AXEC: New Foundations of Economics: Search results for label:Accounting

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November 8, 2026

Occasional X: Clueless economists / Profit (CLXIX)

“This is a macroeconomic accounting identity: aggregate profits equal investment plus capitalist consumption, the government deficit, and net exports, minus workers’ savings. One sector’s profits are determined by spending and saving decisions across the economy.” (Khazbi Budunov) This is one of the dumbest pronouncements in economics: This is a macroeconomic accounting identity, implying that it is true by definition. Actually, economists are too stupid for the elementary algebra that underlies macroeconomic accounting. For details, see The Levy/Kalecki Profit Equation is false https://t.co/pkoZclG49K Reminder: For 200+ years, economics has claimed to be a science. But it still is not. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory & axiomatically false & materially/formally inconsistent. They all got profit wrong. If the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. This also holds for the Levy/Kalecki profit equation. Khazbi Budunov has not been smart enough to figure out the macroeconomic basics. He goes down the scientific drain together with the rest of the Kalecki crowd.
— AXEC (@EgmontHandtke) November 8, 2026

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

October 13, 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

September 4, 2026

Occasional X: Clueless economists / Science (CCCLXXXVII)

“People often do not sufficiently understand G.D.P. To discuss it. So, as a public favour, I have summarised the three different ways to calculate G.D.P. and their respective categories in depth and unambiguity.” (Nikolai Rostow)

Nikolai Rostow does not understand profit. That's… pic.twitter.com/uFzERNZV8U
— AXEC (@EgmontHandtke) September 4, 2026

July 8, 2026

Occasional X: Economics and math ― they just can't get it together (XIII)

“GDP(GNI/GNP) accounting is just a necessary evil, as other baseline measurement methods are worse.” (Stefan Demetz)

I do NOT say that GDP accounting is unnecessary; I say that it is done wrong because the representative economist is too stupid for elementary algebra. It is not…
— AXEC (@EgmontHandtke) July 8, 2026

Occasional X: Clueless economists / Science (CCCLII)

“Actually, GDP sucks. I say that as an expert on reconstructions of national accounting. But it sucks in the way that all critics never say: it understates the massive gains in wellbeing that humanity got.” (Vincent Geloso)

Yes, GDP sucks, because the 'expert on reconstructions… pic.twitter.com/vCGuuWx4Tr
— AXEC (@EgmontHandtke) July 8, 2026

June 5, 2026

Occasional X: Economics and math ― they just can't get it together (XII)

“Murray Rothbard, like other Austrian Economists, believed that the heavy use of mathematics in economic analysis damaged economic understanding instead of enhancing it. This wasn't science, he said; it was 'scientism'.” (Mises Institute)

True, economics is not yet a science,…
— AXEC (@EgmontHandtke) June 5, 2026

June 1, 2026

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

“'Economic theory' is a very strange beast—it has to be wrong, or else your map is the size of the territory, and hence is useless; …” (Brad DeLong)

Brad DeLong is again playing with the word 'wrong'. Wrong in science means material or logical inconsistency: “The chief demerit…
— AXEC (@EgmontHandtke) June 1, 2026

May 28, 2026

Occasional X: Clueless economists / Science (CCCXXXII)

“One of the most common conceptual errors in economics—the error that any economist knows they must explain to the public—is the confusion between identities and equilibrium conditions. It is an obvious error (to those who know the subject) and extremely serious because it easily… pic.twitter.com/M4Fu1GRkK7
— AXEC (@EgmontHandtke) May 28, 2026

May 25, 2026

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

“ … so they [Marx, Keynes] provide you with useful tools you can use rather than eat your brain …” (Brad DeLong)

Keynes got macroeconomic profit wrong because he was too stupid for the elementary algebra that underlies macroeconomic accounting.

For details, see
The unfinished…
— AXEC (@EgmontHandtke) May 25, 2026

May 8, 2026

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

“Well, try maximizing that 'aggregate profit' through government … You're just justifying genocide by maximizing a dumb accounting system pursuing numbers that don't make sense.” (Cezary Baginski)

The Profit Law is a specific application of elementary math, i.e., 5=7-2. This is…
— AXEC (@EgmontHandtke) May 8, 2026

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 15, 2026

Occasional X: Clueless economists / Science (CCXCXIX)

“Reducing the govt's deficit is the same as reducing the non-govt's savings.” (MMT for Progressives)

No, that's a political deception.

It is well-known that MMT's macro accounting is provably false. Therefore, the whole of MMT is false. For the full-spectrum refutation, see… pic.twitter.com/wZGh1Z2ZwC
— AXEC (@EgmontHandtke) April 15, 2026

March 22, 2026

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

“At its fundamental level, MMT is based on accurate accounting.” (Dr. Steve Keen)

Wrong. At its fundamental level, macroeconomic accounting in general and MMT accounting, in particular, is provably false. For details, see

Accounting for dummieshttps://t.co/Fzy8whg6qc

Because… pic.twitter.com/eWcEbMhIZP
— AXEC (@EgmontHandtke) March 22, 2026

January 30, 2026

Occasional X: Clueless economists / Tax (IV)

#Economics #AllYouNeedToKnow

“The middle class in Europe is the one really squeezed by absurd overtaxation. And when you add another 20% VAT on top of that, it makes one want to cry. Got it now?” (Michael Arouet)

It seems that the anti-State reflex is more a psychological than… pic.twitter.com/BkXtWjcu6o
— AXEC (@EgmontHandtke) January 30, 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

December 31, 2025

Occasional X: Economists’ eternal problem with methodology (XII)

#Economics #AllYouNeedToKnow

“AXEC does not show that Godley's stock-flow consistent (SFC) identities are internally inconsistent.” (James Young)

James Young cannot read, see the paper ⇒

The common error of common sense: an essential rectification of the accounting approach…
— AXEC (@EgmontHandtke) December 31, 2025

For more about stock-flow consistency, see AXECquery.

Occasional X: Clueless economists / Science (CCXXV)

#Economics #AllYouNeedToKnow

1 Godley's equations

The representative economist NEVER understood profit/income and, by consequence, how the economic system works. Godley's system of equations is provably false.

For details, see the paper ⇒
The common error of common sense: an… pic.twitter.com/RUkixOdWeJ
— AXEC (@EgmontHandtke) December 31, 2025

December 29, 2025

Occasional X: The futile attempt to recycle Godley (I)

#Economics #AllYouNeedToKnow

“Godley showed that capitalism has a syntax; balance-sheet — and once you see it, equilibrium cannot even be conjugated.” (Beyan.D)

The representative economist NEVER understood profit/income and, by consequence, how the economic system works.…
— AXEC (@EgmontHandtke) December 29, 2025

December 6, 2025

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

#Economics #AllYouNeedToKnow

“As an accounting identity the 'debt' is a record of government-issued financial wealth held by the non-government sector.” (?whispers?)

The MMT error/fraud lies in the word non-government sector. There is NO such thing as the “non-government… pic.twitter.com/ll10GIQjUu
— AXEC (@EgmontHandtke) December 6, 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.