Occasional X: Clueless economists / Profit (CLXVIII)

“Murray Rothbard took Mises's price theory and drove it to a destination Mises never reached.” (Handre) von Mises never understood profit. Murray Rothbard never understood profit. Handre never understood profit. Consequently, they never understood how the economic system works. The same holds for the rest of Austrians. In Chapter 8.1 of Man, Economy, and State, Murray Rothbard writes: “In the evenly rotating economy, there are only two ultimate categories of producers’ prices and incomes: interest (uniform throughout the economy), and 'wages'—the prices of the services of various labor factors. In a changing economy, however, wage rates and the interest rate are not the only elements that can change. Another category of both positive and negative income appears: entrepreneurial profit and loss.” (Rothbard, p. 509, Kindle Version) 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 that profit appears if Qm:=(I−Sm)>0, if there is a public deficit Qm:=(G−T)>0, and if there is profit distribution Yd and an expenditure ratio of ρE=1. Needless to emphasize, that neither Murray Rothbard nor Handre have ever heard of the Profit Law. The Law refutes Austrianism. Part of the formula has already been explained; see Clueless economists / Profit (CLXVI) https://t.co/9m7wYiHvr4 In the following, it is explained how the free-market economy creates free lunches for WeTheOligarchy with profit distribution Yd. The derivation is summarized in the table below ( ⇓ AXEC245). The elementary production-consumption economy is given with the axiomatically correct macroeconomic axioms in lines 1-3. They are systemic, not behavioral. The price follows in lines 5 and 8. In the elementary production-consumption economy, i.e., in the evenly rotating simple economy, the market-clearing and budget-balancing price is equal to unit wage costs W/R. The workers get the entire product O. The business sector's profit Qm is zero. Profit of the business sector (line 12) and the differentiated income/consumption of the household sector (lines 13, 14) define the interrelationship of balances. One limit case is ρECW=1 and ρECD=1, with the result Qm=Yd. In the evenly rotating economy, profit is equal to distributed profit. That means that WeTheOligarchy can make profit and full consumption of distributed profit to repeat themselves in all eternity. Profit distribution (co-)produces the free lunches of the free-market economy. Profit is recreated by profit distribution, i.e., there is no productive contribution of WeTheOligarchy to the real product O that justifies distributed profit income. The price adapts analogous to line 5. The price mechanism redistributes the real product O between the receivers/consumers of wage income and the receivers/consumers of distributed profit. In essence, Austrians are the promoters of the free-market economy as a free-lunch system for the Oligarchy. The free-market economy has not so much to do with the efficient use of resources but with the distribution of the real product O between WeThePeople and WeTheOligarchy. The distributional trick is done by the Invisible Hand of the price system. Austrians are either stupid or corrupt or both.

— AXEC (@EgmontHandtke) October 21, 2026