A physicist is happy to get something wrong – he can correct his theories and find out something new.
When the world is different from an economists model, he is sure the same model will work better when he tries it again
With thanks to Lars Syll for highlighting this extract
By being “correct” we can sometimes end up encouraging views that make no sense – because we don’t allow people to not only hear truths but also put them in to context.
For example “men and women are different” is not a sexist remark, but if we are not allowed to say it and explain what we mean, we can end up with people hearing it for the first time in a context which leads them to think that “women are inferior” which is sexist and unjustified by the evidence.
Lars Syll’s post says that state intervention interferes with the market and as a result competition does not necessarily eliminate bad bosses (quoting banks as an example – without state intervention after the 2008 crisis, many banks would not exist and their bosses would no longer be employed).
But surely this is the same as saying that competition does not really exist. State intervention has rigged the system!
But what of the argument that competition eventually eliminates bad bosses? True, it does sometimes; the relatively egalitarian John Lewis Partnership has done better than department stores such as…
Source: Does competition really eliminate bad bosses? | LARS P. SYLL
Sweden has during the last couple of decades tried to marketize the public welfare sector. The prime mover behind the marketization has (allegedly) been the urge for cost-minimization, freedom of c…
Source: Marketization undermining the welfare system | LARS P. SYLL
Perhaps not as far advanced as the British “marketisation” of welfare (and healthcare), this review of the effects in Sweden suggests that we cannot expect “privatisation” to work for a number of reasons:
Not a lot has been made of the quick turnabout in policy. Philip Hammond presented a budget with lots of facts and figures and within a week, the key economic policy – being sensible – is out of the window and the budget has a £2bn hole in it.
This is not the first time this has happened with a “fiscally responsible” conservative government. George Osborne – the man who can hold down any number of full-time jobs – has had to reverse key policies within days – he was the man who decided a £4.4bn cut in benefits was not acceptable (in 2016). And he presided over the “omnishambles” budget of 2012 when various VAT changes (including the pasty tax) were later scrapped.
The problem is not limited to conservative politicians, with Gordon Brown announcing in 2007 he was “cutting” the 10p tax rate – which meant a hike in taxes, which he had to balance by national insurance changes of his own.
But the real problem seems to be the deficit in reality. When chancellors talk about “reducing the debt” what they seem to mean is “not borrowing quite as much as last year.” When ordinary people and businesses talk about “reducing debt” they mean paying some of it back.
When recent conservative chancellors talk about being fiscally responsible, 
they seem to ignore the numbers and try to claim that labour chancellors borrowed irresponsibly when borrowing under 40% of GDP (2005 to 2009 on average) when in recent years borrowing is only now coming back down to that level of GDP.
The idea of actually paying some of the debt back is still a dream. The “red book” which has all the forecasts in it still shows the government borrowing more money every year to 2021-22.
As someone who correctly predicted the financial crisis (first in 2003 and later in a 2006 book) I support Andy Haldane’s assertion that the economics profession is “to some degree in crisis”.
A great article backed up with a challenging image
Everything we know is not just wrong – it’s backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes.
With thanks to Lars P Syll for this argument about how far we should go to make economic models. He concludes:
It is better to be vaguely right than precisely wrong
Denicolò and Zanchettin, in an article published by the prestigious Economic Journal, claim to have shown among other things that “stronger patent protection may reduce innovation and growth.” As a…
Source: Economics vs. reality
No, its not really about Borrowing, but I have just spotted this article and was fascinated by the possibility that older people have just decided to kill their golden goose.
A quote about Brexit supporters by a friend of mine last week attracted a lot of attention when I stuck it on Twitter yesterday.
This is the last ‘fuck you’ from the baby boomers. They took the secure corporate and government jobs with the guaranteed pay rises and final salary pension schemes and benefitted from property they bought cheap and sold dear. They burnt the bridges behind them by colluding with the dismantling of the very things that had brought them prosperity. Their last act will be to burn the economy before they die.
It even made the Independent. Some people were offended by it but, for the majority of those who commented, it seemed to strike a chord, suggesting there is at least a grain of truth in it.
It is certainly true that the pollsters are recording the highest support for Brexit among older voters. YouGov data
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The euro has taken away the possibility for national governments to manage their economies in a meaningful way — and in Greece the people has had to pay the true costs of its concomita…
