Category: Economic Theory
The analysis published under this category are as follows.
Monday, February 28, 2011
Trade Solutions That Won’t Work / Economics / Economic Theory
By: Ian_Fletcher
Americans in recent decades have not, of course, been entirely unaware that America has a trade problem. This has drawn into public debate a long list of proposed solutions. Unfortunately, many will not work, some are based on analytical confusions, and a few are outright nonsense. If we are to understand the true scope of our problem and frame solutions that will work, these false hopes must be debunked forthwith.Read full article... Read full article...
Sunday, February 27, 2011
Why a Flat Tariff on All U.S. Imports Would Work / Economics / Economic Theory
By: Ian_Fletcher
I advocate protectionism. But one standard criticism is that this would just result in politically connected industries getting tariffs raised on the products they produce. This would corrupt our economy, force consumers to pay higher prices, and serve no legitimate economic logic. Read full article... Read full article...
Saturday, February 26, 2011
In Praise of Mercantilism, or Why Economic History Isn’t Boring / Economics / Economic Theory
By: Ian_Fletcher
Does economic history hold a giant clue for getting America out of its present trade mess? Yes, because it debunks the idea that free trade is how nations become prosperous. Instead, it shows that nations win at international trade by playing a 400-year-old game called mercantilism.Read full article... Read full article...
Thursday, February 24, 2011
Why Have Nations at All? The Case for Economic Borders / Economics / Economic Theory
By: Ian_Fletcher
Why have nations at all, economically speaking?This question is provoked by the fact that every few months, without fail, somebody writes to me and asks why, if the protectionism I advocate between the U.S. and the rest of the world is rational, why isn't it rational to have tariffs between the various states of the U.S.? And since it clearly doesn't make any sense to have tariffs on trade between, say, California and Oregon, it follows that nations shouldn't practice economic protectionism either.
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Monday, February 21, 2011
Commerce Is a People's Revolution / Economics / Economic Theory
By: Douglas_French
The big-box book business has begun to crumble with the bankruptcy filing of book-selling behemoth Borders. The Chapter 11 filing indicates the company is looking to restructure its debts and continue on. But as in the case of bankrupt Blockbuster, there may not be anything to restructure, with both of these old-technology companies destined for liquidation and futures of little more than Wikipedia entries chronicling each company's past glories.
Sunday, February 20, 2011
Global Economy on the Edge of Chaos / Economics / Economic Theory
By: David_Knox_Barker
Nobel economist Friedrich Hayek’s most enduring legacy is his defense of classical liberalism and free market capitalism. The Road to Serfdom is Hayek’s case against central planning, something he viewed as a product of human design as opposed to human action. Hayek and his mentor Ludwig von Mises were the preeminent writers and thinkers of the Austrian school of economics and political economy.
Friday, February 18, 2011
What Economics is Not / Economics / Economic Theory
By: Andy_Sutton
It is starting again. It is a phenomenon that occurs more regularly now, especially with daily talk of massive imbalances right along with a massive boost in activity. More and more people are scratching their heads wondering what gives. Once again, economics has become a debating society. There are Keynesians, Austrians, the Classic folks, and those who will use ridiculous rationale and textbook, but not applicable accounting definitions to try to assert that we’re really getting rich every time the government borrows another dollar. It is no wonder people are confused. Like so many other areas of our society, particularly morality, the definitions have been skewed, the lines, blurred, and the waters made muddy.
Tuesday, February 15, 2011
Mergers and Acquisitions and the Destruction of Wealth / Economics / Economic Theory
By: Douglas_French
The stock market has been on a tear and it's all about mergers and acquisitions (M&A).
Last year ended up being a blockbuster for global mergers and acquisitions, with the total number of deals and values both rising by over 20 percent for 2010, hitting $2.4 trillion. Private equity buyouts meanwhile rose 7.2 percent, marking the strongest year for buyouts since 2007. Activity in M&A more than doubled in Australia; the Asia-Pacific region saw M&A deal value reach its highest value on record; and M&A deals also jumped 37 percent in Europe.
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Monday, February 07, 2011
Subjective Value and Market Prices / Economics / Economic Theory
By: Robert_Murphy
One of the most subtle aspects of modern economic theory is the relation between subjective value and objective money prices. This is an area where the Austrians have an advantage over other schools, because they care more about their forebears than most other economists, and because Austrians were instrumental in the development of subjective-value theory.
Monday, January 24, 2011
Response to Krugman on Austrian Business-Cycle Theory / Economics / Economic Theory
By: Robert_Murphy
As many readers already know, last week Paul Krugman linked to one of my Mises Daily articles explaining the importance of capital theory in any discussion of the business cycle. Although Krugman graciously described my fable about sushi-eating islanders as "the best exposition I've seen yet of the Austrian view that's sweeping the GOP," naturally he derided the approach as a "great leap backward" and a repudiation of 75 years of economic progress since the work of John Maynard Keynes. To bolster his rejection, Krugman listed several problems he saw with the Austrian understanding.
Wednesday, January 19, 2011
Defining Economics / Economics / Economic Theory
By: Richard_Daughty
I have grown to think that the definition of "economics" was the one found in the Mogambo Big Book Of Economic Stuff (MBBOES), which is, "The horrific inflation in prices caused by evil and/or stupid people creating excess money, perpetrators of which comprise a long, long list of evil people and/or stupid people, starting with the Federal Reserve, Congress, and the odious Supreme Court, whose particular idiocy is their traitorous decision to allow a fiat currency, instead of the dollar being defined as a specific weight of gold as required by the freaking Constitution of the United States, for crying out loud, a specific mandate purposely put there by the Founding Fathers to prevent inflation in the money supply, which causes inflation in prices, which is the Number One Killer Of Economies (NOKOE). See also Doomed, We're Freaking."
Monday, January 17, 2011
Is There a Conservative Case for QE? / Economics / Economic Theory
By: Robert_Murphy
I recently discussed David Frum's lament that conservative Republicans are defecting from "respectable" economists and joining the ranks of the Austrians. One of the reasons for this is that many conservative pundits — Frum included — are Keynesians, plain and simple. Many rank-and-file conservatives are recognizing that it makes no sense to lambast Obama's fiscal-stimulus package in one breath and praise Bernanke's monetary stimulus in the next.
Thursday, January 13, 2011
Where Profit Comes From / Economics / Economic Theory
By: George_Reisman
Labor unions like to argue that the payment of higher wages is to the self-interest of employers because the wage earners will use their higher wages to make additional purchases from business firms, thereby increasing the sales revenues and profits of business firms. However, wrong and foolish it may be, this is an argument worth analyzing in some detail, because it can provide a gateway to a discussion of the actual sources of profit in the economic system.
Wednesday, January 12, 2011
Krugman's Straw-Man Market System / Economics / Economic Theory
By: William_Anderson
A friend of mine a decade ago was looking to do doctoral work in economics, and one of the places where he inquired was his state's flagship university. But he decided not to seek his doctorate at that particular place after he spoke to someone who was just about to defend his economics dissertation there.
Monday, January 10, 2011
Following the Efficient-Markets Hypothesis into Absurdity / Economics / Economic Theory
By: Robert_Murphy
Austrians in the tradition of Mises and Rothbard stress the resilience of a free-market economy, and they believe that the institution of private property — along with the profit-and-loss test — will steer resources into their most valuable niches.
However, most Austrians stop short of following Chicago School economists' advocacy of the "efficient-markets hypothesis" (EMH). In its most extreme form, the EMH becomes a caricature of itself in which asset bubbles are not just unlikely but logically impossible.
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Wednesday, January 05, 2011
Economists Can't Forecast for Toffee, In Defense of the “Old Always” / Economics / Economic Theory
By: John_Mauldin
Long time readers of Outside the Box are familiar with the name of James Montier, who is now with GMO in their London office. Today, James, with his usual acerbic wit, takes on the notion of the "New Normal" and offers us a defense of the "Old Always." James is a value investor and sees mean reversion as still alive and kicking, where some proponents of the New Normal think we should throw out all of the old aphorisms. While I am in the New Normal camp, I also agree with James. This makes for some quick and thought-provoking reading.
Wednesday, December 29, 2010
The Emperor Keynes Still Has No Clothes / Economics / Economic Theory
By: Gary_North
It is time to consider the recommendation and economic analysis of Yale University economist Robert Shiller. He is widely respected, the co-designer of the Case-Shiller index, which traces housing prices in 20 American cities. He coined the phrase "irrational exuberance," which was made famous by Alan Greenspan in the mid-1990s.
Tuesday, December 28, 2010
Theft by Mercantilism, China and the Keynesian Trap / Economics / Economic Theory
By: Gary_North
"Thou shalt not steal, except by majority vote." ~ The Gospel According to Keynes, Chapter 1, verse 1.
Keynesianism is an economic philosophy based on the idea that the free market required intervention from the civil government in order to maintain justice and efficiency. The free market is both inefficient and unfair to the common man, Keynesianism teaches.
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Monday, December 27, 2010
Job Creation and Other Economic Myths / Economics / Economic Theory
By: MISES
Fred Buzzeo writes: Job creation has become the central theme of the current recession. The focus on job growth is widespread among both conservative (if I may use this term liberally) and left-leaning economists. Furthermore, if you ask the man on the street what the pressing economic problem of the time is, he will certainly respond, "Jobs."
Monday, December 27, 2010
Have Events During 2010 Vindicated Keynesian Economic Models? / Economics / Economic Theory
By: Robert_Murphy
In last Monday's article I discussed Jim Manzi's debate with economist Karl Smith. I pointed out that Smith's evidence in favor of mainstream macroeconomic models was actually consistent with the view that fiscal and monetary "stimulus" policies only stoke economic crises.
In the present article, I'll show a different example of this same pattern. Specifically, Paul Krugman took a macro forecast from Mark Zandi, and then after the fact compared it to the actual trajectory of GDP. Krugman concluded that Keynesian theory was vindicated, when in fact the results are more in line with what the critics predicted would happen.
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