This book is primarily directed at my fellow economists and it primarily gives theory and stylized facts. The colleagues will specifically have to understand the ‘Definition & Reality methodology’ before they will appreciate that my analysis is scientifically warranted. Much work remains to be done in practical research. And much work remains to be done by the other professions. Since the current imbalance of powers has many victims, it may be hoped, none the less, that the parliaments of our democratic nations investigate the issue too, so that there is more hope for improvement in their living conditions. Parliaments should do as Alfred Marshall (1890, 1947:3) wrote: “Now at least we are setting ourselves seriously to inquire whether it is necessary that there should be any so-called ‘lower-classes’ at all: that is, whether there need be large numbers of people doomed from their birth to hard work in order to provide for others the requisites of a refined and cultured life; while they themselves are prevented by their poverty and toil from having any share or part in that life.” Books are more stimulating and more enjoyable to read if they are guided by questions and if they cause questions themselves. This book has been written in the style that it provides answers and thus it must be feared to be a dull read. It is too late to change that style. However, some questions are: (1) How is it possible that Europe has an unemployment of about 10% for more than three decades now, and the USA the mirror image of poverty ? (2) Can we really trust our governments ? With this book ends a project that basically started with the Fall of the Berlin Wall in 1989. My hope is that this book contributes to the fall of some other walls, i.e. the intangible mental ones, consisting of perceptions and conventions - but equally confining. Contents in Brief Book I Introduction 11 Book II Trias Politica and Economic Supreme Court 16 Book III Economics ‘as usual’ 36 Book IV Presentations for the general public 60 Book V Methodology: Definition & Reality 69 Book VI Structural models 87 Book VII Social Choice 158 Book VIII Supportive notions 186 Book IX Reduced form 198 Book X Conclusions 216 Appendices 266 The symbol ° is used to indicate market clearing equilibrium (and possibly expectational). The symbol * or E[.]is used for expectations and expectational equilibrium (and possibly market clearing). The symbol °* is used for both, and · for the one or the other (and possibly both). Contents Book I Introduction 11 1. Order of presentation 11 2. The general theory 11 3. Methodology 14 Book II Trias Politica and Economic Supreme Court 16 4. The Trias Politica 16 5. The economic record of the 20th century 18 6. An Economic Supreme Court 24 7. Position of the Court in economic theory 26 8. The record of economics itself 26 9. Economics ‘as usual’ and its inadequacy 30 10. Four empirical cases 32 11. The moral imperative 33