D.W. MacKenzie contrasts economic methodologies to show how Austrian economists employ sound theoretical concepts that guard against the wiles of political and ideological fashion. Data alone will not keep us grounded, while indulging in socialist fantasies end only in our sinking to the worst depths of poverty and despotism.
Errors are an inevitable part of human action, writes Gene Callahan. If the future were certain, we would not need to act. Yet many economic models assume all economic actors possess perfect information, all plans are coordinated, and all adjustments to new data are made instantly and without cost.
Popular thinking about economic growth is still strongly influenced by the productivity theory of capital, which presumes that capital engenders a yield like the fruits from a tree, writes Antony P. Mueller. If it were merely aggregate investment that mattered, economic development and continuous wealth creation would be child's play.
Despite its great appeal because of its simplicity, the supply-demand graphic as employed by mainstream economics is a tool that is detached from the facts of reality. The real-world economy is far too complex to be faithfully rendered on simple graphs that take no account of uncertainty, entrepreneurial speculation, and the ceaseless change of the market economy.
Typical Ph.D. economics student may be able to tell you lots about Kuhn-Tucker conditions, Hamiltonians, optimal control theory, undetermined coefficients, differential equations, and the like. They may speak fluently the language of mathematics and speak of sophisticated programs in GAUSS, SAS, and STATA. They may look at you with a curious bewilderment, however, upon the mention of Adam Smith. Perhaps you know of him.
In the real world, human action can only manifest itself through material objects; man must utilize the resources that nature gives in order to employ means. If man desires to live, he must obtain food, shelter, and other physical necessities. On the most fundamental level, to exist in this universe, man must occupy space.
In all the commentary on Patrick J. Buchanan's new book (The Death of the West, NY: Thomas Dunne Books, 2002), has anyone discussed his silly economic fallacies and highly interventionist policy agenda? This is the conservative book of the year, the core thesis of which (the West needs higher rates of population increase to keep up with the Third World) impacts very strongly on economic issues.
While many pundits are fond of declaring that capital drives up medical costs, they simply are not being truthful. As one with even a rudimentary understanding of economics knows, capital has the effect of reducing unit costs. It would make no sense to acquire capital, otherwise.
There are some people who think that leaving the setting of many of the terms of California's energy trade to politicians and bureaucrats constitutes a substantially regulated, not a deregulated, energy market. Just because there were some aspects of this trade that were removed from the province of California's government, it does not follow that the market was deregulated--meaning, set free.
According to the popular view, the revival of some important economic indicators has raised the likelihood that the aggressive lowering of interest rates by the Fed will invigorate the economy. The irony is that the very same loose monetary policies that are expected to energize the economy in fact undermine its main source of strength.
