Posts Tagged ‘ economics ’

The confidence fairy vs. the animal spirits — not really a fair fight

August 4, 2011
posted by

Independent Institute Independent Institute
by Robert Higgs  

"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)

http://bit.ly/qRtw7Z  

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Bloody Keynesians

August 2, 2011
posted by

Cafe Hayek Cafe Hayek
by Don Boudreaux  

"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)

http://cafehayek.com/2011/08/bloody-keynesians.html  

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How wage rigidity is special

August 2, 2011
posted by

EconLog EconLog
by Bryan Caplan  

"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)

http://econlog.econlib.org/archives/2011/08/how_wage_rigidi.html  

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Keynes and anti-Keynes

July 20, 2011
posted by

EconLog EconLog
by Arnold Kling  

"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)

http://econlog.econlib.org/archives/2011/07/keynes_and_anti.html  

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The critical flaw in Keynes’s system

July 18, 2011
posted by

Ludwig von Mises Institute Ludwig von Mises Institute
by Robert P. Murphy  

"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)

http://mises.org/daily/5464/The-Critical-Flaw-in-Keyness-System  

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The trade deficit: Myth or catastophic reality?

July 14, 2011
posted by

Neal Reynolds Nuzcom
by Neal Reynolds  

"Free-market economists argue that there is no such thing as a trade deficit since all dollars spent overseas must eventually come back to purchase domestically produced goods and services, thus creating jobs in exchange for the ones that were lost due to the foreign purchases. But there is a huge exception to this rule that these economists overlook: The dollars that were sent overseas can instead be used to purchase our assets – assets which in many cases we didn't work for but inherited from the labors of previous generations ... or nature itself." (07/14/11)

http://tinyurl.com/62tldyy  

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ABA: Always Be Advising

July 5, 2011
posted by

EconLog EconLog
by Bryan Caplan  

"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)

http://econlog.econlib.org/archives/2011/07/aba_always_be_a.html  

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The Chicago School versus the Austrian School

June 20, 2011
posted by

Ludwig von Mises Institute Ludwig von Mises Institute
by Robert P. Murphy  

"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)

http://tinyurl.com/4xge8c8  

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Intellectual inertia and Keynesianism

June 13, 2011
posted by

Daily Anarchist Daily Anarchist
by Sima Qian  

"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)

http://tinyurl.com/3dxlpxw  

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Do we need a weak dollar?

June 2, 2011
posted by

Ludwig von Mises Institute
by Robert P. Murphy  

"Last week I testified before a Congressional subcommittee on the Fed's role in rising gasoline prices. All of the economists on the panel agreed that oil prices were rising (partly) because of the dollar's fall against other currencies. However, Dean Baker — prominent Keynesian pundit and codirector of the Center for Economic and Policy Research — testified that the dollar's fall was inevitable, and even a good thing in light of the US trade deficit. At the time, I knew I disagreed with Baker, but I didn't get a chance to explain why." (06/02/11)

http://mises.org/daily/5344/Do-We-Need-a-Weak-Dollar  

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What conservatives ignore in Adam Smith’s message

May 31, 2011
posted by

Christian Science Monitor
by Louis Rene Beres  

"Through capitalistic modes of production and exchange, therefore, reasoned Smith, an inextinguishable social inequality might still be reconciled with broad human progress. But today’s conservative defenders of Smith usually ignore, either deliberately or unwittingly, the full depth of his rather complex thought. A system of 'perfect liberty,' as Smith called it, could never be based upon any encouragements of needless consumption. Instead, he argued, the laws of the market, driven by competition and a consequent 'self-regulation,' strongly demanded a principled disdain for all vanity-driven consumption."

http://tinyurl.com/4363xp5  

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But there ARE free lunches!

May 31, 2011
posted by

Foundation for Economic Education Foundation for Economic Education
by Sandy Ikeda  

"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)

http://www.thefreemanonline.org/headline/but-there-are-free-lunches/  

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Economic analysis and the Great Society

May 26, 2011
posted by

Independent Institute Independent Institute
by Robert Higgs  

"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)

http://independent.org/newsroom/article.asp?id=3064  

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Boombustology: A review

May 25, 2011
posted by

Foundation for Economic Education Foundation for Economic Education
by Warren C. Gibson  

"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)

http://www.thefreemanonline.org/headline/boombustology-a-review/  

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Free Banking and the Structure of Production: A Contrast of Competing Banking Systems

May 24, 2011
posted by

Libertarian Papers
by Dan Mahoney  

"In this paper we extend an argument originally developed in Hulsmann (2009) to analyze changes to the structure of production that occur when the demand for money changes." [abstract -- full paper available as PDF or MS Word download] (05/23/11)

http://libertarianpapers.org/2011/14-mahoney-free-banking/  

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Mr. Smith Goes to Public Choice

May 22, 2011
posted by

EconLog EconLog
by David Henderson  

"I woke up early Friday morning and, rather than turning on ESPN, which is my wont, I surfed movies and found that 'Mr. Smith Goes to Washington' had started only a few minutes earlier. Once I start watching that movie, I'm hooked and I hang in for the whole thing. What struck me this time, which was probably about my third or fourth time, was how well Frank Capra nailed it on some of the most important things about public choice, things that I talk about in class when I teach a segment on public choice." (05/22/11)

http://econlog.econlib.org/archives/2011/05/mr_smith_goes_t.html  

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Can government’s finances be compared to a household’s?

May 19, 2011
posted by

Ludwig von Mises Institute Ludwig von Mises Institute
by Robert P. Murphy  

"Politicians often try to empathize with struggling Americans by promising to cut government spending, 'just like regular households in tough times.' This simile evokes different reactions depending on one's economic views. Keynesians think it's reckless, proponents of Modern Monetary Theory (MMT) think it's absurd, and Rothbardians think it's correct as far as it goes, but it falsely equates tax revenues to an honest living." (05/19/11)

http://tinyurl.com/3omwaay  

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The myth of natural monopoly

May 15, 2011
posted by

Ludwig von Mises Institute Ludwig von Mises Institute
by Thomas J. DiLorenzo  

"It is a myth that natural-monopoly theory was developed first by economists, and then used by legislators to 'justify' franchise monopolies. The truth is that the monopolies were created decades before the theory was formalized by intervention-minded economists, who then used the theory as an ex post rationale for government intervention. At the time when the first government franchise monopolies were being granted, the large majority of economists understood that large-scale, capital-intensive production did not lead to monopoly, but was an absolutely desirable aspect of the competitive process." (05/13/11)

http://mises.org/daily/5266/The-Myth-of-Natural-Monopoly  

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The Causes of Price Inflation & Deflation: Fundamental Economic Principles the Deflationists Have Ignored

May 9, 2011
posted by

Libertarian Papers
by Laura Davidson  

"In the inflation-deflation debate, deflationists view credit as the most important factor affecting prices. As far as they are concerned, the credit contraction of 2008 caused prices-in-general to fall, and prices will continue to fall unless bank lending resumes. But are these opinions based on a sound understanding of economics?" [abstract -- full paper available as PDF or MS Word download] (05/05/11)

 

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Keynesian economics and regulation

May 8, 2011
posted by

Ayn R. Key
by Ayn R. Key  

"It may seem rather odd to say this, but it is actually true that Keynesian Economists are not automatically advocates of the regulatory state. By definition, Keynesian economics is concerned with fiscal policy, using federal budgetary policy to moderate the economy. There is nothing about that which would indicate that a Keynesian must embrace regulation -- it is theoretically possible to encounter a Keynesian who is only concerned about fiscal policy." (05/07/11)

http://tinyurl.com/4yck5yf  

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Truth and freedom in economic analysis and economic policy making

April 24, 2011
posted by

Liberty & Power
by Robert Higgs  

"In both the realm of economic research and the realm of economic policy, freedom is an essential condition for the generation of truth and thus for the enhanced enjoyment of social life that depends on making use of true, rather than false, information. The academic world of the show-off, pyrotechnic economists who dominate today’s mainstream profession would be impossible without the vast government subsidies that support these economists and the institutions in which they concoct their wizardry." (04/21/11)

http://hnn.us/blogs/entries/138602.html  

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Natural scientists and economics

April 19, 2011
posted by

Cafe Hayek Cafe Hayek
by Don Boudreaux  

"I don’t blame natural scientists for their frequent failures to grasp even basic economics. Each of these scientists is a specialist in his or her own field. It would be as out of place for me to criticize, say, a scientist who specializes in the study of ants for his poor grasp of economics as it would be for the ant-specialist scientist to criticize me for my poor grasp of the biology and behavior of ants. The difference is that I don’t fancy that my expertise in economics equips me to speak with any authority at all on ant science or on other natural-science matters." (04/18/11)

http://cafehayek.com/2011/04/natural-scientists-and-economics.html  

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Corporate profits

April 11, 2011
posted by

EconLog EconLog
by Arnold Kling  

"In the comments on other posts, I have seen questions addressed to me about 'excessive corporate profits.' I am going to answer this question in very basic terms." (04/11/11)

http://econlog.econlib.org/archives/2011/04/corporate_profi.html  

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Not everything is a market

April 7, 2011
posted by

Foundation for Economic Education Foundation for Economic Education
by Steven Horwitz  

"It often seems that libertarians (especially ones who are well read in economics) think every social phenomenon under the sun can be understood in the same sorts of terms used to analyze markets. ... there’s no doubt that the 'economic way of thinking' can be valuable in understanding all kinds of human behavior, including those listed above. As someone who has written on the economics of the family, I can hardly deny that basic point. However, treating everything like a market can lead us into serious error as well." (04/07/11)

http://www.thefreemanonline.org/headline/not-everything-is-a-market/  

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The Keynesians’ special case

April 6, 2011
posted by

Foundation for Economic Education Foundation for Economic Education
by William L. Anderson  

"Under the Keynesian paradigm, if monetary authorities cannot stimulate private spending by forcing down interest rates, then the only other avenue is for the government to borrow and create new money, and spend on its own projects. If the first option does not work, the second, by definition, must." (04/06/11)

http://tinyurl.com/449kndp  

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