Thanks for posting link to this very interesting paper.

]]>«Keynes’s understanding that the elimination of unemployment is not simply a matter of “getting

prices right” can – perhaps surprisingly – be supported by consideration of what we may call

“Walrasian macroeconomics”. The point has been made by Michio Morishima, the distinguished

Japanese economist, that, in a Walrasian-type macroeconomic model, more than flexibility of

prices is required to guarantee full employment. Even if prices are fully flexible, that may not be

enough to ensure that the system will naturally tend to equilibrium at full employment. His

argument is concerned not with the stability of equilibrium (whether the system if upset will

return to equilibrium), but with a question not normally raised – the existence of equilibrium (the

existence of a set of values at which all markets in the system can be simultaneously in

equilibrium). Let us examine first of all the characteristics of a “Walrasian macro model” and

then turn to Morishima’s (rather neglected) thesis.»

* https://www.jstor.org/stable/10.13169/worlrevipoliecon.8.4.0480

]]>blog topic

]]>Comment on David Glasner on ‘Jack Schwartz on the Weaknesses of the Mathematical Mind’

David Glasner quotes Jack Schwartz approvingly: “In a psychological description of the computer intelligence, three related adjectives push themselves forward: single-mindedness, literal-mindedness, simple-mindedness. Recognizing this, we should at the same time recognize that this single-mindedness, literal-mindedness, simple-mindedness also characterizes theoretical mathematics, though to a lesser extent.”

This worn-off cliche of the small-minded mathematician is contrasted with the flamboyant artistic scientist: “Part of what goes into the making of a good scientist is a kind of artistic feeling for how to adjust or interpret a mathematical model to take into account what the bare mathematics cannot describe in a manageable way.”

This echoes Keynes’ hallucinatory self-description of the master-economist: “The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.”

Never has scientific incompetence advertised itself better. Fact is that Keynes was too stupid for the elementary algebra that underlies macroeconomics.#1

Keynes ― the trained mathematician ― stated in his General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This is provably false. The mathematically correct relationship reads Q=I−S with Q as macroeconomic profit.#2, #3

Let this sink in: the master-economist Keynes had NO idea of profit “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.) Now it holds: when the foundational concepts are false the whole analytical superstructure is false. In other words, Keynes’ General Theory is scientifically worthless.#4

That is bad enough but it gets worse: After-Keynesians did NOT spot Keynes’ blunder to this day. For example, Paul Krugman still applies IS-LM. So, not only Keynes but Post- and Anti-Keynesians alike have been too stupid for the elementary algebra that underlies macroeconomics.

Economics (Walrasian, Keynesian, Marxian, Austrian) is mathematically flawed. As Georgescu-Roegen put it: “It is difficult to contemplate the evolution of the economic science over the last hundred years without reaching the conclusion that its mathematization was a rather hurried job.” This means that economic policy guidance NEVER had valid scientific foundations. Note that the fault lies NOT with mathematics but with economists. Their proven mathematical incompetence notwithstanding, the master-economists award themselves the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.#5

Egmont Kakarot-Handtke

#1 Economics, math, pluralism, and corruption

https://axecorg.blogspot.com/2019/09/economics-math-pluralism-and-corruption.html

#2 How Keynes got macro wrong and Allais got it right

https://axecorg.blogspot.com/2016/09/how-keynes-got-macro-wrong-and-allais.html

#3 Wikimedia AXEC143 Macroeconomic Profit Law

#4 For details of the big picture see cross-references Keynesianism

https://axecorg.blogspot.com/2016/09/keynesianism-cross-references.html

#5 Economics: The greatest scientific hoax in modern times

https://axecorg.blogspot.com/2019/05/economics-greatest-scientific-hoax-in.html

The hydrogen atom example strikes me as a bit ingenuous, in that physicists merely adopted a mathematical framework to describe an interpretation of how subatomic particles interact. To be sure, there are different models, some better than others.

A different example that I think reflects our modern reality better is how dynamic programming and optimal control theory were developed in part to aid in solving the problem of getting rockets off of the ground and into orbit. The foundations for these areas were already laid down, but were refined based on current practical need. And these same models were found to have other uses, such as the workhouse DSGE model, and in biophysics, to name two.

Schwartz is most certainly correct to acknowledge that theoretical frameworks, mathematical or not, have strict limitations and cannot describe anything that lies outside the domain created by the assumptions (or axioms). A failure to understand these limitations, or do attempt to circumvent or ignore the assumptions will predictably result in disaster.

It is not so much that mathematics is simple-minded or literal-minded, but rather that we fail to or choose not to understand how to interpret the meaning of what we have written down, and to question our choices regarding the construction of the framework.

]]>Sri Thiruvadanthai refers to the Levy/Kalecki equation. This is misleading. See

The Levy/Kalecki Profit Equation is false

https://axecorg.blogspot.com/2019/06/the-levykalecki-profit-equation-is-false.html

Egmont Kakarot-Handtke

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