“According to Modern Monetary Theory (MMT) it is possible to use expansive monetary policy - money creation by the central bank (i.e. the Federal Reserve) - to finance large fiscal deficits that will ensure full employment and good jobs for everyone, …” (Sebastian Edwards, Hoover Institution) Employment theory has been wrong since the Founding Fathers. MMT is no exception. The axiomatically correct macroeconomic Employment Law (⇓ AXEC62d) tells one how ― in the elementary case ― the employment L depends ― under the analytical condition of product market clearing ― on ρE and ρF. The factor cost ratio ρF is composed of the wage rate W, the inverse productivity R, and the inverse price P. The ratio ρE depends on (public/private) deficit-spending/money-creation. The Law consists of measurable variables and is testable if generalized. The macroeconomic price mechanism is embodied in ρF. An increasing price P means falling employment L, and an increasing wage rate means increasing employment. A falling price increases employment. A rising price decreases employment. The closer ρF is to 1, the higher employment is. This is contrary to the microeconomic microbrain logic. So, what happens politically? Deficit-spending/ money-creation, i.e., ρE>1, increases employment L, but only if ρF remains constant. If the price P increases simultaneously, ρF decreases, and employment goes down. As a limiting case, both effects cancel each other out. Employment stays the same; only macroeconomic profit increases. The State's deficit spending appears to be ineffective. The government sector is not alone; the business sector as a whole can make employment what it wants if it can somehow be made to act coordinated. The weakening of the government sector and the strengthening of the business sector is the aim of Neoliberalism. The Employment Law says that Neoliberalism makes ρE=1 and ρF smaller, and as a result, employment L will shrink. “The four experiments studied in this paper ended up badly, with runaway inflation, huge currency devaluations, and precipitous real wage declines.” (Hoover Institution) Inflation is a coordinated policy of the business sector; it does not happen spontaneously. All negative effects on employment and the real wage are the result of business sector policy. For more on the axiomatically correct employment theory, see Cross-references: Employment https://t.co/RfA1hj72qQ
— AXEC (@EgmontHandtke) November 2, 2026
This blog connects to the AXEC Project which applies a superior method of economic analysis. The following comments have been posted on selected blogs as catalysts for the ongoing Paradigm Shift. The comments are brought together here for information. The full debates are directly accessible via the Blog-References. Scrap the lot and start again―that is what a Paradigm Shift is all about. Time to make economics a science.