Prices

While Modern Portfolio Theory (MPT) is popular in academic economics and finance, it fails to properly explain profits, mistakenly confusing entrepreneurial profit seeking with risk management.

While Modern Portfolio Theory (MPT) is popular in academic economics and finance, it fails to properly explain profits, mistakenly confusing entrepreneurial profit seeking with risk management.

Bob walks through a recent WIRED video on “the economics behind the Great Depression,” correcting its claims on lax regulation, Hoover’s alleged inaction, the role of the Fed and the gold standard, and the notion that World War II ended the slump.

Bob revisits capital and interest theory to show why the textbook result “interest = MPK” only holds in a one-good world, and why in actual markets the interest rate emerges from time, prices, and capital valuation—not raw productivity.

Much of mainstream economics holds to the Efficient Market Hypothesis (EMH), which is built on highly unrealistic foundations. The Austrian causal-realist approach has more explanatory power.

New scholarly work is appearing regularly in the Quarterly Journal of Austrian Economics and the Journal of Libertarian Studies. Here is a sampling of recently published articles.

No matter how “inelastic” the demand, excessively high prices cannot persist indefinitely without human action.

If New Yorkers wanted to help students by paying for their tuition, they would have already done so on their own.

It is one thing to understand economics and quite another to be able to explain how economics works. Those who favor free markets also need to be able to explain and defend them.

David Brady, Jr. reviews The Magic Coin by Dr. Jonathan Newman, a children‘s book that explains money in a way that even modern adults can understand.