AXEC: New Foundations of Economics: Saving

Showing posts with label Saving. Show all posts

October 19, 2026

Occasional X: Clueless economists / Science (CCCXCVIII)

“The small detail is ontological: general equilibrium closes the system through assumptions, while post-Keynesian SFC models allow us to study a monetary, historical, open economy shaped by uncertainty and institutions. But yes, the accounts balance in both. Mystery solved!” (Esteban Cruz) Neither the General Equilibrium nor the Keynesian SFC approach gets the balances right. They are both proto-scientific garbage. Neither Roger Farmer nor Esteban Cruz ever understood profit, and by logical consequence, how the economic system works. Both are scientifically incompetent economists. 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 minimum requirement in science is logical consistency. Economists never rose above confused blather. To finally become a science, economics needs a Paradigm Shift from false behavioral microfoundations and false Keynesian macrofoundations to true macrofoundations. You can see the correct balances in the following graph (⇓ AXEC244). The macroeconomic axioms for the elementary production-consumption economy are given in lines 1-3. Under the conditions of market-clearing and budget-balancing, the price is equal to unit labor costs W/R. The workers get the whole product (line 8). There is neither a real nor a nominal balance. Profit is zero. This is the methodologically correct starting point. Needless to emphasize that the representative economist messed it up. In the general case, the expenditure ratio is different from 1, i.e., ρE≠1, and this produces nominal balances (lines 12-15). The elementary balances equation says that the macroeconomic profit of the business sector Qm is equal to the dissaving of the household sector -Sm, and that loss -Qm is equal to saving Sm (line 14). The sum of balances is zero (line 15). Esteban Cruz often says, “Mystery solved!” The methodological implication is straightforward: The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. Profit is the foundational concept of economics. Legacy economics goes down the scientific drain including its proponents. It will be a good day for science when incompetent folks like Roger Farmer and Esteban Cruz are gone.
— AXEC (@EgmontHandtke) October 19, 2026

August 24, 2026

Occasional X: Clueless economists / Science (CCCLXXVIII)

“Those slides live in the mind of every modern austrian.” (H-Punk)

Those slides prove that Austrianism is failed/fake science. Austrians never understood profit and, by logical consequence, how the economic system works.

The saving of the household sector is absolutely… pic.twitter.com/1FdCyuLhe8
— AXEC (@EgmontHandtke) August 24, 2026

July 30, 2026

Occasional X: How it works (CDXCVI)

“Muh profit is theft!!!! Whereas in the real world, Marx’s own labor theory of value was dead by volume 3 of Capital after treating it as iron law in volume 1. Böhm-Bawerk asked a simple question: why does capital earn a return at all?” (Rothmus)

The short answer is that both… pic.twitter.com/8iBg6rcYtJ
— AXEC (@EgmontHandtke) July 30, 2026

Notice: Improved version

June 26, 2026

Occasional X: I=S ― the biggest idiocy in macroeconomics (V)

“Keynes built his entire system on a confusion a first-year student should catch: he treated saving and investment as enemies. Pull a dollar out of consumption and stuff it under the mattress, and the whole economy supposedly seizes up. Demand collapses. Workers get fired. The… pic.twitter.com/FORc3Ud6rs
— AXEC (@EgmontHandtke) June 26, 2026

June 12, 2026

Occasional X: I=S ― the biggest idiocy in macroeconomics (III)

“You save money because you value future consumption over present consumption. That's time preference, and it drives everything in a capitalist economy. When you delay gratification, you create the capital that builds tomorrow's wealth.” (Handre)

This is the bedtime story that…
— AXEC (@EgmontHandtke) June 12, 2026

May 8, 2026

Occasional X: Clueless economists / Profit (CL)

“Government deficit = private sector surplus (math, not a theory)” (?whispers?)

There is no such thing as the Private Sector, but only the household sector and the business sector. The respective balances are saving Sm and profit Qm. So, the correct formula says Government… pic.twitter.com/4n8Vnwmh4R
— AXEC (@EgmontHandtke) May 8, 2026

Also on fiat money.

May 6, 2026

Occasional X: Clueless economists / Profit (CXLVIII)

“Maybe he can use Claude to discover that the National Debt is really savings and the money supply? My AI says it is.” (Bill Goggin)

The free-market economy runs on profit. Macroeconomic profit is given by the axiomatically correct Profit Law / Balances Equation…
— AXEC (@EgmontHandtke) May 6, 2026

April 29, 2026

Occasional X: The futile attempt to recycle MMT (CXCVII)

“What do you mean 'hide' - sectoral balance is cited by MMT to explain exactly this.” (Not The Torygraph)

Are you really that stupid? You mention Malcolm Reavell's graph, where he juxtaposes the balances of the Central Government and the Private Sector, and both are equal. WOW,… pic.twitter.com/uZOK5D4WLE
— AXEC (@EgmontHandtke) April 29, 2026

April 9, 2026

Occasional X: How it works (CDLXVIII)

“From pound notes to gilts, Treasury bills, Premium Bonds, British Savings Bonds and Bank of England reserves, HM Government debt is private savings. Why are savings going to collapse us in misery?” (Tally Sticks)

In his confusion, Tally Sticks is messing up a lot of things. The…
— AXEC (@EgmontHandtke) April 9, 2026

“Government liabilities are still non-government financial assets.” (Tally Sticks)

Non-government is a weasel word. The correct sentence reads 'Government liabilities are either the Workers' or the Oligarchy's financial assets.' The Oligarchy's part is much, much bigger.

Why…
— AXEC (@EgmontHandtke) April 9, 2026

Correct macroeconomic accounting yields Qm≡–Sw+(G–T).

You rewrite it as Qm+Sw≡(G–T) and call the left side non-governmental. This vanishing of profit is a deception for the communicative advantage of WeTheOligarchy and the disadvantage of WeThePeople.
— AXEC (@EgmontHandtke) April 9, 2026

April 8, 2026

Occasional X: Economists still get saving/dissaving and loss/profit wrong (XI)

“… but when you tell them that mathematically, new savings in the private sector mean a state deficit, they grimace.” (fiat money, quoted by ?whispers?)

Macroeconomic profit is given by the axiomatically correct Profit Law / Balances Equation (I−Sm)+(G−T)+(X−M)−(Qm−Yd)≐0.… pic.twitter.com/aKGK5MRmWN
— AXEC (@EgmontHandtke) April 8, 2026

Occasional X: Clueless economists / Tax (IX)

Yes, case 1 is the uncorrupted starting case. The household sector's first choice is how many private goods and how many public goods they want. This is analogous to the choice between red wine and white wine. The obvious problem is that not all households have the same…
— AXEC (@EgmontHandtke) April 8, 2026

“Govt doesn't need tax revenue before it can spend. It spends by instructing the BoE to create central bank money (reserves) out of nothing, …” (?whispers?)

At this stage, the distinction between the Central Bank and the Commercial Banks is unnecessary. So, there are no…
— AXEC (@EgmontHandtke) April 8, 2026

“When the government runs a deficit (G > T), the non‑government sector as a whole receives net financial assets equal to that deficit.” (?whispers?)

There is no such thing as the non‑government sector. That's the big MMT swindle. There is only the household sector and the…
— AXEC (@EgmontHandtke) April 8, 2026

March 23, 2026

Occasional X: Economists still get saving/dissaving and loss/profit wrong (IX)

“Here is the uncomfortable truth: Your savings exist because the government is in debt.” (Dr. Steve Keen, quoted by ?whispers?)

Here is the uncomfortable truth: neither Dr. Keen nor ?whispers? understands the relationship between saving, profit, loss, and public deficit/debt.… pic.twitter.com/jTjPnTqhZo
— AXEC (@EgmontHandtke) March 23, 2026

March 21, 2026

Occasional X: Economists still get saving/dissaving and loss/profit wrong (VIII)

“capital accumulation requires savings. savings require low time preference.” (Time Preference)

As always, Time Preference is dead wrong.

It is NOT the case that saving governs investment or that investment governs saving or that both are equal by definition. Both are… pic.twitter.com/N774NiUcgB
— AXEC (@EgmontHandtke) March 21, 2026

February 26, 2026

Occasional X: The futile attempt to recycle MMT (CLXXXIX)

“'Global debt' is the sum of money owed by all economic entities (governments, companies, persons, etc.) ... a dumb accounting convention, useless except to mislead many who don't understand it.” (MMT samvega)

The favorite MMT graphic is an optical deception for the advantage of…
— AXEC (@EgmontHandtke) February 26, 2026

February 20, 2026

Occasional X: Economists still can't get the sectoral balances right (V)

“If the state runs a surplus then some other actor in the macro economy ran a defecit. The private sector! (Phil Waller)

There is no such thing as the private sector; there is only the household sector and the business sector. The balance of the latter is profit, the balance of… pic.twitter.com/sqy9xVUBgw
— AXEC (@EgmontHandtke) February 20, 2026

January 25, 2026

Occasional X: Economists still get saving/dissaving and loss/profit wrong (VI)

#Economics #AllYouNeedToKnow

“Your savings exist because the government is in debt.” (Steve Keen)

Steve Keen never understood profit and, by consequence, how the economy works. That's self-disqualifying.

There are TWO sectors, the business sector and the household sector. The…
— AXEC (@EgmontHandtke) January 25, 2026

January 24, 2026

Occasional X: Clueless economists / Productivity (I)

#Economics #AllYouNeedToKnow

“However, standard labour productivity aggregates wages, profits, rents, and interest into its numerator while normalising solely by labour input. ” (James Young)

Because wages are flows and macroeconomic profit is a difference of flows, “wages,… pic.twitter.com/9VTSfzlh7V
— AXEC (@EgmontHandtke) January 24, 2026

January 3, 2026

Occasional X: Economists still get saving/dissaving and loss/profit wrong (V)

#Economics #AllYouNeedToKnow

“In the modern economy, most capital is created by bank credit, not prior saving, …” (James Young)

True. It is NOT the case that saving governs investment or that investment governs saving or that both are equal by definition, as Keynes said. ⇓… pic.twitter.com/4AP0mHWh8d
— AXEC (@EgmontHandtke) January 3, 2026

December 10, 2025

Occasional X: The futile attempt to recycle MMT (CLXXIX)

#Economics #AllYouNeedToKnow

“2/the debt are the private sector net savings.” (Patricia Pino)

No.

There is no such thing as the private sector. There are the business sector and the household sector. The balance of the household sector is saving/dissaving, and the balance of…
— AXEC (@EgmontHandtke) December 10, 2025

Occasional X: Economists still get saving/dissaving and loss/profit wrong (IV)

#Economics #AllYouNeedToKnow

“No one is claiming that I ≠ S.” (Shahin Ashkiani)

It is NOT the case that saving governs investment or that investment governs saving or that both are equal by definition, as Keynes said. ⇓ Both are independent, and they together determine… pic.twitter.com/Ldq0QKLyUE
— AXEC (@EgmontHandtke) December 10, 2025

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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.