"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

Monday, December 27, 2010

Saturday, December 18, 2010

Exogenous versus endogenous

By definition, an agent cannot plan a shift of either his supply or his demand function for any good.

Saturday, November 27, 2010

Profit

True profit is always for free. It is, as Knight writes (1), "unimputable income". That's why change in profit doesn't change purpuseful behavior to undertake: it is not action-changing.

(1) Knight, Frank. Risk, Uncertainty, and Profit. 1921 -1957-. Page 308 (chapter 10, paragraph 29).

Sherlock Holmes and economics

Think of a fictional character from a novel being very used in economics. Maybe, the first comes to your mind is Robinson Crusoe. It is so widely used that some people even talk about "Crusoe economics", the economics of an agent without interaction with others. Nevertheless, I find even more interesting the character of Sherlock Holmes. I guess he is the role model of what a good economist (any scientist, indeed) must aspire to be: "the most perfect reasoning and observing machine that the world has seen". Even if you don't agree with his method (I particularly don't think it to be as efficient as Conan Doyle depicts it), I guess you can, with great benefit for economics, define and debate about a sort of "Holmes epistemics".

Wednesday, September 15, 2010

The economist as something distinct

One of the undeniable tasks of the economist is to attain professional self-awareness: to be as clear as possible on what is not an economist.

Sunday, September 5, 2010

Friday, August 20, 2010

God as non-planned (spontaneous) order

The invisible hand is God's hand.

So, quoting Mises: "Fort the agnostic, atheistic, and antitheistic historians and economists there is no need to refer to Smith's and Bastiat's invisible hand." Theory and History, page 169.

Wednesday, August 18, 2010

In defense of extreme apriorism

It is not the task of the economist to determine whether actual equilibrium is going to be attained or not. His task comes to and end once he has correctly posed the role of the arbitrager in exclusively attaining such equilibrium as well as the enunciation of some general conditions from here on.

But when we, understandably anxious of arriving at specific equilibria, pretend to use economics to test or falsify empirical evidence of such equilibria or paths to equilibria, we ar at a total loss. And, as expected, the unfair condemnation of economics for no being "exact" or even useful at all doesn't take long to come out.

It is in that sense that Hayek is right in his 1937 paper Economics and Knowledge. Effectively, if you don't make certain assumptions about information, you are not going to be able to find equilibria. However, he is wrong in pretending that it is up to economics (the pure logic of choice) the accomplishment of this task. The methods and ways in which assumptions about the obtaining and coordination of information are entrepreneurial and far away from the method and traditional aim of economics. If you agree that that empirical task is a task of econonomics, you are compelled to accept as part of the tasks of economics the calculation of how to throw a ball in order to deceive a rival player and so scoring a goal or the successful bargain of the price of a Holstein cow in the town of Coronado, Costa Rica. Intuitively, you do not expect neither to require from an expert soccer player or a cattle merchant to take courses in what usually is taught in an economics course nor that an economist qua economist is prepared to score goals or evaluate cattle. Of course, you could require those abilities from whoever you call a competent economist and call this a merely semantic problem.

It is precisely difference about assumptions on information, particularly the non-coercive stickyness of prices which separate new Keynesianism from other brands of economics. So, you should conclude that the relevant difference doesn't deal with economics; it is rather ultra-economic.

Finally, you have other formal attempts to deal with the coordination through equilibrium, particularly game theory. And, in this, case, you have to note that game theory it's seen not just as an extension of economics, but rather as a quite independent discipline useful in several fields.

Saturday, August 7, 2010

Saturday, July 24, 2010

Market as an information system

A market is a system of creation and spread of information. No more, no less.

Logic versus obvious

Some critics of pure logic of choice could be caught saying that it can not create "information" but only rephrase it. Those people should begin to have clear that "logic" is not the same than "obvious".

Saturday, July 17, 2010

Market and freedom

The only condition for a market is freedom to exchange.

Economics versus statistics

No truly economic assertion can be said merely by quantities.

Every single economic assertion needs recourse to purpose. That's necessary. That's sufficient.

There's really nothing more to economics than pure logic of choice. Everything else, even if useful, is in the aim of statistics. And (it should be patently obvious but regretfully isn't), economics is not statistics.

Wednesday, July 14, 2010

Good education

The good pupil must be totally docile to the form in which he is taught and totally rebel to the teaching itself.

The good teacher must use authority exclusively for the aim of teaching.

The good pupil must be a good pupil only to a good teacher.

The way in which something is taught is part of the teaching.

Saturday, July 10, 2010

Profit and loss

Expenditure (paid price) is chosen sacrifice. The agent can only choose sacrifice if he expects the value of expenditure (cost) to be worse than the value of the income (revenue). Ex post, cost can be better than revenue, but ex ante this can not be planned. Loss is exclusively an ex-post phenomenon. Ex ante, the agent only acts on grounds of profit.

Cost determines price

In the long run, expenditure (whose value is cost) determines price. This doesn't opposes at all to the theory that, given a production-possibility frontier, value alone determines prices. It is just an assertion that has to be interpreted very carefully and with a lot of subtlety. It means that, in the long run, it is not the concrete (as disconnected from anything else) value ascribed to a good what determines its price but that value in the context of comparison with the rest of goods (general equilibrium). This is how we have a remembrance, a warning, that whenever we make an analysis allowing for enough time as to everything to adjust, we can not forget general equilibrium. Partial equilibrium analysis is just the the first stage of general equilibrium analysis.

Sunday, July 4, 2010

Short run

Short run is usually presented as one in which some expenditure can not be avoided. However, if such expenditure can not be avoided, its value can not account for cost.

I propose to interpret the short run rather as one kind of production engineering in which some expenditure is common to all production or independent of the quantity of produced units. In such a case the value of such common expenditure has to be regarded as cost.

This, however, implies that it can not be accepted in praxeology such a category as ex-ante losses in the short run (neither in the long run). When the agent is choosing between producing or not, he is free for disposing of common expenditure. He has to decide between producing (in which case he will have to incur in common expenditure as well as expenditure particular for each unit produced) or not producing (remaining, this way, without the charge even of common expenditure).

So, the short run supply function does not exist for magnitudes of the marginal (particular) expenditure above the average particular expenditure but only for magnitudes of that marginal expenditure above the average total expenditure.

By the way, it has to be remembered that such supply is not a supply of previously produced goods (in which case there would be a produced stock and the supply would depend exclusively on the owner-supplier's preference). The short run (as well as the long run) supply functions are necessarily supplies of not yet produced goods; i.e. they are no more than schedules in the head of the deliberating agent confronting the decision of whether producing or not. He will produce (and eventually supply) exclusively if he expects to earn a profit.

If the producer actually faces a situation in which he can not change certain element adjuvant in the production process, that is not a matter of cost but one of production function's shape, of technology, of the information the agent has in order to produce. What happens can be modeled as producer ignorance regarding how to push the production opportunities out, as the arriving at the production-possibility frontier. It can, however, not possibly be modeled as a "fixed cost", which is an oxymoron. Cost only emerges when there is choice, when the option can actually be rejected, when it is "flexible", when it is "not fixed". If the situation is given, fixed, you are not talking about cost, you are talking about a general condition of welfare. You maybe are in the realm of a science of happiness or welfare but you are certainly no more in the realm of a science of purposeful behavior, of economics.

Other feature about the relation between common and particular expenditure, not usually taken into account, is that there can be expenditure common only to certain quantities of production, a sort of "crawlingly-pegged" expenditure.

Sunday, June 20, 2010

A challenge

Observing correlation (or lack of it) between two phenomena of purposeful behavior is impossible. Only on material phenomena can correlation be observed. Just try to prove me wrong!

Sunday, June 13, 2010

Hicks wrong on doing without the law of diminishing marginal utility

Hicks is wrong when he despises the concept of "diminishing marginal utility". (1) I would agree with him if he would merely refer to the cardinal utility's interpretation, i.e. to think of the concept as referring to actual somehow mensurable magnitudes of utility. (To be sure, this cardinal interpretation is not even Marshall's.(2)) However, Hicks seems to entirely do without the concept instead of just removing the cardinal interpretation. If so, he is plainly wrong. He confounds the unsuitability of the name with that of the concept. If only we use such a name as, for instance, "the law of worse marginal value of perfectly homogeneous goods" and interpret it as Rothbard does (3), we have a concept absolutely necessary to deduce the demand law and, in general, to develop price theory.

(1) Hicks, John. Value and Capital. 1939. Pages 20-25.
(2) See Marshall, Alfred. Principles of Economics. 1890 -eighth edition, 1920-. Book III, chapter III, note 1.
(3) Rothbard, Murray. Man, Economy, and State. Pages 21-33 and especially 73-74.

Wednesday, March 31, 2010

A quote for reflexion on this Holy Week

"[T]he great lesson of humility which science teaches us, that we can never be omnipotent or omniscient, is the same as that of all great religions: man is not and never will be the god before whom he must bow down." (1)

(1) Cohen, Morris. Reason and Nature. 1931-Houghton Mifflin Harcourt-. Page 449. Significantly enough, this exact quote is used by Hayek to close the part one of his The Counter-Revolution of Science.

Sunday, March 14, 2010

A Nobel for professor Kirzner

It would be an honor for the Nobel Prize in Economics to go to professor Israel Kirzner.

Sunday, February 14, 2010

Egalitarianism and constructivism in flat tax

In (even classical) liberalism, there's egalitarianism and constructivism. As I'm absolutely neither an egalitarian nor a constructivist, I happen not to be able to be a liberal. I'm a conservative.

Take for instance, taxes. Many liberals support a flat tax on grounds of egalitarianism (everyone paying proportionally for government) and, by believing they can re-design the spontaneous order of the tax constitution, they give themselves away as constructivist. They overlook the unintended consequences a tax reform (even a flat tax reform) can bring about.

Thursday, January 28, 2010

Wednesday, January 20, 2010

Just to be clear

One thing is the moral obligation to help the needed. This is on what Christian love for others is based on.

Other thing is the right to demand the help of others. This is on what the State usually is based on.

On the one hand, the Christian teaching compels to help others, but doesn't promote any right to demand the help of others. Quite on the contrary, from its very origin, Christianity instructs to stoically put up with in facing need, without even trying to resort to others help, not to speak of doing it by force.

On the other hand, according to Bastiat, the State is a fiction through which everybody endeavors to live at the expense of everybody else. Government is usually the means through which majorities organize themselves in order to abuse from minorities.

Saturday, January 2, 2010

Hayek the missionary

One of the strongest cases I've found to remain Catholic is Hayek's thesis, a summary of which appears in the next text:

"It may indeed prove to be far the most difficult and not the least important task for human reason rationally to comprehend its own limitations. It is essential for the growth of reason that as individuals we should bow to forces and obey principles which we cannot hope fully to understand, yet on which the advance and even the preservation of civilization depend. Historically this has been achieved by the influence of the various religious creeds and by traditions and superstitions which made men submit to those forces by an appeal to his emotions rather than to his reason. The most dangerous stage in the growth of civilization may well be that in which man has come to regard all these beliefs as superstitions and refuses to accept or to submit to anything which he does not rationally understand. The rationalist whose reason is not sufficient to teach him those limitations of the powers of conscious reason, and who despises all the institutions and customs which have not been consciously designed, would thus become the destroyer of the civilization built upon them. This may well prove a hurdle which man will repeatedly reach, only to be thrown back into barbarism." (1)

(1) Hayek, Friedrich. The Counter-Revolution of Science. 1952 -LibertyPress, 1979-. Pages 162-163.