What is Economics Today?

by Mario Rizzo

I was recently at the Summer University in Aix-en-Provence. I heard more than once about the need to educate people in economics in order to get better public policy.

My purpose in this post is not to go over the issue of the relative power of ideas about the “general welfare” as compared to special interests in determining public policy. Instead, I want to raise the question of whether today’s economics is homogeneous enough to teach basic lessons about the desirability of free markets. Let us put aside the old socialism and central planning issue. We can say that “economics” defeated that. Continue reading

Macroeconomics from a Pre-Keynesian Perspective

by Mario Rizzo  

The principal component-idea of macroeconomics – aggregate demand and aggregate supply – trades on the analogy with the Marshallian individual market demand and supply analysis. For many students this makes the idea of macro-aggregation seem quite uncontroversial, almost “natural.”  

My “complaint” will not be about aggregation in general. We are always aggregating and disaggregating when the occasion warrants it. My problem is with a particular form of aggregation. Is it useful? Has it led us to an analysis of the right questions? Does it obscure important interrelations?   Continue reading

Paul Krugman: Ipse Dixit

by Mario Rizzo  

Under other circumstances, Paul Krugman would have made an excellent pope if we judge by his economics pronouncements. Let me take two examples from a recent New York Times column. This is my interpretation of what he is saying.  

1. On the one hand, as Keynesians have always taught: There is no real danger of interest rates rising as the Treasury accumulates massive amounts of debt. This is because there is a vast surplus of (ex ante) savings out there just waiting to buy US treasuries at low interest rates. This is our official teaching.  

2. On the other hand, there are economists out there sowing the seeds of heresies. It is understandable in this time of unprecedented events that even wise economists might be tempted to stray from the Truth. They are making statements that confuse the faithful in their daily activities (of buying and selling treasuries). They are frightening them with stories of inflation and high interest rates. Many, perhaps most, of these teachers have evil motives.  These heretics are making it more difficult for the “church” to help us all to salvation.  

Read the article yourself. Isn’t this what he is saying?