Keynesian Economics as a Religion

Macroeconomics, the Great Mirage

 

In various regards, macroeconomics is more like a religion than a science. First of all, it started from “abstract speculation” (J.S. Mill) or a voice in the wilderness , so to speak (1936 AC  = 1 AK). Then, a few powerful disciples gave it some substance. For example, John R. Hicks suggested a framework called “the IS-LM model” in speaking for the voice (2 AK). Paul Samuelson wrote a gospel titled Economics (13 AK). So many other Nobel laurates, including Joseph, Peter, and another Paul, “supplied” greater details, while citing and propagating one another’s New Statements, right or wrong . Of course, full-fledged support has somehow been provided by Pax Politicana.

             Notwithstanding, there is no scientific foundations, micro or macro, whatsoever of Keynesian economics. J.M. Keynes himself was not a scholar, much less a scientist: he was an economic commentator or a policy designer by profession. His so-called theories are not much more than news commentaries. Particularly, he had a style, genuinely journalistic and purely conjectural: for instance, “In the long run, we are all dead”; “in so many words,” “unanimous,” "animal spirits," beauty contest," and the like;  “liquidity preference,” "mulitiplier effect ," and so on. He almost called his opponents “intellectually dishonest.” Just to add,  a scholar would have named his signature idea as “liquidity avoidance.”

             His tip of the liquidity preference was M = L(i). This does not mean much if you do not specify the function L. His disciples John, Paul and others added some flesh to the tip and suggested M = k∙(P∙Y). Unfortunately, the so-called “quantity theory of money” is no theory at all because it makes absolutely no sense. Before anything else, the equation suffers from dimension aberration: M is a stock and P∙Y is a flow; then, k must be a variable but Keynes’s disciples call it a “constant,” instead.

             By definition, a stock is an accumulation while a flow is the speed of accumulation. Thus, the stock depends on the time duration of accumulation. Suppose you are in a car. Your driving distance, a stock, must be determined jointly by “miles per hour,” aka speed, and by hours of driving, or time duration. To paraphrase the liquidity preference “theory,” Y is your earnings per year, or the speed per annum of earnings, while M is accumulation of your assets, or “preferred liquidity” if you will. In one year k is the unity (1), in two years k is two (2), in three year k is three (3), and you keep going. Your conclusion: k surely is a variable.

             If you are further interested in fallacious “macroeconomic foundations of Keynesian economics,” you may refer to the attachment.

 

Attatchment:

Dimension Aberration, Reverse Causation and

Certain Manifest Errors in Macroeconomics

 

YDA 02 Fallacious Macro Models.pdf

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