Archive for March 2009
I was going over my post on Happiness Economics and Marginal Utility and I had a few more ideas. Perhaps I was wrong in saying that “We simply cannot perform [a comparison of value scales of different people]”.
Take for example an auction of a house between several bidders. Each bidder verbally expresses a price that he is willing to pay for the house. More and more people are pushed out of the bidding. This is the final result of the bidding:
(A) Auction winnner: €300,000
(B) Second place: €290,000 …
We know that person A values the house at €300,000 or more, while person B is unwilling to pay that amount. We can assume the auction price went up in incriments of €10,000. Now we can compare the value scales of person A and B with respect to the house. We would be perfectly correct in stating “Person A values the house more than person B”.
But notice that we did not use marginal utility here, and it’s pretty obvious that any redistributionist arguments cannot possibly rest on marginal utility theories alone.
From about 5:00:
“You know, all the guys watching this program will know people who are in debt. You know, they have got five credit cards. They have overspent on them. And what would be the advice that you would give to somebody in that situation? You would say, curtail your spending. You know, try and live within your means. Keep your budget down.
But, when it is a government, the advice is, no! Spend more! There’s this brilliant magic wand called Keynes. And it means that, the more you spend, the more you borrow, the better you’re going to actually make the economy.
Well, you have to be either a banker or a politician to think that way.”
I’ve discovered a fantastic new website called KhanAcademy.org. It’s an awesome organisation that aims to provide “a high quality education to anyone, anywhere”. It’s has video lessons on everything you want to know about maths and physics, as well as a mean finance and banking section. Sadly there’s no pure economics section…yet.
Here are the Khan Academy’s concerns about the Geithner plan (Hat-tip to Karl Deeter)
There’s a new wave of economic thought gaining popularity. It’s called Happiness Economics, and it attempts to place happiness at the centre of economics and public policy. Although it is replete with fallacies, I shall focus on the movement’s treatment of utility and value. I will attempt to highlight it’s theoretical misunderstandings and argue that empirical evidence does not support redistributive measures.
Here is one of the theoretical insights from Richard Layard’s Happiness: Lessons From A New Science:
In fact, the benefit from extra income is less the richer the person, so if money is transferred from a rich person to a poorer one, the poorer person gains more happiness than the rich person loses. Thus a country will have a higher level of average happiness the more equally its income is distributed.
We can see where Layard is coming from if we consider the following propositions:
There is a new blog about the Irish economy by a very impressive list of professional economists, which I’m sure that many of you have been following. It’s definitely a blog worth keeping an eye on.
One post that I noticed recently, “On German Concerns About US Monetary Policy“, contains too many interesting points for me to deal with in one post, but I would like to focus on one simple idea and see if my analysis can add to the conversation. The question is: are central bank asset purchases inflationary? And what about loans? I will write generally about my understanding of some important effects of money creation. Read the rest of this entry »
Here is Jill Kirby on Morning Ireland discussing the Austrian approach to handling business cycles.
Here is Karl Whelan of irisheconomy.ie on the matter. It appears he posted the link so everyone could get “some entertainment” from the clip. I’ve made a few comments below Whelan’s piece.
Note: RTE requires RealPlayer.
*Edit: Ok, after listening to the clip a couple of times I noticed a couple of things. First off, I noticed that the presenter placed a large amount of emphasis on “suffering” through the recession. This is sneaking in morality tales in by the back door. It’s not unusual to criticise the Austrian response to recessions this way. For instance see Krugman: Read the rest of this entry »