Occasional X: Economics and math ― they just can't get it together (XVI)

“The arrogance of mathematics becomes counterproductive when the map is mistaken for the territory. It reduces economics to what can already be quantified, discouraging exploration of what remains unknown. Pedantry is not scientific rigour, and mathematical.” (Rangaraj C) Yes, mathematics can be misused. Economics is the most obvious example in the history of failed/fake science. This is long known. Georgescu-Roegen was well aware of his fellow economists’ utter scientific incompetence: “Knight lamented that there are many members of the economics profession who are ‘mathematicians first and economists afterwards.’ The situation since Knight's time has become much worse. There are endeavors that now pass for the most desirable kind of economic contributions, although they are just plain mathematical exercises, not only without any economic substance but also without mathematical value. Their authors are not something first and something else afterwards; they are neither mathematicians nor economists.” From the fact that legacy economics has been a cargo cult science, especially with the misuse of math, it does not follow that Austrian anti-math is the correct conclusion. Far from it. Georgescu-Roegen again: “Lest this position is misinterpreted again by some casual reader, let me repeat that my point is not that arithmetization of science is undesirable. Whenever arithmetization can be worked out, its merits are above all words of praise. My point is that wholesale arithmetization is impossible, that there is valid knowledge even without arithmetization, and that mock arithmetization is dangerous if peddled as genuine.” The incompetent scientist solves nothing but keeps everything in the swamp of inconclusiveness, where 'nothing is clear, and everything is possible' (Keynes). Inconclusiveness is what Popper called an immunizing stratagem because: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman) Austrian anti-math is an immunizing stratagem to keep everything in the swamp of endless political blather. Von Mises never understood the foundational concept —profit— of economics. Scientifically, he was a dead man walking/talking from the beginning. His political pronouncements have no valid scientific foundations. Praxeology is a tautological joke. His 'theory' is political agenda pushing verbalized in the economics jargon. Economics has been failed/fake science since the Founding Fathers. It has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. Among all scientifically incompetent economists, Austrians have been the dumbest. The appropriate math of economics is not constrained optimization, i.e., calculus or what Austrians call Marginalism, but the elementary algebra that underlies macroeconomic accounting. Economics is about the economic system's behavior, not about human behavior. Human behavior is the subject of psychology, sociology, history, evolutionary biology, etc., and the silly content of everyday brainless gossip.

— AXEC (@EgmontHandtke) November 15, 2026

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

“The more I delve into my Economics studies in Madrid and the more I listen to the lectures and classes of Professor Jesús Huerta de Soto, the more convinced I am that economic freedom, private property, and entrepreneurship are fundamental pillars of a prosperous society.” (Maria Elizabeth Huber) The Austrian School is refuted on all counts. They never understood profit, and by logical consequence, how the economic system works. That is self-defeating. The economy runs on profit. The minimum requirement of a free-market economy is that macroeconomic profit Qm is greater than zero. If Qm<0, recession/depression/breakdown results. This is the main economic principle; all other explanations of how the economy works are secondary. Utility/profit maximization or free people on free markets or competition or hard work or innovation or the entrepreneur 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. Austrians have never had enough brains to understand the objective/systemic facts, i.e., the existential preconditions. 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 has always been failed/fake science. They are political storytellers for an audience that cannot spot the difference between science and political agenda pushing. I am sure that Professor Jesús Huerta de Soto does not understand the economic basics that are summarized in table AXEC226f ⇓.

— AXEC (@EgmontHandtke) November 14, 2026

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

“The State is an institution run by gangs of murderers, plunderers and thieves, surrounded by willing executioners, propagandists, sycophants, crooks, liars, clowns, charlatans, dupes and useful idiots.” (Hans-Hermann Hoppe) Whatever this is, it is not economics. But there are similarities. 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. Economic policy guidance has never had valid scientific foundations. This converges with Hans-Hermann Hoppe's philosophical insight about the State: The representative economist in general and the Austrian School economist in particular is NOT, and never has been, a competent scientist but an agenda pusher / useful idiot / impostor / phrase monger / storyteller / troll / pseudo-psychologist / self-gloryfier / heroic good-cause fighter / media talker / hallucinatory prophet / clown in the political Circus Maximus (AXEC108o ⇓).

— AXEC (@EgmontHandtke) November 14, 2026

Occasional X: How it works (DXLIV)

“Thomas Piketty built a global reputation on a single, seductive claim: capital accumulates faster than the economy grows, causing wealth to concentrate permanently at the top, and only aggressive redistribution fixes this. … But the entire foundation is rotten. Piketty's central formula, r > g (the return on capital exceeds economic growth), relies on projecting historical capital returns forward indefinitely.” (Handre) Let's generalize: both Piketty and Handre don't understand the investment cycle. The foundational error of legacy economics consists of the fact that the representative economist does not understand profit. As a logical consequence, distribution theory, monetary theory, value theory, etc. have been false since the Founding Fathers. To this day, economics is not a science because it does not get the foundational concepts right. Macroeconomics has always been axiomatically false. It has to be rectified first. This requires a Paradigm Shift. In the following, the problem is reduced to the bare bones. The new axiom set is given in lines 1-3 as shown in the table AXEC243a ⇓ The condition of market-clearing, i.e., X=O, is introduced in line 5. The condition defines the analytical causality. The market-clearing price P is here the dependent variable and is given for the specific and the general case in lines 5, 13, and 17. With the condition of budget-balancing added, i.e., Ec=Yw, that is ρEc=1, the price P is equal to unit wage costs W/R in line 5. Macroeconomic profit Qm is zero in line 7. In the most elementary case, the market-clearing price P moves with unit wage costs W/R. The workers always get the whole product O. Their real wage is equal to the productivity, i.e., W/P=R. General wage increases are pointless. The worker's living standard depends alone on the productivity R. The profit Qm for the business sector is zero. Price increases can come only from wage rate increases or from productivity decreases. The quantity of money is not a price determinant. The elementary production-consumption economy is then split into two equal firms. Thus, microeconomics and macroeconomics are consistent. The differentiated economy is given in the general form with lines 10-13. For a start, the two firms are equal in all respects. The market-clearing price is equal for both. Now, firm 1 produces the consumption good as before. Firm 2 produces an investment good instead (line 16). The households reduce their consumption spending, i.e., they save (line 16). Instead, the business sector buys the output of firm 2 with Ei1. The amount is equal to the former consumption expenditures, i.e., Ei1=Ec0. In this special case of the synchronous investment cycle, saving equals investment. However, the saving is done by the household sector, and the investment is done by the business sector. It is assumed here that the business sector takes credit from the banking sub-sector, and the household sector deposits its saving. Thus, the banking sub-sector's balance sheet says, in the old notation I=S, in the new notation Ei1=Sm1. It seems that the saving of the household sector finances the investment expenditures of the business sector. In fact, the two amounts are independent of each other and are only equal in the limiting case of a perfectly synchronous investment cycle. The profits of both firms are zero as before. In period 2, the investment goods are used for the production of the consumption goods in both firms. Firm 2 switches back from investment goods production to consumption goods production. The input of investment goods increases the productivity of the consumption goods production, i.e., R2>R0. Accordingly, the output increases with an unchanged total labor input L, compared to period 0. The productivity effect alone lowers the market-clearing price. However, the nominal demand increases because the savers of period 1 dissave in period 2. The resulting effect on the market-clearing price depends on the relative strengths of the two effects (line 17). It is assumed for the moment that the market-clearing price remains unchanged, i.e., Pc3=Pc0. In this case, the investment cycle produces a pure time transfer of the consumption goods from period 1 to period 2. Only if the price is lower do the saver-households get more in real terms. Saving in period 1 is 'rewarded' with more consumption goods in period 2, if the productivity effect is large enough. This increase can be interpreted as a real interest rate. However, the households that have not saved also benefit from the productivity effect in the form of a lower market-clearing price (line 17). Because the household sector dissaves, the business sector now makes a profit (line 18). Because the investment goods are used up in period 2, the depreciation is equal to the monetary profit Qm, and the net profit is zero. Over the whole synchronous investment cycle, the business sector's net profit is zero. Macroeconomically, the productivity effect does not translate into a profit effect. Only if one firm can increase its productivity and the others can not, this increase its profit. This is a partial effect that cannot be generalized. It leads to the intellectual shortcut that a productivity increase always means a profit increase. This is the typical microeconomic Fallacy of Composition. What remains is the productivity effect. The household sector benefits only if the productivity effect overcomes the dissaving effect. In this case, all households are 'rewarded', not only the savers/ dissavers. For the saving/dissaving households, a real interest rate can be calculated. This interest rate has nothing to do with the interest rate for the investment credit and the interest rate for saving deposits. As a consequence, the banking credit interest rate does not follow from the productivity effect of the investment. The difference between credit interest and deposit interest is, in the elementary case, equal to the bank's wage bill. The first conclusion from the synchronous investment cycle is that the accustomed business cycle theories are conceptually defective. A growing capital stock does not increase macroeconomic profit over the complete investment cycle. Only if one firm increases its capital stock and its productivity, its profit increases. However, because the market-clearing price decreases because of the productivity effect, the loss in firm 2 increases also. If firm 2 cannot also increase its productivity, it will go bankrupt. Thus, monopolization increases. Conclusion: Economists habitually confound partial and total effects. This is the Fallacy of Composition. In a synchronous investment cycle, the sum of macroeconomic net profit is zero. 'Piketty's central formula, r > g (the return on capital exceeds economic growth)' is provably false, because macroeconomic profit is produced by private/public deficit spending, i.e., not by the growth of capital but the growth of debt.

— AXEC (@EgmontHandtke) November 14, 2026

Occasional X: Time to get the axioms of economics right (XII)

“The objects and theorems of mathematics are as objective and independent of our free choice and our creative acts as is the physical world.” (Gödel, 1951, Gibbs lecture manuscript, quoted by Plato's Stepchild) The same holds for economics. The state of economics is this: there is political economics and scientific 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. From the beginning, economics has not been a science but silly political agenda pushing. 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 is materially/formally inconsistent, i.e., provably false. Economics has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. Actually, economics is about how the economy works. It is a genuine systems science. To finally become a science, economics needs a Paradigm Shift from false mainstream microfoundations and false Keynesian macrofoundations to true macrofoundations (⇓ AXEC121l).

— AXEC (@EgmontHandtke) November 14, 2026

Occasional X: How it works (DXLIII)

“October: The Federal Government took in $369 billion and spent $773 billion. That's a $404 billion deficit in just one month.” (Charlie Bilello) 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. Currently, POTUS is exploding the public debt; this will increase the number of millionaires/ trillionaires/ zillionaires in the short run, no matter how the real economy performs. As a card-carrying member, President Trump is just following the Prime Directive ('POTUS'S General Order No. 1') of WeTheOligarchy. Needless to emphasize that the growth of macroeconomic profit is roughly equal to the growth of WeThePeople's public debt. If this growth slows down, the free-market economy implodes.

— AXEC (@EgmontHandtke) November 14, 2026

Occasional X: The futile attempt to recycle Marx (LXIII)

“To understand Marx, you really need to read all three volumes of Capital carefully. It’s not exactly easy, especially compared to modern economics books, where you open one and everything is already formalized and clearly explained without all the literary allusions. (Khazbi Budunov) Marx had no clue what the foundational concept of economics —profit— is. That's self-defeating. The crucial point with Marx/ Socialism/Communism/ Capitalism is whether Marx understood how the monetary economy works. This presupposes an understanding of the concept of profit. Because Marx was too stupid for elementary logic/algebra, his economics has been failed/fake science from the beginning. For proof, see the working paper Profit for Marxists https://t.co/pslUNCu2Ef As far as Marx's sociology is based on economics, it has no valid scientific foundations. 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) So, folks like Khazbi Budunov are just turning over the scientific dung heap again and again and are spreading the hope that somehow a breakthrough is just around the corner. With Marx's approach, it will never happen. From inconsistent premises, nothing of scientific validity can ever follow. Science is forward-looking; current economics is caught in the mental trap of obsolete approaches. To finally become a science, economics needs a Paradigm Shift from false behavioral microfoundations and false Keynesian macrofoundations to true macrofoundations.

— AXEC (@EgmontHandtke) November 14, 2026