What equality-efficiency trade-off?

As my online debates with ‘well-trained’ economists continue with full force I will again use this blog as an outlet to expand on arguments that can’t be made in 140 characters or less, or those that simply attract religiously-held views via comment pages. On Facebook an otherwise innocuous comment, that it is “undeniable there is


Policy and the worship of prediction markets

The idea of the market as ‘information aggregator’ is, like many ideas, probably as old as humanity itself, but Friedrich Hayek is usually credited with popularising the idea in his 1945 article “The Use of Knowledge in Society”. He writes The peculiar character of the problem of a rational economic order is determined precisely by


You can’t borrow from the future!

“We are borrowing from the future” is a common phrase you might hear from economists musing about the state of the economy; about the behaviour of individuals, businesses and especially of government. These statements arise in discussions about ageing, stimulus, social security, public investment, public debts, health, education and almost every other public policy topics


Economics makes you selfish

I was motivated to write this post by fellow Australian young economist Gabriela D’Souza “After Taking Economics, Students Become More Selfish and Expect Worse of Others” Well that’s just common sense. — Gabriela D’Souza (@gabster0191) October 24, 2013 I disagree. Selfishness is not common sense. It all seems to have started with this article, part


Ersatz Nobel bets both ways in asset price prize

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013 (remember there is no actual Nobel Prize for economics) has gone to three men that share a theme: asset prices. Eugene Fama, Lars Peter Hansen, and Robert Shiller have developed empirical methods and used these methods to reach important and lasting insights


Why the Republicans are whacko

John Roskam of The Institute of Public Affairs appears today at the AFR to defend Republican maneuvres in the US and ideological politics in general: It says a great deal about modern-day democracy in Australia and America that some politicians now think they can insult another politician by calling them “ideological”. Last week, when Education


Rent control as a social bargain

This is one area of economics that really bugs me.  For a discipline professing to understand commerce, markets and investment, economics has no widely accepted accepted core theory that allows for systematic economic rents to land owners. But that doesn’t stop most economists being confident about their opinions on the matter. Rent control can work.


Thinking like Coase, not an economist

I have often railed against the economic approach to social organisation problems which can be described as ‘assume first ask questions later’.  There are too few good economists following more scientific methods of sound reasoning and the reliance on evidence in light of real world institutional structures. The first approach is often called ‘thinking like


Repairing infrastructure can help repair economy

By Leith van Onselen Barry Riholtz, author of The Big Picture, last night published an interesting article arguing for a substantial expansion of public infrastructure investment across the US: Not too long ago, the infrastructure of the United States was the envy of the world. We had an extensive interstate highway system, deep-water ports connected


Houses and toilet paper

By Leith van Onselen The Telegraph published an interesting article recently on rationing policies implemented by the Venezuelan Government, which is causing shortages in a variety of basic goods like toilet paper: First milk, butter, coffee and cornmeal ran short. Now Venezuela is running out of the most basic of necessities – toilet paper… One


Economics should think small

I attended a fascinating, if somewhat disturbing talk at the Cranlana Programme by Scott Borg, director and chief economist at the US Cyber Consequences Unit, who is a cyber warfare specialist and economist at the US Cyber Consequences Unit. It included horrible descriptions of the end of the world as we know it, much as


Bernanke on the death of innovation

Cross-posted from Kate Mackenzie at FTAlphaville. Many factors affect the development of the economy, notably among them a nation’s economic and political institutions, but over long periods probably the most important factor is the pace of scientific and technological progress. That’s Ben Bernanke addressing a graduating class at Bard College at Simon’s Rock, Massachusetts, on Saturday. He


The savings heist

One of the puzzles of the global financial crisis has been that there has been no push for debt to equity swaps. In previous crises, most notably the Latin American debt crisis of the 1980s, arguably the beginning of the modern era of hyper usury and financial debauch from globalising Western banks, the situation was


Think tanks and ageing agendas

Propaganda from the loon bin seems to fill ever more pages of the mainstream media. Take this recent example from the UK Higher state pension ages are not only possible (given longer life expectancy) and desirable (given the fiscal costs of state pensions) but later retirement should, in fact, lead to better average health in


Rethinking the middle-class

Cross-posted from Paul Wallbank Technologist Jaron Lanier says the internet has destroyed the middle classes. He’s probably right, a similar process that put a class of mill workers out of a job in the Eighteenth Century is at work across many industries today. Those loom workers in 18th Century Nottingham were the middle class of the


Towards a semiotic economics

The habit in economics of using either tenth rate metaphors (without being aware they are metaphors) or to mathematicise human behaviour has largely doomed the discipline to irrelevance, at least when it comes to uncovering anything remotely resembling the truth. It is a determined effort to avoid a central fact. Markets are animated by humans,


Creative destruction hits the computer market

By Leith van Onselen Paul Wallbank has today posted an interesting article on the big changes taking place in the personal computer market as new market entrants and technologies increasing displace incumbents and former market leaders: One of the truisms of modern business is that no incumbent is safe, Microsoft, Nokia and Hauwei are good


The insufferable conceit

Two problems plague the analysis of the financial system, problems that are related. Let’s call them the twin delusions. One is the persistent use of metaphors to characterise what is happening in the markets by people who do not seem to understand what a metaphor is, so they are seduced by them. The second is


A theory of return-seeking firms – Part 2

In my previous post I introduced the idea that the neoclassical market model is built on the shaky foundation of profit maximisation.  I introduced the theory of a return-seeking firm, whose aim is to find the highest returns, measured as profits per unit of cost, over the long run. It is now time to expand


The morality of economics

Tyler Cowen has an article in the New York Times about the egalitarian tradition of economics.  It is genuinely an effort to promote economic analysis and rationale as THE tool for social analysis, since it is the only value-free objective way to look at society.  My experience in the profession gives me strong reasons not


When ‘culture’ is the best explanation

A recent blog post about ‘culture’ making a lousy explanation of social and economic phenomena sheds even more light on the bizarre culture that is economics. The core criticism is that “since “culture” is compatible with any conceivable set of facts, it is not falsifiable.”  Which is surprising for a member of the economics club that


Regulation = bad = nonsense

If there is one thing that bugs me it is the emotional resonance the anti-regulation loon-bin has with your average punter.  The current media regulation debate is just one example. Regulation = bad. Don’t ask any more question please. Very few of the loudest voices grasp that the economy is fundamentally built on regulation.  Maybe


A theory of return-seeking firms – Part 1

In neoclassical market theory firms are profit-maximisers.  That sounds intuitive enough – until you realise exactly how economists define profits and the problems it creates for the whole market model. In this series of posts I will develop my ideas about an improved market model incorporating return-seeking firms at its core, rather than profit-maximising firms,


Will Say’s law stay dead?

The generally regarded zombie idea of Say’s law seems to be making a resurgence.  A restatement of Say’s law is “production of commodities… is the one and universal cause which creates a market for the commodities produced”. Or in more common parlance, “supply creates demand”. A current problem is the rather widespread use of Say’s


Kickstart Keen and Minsky

In case you missed it. Over the weekend Professor Steve Keen launched a kickstarter campaign to raise $50,000 ( with the ultimate aim of $1 million) for a computer program for building & visually simulating dynamic, monetary economic models named Minsky. Pledging to the campaign has a sliding rewards scale with the main reward being


Looking for rent-seekers in all the wrong places

Professor Paul Frijters recently wrote about the role of economists in the fight against rent-seeking. The search for more privilege is normal but, in order to have a healthy society, so must there be a perennial fight against it for otherwise the privileged end up lording over the rest who just have to grin and bear their


The pre-saving myth of superannuation

It baffles me that an area of economic research with very important policy applications has produced more than 45,000 articles and still comes to a general consensus that is completely incorrect. I’m talking about the macro-economic effects of superannuation. The incorrect consensus, one that is drummed into economics PhDs across the world every year, is


Economists and the Powerful

If you rarely read to the end of a post, here’s my executive summary: Read this book – Economists and the Powerful: Convenient Theories, Distorted Facts, Ample Rewards. For others, read on. Harling and Douglas intensify the attack on the accepted mainstream economic dogma with this outstanding contribution that brings back logic, evidence and honesty to


Robots confusing economists

Chatter on the econosphere has been abuzz on robots and income inequality recently, stirred into action by Paul Krugman’s NYT piece last week, and subsequent follow up. We have Nick Rowe using this talk to support a general equilibrium approach to economics and make the mathematical case here.  Previously we have seen Google Chairman Eric Schmidt