Posts Tagged ‘ economics ’

"I am pretty sure that, had I taken economics in school, I would never have developed an interest in it." (11/11/11)

"Lately I’ve landed in discussions about whether there is such a thing as human action. I’m not kidding. Some educated people have their doubts." (11/11/11)

"Do you sometimes wonder why economists are accorded such respect and influence given the fact that they claim knowledge over the unknowable, promote theories that are untestable, and make forecasts for which they are never held accountable? Isn’t that the definition of a witch doctor?" (10/18/11)

"In this article we consider the theories of utility developed by Rothbard and Kirzner in their respective treatises on economic theory (Man Economy and State, and Market Theory and the Price System). We argue that while both authors were strongly influenced by Mises’ ordinalist conception of utility and in fact both authors affirm this conception in their initial expositions of utility theory, their subsequent developments diverge quite sharply." [abstract -- full paper available as PDF or MS Word download] (10/16/11)

"The idea of regime uncertainty had sound economic theory and substantial empirical evidence to support it from the beginning, and a great deal of additional evidence has accumulated over the past three years. Yet critics have continued to dismiss it either as Republican bunk bought and paid for by Obama-hating billionaires or as a sort of 'just so' story concocted by flaky think-tank nobodies, such as yours truly. Now, however, the research reported by Baker, Bloom, and Davis knocks the ball firmly back into the critics’ court." (10/08/11)

"The root of any system of economic theory is the theory of price. But while modern Austrian economists have put a great deal of effort and ingenuity into building up the superstructure of their discipline since the mid-1970s, they have paid scant attention to ensuring that the price theory supporting the edifice is a sound and settled doctrine." [abstract -- full paper available as PDF or MS Word download] (09/27/11)

"When presented with quotes by George Osborne and Vince Cable [from] 2009 that printing money was the last resort of desperate governments and 'Mugabe economics' Danny Alexander laughed it off. This is because people don’t really understand economics -- they see the headline figures, they associate recessions with whoever is in government; but as Ron Paul recently said, 'A lot of people just flat out don’t understand what I’m talking about.' But the Austrian explanation doesn’t have to be complicated." (09/27/11)

"Although Monetarism, as an interventionist economic policy, clearly isn’t libertarian, people continue to consider it as such. The basic difference between Keynesian Economics and Monetarist Economics is that one favors fiscal policy while the other favors monetary policy as a way for the government to manage the economy through the manipulation of aggregate demand." (08/26/11)

"Open up any principles of economics textbook written between the 1950s and the early (and maybe even late) 1970s, and the odds are high that it will say that the United States has a mixed economy. One part of the mix, it will say, is free markets or capitalism. It's sometimes vague about the other part of the mix. ... But sometime in the 1980s, writers of economics textbooks -- and even many economists in popular articles -- lost some accuracy. They started saying that the U.S. has a free-market economy." (08/21/11)

"The humor columnist for the New York Times, Paul Krugman, has recently taken to defending his vulgar Keynesianism against its critics by accusing them of making arguments that rely on the existence of a 'confidence fairy.' By this mockery, Krugman seeks to dismiss the critics as unscientific blockheads, in contrast to his own supreme status as a Nobel Prize-winning economic scientist. The irony in this dismissal, as others, including my friend Donald Boudreaux, have already pointed out, is that Krugman’s own vulgar Keynesianism relies on a much more ethereal explanatory force for its own account of macroeconomic fluctuations -- namely, the so-called animal spirits." (08/03/11)

"It’s as if a person who is bleeding to death because of a gunshot wound in his stomach is brought to a physician. The physician correctly realizes that the patient is losing massive amounts of blood and, also, correctly understands that such blood loss is dangerous to the patient’s health. So the physician prescribes massive infusions of blood, period If the patient doesn’t recover, the physician orders that the volume of blood-infusions be increased. If the patient dies, the physician will forever blame himself for not increasing the volume of blood-infusions even further." (08/01/11)

"Both nominal wages and nominal housing prices are what economists call 'downwardly inflexible.' In most markets, falling demand swiftly leads to falling prices, and surpluses don't last long. But in labor and housing markets, market adjustment to negative demand shocks is far more reluctant. There are plenty of regulations that exacerbate the problem, of course. But the main cause in both cases seems to be psychological." (08/02/11)

"What I call the textbook Keynesian model is one in which you think of everybody as working in a GDP factory, and the aggregate price of labor is fixed. (If you go to the graduate textbook model, you have prices that move, but too slowly, and it can have stickiness in output prices, not just the wage rate.) In terms of theoretical outlook, I would say that anyone who works with the GDP factory model and the textbook version of aggregate demand and aggregate supply is conducting the conversation in a way that is understandable to the Keynesian tradition. However, there are those on the far left and far right who do not like the GDP factory story and who see things as more complicated." (07/20/11)

"As part of my Mises Academy class Keynes, Krugman, and the Crisis, I have reread large portions of The General Theory. In his masterpiece, Keynes erects an impressive framework on one crucial assumption: left to its own devices, the free market can get stuck in an equilibrium with very high unemployment. Although Keynes's whole edifice and critique of the 'classical economists' rests on this belief, he devotes surprisingly little time to supporting it." (07/18/11)

"I often annoy other economists by giving advice. 'Economists are supposed to describe behavior, not change it,' they insist. But they couldn't be more wrong. Economics is inherently advisory. Anytime an economist notices a discrepancy between (a) the world as it is, and (b) the world as people believe it to be, economics implies advice." (07/05/11)

"People often ask me, 'How are the Austrians different from the Chicago School economists? Aren't you all free-market guys who oppose big-government Keynesians?' In the present article I'll outline some of the main differences." (06/20/11)

"Anarchists face many challenges establishing a state-free society. One of the main challenges we face is the fact that an idea that is widely held will continue to be widely held. This intellectual inertia causes false, pro-state ideologies to be established and propagated long after they have been disproved. An excellent example of this is Keynesianism, which is used to justify some actions of the state. It was exploded by the stagflation of the ‘70’s, but it is still the most taught macroeconomic theory." (06/13/11)

"Suppose I’m in the business of making lunches. Let’s say that with my current know-how I can make a maximum of 20 lunches a day by using two units of labor and four units of capital. One day I discover a way to make two lunches of the exact same kind, at least from the perspective of my customers, with the same amount of inputs that it previously took to make one. In other words, before that fateful day I was selling lunches inefficiently; I was producing only half the lunches that I could have been. Discovering that inefficiency means I can create 20 additional lunches." (05/31/11)

"Although the Great Society should be understood as primarily a political phenomenon — a vast conglomeration of government policies and actions based on political stances and objectives — economists and economic analysis played important supporting roles in the overall drama. Even when political actors could not have cared less about economic analysis, they were usually at pains to cloak their proposals in an economic rationale. If much of this rhetoric now seems to be little more than shabby window dressing, we might well remind ourselves that the situation in this regard is no better now than it was then." (05/26/11)

"Most macroeconomists see the boom-bust cycle as an unsolved problem. Like physicists in search of a Grand Unified Theory, they long for a model that accounts for all the major aspects of the business cycle. Perhaps they are hampered by looking through the wrong end of a telescope. Mansharamani uses not just one but five 'lenses' to examine the subject." (05/25/11)