More on the role of prices:
What Are Just Prices?
Daily Article by Jeffrey A. Tucker
http://www.mises.org/story/2976
We all have strange and contradictory wishes concerning what prices should be. We are outraged at what is happening to the price of gas and food. We don't think they should go up. In real terms, we want them to fall, and they have fallen in the last decade and a half. That's a good thing, right? That's how the world should work.
But housing? Now, that's a different matter. When the prices fall, people freak out. It's like the end of the world. How is it possible that my own home would fall in price?! That's not the way the world should work. Everyone knows that house prices are suppose to go up up up, all the time, without fail, until the end of time.
Same with stocks. We want to open the webpage that lists our portfolios and see the prices higher and higher all the time. When they fall, we flip out and demand justice.
But let's stop and think about how peculiar this is. What kind of theory of the world insists that houses and stocks always go up in price, whereas gas and grain prices always go down? That doesn't really make sense. A price is not set by natural law, nor are price movements intended to follow a preset pattern like the movements of stars. Prices are nothing but exchange ratios — points of agreement between buyer and seller. They reflect many factors, none of them fixed parts of the universe.
Excellent analysis of the role of prices!
Greg
Tuesday, June 3, 2008
Monday, June 2, 2008
Economics in One Lesson
From Henry Hazlitt’s “Economics in One Lesson”:
“… The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups…”
http://mises.org/story/3000
Comment: “Good economist” has almost become an oxymoron.
Antony Mueller
“… The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups…”
http://mises.org/story/3000
Comment: “Good economist” has almost become an oxymoron.
Antony Mueller
Sunday, June 1, 2008
Foundations of a Free Society
June 12 - 15, 2008 the Liberty Fund colloquium entitled "The Foundations of A Free Society" will be held in Indianapolis. Steve Pejovich, conference director, has selected a number of readings designed to generate discussion.
Milton Friedman - Free to Choose
B Roggy - Can Capitalism Survive?
Adam Smith - The Wealth of Nations
D. North and B. Weingast - The Constitution and Commitment
F. Hayek - Liberalism
P. Manet - Intellectual History
S. Pejovich - Transaction Costs
G. Libecap - Contracting for Property Rights
R. McChesney - Government as Definer of Property Rights
S. Huntington - Clash of Civilizations
S. Pejovich - The Role of Culture
Other Pejovich readings
Capitalism and the Rule of Law
Understanding the Transactions Costs of Transition
Property Rights and Economic Theory
Milton Friedman - Free to Choose
B Roggy - Can Capitalism Survive?
Adam Smith - The Wealth of Nations
D. North and B. Weingast - The Constitution and Commitment
F. Hayek - Liberalism
P. Manet - Intellectual History
S. Pejovich - Transaction Costs
G. Libecap - Contracting for Property Rights
R. McChesney - Government as Definer of Property Rights
S. Huntington - Clash of Civilizations
S. Pejovich - The Role of Culture
Other Pejovich readings
Capitalism and the Rule of Law
Understanding the Transactions Costs of Transition
Property Rights and Economic Theory
Tuesday, May 13, 2008
2008 Teaching and Learning with Technology Conference
Avatars: Pros and Cons as an instructional technology.
Thursday, May 8, 2008
Hayek's 109 birthday
From Cafe Hayek:
F.A. Hayek was born on this day in 1899. To mark this occasion, I offer a brief passage from page 104 of Hayek's 1973 book Law, Legislation, and Liberty, Vol. 1: Rules and Order:
Maintaining the overall flow of results in a complex system of production requires great elasticity of the actions of the elements of the system, and it will only be through unforeseeable changes in the particulars that a high degree of predictability of the overall results can be achieved.
F.A. Hayek was born on this day in 1899. To mark this occasion, I offer a brief passage from page 104 of Hayek's 1973 book Law, Legislation, and Liberty, Vol. 1: Rules and Order:
Maintaining the overall flow of results in a complex system of production requires great elasticity of the actions of the elements of the system, and it will only be through unforeseeable changes in the particulars that a high degree of predictability of the overall results can be achieved.
Monday, May 5, 2008
Agricultural Subsidies
The impact of agricultural subsidies on welfare, both domestically and internationally, was a key topic discussed May 2-4, 2008 at The Understanding Liberty and Choice: Free Trade, Globalization, and Economic Development. This joint FTE and Liberty Fund colloquium discussed the neo classical view of trade as well as contemporary views of trade. Two of the texts - In Defense of Globalization and The Travels of a T Shirt in the Global Economy included analysis of the impact of subsidy in the agricultural sector.
This analysis was extended on the Becker-Posner Blog. On May 4, Posner wrote:
There is no justification for the Farm Bill in terms of social welfare. The agriculture industry does not exhibit the symptoms, such as large fixed costs, that make unregulated competition problematic in some industries, such as the airline industry, about which Becker and I blogged recently. It is true that crops are vulnerable to disease, drought, floods, and other natural disasters, but the global insurance industry insures against such disasters, and in addition large agricultural enterprises can reduce the risk of such disasters by diversifying crops and by owning farm land in different parts of the nation and the world. If a farm enterprise grows soybeans in different regions, a soybean blight in one region, by reducing the supply of soybeans, will increase the price of soybeans, so the enterprise will be hedged, at least partially, against the risk of disaster. Supply fluctuations due to natural disaster create instability in farm prices, but farmers can hedge against such instability by purchasing future or forward contracts. There is no "market failure" problem that would justify regulating the farm industry. All the subsidies should be repealed.
http://www.becker-posner-blog.com/archives/2008/05/the_outlandish.html
Becker responded:
Posner presents evidence on the sizable subsidies received by American farmers from the federal government of the United States. However, the US is not unique, for every rich country including France, Germany, Great Britain, and Japan, heavily subsidizes their farmers, no matter how small the agricultural sectors. In fact, some of these other countries subsidize farmers more generously than even the United States. On the surface, this universal tendency for rich countries to subsidize farming, no matter how different are the details of their political systems, is a paradox. For since only a small fraction of the populations of these countries work in agriculture, farmers cannot contribute much to any majority voting coalition.
http://www.becker-posner-blog.com/archives/2008/05/farm_subsidies.html
This analysis was extended on the Becker-Posner Blog. On May 4, Posner wrote:
There is no justification for the Farm Bill in terms of social welfare. The agriculture industry does not exhibit the symptoms, such as large fixed costs, that make unregulated competition problematic in some industries, such as the airline industry, about which Becker and I blogged recently. It is true that crops are vulnerable to disease, drought, floods, and other natural disasters, but the global insurance industry insures against such disasters, and in addition large agricultural enterprises can reduce the risk of such disasters by diversifying crops and by owning farm land in different parts of the nation and the world. If a farm enterprise grows soybeans in different regions, a soybean blight in one region, by reducing the supply of soybeans, will increase the price of soybeans, so the enterprise will be hedged, at least partially, against the risk of disaster. Supply fluctuations due to natural disaster create instability in farm prices, but farmers can hedge against such instability by purchasing future or forward contracts. There is no "market failure" problem that would justify regulating the farm industry. All the subsidies should be repealed.
http://www.becker-posner-blog.com/archives/2008/05/the_outlandish.html
Becker responded:
Posner presents evidence on the sizable subsidies received by American farmers from the federal government of the United States. However, the US is not unique, for every rich country including France, Germany, Great Britain, and Japan, heavily subsidizes their farmers, no matter how small the agricultural sectors. In fact, some of these other countries subsidize farmers more generously than even the United States. On the surface, this universal tendency for rich countries to subsidize farming, no matter how different are the details of their political systems, is a paradox. For since only a small fraction of the populations of these countries work in agriculture, farmers cannot contribute much to any majority voting coalition.
http://www.becker-posner-blog.com/archives/2008/05/farm_subsidies.html
Thursday, May 1, 2008
Free Trade, Globalization, and Economic Development
The series of joint FTE and Liberty Fund colloquium continues in May with:
Understanding Liberty and Choice: Free Trade, Globalization, and Economic Development.
As with the previous colloquium, the unique characteristics of the FTE and Liberty Fund approaches will be integrated. The keynote speaker, Pietra Rivoli will bring her expertise to our discussion which is centered around a number of readings including her acclaimed book - The Travels of a T Shirt in the Global Economy.
Looking forward to our discussions in May. Please feel free to post questions, comments or resources here that are relevant to our meeting.
Click here for a look at the full conference schedule as well as our readings.
Understanding Liberty and Choice: Free Trade, Globalization, and Economic Development.
As with the previous colloquium, the unique characteristics of the FTE and Liberty Fund approaches will be integrated. The keynote speaker, Pietra Rivoli will bring her expertise to our discussion which is centered around a number of readings including her acclaimed book - The Travels of a T Shirt in the Global Economy.
Looking forward to our discussions in May. Please feel free to post questions, comments or resources here that are relevant to our meeting.
Click here for a look at the full conference schedule as well as our readings.
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