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

“The core Keynesian error is treating consumption as the engine of wealth. Keynes fixated on aggregate demand, the total spending flowing through an economy, as the variable governments must manage. Boost it artificially, and you rescue the economy. Production precedes consumption. …Government stimulus spending doesn't create resources. It redirects them. When Washington borrows a billion dollars and injects it into infrastructure or green energy, it pulls that capital away from whatever private actors would have funded.” (Handre) Economic debate suffers from the fact that economics is a failed/fake science. Economists do not know what profit is, and consequently, how the economic system works. It's been that way ever since Adam Smith. Both Keynesianism and Austrianism is proto-scientific garbage. The free-market economy runs on profit. Macroeconomic profit Qm is given by the axiomatically correct Profit Law Qm:=(I−Sm)+(G−T)+(X−M)+Yd. The Law implies Qm≔(I−Sm)>0 for Early Capitalism, and it implies Qm≔(G−T)>0 for Late Capitalism. Keynes observed that investment expenditures I were insufficient; therefore, the balance (I−Sm) was too low. He proposed to compensate the shortfall with a bigger balance (G−T) of public deficit spending. Handre's claim that this “pulls capital away from whatever private actors would have funded” is a hallucination because the actual problem was that there never were private actors in the wings to fund private investment I in the first place. In the monetary economy, investment is not restricted by the household sector's saving Sm. If Sm is zero, investment is fully financed by credit and retained profit. In free-market economies, public debt has increased with minor interruptions for 200+ years. So, Qm≔(G−T)>0 is a crucial ingredient of Capitalism's life elixir. Everybody understands that the overriding principle of economics is that macroeconomic profit is greater than zero; otherwise, firms start going bankrupt, and the breakdown begins. All other principles are secondary at best. Neither utility maximization nor profit maximization nor efficient resource allocation keeps the economy above the zero-profit cutoff. Currently, 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 a failed/fake science. Ultimately, this means that the representative economist is too stupid to understand the elementary algebra that underlies macroeconomic accounting. Austrians can't get beyond their microeconomic/ behavioral horizon. Math was never their strong suit. From the fact that the free-market economy thrives on positive/increasing macroeconomic profit, which, in turn, stems mainly from the State's deficit-spending/money-creation, it follows immediately that budget-balancing/debt-reduction turns macroeconomic profit into loss, and this means that the free-market economy cannot dismount from the debt tiger. Because of deficit-spending/money-creation, i.e., of the free lunches for the Oligarchy, the distribution of income/wealth becomes progressively more extreme. As the debt grows, the number of millionaires/billionaires/zillionaires grows exponentially. Since the household sector is taxed for interest, there is an absolute upper limit for the growth of public debt, which is given by public_debt times avg_interest_rate ≦wage_income. Economic problems, though, start much earlier because of other irreducible items in the budget (military, health, etc.) and a not exactly known upper tax-to-income limit. The breakdown of the free-market economy is a systemic inevitability. The important thing is not whether it will happen, but when. The current system can only exist as a nominally growing economy. If debt growth stops, macroeconomic profit approaches zero, and the economy implodes. Austrians correctly observe the lethal weaknesses of the free-market system. Their communicative modus operandi is to simply attribute all economic misdevelopments to the State and to advertize the unchained entrepreneur as the economic savior who is eagerly waiting in the wings. The fact is, behind the wings there has never been anything.

— AXEC (@EgmontHandtke) November 7, 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 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 (CDIV)

“Grok does not agree, nor do I.” (RFB) Too bad for Grok. This blunder will send the stock price down the sink hole. AI/Grok has been trained on legacy economics. Accordingly, it brings back all the crappy slogans we have heard ad nauseam from the silly members of a failed/fake science. AI, too, works according to the garbage-in-garbage-out principle. For example: “It [economics] is not a classical natural science.” You cannot be more tautological. “The subject matter itself sets hard limits that physics does not face.” Yeah, that's one of the oldest excuses for incompetence. When economists are ridiculed for not having achieved anything of scientific value since Adam Smith, they retort with the Cobden excuse: “Years ago I heard Mr. Cobden say at a League Meeting that ‘Political Economy was the highest study of the human mind, for that the physical sciences required by no means so hard an effort.’” (Bagehot, 1885) Note the sick logic: science is what physicists do, but economics “falls short of the classical natural-science ideal for structural reasons.” Trivially true, but irrelevant. Scientific standards are defined independently of physics: “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, 1994, 31) Fact is that economics has been materially/formally inconsistent 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. Grok does not realize it, but repeats the foundational error. 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 is failed/fake science, but Grok doesn't realize anything. 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. Grok has been trained on the wrong stuff, and never realized anything (⇓ AXEC 136j). Retry the exercise with the cross-references Failed/Fake Scientists https://t.co/f98ujAER8Q Scientific Incompetence https://t.co/uiyfRTZ3IL Proto-Science/Cargo Cult Science/Fake Science https://t.co/Kf9k12pnai

— AXEC (@EgmontHandtke) October 26, 2026

Occasional X: Clueless economists / Science (CCCXCVII)

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” (Adam Smith, quoted by Econlib/Art Carden) Adam Smith was not an original thinker, not a scientist, not an economist; he was a populist moralizer (⇓ AXEC179a). Economics has been failed/fake science since the Founding Fathers. It has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. Economics is about how the economy works. It is a genuine systems science. Adam Smith made it a 'moral science'. 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 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 Law implies PublicDeficit-Is-PrivateProfit 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 is a critical element of the economy's survival. The minimum requirement of a free-market economy is that macroeconomic profit is greater than zero, i.e., Qm≥0. If Qm<0, recession/depression/breakdown results. This is the main economic principle; all other explanations of how the economy works are secondary. Utility/profit maximization or free people on free markets or competition or hard work or innovation or the entrepreneur do not keep the economy above the zero-profit cutoff. Scientifically, it's rather simple: no macroeconomic profit, no economy. But economists are only look-alike scientists. They have never had enough brains to understand the objective, systemic facts, i.e., the existential preconditions. Free-market economies are continuously saved from breakdown by the deficit-spending/money-creating duo of Treasury/Central Bank, i.e., the State. This means that Adam Smith's premise that the unfettered free-market economy is a self-adjusting, self-stabilizing, and self-optimizing system is axiomatically false. Adam Smith lost the battle of ideas. Continuing to promote him is not science, but disinfotainment at best.

— AXEC (@EgmontHandtke) October 16, 2026

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

“Everything is a budget constraint or supply and demand, as in Principles of Micro.” (Brian Albrecht) The most important balance of economics —profit— is missing in Brian Albrecht's charts. This tells one that economists are too stupid for the elementary algebra that underlies macroeconomic accounting. Macroeconomic profit or loss Qm, i.e., the business sector's balance, is given by the axiomatically correct Profit Law Qm:=Yd+(I−Sm)+(G−T)+(X−M). This boils down to Qm:=(I−Sm) for the elementary case of a consumption-investment economy. Normally, I, the investment expenditures of the business sector, are greater than the saving Sm of the household sector. This is how profit comes into the world. In the case of I=Sm, macroeconomic profit is zero, and if I<Sm the economy breaks down. Microbrains like Brian Albrecht never understood the basics. The Principles of Micro are proto-scientific garbage. Let this sink in: economists still get the subject's foundational concept of profit wrong. They have been scientifically incompetent since Adam Smith. Economics is scientifically worthless to this day. For details, see Cross-references: Profit https://t.co/taznr3RMBt

— AXEC (@EgmontHandtke) October 14, 2026

Occasional X: Economists are too stupid for macro accounting (X)

“There's a rote lesson among economists: Domestic savings are insufficient, so we run a current account deficit. Yet in an economy like Turkey's, causality often works in reverse. Let's look at the sectoral balances approach, epitomized by Wynne Godley: (S−I) = (G−T) − (M−X).” (Oktay Özden) The most important balance of economics —profit— is missing. This tells one that economists are too stupid for the elementary algebra that underlies macroeconomic accounting. Nothing has ever been dumber than the discussion 'identities vs equilibrium' or the slogan 'That's just an accounting identity'. Macroeconomic profit or loss Qm, i.e., the business sector's balance, is given by the axiomatically correct Profit Law Qm:=Yd+(I−Sm)+(G−T)+(X−M). This translates into the Balances Equation (I−Sm)+(G−T)+(X−M)−(Qm−Yd)=:0, i.e., all balances cancel out. All variables are measurable to two decimal places. Legend: Qm business sector's macroeconomic profit, Yd distributed profit, Sm household sector saving, G government expenditures, T taxes, X exports, M imports. Let this sink in: economists still get the subject's foundational concept of profit wrong. They have been scientifically incompetent since Adam Smith. Economics is scientifically worthless to this day. For details, see Cross-references: Accounting https://t.co/xNov0qlQQo

— AXEC (@EgmontHandtke) October 13, 2026

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

Adam Smith was not an original thinker, not a scientist, not an economist; he was a populist moralizer. ⇓ Economics has been failed/fake science since the Founding Fathers. It has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. Economics is about how the economy works. It is a genuine systems science. Adam Smith made it a 'moral science'. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. Economic policy advice has never had valid scientific foundations. Economics has always been a propaganda tool for a low-IQ audience. Continuing to promote Adam Smith is not science, but disinfotainment.

— AXEC (@EgmontHandtke) October 11, 2026

Occasional X: The futile attempt to recycle Adam Smith (XC)

“Reading guides, lesson plans, bellringers, and full topic toolkits on trade, prices, and the invisible hand — everything you need to bring Adam Smith into class next week.” (Econlib)

Adam Smith was not an original thinker, not a scientist, not an economist; he was a populist… pic.twitter.com/UPzRK686Qu

— AXEC (@EgmontHandtke) September 26, 2026

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

“It looks paradoxical. But that’s how it should be, as Adam Smith knew, John Stuart Mill knew, Karl Polanyi knew.” (Kaushik Basu)

No. That's not how it should be. Kaushik Basu does not understand what science is all about. He has totally overlooked that as a scientist, the… pic.twitter.com/hz6oZaiO3L

— AXEC (@EgmontHandtke) August 19, 2026

Occasional X: Clueless economists / Science (CCCLXXVI)

“The answer to the water-diamond paradox falsified Marx’s assumption that value is derived from labor. Adam Smith in 1776 couldn’t answer why diamonds cost a bundle whereas water costs almost nothing in comparison although it’s necessary for survival. Carl Menger figured out that… pic.twitter.com/Febjk7TCYX

— AXEC (@EgmontHandtke) August 15, 2026

Occasional X: Clueless economists / Profit (CLVIII)

“IN THIS HOUSE, WE DERIVE: THE INVISIBLE HAND THEOREM FROM THE RATIONAL CHOICE POSTULATE VIA INSTITUTIONAL ANALYSIS THAT'S THE MAINLINE OF ECONOMICS FROM ADAM SMITH TO VERNON SMITH.” (Nathan Goodman, quoted by Peter Boettke)

The mainline has always been false.

The founding… pic.twitter.com/qtfQTU0Ghd

— AXEC (@EgmontHandtke) August 8, 2026

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

“Boudreaux reflects on his many years teaching a graduate seminar on Smith at George Mason University, the layers of insight he continues to discover on each re-read …” (Hayek Program)

Next to discover: Adam Smith was not an original thinker, not a scientist, not an economist;… pic.twitter.com/CXRlrScVMn

— AXEC (@EgmontHandtke) July 22, 2026

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

“As the father of modern economics Adam Smith wrote, we should “allow every man to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice.” (Adam Smith, quoted by Foundations for Economic Education)

This may be true or false… pic.twitter.com/7S4foAMl5U

— AXEC (@EgmontHandtke) July 17, 2026

Occasional X: Clueless economists / Employment (XXXV)

 

“Raising the minimum wage doesn't make workers more productive, but rather, it just makes them more expensive.” (infineo)

There is no behavioral relationship between the minimum wage and productivity. The employment theory has been false since Adam Smith.

Economics claims to be… pic.twitter.com/yaGH7r9myw

— AXEC (@EgmontHandtke) June 26, 2026

Occasional X: Clueless economists / Science (CCCXXXIV)

“250 years after The Wealth of Nations, William Easterly's Violent Saviors revives Smith's core insight: development must arise from voluntary cooperation, not expert design.” (Econlib)

This may be true or false sociology, but it is not economics.

Adam Smith was not an original… pic.twitter.com/LvINZkNrML

— AXEC (@EgmontHandtke) May 29, 2026

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

“Adam Smith used the phrase 'invisible hand' just once in The Wealth of Nations. And yet it became the defining idea of modern economics. ” (Mariana Mazzucato)

Adam Smith was not an original thinker, not a scientist, not an economist; he was a populist moralizer. ⇓ People like… pic.twitter.com/G6UYL5376G

— AXEC (@EgmontHandtke) May 7, 2026

Occasional X: Clueless economists / Science (CCXCXVII)

“As Adam Smith recognized more than 230 years ago, economic freedom and the economic prosperity it brings work to the advantage of the poor.” ( Robert Lawson, quoted by Foundation for Economic Education)

Economists claim that they have scientifically discovered the mysteries of…

— AXEC (@EgmontHandtke) April 14, 2026

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

“Adam Smith’s The Wealth of Nations didn’t just explain the world – it changed it.” (Austrian Economics Center)

Change is a weasel word. Any moron can change the world. The point is to improve it. Economists failed at this task.

Adam Smith was not an original thinker, not a… pic.twitter.com/HUMyGBNxsJ

— AXEC (@EgmontHandtke) April 2, 2026

Occasional X: The futile attempt to recycle Adam Smith (LXXXIX)

Adam Smith was not an original thinker, not a scientist, not an economist; he was a populist moralizer. ⇓

Since Adam Smith, economists haven't had valid scientific knowledge.

The representative economist is NOT, and never has been, a competent scientist but an agenda pusher /… pic.twitter.com/cEnqfZKpsw

— AXEC (@EgmontHandtke) March 31, 2026