"To defend the truth, to articulate it with humility and conviction, and to bear witness to it in life are therefore exacting and indispensable forms of charity."

H. H. Benedict XVI. Caritas in Veritate Encyclical. June 29, 2009

Friday, May 27, 2016

Who to blame for lost jobs? Foxconn or FLA?

Since some 4 years ago, the Fair Labor Association has been denouncing Foxconn company for offering illegally inadequate labor conditions in their facilities in China. This is what Foxconn has been doing to avoid a continuing incurrence in such practices.

Friday, October 24, 2014

Returns to true scale

If you think you have a case of either increasing or decreasing returns to scale, check again your list of inputs. In the true long run, there are only constant returns to scale.

What you really have when you apparently have either increasing or decreasing returns to scale is an instance of not taking into account that some input(s) can be "fixed" in the sense that they are collective for some range of output production, but this in advance is an instance of short- not long-run production, and therefore, not liable to be analyzed through the returns to scale perspective, which is only applicable to long-run, i.e. all-inputs-varying, cases.

This means that you can never justify that in the long run there are natural monopolies due to increasing returns to scale. What you may have in this sort of cases, it is a firm operating in the short-run first stage of production, where there can be increasing marginal returns on some inputs while keeping fixed others.

See also this post of mine on the same topic.

Wednesday, September 17, 2014

Sources of market power

Market power arises from two sources: violence which avoids competition from other market participant and the favor of the people with which the market powerful trades. There is no third source whatsoever.

Friday, September 12, 2014

False dichotomy between profit and utility

The whole difference between the economic analysis of a consumer and that of a producer for the market is this: when you analyze a consumer you only pay attention on how the consumer tries to optimize value for himself while when you analyze a producer for the market you pay attention on how the producer tries to optimize value for buyers as a means to optimize value for himself.

Saturday, July 26, 2014

About Hayek's "Economics and Knowledge"

This paper by Hayek is of the utmost importance for understanding the key difference between pure Misesian economic theory and the positivism of Popper/Friedman. Indeed, they do not contradict each other. One way of seeing it, and this is precisely what is illuminated by Hayek, is: Misesian economic theory would say that there are supply and demand curves, and why they are of such and such shape and so on. But Misesian theory could never assure that an equilibrium is going to be achieved. That is not pure logic of choice (theory, in Mises terminology) but history (or empiricism or behavior, according to neoclassic parlance).
Given that some individuals have in their minds at a specific instant a certain maximum price to pay and/or a minimum price to be paid, the actual process of groping is achieved by specific individuals in specific situations in time and space: they are empirical!
What Hayek says is akin to: "hey guys, economics is not only what Mises calls theory (pure logic of choice) but is also history (and then empiricism, positivism, etc.).

Sunday, October 6, 2013

Generation F: how common life will be in 2050

The problem:
Sexual maturity arrives at, say, 15 years old, but productive maturity arrives only after college graduation at, say, 25 (I'm thinking of post-degree). Those 10 years are years in which people want to have sex but feel that cannot afford to form a family. The  consequence is that by the time productive maturity arrives anti-family practices and then values have been consolidated. Plus, this enforces hedonism which in advance calls for selfish fun after productive maturity by renouncing to form a family, and to see having a wife and children as a sacrifice rather than an achievement.

The consequence of the problem:This will pressure to a more and more selfish, superficial life, to more vice, crime and degradation (particularly sexual degradation), to a dystopia, to general unhappiness.

The solution:
A scheme through which companies will hire people since 15 (sexual maturity) and technical education will be an in-house or at least very specific, long-term process. Education companies will sell to the companies, not to the students. Worker-students will learn in their job time, making a fuller use of new informatics technologies, professors will go to the company, university campus as we know them today will either disappear altogether or transform themselves into research companies. Study subjects will be very different for different people. It will be the end of one-fits-all curricula. Education will be paid by companies on condition of employee loyalty. Technical study will be more of a life-time slow process. Humanities or moral or religious education will be a private weekend activity. Work time will be short, maybe six or seven hours for men and even less for women (at least during pregnancy or lactation).

The consequence of the solution:
Since productivity will continue to be higher and higher, people will be able to afford big families, a lot of children will be the most conspicuous mark of status. Since families will become the most important life project again, companies will have to adapt to this. Companies will have their own day care for children and maybe the old. Maybe both husbands working for the same company or nearby companies will be very common. Companies will have their own schools and high schools, and will try to engage those young people into the next generation of worker-students. Companies will be less and less about producing a determined good and more and more about satisfying needs with the ultimate goods whatsoever in which the have some competitive advantage.

Thursday, September 26, 2013

Agent theory versus micro theories

One of the main contributions of Austrian economics in general and of Mises in particular is the underlying general agent theory which is behind the mere specializations of consumer theory and producer theory. This one logic is far less clear in the economics of Marshall which of course is which is viewed today as standard micro theory.

Friday, September 13, 2013

Only men being priests as an exaltation of the woman

I guess that, in allowing only men to become priests, to marry the Church, a fundamental reason is this sort of femininity which pervades the Church as Christ's wife and mother of ours. Well understood, the prescription of only men becoming priests constitutes a veneration to femininity and the irreplaceable role of the woman as wife and a mother. In seeing only men being priests, we see the reflection of the Church being necessary feminine, and of women as being an utmost beautiful representation of the Church.

Tuesday, September 10, 2013

Capitalism and socialism

Capitalism can completely dispense of socialism, but socialism is going to always somehow be dependent on certain capitalist tenets and institutions.

Sunday, September 1, 2013

Simplest way to start a band exchange regime

Technically, a floating exchange rate regime is the optimum.

But guess what: only a blackboard economist without ever going beyond his armchair could see this as a feasible project, at least for starting a new exchange regime coming from, say, a fixed exchange regime.

An option is a gradually stretching-out band.

However, the width as well as the slope of both floor and roof of the band is a very difficult question to ask, and if you do it in the wrong way (read, too fast) either exporters or importers are going to buy lobby for your band experiment to finish.

The key is that everybody gets gradually accustomed to the band.

A practical way of doing this is by just picking a preferably small amount of daily stretching out. I call this amount "rodin" (Spanish for training wheel).

Then each time the market exchange rate touches either the floor or the roof, you stretch out the band (reduce the roof or increase the roof) by the rodin amount.

How is the band to evolve? You don't know beforehand. If it is going to go predominantly down or up, or how fast is going to stretch out, all is a market matter.

Thursday, August 22, 2013

Irrational market

"The market is irrational" is Economist for "I don't have a fricking idea of what is causing such and such behavior on this market".

"The market is irrational" can be translated into Noneconomist as "I am either stupid enough or lack enough training as to understand what the heck is going on with this damned market, but I'm also a little too arrogant as to acknowledge it."

Saturday, August 3, 2013

Friday, July 26, 2013

Selling a song in a filleted form

A song is usually recorded on several separated tracks. I guess that it is good business to sell every track separetely. You practically don't lose sale on the packaged song but gain a market on its fillets or tracks.

Thursday, July 25, 2013

Friday, June 28, 2013

Market environmentalism

The more nature you consume, the more nature market either produces or otherwise protects.

Wednesday, June 26, 2013

The road to legalizing drugs

Do you want to legalize drugs? Allow the government to have a monopoly on them.

Sunday, June 23, 2013

Wednesday, April 10, 2013

Not really an exception

Markets failures are to market law as hydrogen globes are to gravity law.

Tuesday, April 9, 2013

We all save lives

I meet this guy and he says: "My work is to save lives. I'm a doctor". I answer: "Great! Mine too is to save lives!". He says: "Are you a doctor too?". I answer: "No, I'm an economist". He sees me frowning. I explain:

"An economist job is, for instance, to tell people how the economy is faring. This helps people to take decisions; in particular decisions related with the best way to finance colleges where medicine is taught, to finance profitable colleges and to shut down unprofitable ones. Other people decides on hiring or firing doctors, or on how to invest funds in order to pay hospital rolls.

By the way, all other people too helps in saving lives: the security officer outside the hospital, the traffic officer in the streets which helps doctors and security officers to arrive on time to their jobs, the man who sells the yachts which are the reason why some doctors decide to work at night, etc.

The fact that we only see the clock hands but not the pinions or ratchets are not an argument at all to conclude that only the hands are instrumental to allow a clock to work."

So, yes the doctor helps to save lives. He is the last part of a process not designed (and not designable!) by anyone but which nevertheless works. But as long as the doctor has a claim to say that he saves lives, anyone else has it too.

My summary of Knight's "Risk Uncertainty and Profit"

There is not such a thing as "systematic uncertainty". That's an oxymoron.