Tag Archives: economics

Why we don't need macroeconomic data in a free economy

Source: Ludwig von Mises Institute
by Frank Shostak

"It is common for commentators and economists in their discussions to continuously refer to something called the 'economy' — which sometimes performs well and at other times poorly. This 'economy' is presented as a living entity apart from individuals. For example, various experts report that the 'economy' grew by such and such percentage, or the widening in the trade deficit threatens the 'economy.' What do they mean by the term 'economy?' Does such an entity actually exist?" (04/04/17)

https://mises.org/blog/why-we-dont-need-macroeconomic-data-free-economy

Conservatives better hope that wages and prices are sticky

Source: EconLog
by Scott Sumner

"I believe that a combination of sticky wages and monetary shocks produce most of America's economic slumps, including the Great Contraction of 1929-33, as well as other big recessions like 1920-21, 1937-38, 1981-82 and 2008-09. I do not believe the capitalist system is 'inherently unstable' and that big government is needed to stabilize it, rather I believe that it is naturally stable, as long as bad monetary policy doesn't interact with wage stickiness to produce business cycles. But suppose it were shown that I am wrong, and that wage/price stickiness is not an issue — what then? That would be very bad news for my laissez-faire ideology. Now I'd have to concede that events like the Great Contraction of 1929-33 showed that capitalism is indeed inherently unstable, and that this problem could not be fixed with good monetary policy. Now I'd have to entertain other solutions, such as big government and or comprehensive economic planning." (03/25/17)

http://econlog.econlib.org/archives/2017/03/conservatives_b.html

For Keynesians and Austrians, "uncertainty" means two different things

Source: Ludwig von Mises Institute
by GP Manish & Felicia Cowley

"Keynesian economics has witnessed a remarkable resurgence since the crisis of 2008. The inability of mainstream economics to predict or explain the crisis led many economists to become skeptical of its core macroeconomic tenets. Several have turned the clock back to the ideas of Keynes to make sense of the housing bubble and the ensuing recession. One such explanation inspired by the General Theory emphasizes the endemic uncertainty of the future and its implications for market stability. … this line of thought bears a striking resemblance to Austrian ideas. Moreover, its rejection of mathematical probability as a foundation for expectations is echoed by several prominent Austrian economists. Nevertheless, while Keynesians conclude that the uncertainty of the future renders a market economy inherently unstable, Austrians embrace uncertainty without losing faith in the order generated by a market economy. What lies at the root of this puzzle?" (03/23/13)

https://mises.org/blog/keynesians-and-austrians-uncertainty-means-two-different-things

Novelists remembered what economists forgot

Source: Cato Unbound
by Maria Pia Paganelli

"The bifurcations between the individual and the social and between the political and the economic, mentioned in all the essays this month, create parallel worlds in which the public spirit is segregated into the political sphere and self-interest into the economic sphere. This generates an idyllic image of the political but also a despicable image of the economic. While politicians care dispassionately about the world, economic agents are heartless calculators. What novels help us see is that that bifurcation is artificial and potentially limiting. Characters in novels, whether they are politicians or economic agents, are generally complex individuals. Many of public choice theory's agents are not." (03/15/17)

https://www.cato-unbound.org/2017/03/15/maria-pia-paganelli/novelists-remembered-what-economists-forgot

Mark Twain, meet Gordon Tullock

Source: Cato Unbound
by Michelle Vachris

"As Cecil Bohanon and I have argued elsewhere, despite the vast chasm between the economics and literature disciplines, there exist gains from trade between the two. Tyler Cowen has explained that novels are similar to economic models in that the stories usually trace through shocks to the system of the characters. Therefore we and our students can learn a lot about the economy and economic theories by reading works of literature, and vice versa. In particular there are plenty of examples of what Skwire calls 'public choice sensibility' in literature that predates the development of public choice theory. To get us started, Skwire provides us with an introduction to Shakespearean coverage of public choice sensibility. I'd like to extend this train of thought by offering up Mark Twain and Charles Dudley Warner's book A Gilded Age, A Tale of Today." (03/13/17)

https://www.cato-unbound.org/2017/03/13/michelle-vachris/mark-twain-meet-gordon-tullock

Adam Smith's public choice economics

Source: Cato Unbound
by Maria Pia Paganelli

"In Smith's account, land owners were too concerned with showing off their riches to care about things other than ornaments. Farmers and workers may have known their interest but were seldom in a position to lobby. They were many, and they were spread throughout the country. Merchants and manufacturers, on the other hand, knew their interest well and tended to be concentrated in towns. They were few and lived in proximity to each other. They could more easily conspire against the public and indeed this is what they did." (03/10/17)

https://www.cato-unbound.org/2017/03/10/maria-pia-paganelli/adam-smiths-public-choice-economics

Higher costs don't mean higher prices

Source: Ludwig von Mises Institute
by Per Bylund

"The reason an expensive good is produced at high cost is that those high costs can be covered by the anticipated price that it can be sold for. It doesn't mean that entrepreneurs choose high costs for the fun of it, but that they motivate a certain level of costs based on the anticipated price — and that price is really dependent only on consumer valuation of the final good. In imperfect markets, this means there can be high markups that offer entrepreneurs enormous profits. But this is also what lures other entrepreneurs to enter this particular market, so where there are no significant barriers to entry profits will tend to get squeezed until they reach the standard market rate of return. In this process, costs are pushed down but consumer good prices even more so, thereby making consumers the ultimate winners of this process. So it is not in any sense a paradox that the market price of a box of paint has very little to do with the final price of the painting." (03/08/17)

https://mises.org/blog/higher-costs-don%E2%80%99t-mean-higher-prices

Power-hunger

Source: EconLog
by Bryan Caplan

"What economics teaches is not that greed is good, but that good incentives transform this questionable motive into awesome results. Greed plus property rights plus competition plus rationality plus reputation is good. Greed alone is film noir. In Public Choice, also known as 'economics of politics,' we usually assume that politicians are motivated not by greed, but by power-hunger. Of course, we rarely utter the word 'power-hunger.' Instead, we call it 'vote maximization,' just as we call greed 'profit maximization.' But when Public Choice pictures politicians, it pictures humans filled with lust for power." (03/02/17)

http://econlog.econlib.org/archives/2017/03/power-hunger.html

Yes, students still need Econ 101

Source: James G. Martin Center for Academic Renewal
by Donald J Boudreaux

"In an article published recently in the Atlantic, 'The Curse of Econ 101,' University of Connecticut law professor James Kwak argues against what he assumes to be the content, thrust, and effect of the basic principles course, Economics 101. He thinks it's too simplistic. And he's sure that in its simplicity, it masks the complexities that must be accounted for when passing judgment on economic reality and especially on government policies." (02/22/17)

https://www.jamesgmartin.center/2017/02/yes-students-still-need-econ-101/

The goal of socialists is socialism — not prosperity

Source: Ludwig von Mises Institute
by William L Anderson

"As I observe (and participate in) a few discussions on Facebook and elsewhere about socialism, I have come to a few conclusions about the nature of the arguments and the reasons why socialists remain socialists even as we see the utter failure of socialist economies throughout history. Maybe the meme that appears once in a while — '“If socialists understood economics, they wouldn't be socialists' — might be true, but I doubt it. As I see it, the purpose of establishing socialism is to further promote socialism, not improve the lot of a society and certainly not to promote prosperity." (02/14/17)

https://mises.org/blog/goal-socialists-socialism-%E2%80%94-not-prosperity