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Channel: Economic Theory – Whistling In The Wind
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Challenging Economics – Theory Of Comparative Advantage

There are few debates that economists take only one side in and trade is one of them. Textbooks argue that trade creates prosperity always and everywhere. Students are required to answer questions on...

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Economists And The Powerful

One of the most glaring omissions from modern economics is the complete absence of any mention of power. Textbooks describe a world where everyone is equal and no one has power to influence others to...

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Economics Of Advertising

Advertising is a hugely influential part of society and business yet it is never mentioned in traditional economics. In neo-classical economics, firms do not advertise. This is not a trivial omission...

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The Importance Of Location

One thing about most discussions of the free market is that they never mention location. It is enough that firms exist; it is presumed that if they offer a good product and a good price consumers will...

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Why Do We Print Money?

Printing money seems like a no-brainer. Surely it’s extremely obvious that printing money is a recipe for disaster that will result in hyperinflation. Surely the obvious action is to not print money...

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The Great Bitcoin Bubble

There’s this new idea that plans to revolutionise money. It’s called bitcoin and aims to be an online currency to replace the real thing. Unlike printed money, it is not controlled by any central bank...

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The Bitcoin Bubble Has Burst

Well it has finally happened. We looked at those charts of ever rising price of bitcoin and said this cannot last, and it hasn’t. The bitcoin bubble has finally peaked and now all that is left is to...

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Why Did Communism Fail? #2 – Absence Of The Market

The main reasons why Communism failed was that it could not provide a decent standard of living for its people. This was because the absence of a market meant Communism was enormously wasteful with...

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Why Did Communism Fail? #3 – Incentives

The most common and simple explanation for why communism failed is that people are greedy. This is a gross simplification but does contain some truth. Communism failed to provide incentives for workers...

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Why Cutting Public Sector Pay Is Always a Bad Idea

Reblogged from Irish Student Left Online: - Robert Nielsen discusses the ongoing dispute over the Croke Park II proposals, and why cutting wages is always a bad idea. At the moment there is a great...

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Libertarianism And Society

When a Libertarian is making their case they usually frame it from the view of individual rights. They argue that individuals have certain rights, such as property rights and the freedom to choose....

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A Minsky-Fisher-Koo-Keynes Theory Of Boom And Bust

The financial crisis and recession has turned economic thinking on its head. Economic textbooks which presume recessions never occur and unemployment is a voluntary decision have failed to keep up....

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Debunking The Broken Window Fallacy

One day a boy was playing football when he accidently broke a window. Rather than get mad, the people shrugged their shoulders and said breaking windows is good for the economy. After all, if no...

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Guide To The Economic Schools Of Thought

Economics is not a homogenous or unified subject, rather there are a series of competing ideas over the key areas. These ideas can be roughly divided into several schools of thought and I’ll give a...

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Say It Isn’t So

Few economists openly admit to believing in Say’s Law anymore. It is generally considered a relic of the past, a once dominant theory that had faded away. Although it was prominent in the 19th century,...

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The Emperor’s New Econometric Model

Once upon a time some men decided to play a con trick on the Emperor. So they told the emperor that in exchange for only a mildly exorbitant fee they would produce the greatest econometric model in the...

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Time To Bury The Ricardian Equivalence

There is a peculiar argument against stimulus called the Ricardian Equivalence. It argues that if individuals have rational expectations, then when the government gives the economy a boost during a...

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Why Wages Don’t Fall During A Recession

I have finished reading a fascinating book by Truman Bewley called “Why Wages Don’t Fall During A Recession”. It’s an interesting book not only for its topic but also for the way in which the author...

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Where Does The Price Come From?

Even though prices are an essential part of the economy, surprisingly little effort goes into researching them or attempting to understand how they are set. The standard economics textbook gives only...

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Do People Really Have Inflation Expectations?

A common feature of macroeconomics is to run models assuming that individuals in the economy have inflation expectations. This flows naturally from assuming that they have rational expectations (can...

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