Tuesday, May 30, 2017

Lars P. Syll — What is Post Keynesian Economics?

Paul Davidson's view.

Lars P. Syll’s Blog
What is Post Keynesian Economics?
Lars P. Syll | Professor, Malmo University


AXEC / E.K-H said...

Post Keynesianism, science, and universal idiocy
Comment on Lars Syll on ‘What is Post Keynesian Economics?’

There is science and non-science. The former is the realm where the criterion true/false is applied and nothing else, the latter is the vast realm of what John Stuart Mill called universal idiocy (1879, p. 26).

True/false in turn has two inseperable aspects: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant, 1994, p. 31)

Logical consistency is methodologically secured by the axiomatic-deductive method. This method presupposes firm ground to start with or, as Aristotle put it: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” Without firm ground logic runs amok and thus contributes to universal idiocy. As Keynes aptly remarked: “… a remorseless logician can end up in Bedlam.” (Moggridge, 1976, p. 36). This, clearly, is NOT an argument against logic but against logic that lacks firm ground. Logical consistency is indispensable.

Refutation of a theory/model consists in the proof that it is either logically inconsistent or empirically inconsistent. Theories/models that take nonentities into the premises (angels, unicorns, Santa Claus, utility, equilibrium, etcetera) are a priori OUT of science. However, sometimes it is not immediately obvious whether a word denotes a nonentity or not, e.g. ether or phlogiston or extraterrestrials. Nonentities are the conversation topic of universal idiocy, entities are the subject matter of science.

Keynes was very clear about the all-decisive importance of sound premises: “For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises.” (1973, p. xxi)

Keynes left not the slightest doubt that Orthodoxy’s premises are false. Consequently, he left them behind and formulated the foundational syllogism of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment.” (1973, p. 63)

This elementary two-liner, though, is conceptually and logically defective because Keynes did not come to grips with profit and therefore “discarded the draft chapter dealing with it.” (Tómasson and Bezemer, 2010, p. 12). As a result, the whole Post Keynesian theoretical superstructure is false (2011).

See part 2

AXEC / E.K-H said...

Part 2

Because Keynes did not get the macrofoundations right the Keynesian Revolution ultimately failed. Just like his predecessors, Keynes had no idea of the fundamental concepts of economics, viz. profit and income. Yet, neither Keynesians nor Post Keynesians nor New Keynesians nor Anti-Keynesians ever spotted the logical inconsistency in Keynes’s macrofoundations. Not very profound thinkers these Walrasian, Keynesian, Marxian, Austrian folks.

As as result, model bricolage, discussion and debate drifted away into the realm of economic nonentities like general equilibrium, ergodicity, rational expectations or the vacuous pseudo-realism of uncertainty, animal spirits, or folk psychology/sociology/politics.

The axiomatic foundations of economics are provably false since more than 140 years in the case of Walrasianism and since more than 80 years in the case of Post Keynesianism. Because of this, economic policy advice of BOTH Walrasians AND Keynesians has no sound scientific foundation (2015). Like Walrasianism, Post Keynesianism is NOT an instantiation of science but an instantiation of universal idiocy.

Egmont Kakarot-Handtke

Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL http://ssrn.com/abstract=1966438.
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2624350.
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.
Mill, J. S. (1879). Utilitarianism. URL https://www.amazon.de/Utilitarianism-English-John-Stuart-Mill-ebook/dp/B00849BWNS/ref=sr_1_sc_1?ie=UTF8&qid=1470037046&sr=8-1-pell&keywords=Utiliarianism+Mill+Ebook.
Moggridge, D. E. (1976). Keynes. London, Basingstoke: Macmillan.
Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL http://mpra.ub.uni-muenchen.de/20557/.

Ralph Musgrave said...

What is post Keynsian economics? Good question. My answer is: “a set of ideas which boil down to nothing and promoted by time wasters who are trying to attract attention to themselves and keep themselves employed at the taxpayers’ expense”. Or perhaps I’m just feeling cynical this morning.

Anyway, great people throughout history, Jesus, Buddha, Keynes, etc, are always followed by a collection of nit pickers and time wasters (“theologians” in the case of religious leaders). As for Keynes, his ideas are very similar to MMT and have stood the test of time. I thus see no need for “post Keynsians”.

Bob said...

The Post Keynsians always ring twice.

Matt Franko said...

"What is PKE?"

Who cares?

MRW said...

Who cares? Indeed.

AXEC / E.K-H said...

Post Keynesianism, too, is proto-scientific rubbish
Comment on Lars Syll on ‘What is Post Keynesian Economics?’

This is the first rule of scientific research: “… before accepting the conclusions of any economist’s model as applicable to the real world, the careful student should always examine and be prepared to criticize the applicability of the fundamental postulates of the model; for, in the absence of any mistake in logic, the axioms of the model determine its conclusions.” (Davidson)

Hence: “To develop an economic theory applicable to a monetary economy, Keynes suggested rejecting three basic axioms of classical economics.” And: “The rejected axioms are the ergodic axiom, the gross-substitution axiom, and the neutral-money axiom.” (Davidson)

So far, Davidson is methodologically on firm ground. However, rejection is the easy part: “The problem is not just to say that something might be wrong, but to replace it by something ― and that is not so easy.” (Feynman) And here is the snag for Keynesians and Post Keynesian: “As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction.” (Nell)

Fact of the matter is that Keynes#1 and the Post Keynesians#2 failed at construction. In technical terms, what has to be done is to fully replace the false Walrasian microfoundations by true macrofoundations.

Davidson proposes to take the following propositions as axioms:
• money matters,
• rational calculations regarding the future are impossible,
• money contracts are a human institution developed to efficiently organize time-consuming production and exchange processes,
• unemployment, rather than full employment, is a common laissez-faire situation,
• the future is uncertain (nonergodic) and cannot be reliably predicted.

There is nothing to say against these propositions except that they cannot be taken as axioms.

Paul Davidson does not really understand what science and axiomatization is all about. The statement “the future is uncertain (nonergodic) and cannot be reliably predicted” is trivially true except for the fact that science, to begin with, does not predict the future.#3 When an apple fell on his head Newton did NOT predict when the next apple will fall but he formulated the general law of falling bodies.

In brief, the nonergodic axiom is not an axiom but an instance of moronic realism. The lethal blunder of Post Keynesians in general and Paul Davidson and Lars Syll in particular consists in the Fallacy of Insufficient Abstraction.

Keynes realized that the core of economics is the monetary theory of production. Accordingly, the macroeconomic axioms have to describe the most elementary configuration of the economy.#4

Imagine Archimedes sitting in the bathtub and trying to solve the problem of the gold content of Hiero’s crown and someone tells him the world is complex, uncertain, and unpredictable. Yes, Archimedes would have said, the only thing that is certain is that you are a moron. Eureka!

What scientists have come to understand is that historical uncertainty is compatible with eternal law/invariance. This holds for physics as well as economics. The problem of orthodox and heterodox economics is that neither approach has figured out how the monetary economy works and this has nothing to do with ergodicity but with stupidity.#5

Egmont Kakarot-Handtke

#1 See ‘Finalizing the Keynesian Revolution’

#2 See ‘Why Post Keynesianism Is Not Yet a Science’

#3 Science does NOT predict the future

#4 See ‘The problem with macro in two words’

#5 For details see cross-references

Penguin pop said...

"Who cares?"

It seems like more semantics games, and I've grown to hate time-wasting bullshit like that. I read blogs that are considered in that category, but ultimately the problem to solve is the same. Well said, Matt.

I see the same kind of self-congratulatory wankery in other fields too. Sociology, feminism, and others likely have some of the same problems too in this regard though I'd have to do more research on this.

AXEC / E.K-H said...

Penguin pop, MRW, Matt Franko, Bob

You ask: “Who cares?”
Have you never heard of covfefe?