Category Archives: Economic Theory

So-Called ‘Long-Run’ Monetarist Correlations and Non-Ergodicity

Just doing some quick house-cleaning on some previous posts. When I ran regressions plotting the money supply against the CPI I was told that I should average them over 5 year periods because this would supposedly iron out ‘volatility’ and … Continue reading

Posted in Economic Theory, Statistics and Probability | 15 Comments

The Backward World of ‘Arguments From Authority’ in Economics

Unlike almost all the other human sciences economics suffers from chronically poor scholarship. Bad habits of citation and scholarship have become so ingrained in the discipline that to not adhere to them is often considered to be poor form or … Continue reading

Posted in Economic Theory, Philosophy | 6 Comments

Inflation is NOT Always and Everywhere a Monetary Phenomenon

Monetarism is a hoary old myth that does its damage in two distinct ways. The first is that, piggybacking on Milton Friedman’s personality, basically an entire generation of economists are actually monetarist in their practical thinking. Greg Mankiw once remarked … Continue reading

Posted in Economic History, Economic Theory | 57 Comments

The ‘Information Asymmetry’ Paradigm is Vacuous

Sympathetic Post-Keynesian types often ask me what I think of the whole ‘asymmetric information’ paradigm. They’re often struck when I say that I think that its vacuous. After all doesn’t this paradigm undermine the dreaded General Equilibrium theory? Well yes … Continue reading

Posted in Economic Theory, Psychology | 10 Comments

How to Approach the Problem of Inflation in Economics

In my previous post I laid out why the Phillips Curve theory of inflation is wrong and why it was misguided to try to rebuild it. The key point I made in that regard was that inflation is a complex, … Continue reading

Posted in Economic Policy, Economic Theory | 5 Comments

The Phillips Curve: Timelessly Misleading

Tom Palley has written a blog post politely requesting that Paul Krugman might give a bit of recognition to non-mainstream contributors to economics. It would be nice to see this happen but I doubt that it will (although Palley is … Continue reading

Posted in Economic History, Economic Theory | 28 Comments

Financial Markets in Keynesian Macroeconomic Theory 101

Yesterday when I published my post on Krugman and the vulgar Keynesians not understanding the meaning to the term ‘liquidity trap’ I came to realise that many readers — both sympathetic and hostile — do not really understand the Keynesian … Continue reading

Posted in Economic Theory, Market Analysis | 20 Comments

Paul Krugman Does Not Understand the Liquidity Trap

I came across a very amusing piece from Krugman in 2010. The piece is entitled ‘Nobody Understands the Liquidity Trap‘. Actually, Krugman might have a point — if we include him in the ‘everybody’ that does not understand the liquidity … Continue reading

Posted in Economic Theory | 42 Comments

Can Lachmann’s Arbitrage Save the Austrian Theory of the Interest Rate?

This is the second part of my criticism of Glasner and Zimmerman’s paper. The first part can be found here and should be read and understood before proceeding with the second part. Glasner and Zimmerman note that Ludwig Lachmann tried … Continue reading

Posted in Economic Theory | 7 Comments

Glasner and Zimmerman on the Sraffa-Hayek Bust-Up and the Natural Rate of Interest

David Glasner from over at the blog Uneasy Money has co-written an interesting paper on Sraffa and his critique of the natural rate of interest as it was put forward in Hayek’s business cycle theory. There is a lot that … Continue reading

Posted in Economic Theory | 13 Comments