Occasional X: How it works (DXXXV)

“Mises in Human Action is very clear in the passage below: money prices of factor inputs do not directly determine the output prices: factor input prices are determined 'EXCLUSIVELY by the anticipation of future prices of the products'.” (Lord Keynes) Time to get Price Theory right. 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. Economics needs a Paradigm Shift. The representative economist will not survive it intellectually. The methodologically correct approach is summarized in table AXEC247 ⇓. Microfoundations are methodologically false; 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 or ρEC=1, this yields the price P in line 6 as equal to unit wage costs W/R. Without budget-balancing it is ρEC*W/R. For a start, the price is the dependent variable here. This is a starting condition. In the most elementary case, the price is equal to unit wage costs W/R. The workers get the whole product O. The profit Qm for the business sector as a whole is zero. In the general case, the macroeconomic price depends on demand and unit wage costs. If the condition of budget balancing is lifted, i.e., nominal demand is not determined by income. The market-clearing price P is now co-determined by the expenditure ratio ρE, i.e., ρE1<1 means saving of the household sector as a whole. Dissaving, i.e., ρE1>1, means that the household sector takes a credit from the Central Bank. The Central Bank stands here for the banking system. Dissaving also means that the business sector makes a profit in line 9 and accordingly has demand deposits at the Central Bank. If the household sector saves, the business sector makes a loss. If the condition of zero distributed profit is lifted in line 13, the resulting market-clearing price in line 14 is dependent on the differentiated expenditure ratios of wage income and distributed profit income, the relative weight of distributed profit ρD, and unit wage costs W/R. This relationship consists of measurable variables and is testable in principle. The axiomatically based price formula in line 14 fully replaces Demand-Supply-Equilibrium for the elementary production-consumption economy. It replaces also the silly Demand-Supply-Equilibrium storytellers.

— AXEC (@EgmontHandtke) November 4, 2026

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

“But charigng of interest is bad, right? And there is no economic reason for it. As Marx says 'it's usury!!!' :-D” (Inclamiente) Generally speaking, interest is justified in a monetary economy if the interest difference of the given stocks covers the wage and risk costs for administering the total active/passive portfolio of the central-bank/ banking-subsector. If it is higher, the banking subsector makes a profit; if it is lower, banks go bankrupt. Among private households, the interest rate above the banks' interest rate of equal risk/lack of securitization may be called usury. Marx had nothing to say about how the economy works because he did not understand profit — the pivotal concept of Capitalism. Manifest inconsistency is an advantage in religion/politics, but a lethal disadvantage in science. To expect scientific knowledge from Marx or his sorry followers is as good as to expect rain from the chief's rain dance.

— AXEC (@EgmontHandtke) November 4, 2026

Occasional X: Paradigm Shift (CXXX)

“Yes it doesnt matter, I dont need a particular homo economicus. individuals and firms in Marx's framework can believe what they want, act how they desire, but ultimately the market ensures that those not in line are banished to the shadowrealm of bankrupcy.” (Moulaga expropriator) Almost right. Economics is not about how people behave but how the economic system behaves. The economic system is given with the axiomatically correct macrofoundations AXEC121l ⇓. Human behavior is formally added to the objective/systemic axiom set with the Propensity Function. As Aristotle put it 2400 years ago: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle, Analytica) The representative economist is methodologically more than 2000 years behind the curve — Walrasianism, Keynesianism, Marxianism, and Austrianism don't matter.

— AXEC (@EgmontHandtke) November 4, 2026

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

“Before Carl Menger published his Principles of Economics in 1871, mainstream economic thought was a muddle of half-truths, moral philosophy dressed as science, and a value theory so broken it could not explain why water costs less than diamonds. The classical school, anchored by Adam Smith and David Ricardo, gave the world the labor theory of value. Price, they believed, derived from the labor embedded in production.” (Handre) Adam Smith/David Ricardo were 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/8NXaiPVsHv (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 3, 2026

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

“Really? :-D it doesn't matter what guides people to do things? The incentive and behavior under the incentives doesn't matter for your economics? :-D then what do you study, you don't study the economy - how people allocate resources. So what do you study?” (Inclamiente) You are behind the curve. The question has already been answered: “The subject matter of economics is not homo oeconomicus but the economic system. Because of this, economics has to be redefined. — Old definition, subjective-behavioral: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” (Lionel Robbins, 1935) — New definition, objective-structural: “Economics is the science which studies how the monetary economy works.” (AXEC) The original methodological blunder of Orthodoxy has been that it attempted to axiomatize human behavior. This is a fine example of what Feynman called cargo cult science, i.e., ‘The form is perfect. But it doesn't work.’ The correct approach consists of axiomatizing the objective structural relationships of the monetary economy.” For details, see Redefining economics (I) https://t.co/Ju2upUfGPg To finally become a science, economics needs a Paradigm Shift (AXEC121l. It's pretty obvious that low-IQ folks like Inclamiente will not survive this intellectually.

— AXEC (@EgmontHandtke) November 3, 2026

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

“The beauty of Marx is that as long as the agents are not all lobotomized like you, what they believe, what guides their decisions, doesnt really matter. (Moulaga expropriator) Marx had no clue about 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 his sociology is based on economics, it has no valid scientific foundations. Scientific competence cannot be replaced with politico-philosophical blather. However, for a low-IQ audience, Marx still delivers plausible psycho-social explanations.

— AXEC (@EgmontHandtke) November 3, 2026

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

“Oh really? Go ahead and answer my question then.” (Inclamiente) With the self-declaration as an economist, every economist has to answer the basic question of how the economy works. He has to answer it to the public, not specifically to any hopelessly deranged political agenda-pusher on the Internet. My answers are given on my blog, my working papers, and my book. Please help yourself.

— AXEC (@EgmontHandtke) November 3, 2026

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

Occasional X: How it works (DXXXIII)

“American military spending is only possible because the dollar is the reserve currency. This is not an opinion. It is arithmetic. The United States runs persistent deficits that would be unsustainable for any other country. It finances those deficits by issuing Treasury bonds.” (Sony Thang) With its double deficit, America has been the profit-maker for itself and the Rest of the World. That goes hand in hand with the dollar's role as a reserve currency. 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. The Law implies also that America's foreign trade deficit, i.e., Qm:=(X−M)<0, is profit for the rest of the world, i.e., Qm:=(X−M)>0, which takes the form of currency reserves. In free-market economies, public debt has increased with minor interruptions for over 200 years. Therefore, Qm:=(G−T)>0 has been a critical factor for Capitalism's survival. The free-market economy is temporarily saved from breakdown by the deficit-spending/money-creating duo of treasury/ central bank, i.e., the State. This means that the premise of legacy economics, i.e., that the unfettered free-market economy is a self-adjusting, self-stabilizing, and self-optimizing system, is axiomatically false. This means that economics is failed/fake science. Economists are not scientists. They are mostly silly wafflers for a low-IQ audience. The free-market polity is an Oligarchy with parliament / treasury / central bank / capital markets / big business / three-letter agencies as integral parts. With the other determinants excluded for the moment, private financial wealth grows with public debt. Eventually, WeTheOligarchy owns the financial assets, and WeThePeople owe the public debt and are taxed for interest on government bonds as long as the debt is rolled over. Interest payments on the debt reduce their disposable income for an indefinite time. The government taxes WeThePeople on behalf of WeTheOligarchy. This profit/interest/tax triple-whopper produces wealth for WeTheOligarchy and debt and real-income reductions for WeThePeople. Via the foreign trade balance, America distributes part of its macroeconomic profit around the world. In addition to legitimate monetary operations, the central bank is well-positioned to carry out or support illicit operations that are economically equivalent to putting counterfeit money into circulation. The volume of illicit deficit spending and money creation, as well as the quantity of Dark Money in circulation, is not publicly known. Therefore, Profit Theory, Distribution Theory, and Monetary Theory have no empirical leg to stand on. The financial sub-sector, big business, and billionaires recycle some of their profits and financial wealth to control major public, private, and political institutions. Thus, they corrupt the polity. The direction of academic scientific research is controlled by grants. In essence, this is how the self-alimentation and self-preservation of WeTheOligarchy work. Capitalism thrives on free lunches that are ultimately supplied by the duo of treasury/ central bank, i.e., the State. America is still the source of profit free-lunches for itself and the Rest of the World. It's not the absolute amount of military spending that counts; it's the DEFICIT that counts; roughly speaking: ALL government spending (including social spending and interest on government bonds) minus ALL taxes.

— AXEC (@EgmontHandtke) November 2, 2026

Occasional X: Clueless economists / Science (CCCXCII)

“Economists will look you dead in the face and call this science.” (Jack Meyer) Yes, this is the sorry state of economics. It's scientifically worthless — only good for inconclusive political blather. But they award themselves the EconNobel for 'economic sciences' (AXEC136j ⇓). Science is binary true/false and NOTHING in between. Non-science is the swamp between true and false where ‘nothing is clear and everything is possible’ (Keynes). The distinction between science and non-science corresponds to the ancient Greeks’ distinction between episteme (= knowledge) and doxa (= opinion). Methodologically, economists are 2400 years behind the curve. The fact is that about ninety-nine per cent of people are satisfied with opinion, and only one per cent is devoted to episteme. Economists do NOT belong to the latter group. Economics is a cargo cult science, and economists are fake scientists, and the EconNobel is a fraud. When they've used all their arguments, the scientifically clueless hit the social media emergency brake and retreat to an etiquette class: “Personal insults are best left in the schoolyard. Nor do they contribute to the persuasiveness of your derivative arguments. You are Blocked.” (Roger Farmer, #EconBlocker) The state of economics is this: there is political economics and theoretical 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. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing). This is why economics never rose above the level of a proto- or cargo cult science. There are the hard rocks of true or false and the swamp between them. The swamp is the natural habitat of morons, agenda pushers, confused confusers, incompetent scientists, political economists, status-quo inertionalists, commonsensers, and anti-scientists. Political economists are natural-born swampies. In marked contrast to scientists who drive the question under discussion to the point of a clear-cut decision between true or false, neither the orthodox nor the heterodox swampy has a genuine interest in a definite outcome but seeks to keep matters in the swamp of inconclusiveness. Swampiness is what Popper called an immunizing stratagem because: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman) Therefore, the cargo cult scientist is mainly occupied with producing a methodological smoke screen that consists of vague concepts, anything-goes, pluralism of false theories, alleged complexity, ontological uncertainty, unreliable data, faux humility, the post-modern replacement of true theory by political narrative, and a veritable artillery barrage of silly excuses. The beauty of the swamp is that logical and empirical failure is inconsequential.” (AXEC) For more details, see What is so great about cargo cult science? or, How economists learned to stop worrying about failure https://t.co/VoQJMa4CUZ From the beginning, economics has not been a science but silly political agenda pushing. There has not been genuine scientific progress since the Enlightenment, only changes in propaganda. Watch the sorry contemporary academic discussion. They're just turning over the scientific dung heap without ever arriving at a result that satisfies the most 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) 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. As far as an approach is formalized, economists apply the wrong math. However: “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) To finally become a science, economics needs a Paradigm Shift. The current group of academic non-scientists will not survive this.

— AXEC (@EgmontHandtke) November 2, 2026

Occasional X: Paradigm Shift (CXXIX)

“Yes. General Equilibrium Theory is a language that enforces internal consistency. Like individual rationality: GE alone is irrefutable. That does not mean it is worthless: Far from it.” (Roger Farmer) Yes, consistency is important: “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) However, each Paradigm stands or falls with its premises: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle, Analytica) J. S. Mill was perfectly clear about the starting problem: “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.” The problem with modern macroeconomics 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. Roger Farmer is a retarded blatherer.

— AXEC (@EgmontHandtke) November 1, 2026

Occasional X: How it works (DXXXII)

Why the Worst Get on Top is the title of Ch. 10 in Friedrich Hayek's book The Road to Serfdom. In the free-market economy, profit may provide a strong incentive to corruption/organized crime. According to quasi-Darwinian logic, the most corrupt survives. The proof is given in table AXEC221b ⇓. Microfoundations are methodologically false; therefore, the elementary production-consumption economy is given with three macroeconomic axioms in lines 1, 4, 7. The business sector is split into two identical firms in lines 1-2, 4-5, 7-8. Under the initial analytical conditions of market-clearing and budget-balancing, this yields the price P in line 16. For a start, the price is the dependent variable here. In the initial state, the price is equal to unit wage costs W/R, and equal for both firms. The workers get the whole product O. The profit Qm for both firms and the business sector as a whole is zero. Now, the wage rate W in firm 1 is lowered arbitrarily; otherwise, both firms are identical in every respect. As a result, the market price P decreases in line 12. The profit of firm 1 increases in line 19; firm 2 makes a loss in line 20. Total profit remains zero. The household sector as a whole still gets the whole product O, but the workers of firm 1 can buy less with their lower wage income; the workers of firm 2 can buy more with their unchanged wage rate W and a lower price P. The firm that somehow manages to pay less for the same labor input increases profit Qm. Firm 2 makes a loss and will go bankrupt if it does not also make a wage cut. As a result, firm 1 wins the race to the bottom. The workers of firm 1 cannot move to firm 2 because it no longer hires or doesn't exist any longer. This process of cross-over exploitation is inherent to capitalism and inevitably leads to higher concentration. If a firm can undercut minimum wage regulations, it can be said that the criminal firm wins and the honest firm loses. What remains in the long run is a degenerated/ corrupted free-market economy. On closer inspection, economics is revealed as the story of intra-sectoral cross-over exploitation among the firms of the business sector and among the households of the household sector. Sociologically, this means there are no classes with a common interest. Ultimately, the market is not primarily an allocation mechanism but a quasi-Darwinian selection mechanism that increases the survival chances of the corrupt and decreases them for the honest. This is why guilds have emerged historically. Basically, they are self-organized associations of the honest against the corrupt, with honor as the guiding behavioral principle. Honor was replaced with the freedom of licit/illicit profit maximisation, which favors the corrupt.

— AXEC (@EgmontHandtke) November 1, 2026

Occasional X: How it works (DXXXI)

“If only 4% of gains went to innovators and we got so much innovation, what if property rights were tightened? What if they could appropriate 5% instead? How much more innovation would we get?” (Vincent Geloso) Innovators and creative geniuses are the most exploited group in the free-market system. Business has captured the real wealth creators. As a rule of thumb, not those who create and ultimately enhance the productivity of the economic system get wealthy, but those who employ or sponsor them — or simply steal their ideas. Of course, the group/generations of innovators and creative geniuses deserve 100 percent of the gains. How could they appropriate it? For details, see How it works (DXXX) https://t.co/ibUuwn8flm

— AXEC (@EgmontHandtke) November 1, 2026

Occasional X: How it works (DXXX)

“Generations of students learned economics through the Samuelson and Nordhaus textbook. But my favorite article of his is another one: 'Schumpeterian Profits in the American Economy: Theory and Measurement,' from 2004. For every 100 euros of value that an innovator creates, they keep just a little over 2. We get the other 98. … It's worth remembering this whenever someone proposes heavily taxing the fortunes of entrepreneurs, as if they were a burden on society. The innovator already keeps a minimal slice of the value they create. Taxing that slice yields little and puts everything else at risk.” (Pedro Santa Clara) The obvious swindle is to verbally equate innovators and entrepreneurs. They are as different as can be. Innovators and creative geniuses are the most exploited group in the free-market system. Business has captured the real wealth creators. As a rule of thumb, not those who create and ultimately enhance the productivity of the economic system get eventually wealthy, but those who employ or sponsor them — or simply steal their ideas. The real creative genius Tesla died poor, with a charity from the firm he helped to create and prosper.‡ In the end, the royalties go elsewhere. “Nordhaus wanted to know how much of the value created by innovation stays with the innovator. … The answer: about 2.2%. The rest went to society, especially to consumers, in the form of lower prices and better products.” (Pedro Santa Clara) Innovators and creative geniuses cannot be presented as the heroes of the free-market system. They enhance the productivity of a firm, but the enhanced profits are taken by the firm's owners. That scientists/inventors work for firms is a historical accident and in NO way intrinsic to science. To the contrary. Genuine scientists, for example, are fed up with working under the direction of a management with entirely different incentives or constantly begging for funding from the oligarchy. Seen from the perspectives of merit and the freedom of science, this is as perverse as it gets — in any case for basic research. Time for a new business model ⇒ A rough business plan for science https://t.co/fvOOBCrRgV Toward the New Academy https://t.co/4lOOZdZkox ‡ Sources “In early 1891, George Westinghouse explained his financial difficulties to Tesla in stark terms, saying that, if he did not meet the demands of his lenders, he would no longer be in control of Westinghouse Electric and Tesla would have to 'deal with the bankers' to try to collect future royalties. The advantages of having Westinghouse continue to champion the motor probably seemed obvious to Tesla and he agreed to release the company from the royalty payment clause in the contract. Six years later Westinghouse purchased Tesla's patent for a lump sum payment of $216,000 as part of a patent-sharing agreement signed with General Electric ….” (Wikipedia) “At this time, Westinghouse Electric & Manufacturing Company began paying him $125 (equivalent to $3,010 in 2025) per month in addition to paying his rent. Accounts of how this came about vary. Several sources claim that Westinghouse was concerned, or possibly warned, about potential bad publicity arising from the impoverished conditions in which their former star inventor was living. The payment has been described as being couched as a 'consulting fee' to get around Tesla's aversion to accepting charity.” (Wikipedia) “J.P. Morgan stopped funding Nikola Tesla … around 1903–1904 because Tesla's project lacked a viable business model for making money.” (Google AI)

— AXEC (@EgmontHandtke) November 1, 2026