While it may wound the pride of "Mainstream Economists" to accept that they need supervision by accountants, that wound is far less significant than the wound to the body politic and the entire world economy, especially their own, that their blindness has inflicted.
This has also affected financial economics. Last year I was reading a book on the financial markets by a heterodox fund manager and he complained that, with the rise of mathematical finance, people had stopped learning contract law and accounting and just thought mining historical series of market data was enough to do finance.
There's something decidedly strange about the way mathematization and physics envy has led economics (and financial economics) to abandon the study of the entities and processes that make up the economy. This kind of "accounting"/"flow of funds" models of both economic agents and the economy as a whole seem intuitively appealing from a physics point of view. So you get a decidedly unphysical theoretical construction out of physics envy. And then an "engineering" built out of it, with disastrous results. The peak-to-trough part of the business cycle is an outlier. Carnot would have died laughing.
it was to bring the accounting models of the firm into macroeconomics
If only it did!
On the national balance sheet, there is no National Equity, only a National Debt.
The balance sheet shows the debt: but it doesn't show the productive assets it paid for - because the only "productive" assets are - by definition - in the private sector....
The whole concept of National Debt is insane. While individual countries may - through fortune or force - be able to repay their own National Debt, across the entire system, how can National Debts ever be repaid? "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Paying off debt destroys money. But in order to repay it, new credit=debt=money has to be created. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
