Occasional X: How it works (DXXXIV)

“Here is one of the clearest proofs of how prices have become *relatively* inflexible since the 1930s. In the 1700s and 1800s, many prices really were quite flexible, but not so today. Once you take out 1970s Stagflation (an anomaly), the data is as clear as day: …” (Lord Keynes) Price Theory has been proto-scientific garbage 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. 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. Price Theory has to be based on systemic axioms instead of behavioral axioms. The methodologically correct approach is summarized in table AXEC246 ⇓. Microfoundations are methodologically false; this requires a Paradigm Shift. 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 4. For a start, the price is the dependent variable here. This is a starting condition that is lifted later. In the initial state, i.e., ρEC=1, the price is equal to unit wage costs W/R in line 6. The workers get the whole product O. The profit Qm for the business sector as a whole is zero. Now, the tacit assumption that macroeconomic accounting covers all transactions is dropped. In the best case, it registers all licit transactions. Therefore, the axioms have to include illicit transactions. This is done in lines 13 and 14. Illicit transactions consist of illicit income in line 13 and normal consumption expenditures in line 14. As an example, illicit income consists of the off-balance payments of three-letter agencies to their unofficial employees. This income is paid with central-bank-produced counterfeit money. This money is practically indistinguishable from 'original' money. The dark income does not appear in the official statistics. As a result, the market-clearing price in line 15 increases. For the special case of budget-balancing and market -clearing, macroeconomic profit is equal to the illicit income in line 17. Lord Keynes's graph can be reinterpreted as follows: The long-run inflation that started around 1950 coincides with the founding of the CIA in 1948. Since this time, their inofficial employees are paid with counterfeit money. Illicit income fuels normal consumption expenditures and increases the market price and the profit of the business sector. The inflation since the 1950s is attributable to the steady growth of all kinds of three-letter agencies. Whether this hypothesis is true or not can not be empirically established because of Dark Money. Monetary Theory has no empirical leg to stand on. Testing the Quantity Theory is impossible for all practical purposes because National Accounting is incomplete. There is no such thing as the 'clearest proof'.

— AXEC (@EgmontHandtke) November 3, 2026

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

“Cool, now tell us, why does interest emerges according to the mainstream economics. Show us how you got it.” (Inclamiente) The axiomatically correct AXEC approach does not explain how interest emerges in mainstream economics. AXEC proves that mainstream economics is proto-scientific garbage because it still gets the foundational concept of profit wrong. If profit is false, the whole approach is scientifically worthless. For the axiomatically correct systemic approach, see the working paper The emergence of profit and interest in the monetary circuit https://t.co/hLik3pwSr5

— AXEC (@EgmontHandtke) November 3, 2026

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

“Are you retarded, illiterate or what is your problem? Marx was literally one of the first to talk about interest as a cost of production of financial capital, and to treat differently returns from financial products vs profits of finance firms.” (Moulaga expropriator) Marx's economic theory belongs to the scientific sphere and has to be refuted according to scientific methodology. Because Marx got the foundational concept of economics —profit— wrong, his remaining communicative contributions reduce to psycho-social-political-philosophical blather. Unfortunately, this part has dominated public opinion to this day. Ultimately, the idiocy of the discussion consists of the intentional/unintentional muddling of economics, sociology, psychology, history, politics, philosophy, gossip, and shithrowing. Marx/Engels called their common project Scientific Socialism‡, but its scientific content has been zero from the beginning. Marx/Engels and their followers never understood science. For proof, see the working paper ⇒ Profit for Marxists https://t.co/P1NOW4FyXK Also Here is the long-overdue scientific death certificate for Marx and Marxists. https://t.co/9SwjuSW8Ca Marxianism still has no scientific truth-value, only political use-value. It is still good for playing low-IQ communicative games, but for nothing else. In the scientific sphere, Marx is still a zero. In the political/philosophical sphere, confused blather is the norm; here Marxianism has its ecological niche as a Weltanschauung together with all other occult/esoteric/voodoo/religious/etc. aberrations of the human mind. The proof for utter scientific incompetence is in followers like Moulaga expropriator ‡ “Scientific socialism, primarily associated with Karl Marx and Friedrich Engels, is a materialist, historical approach to understanding society, viewing history as a progression driven by economic conditions and class struggle, …” (Google AI, Scientific Socialism)

— AXEC (@EgmontHandtke) November 3, 2026

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

“Why does economics work with utility functions, and not just decision rules? The key trick is the use of the mathematical technique of Lagrangians to solve the age-old philosophical 'is-ought' problem” (alz) The methodological problem with modern economics is that it is axiomatically false. Economics is failed/fake science. The microfoundations approach was doomed from the outset. The Founding Fathers defined economics as a social science, and accordingly, it has been based on subjective/behavioral assumptions/axioms. This has been the methodological ur-mistake. For example, here are the Walrasian axioms: “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 methodological mistake is that economists put the behavioral assumption of constrained optimization and equilibrium into the premises. This is a petitio principii, but economists do not know what this means. Stupidity makes faithful worshipers: “And so — faithful to the theory's conceptual cornerstones and hoping against all hope that the unthinkable may still be achieved (i.e., a satisfactory theory of the price mechanism) — the tormented upholders of the validity of the paradigmatic core of economic equilibrium theory appear singularly reluctant to face the problem of comparing expectations and results and assessing the consistency of the theory.” (Ingrao et al., 1990, p. 346) Although microfoundations is methodologically a false concept, economists repeat it nonetheless: “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, pp. 369-370) The way forward is to reconstruct economics entirely without the concepts of constrained optimization, rational expectations, equilibrium, and other NONENTITIES. In methodology, this is called a Paradigm Shift: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990, p. 362) It means, first, that legacy economics goes down the scientific drain for good. It means, second, to go forward and perform the Paradigm Shift (⇓ AXEC113i). It means, finally, to bury microeconomists in the darkest corner of the Flat-Earth cemetery. Economics is a genuine system science, not a social science. Economists have gotten it wrong since the Founding Fathers. The EconNobel for 'economic sciences' is a scientific fraud. The representative economist is either stupid or corrupt or both.

— AXEC (@EgmontHandtke) November 3, 2026

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

“For decades, classical economists like Adam Smith struggled to explain why water was cheap, while diamonds, largely useless luxuries, commanded a fortune. Austrian economist Carl Menger solved the diamond-water paradox by pioneering the concept of subjective marginal utility, pointing out that economists had mistakenly concluded that 'value in use' and 'value in exchange' were entirely separate concepts driven by production costs.” (Creative Deduction) Adam Smith was 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/8NXaiPW0x3 (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 2, 2026

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

“Hayek has taught us this lesson about pricing, over and over again. Free-market prices have an important role to play in our society, in our economy. They convey precious information.” (Walter Block) Hayek never understood profit and, by logical consequence, how the markets function. His efficiency story is a benign interpretation of what the price mechanism, i.e., the Invisible Hand of the Oligarchy, really does. The free-market system is, in the last instance, a quasi-Darwinian selection mechanism, i.e., the economic analog to triage in medicine. For example, during a famine, only the rich person can pay the high price of bread and survive. In contrast, the poor person leaves the market empty-handed to die of starvation. The market's primary function is NOT efficient information-processing/resource-allocation (Hayek's hallucination) but the redistribution of the Quality-of-Life. In economically extreme situations, the Invisible Hand kills anonymously. Because the price mechanism is a powerful tool, the most important task of an economist ― who is smart enough to know on which side his bread is buttered ― is to praise its informational magic, its efficiency, or its welfare effects. This distracts from the fact of selection. The optical illusion is this: the price is co-determined by nominal demand, and demand depends on different earnings, profit distribution, and different accumulated wealth. The price structure distributes, in any period, real output/wealth to already existing financial wealth. It distributes the Quality-of-Life. The problem is that richness often does not come from merit but from fraud, exploitation, organized crime, primitive accumulation, stealing innovative ideas, or from big-style printing counterfeit money. The quasi-Darwinian free-market selection mechanism increases the survival chances of the corrupt and decreases it for the honest. For details, see How it works https://t.co/lqv0W118dK The price mechanism has not much to do with abstract optimal allocation of resources but makes sure that the Quality-of-Life is ultimately allocated to the Oligarchy. 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, not utility/profit-maximizing free people on free-markets or optimal allocation. The axiomatically correct macroeconomic profit formula reads: Qm:=Yd+(I−Sm)+(G−T)+(X−M). It holds for every monetary economy, independently of political ideology. Macroeconomic profit is equal in Capitalism and Socialism according to the Profit Law. The Profit Law implies Public-Deficit-is-Private-Profit 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 must be considered a critical factor for Capitalism's survival. Capitalism is temporarily saved from breakdown by the deficit-spending/money-creating duo of Treasury/Central Bank, i.e., the State. The State has existential primacy, not the free-market or the price system. Capitalists and Socialists have never really understood what profit was. Friedrich Hayek never came intellectually above the microeconomic level and fell foul of the Fallacy of Composition. He was not a competent scientist but a political agenda pusher. More precisely, Hayek was a political agenda pusher for the Oligarchy in the guise of science. He added intellectual corruption to the system of financial corruption.

— AXEC (@EgmontHandtke) November 2, 2026

Occasional X: Clueless economists / Employment (XD)

“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