AXEC: New Foundations of Economics

October 26, 2026

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

“Notice, I haven't said anything about Austrian Economics. I want you to elucidate how you will be any different because you use an equation?” (RFB) Ludwig von Mises never understood profit, and by logical consequence, how the economic system works. That's self-defeating. To this day, Austrians have not realized their scientific blunder. Ignorance cannot recognize its own ignorance. Like other approaches, Austrianism has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. 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 Law implies PublicDeficit-Is-PrivateProfit Qm≔(G−T)>0, i.e., macroeconomic profit is (co-)produced by deficit-spending/money-creation, i.e., the growth of public debt. Von Mises had a voodoo explanation of profit: “The ultimate source from which entrepreneurial profit and losses are derived is the uncertainty of the future constellation of demand and supply.” He leaves open the question of how the spiritual concept of uncertainty materializes into measurable hard cash in the box. In free-market economies, public debt has increased with minor interruptions for over 200 years. Therefore, Qm≔(G−T)>0 is a critical element of the economy's survival. The minimum requirement of a free-market economy is that macroeconomic profit is greater than zero, i.e., Qm≥0. If Qm<0, recession/depression/breakdown results. This is the main economic principle; all other explanations of how the economy works are secondary at best. Utility/profit maximization or free people on free markets or competition or hard work or innovation or the entrepreneur or optimal allocation do not keep the economy above the zero-profit cutoff. Scientifically, it's rather simple: no macroeconomic profit, no economy. But economists are only look-alike scientists. They have never had enough brains to understand the objective, systemic facts, i.e., the existential preconditions. Among scientifically incompetent economists, Austrians are the dumbest. Free-market economies are temporarily saved from breakdown by the deficit-spending/money-creating duo of Treasury/ Central Bank, i.e., the State. This means that the Austrian premise that the unfettered free-market economy is a self-adjusting, self-stabilizing, and self-optimizing system is axiomatically false. Austrianism is failed/fake science. Neither von Mises nor the sorry bunch of followers ever understood what keeps the economy going.
— AXEC (@EgmontHandtke) October 26, 2026

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

“The action axiom is the foundational proposition in Austrian economics (praxeology) stating that humans act purposefully to achieve desired ends. Formulated extensively by Ludwig von Mises, it defines human behavior as the conscious use of means over time to move from a less satisfactory state to a more satisfactory one.” (Google AI) The Austrian Action Axiom is an empty tautology. The AXEC axioms are objective/systemic, not subjective/behavioral. (A0) The objectively given and most elementary configuration of the economy consists of the household sector and the business sector, which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours L. (A2) O=RL output O is equal to productivity R times working hours L. (A3) Ec=PX Consumption expenditures Ec are equal to the price P multiplied by the quantity bought or sold X. Dimensions: Yw → $ per year, W → $ per hour, L → hours per year, O → units per year, R → units per hour, Ec → $ per year, P → price per unit, X units per year. All axiomatic variables are measurable in principle. This is the precondition for testing. You cannot test the Action Axiom or other Austrian tenets. Austrians don't even get the foundational concept of economics —profit— right. AXEC solves the starting problem. J. S. Mill put it thus: “What are the propositions which may reasonably be received without proof? That there must be some such propositions all are agreed, since there cannot be an infinite series of proof, a chain suspended from nothing. But to determine what these propositions are, is the opus magnum of the more recondite mental philosophy.” Mises's Action Axiom is the starting point of inconclusive behavioral blather. Austrianism is failed/fake science. Austrians neither understand science nor economics. RFB is living proof.
— AXEC (@EgmontHandtke) October 26, 2026

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

“Grok does not agree, nor do I.” (RFB) Too bad for Grok. This blunder will send the stock price down the sink hole. AI/Grok has been trained on legacy economics. Accordingly, it brings back all the crappy slogans we have heard ad nauseam from the silly members of a failed/fake science. AI, too, works according to the garbage-in-garbage-out principle. For example: “It [economics] is not a classical natural science.” You cannot be more tautological. “The subject matter itself sets hard limits that physics does not face.” Yeah, that's one of the oldest excuses for incompetence. When economists are ridiculed for not having achieved anything of scientific value since Adam Smith, they retort with the Cobden excuse: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort.’” (Bagehot, 1885) Note the sick logic: science is what physicists do, but economics “falls short of the classical natural-science ideal for structural reasons.” Trivially true, but irrelevant. Scientific standards are defined independently of physics: “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, 1994, 31) Fact is that economics has been materially/formally inconsistent since the Founding Fathers. Economics has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. Grok does not realize it, but repeats the foundational error. 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 is failed/fake science, but Grok doesn't realize anything. The minimum requirement in science is logical consistency. Economists never rose above confused blather. As far as an approach is formalized, economists apply the wrong math. Grok has been trained on the wrong stuff, and never realized anything (⇓ AXEC 136j). Retry the exercise with the cross-references Failed/Fake Scientists https://t.co/f98ujAER8Q Scientific Incompetence https://t.co/uiyfRTZ3IL Proto-Science/Cargo Cult Science/Fake Science https://t.co/Kf9k12pnai
— AXEC (@EgmontHandtke) October 26, 2026

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

“The economy as a whole. Oh, please do go on. You are defining that how, measuring it how? Auditing the 'data' you use how? Choosing the inputs how?” (RFB) You agree that profit is an economic variable that can be measured to two decimal places. In the old days, you could even see and touch it in the cash box. You can measure individual profit; you can measure total profit by simply adding up. Needless to emphasize that there can be practical difficulties to collect the data; in particular if the entrepreneur is a member of Organized Crime. In principle, with all entrepreneurs being honest people, macroeconomic profit or loss Qm, i.e., the business sector's balance, is given by the axiomatically correct Profit Law Qm:=Yd+(I−Sm)+(G−T)+(X−M). If you were not so stupid and were familiar with the elementary math that underlies macroeconomic accounting, you could read it off the business sector's profit and loss account. Of course, economists cannot do it, because they have never understood profit, and by logical consequence, how the economic system works (⇓ AXEC109k). Macroeconomic profit does NOT follow from behavioral concepts of utility or profit maximisation.
— AXEC (@EgmontHandtke) October 26, 2026

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

“I love Economists who think that complex human behavior across hundreds of millions actors can be precisely calculated with an equation, based on data that no one audits or can be verified.” (RFB) You are in the wrong movie. Economics is a genuine systems science, NOT a social science; i.e., it is NOT about Human Nature / motives / behavior / preferences / choice / incentives / values / actions / expectations, etc. Psycho-social economics has always been cargo cult science (Feynman's term). No way leads from the understanding of individual behavior to the understanding of the behavior of the economy as a whole. Mindreading homo oeconomicus, a.k.a. the economic agent, is (i) a futile exercise to begin with, and (ii) pointless because it runs with logical necessity into the Fallacy of Composition. 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. Put simply: Human-Nature economists are scientifically incompetent imbeciles and methodologically in the dark woods. RFB is living proof.
— AXEC (@EgmontHandtke) October 26, 2026

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

“British pedophile John Maynard Keynes made one genuinely useful observation: in a severe deflationary panic, when businesses freeze and nobody spends, government can sometimes break the paralysis. … Keynes identified that rigid nominal wages meant unemployment rather than wage cuts when demand fell. But he built a catastrophically wrong policy architecture on top of it.” (Handre) First, denunciation is not refutation. This is political agenda pushing, not science. Neither Austrians nor Keynesians got employment theory right. Scientific incompetence was what they always had in common. For the scientifically and polemically valid refutation of Keynesianism, see Cross-references: Keynesianism https://t.co/ZoIDUg46Lg The axiomatically correct macroeconomic Employment Law (⇓ AXEC62d) tells one how ― in the elementary case ― the employment L depends ― under the condition of product market clearing ― on ρE and ρF. The factor cost ratio ρF is composed of wage rate W, the inverse productivity R, and price P. The ratio ρE depends on (public/private) deficit-spending/money-creation, i.e., deficit-spending ρE>1 is Keynes's pseudo-revolutionary idea; ρE=1 means budget-balancing. 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 is employment. This is contrary to the microeconomic Austrian microbrain logic. Austrian always claimed that the price mechanism (which is embodied in ρF) works automatically towards full employment and ρE>1, i.e., deficit-spending/money-creation is ultimately toxic. Keynes claimed that the price mechanism ρF fails because of stickiness and that therefore ρE>1 must do the heavy lifting. Both Austrianism and Keynesianism are axiomatically false. It is high time that both Austrians and Keynesians go down the scientific drain. For more on the correct employment theory, see Cross-references: Employment https://t.co/RfA1hj72qQ
— AXEC (@EgmontHandtke) October 26, 2026

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

“What ensued would later be dubbed the 'poker incident,' named for the fireplace poker from the room's hearth that Wittgenstein brandished while listening impatiently to the lecture.” (Jonathan Clapsaddle) We know that people like personality stories and dirty-laundry gossip. Of course, that's not philosophy but political disinfotainment and, strictly speaking, anti-scientific. Concerning economics, Popper later on stated: “Now the rationality principle, which in the social sciences plays a role somewhat analogous to the universal laws of the natural sciences, is false, and if in addition the situational models are also false, then both the constituent elements of social theory are false.” (Popper, 1994, p. 173) For details, see Key Issues: Demarcation and the Midas Touch of science https://t.co/LB3gLtb0Mv Economics has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. However, economists have always violated the elementary scientific principle: “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) This is why economics has become a senselessly stirred scientific dung heap.
— AXEC (@EgmontHandtke) October 26, 2026

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Knowledge only — no opinion

Science does not explain everything, but non-science explains nothing.

Neither orthodox nor heterodox economics satisfies the scientific criteria of material and formal consistency.

Economists cannot explain how the economy works. The Profit Theory is false since Adam Smith. There is much opinion and little knowledge.

Opinion is the realm of political economics, knowledge is the realm of theoretical economics.

Political economics is scientifically worthless.

Theoretical economics is built upon clearly stated premises, i.e., upon a set of axioms.

Orthodoxy got the axiomatic foundations wrong and Heterodoxy has none at all.

Economics is a failed science. Economists are incompetent scientists.

Profit

Neither Classicals, nor Walrasians, nor Marshallians, nor Marxians, nor Keynesians, nor Institutionialists, nor Monetary Economists, nor MMTers, nor Austrians, nor Sraffaians, nor Evolutionists, nor Game theorists, nor EconoPhysicists, nor RBCers, nor New Keynesians, nor New Classicals ever came to grips with profit. Hence, they all fail to capture the essence of the market economy.

Because of this, economists have nothing to offer in the way of a scientifically founded economic policy guidance.

The hybrid science

As a first approximation, one can agree on the general characteristic that the economy is a complex system.

However, with the term system one usually associates a structure with components that are non-human. In order to stress the obvious fact that humans are an essential component of the economic system the market economy should be characterized more precisely as a complex hybrid human/system entity.

The scientific method is straightforwardly applicable to the sys-component but not to the hum-component. While it is clear that the economy always has to be treated as an indivisible whole, for good methodological reasons the analysis has to start with the objective system-component.

In gestalt-psychological terms the economic system is the foreground, individual behavior the background. Common sense wrongly insists that the hum-component must always be in the foreground. This fallacy compares to geo-centrism. The economic system has its own logic which is different from the behavioral logic of humans. The systemic logic is what Adam Smith called the Invisible Hand.

There are systemic laws but no behavioral laws. Systemic laws have the same methodological status as physical laws.

Neither Orthodoxy nor Heterodoxy can tell what the systemic laws of the actual monetary economy are.

Whether the outcome of the human/system-interaction is good or bad is a politcal question that lies outside of theoretical economics. Theoretical economics explains how the actual economy works - no less, no more.

Narrative vs.Theory

Psychological, sociological or behavioral assumptionism cannot yield anything other than a gossip model of the world. Second-guessing the agents is not economic analysis.

Science deals exclusively with propositions that can in principle be decided by objective means. The rest is opinion, faith, phantasy, motive speculation, allegation, hallucination, myth, paranoia, ink-blot association, psychology, philosophy, in one word: storytelling.

Storytelling is the original mode of communication in the social realm — except science.

Political economics is storytelling and, by default, the natural habitat of confused confusers. Walrasianism, Keynesianism, Marxianism, Austrianism are social narratives and not scientifically valid representations of reality.

"The truth is, most persons, not excepting professional economists, are satisfied with very hazy notions." (Fisher)

In marked contrast, theoretical economics lives up to the standards of material and formal consistency. A scientific theory is the best mental representation of reality that is humanly possible.

Theory starts with a set of objective and consistent axioms.

Paradigm Shift

"The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy." (Feynman)

"As will become evident, there is more agreement on the defects of orthodox theory than there is on what theory is to replace it: but all agreed that the point of the criticism is to clear the ground for construction." (Nell)

"The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory." (Blaug)

"Is it not a fact, which stares at us from the histories of all sciences, that it is much more difficult for the human mind to forge the most elementary conceptual schemes than it is to elaborate the most complicated superstructure when those elements are well in hand?" (Schumpeter)

"The task of producing knowledge against the grain requires imagination." (Mirowski)

"A new idea is extremely difficult to think of. It takes a fantastic imagination." (Feynman)

"The scientific imagination dreams of explanations and laws." (Peirce)

"It is brilliance of imagination which makes the glory of science." (Evans)

"... we know little more now about ‘how the economy works,’ ... than we knew in 1790, after Adam Smith completed the last revision of The Wealth of Nations." (Clower)

Selftest and to watch for

You apply one of these items

• supply-demand-equilibrium,

• general equilibrium,

• marginal utility,

• well-behaved production functions,

• total income = value of output,

• total income = wages + profits,

• I=S,

• wage rate down - employment up,

• behavioral axioms?

Then you are out of science because of unnoticed material or formal inconsistency.

Every economist who uses the concept of equilibrium is scientifically incompetent because she/he failed to notice that equilibrium is an economic nonentity.

Practically this means: as soon as the word equilibrium appears in an economic text it can be thrown into the waste basket. The same holds for all other nonentities.

The vast majority of economists deals mainly with nonentities. This is why Walrasianism, Keynesianism, Marxianism, Austrianism is scientifically worthless.

Since Adam Smith, economic policy guidance has no sound scientific foundations.

To be replaced (1)

The core premises of Orthodoxy are uncertain and false and this fully explains the failure of the research program.

“As with any Lakatosian research program, the neo-Walrasian program is characterized by its hard core, heuristics, and protective belts. Without asserting that the following characterization is definitive, I have argued that the program is organized around the following propositions: HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

The inescapable Paradigm Shift consists of the move from this obsolete hard core to the superior set of structural axioms.

To be replaced (2)

The fundamental equations of macroeconomics have been formulated by Keynes in two lines.

"Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment."

This elementary syllogism is demonstrably false. The demonstration consists in the proof that Keynes could not solve the Profit Puzzle. Neither did Post-Neo-New-Keynesians.

In the most general terms, the economics Paradigm Shift consists in switching from the behavior-centric bottom-up approach to the structure-centric top-down approach. This is comparable to the Copernican turn from geo-centrism to helio-centrism.

Consensus

Economics is a science without scientists. Because they are ignorant of the elementary difference between profit and income, the present generation of economists has not made and cannot make a significant contribution to the discussion about how the actual economy works.

Every orthodox or heterodox economist can convince himself/herself that their profit theory is defective.

Every non-economist can — by applying elementary logic — convince himself that conventional profit theories are false. See 'How the intelligent non-economist can refute every economist hands down'.

Because the profit theory is false the whole of conventional economic theory has to be rejected.

"What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work: were it engineering, the bridge would collapse." (McCauley)

No scientist will ever accept Walrasianism, Keynesianism, Marxianism, or Austrianism. These approaches are logically and/or empirically refuted. This is the actual methodological state-of-art. Walrasians, Keynesians, Marxians, or Austrians are still at the proto-scientific stage. These approaches cannot be improved, only abandoned.

Economists are a public nuisance because they have an opinion on everything but knowledge of nothing.

About me

“Bottom line is that your profit law is just a definition you made up nobody else agrees with, nobody. You are all alone with your precious tautology.” Barkley Rosser

“In any event, your entire theory is based on you doing macro accounting in wacky fashion that nobody agrees with.” Brian Romanchuk

"Your stuff is at least original: it's quite cool after a couple of decades at this to see a fresh Economics. But real promises are not advanced: they were around for millennia until the Greeks obscured them with Metaphysics." Chris Cook

"No mate, they're you-blockers. You have all the personality traits of a crank, and the rest of them have tired of you. You could be 100% right, and you'd still die as your only follower." Steve Keen

"What you are doing fills is all with joy, your constructive critique is most welcome!"

Achim Truger,

German Council of Economic Experts,

in a failed attempt to be ironic

"200+ years of thought and yet you are the only one who gets it—or even understands your argument. Thank god we have you, pseudonymous Twitter user. Otherwise no one would know."

William Luther

Assistant Professor of Economics

in a failed attempt to be funny

"Egmonts profit law is the perfect equation that demonstrates this in action. Put the equation into a spreadsheet and then add government spending and watch how it flows into profits. Enter in some debt (-Sm) and watch too how that flows into profits. It can't go anywhere else."

Dean

About the rest of economics

Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, Pluralism are mutually contradictory, axiomatically false, materially/ formally inconsistent. Economics is a failed science.

“There are three classes of people: those who see. Those who see when they are shown. Those who do not see.” Leonardo da Vinci

In economics, the overwhelming majority belongs to Class III. This explains why economics is after 200+ years still at the proto-scientific level.

The obvious task for every economist is to advance from cargo cult science and political agenda-pushing to science. This is absolutely beyond the means of Class III people.

For 200+ years now, economists are not scientists but agenda pushers, useful idiots, clowns in the political Circus Maximus.

Nopopop

This blog does not add to any popular/un- popular opinion.

This blog does not hand out advice about how to avoid taxes, to get rich on the stock market, to be successful in business, to increase the wealth of nations, to run an economy, to maximize welfare, to prevent national/global bankruptcy, to improve the institutional setup of society, to get out of national/global depression, nor about how to save humankind or any subgroup thereof.

This blog is about the true theory of the actual monetary economy.

"In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion." (Stigum)

Focus

Science is of primary interest and importance. Scientists are of secondary interest.

With regard to science, most people lose focus easily because of a natural preference for anecdotes and gossip over facts or subjectivity over objectivity.

Hence, Schumpeter once considered it necessary to remind his habitually disoriented fellow economists: “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.”

Science is about true/false and nothing else.

Disclaimer

Missing Blog-Reference links: AXEC does not guarantee that their comments can at any time be recovered from where they have been posted intitially because the availability depends on the publication policy of the blog owner which is implicitly accepted on entering a debate. See also: 'Economists: Incompetent? Stupid? Corrupt?'

Texts: Parts of arbitrary length of any of the author's texts is and will be used again by the author in papers, books, websites, blogs, and other media without explicit reference. The right to make corrections or minor textual improvements on reutilization is reserved. Therefore, it is always a good idea to double-check for the latest version.

Caution: Do not expect a corroboration of your political view. Neither a refutation. Political economics has been scientifically worthless since Adam Smith. Politics has to be separated from economics because it is categorically different from science. The best science can do and has always done is to prove beyond reasonable doubt that you have been objectively wrong or ignorant until now. Science goes beyond the naive common sense of today and becomes the sophisticated common sense of tomorrow.

See also Terms of Use and Legal at www.AXEC.org

Outlook

To recall, while political economics is storytelling, theoretical economics adheres to scientific standards.

The first task of theoretical economics is to get the axiomatic foundations right. This is what J. S. Mill called the opus magnum. Neither Orthodoxy nor Heterodoxy came up with a reasonable solution to this day. This explains the secular stagnation of economics.

There is no serious alternative to structural axiomatic economics. This is not a matter of opinion but of proof. The sole criteria are material and formal consistency.

All of economics has to be reconstructed from the ground up.

Major economic policy implication

The price mechanism does not work as standard economics hypothesizes. The axiom-based Employment Law states that overall employment increases if the average wage rate increases relative to average price and productivity. This gives one the lever to improve the employment situation all over the world and to fend off deflation without rising debt and without artificial capacity growth. To increase the average price relative to the average wage rate and productivity increases unemployment.

Right policy depends on true theory.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

Lacking the true theory, economists promote for more than 200 years opinion instead of knowledge.