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

“James K. Galbraith shows why exponents of the discipline’s 'orthodoxy' are struggling to counter 'heterodox” insights.' (Project Syndicate) Both Orthodoxy and Heterodoxy are failed/fake science. Keynesianism has been proven false from the beginning (⇓ AXEC172a). Therefore, it has never been more than theatrics, or what Feynman called a Cargo Cult Science. Keynes got macroeconomics axiomatically wrong. His scientifically incompetent followers never spotted the methodological defect. After-Keynesian macrofoundations are not a real improvement of the orthodox microeconomic approach. Both are axiomatically false. Keynes, too, misunderstood the concept of profit because he was too stupid for elementary algebra. Consequently, he botched the long-overdue Paradigm Shift from microfoundations to macrofoundations. This initial blunder means that the entire field of economics (both micro and macro) is provably false. As a result, economics has never been more than silly blather for a low-IQ audience. But scientific principles have not really mattered in economics for over 200 years: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941) Together, the orthodox and heterodox economists are just turning over the scientific dung heap without ever arriving at a result that satisfies the most elementary scientific principle. The After-Keynesian critique of mainstream economics is spot on, but their alternative is also scientifically worthless. However, for a theatrical performance on the academic stage, it's good enough. After all, the show must go on. For details, see Cross-references: Keynesianism https://t.co/ZoIDUg46Lg Cross-references: Heterodoxy: https://t.co/3Ec3ZDuv5p

— AXEC (@EgmontHandtke) November 5, 2026

Occasional X: How it works (DXXXV)

“Mises in Human Action is very clear in the passage below: money prices of factor inputs do not directly determine the output prices: factor input prices are determined 'EXCLUSIVELY by the anticipation of future prices of the products'.” (Lord Keynes) Time to get Price 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. The methodologically correct approach is summarized in table AXEC247 ⇓. 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 6 as equal to unit wage costs W/R. Without budget-balancing it is ρEC*W/R. 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 and unit wage costs. If the condition of budget balancing is lifted, i.e., nominal demand is not determined by 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 9 and accordingly has demand deposits at the Central Bank. If the household sector saves, the business sector makes a loss. If the condition of zero distributed profit is lifted in line 13, the resulting market-clearing price in line 14 is dependent on the differentiated expenditure ratios of wage income and distributed profit income, the relative weight of distributed profit ρD, and unit wage costs W/R. This relationship consists of measurable variables and is testable in principle. The axiomatically based price formula in line 14 fully replaces Demand-Supply-Equilibrium for the elementary production-consumption economy. It replaces also the silly Demand-Supply-Equilibrium storytellers.

— AXEC (@EgmontHandtke) November 4, 2026

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

“But charigng of interest is bad, right? And there is no economic reason for it. As Marx says 'it's usury!!!' :-D” (Inclamiente) Generally speaking, interest is justified in a monetary economy if the interest difference of the given stocks covers the wage and risk costs for administering the total active/passive portfolio of the central-bank/ banking-subsector. If it is higher, the banking subsector makes a profit; if it is lower, banks go bankrupt. Among private households, the interest rate above the banks' interest rate of equal risk/lack of securitization may be called usury. Marx had nothing to say about how the economy works because he did not understand profit — the pivotal concept of Capitalism. Manifest inconsistency is an advantage in religion/politics, but a lethal disadvantage in science. To expect scientific knowledge from Marx or his sorry followers is as good as to expect rain from the chief's rain dance.

— AXEC (@EgmontHandtke) November 4, 2026

Occasional X: Clueless economists / Interest (II)

“So you literally have no economic explanation of how interest emerges :-D. Wtf is homo economicus? :-D” (Inclamiente) 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. The methodologically correct approach is summarized in table AXEC240a ⇓. 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, this yields the price P in line 5. For a start, the price is the dependent variable here. This is a starting condition that is lifted later. In the initial state, the price is equal to unit wage costs W/R in line 5. The workers get the whole product O. The profit Qm for the business sector as a whole is zero. Now, the condition of budget balancing is lifted, i.e., nominal demand is not determined by income. The market-clearing price P is now co-determined in line 9 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 11 and accordingly has demand deposits at the Central Bank. From the difference between the interest on credit and the interest on deposits, the banking system pays its wages. The difference in the interest rates must be sufficient for the banking system to make at least zero profit. Not “the” interest rate, but the difference between the two interest rates is the key variable of the Theory of Money. If the household sector saves, the business sector makes a loss in line 11. Accordingly, the household sector gets interest on demand deposits and the business sector pays interest on overdrafts. This has been inter-sectoral macroeconomic saving, but there is also intra-sectoral individualistic saving/lending. In lines 15 and 16, there are two households. Household 2 dissaves, i.e., it increases its consumption expenditures Ec1 in the current period and wants to reduce its consumption expenditures in the next period and intends to pay the loan back in the next period. Obviously, it needs a household with complementary preferences. Household 1 saves in the current period (line 15) and intends to dissave in the next period, i.e., to increase its consumption expenditures with the loan payback. In both periods, total sectoral saving/dissaving is zero. In effect, it is a complementary intertemporal consumption transfer. Household 2 consumes more than its period income in the first period and less in the second period; household 1 consumes less than its period income in the first period and more in the second period. Saving and dissaving cancel out in both periods. In the accustomed language, household 2 has a high time preference and household 1 has a low time preference. It is usually assumed that household 2 pays interest to household 1. This is not necessarily the case. If only physical time transfer is possible, household 2 pays interest in the form of storage costs to get consumption goods from one period to the next. Analogously, it is logically possible that the saver pays interest to the lender depending on the relative urgency of the complementary time preferences. For this reason, interest cannot be justified in principle with individualistic high time preference. This is only half of the story. In the limiting case, with perfectly complementary time preferences (and no risks), the individualistic interest rate is zero. In real terms, household 1 gives stuff to household 2 in period 1 and gets it back in period 2 when he needs it. The temporal exchange is beneficial for both parties. Ultimately, interest is not justified individually, but because the banking system has to pay its wages and loan defaults from the difference between interest on loans and interest on deposits.

— AXEC (@EgmontHandtke) November 4, 2026

Occasional X: Paradigm Shift (CXXX)

“Yes it doesnt matter, I dont need a particular homo economicus. individuals and firms in Marx's framework can believe what they want, act how they desire, but ultimately the market ensures that those not in line are banished to the shadowrealm of bankrupcy.” (Moulaga expropriator) Almost right. Economics is not about how people behave but how the economic system behaves. The economic system is given with the axiomatically correct macrofoundations AXEC121l ⇓. Human behavior is formally added to the objective/systemic axiom set with the Propensity Function. As Aristotle put it 2400 years ago: “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) The representative economist is methodologically more than 2000 years behind the curve — Walrasianism, Keynesianism, Marxianism, and Austrianism don't matter.

— AXEC (@EgmontHandtke) November 4, 2026

Occasional X: The futile attempt to recycle Austrianism (CXXXVI)

“Before Carl Menger published his Principles of Economics in 1871, mainstream economic thought was a muddle of half-truths, moral philosophy dressed as science, and a value theory so broken it could not explain why water costs less than diamonds. The classical school, anchored by Adam Smith and David Ricardo, gave the world the labor theory of value. Price, they believed, derived from the labor embedded in production.” (Handre) Adam Smith/David Ricardo were scientifically incompetent, and Menger was no better. The most obvious mistakes with his value theory are: (i) First of all, water and diamonds are different kinds of goods. Water is produced and consumed in one period; diamonds are forever. Menger confounded perishable consumption goods with non-financial assets, i.e., a physical store of value; i.e., he confounded non-durables and durables. Methodologically, this means getting the relationship between flows and stocks wrong. (ii) The marginal utility of one person does not matter much, because the market transforms a great number of diverse subjective valuations into one objective price for all. Menger fails to show how this transformation works. For the correct answer, see The Logical Interface Between Objective Macrofoundations and Subjective Valuations https://t.co/8NXaiPVsHv (iii) The question of value does not arise outside the economic system, where labor gets a wage, and the output is sold on the market. The Value Theory presupposes a monetary economy. The marginal utility of water for some freak guy in the desert is irrelevant to the market price of water. (iv) The subjective value has ultimately to be backed up by an objective amount of money. The subjective value of water may be high, but if the agent can maximally spend his income and if his income is very small, the thirsty person cannot buy enough water and leaves the market to die in some dark corner. The survivors understand that the market is not primarily an efficient information mechanism but a quasi-Darwinian selection mechanism that makes sure, with some unintelligible Invisible-Hand trick, that the rich person survives the poor person if scarcity becomes extreme. These four methodological mistakes are sufficient to make Menger's approach scientifically worthless and all Austrian propagandists unemployed. The methodologically correct approach is summarized in table AXEC233b ⇓. Microfoundations are methodologically false; therefore, the elementary production-consumption economy is given with three macroeconomic axioms in lines 1, 2, 3. The business sector is later differentiated in lines 15, 16, 17. Under the initial analytical conditions of market-clearing, i.e., X=O, and budget-balancing, i.e., Ec=Yw, this yields the price P in line 5. For a start, the price is the dependent variable here. This is a starting condition that is lifted later. In the initial state, the price is equal to unit wage costs W/R in line 5. The workers get the whole product O. The profit Qm for the business sector as a whole is zero. Now, the condition of budget balancing is lifted, i.e., nominal demand is not determined by income. Accordingly, the two market-clearing prices depend on the respective expenditure ratios ρE1, ρE2 and unit wage costs W1/R1, W2/R2 in lines 18, 19. The measurable expenditure ratio is a proxy for the consolidated multitude of unmeasurable individual subjective values. As a result, relative prices are given in line 20. For the special case of budget balancing, i.e., ρE1=1, ρE2=1, and equal wages W1, W2, in both production lines, the relative price is equal to the inverse productivities. It is not proportional to labor time input. This result can be projected back to the original Labour Theory of Value and amounts to a refutation. It reveals the scientific incompetence of Austrian economists from Menger onward.

— AXEC (@EgmontHandtke) November 3, 2026

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

“Really? :-D it doesn't matter what guides people to do things? The incentive and behavior under the incentives doesn't matter for your economics? :-D then what do you study, you don't study the economy - how people allocate resources. So what do you study?” (Inclamiente) You are behind the curve. The question has already been answered: “The subject matter of economics is not homo oeconomicus but the economic system. Because of this, economics has to be redefined. — Old definition, subjective-behavioral: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Lionel Robbins, 1935) — New definition, objective-structural: “Economics is the science which studies how the monetary economy works.” (AXEC) The original methodological blunder of Orthodoxy has been that it attempted to axiomatize human behavior. This is a fine example of what Feynman called cargo cult science, i.e., ‘The form is perfect. But it doesn't work.’ The correct approach consists of axiomatizing the objective structural relationships of the monetary economy.” For details, see Redefining economics (I) https://t.co/Ju2upUfGPg To finally become a science, economics needs a Paradigm Shift (AXEC121l. It's pretty obvious that low-IQ folks like Inclamiente will not survive this intellectually.

— AXEC (@EgmontHandtke) November 3, 2026