10 economic propositions

August 10th, 2008 at 9:55 am by David Farrar

Paul Walker blogs a list of 10 economic propositions accepted by almost all the top economists:

  1. The market is the most efficient of all economic systems.
  2. Free trade helps economic development.
  3. Good institutions help development.
  4. The best measure of a good economy is its growth.
  5. Creative destruction is the engine of economic growth.
  6. Monetary stability, too, is necessary for growth; inflation is always harmful.
  7. Unemployment among unskilled workers is largely determined by how much labor costs.
  8. While the welfare state is necessary in some form, it isn’t always effective.
  9. The creation of complex financial markets has brought about economic progress.
  10. Competition is usually desirable.

Walker concludes:

Sorman closes this piece by noting that one of the hardest ideas to translate into language that public opinion will accept is the fact that even the best of all possible economic systems is still imperfect. Markets are one of the many human institutions that are the result of human action, but not of human design. But they are based on people and without perfect people you are unlikely to get perfect markets. But for all these imperfections, we have yet to find a better economic system.

Market economies are indeed not perfect. But as says, no-one has found a better system. It reminds of the Churchill quote about how democracy is the worst possible way to choose a Government – except for all the other ways!

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51 Responses to “10 economic propositions”

  1. Glutaemus Maximus (2,207 comments) says:

    As sure as eggs are eggs, you are going to get a complete proposal against this truism.

    Don’t we just love it when the reasoning is perfectly flawed!

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  2. philu (13,393 comments) says:

    that’s quite funny..eh..?

    ..and..i wouldn’t have a clue who paul walker is..

    ..but he dosen’t seem to much of a ‘clue’..either..

    1. The market economy is the most efficient of all economic systems.

    (um..!..the global meltdown..?

    ..workers earning less than they did in the mid-seventies..

    2. Free trade helps economic development

    (shouldn’t that be environmental degradation,.)

    3. Good institutions help development.

    (yes..with qualifications..see 2..)

    4. The best measure of a good economy is its growth.

    um..!..no.

    .untramelled growth has brought us to this ‘sticky’ environmental/economic dead-end..eh..?

    5. Creative destruction is the engine of economic growth

    (see 2…).

    6. Monetary stability, too, is necessary for growth; inflation is always harmful.

    (um..usually..(with qualifications)..but a micro-issue in this big-picture debate..)

    7. Unemployment among unskilled workers is largely determined by how much labor costs.

    that is just so simplistic ..i can’t be bothered answering it..

    8. While the welfare state is necessary in some form, it isn’t always effective.

    of course it could be ‘more effective’..

    ..but i would guess mine and walkers’ prescriptions would vastly differ..)

    9. The creation of complex financial markets has brought about economic progress.

    (um..!..future derivatives..?..(yet to implode..?..)..sub-pime-driven meltdown..

    ..banks teetering on an abyss..?

    ..yeah..!..it’s all beem bloody brilliant..!..eh..?

    10. Competition is usually desirable.

    (yes..with qualifications..

    ..as in no way is the ‘competition’ of the duopoly controlling the supply of our food..

    ..’desirable’ for us mug-punters..

    ..as just one example…of many examples..of false-economy..)

    crikey..!

    not much left..!..eh..?

    phil(whoar.co.nz)

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  3. ghostwhowalks2 (126 comments) says:

    The ‘true’ market economies arent practised since they have so many flaws.
    AS for most efficient, it seems that a hybrid market-collective economy such as we have in NZ.

    Meanwhile the US Federal Reserve and The US government is going into the home loan business, after deciding that loans to Wall St were a good idea.

    Comming soon the US government will be providing money to General Motors and Ford

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  4. WraithX (295 comments) says:

    Philu: I think you know, as well we all do, that the “meltdown” is temporary and things will pick up again – if it weren’t for the market economy, this may not happen – or not in as efficient a manner. You can’t simply say market economies are bad because of the current situation; that would be as bad as saying global warming isn’t happening because there has been no warming for the last 10 years. You need to look at the big picture economically, in the same way as you ask others to look at the bigger picture of global warming.

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  5. Glutaemus Maximus (2,207 comments) says:

    And thus it ever was!

    Still, despite the Treasury calling the Economy as being in technical recession. The press releases from Control central still bugle the

    improbable fact that the Economy is in good hands!

    Just remarkable.

    Capitalism is interested in creating wealth, and Socialism is obsessed with the even distribution of Wealth. Especially distributed

    evenly to the Socialist Elite, and ruling departments who haven’t got the faintest idea as to how wealth was ever created in the first

    place!

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  6. Deborah (156 comments) says:

    I think the problem is that (1) is phrased the wrong way. “The market is the least inefficient of all economic systems” would be a better way of putting it. Phrasing it positively, per the list above, means that economists and ordinary punters alike tend to think of it as “the market is perfectly efficient”, which quite clearly, it isn’t. They also tend to conflate “the economy” and “society,” leading to claims like (8). It might be that the welfare system isn’t very good at delivering market solutions, but perhaps it’s quite good at keeping people fed.

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  7. ghostwhowalks2 (126 comments) says:

    The market economy is the most efficient of all economic systems.

    So thats why a National government wants to put $1.5 billion into fast internet in NZ since they want the least efficent product

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  8. NZD.JPY (130 comments) says:

    once again philu destroys the hopes of the capitalist world with his razor sharp fisking.

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  9. Interested Party (61 comments) says:

    So lefties – what is the best system then. NZ is predominately free market – although Helengrad is trying to change that. The market is self correcting, as over time is relies on the collective decisions of every one. Government controlled economies rely on the decisions of those power – in our case this is the cabinet. Mr Cullen in his wisdom pays a billion for the train set, if it went to the market it may have sold for $200m tops WHOOPS! (not to worry there plenty of that (our) money lying around) I’d rather trust the collective wisdom of the market, than the wisdom of a few ex school teachers

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  10. ghostwhowalks2 (126 comments) says:

    For the next 2 weeks , the Beijing Olympics , bought to you by a market economy.
    Coming soon the Rugby World Cup in NZ , bought to you by a market economy, or the new version where the losses are bourne by the public while the profits go to the market

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  11. reid (15,970 comments) says:

    Yes NZD.JPY I was thinking the same thing, as in:

    “that is just so simplistic ..i can’t be bothered answering it..”

    Now you know how the rest of us feel about you, phil.

    How about making a relevant point every now and then, just to keep up appearances?

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  12. expat (4,048 comments) says:

    I hear some annoying buzzing noise, like a communist or two that have got loose from the standard.

    Obviously the state should nationalise all private enterprise.

    We see how well that worked for the Russians.

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  13. reid (15,970 comments) says:

    Modern economics is a battle between Keynesian and Hayeckian economics. (Keynes is roughly state ownership of heavy industries a.k.a. “strategic” assets and counter-cyclical spending: govts are supposed to save when times are good and spend when times are bad. Everyone followed that model, world-wide, until the late 70′s. Hayeck is roughly divesting the state of “strategic” assets and deregulating to encourage free market activity a’la Reagan, Thatcher and Douglas.) To me it’s clear that Keynes’ doesn’t work and can’t work. There are too many arguments against state ownership and Keynesian policies lead to the stagflation we saw in the 70′s and the destruction of the Soviet economies.

    We haven’t yet worked out how to properly apply the Hayeckian model. One of the issues causing sub-prime was the regulatory vacuum and you could say the same thing here. For example we failed, in NZ, to prevent kickbacks being given to financial consultants for steering their clients toward specific finance companies. Duh.

    However it’s clear that the market model, on balance, provides better performance over time. We just need to iron out the kinks.

    I might add that Cullen, a Keynesian, didn’t follow that model, he spent when times were good, and now we have nothing to carry us through. Duh again.

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  14. Kimble (4,383 comments) says:

    phule, you shouldnt comment on economics until you know what it is you are talking about.

    “Creative destruction” has very little to do with environmental degradation, in fact, it is the most likely going to be part of the solution.

    The global “meltdown” is nothing of the sort, and is more of a temporary “micro-issue” than inflation, which is obviously another topic you dont understand.

    The complex financial systems didnt push banks to the edge of the “abyss”, it was the banks own poor decisions. A complex financial system can more efficiently spread risk, but the banks engineered to much of it and ended up being the ones holding the risks. The banks didnt do a good job being banks.

    I am sure “Institutions” as mentioned above, aren’t what you think they are.

    Un-Free trade is what strong nations use to bully smaller, poorer nations and tilt the game away from fairness. By being anti-free trade you are part of the problem that is keeping poor countries poor and their populations impoverished and starving. The fact that you justify it on “environmental grounds” just confirms what we all should already know about the Green movement; they dont care about people.

    The funny thing is, environmentalism is a luxury of wealthy nations. The best way to get the environmental desires of the West to take hold in the countries that will be doing most of the polluting going forward would be to increase free interactions, not block them.

    People can see that you are plainly unthinkingly anti-market, and will never change your mind because it is too hard for you. You cannot even comprehend how a market system could possibly have been beneficial for the human race. And that just shows your intellectual laziness.

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  15. expat (4,048 comments) says:

    NZ financial system has no regulationm any tom dick or rod can open up shop and play banks.

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  16. philu (13,393 comments) says:

    “..The funny thing is, environmentalism is a luxury of wealthy nations..”

    oh..!..is that right..?..

    ..speaking of ‘intellectual laziness’..eh..?

    ..interesting tho’ you confirm my long held warning our banks are in line to fall over..

    ..and given i believe/support the ideas of a new green/sustainble economy..

    ..and how we get there..

    ..as one of our (few) solutions..

    ..the rest of what you say is also just blown out your arse..

    eh..?

    .phil(whoar.co.nz)

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  17. iiq374 (262 comments) says:

    Meanwhile the US Federal Reserve and The US government is going into the home loan business, after deciding that loans to Wall St were a good idea.

    Comming soon the US government will be providing money to General Motors and Ford

    LOL – so ghostwhowalks is now railing against the idea of the Government being involved in the finance sector; quick start telling us how Labour needs to pull the plug on KiwiBank!

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  18. iiq374 (262 comments) says:

    expat – sorry not correct.
    While it is alot easier to setup a financial institution – there is a reasonable amount of regulation around setting up a bank (not as much as under APRA in Australia – but still a fair amount).

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  19. iiq374 (262 comments) says:

    Phil – given that the main bank in NZ to go bankrupt previously was the BNZ under Labour management; I’d say KiwiBank would be the number one to be looking shonky.

    But unfortunately for you the NZ banks capital ratios still look pretty healthy, even under the -ve equity situation a number of plonkers have situated themselves in.

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  20. expat (4,048 comments) says:

    Yeah, you know what I mean – any tosser with a marketing manager can pretend to have strong pillars etc and start flogging debentures on radio pacific a la playing banks.

    The NZ regulatory regime for financial services is woeful.

    Third World.

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  21. philu (13,393 comments) says:

    “..Phil – given that the main bank in NZ to go bankrupt previously was the BNZ under Labour management; I’d say KiwiBank would be the number one to be looking shonky..”

    the truth is just the opposite..actually..

    it’s the aussie banks..and their exposure to the ever-escalating american meltdown..

    ..that threatens to engulf them/us..

    ..(they have/had a big sub-prime habit..

    ..and the withdrawals could well be a ‘killer’)

    ..one who knows his stuff..told me kiwibank was/is the safest..

    ..phil(whoar.co.nz)

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  22. Kimble (4,383 comments) says:

    “..The funny thing is, environmentalism is a luxury of wealthy nations..”

    “oh..!..is that right..?..”

    Yes, it is. People only start to care about the environment for the environments sake when they have full bellies. Before that, they care about getting full bellies.

    “..interesting tho’ you confirm my long held warning our banks are in line to fall over..”

    I never said that, I was quoting you, which is why I put “abyss” in quotation marks. The current strife the banks are in is serious, but it isn’t going to destroy the entire global financial system.

    “..and given i believe/support the ideas of a new green/sustainble economy..

    ..and how we get there..

    ..as one of our (few) solutions..

    ..the rest of what you say is also just blown out your arse..

    eh..?”

    Well, you didnt actually address any of my points or make one of your own, so… I guess I win.

    Kiwibank IS relatively safe from the current problems. The other NZ/Aus banks aren’t in too bad shape. They have had some embarrassing write-downs (which is worn entirely by the owners), but they are nowhere near “engulfed” in the American “meltdown”.

    Where Kiwibank has a problem is with future Labour governments tinkering with it and using it as an extension of their political arm. Which we know they are likely to do. And dont forget the Greens, who we are certain would try and use it to “fix” the market.

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  23. Charlie Tan (255 comments) says:

    “The market economy is the most efficient of all economic systems….”

    Snore.

    Rule 11: “Economists” (that is people who have at least an undergraduate degree in something that should really be a social science but pretends to be a natural one) tend to make bland, unprofound positivist statements that are then taken by other people who have the same qualifications as a normative prescription.

    But, of course, you can’t argue with them as to whether efficiency is always “good”. No. They are the experts, after all.

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  24. iiq374 (262 comments) says:

    one who knows his stuff..told me kiwibank was/is the safest..
    Riiight – because the TSB’s exposure to US Subprime is HUGE [sic]

    And you just know that the quality of the aquired NZHL loan book is impeccable…

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  25. Kimble (4,383 comments) says:

    “But, of course, you can’t argue with them as to whether efficiency is always “good”.”

    You obviously don’t know what “efficiency” is.

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  26. Kimble (4,383 comments) says:

    But hey, if you want to argue that achieving the best outcome possible for the most people with a fair distribution is “bad” then go ahead.

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  27. philu (13,393 comments) says:

    kimble..the sub-prime meltdown in america dosen’t peak untill the end of 2009..

    ..(that word again..’peak’..and ‘peak’ does not mean ‘end’..either..)

    ..given how fast/far things have moved since last christmas..

    ..you are predicting ‘stability way past there..to any recovery period..?

    ..(good luck with that..!

    ..and i do hope you are right..and i am wrong..

    ..but i don’t think you are..

    (you are just swallowing the ‘there..there’..everything will be ok..!’ official bullshit messages..

    ..nothing more..)

    phil(whoar.co.nz)

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  28. iiq374 (262 comments) says:

    Phil U – Actually I would be surprised if it actually manages to peak by the end of 2009, and the repercussions will be felt for quite some time. The main one I’m waiting for is when all the lefties start whining because the banks won’t lend to their favoured demographic anymore. And reverse their current position that the banks are evil for lending…

    But asides from that the peak will still be like the doomsday messages of $100 per barrel oil creating worldwide economic meltdown; BS.

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  29. Charlie Tan (255 comments) says:

    “But hey, if you want to argue that achieving the best outcome possible for the most people with a fair distribution is “bad” then go ahead.”

    The point, Kimble, is that concepts like “best” and “fair” are hardly ever problematised in the economists’ calculations. In fact the preoccupation with material gains leads economists to assumptions about these terms that are not necessarily held by “most”. Not everybody’s interests sit on a difference curve between two variables, old boy.

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  30. Charlie Tan (255 comments) says:

    In fact, obtaining the “best” for “most” under “fair” conditions could be an argument for government control of an economy, not that I am advocating that. It all dependes on your definitions of these terms.

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  31. Casey (11 comments) says:

    The problem is that parts of the world, most notably the US where all the current strife is eminating for, have not practiced market economics for close on two decades, and that’s the problem – if they hadn’t tried to bail out all those that take risk, and pumped up the money supply whenever a slow down occurred, they would have had the occasionally clean-out and a healthy economy. Instead, they’ve encouraged excessive risk taking where financial institutions take the profits, and the US tax payer the losses. And they’re still at it and about to try to bail out the whole US home mortgage market, the consequences of which will haunt the US tax payer for years – Phil is almost right, but I think the “subprime” peak is further out than 2009.

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  32. ghostwhowalks2 (126 comments) says:

    Considering the 4 main aussie banks have 10s of billions in loans from overseas sources comming up for renewal in the next 18 months ( Kiwibank hasnt borrowed overseas to only a small extent).

    How are they going to refinance that , when they have loaned it out on property in NZ at longer terms .

    ( Thats how banks make their money , borrow short and lend long and take the difference in interest rates as profit).

    But wait , hasnt Candy Floss Key promised to borrow more for ‘infrastructure’.

    Looks like he’ll be borrowing a hell of lot more so the private banks can take the money and not have to call in all there loans,like they are doing now on wall st.

    Some are suggesting the Reserve Bank of Australia is allready doing this. Providing finance for the private sector.

    Its called printing money

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  33. big bruv (13,316 comments) says:

    Ghost

    Do you ever get sick of telling blatant lies?

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  34. iiq374 (262 comments) says:

    GWW – Right, and thats why when the Reserve Bank changes the OCR there is no impact on lending and savings rates…

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  35. Casey (11 comments) says:

    Ghost – you clearly don’t have any background in markets – bank’s make their money from earning an interets margin and manage the resultant interest rate risk – if its was simply a case of borrowing short and lending long, one business cycle would wipe out the banking industry (refer US S&L decable). The Aussie banks are refinancing and extending their portfolio terms without alot of trouble, the difference now is that its costing them more to do so. But that extra cost is being passed through to its customers and will slow economic growth and will increase bad debts, as happens in recessions anyway. NZers do not save and accordingly the banks are forced to fund offshore – Kiwibank is able to avoid that to date because it is a minnow lender, but if it were to get size over time, it would need to act accordingly.

    Fortunately the four Aussie banks have very little “subprime” debt, some of them have none, so that extra borrowing cost is alot less than other countries – NZ is fortunate that it has a world class banking system, be it emanating from Australia, and hence will have much less financial strife from that source than most other countries.

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  36. iiq374 (262 comments) says:

    Phil – think you should have a read before continuing to peddle the Kiwibank = Safe line… http://iiq374.blogspot.com/2008/08/kiwibank-safest-haven-tui-ad-in-making.html

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  37. ghostwhowalks2 (126 comments) says:

    The banks havent run out of money yet, the tidal wave of uridashi redemtions will be coming in the next 9 months.

    Estimates are there is $7000 owed for every man woman and child in NZ

    http://www.financialsense.com/fsu/editorials/danielcode/2008/0129.html.

    AS you obviously dont know, the banks borrow short term 9 – 36 months and lend long term 15- 25 years.

    How are they going to repay the uridashi bond holders in the next months, they have to borrow from some one else

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  38. sonic (2,818 comments) says:

    Ah yes the wonderful free market, so effective at making sure the state bails them out whenever they screw up.

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  39. Redbaiter (13,197 comments) says:

    “Ah yes the wonderful free market, so effective at making sure the state bails them out whenever they screw up.”

    There’s never been anything like a ‘free market’ while fuckwits like you have been in control you half educated little commie puke.

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  40. expat (4,048 comments) says:

    With demonstrated knowledge of international banking and capital funding shown here the combined heads of all australian banks will be poring over this thread looking for hints on how to stave off bankruptcy.

    Perhaps you commies can stick to your knitting, moaning about National and mouthing off neo-marxist influenced dogma.

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  41. NZD.JPY (130 comments) says:

    nice one sonic. and how does the free market “make sure” the state bails them out? answer – vote for cullen. he’s stupid enough to go for it. when labour here pumped billions into northern rock one of the first things the bank tried to do was pay it out as divdends to its shareholders. maybe their bonuses were tied to the share price? then the govt discovered that NR was more exposed than they were told by NR. oh really? now that it’s nationalised it has to pump more billions of taxpayers pounds in because govt banks must be protected at all costs. tell me how you can engineer this so you can make super risky loans but with government backing if they default? we know the answer and unfortunately for all of us (except a few bank directors) the answer lies in voting in gullible bleeding heart softcocks like your dear leader and her comrades. that the apparent leaked national not-so-secret agenda makes bigger news than cullens splurge to the australians is just depressing. that you continue to support this just because it is a labour govt that does it shows that you are an automaton.

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  42. Tauhei Notts (1,611 comments) says:

    I have shares in ANZ, Westpac and CBA which is the parent of ASB Bank. They have all taken a pasteing. They would dearly love to increase their charges to New Zealanders but know that Kiwibank will cream them.
    Here is comment that I am almost ashamed to make.
    “Jim Anderton did only one good thing in his life; he set up Kiwibank”.
    Now, if Cullen could get mutual recognition of franking credits; he would go up in my estimation.

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  43. Kimble (4,383 comments) says:

    “In fact, obtaining the “best” for “most” under “fair” conditions could be an argument for government control of an economy, not that I am advocating that.”

    Well, it IS used as the justification for state control. All the time.

    “The point, Kimble, is that concepts like “best” and “fair” are hardly ever problematised in the economists’ calculations.”

    You are kidding me, right? “Best” is what the attainment of pareto efficiency is all about. “Fairness” is subjective, but still a significant concern of economists.

    “In fact the preoccupation with material gains leads economists to assumptions about these terms that are not necessarily held by “most”.”

    This is the problem that economists have; PR. People seem to think they are the equivalent of stock brokers and the Gordon Gecko type. They see economists talking about money and wealth, and assume that these are their sole concern. Economists are disliked because they ask questions that sound callous, bit often they are some of the only people really concerned about the reality of a situation, and try to use logic rather than emotion to determine the best outcome.

    It would be a nice if this was a world where all decisions are easy, and the heart can overrule the head. But the real world doesn’t work like that. Economists are there to ask the hard questions and to point out the hard truths.

    “Not everybody’s interests sit on a [in]difference curve between two variables, old boy.”

    And economists don’t say that they do.

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  44. Kimble (4,383 comments) says:

    “Now, if Cullen could get mutual recognition of franking credits; he would go up in my estimation.”

    It wont be under his watch, and it is something which any minister worth his salt would try for. If the Libs had won the Australian election, it wouldnt even be on the table.

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  45. Owen McShane (1,226 comments) says:

    My preferred reworking of the first claim would go:
    “The market is the most efficient means available for allocating scarce resources if only because the multitude of players in the market have much more information than any central agency provided the price system is operating with reasonable efficiency and stability.”

    If anyone disagrees with this claim I would like them to tell me who they think can do a better job of allocating scarce resources. Committees of wise men such as Stalin, Mao, Castro, Pol Pot, and so on?

    Or what about nice kind folks like Winston Peters, Ruth Dyson, Russel Norman, Philip Field, Tariana Turia, Trevor Mallard, or any parliamentarian you care to name?

    If not then aren’t we back to the market – which of course is us!

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  46. PhilBest (5,117 comments) says:

    Hey! I linked to that article in an argument on another thread here on Friday or Saturday. Nice to see it posted as a thread in its own right, now.

    Another GOODIE discussion of the basic economics issues, is “The Myth of the Rational voter” by Bryan Caplan. Basically, most voters have swallowed the mythology of halfwitted socialism (see “sonic” and others above as typical examples), so no democracy actually ends up with real free market policies operating.

    In the USA, for example, business executives have been jailed for:

    1) Charging the same prices as their competitors
    2) Charging prices too low for competitors to get established in their market

    For Eff’s effing sake.

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  47. stephen (4,063 comments) says:

    “The Myth of the Rational voter” – i’d agree with that, see ‘values voters’ who by all accounts vote against their own self interest in the US.

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  48. Ryan Sproull (7,033 comments) says:

    I think you guys should all decide on a definition of “efficiency” first.

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  49. Charlie Tan (255 comments) says:

    ““Best” is what the attainment of pareto efficiency is all about.”

    Duh. Do you even know what it means to problematise something? One of the most strident criticisms of distributions that acheive a Pareto optimum is that that often does not lead to socially desirable outcomes. So how do you reconcile that with the notion of “good” or “best”, unless you are making some pretty broad assumptions about what those things mean?

    This pretty much highlights the problems with (undergraduate) economics. You see pareto efficiency as a good in itself because it adheres to a theory that says that it is good. As well as drawing lines on graphs that represent ‘efficiency’ (a concept which in itself is contested), can you also draw circles to outline the way you think?

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  50. Charlie Tan (255 comments) says:

    “Another GOODIE discussion of the basic economics issues, is “The Myth of the Rational voter” by Bryan Caplan. Basically, most voters have swallowed the mythology of halfwitted socialism (see “sonic” and others above as typical examples), so no democracy actually ends up with real free market policies operating.”

    I suppose the corrollary of this is that those who vote for free-marketeers have also been “socialised” into doing so.

    “1) Charging the same prices as their competitors
    2) Charging prices too low for competitors to get established in their market ”

    For real? I’d like to see the evidence.

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  51. PhilBest (5,117 comments) says:

    Here is an excerpt from “The Injustice of Anti-trust Laws”, by Richard M. Salsman.

    “…………..The antitrust laws are based on the economic theory of “pure and perfect competition” and deeper, on the ethical theory of altruism, or self-sacrificial service to others. What do the laws require? What illegal behavior do they cite? What punishments do they endorse?

    The antitrust laws are as arbitrary as the “perfect competition” doctrine and as anti-business as altruism requires. Consider only those provisions relating to price setting. If a business sets a price above the prices of its rivals, it can be charged with “intent to monopolize.” If it sets a price below those of rivals, it can be charged with “predatory pricing” or “unfair competition” or “restraint of trade.” If it charges a price similar to those of rivals, it can be charged with “collusion” and joining a “conspiracy to fix prices.”

    In short, the minute you go into business, whatever price policy you adopt, you violate the antitrust laws. You’re guilty for being in business as such. You’re presumed guilty until you prove yourself innocent, a direct perversion of proper justice. Does this mean every enterprise is prosecuted under the antitrust laws? No. But the wide discretion and limitless capacity to attack anyone, anywhere, at anytime, gives the trustbusters enormous power. What, then, is the standard or signal justifying prosecutorial action? The trustbusters target those firms that it feels exhibit what it deems, subjectively, to be “excessive” pricing power, “excessive” contracting powers, “excessive” profits, or “excessive” market share. By “powerful” they mean: economic power is political power. By “excessive” they mean: more than what altruism and “perfect competition” can allow.

    The trustbusters seek out and persecute the most visible “imperfections” in the market—that is, they seek out and attack the biggest, most distinct, most successful, most profitable, most widely advertised and most frequently patronized firms. The antitrust advocates call it “leveling the playing field” but it’s really leveling of the ability, the skills and rewards of the players on the field. Objectivity entails the rule of law, not the rule of men and their whims. It provides a level playing field, but with the state as a referee, not as a brazen and biased intruder, running riot on the field, or roughshod over ability, in pay to incompetence, by changing the rules and the score at will to achieve his twisted aims.

    There are other elements of antitrust law which codify altruist and egalitarian theories of perfection and sabotage business freedom. There is the “essential services” doctrine which says a product or service that becomes widely used and relied upon loses its private character and effectively becomes public property, to be shared with rivals and the government. If this is not penalizing success for being success nothing is. Here, the successful exercise of one’s property rights, the successful creation and distribution of a product throughout an entire economy causes one to lose those rights, to be robbed of the product of one’s creative efforts. These values are stolen and given to those who did not and could not create them. The wealth is stolen “from each according to his ability” and given “to each according to his need.” That’s Karl Marx’s phrase; Marx, codified in law.

    An example of the arbitrariness of these laws can always be found in the way the trustbusters define a firm’s “market share.” They define it anyway they wish, to maximize guilt. In a case against DuPont they said the firm monopolized the market for food wrap. It created cellophane. Few others made it as well. What’s the market, cellophane? Why not define the market as all food wrap? Include aluminum foil, zip-lock bags, or Tupperware? Too big a market? How about the market share of these things, not in the US but only in Cambridge? Or only in the stores around Harvard Square? You get the idea. The government defines the market as narrowly as possible to show “excess share.”

    What about the interpretation of that share? Why is it called a “share?” Are markets fixed things, grabbed at by competitors? Or are markets made possible by and expanded by the producers? We’re told, ominously, that Microsoft “controls” 80% of the market for operating systems for personal computers, that it has a “dominant” market share.” Has it been forgotten that Microsoft made these products? That it owns them until they’re sold? That the products were bought voluntarily? The right to private property means the right to hold it, to alter it, to exchange it—that is, to control it. Is a firm guilty of controlling its own property? To prosecute a firm for that is to obliterate the right to private property. Is that justice? Can a firm be said to “control” goods it sold in an open-market, goods now owned by others? How? Don’t others have the right to their property?

    I’ve not even mentioned the array of other antitrust provisions that violate simple justice. There are the retroactive elements—definitions of wrong-doing that are so murky, firms can’t know in advance what they might become charged with, what they may be guilty of, when, or for what reason. That’s called retroactive law, and its forbidden by the US Constitution. The rights of criminals are better protected than those of businessmen. Add to this the fact that most antitrust cases are decided by precedent—not what’s written in the law itself, but what thousands of judges have written in thousands of antitrust case spanning an entire century. And it gets worse every year. And if all this were not bad enough, convictions under these laws bring heavy fines, dismemberment, even jail terms…….”

    The whole thing is worth reading:

    http://www.moraldefense.com/Advocacy/Antitrust/Microsoft/Lectures/Harvard_Antitrust_Lecture.htm

    There is a lot more of relevance, covered in the book “Capitalism; The Unknown Ideal” by Ayn Rand and others. the above article quotes excerpts of it. I disagree with Ayn Rand’s despisal of altruism, but I found that particular book one of the most illuminating books I have read on many economics subjects.

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