Man has only one tool to fight error: reason.
— Ludwig von Mises
1. France’s new Socialist vision is likely to lead down the road to ruin. The Economist might even be putting it lightly: news of rising labor costs (i.e. the increase in the cost to fire workers) seems to be leading to a high rate of early firings. That’s called regime uncertainty. The article’s author makes a great statement though: maybe this is what companies deserve after taking advantage of the vast rent-seeking opportunities available to them. In any case, in his lecture two weeks ago, Jesus Huerta de Soto told us that it would be France who would most greatly threaten the Euro (depending on the actions of the new Hollande administration).
2. For Spanish speakers, journalist Inés Abril writes on Spain’s banking dilemma and the alternative solution of the “bail-in.” A few weeks ago I linked to an article by Juan Ramón Rallo, an Austrian economist who proposed the idea, published in the Wall Street Journal (in English). Abril, here, explores others who propose similar solutions: allowing banks to fail and holding investors liable.
3. Blogger Unlearningecon posts the general idea of chapter 3 of Keen’s Debunking Economics. While Keen purports to write for a general audience, it is difficult to really judge the merits of this chapter without being familiar with the literature — literature, as Keen admits, that one might find useful only while pursuing a masters or doctorate in economics. The chapter’s purpose is to briefly describe the logic behind market demand curves and then show, theory by theory why the Neoclassical theory of market demand does not make much sense at all. Since I have not yet taken any doctorate level economics courses, I cannot offer much of an accurate assessment of Keen’s work here.
Regarding his discussion of undergraduate economics, I think he misses the pedagogical purpose of supply and demand models. They are not meant to reflect reality (inherent, in fact, even in the necessary ‘ceteris paribus‘ condition textbooks give these models), but rather to illustrate certain points.
Whether or not general equilibrium theory has been taken “too far” by the profession, I cannot comment and Keen is not the first person to point out a deficiency in this direction (Austrians like to make the same criticism, as well). Given the limitations of my knowledge and the understanding of the literature that Keen shows, it is here where his criticism is the most interesting; but, given his attitude toward undergraduate models, I cannot help but be skeptical of his ability to interpret the reason why economists might use more advance general equilibrium models.
Are there better pedagogical tools? Maybe. Are there better advanced methods of modelling economics? Maybe. But, instead of going in this direction, Keen only goes so far as to construct a vision of the modern Neoclassical economist as someone utterly incapable of realizing the consequences of his own findings and contradictions. While this chapter serves as, perhaps very important, stimulus to find out for myself, it is not convincing on its own.
4. Mises.ca ran a reprint of my lecture “Regulating the Radically Unknown.”
5. Arnold Kling on opening and closing minds through your writing. It’s a great post, in that it allows one to self-reflect on how he or she approaches the topics written on. As a student and someone in perpetually learning, I hope that I approach mostly category (b). I’d like to do (a), as well, but sometimes it’s more difficult for me, because I tend to be stubborn — I’m stubborn to force the other person to reveal his or her own position less ambiguously (it’s a learning tool). But, so far, I’ve mostly tried (b), because this blog is mostly for my own personal purposes: to document and solidify what I’ve learned. Since I’d like to be open minded, this blog is open minded in that I explore literature that isn’t constrained to the Austrian School, and I hope this influences those who read this blog.
6. Beatrice Cherrier on the development of economics in Chicago between 1939 and 1955. Specifically, she looks at the development of two quasi-independent strands of economic thought.
7. Just having seen it a few minutes ago (with a post-Euro 2012 “hangover”), I haven’t had time to read this piece on post-1994 Rwanda, by Ángel Martín Oro and Marc Bisbal Arias.