Category: Economic TheoryThe analysis published under this category are as follows.
Sunday, January 25, 2015
Brendan Brown writes: Amongst the big winners from the Obama Fed’s Great Monetary Experiment has been the private equity industry. Indeed this went through a near-death experience in the Great Panic (2008) before its savior — Fed quantitative easing — propelled it forward into new riches. There is no surprise therefore that its barons who join the political stage (think of the last Republican presidential candidate) have no interest in monetary reform. And the same attitude is common amongst leading politicians who hope private equity will provide them high-paid jobs when they quit Washington.Read full article... Read full article...
Sunday, January 04, 2015
Gary Galles writes: When people want to add extra “oomph” to negative depictions of self-owners acting without coercion — that is, market competition under capitalism — they turn to name-calling. One of the most effective forms is describing such competition as dog-eat-dog. When that characterization is accepted, the mountain of evidence in favor of voluntary social coordination can be dismissed on the grounds that it involves a vicious and ugly process so harmful to people that it outweighs any benefits.Read full article... Read full article...
Friday, January 02, 2015
Recently, the Financial Times published an article containing charts displaying the correlation between government spending and real GDP growth.1 Based on these correlations, the author of the article, Matthew Klein, comments: “It’s no secret that spending cuts (and tax hikes) have retarded America’s growth for the past four years.” He goes on to argue that from mid-2010 to mid-2011, the reduction in government spending in the US shaved 0.76 percent off of the economic growth rate. Klein conjectures that this slowdown in the growth rate caused a level of real GDP today that is 1.2 percent less than it would have been in the absence of this exercise in “austerity.” He also points out that since 2012 almost all of the depressive effect on real GDP growth of government austerity was the result of the reduction in military spending. While some of the reduction was beneficial, Klein opines, “some of it represents a self-inflicted wound.” Indeed it may represent a self-inflicted wound on the Federal government, but in that case it benefits the private economy.Read full article... Read full article...
Thursday, December 25, 2014
Dale Steinreich writes: Halloween has a socialist tenor. Menacing figures arrive at your door uninvited, demand your property, and threaten to perform an unspecified "trick" if you don't fork over. That's the way the government works in a nutshell.
Thanksgiving has been reinterpreted as the white man, after burning, raping, and pillaging the noble Indian, trying to make amends with a cheap turkey dinner. New Year's can be ruined as the beginning of a new tax year, and the knowledge that the next five or six months will be spent working for the government.Read full article... Read full article...
Wednesday, December 24, 2014
Ryan McMaken writes: As Charles Dickens himself admits, Ebenezer Scrooge is a thoroughly peaceful man, guilty of no true crime, who has robbed no one. Therefore, we must conclude that his wealth is a sign of his ability to please at least some people, and as Michael Levin notes: “Dickens doesn't mention Scrooge's satisfied customers, but there must have been plenty of them for Scrooge to have gotten so rich.”
But as he is a person with bad manners and a disagreeable personality, many have conflated Scrooge’s personality traits with his business practices, although the two are unrelated phenomena. As a miser and businessman, Scrooge provides numerous valuable services to the community including, as Walter Block has shown, driving down prices and making liquidity available to those who, unlike the wrongly maligned misers, have been either unwilling or unable to save in comparable amounts.Read full article... Read full article...
Sunday, December 21, 2014
Mark Tovey writes: The unhampered market creates economic inequality. Free marketeers tend to concede this fact as an unfortunate defect in an otherwise laudable system. F.A. Hayek, however, in a chapter from The Constitution of Liberty, argued that inequality is fundamental to a society's progress. Hayek explained how, by purchasing luxuries unimaginable to the average man, the rich unwittingly perform a vital public service. Indeed so fundamental is inequality to economic progress that egalitarian societies, Hayek concluded, would be faced with no choice but to deliberately re-inflict upon themselves the very class systems they had sought to escape, should they wish to achieve well-directed economic advancement.Read full article... Read full article...
Wednesday, December 17, 2014
We currently face a monumental dilemma. How do we extract ourselves from all this excessive debt without crashing the world economy? There is a solution which is totally counterintuitive: print even more money. In other words, to get out of the deep, deep hole we are in, dig even deeper.
It is called the Chicago plan. With a stroke of a pen, money would be substituted for debt, without the negative consequences of printing money. Banking would be restructured so that it never again leads to boom and bust cycles, and most debt, public and private, could be cancelled. It’s basically a “one time” get out of jail card for the world economy.Read full article... Read full article...
Wednesday, November 12, 2014
Ken Zahringer writes: My dinner companion sounded indignant. “It’s a shame we have to tip the waitress,” she said. “The restaurant owner ought to pay the staff enough to live on.”
I imagine that is a common attitude among those steeped in our current cultural climate of envy and dislike of economic success — the anti-capitalist mentality, as Mises put it. It’s easy to fall into the trap of thinking that we tip waiters out of sympathy, due to their misfortune of having to work in an industry full of greedy restaurant owners who won’t pay a “living wage.” In fact, tipping is an elegant market solution to a particular set of circumstances, often present in service jobs, that makes determining an appropriate wage extremely problematic. The practice of tipping used to be more common, applying to many more service positions than at present, when it is largely restricted to waitstaff and skycaps. Part of the reason for its partial demise is just the wandering course of economic change, but many jobs that used to be paid primarily by tips came to be covered by minimum wage legislation and simply disappeared.Read full article... Read full article...
Sunday, November 09, 2014
Richard Ebeling writes: Eighty years ago, in the autumn of 1934, Ludwig von Mises’s The Theory of Money and Credit first appeared in English. It remains one of the most important books on money and inflation penned in the twentieth century, and even eight decades later, it still offers the clearest analysis and understanding of booms and busts, inflations, and depressions.
Mises insisted that the economic rollercoaster of the business cycle was not caused by any inherent weaknesses or contradictions within the free market capitalist system. Rather, inflationary booms followed by the bust of economic depression or recession had its origin in the control and mismanagement by governments of the monetary and banking system.Read full article... Read full article...
Thursday, November 06, 2014
The theoretical construct of Keynes’s monetary view of the world is known as the liquidity preferences theory of money. This theory is the foundation of many macroeconomic models and stands in stark contrast to the classical view of interest rates, the loanable funds theorem.
Much of Keynes’ work, including this theory, disproportionately elevated the importance of holding cash as a key economic variable. Income can be consumed, saved or held in cash. Consumption is for personal satisfaction. Saving is a transfer of claims on goods and services from consumers to investors. Holding cash, or hoarding, is the equivalent of stuffing money in your mattress.Read full article... Read full article...
Tuesday, October 28, 2014
Old Habits Reappear
Fighting the Fear of Fear
Myself Is after Me
Frayed Ends of Sanity
Hear Them Calling
Frayed Ends of Sanity
Hear Them Calling
Hear Them Calling Me
- Frayed Ends of Sanity, Metallica
Wednesday, October 22, 2014
I am thinking about the similarities between a financial crisis and for instance a family crisis, the death of a loved one or close friend, a divorce, or a personal bankruptcy.
And I wonder why in the case of our recent (aka current) financial crisis, we allow nothing to enter our communications, and our train of thought, but the idea of recovery and a return to growth. Has everyone always reacted that way after earlier financial crises – history is full of them -, or is something else going on?Read full article... Read full article...
Monday, October 20, 2014
Challenge to Keynesians 'Prove Rising Prices Provide an Overall Economic Benefit' / Economics / Economic Theory
The ECB has been concerned about falling consumer prices. I propose that's 100% stupid, yet that's the concern.
When the euro declined vs. the US dollar, the ECB was happy that inflation would inch back up. The fear now is that falling oil prices will take away the alleged gain of a falling euro.Read full article... Read full article...
Tuesday, October 14, 2014
Mateusz Machaj writes: Recently, the Polish economy experienced its first price deflation since the 1980s, which sparked in the country deflationphobia (or, as Mark Thornton calls it, apoplithorismosphobia).
Media sources and many economists focus on price inflation and price deflation as the source of various economic ills, but, contrary to much of the rhetoric, price inflation and price deflation are always “optimal” in the economic sense. At first, such a claim may seem controversial, since virtually all economists have something negative to say about either inflation or deflation. This concerns almost all schools of economic thought, mainstream and heterodox, including the Austrians.Read full article... Read full article...
Monday, October 13, 2014
Adam Smith and the Ponzi Economy
Like the archetypal images of love that were handed down by early Greek philosophers, of Erotic love, Parental love, and what later became Christian or Dutiful love towards fellow persons and living things of all kinds, the supposed “classic image” of the economy is the “Wealth of Nations”. Taken by the “Neolibs” of the 1980s and their surviving throw-offs as a timeless ode to invisible but all-powerful “market forces”, this classic model was handed down by their guru – Adam Smith.