no third solution » Economic Fallacies
On The Labor Theory of Value
A while back I read parts of Kevin Caron’s Studies in Mutualist Political Economy. A while back. I was particularly interested in his commentary on the labor theory of value. [T]he labor theory of value is based, not on an inductive generalization from the observed movement of prices, but on an a priori assumption about why price approximates cost, except to the extent to which some natural or artificial scarcity causes deviations from this relationship. Like Carson, I believe there is a case to be made for an a priori assumption about why price approximates cost, but the conclusion I reach is quite different. The “natural” scarcity is embodied in the supply/demand diagram. Prices will approximate costs (in a free market), all else being equal, because competition makes … Read entire article »
Filed under: Blog Reactions, Economic Fallacies, Economics Lessons
What’s So Bad About Deflation?
In response to a Christian Science Monitor article on the perils of Deflation, Todd asks: The whole idea of “deflation” seems mostly nonsense to me. The only way to have true deflation is through a decrease in the money supply (like destroying money). I think when they say “deflation” they usually mean what I would call “net deflation,” taking into account not just the money supply but the supply, quality, and cost-to-make of goods as well. So while a debt-based currency will always be inflating due to new money being created with every new loan, there could be “net deflation” if the prices of products relative to the currency are decreasing. Does that make sense? Is that a weird interpretation? I am looking at you David Z. and FSK. A debt-based currency can certainly … Read entire article »
Filed under: Economic Fallacies, Economics Lessons
How Do Taxes Destroy Productivity?
Mark Cuban continually asserts that taxes have no effect on entrepreneurship, essentially spitting in the face of just about every economist from every school of economic thought, who has ever lived. Also, by framing it as a “taxes dont’ matter” argument, Cuban has conveniently avoided the real problem: taxation is theft, plain and simple. While I prefer lower taxes, I can tell you that no entrepreneur or CEO worth a damn in this country gives up or works less because of a change in tax policy. . There is an outside possibility that übermenschen CEOs and entrepreneurs aren’t affected by tax policy. I doubt it, but it’s not worth arguing that point. Since the world is not made up of capitalist-entrepreneurs, or CEO’s worth-a-damn, we can’t look solely at … Read entire article »
Filed under: Economic Fallacies, Economics Lessons, Left Libertarian, Taxation is Theft