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View Diary: Uniformly Catastrophic (151 comments)

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  •  We find it also clearly advocated by Hayek (1+ / 0-)
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    who argued back in the debate with Sraffa on the attempt to link the natural and money rates of interests to real economy fluctuations and crises (Hayek, like Keynes, is following Wicksell here from Lectures on political economy, vol 2). Essentially Hayek argued that interference in the system by governments following Keynes recommendations will actually lead to a longer period of disequilibrium and crisis and that we are better off letting the system come back on its own. This is of course adopted by Friedman and popularised by the Chicago school. This leads to debates on what policies are actually acceptable (if any) and the limits to fiscal policy based on whether the multiplier actually is responsive enough so that fiscal policy would be of any use at all (see the New Classical economics, especially Barro on that last point).

    Uncertainty and expectations and the manner in which they are treated have been the topic of many discussions in the history of economics thought and modern economic discussions from many different perspectives including literally assuming them away due to specifications on expectations. They really do upset the applecart of certain theories given the manner in which the theories are actually structured and what they argue.

    I would argue that contrary to the opinion of most economists, economics is a social science, some of the most important influences on economic decisions, choices and variables, (e.g., customs and habits) cannot really be properly modelled and we may not actually want to do so. Some things can be addressed quantitatively, others less so or not.

    That is a great sign and unfortunately very true. "Economics is the only discipline in which a person can have a successful career without ever once being right." It is hard to think of another discipline where someone can be demonstrably wrong and still held in such high regard. :(

    No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

    by NY brit expat on Sun Aug 02, 2009 at 02:48:10 PM PDT

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