MMT: The joy of public deficit spending

Comment on Peter Cooper on ‘Short & Simple 14 ― Direct Impacts of Fiscal Policy on Net Financial Assets’

Blog-Reference

Peter Cooper argues in favor of public deficit spending: “The government spending, … causes an increase in the net financial assets (financial assets minus financial liabilities) of non-government.”

The term non-government covers the business and household sectors. It is, obviously, of utmost importance whether the increase of financial assets takes place in the household or the business sector. Peter Cooper treats the first case and ignores the second completely. Let us remedy the omission.

There are three cases in a production-consumption economy without government activity: (i) household sector spending C is equal to wage income Yw, or (ii), spending C is greater than wage income Yw, or (iii) spending C is less than wage income Yw.

Here, case (i) is taken, i.e., budget balancing of the household sector, i.e., C=Yw. When the government is added with pure deficit spending, i.e., spending G is positive, and taxes T are zero, then the sum C+G is greater than wage income Yw. Accordingly, public deficit spending produces a monetary profit for the business sector Qm≡C+G−Yw with C=Yw.

At the end of the period, the accounts of the Central Bank ― which has created the money for deficit spending out of nothing ―, the business sector, and the government sector look as follows. #1

The government deficit spending causes an increase in the financial assets of the business sector. It holds Public Deficit = Private Profit. At first, the financial asset consists of deposits at the Central Bank which bear zero interest.

In the second step, the public debt is consolidated by the issuance of long-term government bonds or other types of securities. Government securities bear interest and normally have the best rating, i.e., Triple-A. After the switch from non-interest-bearing deposits to interest-bearing bonds, the newly created money vanishes again, and the accounts look as follows. #2

Government deficit spending not only produces profit for the business sector. With the supply of government bonds and other types of securities comes a stream of future interest payments.

With the promotion of deficit spending, MMT sees to it that the business sector not only enjoys profit but also a risk-free asset and a long-term flow of interest. This flow comes in subsequent periods from the taxation of the household sector and is secured by the taxing power of the government.

Egmont Kakarot-Handtke


#1 Graphic AXEC102 Government deficit spending, creation of money
#2 Graphic AXEC103 Government deficit spending, consolidation

Related 'Down with idiocy!' and 'MMT: The one deadly error/fraud of Warren Mosler' and 'MMT: Redistribution as wellness program' 'Austerity and the idiocy of political economists'. For the full-spectrum refutation of MMT see cross-references MMT.

The five pathetic blunders of Roger Farmer

Comment on Roger Farmer on ‘The Marriage of Psychology with Multiple Equilibria in Economics’

Blog-Reference

(i) Roger Farmer does not understand what science is all about, and that economics fits Feynman’s definition of a cargo cult science to a T: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

(ii) Roger Farmer does not understand that the subject matter of economics is ill-defined. Economics is NOT a social science but a systems science. The lethal methodological defect of economics is that it is microfounded, that is, based on behavioral axioms. #1 Now it holds that (1) there is NO such thing as an invariant of human behavior, and (2), NO way leads from the explanation of Human Nature/ motives/ behavior/ action to the explanation of how the economic system works.

(iii) Roger Farmer is trapped in the tradition of methodological individualism. It is not at all sufficient to replace defunct constrained optimization with the more realistic assumptions of behavioral economics. Economics is NOT AT ALL about Human Nature/motives/ behavior/action. This is the subject matter of psychology, sociology, anthropology, history, political science, biology, etc. Economics is about the economic system and objective systemic laws.

(iv) It should be pretty obvious that economics has hitherto dealt with NONENTITIES: the two behavioral axioms constrained optimization HC2 and rational expectations HC4, and the systemic NONENTITY equilibrium HC5. There is NO such thing as equilibrium/ disequilibrium in the market economy. To replace a single equilibrium with multiple equilibria is, therefore, a futile exercise. Every theory/model that contains a NONENTITY is a priori false. Because of their absorbing occupation with cargo cultic NONENTITIES, Roger Farmer and the representative economist do, until this very day, not know what profit ― the foundational and very real entity of economics ― is.

(v) Economics has to be macrofounded, and this requires the full replacement of false Keynesian macrofoundations. This is the absolutely necessary first step of any New Economic Thinking. All else is a mere repackaging of failed economics. Psychologism and Equilibrism have always been and will always be proto-scientific garbage.

Egmont Kakarot-Handtke


#1 “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)

Related 'After-Keynesian zombie interbreeding' and 'Fact of life: your econ prof is scientifically incompetent'. For details of the big picture, see cross-references Scientific Incompetence.

How some MMTers got inflation wrong

Comment on Nick Johnson on ‘Modern Monetary Theory and inflation ― Anwar Shaikh’s critique’

Blog-Reference and Blog-Reference

Nick Johnson compares Anwar Shaikh’s approach with the MMT approach. Scientifically, this is a futile exercise, just as comparing Superman with Spiderman because both are NONENTITIES.

MMT is an offshoot of Post-Keynesianism. Anwar Shaikh works largely within the Classical/ Marxian tradition. However, the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/ formally inconsistent, and all got profit wrong. With the pluralism of provably false theories, both orthodox and heterodox economics sit squarely at the proto-scientific level.

Clearly, when the foundational concept of profit is not properly understood, the rest of the analytical superstructure falls apart, and the whole is scientifically worthless. What the representative economist has to understand is that nothing less than a Paradigm Shift is required, that is, a move from obsolete Walrasian microfoundations and false Keynesian/ Marxian macrofoundations to entirely new macrofoundations. #1

To go back to the basics, the elementary production-consumption economy is, for a start, defined by three macro axioms (Y_w=WL, O=RL, C=PX), two conditions (X=O, C=Y_w), and two definitions (profit/loss Q_m≡C−Y_w, saving/dissaving S_m≡Y_w−C). #2

It always holds Qm≡−Sm, in other words, the business sector’s deficit (surplus) equals the household sector’s surplus (deficit). Loss is the counterpart of saving, and profit is the counterpart of dissaving. This is the most elementary form of the macroeconomic Profit Law. This law refutes familiar profit theories. Note in particular that profit for the economy as a whole has nothing to do with capital or productivity or greed or power.

Money is needed by the business sector to pay the workers who receive wage income Y_w per period. The workers spend C per period. Given the two conditions, the market-clearing price is derived for a start as P=C/X=W/R. So, the price P is determined by the wage rate W, which has to be fixed as a numéraire, and the productivity R. From this follows the average stock of transaction money as M=κY_w, with κ determined by the payment pattern. In other words, the quantity of money M is determined by the AUTONOMOUS transactions of the household and business sector and created out of nothing by the central bank. The economy never runs out of money.

The transaction formula reads in the general case M=κ sup(1, ρ_E) PX= κ (sup(1, ρ_E) RL) P, with the ratio ρ_E defined as C/Y_w, and this yields the commonplace correlation between the quantity of money M and price P for a given employment/output level, except for the fact that M is the DEPENDENT variable.

The market-clearing price is given with the macroeconomic Law of Supply and Demand: #3

An expenditure ratio ρ_E greater than 1 indicates credit expansion = dissaving, a ratio ρ_E less than 1 indicates credit contraction = saving. In the initial period ρ_E = 1, i.e., the household sector’s budget is balanced. The ratio ρ_E establishes the link between the product market and the money/capital market.

Now we have deficit spending, i.e., ρ_E greater than 1, which yields a price hike. If deficit-spending is repeated period after period, the price remains on the elevated level, but there is NO inflation. No matter how long the household sector’s debt increases, there is NO accelerated price increase.

The price formula makes it clear that inflation only occurs if the wage rate W increases in successive periods faster than productivity R. This can happen at ANY employment level. It is NOT a precondition that employment is close to the capacity limit. This is merely a false interpretation of the Phillips curve.

MMT claims that inflation/deflation can be managed via fiscal and monetary policy. This policy advice has no sound theoretical foundation. #4

The current deflationary trend is caused by the fact that (worldwide) wages lag behind productivity growth. To turn this trend around, it does not matter much what happens on the money/bond/stock markets; what matters is that governments/central banks engineer a coordinated worldwide increase in the average wage rate.

Policy guidance of both MMT and Anwar Shaikh is ineffective/misleading because, for both approaches, the macrofoundations and the concept of profit are ill-defined and methodologically unacceptable.

Egmont Kakarot-Handtke


#1 First Lecture in New Economic Thinking
#2 For the detailed description, see How the intelligent non-economist can refute every economist hands down.
#3 Graphic AXEC101 Price formula = Law of Supply and Demand
#4 For the full-spectrum refutation of MMT, see cross-references MMT

Related 'Putting economic policy on scientific foundations' and 'Why Post Keynesianism Is Not Yet a Science' and 'The Profit Theory is False Since Adam Smith' and 'Gov-Deficits do NOT cause inflation'.

Inflation: back to basics

Comment on David Andolfatto on ‘A monetary-fiscal theory of inflation’

Blog-Reference and Blog-Reference on Aug 8

David Andolfatto argues from a sophisticated model: “In my formal model, I have a parameter that indexes the growth rate in the demand for real money/bond balances (where money and bonds take the form of USDs and USTs, respectively). In the open-economy version of my model, I have a ‘money demand growth regime’ originating from the foreign sector. In the model, this regime translates into persistent U.S. trade deficits, representing the foreign sector's desire to acquire USD/UST at an elevated pace.”

Basically, in this model, deflation/inflation is driven by what happens on the UST market. This is in line with the commonplace Quantity Theory, which holds that a smaller or broader composite called ‘quantity of money’ determines the price level.

Now, it is well-known that the familiar models, which are either from the Walrasian type (= microfoundations) or the Keynesian type (= macrofoundations), are axiomatically false. Because of this, monetary theory has to be based upon entirely new macrofoundations. #1

In order to go back to the basics, the elementary production-consumption economy is, for a start, clearly defined by three macro axioms (Y_w=WL, O=RL, C=PX), two conditions (X=O, C=Y_w), and two definitions (profit/loss Q_m≡C−Y_w, saving/dissaving S_m≡Y_w−C). #2

Money is needed by the business sector to pay the workers who receive the wage income Yw per period. The workers spend C per period. Given the two conditions, the market-clearing price is derived for a start as P=C/X=W/R. So, the price P is determined by the wage rate W, which has to be fixed as a numéraire, and the productivity R. From this follows the average stock of transaction money as M=κY_w, with k determined by the payment pattern. In other words, the quantity of money M is determined by the AUTONOMOUS transactions of the household and business sector and created out of nothing by the central bank. The economy never runs out of money if the Central Bank does a good job.

The transaction formula reads M=κ sup(1, ρ_E) PX= κ (sup(1, ρ_E) RL) P, with the ratio ρ_E defined as C/Y_w, and this yields the commonplace correlation between the quantity of money M and price P, except for the fact that M is the DEPENDENT variable.

The market-clearing price is given in the general case with the price formula, a.k.a. Law of Supply and Demand

An expenditure ratio ρ_E greater than 1 indicates credit expansion = dissaving, a ratio ρ_E less than 1 indicates credit contraction = saving. In the initial period ρ_E = 1, i.e., the household sector’s budget is balanced. The ratio ρ_E establishes the link between the product market and the money/capital market.

Now we have deficit spending, i.e., ρ_E greater than 1, which yields a price hike. If deficit spending is repeated period after period, the price remains on the elevated level, but there is NO inflation. No matter how long the household sector’s debt increases, there is NO accelerated price increase.

The price formula makes it clear that inflation only occurs if the wage rate W increases in successive periods faster than productivity R. This can happen at ANY employment level. It is NOT a precondition that employment is close to the capacity limit. This is merely a false interpretation of the Phillips Curve.

The current deflationary trend is caused by the fact that (worldwide) wages lag behind productivity growth. To turn this trend around, it does not matter much what happens on the market for UST, what matters is that governments/central banks engineer a coordinated worldwide increase of the average wage rate.

Egmont Kakarot-Handtke


#1 First Lecture in New Economic Thinking
#2 For the detailed description, see How the intelligent non-economist can refute every economist hands down

Related 'Essentials of Constructive Heterodoxy: Money, Credit, Interest' and 'Essentials of Constructive Heterodoxy: Financial Markets' and 'Forget Friedman, forget the Quantity Theory' and 'Gov-Deficits do NOT cause inflation' and 'Links on Inflation' and 'A la recherche de l'inflation perdue' and 'Going beyond No-Idea economics' and 'Putting economic policy on scientific foundations'

Fact of life: Your econ prof is scientifically incompetent

Comment on Lars Syll on ‘The conundrum of unknown unknowns’

Blog-Reference and Blog-Reference on Aug 9 adapted to context

Economics is a cargo cult science because economists never understood what science is all about. Proof No 1: like the average commonsenser, economists maintain that science is about predicting the future.

John Kay explains why this does not work in economics: “Big data can help us understand the past and the present but it can help us understand the future only to the extent that the future is, in some relevant way, contained in the present. That requires a constancy of underlying structure that is true of some physical processes but can never be true of a world … in which important decisions or discoveries are made by processes that are inherently unpredictable and not susceptible to quantitative description.”

This so trivial that it hurts and, above all, it is beside the point. It is not a specific failure of economics that it cannot predict the future because — as a matter of principle — science is NOT AT ALL in the business of prediction because it is long known among scientists: “The future is unpredictable.” (Feynman)#1

Only charlatans predict the future, and only morons take them seriously. The silly game, who predicted the last crash of the stock market or the real estate market, is the proper stuff for the Circus Maximus.

The first thing to understand is that science is NOT about prediction but about knowledge. So, to begin with, things that are not knowable are a priori OUTSIDE of science. Scientific knowledge satisfies two criteria: material and formal consistency. Everything else is storytelling, sitcom blather, and clueless filibuster about unknown unknowns.

Scientific knowledge is embodied in the true theory. The true theory is the best possible mental representation of reality.

Proof No 2: the representative economist does not realize that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that ALL got the pivotal economic concept of profit wrong.

The identifier of the representative economist is that he is content with the pluralism of provably false theories and that he tries to explain/excuse manifest failure away.#2

The final proof of scientific incompetence is that neither orthodox nor heterodox economists have gotten the foundational concepts of their subject matter ― profit and income ― right. Because of this, economics stagnates for 200+ years at the proto-scientific level.

The study of economics is an intelligence test. Who does not realize until his final exam that supply-demand-equilibrium does NOT explain how the actual economy works, that DSGE and Post Keynesianism are provably false, that Marxiansim, Austrianism, or Pluralism is NO alternative, that the scientific content of economics textbooks from Samuelson to Mankiw is zero, and who becomes himself an economics teacher without any serious idea of how to get out of the swamp proves only a complete lack of scientific competence.

Egmont Kakarot-Handtke


#1 Scientists do not predict
#2 Failed economics: The losers’ long list of lame excuses

Related 'The myth of economics knowledge' and 'Why economists have not been effective in economics' and 'There is NO such thing as an economic expert' and 'Economics: a science without scientists' and 'Lucas: Confession of a scientific write-off' and 'Milton Friedman, fake scientist' and 'How Arrow pushed economics over the cliff' and 'The father of modern economics and his imbecile kids' and 'Economics: The greatest scientific fraud in modern times' and 'To this day, economists have produced NOT ONE textbook that satisfies scientific standards' and 'In search of new economists' and 'First Lecture in New Economic Thinking'. For details of the big picture, see cross-references Incompetence and cross-references Failed/Fake Scientists and Ch. 13, The indelible scientific disgrace of economics, in Sovereign Economics.

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Graphic AXEC136g

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REPLY to Tom Hickey, Matt Franko on Aug 10

The representative economist has no idea of what science is all about. What is called prediction in science is categorically different from the commonsensical meaning of ‘predicting the future’.

Scientists do not predict when the next apple will fall from the tree. What they indeed predict is position and velocity at any point in time once the apple has started to fall. The commonsenser’s view of reality is entirely DIFFERENT from the scientist’s view. The commonsenser’s view is practical, trivial, and false but utterly convincing for other commonsensers.

Each falling apple is a unique historical event. There are arbitrary many proximate causes for an apple to fall: a hailstorm, playing children, an exploding meteorite, material fatigue, an earthquake, and so on. In almost all cases the singular event is uncertain and unpredictable. That is so OBVIOUS that no physicist ever lost many words about the historicity and uncertainty of falling apples.

A SCIENTIFIC prediction is a conditional proposition that presupposes: (i) the exact knowledge of initial conditions, (ii) the knowledge of one or more universal laws, (iii) the absence of disturbances. (Popper, 1994)

The idiocy of economists consists in running around and warning of the next crash and making policy proposals without having the true economic theory, that is, without knowing how the economic system works, that is, without having figured out the objective systemic laws of the monetary economy, for example, the Profit Law. The idiocy of economists consists in not knowing after 200+ years what profit is. And this includes MMT.

There are, of course, economic laws but they do NOT, of course, relate to human behavior.

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REPLY to Matt Franko on Aug 11

When the apple fell on his head, Newton suddenly understood how gravitation works and he wrote down one of the most profound physical laws which enabled the precise calculation of planetary trajectories.

When the apple fell on his head, Matt Franko predicted that the next apple harvest will take place in the first two weeks in October.

Here you have the difference between a scientist and an imbecile economist in a nutshell.

The irrelevance of populism for economics

Comment on Jonathan Schlefer on ‘Market Parables and the Economics of Populism’

Source-Reference Foreign Affairs, no external Blog-Reference

There is the political sphere, and there is the scientific sphere. It is quite obvious that both are ontologically different, and because of this, it is of utmost importance to radically separate the two. As a matter of principle, political questions have to be answered in the political sphere and are the subject matter of Political Science. The economist has a voice in the political sphere like every other voter. But it is NOT his task to climb on a soapbox and push a political agenda.

Economics is a science, and the economist has to satisfy scientific standards and NOTHING else. Scientific standards have been well-defined since antiquity: “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)

Scientific knowledge is embodied in the true theory. The true theory is the humanly best mental representation of reality. This defines the economist’s task: “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)

In very general terms, science is about invariances: “An objective fact is one that is invariant under all admissible transformations.” (Nozick) Translated into economics, this means that economists have to figure out the economic laws that underlay the ever-changing historical surface.

The fact is that economics is a failed science. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, and MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational economic concept of profit wrong. How could this happen?

A closer look reveals that there are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda; the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

The fact is that theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Political economists are NOT scientists but voluntarily useful idiots for one fraction of the political spectrum or the other. The fact is that economics is virtually non-existent as science but merely in the cargo cultic incarnation of the thinly disguised political sects of Walrasianism, Keynesianism, Marxianism, Austrianism, and MMT. All these approaches are proto-scientific garbage.

The proof is in the reaction to populism. The idea that physicists rewrite their science when the head of state changes or when people vote in a referendum Leave or Remain is absolutely ridiculous. Curiously, the idea appears NOT ridiculous with regard to economics. Science does NOT react to populism but politics must, and so must political economics. Somehow, people seem to recognize that economics is NOT a science and that economists are NOT scientists but agenda pushers. And while everybody is well aware that it is impossible to change the Law of Gravity by popular vote, it is known from experience that it is relatively easy to replace one agenda pusher with another one.

Economics has to change because it is provably false, i.e., materially and formally inconsistent. Methodologically, such a change is called a Paradigm Shift. Economics has NOT to change because populists demand a change in economic policy. The change in economic policy has to be realized in the political sphere with political means.

The fact is that the economist qua scientist has NOTHING at all to say about policy or the realization of the Good Society, as is well-known since J. S. Mill: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”

From this follows (i) that all agenda pushers who have abused economics in the form of political economics for more than 200 years have to be expelled from the sciences, and (ii), that economics has to perform the Paradigm Shift, that is, to move from Walrasian microfoundations and false Keynesian macrofoundations to the true macrofoundations.

The task of the economist is to figure out how the economy works. Neither right-wing nor left-wing political economists were successful at this task. The proper place of both orthodox and heterodox economics of the past 200+ years is ― NOT the political soapbox but ― the wastebasket.

Egmont Kakarot-Handtke


Related 'Right troll left troll pack your bag and get out of economics' and 'Trust in economics as a science?' and 'Economists and the economy ― a nonstarter for 200+ years' and 'Political economists ― the village idiots of science' and 'Economists: Time to say goodbye' and 'Economics: A pointless left-right wrestling show' and 'Political economics: Who hijacks British Labour?' and 'From false microfoundations to true macrofoundations'. For more details, see cross-references Failed/Fake Scientists and cross-references Political Economics and cross-references Paradigm Shift.

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Graphic AXEC108l

A la recherche de l'inflation perdue

Comment on David Andolfatto on ‘Where’s the inflation?’

Blog-Reference and Blog-Reference

David Andolfatto asks: “What accounts for the missing inflation? In a recent NYT article, Binyamin Appelbaum mentions four theories of inflation: (1) Monetarist, (2) Phillips Curve, (3) Expectations, and (4) Internationalist.”

Obviously, economists are lost in the woods. The ultimate reason is no other than their scientific incompetence. For concise proof let us focus here on the Phillips curve.

The fact that the Phillips curve now seems to be flat only tells one that it has been misspecified all along. Thanks to the scientific incompetence of economists this remained undetected since Samuelson/Solow messed things up. The methodological blunder consists of interpreting the Phillips curve as a behavioral relationship. What has to be done is to formulate the Phillips curve as an objective structural-systemic relationship.#1 This relationship consists alone of measurable variables and is therefore readily testable.

From the correct systemic relationship follows that employment L depends (i) on aggregate demand, and (ii), on the price mechanism, which is formally embodied in the macro-ratio rhoF=W/PR with W = (average) wage rate, P = (average) price, and R = (average) productivity. The first thing to notice is that wage rate and price both can ― as a matter of principle ― move independently. Their respective movements co-determine with any given composition of aggregate demand employment. There is no fixed behavioral feedback dependency between employment and wage rate/price either.

Let all other variables be fixed and the rate of change of productivity R for simplicity be zero, i.e. r=0, then there are THREE logical cases: (i) The rate of change of the wage rate W is equal to the rate of change of the price P, i.e. w=p, then employment does NOT change NO MATTER how big or small the rates of change are. (ii) The rate of change of the wage rate is greater than the rate of change of the price then employment INCREASES. (iii) The rate of change of the wage rate is less than the rate of change of the price then employment DECREASES.

So, it is DIFFERENCES in the rates of change of wage rate and price and NOT the absolute magnitude of change that affects employment. Every perfectly SYNCHRONOUS inflation/deflation/hyperinflation is employment-neutral, that is, employment sticks indefinitely where it actually is.

The correct systemic Phillips curve tells one (i) that there is no necessary behavioral relationship between employment and inflation, and (ii), prolonged synchronous inflation or hyperinflation does not happen by accident but must be engineered. The normal course is that price inflation is faster than wage inflation and this means increasing unemployment.

The answer to the question ‘Where’s the inflation?’ is roughly speaking: there is (worldwide) deflation because the increase of the average wage rate lags behind the increase of the average productivity.

Egmont Kakarot-Handtke


#1 For more details see Putting economic policy on scientific foundations.