Tag Archives: economics

Why mainstream economics consistently fails to explain the occurrence of recessions?

Source: Cobden Centre
by Dr. Frank Shostak

“For Martin Wolf as for most mainstream economists the Keynesian remedy is always viewed with positive benefits — if in doubt just push more money and boost government spending to resolve any possible economic crisis. It did not occur to our writer that without understanding the causes of a crisis, administering Keynesian remedies could make things much worse. The proponents for strong government outlays and easy money policy when the economy falls into a crisis hold that stronger outlays by the government coupled with increases in money supply will strengthen monetary flow and this in turn will strengthen the economy. What is the reason behind this way of thinking?” (03/26/18)


Calculation and the question of arithmetic

Source: Ludwig von Mises Institute
by Jeffrey M Herbener

“The view that Ludwig von Mises had more in mind in his calculation critique of socialism than the Hayekian knowl­edge problem has recently been attacked by Leland Yeager. This article addresses Yeager’s central claim that, ‘I cannot believe Mises was merely saying that if the socialist planners possessed in some remarkable way all the information normally conveyed by genuine market prices, they still would be stymied by inability to perform calculations in the narrow arith­metical sense, an inability that advances in supercomputers might conceivably overcome.’ Yeager then asserts that Joseph Salerno, Murray Rothbard, and I (SRH) claim that this is what Mises meant.” (03/21/18)


Coase and Krugman

Source: EconLog
by Scott Sumner

“In 1960, Coase developed a radically new way of thinking about externalities. At the time, Pigou’s interwar theory of externalities was very well established, almost unquestioned. When a person or company does something that imposes external costs on others, there is a market failure. The optimal public policy is a remedial tax, equal to the size of the external cost. … Coase’s basic insight is that external costs, by themselves, are not market failures. The victim would have an incentive to bribe the entity imposing external costs. That bribe has a similar impact to an optimal tax. Thus before Coase, economists thought there was an economic rationale for government regulation of indoor smoke. After Coase, economists recognized that the owner of the property, not the government, should regulate indoor smoke. But Coase did not stop there. He also showed that when many people are harmed by externalities, there may be ‘transactions costs’ in privately negotiating an agreement. In that case, Pigou’s suggestion that a remedial tax is needed might be correct. But the real problem is not externalities, it’s transactions costs. In 1998, Krugman came up with a radically different way of thinking about liquidity traps.” (03/17/18)


Tariffs: A history of repeated failure

José Niño

Source: American Institute for Economic Research
by Jose Nino

“Even though tariffs have a proven track record of failure, why do policymakers insist on bringing these failed polices back from the grave? The harsh reality is that tariffs yield clear benefits for the narrow interest groups that promote them. Public-choice theory sheds some interesting light on how interest groups can mobilize rapidly in pushing for policies that hurt the rest of the populace.” (03/12/18)


What is wrong with the popular definition of inflation?

Source: Cobden Centre
by Dr. Frank Shostak

“What is today called inflation is the general rise in prices, which is in fact only the outcome of inflation. Consequently, anything that contributes to price rises is now called inflationary and therefore must be guarded against. Thus, a fall in unemployment or a rise in economic activity are all seen as potential inflationary triggers and therefore must be restrained by central bank policies. Some other triggers such as rises in commodity prices or workers’ wages also regarded as potential threats and therefore must be always under the watchful eye of the central bank policy makers. If inflation is indeed just a general rise in prices, then why is it regarded as bad news? What kind of damage does it do?” (03/12/18)


Economics was invented to refute Trump’s tariff arguments

Source: Foundation for Economic Education
by Tom Mullen

“When Adam Smith wrote Wealth of Nations, it wasn’t to refute the ‘godless socialists’ 21st-century Republican voters believe are taking over the world. It was to refute the kinds of protectionist ideas championed by conservatives like Edmund Burke and Alexander Hamilton in Smith’s day, Abraham Lincoln eighty years later, and Trump today. Bastiat remade Smith’s case in 1848. Henry Hazlitt did so again in 1946. Still, these economic fallacies persist because they offer the victims of other bad economic policies villains they can blame for largely self-inflicted wounds.” (03/05/18)


The fateful wish for price stability

Source: Ludwig von Mises Institute
by Thorsten Polleit

“For economists of the Austrian school, the monetary policy objective of price stability is a recipe for bringing about disastrous results, namely recurrent economic crises, which in turn ultimately lead to a destruction of economic and political freedom. With price stability having become so widely favored, it is important to outline the Austrian School’s thinking in some more detail.” (03/01/18)


Dehomogenizing Austrian economics: The revival of Wieser

Source: Cobden Centre
by Joseph T Salerno

“[T]he dehomogenization debate of the last few decades was actually initiated by a radical reinterpretation of the socialist calculation debate of the 1930s published by Israel Kirzner in 1988. Prior to Professor Kirzner’s seminal article, ‘The Economic Calculation Debate: Lessons for Austrians,’ it was widely accepted by both neoclassical and Austrian economists that Hayek (and Lionel Robbins) had diverged from and softened Mises’s position that economic calculation was ‘impossible’ under socialism.” (02/15/18)


Is Paul Krugman now too conservative for our textbooks?

Source: EconLog
by Scott Sumner

“In the third edition of Mankiw’s excellent textbook, he quotes Paul Krugman defending child labor (as a lesser of evils) in the context of international trade agreements …. That all seems pretty unobjectionable to me. Who favors child prostitution? (Apparently, lots of people favor policies that lead to child prostitution.) I’m told that this Krugman comment was removed from later editions. In the 4th edition it was replaced with an article by Virginia Postrel, which emphasized that most parents don’t want their kids to work, and that economic growth was the most reliable way of eliminating child labor. Once again this is very sensible, and perhaps less controversial. I’m told that still newer editions also dropped even that discussion.” (02/13/18)


The Applied Theory of Bossing People Around

Deirdre N. McCloskey

Source: Reason
by Deirdre Nansen McCloskey

“Richard Thaler won the 2017 Nobel Memorial Prize in Economics. It’s not an original Nobel prize, as recipients in the other fields will be glad to inform you. Alfred Nobel detested economics. Nonetheless, since 1969, some 79 prizes have been given by the Swedish National Bank to economists, and one to a psychologist in economists’ clothing. Thaler is distinguished but not brilliant, which is par for the course. He works on ‘behavioral finance,’ the study of mistakes people make when they talk to their stock broker. … Once Thaler has established that you are in myriad ways irrational it’s much easier to argue, as he has, vigorously — in his academic research, in popular books, and now in a column for The New York Times — that you are too stupid to be treated as a free adult. You need, in the coinage of Thaler’s book, co-authored with the law professor and Obama adviser Cass Sunstein, to be ‘nudged.’ Thaler and Sunstein call it ‘paternalistic libertarianism.'” (for publication 03/18)