Friday, September 24, 2010

Some Defunct Economist - 9/24/2010

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist" - JMK

- Matt Yglesias on Malthus's population theory and its use in literature.

- Richard Posner on Keynes and the paradox of thrift.

- Jonathan Catalan on Richard Cantillon and on Marx on Cantillon.

- ThinkMarkets has a good quiz up with a quote about the market process that the hosts ask you to attribute. The answer is given in the comment section so don't scroll down until you're ready!

- I just finished reading a great article by William Grampp called "The Liberal Elements in English Mercantilism", from the Quarterly Journal of Economics (1952). It's very good stuff - here's a piece from the introduction that gives you a sense of what angle he's coming from:

"By reasoning from the actual practices of mercantilist states, economists and historians usually have supposed that the doctrines of the period of mercantilism were a justification of its institutions. It is common in studies of mercantilism for the author to explain, say, the restriction of imports by referring both to the tariff duties of the age and to the concurrent doctrine of a favorable balance of trade, or for him to move freely among expressions of public officials, laws, economic tracts and discourses, and to suppose that because particular controls were exercised, like price fixing, they must have been justified in the economic writing of the time. No one, of course, would write of recent economic policy this way. It would be unthinkable to describe the New Deal by an indiscriminate reference to the works of Keynes and Hansen and to the public papers of Franklin D. Roosevelt and the private memoranda of Harry Hopkins and always to suppose that whatever the state did or wanted to do found its rationalization in economic doctrines. When studies of mercantilism use a method of this kind, they leave an impression with the reader that in many ways is distressingly wrong. He must be led to think that because the mercantilist states did not believe in the market as the mechanism for discharging the economic functions of society, the economists of the age held the same belief and were in favor of the intricate kind of regulation which was practiced."

1 comment:

  1. Posner almost gets it. He makes a few peculiar errors in his analysis, and he doesn't qualify the misnomer "paradox of thrift". For example, the problem does not necessarily involve a reduction in consumption, because a change in the composition of saving will do. Moreover, it is possible to trigger the paradox while total savings is declining, since it is really about monetary expenditures.

    The "paradox of thrift" is what occurs when the best medium of exchange available is faltering and no alternative can step in. Although it is not a product of government intervention per se, the paradox would likely occur less without it.


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