Category: Economic TheoryThe analysis published under this category are as follows.
Tuesday, September 30, 2014
This Friday is Yom Kippur, the day when Jews around the world ask forgiveness for their transgressions from the year past. Rabbis remind the penitent to dwell on their sins of omission, in which they did nothing when a more thoughtful and proactive action was needed, and sins of commission, in which they actively participated in an unjust action. And while not all economists are Jewish, Gene Epstein the economics editor at Barron's, offered his thoughts on how this applies to the group.Read full article... Read full article...
Friday, September 26, 2014
In 1633 Galileo Galilei, then an old man, was tried and convicted by the Catholic Church of the heresy of believing that the earth revolved around the sun. He recanted and was forced into house arrest for the rest of his life, until 1642. Yet “The moment he [Galileo] was set at liberty, he looked up to the sky and down to the ground, and, stamping with his foot, in a contemplative mood, said, Eppur si muove, that is, still it moves, meaning the earth” (Giuseppe Baretti in his book the The Italian Library, written in 1757).Read full article... Read full article...
Wednesday, September 24, 2014
Mario Draghi, in one of his latest speeches, prodded governments to ease austerity to spur aggregate demand (an oxymoron). The IMF director, Christine Lagarde, recently urged the ECB to continue its easy monetary policy until aggregate demand picks up. U.S. Treasury Secretary, Jack Lew, has, for years, suggested government actions to boost aggregate demand. He has in turn lectured Germany, Japan, and China on the need to encourage demand. It is sad that such economic nonsense is constantly promoted by some of the world’s most influential people, including many leading economists, and that this continues to serve as the foundation of much of contemporary macroeconomic theory.Read full article... Read full article...
Tuesday, September 23, 2014
Shortly after the current Great Recession started, I wrote a Globe Asia column, “A Great Depression?” (December 2008). In it, I stressed the findings contained in Robert Higgs’ important book Depression, War and Cold War: Studies in Political Economy (Oxford University Press, 2006). Higgs concluded that, because of regime uncertainty, investors were afraid to commit funds to new projects. They simply didn’t know what President Roosevelt and the New Dealers would do next.Read full article... Read full article...
Sunday, September 14, 2014
Hans-Hermann Hoppe writes: In the most fundamental sense we are all, with each of our actions, always and invariably profit-seeking entrepreneurs.
Whenever we act, we employ some physical means (things valued as goods) — at a minimum our body and its standing room, but in most cases also various other, “external” things — so as to divert the “natural” course of events (the course of events we expect to happen if we were to act differently) in order to reach some more highly valued anticipated future state of affairs instead. With every action we aim at substituting a more favorable future state of affairs for a less favorable one that would result if we were to act differently. In this sense, with every action we seek to increase our satisfaction and attain a psychic profit. “To make profits is invariably the aim sought by any action,” as Ludwig von Mises has stated it. (Mises, 1966, p. 289)Read full article... Read full article...
Monday, September 08, 2014
By Pure Economic Decision
Firstly Tweeted by journalist Peter Spiegel, late Sunday, September 7, a leaked copy of proposed and agreed new EU28 sanctions against Russia, dating from September 5 confirmed that Russia's energy giants Rosneft, Gazprom and Transfeft will all be hit by European capital market bans:
Friday, September 05, 2014
Paul Krugman is at it again. That is, Mr. Krugman continues to myopically attack anyone who has warned that money printing could lead to 'inflation'.
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"...as I have written many many times, this inflation paranoia has proved remarkably resilient, enduring despite five-plus years of utter empirical failure." Three Roads to Hard Money
Tuesday, September 02, 2014
In recent months talking heads, disappointed with the lack of economic recovery, have turned their attention to wages. If only wages could grow, they say, there would be more demand for goods and services: without wage growth, economies will continue to stagnate.Read full article... Read full article...
Monday, September 01, 2014
Thomas Piketty Tried
Unremarked by most reviewers of Piketty's book “Capital” earlier this year, he also tried to “square the circle” on this longstanding subject. Marx argued that capitalist blind faith in ever-growing markets on the back of ever-growing populations in ever-growing economies could and would try to increase industrial production “until the last moment”. To do this, not only would they need more credit at lower interest rates – harming their pure financial banker brethren – but they would have to pay ever-lower real wages to their slavish workers. With lower real incomes, unsurprisingly, their workers would buy less - but the capitalists “could not understand”. So crisis was hard-wired into the system.
Tuesday, August 26, 2014
“To found a great empire for the sole purpose of raising up a people of customers may at first sight appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers; but extremely fit for a nation whose government is influenced by shopkeepers.”
– Adam Smith, The Wealth of Nations
Wednesday, August 20, 2014
Mark Tovey writes: During an early scene of Dawn of the Planet of the Apes, in which the hyper-intelligent apes were depicted hunting for deer in the forestsurrounding their settlement, someone behind me interjected “if those apes are so smart, how come they’re hunter-gatherers?” While a decent question, he received nothing but a shush from his more etiquette-conscious companion for raising it. While there are many factors other than intelligence that are relevant to a society’s choice of an agricultural or hunter-gather economy, Austrian capital theory can go a long way in helping to explain why the apes featured in the film can be both highly-intelligent and hunter-gatherers.Read full article... Read full article...
Sunday, August 17, 2014
Abenomics Does Not Work
So-called Abenomics is also (so) called Pure Keynesian. Two physics-related analogies help explain why neither Abenomics nor Keynesian economics will work. There is the concept of escape velocity – that is escape from recession - and the time rate of decay of plenty of things, for example of prices if deflation sets in. As we know, economists like to dress up their works on what is a subject that can never be scientific – economics – using mathematical formulae purporting to show neat functional relationships between “key aggregates”, but in several science domains, from astrophysics to subatomic physics firstly these terms have a real meaning. Secondly, ambiguity has to be allowed into the party. Multiple outcomes are perfectly possible.
Friday, August 15, 2014
Gary M. Galles writes: The use of the ceteris paribus, or “other things equal” assumption is an essential aspect of economic education. It is an important caveat that helps make sense of a complicated world by clarifying the incentive stories that comprise the core of economics.
Unfortunately, the often unthinking acceptance of that phrase has also provided an opening for misrepresenting economic reality in analyzing government interventions. That is because governments cannot change just one incentive. As a result, assuming certain “other things equal,” when those other things inherently cannot remain equal, provides cover for omitting adverse effects.Read full article... Read full article...
Wednesday, August 13, 2014
High Frequency Failure
Japan's most recent GDP data showing a 6.8% annual rate of contraction was quickly shrugged off by the markets as only a signal for more handouts from the Japanese government and the BOJ. But Shinzo Abe's government has to admit the failures are coming faster all the time. In the global finance industry we can move on from the easy explanation why we have HFT, Dark Pools, Libor rigging, FX rigging, oil and gold market rigging and the rest – that they deliver large easy profits to insiders, fixers and riggers. These fail-sure (rather than fail-safe) processes are also essential to maintaining an appearance of real economies with real markets. They serve this additional basic function.
Wednesday, July 30, 2014
By Grant Williams
Though they reunited this past month for a series of concerts at London’s O2 Arena, the cast of Monty Python last assembled onstage together at London’s Drury Lane Theatre a staggering 40 years ago.
As they took to the stage at the O2 in early July, the surviving members of perhaps the most famous comedy troupe in history (sadly, Graham Chapman died in 1989) boasted a combined age of 357.Read full article... Read full article...