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General formal foundations of the virtuous deficit–profit symmetry and the vicious debt deflation


  • Kakarot-Handtke, Egmont


A comprehensive dynamic model of the monetary economy that produces the key characteristics of a debt deflation has been presented recently by Steve Keen as an alternative to conventional approaches. His model is based on a double-entry bookkeeping methodology but lacks an acceptable profit theory. In this respect it is not different from familiar approaches. Clearly, a deficient profit theory prevents a proper understanding of how the real world economy works. The present paper takes an entirely different route and places the core of Fisher’s debt deflation theory into the context of the consistent structural axiomatic approach.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:42912

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    References listed on IDEAS

    1. Frank Ackerman, 2001. "Still dead after all these years: interpreting the failure of general equilibrium theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 9(2), pages 119-139.
    2. Kakarot-Handtke, Egmont, 2011. "When Ricardo saw profit, he called it rent: on the vice of parochial realism," MPRA Paper 33625, University Library of Munich, Germany.
    3. Kakarot-Handtke, Egmont, 2011. "Reconstructing the Quantity Theory (I)," MPRA Paper 32421, University Library of Munich, Germany.
    4. Weintraub, E. Roy, 1985. "Appraising General Equilibrium Analysis," Economics and Philosophy, Cambridge University Press, vol. 1(01), pages 23-37, April.
    5. 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.
    6. 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).
    7. Kirman, Alan, 1989. "The Intrinsic Limits of Modern Economic Theory: The Emperor Has No Clothes," Economic Journal, Royal Economic Society, vol. 99(395), pages 126-139, Supplemen.
    8. Kakarot-Handtke, Egmont, 2012. "The rhetoric of failure: a hyper-dialog about method in economics and how to get things going," MPRA Paper 43276, University Library of Munich, Germany.
    9. Kakarot-Handtke, Egmont, 2011. "The pure logic of value, profit, interest," MPRA Paper 30853, University Library of Munich, Germany.
    10. Kakarot-Handtke, Egmont, 2011. "Keynes’s missing axioms," MPRA Paper 32742, University Library of Munich, Germany, revised 11 Aug 2011.
    11. 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.
    12. repec:dgr:rugsom:09002 is not listed on IDEAS
    13. Kakarot-Handtke, Egmont, 2011. "Primary and secondary markets," MPRA Paper 32996, University Library of Munich, Germany.
    14. Kakarot-Handtke, Egmont, 2012. "Make a bubble, take a free lunch, break a bank," MPRA Paper 42996, University Library of Munich, Germany.
    15. 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.
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    Cited by:

    1. Kakarot-Handtke, Egmont, 2013. "Toolism! A Critique of Econophysics," MPRA Paper 46630, University Library of Munich, Germany.
    2. Kakarot-Handtke, Egmont, 2012. "Make a bubble, take a free lunch, break a bank," MPRA Paper 42996, University Library of Munich, Germany.
    3. Kakarot-Handtke, Egmont, 2012. "Intertwined real and monetary stochastic business cycles," MPRA Paper 42793, University Library of Munich, Germany.

    More about this item


    new framework of concepts; structure-centric; axiom set; income; profit; distributed profit; quantity of money; credit expansion; maximum debt/income ratio; annuity; positive feedback; built-in instability;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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