Ten fundamental laws of economics

posted by
December 21, 2016
Ludwig von Mises Institute
by Antony P Mueller  
Posted in Commentary

"In the midst of so many economic fallacies being repeatedly seemingly without end, it may be helpful to return to some of the most basic laws of economics. Here are ten of them that bear repeating again and again." (12/21/16)

  • dL

    I would have disagreements with 8,9,10

    (8) Labor does not create value
    is an overreaction. While I agree w/ the sentiment that labor for the sake of labor is nonsense, the 180 of that is likewise nonsense. For example in the automation age, “hand-crafted,” expert, skilled labor can be a form of economic rent, i.e, returns in excess of opportunity costs w/ respect to heterogeneous tastes/preferences. In short, skilled labor can carry a premium. This has nothing to do w/ “the labor theory of value.” Instead it has to do with the subjective valuations of product diversity and taste heterogeneity.

    (9) Profit is the entrepreneurial bonus
    The author’s justification begins with “In competitive capitalism,” i.e, the world he constructs on paper, but in the real world “competitive capitalism” also features Tullock Auction rent-seeking, Oliver Williamson vertical integration, etc. Stuff that has nothing to do with fixing allocation errors due to divergences in the evenly rotating economy. In short, there are many ways to gain a profit, and not all of them are due to free market entrepreneurial discovery.

    (10) All genuine laws of economics are logical laws

    Economic laws are synthetic a priori reasoning. One cannot falsify such laws empirically because they are true in themselves. As such, the fundamental economic laws do not require empirical verification.

    The laws of political science are a science open to understanding by anyone following the scientific method. They are not a branch of logic discernible only to the enlightened few. By far my biggest complaint w/ Austrian Economics. Simply an overreaction that stems from the socialist calculation debate over the the implications of Walrasian equilibrium theory regarding the Walrasian auctioneer(the State) setting supply and demand.

    Now I often agree re: the pretense of expertise in the use of mathematics in macro-economic planning, but it’s clericalism to insist that things like game theory, complexity theory, graph theory etc are heresy, particularly in the realm of microeconomic analysis.

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