Occasional X: How it works (DXXXVI)

“Prices should be understood first and foremost as a mechanism through which monetary incomes, including profits, are generated and realized. After all, firms set prices not simply to cover their costs, but also to make profits.” (Khazbi Budunov) Time to get Price and Profit Theory right. Economics has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. Economics needs a Paradigm Shift. The representative economist will not survive it intellectually. That's a bad outlook for Khazbi Budunov. The methodologically correct approach is summarized in table AXEC244a ⇓. Microfoundations are methodologically false; therefore, the elementary production-consumption economy is given with three macroeconomic axioms in lines 1, 2, 3. Under the initial analytical conditions of market-clearing, i.e., X=O, and budget-balancing, i.e., Ec=Yw or ρEC=1, this yields the price P in line 5 and 8 as equal to unit wage costs W/R. Without budget-balancing, it is ρEC*W/R, in the general case with ρEC≠1. For a start, the price is the dependent variable here. This is a starting condition. In the most elementary case, the price is equal to unit wage costs W/R. The workers get the whole product O. The profit Qm for the business sector as a whole is zero. In the general case, the macroeconomic price depends on demand, expressed by ρEC≠1, and unit wage costs W/R. If the condition of budget balancing is lifted, then nominal demand is not equal to wage income. The market-clearing price P is now co-determined by the expenditure ratio ρE, i.e., ρE1<1 means saving of the household sector as a whole. Dissaving, i.e., ρE1>1, means that the household sector takes a credit from the Central Bank. The Central Bank stands here for the banking system. Dissaving also means that the business sector makes a profit in line 12 and accordingly has demand deposits at the Central Bank. If the household sector saves, the business sector makes a loss. As a result, the expenditure ratio ρE determines both price P (line 8) and profit/loss Qm (line 12) simultaneously. Without ρE>1, the price cannot rise above unit wage costs W/R, and there is no profit Qm. Profit is not a monetary income; distributed profit is. Profit is a balance, i.e., the difference of flows. Economists have not understood this since the time of the Founding Fathers. If the firm simply increases the price, the market-clearing condition no longer holds and the inventory increases, i.e., O−X>0. Whether the firm wants to make a profit is irrelevant. Profit appears only if ρE>1. Profit does not appear either if the firm simply increases the price. Profit is not psychic or behavioral but depends on the objective/systemic precondition ρE>1. To expect profit from the entrepreneur's wishes or expectations or price increases is as good as expecting rain from the chief's rain dance.

— AXEC (@EgmontHandtke) November 6, 2026

Occasional X: The foul spirit of political economics (CDXXXV)

“Extended Macroeconomics lecture today, 4 hours long, from Keynes to Lucas, how employment and inflation theories evolved and the different versions of the Phillips Curve.” (Benito Salomão) The scientifically valid 1-minute lecture says that economists mutilated and misinterpreted the original Phillip Curve. Paul Samuelson never understood profit and, by logical consequence, how the economic system works. Together with Solow, they messed up the original Phillips Curve back in 1960. ⇒ NAIRU, wage-led growth, and Samuelson's Dyscalculia https://t.co/eo4JJFC4fz and The father of modern economics and his imbecile kids https://t.co/HGon0cPZly For more details, see Cross-references: Employment/Phillips Curve https://t.co/RfA1hj72qQ

— AXEC (@EgmontHandtke) November 6, 2026

Occasional X: The foul spirit of political economics (CDXXXIV)

“Can economics fight fascism?” (Martin Sandbu) No. That's not how it should be. Martin Sandbu does not understand what science is all about. He has totally overlooked that, as a scientist, the economist has no mandate for political agenda-pushing. This is known since the Founding Fathers. “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill) For 200+ years, economics has claimed to be Science but still is NOT. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. As a consequence, economic policy guidance has never had valid scientific foundations (AXEC141g ⇓); left/center/right does not matter. Economics has no truth-value, but only political use-value. The state of economics is this: there is political economics and theoretical economics. The Founding Fathers called themselves political economists; that is, they left no doubt that their main business was agenda pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing). J. S. Mill was the only scientist among his low-IQ peers. He understood the difference between science and politics. After J. S. Mill, economics has been taken over by look-alike scientists. The representative economist is not, and never has been, a competent scientist, but an 1. agenda pusher 2. useful idiot 3. impostor 4. phrase monger 5. storyteller 6. troll 7. self-glorifier 8. pseudo-psychologist 9. speculative mind-reader 10. hallucinating prophet 11. media talker 12. vacuous philosopher 13. tireless reshuffler of the proto-scientific dungheap 14. clown in the political Circus Maximus.

— AXEC (@EgmontHandtke) November 6, 2026

Occasional X: The foul spirit of political economics (CDXXXIII)

“Just remember: … 4. Government deficits create non-government financial surpluses.” (Khazbi Budonov) That's the usual MMT deception. A large deficit for the U.S. government means a healthy free lunch for WeTheOligarchy and a growing number of millionaires/billionaires/zillionares. Reminder: Macroeconomic Profit Qm is given by the axiomatically correct Profit Law Qm:=(I−Sm)+(G−T)+(X−M)+Yd. The Law implies Qm:=(G−T)>0, i.e., macroeconomic profit is (co-)produced by deficit-spending/money-creation, i.e., the growth of public debt. See the graphical proof in Fig AXEC216a ⇓ . After the differentiation between the household sector and business sector, it is methodologically inadmissible to define a 'non-government sector' or a 'private sector' that fuses the two sectors again. This hides the crucial relationship Qm:=−Sm, i.e., the macroeconomic profit of the business sector is the complementary balance to the household sector's dissaving. By the same token, it holds Qm:=(G−T)>0, i.e., the profit of the business sector is equal to the deficit of the public sector. The free-market economy is temporarily saved from breakdown by the deficit-spending/money-creating duo Treasury / Central Bank, i.e., the State. This means that the premise of mainstream economics, i.e., that the unfettered free-market economy is a self-adjusting, self-stabilizing, and self-optimizing system, is axiomatically false. And this means that economics has been proto-scientific garbage for 200+ years. And this means that the representative economist is either stupid or corrupt or both. The non-government sector is a verbal/formal fraud to hide the fact that PublicDeficit=BusinessProfit.

— AXEC (@EgmontHandtke) November 6, 2026

Occasional X: The foul spirit of political economics (CDXXXII)

“For decades, both right and left politicians bought into neoliberal economics. It’s not a pretty story. jamestalarico says 'trickle-down economics is not a theory, it is theft.'” (Evonomics, The Next Evolution of Economics) Trickle-down economics is not theft; it's just another perverse catchword for the system's modus operandi. The folks at Evonomics do not understand profit and, by consequence, how the economic system works. That's self-defeating for an economist, but economists are not scientists. What has evolved in economics is not science but political propaganda. This is the modus operandi: The free-market economy runs on profit. Macroeconomic profit is given by the axiomatically correct Profit Law Qm:=(I−Sm)+(G−T)+(X−M)+Yd. The Profit Law implies PublicDeficit=PrivateProfit Qm:=(G−T)>0, i.e., macroeconomic profit is (co-)produced by deficit-spending/money-creation, i.e., the growth of public debt. In free-market economies, public debt has increased with minor interruptions for over 200 years. Therefore, Qm:=(G−T)>0 has been a critical factor for Capitalism's survival. The free-market economy is temporarily saved from breakdown by the deficit-spending/money-creating duo of treasury/central bank, i.e., the State. This means that the premise of legacy economics, i.e., that the unfettered free-market economy is a self-adjusting, self-stabilizing, and self-optimizing system, is axiomatically false. This means that economics is failed/fake science. Economists are not scientists. They are mostly silly wafflers for a low-IQ audience. Evonomics is a case in point. The free-market polity is an Oligarchy with parliament / treasury / central bank / capital markets / big business / three-letter agencies as integral parts. With the other determinants excluded for the moment, private financial wealth grows with public debt. Eventually, WeTheOligarchy owns the financial assets, and WeThePeople owe the public debt and are taxed for interest on government bonds as long as the debt is rolled over. Interest payments on the debt reduce their disposable income for an indefinite time. The government taxes WeThePeople on behalf of WeTheOligarchy. This profit/interest/tax triple-whopper produces wealth for WeTheOligarchy and debt and real-income reductions for WeThePeople. On closer inspection, WeTheOligarchy gets three free lunches. This explains the observable distribution. To call this trickle-down is an obvious inversion of the system's modus operandi. It works no longer. This is where Evonomics comes in with a new story. In addition to legitimate monetary operations, the central bank is well-positioned to carry out or support illicit operations that are economically equivalent to putting counterfeit money into circulation. The volume of illicit deficit spending and money creation, as well as the quantity of Dark Money in circulation, is not publicly known. Therefore, Profit Theory, Distribution Theory, and Monetary Theory have no empirical leg to stand on. The financial subsector, big business, and billionaires recycle some of their profits and financial wealth to control major public, private, and political institutions. Thus, they corrupt the polity. Economics is no exception. In essence, this is how the self-alimentation and self-preservation of WeTheOligarchy work. Capitalism thrives on free lunches that are ultimately supplied by the duo of treasury/central bank, i.e., the State. Trickle-down has been one of the biggest propaganda hoaxes of all time. The modus operandi is still what it always was. Evonomics won't change anything.

— AXEC (@EgmontHandtke) November 6, 2026

Occasional X: Clueless economists / Science (CCCXCIV)

“In his 1957 essay In Defense of ‘Extreme Apriorism’, Murray Rothbard embraces and defends Ludwig von Mises's methodology of praxeology against critics who claimed its rejection of empirical testing was too extreme. Rothbard argues that economics is fundamentally different from the natural sciences; rather than relying on testing hypotheses against external facts, economic theory is built on absolutely true axioms derived from the indisputable reality of human action.” (Google AI) “Psychic profit is the gain an actor obtains by achieving his most valued end instead of the most valued end he had to give up (this gain is intensive, not extensive, because value is ordinal and not cardinal). … This is a description of how people really act, not a fiction.” (Martin Gamazo) “In the definition which we have attempted to frame of the science of Political Economy, we have characterized it as essentially an abstract science, and its method as the method à priori.” (J. S. Mill) Science is binary true/false and nothing in between. Non-science is the swamp between true and false where ‘nothing is clear and everything is possible’ (Keynes). The distinction between science and non-science corresponds to the ancient Greeks’ distinction between episteme (= knowledge) and doxa (= opinion). The state of economics is this: there is political economics and theoretical economics. The Founding Fathers called themselves political economists; that is, they left no doubt that their main business was agenda pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing). From the beginning, economics has not been a science but silly political agenda pushing. There has not been genuine scientific progress since the Enlightenment, only changes in propaganda. Watch the sorry contemporary academic discussion. They're just turning over the proto-scientific dung heap without ever arriving at a result that satisfies the most elementary scientific principles. “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant) Economics has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. Actually, economics is about how the economy works. It is a genuine systems science. Von Mises's Action Axiom refers to human behavior; therefore, it is unsuitable as a starting point. With his Extreme Apriorism, Murray Rothbard echoes Aristotle: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle, Analytica) What Murray Rothbard, as an incompetent scientist, overlooked is that behavioral premises are neither 'certain, true, nor primary'. Methodologically, the Action Axiom is the wrong starting point. To finally become a science, economics needs a Paradigm Shift from false behavioral microfoundations and false Keynesian macrofoundations to true macrofoundations (⇓ AXEC121l) No Austrian will survive the Paradigm Shift intellectually. Austrianism is not Extreme Apriorism but Extreme Stupidity.

— AXEC (@EgmontHandtke) November 5, 2026

Occasional X: Clueless economists / Science (CCCXCIII)

“Robbins was deeply alarmed by the rising tide of government interventionism, and seeking an intellectual heavyweight to challenge Keynes’s dominance, he invited the young Austrian economist to deliver a series of lectures on business cycle theory. Hayek’s presentations were a sensation, leading to his immediate appointment as the Tooke Professor of Economic Science and Statistics at the LSE.” (Creative Deduction) The discussion between Keynes and Hayek is just another episode in the endless inconclusive blather between incompetent scientists. Keynes failed to understand the concept of profit because he was too stupid for the elementary algebra that underlies macroeconomic accounting. Therefore, he didn't understand how the economic system works. Keynesian policy guidance has never had valid scientific foundations. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. Keynes has been provably false from the start. However, this never meant that Austrianism was any better. Everybody understands that macroeconomic profit must be greater than zero. Otherwise, firms go bankrupt, and the breakdown starts. Therefore, profit has existential primacy in the free-market economy. Macroeconomic profit Qm is given by the axiomatically correct Profit Law Qm:=(I−Sm)+(G−T)+(X−M)+Yd. The Law implies Qm:=(G−T)>0, i.e., macroeconomic profit is (co-)produced by deficit-spending/money-creation, i.e., the growth of public debt. In the free-market economies, public debt has increased with minor interruptions for 200+ years. So, Qm:=(G−T)>0 has been a crucial ingredient of Capitalism's life elixir. The free-market economy is temporarily saved from implosion by the deficit-spending/money-creating duo of Treasury / Central Bank, i.e., the State. This means that the premise of Austrian economics, i.e., that the unfettered free-market economy is a self-adjusting, self-stabilizing, and self-optimizing system, is axiomatically false. And this means that Austrianism has always been proto-scientific garbage, just like Keynesianism. It's just the usual discussion between two blind men about color. To this day, neither Keynesians nor Austrians understand how profit and the price system work. In economics, the Paradigm Shift is long overdue. Neither Keynesians nor Austrians will survive it intellectually.

— AXEC (@EgmontHandtke) November 5, 2026