A blog of the NYU Colloquium on Market Institutions and Economic Processes
by Gene Callahan
No fair googling!
‘Continual deviations of the prices of commodities from their values are the necessary condition in and through which the value of the commodities as such can come into existence. Only through the fluctuations of competition, and consequently of commodity prices, does the law of value of commodity production assert itself and the determination of the value of the commodity… become a reality. Read the rest of this entry »
by Mario Rizzo
This is an important time for Austrians. During the Great Depression and for many years thereafter, J.M. Keynes and his followers dominated macroeconomic theory (some say they created it) as well as the conventional wisdom about the historical lessons of the Depression and the New Deal.
We are now witnessing many important developments that will affect economics and public perceptions for a long time to come. Read the rest of this entry »
by Jerry O’Driscoll
Today’s Wall Street Journal features a major op ed, “Principles for Economic Revival,” co-authored by George P. Schultz, Michael J. Boskin, John F. Cogan, Allan H. Meltzer and John B. Taylor. It begins by noting that the “deep recession and anemic recovery have largely been driven by economic policies that have deviated from proven fact-based principles.”
As the piece’s title suggests, the authors advocate a return to policies for the long-run based on sound economic theory. However much one may disagree with particulars, the emphasis on the long run must be applauded. As they put it, “long-lasting economic policies based on a long-term strategy work; temporary policies don’t.”
The piece is very long, easily the size of two normal opinion pieces. They cover a great deal of ground: bailouts, stimulus, health care, housing monetary policy, etc. It’s well-worth reading and should frame the policy debates going forward.
Let us once and for all be done with endless discussions of temporary policies with transient effects. They don’t work and they distract us from the business at hand. Low marginal tax rates, transparent and not burdensome law and regulation, and non-inflationary monetary policy promote economic growth. The opposite leads to recession and anemic recovery.
by Mario Rizzo
In the September 15th Wall Street Journal there is a chart that gives a quick view of the “pragmatic” expansion of entitlement programs that has led to where we are now. Who could have predicted the long-term consequences of case-by-case pragmatic problem solving? I suggest Herbert Spencer, Ludwig von Mises, and Friedrich Hayek. Read the rest of this entry »
by Mario Rizzo
In today’s New York Times David Brooks argues that conservatives need to plan for “the day after tomorrow.” Tomorrow there will be the revolt against out-of-control government and that is good. But the day after America must return to its traditional non-ideological pragmatism about government. We need to solve problems as we find them. Government used in wise ways can be very helpful.
But what are these pragmatic government policies? Was it not one “fix” after another with little thought to the kind of society being created that has produced what we have today. I have no objection to “pragmatism” if it is a far-seeing pragmatism that looks to consequences – both indirect and complex.
The conservative reaction against “ideology” is a total misconception. A “good” ideology is a philosophy that focuses our attention on the long-run, Bastiat’s “unseen,” and the fundamental values of a free society. Most of all, however, it helps us focus on those rules that act to resist the special interests who would undermine the structure of a free society, one issue at a time.
This ideology is classical liberalism. If we truly understand how things went wrong in the over the past many decades, we would see that non-ideological pragmatism does not inspire confidence.
by Jerry O’Driscoll
Not my words, but those of Armen Alchian, as reported by William Allen in Econ Journal Watch. Allen has written his memoirs and a history of UCLAs economics department in “A Life Among the Econ, Particularly at UCLA.” To a great extent, it is the story of Alchian and the core group around him in the 1950s, 60s and 70s. Allen was co-author with Alchian of University Economics, an influential undergraduate textbook that inspired Paul Heyne’s Economic Way of Thinking.
My own way of thinking was influenced as much by the UCLA tradition as by Mises and Hayek. Mises and Hayek had an important influence on that tradition, however. An emphasis on decision making under uncertainty and incomplete information was its hallmark. All social phenomena could be analyzed by economics, and the economic analysis was micro.
Alchian didn’t deny there were aggregate economic phenomena, only that theory must be microeconomic. In substance, that was Hayek’s view.
Graduate macro classes had as much micro in them as designated micro class. Alchian wrote many of the macro prelim questions, wrongly attributed by students to Axel Leijonhufvud.
Among the luminaries who came and stayed in this period were Harold Demsetz and Robert Clower. Among those who came and left were James Buchanan, Sam Peltzman and Thomas Sowell. My dissertation committee consisted of Leijonhufvud (Chair), Peltzman and Sowell.
by Mario Rizzo
According to an article in the September 6th issue of the New York Times, more and more “experts” are now saying that the government should not try to prop up the housing market but should let prices adjust to their correct levels as rapidly as possible.
Well, you read that here as early as November, 2008 and then again in March 2009. It is part of the continuing myopic harping on aggregate demand which ignores all of the relative price adjustments that a post-bubble economy must experience. The Keynesian habit of ignoring the causes of depressions and dealing only with the analytically-secondary phenomena of aggregate expenditure is or should be unacceptable among intelligent economists.
I repeat what I said in 2008: Let the housing market collapse — fast.
by Jerry O’Driscoll
In the September 4th issue of the Wall Street Journal, Jon Hilsenrath chronicles the debate over the reasons for persistently high unemployment. What is being described is the problem of heterogeneous labor.
Labor, like capital goods, is specialized and specific to certain occupations. When those occupations disappear in recession, the next best alternative immediately available locally may pay considerably lower wages. Workers may “know” they have better alternatives, but their knowledge capital has also depreciated with the crisis and downturn. They must search for employment opportunities. Read the rest of this entry »
by Mario Rizzo
Policy Ideas in the History of Economic Thought
It is no exaggeration to say that if a bright undergraduate wants to get into a top Ph.D. program he needs to take a good deal of mathematics. Many advisors will recommend a minor in mathematics or even a double major in mathematics and economics.
As a result of all this, many of the best undergraduate economics students are mechanical problem solvers. They are in a kind of self-referential bubble, but to a much lesser degree, of course, than are top-department Ph.D. students. They expend tremendous amounts of energy with very little payoff in understanding how real economies work.
However, things would not be so bad if students also took courses that emphasized the broader, historical, institutional, and, dare I say, philosophical aspects of economics. But the intellectual opportunity cost is wrongly perceived as being too high. (Perhaps the career opportunity cost is high, but that is a separate question.)
Absorbing a broader perspective would encourage tolerance for a variety of methods and a greater appreciation for the complexities of economic policy. It would also increase respect for economists of a previous age who knew so much.
So enter my course, “Policy Ideas in the History of Economic Thought.” (See link above.) Read the rest of this entry »
