Misleading jargon can also help perpetuate those beliefs: many people continue to wrongly believe that “real numbers” are more real than “imaginary numbers”; it’s hard to avoid the suspicion that the terminology has had something to do with this.

You keep saying this, but it’s not hard. It’s hard to do it in a closed-form mathematical model of the type that gets published in the AER, but that’s a bad thing about the AER and is kind of the point. “The New Industrial State” is a whole book about profit, planning and corporate power and its effects on the aggregate economy, and it’s not all that hard.

But just because the same word (“profits”) appears in the math model and in the real world, this does not mean they refer to the same thing.

Indeed, we have no reason to suppose that the “variable called profits” tells us anything about profits in the real world. If I renamed my cat Max, giving him the new name “Profits,” I have no reason to suppose that because Profits (aka, Max) sleeps alot that in the real world profits sleep alot.

Mainstream economists have yet to clearly indicate what the relationship is between their models and the “real world.” Just because the models and the real world utilize the same labels (for different things), this does not mean the math model “says” anything about the real world.

Over and over in this thread it’s been pointed out that there plenty of both micro and macro models with positive profits in them. Look through the past, I dunno, five issues of AER and count the # of models with zero profits. Even the infamous DSGE models often assume monopolistic competition.

The only thing I agreed to, I think – not sure what you’re referring to – is that it’s hard to have a GE model with a general theory of imperfect competition. While every competititve market is roughly the same, each imperfectly competititve market is special. Combining them and allowing for intereaction between them is just plain hard.

I have the strong impression that “mainstream economics” includes the idea that apart from monopolies etc all profit is just something that happens naturally for the good of the whole economy, and it also includes the idea that weird things can happen away from equilibrium but that things tend toward equilibrium where weird things stop happening and “profit” balances out with the cost for needed expansion and the cost of capital and so on.

I think “mainstream economics” includes a lot of variety, and for many ideas that get the label you can find some mainstream economists who disagree with them. But that variety still leaves a whole lot of room for heterodox economics which is labeled as not mainstream.

Sometimes the difference between mainstream and heterodox is just in who’s saying it. In genetics, at one point there was a “neoclassical synthesis” that put together most of the genetics known at that time into a coherent whole. You could mostly tell what was part of the neoclassical movement and what wasn’t, though there was some variety within it. I don’t think we have that in economics now.

However, there is a normative economic philosophy that is espoused by a lot of amatuer economists, that goes roughly: “Whatever happens in a free-market economy is good and is the best that could possibly happen, unless a government is involved.” This is similar to the oldstyle view in ecology that ecosystems are each optimised for something-or-other and are as good as they possibly could be so long as human beings aren’t involved. And these people believe that this simple wrong idea is derived from mainstream economics. I can’t prove that it isn’t.

Radek: How jolly, jolly decent of mainstream economics to “allow for” accounting and economic profits! I don’t think I’d ever suggested that economists had banned them. However, “mainstream economics” does not, as I think you agreed not so long ago, work on the basis of models in which economic profits are systematically nonzero and positive.

Are they just “profits arising in a model/theory which is aesthetically pleasing to the whims and fancies of Daniel Davies”?

Profits in the ordinary language sense of the word are accounting profits. There’s not a single neoclassical/mainstream/GE model that insists on accounting profits being zero. So …

what the hell are you talking about???