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Why Economics Matters

Tyler Durden's picture




 

Submitted by Jeff Deist via The Mises Institute,

This article is a selection from a June 19 presentation at a lunchtime meeting of the Grassroot Institute in Honolulu at the Pacific Club. The talk was part of the Mises Institute’s Private Seminar series for lay audiences. To schedule your own Private Seminar with a Mises Institute speaker, please contact Kristy Holmes at the Mises Institute.

First let me say that what we today call “Austrian economics” flows from the great legacy of classical economics, with the very important modification economists now call the “marginal revolution.” Austrian economics is also a term that describes a healthy and vibrant (though often oppositional) modern school of economic thought. It originated with intellectual giants like Carl Menger and Ludwig von Mises, names I’m sure many of you are familiar with. These economists were from Austria, hence the term.

There was a landmark conference at South Royalton, Vermont in 1974, attended by the likes of Murray Rothbard and Milton Friedman, that revitalized the Austrian movement and helped it regain prominence in the latter part of the twentieth century. Milton Friedman was in attendance, and that’s when he famously remarked that “There is only good economics and bad economics.”

And of course that’s true. Schools of thought should not be rigid, or dogmatic, or too narrowly defined. But classifying various economists and theories into groups or family trees does indeed help us make sense of economics. It helps us understand how we arrived at a time and place where Ben Bernanke, Paul Krugman, Thomas Piketty, and Christine Lagarde are viewed as modern mainstream thinkers rather than the radicals they are when compared to the whole history of the field.

Image courtesy of Peter Cresswell.

We supplied some photocopies that roughly trace the history of economic thought. Notice the split in the 1930s, not coincidentally during the Great Depression, between Mises and John Maynard Keynes. Up until then, from about 1850 forward, Austrian economics was mainstream economics. But as you can see, most of today’s mainstream economists fall somewhere under the umbrella of Keynes, and they tend to focus on variants of Keynes’s ideas about aggregate demand.

But at least they focus on something!

Ignorance of Economics Is not Bliss

Which leads me to my topic today: “Why Any Economics Matters.” I say “any” because at this point the entire subject appears to be lost on the average American. Economics is not a popular topic among the general population, it would seem. When economics is discussed at all, it’s in the context of politics — and politics gives us only the blandest, safest, most meaningless platitudes about economic affairs.

Bernie Sanders or Hillary Clinton simply are not going to talk much in economic terms or present detailed economic “plans.” On the contrary, they — will assume rightly — that most Americans just don’t have any interest beyond sloganeering like “1%,” “social justice,” “greed,” “paying their fair share,” and the like.

Candidates on the Right won’t be much better. They’d prefer to talk about other subjects, but when they do broach economics they’re either outwardly protectionist like Donald Trump or deadly dull.  Who is inspired by flat tax proposals?

Americans simply aren’t much interested in the details, or even the accuracy, of the economic pronouncements of the political class. We want bread and circuses.

Consider what people talk about on Facebook: lots of posts about family. Lots of posts about celebrities, and sports. Lots of posts about food, health, and exercise. Some posts about politics, culture, race, and sex, but usually only to support one side or bash the other.

Not much, ladies and gentlemen, in the way of economics. And I submit that might be a very healthy thing. After all — we’re rich! Only a wealthy society does not have to focus on the subsistence-level concerns of adequate food and shelter, hot running water, clothing, electricity, and the like.

So let’s not be too hard on people for not spending their free time reading economics. Leisure itself is a very important activity, and represents a form of economic trade-off.

But economics matters very much, and we ignore it at our own peril. Economics is like gravity, or math, or politics — we may not understand it, or even think about it much, but it profoundly affects us whether we like it or not.

Economics as a subject has been captured by academia, and academics like Krugman are not so subtle when they imply that lay persons should leave things to the experts. It’s like team sports — we may be introduced to it when we’re young, but only the professionals do it for a living as adults.

Yet once we understand that all human action is economic action, we understand that we can’t escape or evade our responsibility to understand at least basic economics. To think otherwise is to avoid responsibility for our own lives.

While we shake our heads when twenty year olds can’t read at the college level or do simple algebra, we don’t worry much whether they never take economics. We would be alarmed if our children couldn’t perform basic math to know how much change they should get at a cash register, but we send them out into the world far more susceptible to being cheated by politicians. Why do we want our kids to learn at least basic geography, chemistry, and physics? And grammar, spelling, literature, history, and civics? We want them to know these things so they can navigate their lives properly as adults

But somehow we’ve come to believe economics should be left to academics and policy wonks. And worse yet, we don’t protest when kids grow up to become adults with little or no knowledge of economics, yet still have strong opinions about economic issues.

Ignorance of basic economics is so widespread that we ought to have a specific word for it, like we have for illiteracy or innumeracy.  

The aforementioned Murray Rothbard had this to say: 

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

I’m sure we’re all familiar with this phenomenon on social media, which seems perfectly suited to vociferous unfounded opinions.

Let’s consider the minimum wage issue, as one example that’s been in the news lately:

Wages are nothing more than prices for labor services. When the price for something rises, demand drops — and you have more unemployed people than you otherwise would. Pure and simple Econ 101.

 

Yet what percentage of Americans today have even seen a downward sloping demand chart in a high school or college class?

It is this great and widespread ignorance of economics that plagues our ludicrous political landscape. It allows politicians to attack capitalism, and make demagogues out of entrepreneurs. It allows politicians to blame free markets for the very economic problems caused by the state and its central bank in the first place — like the dot com implosion, like the housing bubble, like the Crash of 2008, like the unsustainable equity prices commanded by US stock markets today.

In short, ignorance of economics allows some very big falsehoods to be accepted as fact by large numbers of people. And it’s only going to get worse as the presidential election of 2016 unfolds.

Read the full text here.

 

 

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Thu, 09/03/2015 - 19:53 | 6506937 JungleCat
JungleCat's picture

Of course it matters. But it doesn´t matter to the masses. They simply want panem et circenses (bread and circuses).

Let us not forget that human nature has not evolved appreciably since Roman times.

Thu, 09/03/2015 - 19:54 | 6506951 OC Sure
OC Sure's picture

 

 

Propabranda!

 

...Unfortunately, Austrian Economic Theory does not gain traction with the general population because the curriculum contradicts the definition of money by also defining counterfeit as money. The fallacy oozes throughout the culture. From elementary school to master's degrees, students are deceived into believing that counterfeit is money, theft is investment, fraud is banking, and corruption is virtue.

Thu, 09/03/2015 - 20:10 | 6507006 SofaPapa
SofaPapa's picture

The heart of the lie is that economics is something that happens to us.  People don't realize that it is their own spending and paying that is supporting the whole edifice.  There is no connection for people that what they spendis economics.  No understanding at all that we permit the pyramid we see by believing the "something for nothing" lie again and again and again...

And that is the education system and the media.  I believe those are the bases of this fraud.

Thu, 09/03/2015 - 20:21 | 6507015 Money Counterfeiter
Money Counterfeiter's picture

I would classify economics taught today as dictator worship sessions.  It is split about 50/50 with something useful and garbage.   Pretty appealing to sociopaths and control freaks.

Where do we start?  

Inflation reduces unemployment.  Federal spending is “autonomous injections” of magic money that multiply.  Artificially lowering interest rates is “liquidity”.  Government needs to promote positive “externalities”. (education bubbles)  Improvements “pareto” can be made at some people’s expense but no one is hurt. 

 I do the best I can but most students have bought into the dictator worship propaganda and teaching some Austrian economics is not much different than deprograming a Moonie.

Thu, 09/03/2015 - 20:27 | 6507043 negative rates
negative rates's picture

Economics and headaches go hand in hand, it's the ABC's of life, like it or not.

Thu, 09/03/2015 - 21:30 | 6507305 NoDebt
NoDebt's picture

As an economist, I can tell you that most economic problems are CAUSED by governments and that, absent that distortion, there is little reason the average person should ever care more about it than they do the day's weather forecast.  It affects you like a rainy day vs. a sunny day affects you (short term cycles).  It affects you like summer vs. winter affects you (long term cycles).  But you know how to handle those things at your own day-to-day level.  Natural economic cycles generally move at human-comprehendable speeds.

When the government gets involved.... they'll unleash a typhoon in the desert, make it boiling hot in the middle of January and drifting snow in July.  This is done primarily through monetary policy (purposeful debasement of real money at their whim) and through targeted regulations (like mandating 10% corn ethanol being blended with gasoline, which is a really fucking stupid idea). 

GOVERNMENTS change economics such that it no longer moves at human-comprehendable speeds.  Those caught unprepared can be injured or killed.  Those who prepare diligently for such distortions are forced to accept the burden of always carrying a parka around in the middle of July (and a bathing suit in January) because you never know when the temperature is going to suddenly go up or down by 50* without notice.

 

Thu, 09/03/2015 - 21:41 | 6507341 asteroids
asteroids's picture

And that is why I have a big problem with economics. It's not based in systems that mirror nature. Clueless economists at the FED and elsewhere try an experiment, when it fails hit ctrl p and let your grandkids pay for it. I apologise if I offend, but some days economics is about as rigorous as astrology.

Thu, 09/03/2015 - 23:31 | 6507703 NoDebt
NoDebt's picture

Real economics IS based on nature.  Human nature, anyway.  They'll just never tell you that in business school.  Economics is about finding a natural, efficient equilibrium.  Everything else about it is buit on the premise that it can and SHOULD be manipulated for some reason or another (the "greater good", as defined by those in charge of manipulating it).  Once they got ahold of the idea of "fiat money" everthing went apeshit after that.

Fri, 09/04/2015 - 08:13 | 6508329 tc06rtw
tc06rtw's picture

 
…  unfortunately, there’s a remedy for ignorance but  stupidity  is incurable.

Fri, 09/04/2015 - 07:04 | 6508174 DanDaley
DanDaley's picture

+1 Nice!

Thu, 09/03/2015 - 20:16 | 6507017 knukles
knukles's picture

Who put Krugman's name on that chart?  Who the fuck did that? 

https://search.yahoo.com/yhs/search?p=youtube+full+metal+jacket+who+said...

Thu, 09/03/2015 - 20:30 | 6507044 cowdiddly
cowdiddly's picture

I caught that too. That little worm up with the greatest thinkers like Mills, Maulthus. Smith, Marx, Rothbard? Give me a break.

Fri, 09/04/2015 - 06:49 | 6508150 DanDaley
DanDaley's picture

Krugman is a shoe-shine boy to the big dogs...he just happened to be in the room when the picture was taken.

Thu, 09/03/2015 - 20:24 | 6507035 OC Sure
OC Sure's picture

 

 

"The heart of the lie is that economics is something that happens to us.  People don't realize that it is their own spending and paying that is supporting the whole edifice.  There is no connection for people that what they spendis economics."

Unless I misunderstand you, you too seem to have missed the point.

Spending of what?

What is demand? 

Who creates their right to make a demand and who steals that right?

 

Thu, 09/03/2015 - 20:39 | 6507064 junction
junction's picture

Once again, someone brings in the subject of the minimum wage as if all employers obey minimum wage laws.  The opposite is true, as any of these economists would know if these ivy tower economists worked at a gum'mint job checking for compliance with minimum wage laws.  As I did for decades.  I found sustained maybe 99% of every minimum wage complaint I investigated.  Where the employer stole away into the night, leaving behind unpaid workers and stiffed landlords, I usually could do nothing.  For firms in bankruptcy, I gave claimants a Bankruptcy Court claim form if the bar date had not passed yet.  The key finding I found is that when there are not routine  checks of businesses for wage compliance (say every two years), then workers at the minimum wage get shafted.  Hourly salaries become flat weekly salaries.  Tip income starts vanishing into the owner's pocket. The other side of the equation is that to keep up appearances, labor law enforcement is now targeted at minority owned businesses and the fines imposed on these businesses have gone through the roof.  A Ferguson, Missouri type effect.  In Ferguson and similar such corrupt jurisdictions, the police targeted minority motorists and ignored the cartel shipments of meth and cocaine going by car through the same neighborhoods.  Corruption in the government now rules the day, which is why you will never see again fair enforcement of wage laws.  A fact economist never bother considering as they collect their university salaries and write their textbooks filled with unreal world assumptions.    

 

Thu, 09/03/2015 - 19:59 | 6506970 homebody
homebody's picture

Yes, an under-inflated football is very news-worthy.  Hours of reporting and days of Court time.

Thu, 09/03/2015 - 21:26 | 6507034 knukles
knukles's picture

While out aimlessly motoring from one societally proscribed necessity to the next, I was listening to Mr Radio.  A SF news station.  Right at the top-o-de-houah, the national news comes on and lo and behold, the top story was Inflate-gate.  My very same reaction.  How badly does the Wizard Behind the Curtain need the controlled media to divert our attention?  Makes one wonder what would happen if the "real" news was writ large across the skies.  So I flip to another big time Charley news station and va va voom, same story right there at the top.  So cringing while driving (Illegal in CA) I hit a random search button (useless all electronic Yuppie crap on cars) and wind up on a talk show.  Conservative (as in neo-con) talk radio.  Their topic for the day was if women are drunk or dress suggestively, are they responsible for rape. 
My balls creeped back up into my torso.  Very painful.
Not good vibes. 

Thu, 09/03/2015 - 22:09 | 6507463 SmallerGovNow2
SmallerGovNow2's picture

me too knuks.  wife turns on faux news in the morning and it drives me crazy while i'm trying to find real news on the internet.  almost have her understanding that tv is entertainment, NOT news.  well, what else can i say, we're all fucked...

Thu, 09/03/2015 - 22:05 | 6507446 black dragon
black dragon's picture

history as race between state and social power.   forex and facebook

 

https://mises.org/library/anatomy-state

Thu, 09/03/2015 - 19:56 | 6506953 homebody
homebody's picture

Balanced budgets, no debt, no more credit, and no more money printing will work for the country - most people do understand these basic economic rules.  Household budgets should also adopt these types of restraint or we all go down.

Thu, 09/03/2015 - 20:30 | 6507052 Tsar Pointless
Tsar Pointless's picture

No borders too. Oh, and consumption taxes in lieu of income taxes.

The incessant need for "growth" in all areas (including human reproduction) is the downfall of the human species. Not rap music. LOL

Never lose your sense of humor. It's the most important sense we have.

Thu, 09/03/2015 - 23:30 | 6507705 Really20
Really20's picture

True 100%. Many ZHers see that something must be done about our financial system but few see perpetual growth as problematic. In truth, perpetual growth is forced by our debt-backed monetary system and capitalist profit system, by such means as capitalist 0.01%ers taking income away from workers as interest, profit, and rent.

Were our economy actually run in an efficient manner, much of the "growth" within it would rightly be seen as unnecessary bloat fueled by finance capitalism. The "bullshit jobs" would disappear and working hours would go down as more people work at truly necessary jobs. Since the maintenance of wage rates at said jobs would imply cutting into the capitalist share significantly, though, this is not going to happen without a major revolution.

In sum: we don't need "growth", we need to end the system that forces it upon us.

Fri, 09/04/2015 - 00:10 | 6507794 VWAndy
VWAndy's picture

Growth or improvement? There is much more room for improvement than growth. This system is built on waste to a staggering level. The scarcity thing might not be such an issue in light of all the waste. There is no way to tell for sure. But that there is massive waste is not up for debate. Only the extent.

Thu, 09/03/2015 - 20:02 | 6506966 fauxhammer
fauxhammer's picture

Because understanding economics has been so critical to the fed's success with...nevermind

Thu, 09/03/2015 - 20:00 | 6506973 kchrisc
kchrisc's picture

There is economics, and then there are lies covering for plunder that are called economics.

Then there are tools of the plunderers like Keynes and Krugman.

Zion is a scheme, not an ethnicity.

 

 

Thu, 09/03/2015 - 20:00 | 6506976 Goldilocks
Goldilocks's picture

All You Zombies - Hooters (lyrics).
http://www.youtube.com/watch?v=MhYCuia4LCE (5:57)

Thu, 09/03/2015 - 20:24 | 6506985 themarketflash
themarketflash's picture

Great article.  How much different is Hugo Chavez from Bernie Sanders?   I don't think very different and a few years down the road Venezuela is a shambles.  To me Economics is the Golden Rule applied to consumption and work behavior.   We all expect service and value when we buy things and when we work we expect to get paid.  Add those things up and what do you get?  Negatively sloped demand curves and positively sloped supply curves.  Go get 'em Tyler!  By the way you are getting quite the compliment from Steve Hanke.  He is tweeting your stuff that he likes out now.  I personally don't find your Economics as rock solid as when you and I were duking it out on Seeking Alpha comment boards a long time ago.   You are a little too much  "the man is out to get me" these days for my tastes, but overall you are advancing truth.

Thu, 09/03/2015 - 20:11 | 6507010 DOGGONE
DOGGONE's picture

Here is the greatest deception by omission.

Inflation-adjusted stock prices are rarely shown:
http://www.showrealhist.com/begun.gif
http://www.showrealhist.com/
http://www.showrealhist.com/recDJIAtoRD.html

Will this deception by omission end?

Most to blame are
(1) news media -- Take their paid advertising revenue!
(2) higher.education -- Take their endowments!
(3). holders of elected office -- Forbid campaign contributions from financial sector.

Thu, 09/03/2015 - 20:28 | 6507047 Cabreado
Cabreado's picture

In order to survive as an orderly and principle-driven society,

your proclamation "It is this great and widespread ignorance of economics that plagues our ludicrous political landscape"

needs to be denounced with vigor,

as it deflects attention away from forces of Lawlessness and Control which are unconcerned with "economics."

You see... misappropriating thought and energy is directly responsible for an orderly and principle-driven society's demise.

Don't be a part of it.

Thu, 09/03/2015 - 20:29 | 6507049 g3h
g3h's picture

Economics Matters.

We just don't have economists.

Thu, 09/03/2015 - 20:37 | 6507063 Radical Marijuana
Radical Marijuana's picture

Yet another article on Zero Hedge

that GROSSLY UNDERSTATES!

Thu, 09/03/2015 - 21:19 | 6507252 VWAndy
VWAndy's picture

Economics falls into that fiat magic puzzle perfectly. Its all controlled opposition/biggest bullies bullshit.

Fri, 09/04/2015 - 02:35 | 6507931 Mediocritas
Mediocritas's picture

I thought you would have figured out by now my friend that everything from the Mises Institute is simply horse shit.

These guys are praxeologists: http://rationalwiki.org/wiki/Austrian_school#Praxeology

They scorn Empiricism. For them it's all about big long trains of logic supported by no evidence whatsoever, launching from proven-wrong wrong foundations in the first place. Lots of blah, blah, blah with not a citation to a hard-study in sight.

One of the most laughable manifestations of this sort of bullshit is Ayn Rand's Objectivism: http://rationalwiki.org/wiki/Objectivism

Both schools of thought fail immediately at Hume's Is-Ought test: https://en.wikipedia.org/wiki/Is%E2%80%93ought_problem

Beginning with a particular moral and ethical composition, they try to abstract away from the underlying emotionality and ideology of their positions and bamboozle people (including themselves) into thinking that what they're saying is Physical (rather than simply Metaphysical).

Their philosophy is incompatible with Empricism, but unable to deny the success of Empricism, they borrow some of its tools (such as mathematics and logic) and attempt to pass themselves off in some way as Scientific. Like a child playing with toy tools, an engineer s/he is not.

First to protest when claims are made about Economics being unscientific? The Austrians. Post after post here on ZH trying to inform us of their importance in the world! Little kids insisting that they're real doctors / nurses / engineers etc. What we have here are adult zealots.

FreedomGuy makes a ridiculous statement elsewhere in this comment thread, that economics is everything. No. "Everything" (human arrogance right there) starts with irrational human emotions and a genetic program that encourages in-group loyalty and out-group aggression (genetic continuation). That combination results in what we call morality and ethics. From that we formalize it into religions, political parties and various streams of philosophical thinking. 

Economics is simply an obfuscation of some underlying morality and ethics. In the Austrian Economics case, it is the morality and ethics of the 1% and those espousing liberty under the Austrian Economics flag mean only "liberty for me"

Liberty for you often means accepting some oppression for me, and an essential attribute of prosperous society is striking the balance between liberty for the individual vs the other. Such a concept, restriction of personal liberty in the interests of society, is anathema to the zealous Austrian School member. They believe in "natural elites" and that such elites, granted unchecked liberty, will act in the best interests of all. They, of course, consider themselves members of this elite. As an example, the Austrian School considers Monarchy superior to Democracy. From the horses's mouth:

" Princes and kings were dilettantes as rulers, and normally had a good measure of natural elite upbringing and value system so as to act often enough simply as a good household father would have done. Democratic politicians on the other hand, are and must be professional demagogues, constantly appealing to even the basest—and that is typically egalitarian instincts—as every vote is obviously as good as any other. And because publicly elected politicians are never held personally accountable for official public service, they are far more dangerous, from the viewpoint of those who want their property to be protected and want security, than any king has ever been."

http://austrianeconomicsandliberty.blogspot.com.au/2013/09/monarchy-vs-d...

Note the use of "natural elite". Yes, and what a hellhole the world has been under Democracy over the years. It was so much better under the Monarchies of old wasn't it? /sarc

Fri, 09/04/2015 - 07:03 | 6508172 DanDaley
DanDaley's picture

Your name explains it all -Mediocritas.

 

Nobody is more elitist than the progressives, marxists, socialists, and statists who intervene to control, regulate, and restrict everybody (except their cronies -always special exemptions for special people) every second of every day. 

Sun, 09/06/2015 - 02:29 | 6514692 Mediocritas
Mediocritas's picture

Aurea Mediocritas: https://en.wikipedia.org/wiki/Golden_mean_(philosophy)

You don't know shit.

Thu, 09/03/2015 - 20:38 | 6507070 FreedomGuy
FreedomGuy's picture

Economics is everything.

It is the nexus of theories on civil liberties, government, culture, and even finance. All those things are inextricably overlapped. You can start with a theory of government, e.g., socialism or libertarianism and work your way backwards to economics or do the inverse. You can start with Austrian School or free markets and work up to what type of government you should have, along with property rights and civil liberties necessary. 

There are no Communist-Austrian School types. They are incompatible. 

Fri, 09/04/2015 - 03:01 | 6507952 Mediocritas
Mediocritas's picture

Yes, Communist types (left wing) and Austrian types (right wing) are incompatible, but the right wing does not have a monopoly on liberty-centric ideology. In fact, the history of liberty literature is inclined more towards the left. Meanwhile, the right wing has a history of tending towards authoritarianism. 

Have you heard of anarcho-syndicalism? Are you aware that anarcho-capitalism is logically incoherent and that even Rothbard himself, (the man who invented the very term), eventually came to reject Anarchism because it was predominantly left-wing? 

http://anarchism.pageabode.com/afaq/rothbard-we-must-therefore-conclude-...

Same again for Ayn Rand. She despised Anarchism for the same reason: http://www.panarchy.org/rand/anarchism.html

Liberty and Anarchism belong together. Oppression and Authoritarianism belong together. Left-right is a separate variable although, historically, Liberty tends to be more compatible with the Left and Authority with the Right. which is why positions on the Political Compass tend to follow a diagonal line (an empirical fact).

http://www.politicalcompass.org/

Right wing Libertarianism is indeed rare in practise and typically morphs into nothing more than "liberty for the wealthy". Same as it ever was.

http://www.infoshop.org/AnarchistFAQSectionF1

Fri, 09/04/2015 - 05:29 | 6508064 The Wizard
The Wizard's picture

Economics is everything.

Not quite. Economics, like most academic disciplines are paradigms contrived by intellectual elites who sit at the top of their disciplines protecting their academic turf from competing thoughts. This is not to say using analytical tools in academics is wrought with error. Disciplines, as paradigms, must realize when they have lived their useful lives and adjust their models to the "real" world. Economists use their Keynesian theories and expect the world around them to behave according to the models rather than formulating and adapting new paradigms and models to how the world functions. How do Keynesian models factor in the manipulation of markets is one question I most often ask.

The Austrian school is more pragmatic in its approach but does not offer much in the way of analytical models which do have certain benefits. In order to properly analyze the world of transactions, choice, organizations, communications, value, etc. there is a need for new paradigms. By this I don't mean more sub-disciplines of existing disciplines. Good luck trying to get this across to those controlling academics.

Thu, 09/03/2015 - 20:41 | 6507085 Pomkiwi
Pomkiwi's picture

In my opinion, what used to be called 'fiscal drag' is the biggest obstacle to economies these days. Taxation and beaurocracy are choking commerce and personal advancement. I would like to see lower indirect taxation (preferably zero) replaced by direct taxes such as sales tax and capital gains/wealth tax. At present the government picks winners by granting fast track and exemptions to their chosen ones. Another aspect of 'economies' is what used to be caled 'invisibles'. Corporations that derive income from global franchises and investments contribute to balance of trade as much as exporters but I never see any mention in statistics.

Thu, 09/03/2015 - 21:11 | 6507218 Schroedingers Cat
Schroedingers Cat's picture

Banks have completely lost interest in self liquidating loans that build economies and create jobs.  Why bother with traditional banking when they can borrow money for free and gamble with it?  Banks have so neglected their societal function as lending institutions, which is what a fuckin' bank is supposed to be, isn't it?  Instead of banking, they gamble with free money from the US Treasury while leaving the nation high and dry in a liquidity trap, like fish without enough water.  The single greatest contributors to our economy are the students borrowing tens of thousands to go to college with no hope of ever being useful or competent at anything.  Their willingness to ruin themselves for a mickey mouse degree, taking huge loans that fifteen years ago would have been sufficient to train a doctor or lawyer, has kept this economy afloat.  We owe them a very big Godamned THANK YOU next time you order a drink at starbucks.

Thu, 09/03/2015 - 21:20 | 6507261 JOHNLGALT
JOHNLGALT's picture

"PET ROCKS" good, "PET PAPER" bad. That's the only economics you need to know. _JOHNLGALT.

Thu, 09/03/2015 - 21:38 | 6507333 starman
starman's picture

sheep only graze. they get fed and sheared. 

 

Thu, 09/03/2015 - 21:48 | 6507353 Really20
Really20's picture

I hate that both "mainstream" and "Austrian" economics seem to conflate capitalism with a free market and act as if the two are inseparable. Capitalism is private ownership of a business by those who refuse to perform any useful labor and simply want to collect income, while a free market has existed as long as humans have had surpluses and deficits of goods or services which could be rectified by trade.

The rentier economy (safeguarded, of course, by the state which makes and enforces property laws) now eats up nearly half of the produce of labor, part of which is purchased by workers using money lent into existence at interest to keep them in debt bondage. The top 0.01% didn't "earn" anything, they swindled and cheated it out of working people who actually produce the goods and services in the economy. If the Mises Institute wants to remain credible it should stop promoting capitalist ownership and start opposing excessive market intervention (which exists mostly to prop up the said 0.01%). Concentration of ownership in the hands of the elite 0.01% is the greatest impediment existing to a truly free and open market.

Thu, 09/03/2015 - 22:13 | 6507470 Spiritof42
Spiritof42's picture

I hate that both "mainstream" and "Austrian" economics seem to conflate capitalism with a free market and act as if the two are inseparable. 

Not true. The Austrians distinguish between state capitalism and free market capitalism. It's the mainstream that treats them as one in the same.

Concentration of ownership in the hands of the elite 0.01% is the greatest impediment existing to a truly free and open market.

That's a consequence of state capitalism, and in case you haven't noticed, it's collapsing.

Thu, 09/03/2015 - 22:30 | 6507529 Really20
Really20's picture

Concentration of economic power in a few hands by means of private onwership of non-workers over the means of production (capitalism) is inimical to the long-term health of an economy and society, whether those holding the reins of said power call themselves a "state" or not.

Thu, 09/03/2015 - 21:47 | 6507365 Windemup
Windemup's picture

No where does this article mention Henry George who wrote the book on "The Science of Economics" and "Progress and Poverty". It is precisely articles like this that weaken and diminish economic thought.

Thu, 09/03/2015 - 22:34 | 6507542 Spiritof42
Spiritof42's picture

Damn! If only the writer saw you coming, he would have sure to drop Henry George's name.

Here's a link to Henry George on the Mises website.

https://mises.org/library/all-hail-free-trade-and-henry-george 

Thu, 09/03/2015 - 23:06 | 6507651 black dragon
black dragon's picture

where does this crypto coin mining stuff fit into classical economics

http://highoncoins.com

http://zoomhash.com/

https://www.genesis-mining.com

https://www.youtube.com/watch?v=SZMUakJjnVo

i just surfed onto this.. i am experienced enough in auto/motorcycle electronics to build these.  but what are financial strategies

Thu, 09/03/2015 - 23:33 | 6507710 lucky and good
lucky and good's picture

I beg to differ, ignorance is bliss! It may be best to have no idea what "they" have planned for us.

The article below is is a tribute to all those cute little sayings and witticisms that lace their way through our culture and vocabulary. Oh how sweet it is not to know the truth and be so oblivious as to the dangers lurking around every corner that you awake each day to a world of calm serenity.

You take this to the next level when you note that few among us no matter how dumb or how dense think the world would not be better off if they were in charge and calling the shots as ruler supreme.

 http://brucewilds.blogspot.com/2015/07/ignorance-is-bliss.html

Fri, 09/04/2015 - 00:53 | 6507839 monad
monad's picture

Read the instructions and (if ollie don't make hamburger out of your men - WW1, WW2, etc) you won't come back to this.

https://www.youtube.com/watch?v=D0JPSGJVOHo

Sing along, while Barry mows the lawn his way...

Fri, 09/04/2015 - 02:40 | 6507938 Batman11
Batman11's picture

A fundamental assumption of the Austrian school is that bankers and businessmen are honest and can be trusted in a low regulation environment.

Bankers have demonstrated why un-regulated free markets are a utopian fantasy.

We de-regulated banks and trusted bankers and they rigged every market they could.

We removed the 1930s legislation designed to prevent another 1929 and they did it again in 2008.

We can thank the bankers for reminding us of the necessity of legislation and why it was enacted in the first place.

There is lots of financial regulation because bankers are incompetent, unscrupulous and entirely without morals. 

Fri, 09/04/2015 - 03:31 | 6507969 White Tiger
White Tiger's picture

Read the headline and immediately thought of my earlier visit to the singing mermaid coffee shop (I give no free endorsements to fascist coffee shops being given more freedom than is allowed their disorganized competition)...While awaiting my state approved stimulant, I noticed a highscool econ study group deep in discussion at a nearby table. I then noticed that their text book was none other than Krugman's economic farcical paperweight ...and shook my head. The poor young conscripts may never realize that they understood more about economics than the guy who wrote their text book - when they were trading baseball cards on the playground at recess...

I realized the old adage was true: the only place socialism can succeed...is on a college campus, or in a highschool study group. By the time these earnest young folks learn this, THEIR grandchildrens money will have been stolen too.

They can't stoke the coals of sheol hot enough for people like Krugman.

Fri, 09/04/2015 - 09:18 | 6508636 croecko
croecko's picture

Have you seen economics curricula? Ontario recently revised its senior economics course (CIA4U) along with other 'Canada and World Studies' courses. Here is the curriculum point dealing with globalization:

E2.1explain how globalization influences economic decisions of individuals, firms and governments

(e.g., with reference to closing manufacturing companies in North America and moving them to

Asia, use of temporary foreign workers in Canada, relaxing of environmental and/or worker protections

or lowering of corporate taxes to attract investment, availability of cheap consumer goods produced

offshore, consumer backlash and the development of the buy-local movement)

Sample questions: “How has globalization facilitated the international reach of agribusiness?

What impact has this had on smaller local producers and on consumer choice?”

The problem is that many teachers don't have a lot of background and so teach the points with the suggested examples. I distribute a book for the course ("Economics for Canadians - available via www.croecko.com) that has a free-market perspective that is popular with some schools, but it is tough to go against the intellectual drift. 

 

Fri, 09/04/2015 - 09:58 | 6508836 spoonful
spoonful's picture

Economics does matter, it's just that the underlying principles must be applied to actual facts.  The problem today is that these facts, i.e., the unemployment rate, are mostly fudged by the ruling elites, so what good is an economic model when the underlying assumptions are shaky at best?    

Fri, 09/04/2015 - 13:10 | 6510004 lu86cky
lu86cky's picture

If "mainstream economics" had at any time in it's entire history (well since Adam Smith at least) contained even a shred of usefulness to the real world instead of wrapping itself in a cloak academic self-righteousness and then toadying up to whoever is willing to pay the most to warp it even further to their personal ends, it might even be worth discussing.

 

But thus far it hasn't, so it isn't.  

 

The whole edifice needs to be raised to it's core assumptions and re-worked, because something is absurdly wrong with a field of academic study that fails so continuously yet never re-evaluates itself.

 

 

Fri, 09/04/2015 - 19:06 | 6511618 JenkinsLane
JenkinsLane's picture

Cool chart.

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