Talk:Economics/Archive 7

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Economic Theory As A Degenerate Science

Steve Keen a senior lecturer in economics in the University of Western Sydney claims in his book "debunking economics" that current mainstream economic theory is a degenerate science closer to the field of astrology than the field of astronomy. Keen argues that the very mathematical foundation of economics is flawed. While the theory of supply and demand is correct, the mathematics is used incorrectly in the basic foundation of economics.

In particular, the supply and demand graphs shows two straight lines intersecting each other. The point where the straight upward slooping supply line intersect the downward slooping demand line is where the economic exchange is suppose to take place.

The problem as immediately spotted by physicists, mathematicians and engineers is that in real life, lines representing natural phenomena is never a straight line but curves.

Keen says, the market demand curve can’t be smooth – at best it’s jagged, going up and down with price – while the supply "curve" is at best a horizontal line which probably slopes down rather than up.

(This guy Keen is a quack. He is claiming that firms will want to produce more product when price (and profits) goes down and they will want to produce less when selling price (and profits) goes up! He also claims the demand curve rises in places. For this to happen the income effect would have to be greater than the substitution effect and there is very little empirical evidence to support this (see here for an explanation). What actually happens is that the demand curve falls at varying rates (see here). mydogategodshat 11:25, 3 Feb 2004 (UTC) )

If the supply and demand graphs are calculated properly with actual curved supply and demand lines, then an amazing solution may occur. The supply curve may intersect the demand curve at multiple points. That is to say that there may be multiple solutions or points of stability (known as attractors).

Conscious that he might be dismissed as a ranting marginalised lunatic, Keen says his arguments are not based on ideologies, but on mathematics.

Keen says, most introductory economics textbooks present a sanitised, uncritical rendition of conventional economic theory, and the courses in which these textbooks are used do little to counter this mendacious presentation. Students might learn that "externalities" reduce the efficiency of the market mechanism but they will not learn that the "proof" that markets are efficient is itself flawed.

The minority which continues on to further academic training is taught the complicated techniques of economic analysis, with little to no discussions of whether these techniques are actually intellectually valid. The enormous critical literature is simply left out of advanced courses while glaring logical shortcomings are glossed over with specious assumptions. However, most students accept these assumptions because their training leaves them both insufficiently literate and insufficiently numerate.

Equilibrium, he says, has become a religion – anything which is non market is not as good as anything which is market, therefore every move we make towards market will make us better, so it’s an ideology not a reality.

The reality is that the market doesn’t work in equilibrium and that’s the thing that economists can’t comprehend. They are stuck in a 19th century mathematical world, where everything works in equilibrium and they can’t cope with anything other than that.

The main problem I have with this material is that it is not a critique of economics. It is a critque of the simplifing assumptions used in first year economics to make difficult concepts easier for new students to understand. It is true that in first year economics curves are linear, there is no mention of multiple equilibria, all supply curves slope upwards to the right, and there are many assumptions made that are not critically assessed. But when you go beyond first year, these simplifying assumptions are relaxed. Demand curves have price points. It is possible to have a downward sloping to the right supply curve, but only in very resticted situations (only industry supply curves, not individual; only in the long run, not in the short run; and only when the long run average cost curve is decining over all relevent output levels). There are instances of multiple equilibria (labour markets and foriegn trade markets).

This article needs a "Criticisms" section, but this is not it. mydogategodshat 21:22, 3 Feb 2004 (UTC)

The one valuable point made by this contributor is that economist generally do not adequately assess the fundamental assumptions upon which models are built. mydogategodshat 21:34, 3 Feb 2004 (UTC)

Thank you, Mydogate, for putting this in talk. Wikipedia managed to become very slow for me right before I had to leave for work. I think Steve Keen has some points, but I think he is exaggerating when he states that economics as a whole is degenerate. I don't think that the critque should go on the front economics section, but I think either an article on Steve Keen, or on problems with typical economic assumptions would be fine to create as a separate article. Jrincayc 03:06, 4 Feb 2004 (UTC)

Agreed, I would like to see both a short "criticisms" section in this article and also full length articles on the topics. My problem is not with the topics but with the content. I am not familiar with Keens work, but I doubt if this material is an accurate representation of it. Maybe someone that is familiar with Keens could paste this material to a new article and fix it.mydogategodshat 04:12, 4 Feb 2004 (UTC)


Added "Critics" to the "Also See" section. Added Steve_Keen as a link to a separate wiki page. - drnobody

Thanks for the link to Keen's web site. I checked out some of his articles. I particularly liked the way he critiqued infiniticimal output here [1]. I think I will read some of his stuff in detail when I have the time. mydogategodshat 23:36, 4 Feb 2004 (UTC)

---

Quotes from above: "Replaced scarcity, not because it isn't in the textbooks, but because "choices under scarcity" is just a verbose defintition of "trade". I vote for clarity. "

"I think the point of economics is to create those verbose definitions. It's not just "choice under scarcity" but also the NATURE of choice, the NATURE of scarcity. The Fundamentals section is good but has to make this clearer, and come up front. "

Quote 1 is incorrect, choice has little to do with trade and everything to do with scarcity. Choice occurs directly because of scarcity, since if I had everything i wanted (no scarcity) then I would no longer need to *choose* between alternatives. To go further, choice is usually considered a 1 person exercise while trade is at least 2, or more.

I glaced over the article and I see that a lot of stuff in political economy isn't included in here and could, and should, be moved over. --ShaunMacPherson 13:00, 6 Feb 2004 (UTC)

--- A quote: "Economics explicitly does not deal with free abundant inputs -"

I am not sure if this sentence is correct, but at the very least the term 'abundant' is incorrect. The opposite of scarce (finite) is not 'abundant' but closer to limitless / infinite.

As for free, economics looks at free inputs all the time, sun, air are usually considered 'free' for the taking. As well as pure public goods are necessarily 'free goods', usually paid for by tax however, because no market can exist for a pure public good (i.e. national defense).

ShaunMacPherson

More stuff removed

I have removed the following:

[edit]Economics is a social science that studies human resource making activity. Humans make resources to support their life. Human life on this Earth needs supply. The three basic supply, food, clothing and housing then a wide variety other goods, products and services. The supply, these resources is made in the economy of a society. Economics studies how the economy works. How the products, goods and serives are made, traded and distributed.

Maybe this was written by a non-english writer, but I have to challenge some of the terminology. Generally in economics, resources are things that are used rather than made. Also to say that economics studies how things are made is misleading. The study of how things are made is industrial engineering. Economics studies how things are made only in the very restricted sense of how scarce resources are allocated in a production process. I do however agree tautologically that "economics studies how the economy works". :)

mydogategodshat 05:18, 16 Feb 2004 (UTC)

Defining microeconomics

I could as well just edit it, but I'd guess editing wars are frowned upon. So I'm new around here, and, as a non-logged in user, I made some minor changes to the article, most notably in the definitions of microeconomics and macroeconomics. The phrase "which constructs economic phenomena from the behavior of individual actors and firms" was changed to "which constructs economic behavior from the behavior of individual actors and firms" - which makes no sense.

Previously, the page said something about "microeconomics studying the behavior of individual actors", which would rule general equilibrium theory out.

I'm thinking of "Microeconomics builds a theory of economics phenomena starting from its microfoundations - the behaviour of individual families and firms". Somehow, it seems the word "phenomena" is frowned upon, but it's really precisely what I mean here - see phenomenology.

If the talk pages don't show any activity on this in a few hours, I'll edit it again. The old version was imprecise, and the version which replaced mine makes no sense.

I have introduced a definition of microeconomics that mirors the logical structure of the macroeconomics definition. mydogategodshat 01:00, 10 Mar 2004 (UTC)
Your statement that general equalibrium is not macroeconomics is interesting. There is no doubt that gen equl is microeconomics. But this is not the same as claiming that it is not macroeconomics. It certainly deals with macroeconomic topics, even though it is built using microeconomic techniques.mydogategodshat 01:10, 10 Mar 2004 (UTC)

More Capitalism

I am a "newbie" so you can take what I have to say with however much salt you care to.

I was startled, first of all, to find that the word "capitalism" is nowhere actually mentioned in the body of Wikipedia's Economy citation (except in the reference list at the bottom). Capitalism seems instead to have the status of a subcategory in the Business citation. Marxist, Marxism, Marxian, Karl Marx, on the other hand /are/ cited, some more than once. Whatever happened to good old capitalism guys?

Stirling Newberry Most of the article is a discussion of capitalist economics - starting with Smith, Ricardo, moving through Marshall and Keynes, with some references to later work. However it is worth pointing out the difference between market and capitalism - the two are not the same, and emphasizing that economics is focused primarily on capitalist markets, and to a lesser extent socialist ones.

The authors seem to have carried NPOV to a new and near pathological extreme, as though in an article on psychotherapy, Freud had been banished to the Medicine category and the text was chock full of Jungian philosophy.

Stirling Newberry I think this statement is a bit extreme and insulting.

Your article seems more of a battleground than a source of information on Economics aimed at someone that actually wants to know how it is practised in the world as we know it. Last I looked capitalism was /the/ major economic system on the planet and the End of History was nigh. No problem with discussing its shortcomings but shouldn't one at least mention it?

Stirling Newberry And this one definitely is. The article goes into great detail about the primary activity of economists - making models, collecting data and using supply and demand curves with measurable variables to understand collective behavior.

Wgoetsch 22Mar04

As much as I like salt, particularly with french frys, I have to admit that "newbies" can add a perspective that "long timers" miss, and in this instance I agree with user:wgoetsch in some regards. Wikipedia articles do tend to be idiological battlegrounds with everyone adding a paragraph on their particular school of thought. And I agree that there is no economics in this article. There is little in this article about WHAT economists do or HOW they do it. This is not an economics article and is not intended to be one, from what I can see. Instead, it is an overview of economic concepts as seen by various economic schools of thought and branches of economics. I have no problem with this because Wikipedia does have many good economics articles. See for example welfare economics, supply and demand, production theory, consumer theory, labour economics. These articles however, are of less interest to the general public. Labour economics for example has been a candidate for featured article status for several weeks, but it is not being voted for, presumably because so few Wikipedians are interested in "hard" economics.
You mentioned that capitalism was not mentioned in this article, so I added a bit.
mydogategodshat 05:03, 23 Mar 2004 (UTC)

"Missing Link" in the chapter 'Development of economic thought' by a reader from a Post-Communist country

2 April 2004

In our country we haven't had luck to have Ludwig von Mises or any other "Austrian Economist", who would understand topics that no one can understand without embracing "Economic Subjectivism" (see my refutation of its refutation here: http://en.wikipedia.org/wiki/Talk:Economic_subjectivism ) instead of "Economic Objectivism", and we experienced the hyperinflation similar to the German's hyperinflation in 1920's before the collapse of Communism in our country.

After that our economists have been luckily smart enough and didn't accept Monetarism (that was suggested by USA economists) which destroyed some Latino-American economies.

Here is something about "Austrian Economics" that I propose to be inserted after the paragraph on Marxism in the chapter Development of economic thought:

British "objective-cost theory of value" conceptualization inadvertedly led to the "double valuedness" of any object. Any product had two kinds of values at the same time (bread, for example, though higher in "use value" than diamonds, was somehow lower in "exchange value").

This very concept of 'double valuedness' enabled Marx to conceptualize market economy as internally contradictive economic system, a system badly misdirecting resources into "production for profit" (by exploatating the very difference between the "exchange value" and "use value") instead of directing resources (which then communist states did by central planning or by self-managed arrangements in communist Yugoslavia) for "production for use".

As can be seen, British economists' "objective-cost theory of value" conceptualization led to rise of the theory of capitalist exploitation of both natural resources and working class, while they did not deal with the same topics as Marx at all, such as money, capital or business cycles, there were at the same time Austrian economics (founded by Carl Menger who wrote his "Principles of Economics" at roughly the same time as Marx did his "Kapital"), which were first to clash directly with "double valuedess" approach.

Hyperinflation (which later destroyed German economy and made dissapointed German people quite eager to accept Adolf Hitler as their rescuer) was spared the Austrian country mainly due to this Austrian economics approach in 1920s led by Ludwig von Mises, who rejected "double valuedness".

That's one POV, it doesn't happen to accord with much of the evidence on the ground, however.

With annexation of Austria by Germany and Nazi terror Ludwig von Mises emigrated to the United States. There, however, at a time when every communist and social democratic exile from Europe was given a high academic post, the leading Austrian economist Mises was refused such a job, even more, the dean of New York University's Graduate School of Business, Sawhill, has lobbied good students not to take Mises's 'right-wing, reactionary' classes. Neither Mises lived to see the fellow Austrain economist Friedrich Hayek wining the Nobel prize in 1974.

There is an article on Mises, contribute to it.

Even in US it seems the "Austrian Economics" didn't get the deserved space (See: http://www.gmu.edu/departments/ihs/hsr/s97hsr.html#austrianstates ) and is still a "missing link" even in Wikipedia's Development of economic thought.

A reader from a Post-Communist country P.S. I'd like to appologize for my English. My writing in English language is not very good. I understand it very well, though.


Stirling Newberry All I can say is "are you joking?" the economics sections of Wikipedia lean very heavily towards the Austrian school, much more so than practicing economicsts. There is ample coverage - in some cases more than ample coverage - of Austrian concepts, links to mises and other liberatarian/austrian/"classical liberal" sites. The mainstream of economics is focused on mathematical modelling based on collection of data. The Austrian school is certainly part of the overall economic dialog and is referenced. If someone has specific concepts which are important that need to be included, by all means do so.

I find this bias a little puzzling myself.CSTAR 04:31, 23 Jun 2004 (UTC)


A Reader from a Post-Communist Country 11 Avg 2004
There is clear enough distinction between all the economics sections of Wikipedia and the particular section, the 4th Chapter - Development of economic thought section! Or it is not?? Only this particular section was what I have commented. And, I must ask you, if this particular section is leaning heavily towards the Austrian school, as Stiling Newberry is trying to convince me (it is I, who should ask him his "are you joking?" question), why he doesn't say something about the actual leaning of this - remember - particular section towards a particular School of Thought, namely the School that inspired the economic experiments that have put many Central European (as well East German) countries that were once parts of the Austro-Hungarian empire, and before WW II economically not so behind their neighbouring countries, now in year 2004 in a position where Old Europe is afraid of our workers seeking better economic conditions elsewhere because of consequences of this economic experiments.

Any statistical analysis of the text (for example the ratio between the number of words that are used in paragraphs that talk about the particular School that you academics in the capitalist countries who yourself never had to live its experiments, love to write about in this particular section, and the number of words about Austrian Economics in this particular section) can be used to show it. In the following paragraph I have counted 129 words!:

  • In the 19th century, Karl Marx synthesized a variety of schools of thought involving the social distribution of resources, including the work of Adam Smith, as well as socialism and egalitarianism, and used the systematic approach to logic taken from philosopher Hegel to produce "Das Kapital". His work was the most widely adhered-to critique of market economics during much of the 19th and 20th centuries. The Marxist paradigm of economics is not generally held in high regard by market economists, though some concepts from his work are occasionally used in mainstream contexts, particularly in labor economics and in political economy. The term Marxian is in some contexts used to describe work which accepts concepts from his work but does not necessarily subscribe to the political thrust of Marxist thought.

Then there is another 78 words added at the end of another paragraph that IMHO should only say something about whether economics can be applied to all forms of society or not, without any particular School's opinion... however there is added an opinion of one School only. It is I, again, who should state "I find this bias a little puzzling myself" statement, not CSTAR (or Newberry or any of you - academics in the capitalist countries - who, let me repeat, never had to live its experiments! And who never were forced to seek better economic conditions after the fall of some Utopic ideas of some School.)

  • Marxist economics asserts that history is divided into eras which are determined by which two classes, which are struggling to control the means of production - that is slaves and masters, peasants and royalty, wage workers and capitalists - and that mainstream economics only applies to those societies which are "objectively" industrial, that is to say, societies which are capable of industrial production based on their own knowledge and resources. (See Marxism, particularly "The Hegelian Roots of Marxism".)

And the closest to the mere mentioning of existence of the Austrian School (actually it mentions only general approach of supply-side, nothing more) is the following statement:

  • The neoclassical school was challenged by monetarism, formulated in the late 1940's and early 1950's by Milton Friedman and associated with the University of Chicago and also by supply-side economics.

As if there wouldn't be enough distasteful, we have to read yet more opinions held by Utopians in the same section again.

  • Marxist economics generally denies the trade-off of time for money. In the Marxist view, concentrated control over the means of production is the basis for the allocation of resources among classes. Scarcity of any particular physical resource is subsidiary to the central question of power relationships embedded in the means of production.

yours truly, A Reader from a Post-Communist Country P.S. I recommand you academics from Not-Post-Communist-Countries that you come live experiments of the Schools you lean to and then seek better economic conditions in your neighbouring countries, if they would want you at all. 11 Aug 2004

I find the previous ad-hominem textual sequence quite amazing. I for one have lived in many capitalist experiments (I consider myself pro-capitalist by the way) in developing countries (having been born in one) which have resulted in massive income inequalities, social dissruption etc. The attitude which you seem to communicate, that only individuals who have experienced communism have direct empirical knowledge of failed economic systems is not accurate, scientific and frankly hardly collegial.CSTAR 13:40, 10 Aug 2004 (UTC)
Many people have problems distinguishing between economic theory, and the particular government they live under. Clearly our eastern European reader wants more rant fuel against the Soviet Empire. I imagine there are some who want more ranting against the evils of capitalism. These are not, largely, appropriate to "economics". Millions of people have died in famines caused by market economics, millions of people have died in famines caused by command economies, specifically Stalinism and its derivatives. There is an article on marxism where he can jump up and down. As for not "mentioning" the Austrian school, I will point out that a member of it (Robbins) is referenced in the header, that there is a section on marginalism (which is based primarily on Stenger's work) and references in the text, which is as much as the Chicago School gets. There's a whole article on the Austrian school that is linked to. Stirling Newberry 17:03, 10 Aug 2004 (UTC)


As I can see, now, thanks to Susurrus the main article on economics is not distastefully loaded with lengthy paragraphs on a particular School any more. Now they are where they deserve to be, in history (http://en.wikipedia.org/wiki/History_of_economic_thought).
A (now satisfied) Reader from a Post-Communist Country, 4. November 2004

Second paragraph: beliefs

Economists believe that incentives and preferences (tastes) together play an important role in shaping decision making. Sometimes a preference relation can be represented by a utility function. Concepts from the Utilitarian school of philosophy are used as analytical concepts within economics, though economists appreciate that society may not adopt utilitarian objectives.

Could we get rid of Economists believe-- This reminds me of a church. Shouldn't this be something like:

From the distinctive point of view of economic analysis incentives and preferences (tastes) together play an important role in decision making.

Also what meaning does the word "shaping" convey in the original version of the article? Wouldn't it be more informative to refer to a process of decision making (this I admit is idiosyntractic -- I believe in a process view human activity). CSTAR 16:52, 17 May 2004 (UTC)

Economists doesn't believe.... They postulate that incentives and preferences etc. --212.45.33.21 17:04, 11 Aug 2004 (UTC)

Economics Book

I have just created a book on Economics from a mathematical perspective. It has no content yet and help would be greatly appreciated, http://wikibooks.org/wiki/Economics:_A_Mathematical_Aproach.

Interesting. Good luck with it. I wonder if anyone will create: Economics: A Graphical and Intuitive Approach. Jrincayc 02:23, 9 Jun 2004 (UTC)

Externalization

I need to reference an article or section that is not present, one that explains the means by which costs are externalized and the effects of this. Examples could be the externalization of health costs by the coal industry or the externalization of costs of defending, suppressing, and replacing countries and governments to ensure cheap motor fuels in the US. I could write something about this but it would not be from the viewpoint of an economics expert. Please notify me when this is available so that I can link to it. Thanks, Leonard G. 21:57, 2 Jul 2004 (UTC)

I believe the phenomenon you're looking for is already discussed at externality. Isomorphic 23:35, 2 Jul 2004 (UTC)

Adam Smith ain't a bad guy

But isn't this picture at the top completely misleading? Or am I just being too picky? CSTAR 01:24, 16 Jul 2004 (UTC)

No reason not to add pics of Ricardo and Marx. Any objections? Any other key figures mentioned in the intro that rate a picture? - David Gerard 10:20, 16 Jul 2004 (UTC)
I added the pic from a position of almost total ignorance on this topic. Please do replace it with a more suitable one! (I wanted to give this article a shot at being featured). Lupin 11:15, 16 Jul 2004 (UTC)
I've just added pics of Ricardo and Marx as well - the three "main thinkers" listed in the intro. There's no pic for Alfred Marshall. I think it looks nice :-) What do you all think? - David Gerard 12:01, 16 Jul 2004 (UTC)
The pictures are certainly better. It does look nice and avoids the impression of canonizing Adam Smith. But what about a picture of something like a supermarket checkout counter or a farmer's market or even the outside of large US discount retail store or even a French one (e.g. in Shenzhen) -- without the company logo (with a caption such as Globalization and the loss of jobs etc.)? CSTAR 13:52, 16 Jul 2004 (UTC)
I see no reason not to have each of these things. A pic of a bazaar. A pic of a reasonably canonical economic graph (both to make a point and say "mathematics"). A pic of these three dudes (possibly shift them down to the "Development of economic thought" section). We must have a good, relevant and eye-candy graph around. Do we have a suitable pic of a market? - David Gerard 14:24, 16 Jul 2004 (UTC)
A pic of a market at the top, dead white European males in "Development". Graph please, someone! - David Gerard 14:46, 16 Jul 2004 (UTC)


Wow, quick on the bazaar picture. I'm sure a PD picture of one of the commodities markets or stock exchanges could be found or someone could go take them. The Chicago Board of Trade is open to public viewing [2] and the Mercantile exchange is too [3]. Pictures of those trading floors might be a good addition. - Taxman 14:51, Jul 16, 2004 (UTC)