The “Nobel” prize in Economics

Economists understandably get worked up about the “Nobel” prize in economics (Nobel in quotes because it was instituted in 1968 by the Bank of Sweden “in the memory of Alfred Nobel,” unlike the Nobel prizes in physics, chemistry, medicine, literature and peace.)

In any event, you cannot evade the fact that it confers enormous prestige, and most regrettably it buys unjustified influence among politicians and policymakers, especially in developing nations. Continue reading “The “Nobel” prize in Economics”

What’s Capitalism

Vocabulary

Capitalism is a simple enough concept but the associated baggage of its myriad connotations makes the word pretty useless in discussions with people with differing ideological stances, and with people who don’t bother with meaning and content. We can do better.

For any productive discussion, we should have a shared definition of the terms we use. If we are uncertain of the shared meaning of a word, it is best not to use it or even enter into a discussion involving the word or concept.[1]

So let’s take a few moments to define the word first and then get on with the discussion. The definition does not have to be definitive or universally acceptable. It just has to serve the purposes of the discussion. If you don’t accept that definition, it’s not the end of the world; it’s just the end of this discussion.

Capitalism is a combination of (1) private property, (2) free markets, (3) voluntary trade, & (4) institutions which legally enforce contracts. Continue reading “What’s Capitalism”

The Asymmetry between Free Entry and Free Exit

When asked why he was resigning from a particular country club, Groucho Marx’s explanation was “I don’t want to belong to any club that would have me as a member.” That he was allowed to enter meant that the club’s standards were low, and therefore he’d not want to be a member. Very droll. Anyway, there’s an obvious asymmetry between entry and exit. Continue reading “The Asymmetry between Free Entry and Free Exit”

Competition in Free Markets

Production

The primary purpose of production is consumption. Economic activity is by definition the production and consumption of goods and services. Except for the special case of the so-called “Robinson Crusoe” economy (an economy in which there is only one person who has to necessarily be self-sufficient) every real economy involves exchange or trade. The ability to trade what one has produced for things that one wants to consume generates wealth and increases welfare.

You can of course restrict your consumption to only those things you produce, but you will have a Hobbesian existence: “solitary, poor, nasty, brutish, and short.”

Exchange

Exchange makes possible the creation of wealth through division of labor and specialization, two intimately connected concepts. Surgeons operate, bakers bake, brewers brew, carpenters build, architects design, programmers code, … ad infinitum. The ability to exchange decouples production and consumption. Crusoe’s production and consumption are rigidly linked. In our case, we don’t produce any of the things we consume, and don’t consume what we produce. Continue reading “Competition in Free Markets”

Bibek Debroy on the Mahabharata

I believe YouTube is an inexhaustible treasure house of audio and video content guaranteed to delight and instruct every conceivable taste. I spend altogether too much time on the web, and quite a bit of it on YouTube. I am sure that I would have been much smarter and wiser had I had the benefit of the web when I was growing up. Better late than never, though.

Bibek Debroy’s talk on the Mahabharata is a shining example of the gems you find on the web.

It’s as delightful as it is edifying. Bibek-da, as I like to call him, is a scholar of unparalleled distinction of the Indian classics. Not  just that, he’s a distinguished member of my tribe, an economist. What’s not to like about him! Continue reading “Bibek Debroy on the Mahabharata”

Why I’m an Anti-natalist

I am a contrarian, someone who frequently takes a view opposite to that held by the majority. My default position is to view with the utmost suspicion any idea that is popular or fashionable. If the vast majority of the population thinks and believes in a certain way, I default to considering it to be wrong. If the majority believes proposition P to be true, I suspect that P is probably false. My null hypothesis is that the majority is wrong. Very rarely have I had to reject the null hypothesis.

Therefore it should not come as a surprise to you that I am anti-natalist given that most people are natalist. Mind you, there is no causal connection: majority beliefs do not cause me to hold the beliefs I do. It is only that I am more likely not to find myself on the side of the majority. My antinatalist position would not change even if nobody held it or if everybody did. My position is rational, in the sense that I reasoned my way into it. Continue reading “Why I’m an Anti-natalist”