Daily Archives: December 22, 2017

Lorenzo and Horwitz debate Austrian economics

The Market Monetarist

Back in April our friend Lorenzo did a interesting post on Austrian theory. That has now triggered a response from Steve Horwitz who defends the Austrian position. It is excellent stuff. It is a debate between two clever debaters and I have very strong sympathies for both gentlemen. However, I don’t have time today to go through the entire debate, but I will strongly recommend to my readers to take a look at this very interesting debate.

See here:

Lorenzo: About Austrian Economics

Steve’s response: Thoughts on Lorenzo on Austrian Economics

Lorenzo’s feedback to Steve: Response to Dr. Horwitz’s thoughts

Again, this is excellent stuff. Read it! We can all become more clever by debates like this. Thanks guys.

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Steve, George and Bryan debate Austrian economics and empirics

The Market Monetarist

I am a huge fan of Cato-Unbound.org. Here you find good insightful and intellectual debates amount classical liberal, libertarian and conservative scholars on a number of topics. The quality of the pieces on Cato Unbound is always very high. That is also the case for the latest “debate”. As always there is a “Lead Essay” and a number of “Response Essays”. This time the topic is “Theory and Practice in the Austrian School”.

The lead essay is written by Steve Hortwiz and the response essays are by George Selgin and Bryan Caplan.

Fundamentally Steve’s claim is that Austrian method – praxeology – is not as strict anti-empirical as it is often said to be. In his essay “The Empirics of Austrian Economics” Steve makes an heroic attempt to argue that there is no real conflict between praxeology and empirical studies. Everybody who know me would know that I have…

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The Nuremberg Trials: Perceptions and Prejudice?

The View East

The end of World War II saw the establishment of the first International War Crimes Trial in the German city of Nuremberg, with the formation of an International Military Tribunal to oversee the trial and conviction of surviving members of the Nazi power structure. The Nuremberg Trials have had a lasting legacy; leading to the creation of the ‘Nuremberg Principles’ of 1950, heavily influencing the development of international criminal law (particularly in relation to Human Rights), and acting as a model for contemporary war crimes trials. The Nuremberg Trials have been the subject of extensive historical research in the intervening years and War Crimes Trials of former Nazi criminals remain a topical issue today, as demonstrated by the recent trial of 91 year old former concentration camp guard, John Demjanjuk. In May 2011 a German court convicted Demjanjuk of acting as an accessory to murder in relation to the 28,069 who died…

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#OTD USSR broke up

1. The literature on the effect of low-skilled immigration on native wages.  A strong consensus finds that large increases in low-skilled immigration have little effect on low-skilled native wages.  David Card himself is a major contributor here, most famously for his study of the Mariel boatlift.  These results imply a highly elastic demand curve for low-skilled labor, which in turn implies a large disemployment effect of the minimum wage.

This consensus among immigration researchers is so strong that George Borjas titled his dissenting paper “The Labor Demand Curve Is Downward Sloping.”  If this were a paper on the minimum wage, readers would assume Borjas was arguing that the labor demand curve is downward-sloping rather than vertical.  Since he’s writing about immigration, however, he’s actually claiming the labor demand curve is downward-sloping rather than horizontal!

2. The literature on the effect of European labor market regulation. Most economists who study European labor markets admit that strict labor market regulations are an important cause of high long-term unemployment.  When I ask random European economists, they tell me, “The economics is clear; the problem is politics,” meaning that European governments are afraid to embrace the deregulation they know they need to restore full employment.  To be fair, high minimum wages are only one facet of European labor market regulation.  But if you find that one kind of regulation that raises labor costs reduces employment, the reasonable inference to draw is that any regulation that raises labor costs has similar effects – including, of course, the minimum wage.

3. The literature on the effects of price controls in general.  There are vast empirical literatures studying the effects of price controls of housing (rent control), agriculture (price supports), energy (oil and gas price controls), banking (Regulation Q) etc.  Each of these literatures bolsters the textbook story about the effect of price controls – and therefore ipso facto bolsters the textbook story about the effect of price controls in the labor market. 

If you object, “Evidence on rent control is only relevant for housing markets, not labor markets,” I’ll retort, “In that case, evidence on the minimum wage in New Jersey and Pennsylvania in the 1990s is only relevant for those two states during that decade.”  My point: If you can’t generalize empirical results from one market to another, you can’t generalize empirical results from one state to another, or one era to another.  And if that’s what you think, empirical work is a waste of time.

4. The literature on Keynesian macroeconomics.  If you’re even mildly Keynesian, you know that downward nominal wage rigidity occasionally leads to lots of involuntary unemployment.  If, like most Keynesians, you think that your view is backed by overwhelming empirical evidence, I have a challenge for you: Explain why market-driven downward nominal wage rigidity leads to unemployment without implying that a government-imposed minimum wage leads to unemployment.  The challenge is tough because the whole point of the minimum wage is to intensify what Keynesians correctly see as the fundamental cause of unemployment: The failure of nominal wages to fall until the market clears.

From http://econlog.econlib.org/archives/2013/03/the_vice_of_sel.html

The Battle of Hastings and the Birth of the English Language (1066)

ROOTS OF EXCALIBUR

Adventus Saxonum: The Backdrop

When Rome abandoned ‘Britannia’ in 410 AD, the British Isles were open to invasion. Sure enough, Germanic tribes such as the Angles, the Saxons, and the Jutes (among many others) invaded and settled along the eastern coast of modern-day England. This mass migration of Germanic tribes became known as the Adventus Saxonum, which is Latin for ‘Arrival of the Saxons.’

The Saxons eventually rose to power as the most prominent of the other settlers and would become mostly united by the middle of the 900s. Think of it this way, do you remember how the American colonies were settled? The Dutch came over and founded New Amsterdam, and then the English who had already ruled all of New England took over Manhattan and renamed it New York after the Duke of York, then eventually claimed everything else. It’s pretty much the same kind of…

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