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The Common Error of Common Sense: An Essential Rectification of the Accounting Approach

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  • Egmont Kakarot-Handtke

Abstract

This paper takes the explanatory superiority of the integrated monetary approach for granted. It will be demonstrated that the accounting approach could do even better, provided it frees itself from theoretically ill-founded notions like GDP and other artifacts of the equilibrium approach. National accounting as such does not provide a model of the economy but is, rather, the numerical reflex of the underlying theory. It is this theory that will be scrutinized, rectified, and ultimately replaced in what follows. The formal point of reference is "the integrated approach to credit, money, income, production and wealth" of Wynne Godley and Marc Lavoie.

Suggested Citation

  • Egmont Kakarot-Handtke, 2012. "The Common Error of Common Sense: An Essential Rectification of the Accounting Approach," Economics Working Paper Archive wp_731, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_731
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    References listed on IDEAS

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    1. repec:dgr:rugsom:09002 is not listed on IDEAS
    2. Coates,John, 2007. "The Claims of Common Sense," Cambridge Books, Cambridge University Press, number 9780521039581.
    3. Kakarot-Handtke, Egmont, 2011. "Squaring the investment cycle," MPRA Paper 32895, University Library of Munich, Germany.
    4. Ken Dennis, 1982. "Economic Theory and the Problem of Translation," Journal of Economic Issues, Taylor & Francis Journals, vol. 16(4), pages 1039-1062, December.
    5. Kakarot-Handtke, Egmont, 2011. "Reconstructing the Quantity Theory (I)," MPRA Paper 32421, University Library of Munich, Germany.
    6. Kakarot-Handtke, Egmont, 2011. "Primary and secondary markets," MPRA Paper 32996, University Library of Munich, Germany.
    7. Tomasson, Gunnar & Bezemer, Dirk J, 2010. "What is the Source of Profit and Interest? A Classical Conundrum Reconsidered," MPRA Paper 20320, University Library of Munich, Germany.
    8. Bezemer, D.J., 2009. "No one saw this coming. Understanding financial crisis through accounting models," Research Report 09002, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    9. Smith, Adam, 2008. "An Inquiry into the Nature and Causes of the Wealth of Nations: A Selected Edition," OUP Catalogue, Oxford University Press, number 9780199535927 edited by Sutherland, Kathryn.
    10. Hahn, F H, 1980. "Monetarism and Economic Theory," Economica, London School of Economics and Political Science, vol. 47(185), pages 1-17, February.
    11. Bezemer, Dirk J, 2009. "“No One Saw This Coming”: Understanding Financial Crisis Through Accounting Models," MPRA Paper 15892, University Library of Munich, Germany.
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    Cited by:

    1. Kakarot-Handtke, Egmont, 2012. "General formal foundations of the virtuous deficit–profit symmetry and the vicious debt deflation," MPRA Paper 42912, University Library of Munich, Germany.
    2. Kakarot-Handtke, Egmont, 2013. "Debunking Squared," MPRA Paper 51659, University Library of Munich, Germany.
    3. Egmont Kakarot-Handtke, 2013. "The Emergence of Profit and Interest in the Monetary Circuit," World Economic Review, World Economics Association, vol. 2013(2), pages 106-106, February.
    4. Kakarot-Handtke, Egmont, 2012. "Why Post Keynesianism is not yet a science," MPRA Paper 43171, University Library of Munich, Germany.

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    More about this item

    Keywords

    New Framework of Concepts; Structure-Centric; Axiom Set; Primacy of Theory; Income; Profit; Distributed Profit; Money; Flow; Residual; Transaction Matrix; General Complementarity;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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