Tag Archives: economics

Can economics bring back humility and civil discourse?

Source: Acton Institute
by Steve Stapleton

“Today, reason seems upended and our discourse has regressed to where even the fundamental importance of free speech — our first freedom — is being openly challenged. We have made a blood-sport of spewing vitriol and ridicule at those with whom we disagree. This retreat from reason has led too many into the dangerous traps of identity politics, tribalism, and irrational fundamentalism. How do we reclaim the mantle of reason and civil discourse in broader society? Ironically, this coarsening of society is happening amid a growing body of scientific evidence that demonstrates how the human brain can err in its conclusions and convictions. Some of this evidence comes from the field of behavioral economics.” (12/28/17)


Optimality — the mainstream economist’s Holy Grail

Source: Independent Institute
by Robert Higgs

“In discussing the economy and especially economic policy, mainstream economists have been in love with optimality for a century or so. They have built many mathematical models from which they have derived conditions related to optimal tariffs, optimal population, optimal money supply, optimal taxation, optimal subsidies, and so forth. Indeed, for talking about the overall economy, their criterion of efficiency is something called Pareto optimality. By now, probably thousands of articles have been published in economics journals in which the author constructs an economic model, derives from it the optimality conditions, and concludes by making policy recommendations that prescribe how governmental authorities should act — that is, should use their coercive power — to force the real world into conformity with the model’s optimality conditions. All this — above all, the policy recommendations —
is for the most part an enormous waste of time and intellect.” (12/18/17)


America’s Great Depression and Austrian business cycle theory

Source: Future of Freedom Foundation
by Richard M Ebeling

“When Murray Rothbard’s America’s Great Depression first appeared in print in 1963, the economics profession was still completely dominated by the Keynesian Revolution that began in the 1930s. Rothbard, instead, employed the ‘Austrian’ approach to money and the business cycle to explain the causes for the Great Depression, and to analyze the misguided and counterproductive policies that were followed in the early 1930s, which, in fact, only intensified and prolonged the economic downturn. To many of the economists in the early 1960s, Rothbard’s ‘Austrian’ approach seemed out-of-step with the then generally accepted textbook, macroeconomic approach that focused on a highly ‘aggregate’ analysis of economic changes and fluctuations on general output and employment as a whole. There was also the widely held presumption that governments could easily maintain economy-wide growth and stability through the use of a variety of monetary and fiscal policy tools.” (12/18/17)


Why do economists disagree?

Source: Liberty Unbound
by Leland B Yeager

“The influence of economics suffers from the idea that economists disagree to the point of uselessness. George Bernard Shaw supposedly complained that ‘if all the economists were laid end to end, they’d never reach a conclusion.’ A similar old adage says that if you ask the advice of five economists, you will get five different answers, or, if Keynes is one of the five, six answers. Such talk may be fun, but it is unfair. ‘The first lesson of economics,’ said Thomas Sowell, ‘is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.’ … Economists agree on the basics of their subject; disagreement on policy has other sources.” (12/15/17)


More questions for protectionists

Source: Cafe Hayek
by Don Boudreaux

“– Does your neighbor have the right to take up vegetable farming in his backyard without being fined by the government for doing so? – Does your neighbor have the right to repair his ten-year-old car in order to keep it running for a few more years? – Does your neighbor have the right to change the oil, with his own hands, in his own car? – Does your neighbor have the right to buy a used car? – Does your neighbor have the right to sell his car, to move closer to work, and to walk or bicycle daily to work rather than drive to work?” (10/28/17)


Econ as anatomy

Source: EconLog
by Bryan Caplan

“Economists are vocal proponents of the simplistic scientific method. If they can’t present their work as experimental, they strive to label it ‘quasi-experimental.’ But if you read an introductory economics text, virtually none of the content is based on experiments. Instead, good economics texts are packed with truisms based on calm observation of humanity: incentives change behavior, trade is mutually beneficial, supply slopes up, demand slopes down, excess supply leads to surpluses, excess demand leads to shortages, externalities lead to inefficiency. These lessons are as undeniable as ‘the heart pumps blood’ and ‘the stomach digests food.’ But they’re nevertheless supremely insightful and useful. Designing social institutions without considering incentives is as absurd trying to stuff food down people’s lungs.” (10/24/17)


I just don’t get it

Source: Cafe Hayek
by Don Boudreaux

“This morning I was interviewed by my friend Ross Kaminsky on his radio show in Colorado. The subject was behavioral economics. (Richard Thaler, a renowned and respected behavioral economist, is the 2017 Nobel laureate in Economics.) I find much of Thaler’s work — and behavioral economics more generally — to be interesting. I confess, however, that behavioral economics does not ‘grab’ me in the way that it grabs many other economists and social scientists. I could here list the specific objections and reservations I have about behavioral economics, none having to do with the veracity of its particular findings. But I’ll not do so. I want here simply to note that the foundational motivation that seems to me to drive behavioral economists — and to drive those who are most enthusiastic about the findings of behavioral economics — is a motivation that is completely foreign to me. That motivation, as I sense it, is the desire to interfere in the lives of strangers in order to improve the lives of strangers.” (10/11/17)


The world needs an Austrian School approach to economic history

Source: Ludwig von Mises Institute
by Matteo Salonia

“The Austrian School of economics has advanced our understanding of the behavioral patterns that break the cycle of poverty and make prosperity possible. The genius and usefulness of Austrian original reflections like marginal utility are now recognized by many intellectuals and students of economic theory and praxis, and even by non-Austrian economists. Other contributions, such as the business cycle theory, have convinced less people without libertarian circles and remain controversial, but they do contribute to a relatively (and increasingly) well-known cohesive body of knowledge, a systematic approach to the production of goods and services and the link between human action, markets, government interventions, and crises. The Austrian contribution to the field of history has been, in contrast, quite lacking, not in terms of theoretical cohesiveness, but in terms of output and popularity.” (10/06/17)


Economists are the new astrologers

Source: Ludwig von Mises Institute
by Andrew Syrios

“When Christopher Nolan was promoting his previous film Interstellar, he made the casual observation that ‘Take a field like economics for example. [Unlike physics] you have real material things and it can’t predict anything. It’s always wrong.’ There is a lot more truth in that statement than most academic economists would like to admit. Alan Jay Levinovitz recently put forth the provocative argument that economics is ‘The New Astrology.'” (08/29/17)


Economics and human action: Praxeology as a chosen methodology

Source: Reformed Libertarian
by C Jay Engel

“It is well known in Austrian circles that the methodology of economics is praxeology; that is, one can discover economic laws by discovering the implications of the fact that individuals act purposefully. Praxeology is the study of purposeful behavior, it is therefore not concerned with those motions and movements of the body without volitional engagement. These can include, of course, reflexes and instincts, impulses and unconscious activities (sleep walking), muscle memories, and so on. These are left for the physiologists and the psychologists. Praxeology is the study of those behaviors which are intentional; which aim toward fulfillment of a certain desire, or at least the conception of that desire. ” (08/25/17)