The 140 year cycle in macroeconomic thought

I am reading Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy by Henry George (free ebook available here). I’ve been fascinated so far that the economic debates about the long recession of the 1870s are almost identical to those still occurring


Open borders: A morality play by the 1%

Alex Tabarrok, who I rarely agree with, has recently argued his moral position on open borders here. There is no doubt that most moral frameworks also support his position. As do I in the mere theoretical sense. As Tabarrok argues How can it be moral that through the mere accident of birth some people are imprisoned


Economics is applied morality

The ignorance of many highly experienced economists to the moral foundations of their work is quite alarming. As a group, economists typically internalise the utilitarian morality embedded in their methodology to such a degree that they are happy to promote economic theory and practice as an objective scientific approach. To set a more honest course


Poverty is always relative

This post was sparked by a piece over at The Drum (ABC) by the CIS’s Matthew Taylor. Taylor’s argument, which is repeated by many others of similar political disposition (such as Adam Creighton) is that relative poverty doesn’t matter, only ‘absolute’ poverty. If the poor are getting richer in real terms, then it doesn’t matter


Organ markets and the problem of real options

The fanfare surrounding organ markets within the economics community is often extreme. For many it is the last frontier of market fundamentalism, with some even promoting a futures market in organs. For others however, organ markets are so obviously ethically and morally questionable that these ‘non-economic’ concerns override their otherwise vigorous support for market solutions.


Why is return-seeking optimal?

In my rather long introductory post on the new theory of the firm I developed with Brendan Markey-Towler, I listed many important characteristics of our model. I now want to invest some time expanding on these points in a series of posts. The first characteristic of our model is the way we relaxed assumptions about


Time for a new theory of the firm

I don’t know how best to say it, so here it goes – the current mainstream theory of the firm is dodgy. Real dodgy. Put simply, the theory of the firm that we all know and love tolerate, is a neat mathematical construction contrived to support an already established, but flawed, theory of markets. If


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