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"Good" And "Bad" Economics In One Lesson

Tyler Durden's picture




 

Via Henry Hazlitt's Economics In One Lesson,

Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine-the special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

In this lies the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.

The distinction may seem obvious. The precaution of looking for all the consequences of a given policy to everyone may seem elementary. Doesn't everybody know, in his personal life, that there are all sorts of indulgences delightful at the moment but disastrous in the end? Doesn't every little boy know that if he eats enough candy he will get sick? Doesn't the fellow who gets drunk know that he will wake up next morning with a ghastly stomach and a horrible head? Doesn't the dipsomaniac know that he is ruining his liver and shortening his life? Doesn't the Don Juan know that he is letting himself in for every sort of risk, from blackmail to disease? Finally, to bring it to the economic though still personal realm, do not the idler and the spendthrift know, even in the midst of their glorious fling, that they are heading for a future of debt and poverty?

Yet when we enter the field of public economics, these elementary truths are ignored. There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.

But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.

From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

h/t @noalpha_allbeta

 

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Sat, 08/02/2014 - 14:03 | 5037980 Skateboarder
Skateboarder's picture

Economics is not an art, asshole.

p.s. It is not a science either, and it is certainly not a field where you should honor "experts" by de{c,g}ree.

Sat, 08/02/2014 - 14:03 | 5037985 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

No, economics is not an art. Too often is is nothing more than self-serving politics.

Sat, 08/02/2014 - 14:05 | 5037996 Escrava Isaura
Escrava Isaura's picture

The only function of economic forecasting is to make astrology look respectable.

John Kenneth Galbraith

Sat, 08/02/2014 - 14:13 | 5038021 AlaricBalth
AlaricBalth's picture

Economics is a religion and Janet Yellin is its High Priestess. It has its temples, churches and its god is JM Keynes.

And Yellin prayed, "Oh JaMuK, god of Keynsian Economics. I have but two rolls to feed the banking horde. They are insatiable and I have not enough. "
And JaMuK said, "Do not despair, thou shalt print, hypothecate and rehypothecate. The rolls will multiply. Full faith is required. Just knoweth that thou shalt never have enough."

Sat, 08/02/2014 - 14:23 | 5038052 Harbanger
Harbanger's picture

It's the Good the Bad and the Ugly, said Janet.

Sat, 08/02/2014 - 14:39 | 5038092 ZerOhead
ZerOhead's picture

I disagree... economics is an art.

Con-artistry

Of which Milton Friedman was a master...

Sat, 08/02/2014 - 14:43 | 5038126 BigJim
BigJim's picture

If someone asks you "I can only read one book on economics... what should I read?" Hazlitt's 'Economics in One Lesson' should be it.

Published 1947, and still relevant.

Sat, 08/02/2014 - 16:02 | 5038352 Oracle 911
Oracle 911's picture

Economy, my best definition is this: practical philosophy how to manage certain human activities, mostly it is about trade.

 

Well philosophy is full of nonsense. So my question is: where it went wrong? (I mean the economy and philosophy)

Sat, 08/02/2014 - 16:38 | 5038469 NoDebt
NoDebt's picture

Economics and Philosophy have the same track record- they've never actually SOLVED anything.

And they have the same purpose of existance- to make people feel they have control over something they do not actually have control over.

The analogy of economists as modern day high priests is an apt one.

I am an economist by training (but I'm feeling much better now).

Sat, 08/02/2014 - 16:45 | 5038503 TheSecondLaw
TheSecondLaw's picture

Philosophy does not give answers.  It tries to understand the question better.

Unlike economics, philosophy does not attempt to predict.  It attemps to understand.

Sun, 08/03/2014 - 02:09 | 5039666 Tall Tom
Tall Tom's picture

Unlike Keynesian Economics..which is a plan...not a theory.

 

Misean Economics does not concern itself with predictions but concerns itself with observations. That is why it is an art and not a science.

 

Hazlitt is a proponent of the Austrian School.

Sun, 08/03/2014 - 05:56 | 5039777 Oracle 911
Oracle 911's picture

Agree about the Keynesian economics.

 

The truth is, you can make predictions according Misean economics and on the ground level you will be in about 80% of time right, and if you have enough accurate information you will be right in 98% of time. Napoleon said something in these lines: "Predicting means managing." So you can manage things in economy. Note: Peter Schiff is right about the 90% of the time.

 

About science, it became a crazy religion and this is the reason, if the "scientists" observation doesn't fit with the theory the "scientist" has these 3 options:

1st Admitting the fact he/she was wrong.

2nd Ignore the inconsistencies.

3rd Modify the theory, see dark matter/dark energy nonsense.

And because the science became a crazy religion the 1st option is nonexistent and the 2nd and 3rd is happening always these days. Conclusion: if you want real science ask the engineers. :)

 

Philosophy these days is mostly nonsense.

Mon, 08/04/2014 - 01:50 | 5042723 All Risk No Reward
All Risk No Reward's picture

The corrupt economists only see what they are paid to see.  The corrupt media only sees what tey are paid to see.  The corrupts politicians only see what they are financed to see.  The corrupt academicians see only what they are paid to see.

That's the crux of the problem - d*mn near everyone is corrupt to the core underneath a razor thin veneer of legitimacy.

Sat, 08/02/2014 - 17:17 | 5038594 Stuck on Zero
Stuck on Zero's picture

Economics is what happens whether it is studied or not.

Sun, 08/03/2014 - 02:10 | 5039660 Tall Tom
Tall Tom's picture

Wow...You agree with Hazlitt.

Sat, 08/02/2014 - 23:27 | 5039487 A Nanny Moose
A Nanny Moose's picture

Initiation of force and moral relativism.

Sat, 08/02/2014 - 16:41 | 5038489 TheSecondLaw
TheSecondLaw's picture

I agree wholeheartedly about Hazlitt.  

As far as I can see, there are three economic principles, which, if understood, prevent a lot of bullshit being written and said by economists and especially politicans:

1) Marginal Costs

2) Opportunity Costs

3) Hidden Costs

Sun, 08/03/2014 - 01:35 | 5039656 Tall Tom
Tall Tom's picture

One of the best books ever written, Big Jim.

 

I learned more about economics by reading that book than anywhere else.

Sun, 08/03/2014 - 08:14 | 5039916 Bindar Dundat
Bindar Dundat's picture

A modern tradedy to be sure.  

 

Why do economists use decimal places?  To prove they have a great sense of humour:-)

Sun, 08/03/2014 - 08:15 | 5039917 Bindar Dundat
Bindar Dundat's picture

A modern tradedy to be sure.  

 

Why do economists use decimal places?  To prove they have a great sense of humour:-)

Sat, 08/02/2014 - 14:47 | 5038138 Escrava Isaura
Escrava Isaura's picture

Milton Friedman was a master... LMAO

Sat, 08/02/2014 - 16:19 | 5038407 max2205
max2205's picture

Economics is a science.   It becomes an art when politicians get involved

Sat, 08/02/2014 - 20:30 | 5039065 DeusHedge
DeusHedge's picture

Essentially the reason I'm here.

Sat, 08/02/2014 - 14:24 | 5038058 Escrava Isaura
Escrava Isaura's picture

So Balth,

You are telling us that economics and religion are both bogus?

Both self-serving human creation?

Or, am I misrepresenting your post?

Sat, 08/02/2014 - 14:30 | 5038079 Harbanger
Harbanger's picture

It is religious.  Economic law when using fiat currency is based solely on faith.

Sat, 08/02/2014 - 14:40 | 5038116 Escrava Isaura
Escrava Isaura's picture

Harbanger,

Economic Law?

It "fiat currency" is religious because it based solely on faith?

Please, clarify.

Sat, 08/02/2014 - 14:48 | 5038141 Harbanger
Harbanger's picture

Historically, most currencies were based on physical commodities such as gold or silver.  When Central Banks can create money out of thin air and then blow economic bubbles in any sector they choose, it distorts and disregards all economic law and also dilutes the value of the currency.  So it takes faith in central planning really, that they won't destroy the economy and the currency.

Sat, 08/02/2014 - 15:01 | 5038181 ZerOhead
ZerOhead's picture

Except 'Central Planning' doesn't even attempt to control or regulate currency creation.

Bankers do.

Sat, 08/02/2014 - 15:13 | 5038218 Harbanger
Harbanger's picture

What are you talking about? The Fed has been centrally planning our economy since it's creation, and of course they're bankers.  The Statists elected into office love this idea and benefit from the money creation as they can grow the state with no limit to the Nations credit card.  That is until economic law, which is math, returns with a vengeance.

Sat, 08/02/2014 - 15:23 | 5038239 ZerOhead
ZerOhead's picture

I repeat... there is NO planning. Planning considers OPTIONS. These clowns only print.

Printing alone can't be considered a plan... it's more like a policy. Unless of course the options are 1) print & 2) print more

 

Sat, 08/02/2014 - 15:27 | 5038262 Harbanger
Harbanger's picture

They don't only print, they decide exactly where and how much of that printed money goes in their planning schemes. With laser like focus.  They are Central Planners and plan every aspect of your life whether you're aware of it or not. 

Sat, 08/02/2014 - 15:49 | 5038308 mademesmile
mademesmile's picture

I think a more apt name WOULD be the central printers.

Sat, 08/02/2014 - 14:50 | 5038149 AlaricBalth
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Fiat currency is considered legal tender. It is backed only by the "full faith and credit" of the United States government. If faith in that implied guarantee wanes or the credibility of the government backing it comes into question, the currency will slowly, and then suddenly, become useless as a medium of exchange.

Sat, 08/02/2014 - 15:00 | 5038179 Escrava Isaura
Escrava Isaura's picture

Guys, not sure about your answers.

Every one that I asked "Fiat Currency" they have NO clue.

And I live in DC.

Sat, 08/02/2014 - 15:15 | 5038200 ZerOhead
ZerOhead's picture

Fiat money is simply money backed by nothing. It is what the entire planet is operating on right now and it never survives very long (historically) before it crashes to it's intrinsic value which is ZERO. (See : Zimbabwe/ Gono & US/ Greenspan Bernanke Yellen)

 

"In the USA 100% of the money supply is created by the private banks. In Britain the figure is over 97%. In the rest of the world, the figure is estimated to be over 95%. All this money is created as a debt. It is created when people borrow money, as banks do not lend existing money; they just create new money out of thin air to lend."

http://www.moneyreformparty.org.uk/money/about_money/wizard_of_oz.php

Sat, 08/02/2014 - 15:17 | 5038232 AlaricBalth
AlaricBalth's picture

Slave Girl. Why don't you share some
of your wisdom with us. You have been on ZH for 4 plus years, surely you have formulated your own hypothesis.

Sat, 08/02/2014 - 15:49 | 5038306 Escrava Isaura
Escrava Isaura's picture

Slave Girl! That was good.

Anyway Balth, because this article is about economics, so that’s my take:

Economics is not different than religion. It’s man made. With lots of flaws. And heavily indoctrinated.

Sat, 08/02/2014 - 14:37 | 5038103 Skateboarder
Skateboarder's picture

My condolences to all high schoolers who raise the economics == religion comparison in class and get sent to the Principal's office for being terrizzz.

Sun, 08/03/2014 - 02:10 | 5039648 Tall Tom
Tall Tom's picture

So, with your opening post you disagee with Mises' economics?

 

So are you a Keynesian? What is your Economic Philosophy?

 

Henry Hazlitt was a proponent of the von Mises.. He is the author of the article. This is an excerpt out of his book, "Economics in One Lesson".

 

At times I just read and learn. Perhaps you need to slow down and not rush to quick judgment. You might just learn something.

Sat, 08/02/2014 - 14:37 | 5038110 AlaricBalth
AlaricBalth's picture

Strawman. I was merely pointing out that economics is a faith based paradigm. Nowhere do I espouse religion in the traditional sense as bogus or self-serving.

Thanks for asking.

Sat, 08/02/2014 - 14:44 | 5038133 Escrava Isaura
Escrava Isaura's picture

So,

Economics is faith based.

Religion is faith based.

But, neither is bogus or self-serving.

Thanks for clarifying.

Sat, 08/02/2014 - 14:57 | 5038167 Harbanger
Harbanger's picture

Central planning is faith based, economics is a math problem.

Sat, 08/02/2014 - 15:07 | 5038198 Escrava Isaura
Escrava Isaura's picture

But you said economics was religious?

Sat, 08/02/2014 - 15:16 | 5038227 Harbanger
Harbanger's picture

When using fiat currency.  Damn, you're dense.

Sat, 08/02/2014 - 14:05 | 5037993 junction
junction's picture

Boring pretentious article, boring pretentious postings.  What else is new?

Sat, 08/02/2014 - 14:07 | 5038003 Escrava Isaura
Escrava Isaura's picture

You posting it!

Sat, 08/02/2014 - 15:48 | 5038307 Schmuck Raker
Schmuck Raker's picture

I advise you to improve your attention span.

Sat, 08/02/2014 - 16:59 | 5038185 kill switch
kill switch's picture

 

Whats the difference between the Godfather and an economist??

The economist gives you an offer you can't understand..

 

Sun, 08/03/2014 - 02:19 | 5039694 r0mulus
r0mulus's picture

i think they meant that in the way that is meant by "the art of war".

"Latin artem (nominative ars) "work of art; practical skill; a business, craft,""
http://www.etymonline.com/index.php?term=art&allowed_in_frame=0

Sat, 08/02/2014 - 14:16 | 5038030 theonewhowaskazu
theonewhowaskazu's picture

Economics as a study of incentives & how a rational person should react to them isn't something to be put down. Perhaps its not an "art" or a "science", but its surely a much more developed and reasonable academic field than what passes off as "psychology" these days.

What is to be put down is supposed "behavioral" economics, i.e, attempting to claim that it is posible to predict  when & how people are going to act "irrationally", and attempting to control that behavior. This field is messed up for all number of reasons. First, when you point out something as "irrational" publicly, people will most likely stop doing it, especially if you are using that irrationality to justify making policy choices. Second, the behavior might not be irrational at all, but merely representative of a different set of priorities; one might say it is "irrational" to smoke, but when you prioritize the pleasure and other short-term benefits  of smoking over the long-term costs (which for example you may never even experience for a whole array of reasons), it might be perfectly "rational" for some. This "behavioral" branch of economics seeks to create a government-sponsored set of priorities which are to be forced upon every citizen, which is clearly very problematic.

Sat, 08/02/2014 - 14:33 | 5038089 Escrava Isaura
Escrava Isaura's picture

theonewhowaskazu,

Could you "anyone" please take a shot at this? I found it very disturbing.

Post by THE DORK OF CORK:

Any trade economists out there man.

Something happened to the US in the second quarter

http://www.tradingeconomics.com/united-states/terms-of-trade

Sat, 08/02/2014 - 18:06 | 5038729 Jstanley011
Jstanley011's picture

I can find zero commentary on that stat.

Sat, 08/02/2014 - 18:33 | 5038800 Escrava Isaura
Escrava Isaura's picture

I found this:

“H.R. 2847? goes into effect.

It has already been passed, and there is nothing that can be done unless our government is pressed to overturn it. Not likely since they planned this for a long time.

In this bill is an act known as FACTA (Fair and Accurate Credit Transactions Act), which will require all banks around the world doing any kind of business in U.S. Dollars, or with any clients with deposits or business in U.S. Dollars to open their books in complete cooperation with the IRS and allow audits and confiscation.

This means that any foreign bank who wants to remain outside the reach of the U.S. Government will divest all holdings in the U.S. Dollar, and refuse to allow U.S. Citizens to do business with them.

http://john330.org/commentary-2/the-coming-economic-collaps-on-july-1st-2014/

I think this devoted Christian (link above) might be right.

Sat, 08/02/2014 - 14:18 | 5038038 FreedomGuy
FreedomGuy's picture

It is a very simple article but it is actually an important basic truth that is in operation at all times in government. Government does a "stimulus" and spends a trillion on highways and touts all the highway jobs. That makes headlines and everyone cheers, especially union construction crews. Later comes the debt and the very difficult if not impossible to see opportunity costs of spending a trillion on roads, that might have been spent on other things. It is a forced spending by government. Perhaps the roads were satisfactory and now are really nice, but no real added economic benefit at the time...in fact negative as ten million orange cones and detours go up.

I suggest economics is an art like medicine. It is at least in a similar realm to the study of philosophy.

I would also suggest that every member of a Congress should read something simple and straightforward as they consider their legislation...not that it would turn a leftist into a right winger libertarian but it might give pause.

Sat, 08/02/2014 - 14:43 | 5038112 Future Jim
Future Jim's picture

Perhaps this is what the author was trying to say ...

What is Wrong With the People. 

First, there is plenty of reason for hope, so don’t despair, but …

Something is wrong with the people, who seem increasingly partisan, ignorant, apathetic, dishonest, evasive, cowardly, hypocritical, passive aggressive, insecure, conformist, closed minded, irrational, illogical, and unprincipled. Perhaps most obvious is the increase in cognitive dissonance, but the entirety of the character devolution of the people should be really obvious to any American who has lived long enough. I first noticed it during the Clinton Administration, but the root cause actually started long before that and merely caused a rather obvious leap under Clinton.

A lifetime of experience has taught me that just about everyone has the potential for the dark side as well as the potential for nobility. Both impulses are in our genes, but something in our environment is favoring the dark side.

First, let’s identify the rather obvious trends that motivate us to find a cause. Then, we will learn how they all have the same root cause:

Before we can solve a problem, we usually must understand the cause; otherwise, the unintended consequences could be worse than the original problem. In fact, the solutions of the past are the cause of most of our problems today.

Given that those who are most successful tend to be those who are least principled, we can see why every other problem is the result of unhealthy interventions at the top, but how did it get to be this way?

After a few generations of unhealthy interventions from the top by men who may or may not have been principled, we can see how their bad solutions created a perverse incentive structure that rewards bad behavior and punishes good behavior. Just like bad parenting creates a spoiled child who suffers from arrested development, now an entire people are increasingly spoiled children who suffer from arrested development.

The Soviet Union had a system that rewarded unprincipled people, and it crumbled from within.

Everything afflicting the people (that wasn’t caused by evolution) is caused by dishonest banking and a dishonest money supply, and the watershed of problems are self reinforcing. One unusually large cause of problems, that was itself indirectly caused by dishonest banking and dishonest money, is political correctness. Another unusually large cause of problems that was itself indirectly caused by dishonest banking and dishonest money, is media bias. Of course, the chain of cause and effect is long, complex, and suppressed by the media; whereas, myths are substituted by the media, but the chain of cause and effect should be clear by the end of this article.

This is where the real explanation begins.

Dishonest banking and money are caused by:

  • Central banking
  • Fiat currency
  • Fractional reserve banking
  • Quantitative easing
  • Zero Interest Rate Policy (ZIRP)

Central Banking: The Federal Reserve is a private bank with a government granted monopoly on currency creation; whereas, money is a product just like any other, and thus would benefit from competition just like any other product. Why do you think the Federal Reserve refuses to be audited? Central banking was universally considered dishonest until the 20th century.

Fiat Currency: What most people still don’t know is that all of the money in America is created from nothing and backed by nothing except confidence, and thus it is referred to as fiat currency. Fiat currency was universally considered dishonest until the 20th century.

Fractional Reserve Banking:  The main cause of fiat currency is that banks can lend at least ten times as much money as they receive in deposits, and depending on the type of loan and type of deposit, it can be even more. Over time, the government has been making it increasingly easier for banks to create more unearned money out of nothing. This is known as fractional reserve banking, which was universally considered dishonest until the 20th century.

Quantitative Easing: In addition to fractional reserve banking, under Obama, the Federal reserve has been creating a much larger than usual amount of money and loaning it to the government and the banks. This is known as quantitative easing, which was universally considered dishonest until the 20th century.

ZIRP: The federal reserve has reduced the interest rates to nearly zero percent on money it loans to the government and on money it loans to those banks who own the Federal Reserve.  This is known as Zero Interest Rate Policy (ZIRP), which was universally considered dishonest until the 20th century.

Consider that any entity who borrows money at zero interest has little incentive to ever pay it back, and will in fact have much incentive to keep borrowing. That’s a very corrupting influence.

Bailouts: Before Quantitative Easing and ZIRP, the government tried bailouts. Does anyone believe that the crash of 2008 and many of its prerequisites would have happened if all the self-proclaimed Elites had been certain that bailouts were an impossibility? It is almost as if bailouts were part of some plan.

Bailouts are unconstitutional, but they happened anyway, so we see that it is really just the character of the American people that gives the Constitution its power, and the American people lacked the character to stop the bailouts. It is almost as if character devolution were part of some plan.

Bailouts were universally considered dishonest until Obama.

Cronyism: Dishonest banking causes the government and the big banks to receive a flood of unearned money, which then finds it way to their closest cronies, which thus tempts cronies to become closer cronies and which tempts honest entities to become first-time cronies. This is called cronyism, and although it has been growing for a long time, it was universally considered to be dishonest – until Obama became the President.

Government rewards cronies with bailouts, contracts, tax breaks, regulations that help the crony and/or hurt honest competitors, and with selective enforcement of laws and regulations. Once the media became cronies, then media bias also helped other cronies and hurt honest competitors.

Once cronyism took hold at the top of government, the cronyism trickled down to the local level. Cronies in local government thus have the support of the cronies directly above them.

A system that favors cronyism makes it increasingly difficult for honest individuals and honest businesses to compete with cronies. It also manufactures more cronies by corrupting honest people. Furthermore, the dwindling number of men of principle limit their success by avoiding doing business with cronies.

Dishonest bankers corrupted honest banking, which then corrupted government, which then corrupted the free-market, which thus corrupted the people, which thus reduced entrepreneurship, innovation, efficiency, and honesty.

Read the rest at What is Wrong With the People.

Sat, 08/02/2014 - 22:44 | 5039390 Clueless1
Clueless1's picture

Bad economics:  Focuses on the environment in which Humans live in and create.

 

Good economics:  Focuses on the ecology of the Human species.

 

Any ecologist will tell you: All species have some capacity to manipulate and adapt to their environs, but the human capacity is something of a special case.

 

Keep in mind that a purely scientific study of human ecology is bereft of ethics and morality.  If you want a 'moral science,' then look to Political Economy. 

Sat, 08/02/2014 - 14:21 | 5038042 Keltner Channel Surf
Keltner Channel Surf's picture

. . . they reply flippantly, “In the long run we are all dead.” 

Per a new self-declared Fed mandate, this is no longer true. 

QE Eternity morphs in to Double-Secret Reverse Repo Eternity, ad infinitum, preventing recessions, preventing recovery, preventing death.

 

The Bernanke/Yellen dream?   Dismal Science becomes Gay Science (aka Joyful Wisdom), a Nietzschean Eternal Recurrence:  “This [economy] as you now live it and have lived it, you will have to live once more and innumerable times more, ” to which the Fed expects our reply thusly:  'You are a god and never have I heard anything more divine."    Our silence is this regard mystifies them …

Sat, 08/02/2014 - 14:20 | 5038043 Reaper
Reaper's picture

Economics is the alchemy of the 20th and 21st Century. They guarantee to turn government theft by taxes or printing into a gain for those from whom they stole.

Sat, 08/02/2014 - 15:59 | 5038340 FreedomGuy
FreedomGuy's picture

I use that analogy all the time. Let me suggest a finer point. If one dispassionately studies economics in a fairly scientific cause-and-effect method it is more science. Once one crosses to the dark side of actually using or even inventing an economic theory to manipulate an economy it becomes alcehmy and will have the same result.

To use an analogy; if one studies the Amazon rain forest that is botany. If one intervenes and begins replanting that is gardening.

Sat, 08/02/2014 - 14:30 | 5038074 ZerOhead
ZerOhead's picture

“In the long run we are all dead.”

"And such shallow wisecracks pass as devastating epigrams and the ripest wisdom."

 

Someone is messing with you Tyler....

"On a long enough timeline the survival rate for everyone drops to zero"


Sat, 08/02/2014 - 15:03 | 5038184 malek
malek's picture

But you do understand the difference to looking from the viewpoint of an individual vs. that of a society which has offsprings?

Sat, 08/02/2014 - 14:41 | 5038123 christiangustafson
christiangustafson's picture

Go Austrian or go home, bitchez.

Sun, 08/03/2014 - 01:58 | 5039679 Tall Tom
Tall Tom's picture

Can you believe the ignorance here?

 

They give an excerpt from an Austrian School Economist and many (many who will claim to share Austrian Economic Philosophy) are attempting to shred it? Unreal.

Sat, 08/02/2014 - 15:37 | 5038284 Ralph Spoilsport
Ralph Spoilsport's picture

I took one undergrad Economics course as an elective and got a B in it - this was in the mid 70s. I've gotten a much better education in economics right here at ZH.

Sat, 08/02/2014 - 15:42 | 5038294 Freewheelin Franklin
Freewheelin Franklin's picture

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

 

Every governmental policy or law and/or centrally planned economic decision, by its very nature, simultaneously  "helps" some people and "hurts" others. The question isn't 'who should we help, (or hurt)', the question should be, 'should we be helping or hurting anyone'. 

Sat, 08/02/2014 - 16:01 | 5038349 FreedomGuy
FreedomGuy's picture

Nicely said FF. See my ealier post. That is the essential position of the Austrian school of economics and to a lesser extent all free market economists.

Sat, 08/02/2014 - 15:44 | 5038295 Goldilocks
Goldilocks's picture

Cat's puking to Techno Compilation (Original)
http://www.youtube.com/watch?v=V0qhsUxifVQ (1:18)

Sat, 08/02/2014 - 17:00 | 5038552 Shepp
Shepp's picture

To say "Bad" economics consists of short-run thinking while "good" economics consists of both short- and long-term thinking is generally accurate IF one is dealing with sound economic principles.  To reason from faulty premises (e.g. unemployment is an innate ineradicable aspect of capitalism or market economy, therefore monetary policy must be fiddled with to minimize unemployment) leads to errors in both short and long-term thinking.

Economics most definitely IS a science..the study of production under the division of labor.  And is subject to laws and principles no differently than physics or chemistry (e.g. you print money like a madman, and eventually money becomes worthless is a pretty well established economic axiom). 

As I always argue with people, get down to brass tacks before you start debating this economic policy or that, and debate the most basic question that underlies any social system: is man meant to be free and independant to act in his self-interest for the sake of improving and extending his own life, or is he meant to be a slave where the fruits of his mind and his labor are absolutely the prerogative of the state to dispose of (i.e. redistribute)?

Until debating parties recognize their fundamental world-view, all debate is superficial argument about degrees of socialism/statism.

IOW, If I am a committed capitalist, and you are an avowed marxist, us arguing about the degree of FED policy is insanity: The argument should be about Fed or no Fed.  Anything else is compromise with your avowed ideological enemy.

 

Sat, 08/02/2014 - 18:09 | 5038733 Escrava Isaura
Escrava Isaura's picture

Shepp, you said: "sound economic principles.

“Man, you come right out of a comic book!"

Sat, 08/02/2014 - 17:51 | 5038691 Shepp
Shepp's picture

..To add to my previous post: This from Capitalism, A Treatise on Economics by George Reisman:

Developing and expanding of the division of labor is the means of steadily increasing the productivity of labor. The division of labor is a social system in which the individual lives by producing, or helping to produce, just one thing or at most a very few things, and is supplied by the labor of others for the far greater part of his needs.  The production, the very existence, of wealth vitally depends upon the division of labor. 

But while human life and well-being depend upon the existence of wealth, and the production of wealth depends upon the division of labor, the division of labor does not exist or function automatically; it depends upon the laws and institutions a country adopts to govern social interaction. 

The division of labor society is a Capitalist society, which is characterized by the pursuit of individual material self-interest under freedom, and rests on a foundation of the cultural influence of reason.  

What makes the study of economics (i.e. Capitalism) necessary and important is the fact that while human life and well being depend on the production of wealth, and the production of wealth depends on the division of labor, the division of labor does not exist or function automatically. Its functioning crucially depends on the laws and institutions countries adopt. A county can adopt laws and institutions that make it possible for the division of labor to grow and flourish, as the United States did in the late 18th century. Or it can adopts laws and institutions that prevent the division of labor from growing and flourishing, as is the case in most of the world today, and as was the case everywhere for most of history.

Indeed, a country can adopt laws and institutions that cause the division of labor to decline and practically cease to exist. The leading example of this occurred under the Roman Empire in the 3rd and 4th centuries…  The result was that the relatively advanced economic system of the ancient world, which had achieved a significant degree of division of labor, was replaced by feudalism, an economic system characterized by the self-sufficiency of small territories. In order for a country to act intelligently in adopting laws and institutions that bear upon economic life, it is clearly necessary that is citizens understand the principles that govern the development and functioning of the division of labor. If they do not, then it is only a question of time before that country will adopt more and more destructive laws and institutions, ultimately stopping all further economic progress and causing actual economic decline, with all that this implies about the conditions of human life.

Thus, the importance of defending and promoting capitalism consists in the fact that ultimately not only our entire modern civilization and well-being of its citizens, but the very lives of the great majority of people now living depends upon the existence and functioning of the division of labor. 

THE WORLD HAS NOT YET SEEN CAPITALISM

 

 

Sun, 08/03/2014 - 03:18 | 5039721 FreedomGuy
FreedomGuy's picture

I would suggest that the division of labor is not in and of itself a necissity. It is done because it is vastly more efficient. In primitive societies you build your own home, make your own clothes and catch your own fish. You are actually probably not terribly good at any of those, just basically competent.

However, if I build all the homes while you make all the clothes and someone else catches all the fish...and we TRADE...then we all get much better at our TRADE. I get really good at building and someone else catches many multiples of the fish. This in fact, is the simple, elegant and beautiful core of capitalism or as I like to call it, "voluntary exchange".

Sat, 08/02/2014 - 20:19 | 5039038 bentaxle
bentaxle's picture

What a load of bullshit! What is this good economist, bad economist shit!? This site gets more stupid by the day!

 

Economics.....is Politics! Period. Once you finally get that you might just begin to see that politics is corruption, "when the "funny money" is controlled by politicians co-opted by the Central Bank.)

 

It means, being an ordinary Joe, you CANNOT possibly win! You will get inexorably poorer, like it or not, by using the big man in DC's fiat. All that is left to figure out is the actual rate at which you will get poorer, by way of inflation. In a society, based on BS like "the American dream," if it is a complete fallacy for the vast majority - 99% plus - that they will ever be winners, so what is the point of trying???. What the hell are you doing propping it up every day? From getting up, to burning gas, to chaining yourself to a desk all day, to getting beat and then have the government come along and take a large share of your slowly diminishing earnings in taxes.

 

Don't you get fed up of hearing all that, "Government debt is good because it ends up in private sector hands, so everybody happy, stuff?"

 

The above is shit because it explains none of this.

Sun, 08/03/2014 - 02:12 | 5039676 Tall Tom
Tall Tom's picture

This is an excerpt from a book...Perhaps you ought to read the book???

 

Actually Hazlitt is quite critical of many things which you listed. You may find yourself...in (gasp) agreement?

Sun, 08/03/2014 - 00:07 | 5039556 thorsmjollnir
thorsmjollnir's picture

Someone has been reading Hazlitt.

Sun, 08/03/2014 - 00:58 | 5039614 honestann
honestann's picture

So-called "economists" paid by government or [large/financial] corporations are simply paid liars and propagandists.  Period.  And the vast majority of other so-called professionals working directly or indirectly for government or corporations are also simply paid liars and propagandists.  Almost nobody today is willing to remain honest when doing so causes them inconvenience, discomfort or trouble.  And so, mankind is finished.  Stick a fork in them.

Sun, 08/03/2014 - 12:56 | 5040567 Livermore Legend
Livermore Legend's picture

Henry Hazlitt best described by Jim Grant:

" A Self Taught Visionary"

Indeed.

 

Sun, 08/03/2014 - 15:40 | 5041157 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Contemporary Economics can only be operationalized as deviant behaviour systematized to extract wealth transfer from one population to another. The behaviour of all Economists derived from a criminal discipline can only be regarded as qualitatively "bad" IMHO. One cannot state that one level of deviant behaviour is better than another on any given day of the year. The whole domain of Economics is corrupt and the historical principles that formed contemporary thought

on Economics have been rendered moot within a discourse that is largely one of criminality and deviant behaviour on the part of bureaucracy that is rigged. Look at wealth transfer from the mainstream economy to the ruling classes and ask yourself if it is not the case that academic Economics is an ethical domain that promotes  ethical behaviours amongst their so-called 'professional'

classes? The answer is either [YES] or [NO] without equivocation.

The University of Columbia in New York City actively promotes

unethical economic theory and practice IMHO. Theory is one thing and then we get the competing so-called 'theories' that work the markets behind closed doors in dark pooled domains. Contemporary

Economics as outlined via the central planning model of economics is not an empirical science or unbiased enough to characterize it as

'good' economics in theory or practice. The entire base of modern economics has been ignored in practice and thwarted via K-Street lobby of governance and legislation. Glass-Seagall is a case in point and the destroyed economy in the USA is a result of that de-regulatory move. Everything else that seeks to justify today's Economic Theory and Practice is rhetoric and not scientifically meaningful after allowing these theories to be real world tested. In brief, Economics is glorified bullshit pumped out of an Ivory Tower to give it an air of respectability.

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