higher prices in the market. So people are reluctant to force change.

Is socializing externalities a result of "capitalism" as an economic system? I've presented a skeleton argument it is. What the argument it isn't?

AXEC / E.K-H said...

Matt Franko, Tom Hickey, Kaivey, Greg, Calgacus

Public Deficit = Private Profit. This is what the axiomatically correct Profit Law tells us. It is known that neither Keynes, nor Lerner, nor Mosler and the rest of MMTers ever understood how the profit- and price mechanism works. So, this bunch of retards who call themselves economists and propagate deficit-spending as the cure-all in effect pushes the agenda of the one-percenters and is responsible for the observable skewed distribution of income and wealth.

It is a nice try to obscure this fact with your silly blather about soap-making and Darwinism and Hitler and Mussolini and Venezuela and Zeitgeist and garbage collection and philosophy and spiritualism and so on towards the infinite horizon of endless stupidity.

If you really want to do something to promote the Good Society or Science take the remote control and never stop again looking sitcoms.

Egmont Kakarot-Handtke

Kaivey said...

Hi Egmont,

Are you able to write in a few paragraphs, either on your site or here, how your system will redistribute wealth to the poor and solve the problem of the One Percent who are likely to become multi trillionaires at some point because capitalism compounds wealth growth exponentially.

I've looked at your site and I think you need to write a lay man's explanation and if it takes more than a few paragraphs, that's fine.

Don't forget there's pollution and externalities to consider. Will companies without regulation just pollute?

You reject both Keynes and Hayek, that's interesting.

AXEC / E.K-H said...

Kaivey

You say: “Are you able to write in a few paragraphs, either on your site or here, how your system will redistribute wealth to the poor and solve the problem of the One Percent …” and “I’ve looked at your site and I think you need to write a lay man’s explanation and if it takes more than a few paragraphs, that’s fine.”

Either you cannot read or have not looked at my site. See
How the 99 percent can bring overall profit of the 1 percent legally down to zero in 2017
https://axecorg.blogspot.de/2017/01/how-99-percent-can-bring-overall-profit.html

Your post convinces me that it would indeed be best for folks like you to take the remote control and never stop again looking sitcoms.

Egmont Kakarot-Handtke

Kaivey said...

You say there is political economics which is fake and scientific Economics which is real. But I can't see how ethics and morality can be left out of economics. Economics can never be a hard science because it is psychology in a way, or sociology. For instance, theoretical economics might tell us the most efficient way to produce food, but factory farming is hell on earth for the animals, and GMO crops might produce more food now but with worse repercussions later on. Do we really want the most cold scientific economic system for mankind, which would produce the most inhumane working system ever?

AXEC / E.K-H said...

Kaivey

You ask rhetorically: “Do we really want the most cold scientific economic system for mankind, which would produce the most inhumane working system ever?”

No, for heaven's sake, “we” want Stephanie Kelton’s Job Guarantee Program which is composed of Care for the Environment, Care for the Community, Care for the People.#1

Is Stephanie Kelton a politician who wants our votes? No, she is an economist. That’s excellent because I don’t trust politicians. She certainly has a plan how to finance the program? Yes, she is an MMT economist and says that the program is paid for by a government deficit financed by central bank money creation.

What kind of economics is this? Has she never heard of the Profit Law, i.e. Public Deficit = Private Profit, or stealth taxation?#2

No, she shows a graphic that proves that a government sector deficit increases the net-financial wealth of the non-government sector and assures that we are all better off.#3

Genial.

Yes, except for the fact that the sectoral balances have been tampered with.#4 Government deficits increase the net-financial wealth of the business sector and not of We-the-people.#5

This cannot be, Stephanie Kelton cares for the people and not for the one-percenters.

Of course, she does, she is only an abysmally incompetent economist.

Perhaps, but she cares for the environment, the community, and the people, and you care only for science.

This is what an economist is supposed to do: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)

MMTers are not scientists but political agenda pushers.#6

Egmont Kakarot-Handtke

#1 Source, Twitter
https://www.dropbox.com/s/k28xsrct2nnws3o/MMT%20Job%20Guarantee%20Stephanie%20Kelton%20screenshot-twitter.com-2017-12-26-19-25-22-967.png?dl=0

#2 MMT, money printing, stealth taxation, and redistribution
http://axecorg.blogspot.de/2017/11/mmt-money-printing-stealth-taxation-and.html

#3 MMT: The one deadly error/fraud of Warren Mosler
http://axecorg.blogspot.de/2017/11/mmt-one-deadly-errorfraud-of-warren.html

#4 MMT and the magical profit disappearance
http://axecorg.blogspot.de/2017/08/mmt-and-magical-profit-disappearance.html

#5 The profit effect of a Job Guarantee
http://axecorg.blogspot.de/2017/09/the-profit-effect-of-job-guarantee.html

#6 MMT and the promotion of Wall Street socialism
http://axecorg.blogspot.de/2017/11/mmt-and-promotion-of-wall-street.html

ANC Driver said...

Kaivey:

"But I can't see how ethics and morality can be left out of economics. Economics can never be a hard science because it is psychology in a way, or sociology. For instance, theoretical economics might tell us the most efficient way to produce food, but factory farming is hell on earth for the animals, and GMO crops might produce more food now but with worse repercussions later on. Do we really want the most cold scientific economic system for mankind, which would produce the most inhumane working system ever?"

This does raise an important question. Just because we have been unable to 'see' up to this point how ethics and morality can be left out of economics, does not mean we can't see how in the future.

I'm going to suggest Kaivey that morals and ethics can be left out of economics by making a bold and unheard of suggestion...that those who want to live by morals and ethics can do so provided they willingly accept they are no longer permitted to treat or hold any resources (think human needs) as commodities in the sense that the law defines a commodity. This then means they are declaring their intent they have no desire to pursue wealth (i.e. a portfolio of financial or real assets which generate any form of passive income or capital appreciation).

This then splits society (i purposely say society and not the economy because it is only the sectors which treat resources as commodities which make up the economy) into five main groups or sectors instead of four..govt (the govt has the power to treat or not treat resources as commodities), foreign, business, portfolio households, and non-portfolio households. Non-portfolio households do not own anything, they simply act as trustees of the house they live in, the car they use, etc. They are supplied with everything a household needs to fulfill the law (i.e. shelter, food, water, clothing, education for the children etc) and to engage in any productive activity (tools etc provided that productive activity is not done for commercial reasons obviously), but instead of the funds to purchase these 'needs' coming from govt deficits (which only ends up in the hands of the portfolio households), or charity, they are supplied by the central bank with no interest charge, and as soon as the purchase(s) is made, an equivalent of money is extinguished out of the total money supply..i.e., the spending does not inflate the money supply nor does it require govt or household dissaving. This last part is absolutely imperative.

These non-portfolio households are in one sense like non-profits, but they extend to becoming non-profits 24/7 in the sense that the household itself is a non-profit (contrast this with a household which holds a job, has a bank account earning interest, a super fund, etc all of which are generating and contributing to profits and thus govt and household dissaving)

This suggestion is rich in consequences if we think of what these non-portfolio households can do. They can tackle all the problems you suggest without having the problem of having to compete over resources in order to tackle the problems. Govt will work with this households under time-tested principles of resource sharing under mutual trusts.

What's more, this model is not open to abuse for two reasons - first, as trustees they become subject to higher law forms (just as non-profits) are, which means they ARE morally and ethically bound, unlike our contract driven household and business sectors, and second, as Egmont has proven beyond all doubt in his works, monetary profits and 'efficiency of use of resources' have absolutely no connection whatsoever in the aggregate; the consequences of which are that the efficient use of resources (which would be most peoples argument against this suggestion) is more likely under the non-portfolio sector than under the business and portfolio sector.