Discussion Paper

No. 2014-3 | January 14, 2014
An Inconsistency in Using Stock Flow Consistency in Modelling the Monetary Profit Paradox

Abstract

In order to understand from where the profits or monetary profits of capitalists and firms emerge the author examined the phrase of Marx, ‘Die Gesamtklasse der Kapitalisten kann nichts aus der Zirkulation herausziehen, was nicht vorher hineingeworfen war.’ (The class of capitalists cannot extract from the circulation, what has not previously been thrown in.) Also Keen studied the monetary paradox and contrary to circuitists he came to the conclusion that capitalists can make monetary profit with a possibility to earn enough to repay their debt and with positive balances for all actors. The author will prove that Keen made a fundamental mistake and is using the Stock Flow Consistency Principle in an inconsistent way by combining it with behavior equations in a dynamic model. So the solution presented here is not only showing that the numbers are incorrect but the method itself. This resolves a contraction between Keen and circuitists and implies that, in a Wicksellian pure credit economy, it remains impossible to gain a monetary profit for all actors. More precisely that the total sum of monetary profit over all actors is zero.

JEL Classification

C50 C60 E11 E12 E20 E25 E44 G00

Cite As

Marcel R. de la Fonteijne (2014). An Inconsistency in Using Stock Flow Consistency in Modelling the Monetary Profit Paradox. Economics Discussion Papers, No 2014-3, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2014-3

Assessment



Comments and Questions


Anonymous - Referee Report 1
January 14, 2014 - 09:07

see attached file


Marcel de la Fonteijne - Response on Referee Report 1
January 14, 2014 - 17:14

pls see attachment


Anonymous - Referee Report 2
February 19, 2014 - 09:37

see attached file


Marcel de la Fonteijne - Response on Referee Report 2
February 23, 2014 - 11:42

pls see attached file


Marcel de la Fonteijne - Revised Version
March 13, 2014 - 11:06

see attached file