The first fair and deliberate exchange in world history

From The Wealth of Nations:

“Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that….But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.”

On the other hand, it could be the resurrection of an economy recovering from the grip of a socialist experiment, Venezuela say, in about a year or two from now.

Cartoon via Powerline – The Week in Pictures

Oxford University Press from out of nowhere quotes Mill’s fourth proposition on capital

This is a tweet sent out by Oxford University Press Economics.

“Demand for commodities is not demand for labour.” – John Stuart Mill

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From Oxford University Press with Mill’s fourth proposition on capital – demand for commodities is not demand for labour – just thrown out for comment. So I commented:

Replying to 

The statement is true, much to the shame of modern economics. I have written an article on just this: “Mill’s Fourth Proposition on Capital: a Paradox Explained”, published in the March 2015 JHET. Ever wonder why no stimulus has ever led to recovery? Mill explained it in 1848.

As I wrote to my friend and colleague who had spotted the OUPE tweet and forwarded it to me:

From out of nowhere, really, that OUP should suddenly bring forward that quote of all quotes from Mill. Wondrous that you even saw it and thank you for sending it along. I have now added my own tweet to the rest. The destructiveness of Keynesian economics ought to be perfectly evident everywhere except that it’s not. Sad and yet funny that virtually no one today can even work out what Mill had meant even though it had been the universal view of every economist right up to the publication date of the General Theory. And I don’t mean that people disagree with Mill. I mean that no one can even explain why Mill and all of his contemporaries thought this was true so just end up befuddled but leave it alone.

Need I add that Leslie Stephen thought that Mill’s Fourth Proposition was “the best test of a sound economist”? Well, of course I don’t need to, but I will, and also add that Stephen was right and it is.

LET ME ALSO ADD THIS: From The Oz today, via David Uren:

“Average household incomes have not improved significantly since the global financial crisis in 2008-09.”

We are talking about a decade in which real incomes have not risen and during which the unemployment rate has hardly budged. I wrote this in 2008 (and published Feb 2009).

What is potentially catastrophic would be to try to spend our way to recovery. The recession that will follow will be deep, prolonged and potentially take years to overcome.

Mill’s fourth proposition is pure macro (or theory of the business cycle if you want to think in classical terms). You cannot generate a recovery from the demand side is how you might say it today. In the 82 years since The General Theory was published there has not been a single instance where this has been shown to be untrue.

Economics as physics

So the US economy is expanding at a 4.1% annual rate and is experiencing a tightening labour market and possibly even rising real wages. That the American economy under PDT would shed the shackles left by eight years of Obama mismanagement and the inept oversight of GWB was as straightforward as anything I could have imagined although never a certainty given all the unknowns that surround every economy all the time. A supply-side approach, in which the government removes regulations and does not try to spend its way to recovery, is the formula that has worked time and again: see, for example, the spectacular Costello recovery of 1996-98 which was driven by massive cuts to public spending and an entrepreneurial-focused policy framework. No Keynesian at the time had expected it – Treasury begged Costello to reverse his policies! – nor have I ever heard a Keynesian who could explain it. In the midst of the Asian Financial Crisis as well, just to show how difficult it is to find an explanation within modern economic theory for what everyone witnessed but no modern macroeconomist could explain. Which brings me to this.

Steve Hayward, who I usually agree with, has written on Universities: Euthanasia or Suicide in which he discusses how economics is turning itself into a STEM field rather than an area of the humanities, which he thinks of as a good thing. It is already a near useless field of study the way it is presently taught, but economics as physics is its absolute end as a useful empirical science if the aim is to understand how we can best provision ourselves. Nothing will leave economics with less penetration and use than to ship it off to the mathematical side of academic studies. Nothing is more likely to help us find a way to a Venezuelan future. There are numbers in economics, of course, and statistics, but to turn economic theory into nothing but a series of highly abstract mathematical models will ensure that virtually nothing found in an economics journal will provide practical solutions to actual problems related to the world. Once economics dealt with problems, and thought through to solutions, but economics-as-physics is the Death Star for the subject.

Here are a few of the commenters who seem to get it:

Don’ t economics departments want to do this to attract more federal dollars for STEM? Not a good sign. About 30 or so years ago, UVA’s economics department kicked out Buchanan and Coase to go more in the econometrics route. (Paul Craig Roberts wrote about this.) The economics department at my undergraduate university came to be dominated by Marxists. In short, the revolution is corrupting econ departments too.

STEM disciplines are evidence-based. Evidence overwhelmingly shows that Marxism does not work. If an econ department has not ejected all of its Marxists, it should not be allowed to work this dodge.

If Econ is a STEM field, does that mean that Econ Profs can’t point to Venezuela as an example of the success of socialism? Unless they can prove it?

I got a BA in History with a minor in Economics. Although I have had a life long love of history, some of my more enjoyable undergraduate classes were economics. My conversations with recent History and Economic graduates make me wonder if they really got degrees in those fields at all. Their ignorance of even the basics is truly astounding.

Economists almost killed off the history of economic thought and may still do it. For an account of this disastrous venture into academic suicide, see my Defending the History of Economic Thought. Marxists and socialists generally can do maths as well as anyone. But it is a rare temperament who can do economics, and understanding Adam Smith and John Stuart Mill does not require maths and stats. The more mathematical and models-oriented economics becomes the more it will prevent anyone from understanding how an economy actually works.

Economics is a social science not physics

Economics as physics is the death of economics as a useful empirical science studying how we can best provision ourselves, but it does seem to have some self-preservation qualities as well. Steve Hayward has written on Universities: Euthanasia or Suicide in which he discusses how economics is turning itself into a STEM field rather than an area of the humanities. Nothing will leave economics with less penetration and use than to ship it off to the mathematical side of academic studies. Nothing is more likely to help us find a way to a Venezuelan future, as discussed in my post on Mill and the marginalists. There are numbers in economics, of course, and statistics, but to turn economic theory into highly rigorous models will ensure nothing found in an economics journal will ever provide a solution to an actual problem related to the world. Once economics dealt with problems and thought through to solutions, but economics-as-physics is the Death Star for the subject. In reaching his conclusions, Hayward discusses at the start a lecture he had previously given.

One of the points I made in that lecture is that universities would start to divide into practical subjects like business and economics and STEM sciences, and leave behind the humanities and social sciences:

I think we’re already seeing the beginnings of a de factodivorce of universities, in which the STEM fields and other “practical” disciplines essentially split off from the humanities and social sciences, not to mention the more politicized departments. One early sign—perhaps a canary in the university coal mine—can be seen in the recent announcement of the University of Wisconsin Stevens Point campus that it is shuttering 13 departments in the humanities and social sciences, and laying off tenured faculty, on account of declining enrollment and budget pressures, and reallocating funds to STEM subjects.   Another sign are the economics departments that have begun subdividing themselves into “general economics” and an even more-math centric “quantitative econometrics.” Several economics departments are formally reclassifying themselves as STEM departments (there are federal guidelines for this) for a variety of reasons, but among them has to be wishing to disassociate themselves further from other social sciences.

Lo and behold, more economics departments are deciding to become STEM subjects, supposedly for advantages STEM classification provides (especially in attracting and keeping talented foreign students), but I am sure it is in part to disassociate themselves from the rest of the politicized social science disciplines. If nothing else, economics is the one social science field where degree earners have good job prospects, and which doesn’t need propping up.

The Economist reports:

Economics departments appear to be catching on. Yale and Columbia have both changed the code for their economics major in the past few months; five of the eight Ivy League Universities have now done so. Students at Pennsylvania and Cornell are agitating for a switch.

And the American Institute for Economic Research gives five more reasons why economics is better suited as a STEM subject. If you read through these five reasons carefully, it’s what they don’t say that stands out loudly. See what is implied by this passage, for example:

The objective of STEM programs is to create professionally and socially qualified individuals to overcome 21st-century challenges. For that reason, these courses should make students learn how to apply the scientific method to everyday life and acquire useful skills for real-world applications. Economics promotes and develops both of them.

Due to the prevalence of mathematics and pragmatism in economics, positivism is the dominant research method in the field. Therefore, economists examine real-world problems and evaluate feasible solutions through economic positivism, a scientific method.

Further, this degree encourages students to acquire or improve on relevant skills for today’s life, such as critical thinking and problem-solving, entrepreneurship and innovation, resourcefulness and resilience, teamwork and collaboration, and a sense of civic responsibility.

Here are a few of the commenters who seem to get it:

Don’ t economics departments want to do this to attract more federal dollars for STEM? Not a good sign. About 30 or so years ago, UVA’s economics department kicked out Buchanan and Coase to go more in the econometrics route. (Paul Craig Roberts wrote about this.) The economics department at my undergraduate university came to be dominated by Marxists. In short, the revolution is corrupting econ departments too.

STEM disciplines are evidence-based. Evidence overwhelmingly shows that Marxism does not work. If an econ department has not ejected all of its Marxists, it should not be allowed to work this dodge.

If Econ is a STEM field, does that mean that Econ Profs can’t point to Venezuela as an example of the success of socialism? Unless they can prove it?

Economists almost killed off the history of economic thought and may still do it. For an account of this disastrous venture into suicide, see my Defending the History of Economic Thought. Marxists and socialists generally can do maths as well as anyone. But it is a rare temperament who can do economics, and understanding Adam Smith and John Stuart Mill not only does not require maths and stats, will actually prevent you from understanding anything they have to say.

 

The future of their party and who knows who else

Via Steve Hayward.

And yet another take:

1) I am not sorry.
2) It’s not coming down.
3) I will make another one.
4) You don’t have to hate Trump to use humor.
5) I don’t have to warn you when I’m about to tell a joke.

Allie Beth Stuckey

Enlightening & hard-hitting interview with Socialist “it girl” and fellow millennial, Alexandria Ocasio-Cortez [it is a joke]

So let us see what her supporters are like, although the reality is that you cannot parody them since they are such ignorant fodder for a tyranny they have no conception of. It’s only a not very random sample, but there are plenty more like them everywhere.

They are the very definition of drongo. Know-nothings about anything they need to know, whose arrogant stupidity may yet drag us into an abyss out of which even a century from now there will be no coming out of the depths into which our economies might yet descend.