Cafe Hayek: Economic Inquiry and its Logic

MD: Cafe Hayek (i.e. Don Boudreaux) doesn’t know what money is. If we have a reset, he and other Mises Monks want to be on the front lines imposing “gold is money” on us. That will strangle trade. It’s hard to think of anything worse than the Keynesian inflation oriented nonsense we have had my whole lifetime (> 70 years) but they want to show us something worse.

I review their articles because they “are” the enemy … and are their own enemy … they just don’t see it!

>Quotation of the Day…

Posted: 08 Aug 2017 03:45 AM PDT

(Don Boudreaux)

… is from page 27 of my late colleague Jim Buchanan’s 1979 paper “General Implications of Subjectivism in Economics,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan:

Indirectly, however, and in opportunity-cost terms, the empirical-nonempirical debate is of importance.  The young and aspiring economist who becomes the expert empiricist has necessarily sacrificed training time in learning more about the process to which his highly polished technical tools are to be applied.  These gaps in the training of modern economists are beginning to show up in many forms, not the least of which is the deadly dullness that dominates whole departments in many universities and colleges.

MD: And the pot characteristically calls the kettle black.

DBx: Someone can possess nearly god-like mastery of econometric techniques and still be a poor economist (or worse).

MD: When someone plays the “god” card they are tipping their hand revealing their irrationality. It’s always scary,

At the heart of economics, done correctly and productively, are habits and patterns of thought – namely, the economic way of thinking.

MD: Actually economics is just traders and trading. The co-option of money by the money changers and the governments they institute has added a significant “manipulation” factor that swamps anything rational traders do. A “proper” Medium of Exchange (MOE) process has “no” monetary policy.

There lies, for example, the professional instinct incessantly to ask probing questions (above all, “As compared to what?”); the recognition that reality is always far more complex in its details than even the most detailed ‘model’ can possibly capture (and yet the understanding that that reality is comprehensible only through the lenses of well-crafted models or theories);

MD: How about the reality that “zero is the only right value for inflation of money itself”. That’s provable. It’s not theory. And the Keynesians and the Mises Monks don’t get it at all!

and the stubborn insistence on consistency (such as the sound economist’s refusal to regard human and institutional imperfections as infecting only human interactions that occur in non-political settings – such imperfections also infect human interactions that occur in political settings).

MD: But the insistence on “sound” money (i.e. “gold is money”)? That’s ok according to the Mises Monks … even though it predictably “strangles” traders and trade.

Wow me all you want with your econometric wizardry and prodigiousness at digging up, assembling, and processing data.

MD: You mean data processing like INFLATION = DEFAULT – INTEREST = zero? … that’s not heavy math Don!

If you fail to exhibit the economic way of thinking, you are no economist in my book.

MD: Irrational thought should not be tolerated either!

Unless they are filtered through, and assessed according to, the economic way of thinking, all of your numbers and correlations, no matter how high those correlations might be, tell neither you nor anyone else anything of value.

MD: He says … without defining “economic way of thinking”. Economic way of thinking has always been trivial. As Yakov Smirnoff, the Russian comedian, said “business is simple:  buy low, sell high.”

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