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


Why economics is rubbish, episode 324.

By David James. The inadequacies of economics as it is commonly practiced are obvious enough to any thoughtful observer. The question is: why do so few smell the odour? This was the question that occurred to me when reading an analysis of economic academia by Deidre McClosky, called “The Secret Sins of Economics” (which a


One hour per week is employed?

A guest post today from a Canberra economist with significant expertise in analysing household dynamics, and the labour market in particular – let’s call her The Householder. She can be contacted at [email protected] * Whenever unemployment statistics are released, there are invariably exclamations of disbelief from those whose personal experiences do not accord with their most recent


Measuring economic wellbeing

Humanity has long been confounded by the ever-shifting changes of the Earth. From time immemorial, earthquakes and volcanoes would blight society’s thin hold, farmers would find droughts and floods denying the seasons, while rivers and lakes would inexplicably appear then disappear. For most of civilisation’s short existence, only mystics and religion could justify these events.


Cart pulls horse

By David James. Economics may not be a science, but it is an extreme example of scientism: the bane of what is laughably referred to as modern civilisation. Scientism, the religion that science should be applied far beyond what it is devised to do, has in economics been turned into a reversal of what causes


The problem with productivity

Many measures in economics require close scrutiny to assess their efficacy. Of course, no measure is a problem in itself. But they are usually attached to popular metaphors that can be very much a problem. Productivity is one such measure/metaphor. Whether it is labour productivity or multi-factor productivity, productivity is an industrial-era measure that tracks


IMF on full reserve banking

I’m not usually one to talk about alternative monetary systems. I’m somewhat like Sell on News when it comes to our monetary system. Money is rules and the rules are as they are. Yes, it’s sometime interesting and intellectually challenging to talk about how things could be, but the system is what it is and


What economics should be

It should be obvious to even the most casual observer that economics is not a science. That this is not obvious to many is clear evidence that epistemology, the philosophy of knowledge, is little understood by economists. There is no possibility of repeating experiments because the “laboratory” conditions keep changing. As a consequence, there is


The value of economists

Making fun of assumptions economists make is an enjoyable past-time. But we shouldn’t forget that it is the immense difficulty in understanding the complex economic system that leads to these often outrageous (sometimes useful) simplifying assumptions. This same difficulty has lead serious economists to be extremely cautious about the appropriate use of statistical methods and


Perfect market, perfect myth

Economics is the study of markets under a particular set of assumptions. Consider the perfect market – complete, perfect information, free entry, prices adjust to clear the market, a single price emerges. Teaching the foundations of this model is more easily done by appealing to real life situations where perfect markets exist. One classic example


What is the Nobel Prize for economics?

Rational markets can be efficiently designed, most economists will concur. And by using complex algorithms and models, efficient markets can become ever more rational. That was essentially the premise behind awarding this year’s Nobel Prize in Economics – the Sveriges Riksbank Prize – to two American luminaries of game theory, Alvin Roth and Lloyd Shapley.


Growth: the false god

If a team of interplanetary anthropologists (the phrase is an oxymoron, but we have none better) were to descend to earth in their spacecraft they would notice that, like some distant tribe who worships a panther’s claw, a voodoo mask or the gnarled roots of an ancient tree, the human race has a strange fetish