Termination of the history of economics courses contributing to the Global Financial Crisis (GFC)

Helge Nome :

The key to controlling humans does not lie in building fences around them, but to steer their minds away from unwanted questions.

By HopeForTheDismalScience
(William P Bell)

The elimination of courses in the history of economics has contributed to the Global Financial Crisis (GFC) by eroding institutional memory that allowed the dismantling of structures designed to prevent a re-occurrence of the Great Depression.  With little space in the curriculum for reflection on the past, graduate economists feed on a diet of neoclassical mathematics produces an extreme form of bounded rationality where history is both irrelevant and unknown, which makes for a very powerful ideology by steering minds away from unwanted questions.

 

Christmas… were the gifts a waste?

Hello everyone and welcome to 2011, I trust everyone had a nice Christmas and new years!

I have some questions which I would like to ask everyone, and they are; how did everyone rate their gifts? Were you happy with them? Are they useful? Will you actually use them? And most importantly what would you have paid for them?

I was hoping to post this last week but I was too busy eating ham, turkey and Christmas pudding! Oh and unwrapping the few presents I was given to assess the economic value they would provide me.

 

Capital constraints

Capital markets are starting to feel the pinch as US long-term bonds have risen 28 percent over the last month to 3.33 percent (and are currently at 3.35 percent). In the Euro zone, German long-term bonds have risen 27 percent over the last month to 3.03 percent (and are currently at 2.95 percent). In the UK long-term bonds have risen 18 percent since November to 3.55% (and are currently at 3.50 percent). The debt to GDP ratio in the UK is edging close to 100 percent (up from 30 percent only a decade ago).

Why this concern over debt? Debt needs to be serviced. This is done by paying interest. Interest on government (or sovereign) debt is obtained via taxes. Taxes are raised from productive individuals and businesses. As government expenditures increase, certainly beyond the level of received taxes, it must raise this money through the issue of government debt (i.e. treasuries or bonds).

 

Giving Thanks for the Export Successes of Germany

Let us give thanks for the robust export performance of the German economy...

The economic pages of most newspapers this week were dominated by the news of the Irish banking crisis and the impending threat of contagion. So while the discussions of the plight of the financial sector in the PIIGS (Portugal, Ireland, Italy, Greece, Spain) have the talking heads spinning in circles on television, I thought that it being Thanksgiving and all that, this blog should spend some time on a cheerier macroeconomic story: Germany. Even though its quarterly growth rate cooled to a respectable 0.7% from a vertigous 2.2% there is plenty that the interconnected world can feel thankful for as Germany remains an island of economic and financial stability in the midst of the EU’s surfeit of troubles. But, as students of economics, we should ask ourselves: what accounts for this dramatic difference between Germany and its less fortunate fellow Eurozoners?

 

Unions flexing their muscle may not be in the best interest of workers after all

The Transport Workers Union of Australia (TWU) recently announced an agreement it declared ‘will be a benchmark for its national pay strategy’ and has created fears this wage win will spread. The agreement has secured wage rises of between 14– 21 per cent for air freight workers, a rate well above the national inflation rates.

 

Time and logic

Logic and time impact economic value. Logic is a formal, systematic method in which the rules of valid inference determine which premises contain their conclusions. The interesting aspect of logic for economic thinking is that it is timeless. If logic comprises a series of contiguous abstract propositions, then time comprises a series of contiguous moments.

Mainstream economic thinking proposes that mathematical reasoning is the correct tool for use in economic theorizing; but mathematical reasoning is also timeless. Applied to the problems of satisfying human want, the method of mathematical reasoning fails.

 

Long-Run Prospects for Environmental Regulation and International Trade

Are environmental regulations beneficial for society?  According to recent news, the Environmental Pollution Agency (EPA) of the United States calculated the benefit of EPA regulations to society as $40 for every $1 cost to the economy. The same New York Times article also mentions about the reactions from the business side: a coalition of business groups asked the U.S. Congress to delay further regulatory measures by the EPA, claiming that the measures will decrease investments and prevent creation of jobs, damaging the U.S. economy. Businesses from different parts of the world share similar worries about increasing environmental regulations, according to a Reuters news article.

 

The Time Cost of the Present and the Future

An interesting phenomenon that impacts upon economic life is time. Time demarcates satisfaction in the present and near (and distant) future – a future that contains uncertainty. It is therefore pertinent to consider the impact that time can have on economic value. Value of course is a term that needs clarification. Value – but to whom? More precisely, to which authority?

An object is valued for various reasons. Some believe that value is reflected in the prices assigned to an object: such prices reveal the inherent value. Others believe that an object is valued according to an individual’s hidden scale of values. This scale comprises a series of needs and wants, which are ranked in the order of importance; an effort is made to satisfy each need or want up to a certain point. This perspective on value implies that it is subjective. The prices reflected in the market on goods and services reflect this value.

 

The Oil Spill : A Moral Hazard Issue?

The oil spill in the Gulf of Mexico which began with the explosion of a rig on April 20, 2010 appears to be the biggest offshore oil spill in history. Recent news state that it is still not clear who or which company holds the responsibility for the accident. The accused so far include British Petroleum (BP), the owner of the platform, for organizational, technical and safety failures – particularly the BP managers and engineers for missing the warning signs – Transocean,  the owner of the exploding rig for flawed well design, and Halliburton, another BP contractor company, for not using the proper cement for the rig. The accusations include risky decisions aimed at decreasing the costs and increasing the profits and technical and managerial failures.

 

China’s answer to the supply and demand of infrastructure for developing regions.

In a recent Time Magazine article on China’s high speed rail (HSR) network expansion (Engines of Growth, Time, Aug 16^th, 2010), it is reported that China is building an increasingly connected rail network. The reasoning is that better infrastructure is needed for nurturing the economic growth, fostering the transportation of labour and goods, and attracting development in regions traditionally lagging behind in economic growth. The building of a rail network apparently has low initial building costs.

However there are problems. There is a high cost in maintaining the network and infrastructure with not enough returns (ticket sales) to cover this cost. In terms of demand from the people, HSR is much more expensive compared to the traditional slower rail network, and so therefore does not service the lower income population, whom are mostly from the Western China regions, and the Western Economic Triangle.