Hi all, For some reason I can’t post anything particularly long at the moment – as the site doesn’t like me.
As a result, none of the ideas I have for posts can be satisfactorily placed on the site. I can still comment though – its just taking a while.
If you want you can comment on this in the comments section of the post (ht Marginal Revolution, Econlog). I will try to get some posts up tonight.
Over at Econospeak
There appears to be a fair amount of disdain in his post about the mathematical nature of economics. However, I will forgive him for this – he is a heterodox economist after all, so his very discipline is focused on critiquing areas where mainstream economic thought makes a wrong turn. Although I do not share the mis-trust of mathematical theory (infact I believe it is a very useful way to organise ideas (sort of like writing them down), I do agree with the concept that an over reliance on technical models, without an understanding of the underlying assumptions, can lead to spurious conclusions in economics (however, as we have said before, this is a problem with the subjective application of a model – it is not invalidate the model in of itself).
Anyway, the authour appears to believe that economists ignore the idea of a worker. Fundamentally, I get the impression that he is believes economics discusses the rights of capital owners in far more detail than we talk about the rights of workers. However, I’m not certain that I agree – let me try to explain:
If you want to know, have a look at this post. It is completely non-technical, and explains the way macro-economists look at things pretty danged well! (ht Marginal Revolution).
Fundamentally, this view of the business cycle is highly focused on methodological individualism – the business cycle occurs in the context of individuals maximising their happiness given constraints.
Before this strain of thought came out, business cycle theory was a surprising holistic section of economics – something that did not match with the individualistic nature of microeconomics (see Schumpeter). Furthermore, business cycle theory, long-term growth theory, and near term macroeconomics (effectively old school Keynesianism) were relatively incompatible.
Following the collapse of the “consensus” in macroeconomics during the oil crisis the one ray of hope was that we macroeconomics could be recreated in a way that is consistent with microeconomics. According to Kids prefer cheese this research area is still active – which is exactly what we want to hear.
Update: Paul Walker discusses the same article.
Over at Econlog they mention a uncomfortable question that is asked at Instapundit:
If somebody offered us our current income tax system for the first time, would we buy it?
Now when we have defended progressive taxes on this blog we have often assumed that it is a revealed preference for society – in fact this is a favored measure we have for actually revealing (to some degree) what is optimal (here, here, can’t actually find any of the tax posts 🙂 ).
How could this work? How could we have a system that is not optimal.
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One of the major questions I face when discussing economics is:
Why do we feel that prices are the appropriate measure for illustrating the value someone receives from a product?
Now I only have a limited understanding of welfare economics, but I am going to attempt to discuss the issue anyway 😉 . If anyone more knowledgeable would like to correct me I would be happy to hear from them.
In a micro sense this idea could be criticised insofar as one person may have a lower “willingness to pay” for a product which may stem from having a higher opportunity cost (as they have a lower wealth level then other people) rather than truly receiving less value from the consumption of the good/service. If this is the case we may feel that we should re-distribute the resource from the wealth to the poor in order to increase the level of aggregate welfare.
Now accepting this relative ranking of preferences and the given endowment in the market this could be a suboptimal situation in terms of welfare. After all, we know that the poor person values both of these goods more than the wealthy person (assuming no linkages between them) so “total satisfaction” in society will be maximized by this implicit “redistribution” resources. However, this does not make the price mechanism pointless, let me attempt to explain.
at LAANTA has replied to my reply on his post on the problems with utilitarianism.
In this reply he states two issues that he sees with my view of utilitarianism, namely:
I plan to reply to the reply of the reply under the flap 😛