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Savings as the Engine of Economic Growth
SAVINGS AS THE ENGINE OF ECONOMIC GROWTH Most economists concur with the view that what keeps the economy going is consumption expenditure. Furthermore, it is generally held that spending rather than individual saving is the essential condition for production and prosperity. Savings is seen to be detrimental to economic activity as it weakens the potential […]
Does it Matter Whether Assumptions in Economics are Arbitrary?
DOES IT MATTER WHETHER ASSUMPTIONS IN ECONOMICS ARE ARBITRARY? Various assumptions employed by mainstream economists appear to be of an arbitrary nature. The assumptions seem to be detached from the real world. For example, in order to explain the economic crisis in Japan, the famous mainstream economist Paul Krugman employed a model that assumes that […]
Expectations and the Austrian Business Cycle Theory
EXPECTATIONS AND THE AUSTRIAN BUSINESS CYCLE THEORY According to the Austrian Business Cycle Theory (ABCT) the artificial lowering of interest rates by the central bank leads to a misallocation of resources because businesses undertake various capital projects that prior to the lowering of interest rates weren’t considered as viable. This misallocation of resources is commonly […]
Why Mainstream Economics Consistently Fails to Explain the Occurrence of Recessions?
WHY MAINSTREAM ECONOMICS CONSISTENTLY FAILS TO EXPLAIN THE OCCURRENCE OF RECESSIONS? In his article released on March 21 2018 – Economics failed us before the global crisis – Martin Wolf the economics editor of The Financial Times expressed some misgivings about macroeconomics. Economics is, like medicine (and unlike, say, cosmology), a practical discipline. Its goal […]
Can Money Pumping Stimulate Economic Growth?
CAN MONEY PUMPING STIMULATE ECONOMIC GROWTH? According to most economic experts when an economy falls into a recession the central bank can pull it out of the slump by means of money pumping. This way of thinking implies that money pumping can somehow grow the economy. Indeed US historical evidence supposedly does show that easy […]
What is Wrong With the Popular Definition of Inflation?
WHAT IS WRONG WITH THE POPULAR DEFINITION OF INFLATION? According to Mises, Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation’ to refer to […]
The Relevancy of Probability in Economics
THE RELEVANCY OF PROBABILITY IN ECONOMICS Modern economics in addition to sophisticated mathematics also employs probability distributions. What is probability? The probability of an event is the proportion of times the event happens out of a large number of trials. For instance, the probability of obtaining heads when a coin is tossed is 0.5. This […]
Can We Ascertain the Facts of Reality in Economics by Means of Mathematics?
CAN WE ASCERTAIN THE FACTS OF REALITY IN ECONOMICS BY MEANS OF MATHEMATICS? It is generally held that by means of statistical and mathematical methods one can organize historical data into a useful body of information, which in turn can serve as the basis for the assessments of the state of the economy. It is […]
MONEY AND THE STOCK MARKET: IS THERE ANY RELATION?
MONEY AND THE STOCK MARKET: IS THERE ANY RELATION? Is it true that changes in money supply are an important driving force behind changes in the stock price indexes? Intuitively it makes sense to argue that an increase in the growth rate of money supply should strengthen the growth rate in stock prices. Conversely, a […]
Are Inflationary Expectations the Heart of Inflation?
ARE INFLATIONARY EXPECTATIONS THE HEART OF INFLATION? For most economic commentators the underlying driving force of inflation is inflationary expectations[1]. For instance, if there is a sharp increase in the price of oil, individuals may form higher inflationary expectations that could set in motion spiraling price inflation, or so it is held. If somehow expectations […]
Is the High Level of Debt a Major Economic Risk Factor?
IS THE HIGH LEVEL OF DEBT A MAJOR ECONOMIC RISK FACTOR? Many economic commentators regard high level of debt relative to GDP as a major risk factor as far as economic health is concerned. This way of thinking has its origins in the writings of the famous American economist Irving Fisher. According to Irving Fisher,[1] […]
Pool of Funding the Heart of Economic Growth
POOL OF FUNDING THE HEART OF ECONOMIC GROWTH Most experts are of the view that massive monetary pumping by the US central bank, the Fed, during the 2008 financial crisis saved the US and the World from another Great Depression. If increases in money supply is an important catalyst for economic growth then the World […]
