Thursday, October 24, 2013

Shorter Economics Profession

1. Economics is the study of the allocation of scarce resources.

2. The most important topic in economics is growth.

3. Growth has nothing to do with the allocation of scarce resources.

(Inspired by this and this...)


  1. Oh, it just occurred to me. JMK:

    MOST treatises on the theory of value and production are primarily concerned with the distribution of a given volume of employed resources between different uses ... But the pure theory of what determines the actual employment of the available resources has seldom been examined in great detail.

    same same

  2. Maybe that was opaque.
    Scarcity: "the distribution of a given volume of employed resources between different uses".
    Growth: "the actual employment of the available resources".

  3. I should either take this post down or explain the joke. (Probably the former.)

    But the point is, growth is NOT explained by anything that happens in terms of existing resources.

    You are right that much of the economic profession historically has ignored the problem of the level of output at a given moment. But this isn't a fundamental problem, since we can think of unemployed resources as just representing an undesirable allocation that arises for some reason. So incorporating Keynesian problems doesn't in principle require any changes to the scope of economics. And both JMK (most of the time at least) and contemporary mainstream "Keynesians" say that the problem of aggregate demand must be dealt with, but that once it is, the old scarce-means-to-alternative-ends framework is fine.

    growth is a different story, because the consensus in the profession is that essentially all long-term growth is explained by changes in technology. neither the efficient allocation, nor the full utilization, nor even the rate of growth, of labor and capital play an important role in growth. (Again, this is not me, this is every first-year graduate textbook.) But technology is not scarce! It is a public good. And it does not develop through any identifiable production process or market exchange.

    It is almost literally the case that your economics education begins with learning that Y=F(K,L;A) and that almost all the variation in Y is explained in practice by A. And then you spend the rest of your education studying variation in K and L.

    1. This comment has been removed by the author.

    2. I think we have to start with the economics field's hard science pretensions.

      K and L are amenable to economics' scientific method as science is socially understood, and, scientific method is our main claim to authority; A on the other hand, is also a function of the soft sciences and soft non-science language...

      For example, with the opportunity cost (A alternative use of my K and L); is the alternative really available to me if I cannot imagine it in my head or if it is 'uncool' among my peers (liberal interpretation of austrian D.McClorskey).

      Also A is dependent of ideas and hard to measure. A captures institutional framework, we may have to discuss the courts, culture, etc...wrt A.
      "Lateral thinker" Albert Hirschman would be the model economist in that scenario:

    3. Oh...btw, I took down my joke. Inspired by

  4. Hey, I just thought it was neat you and Keynes both contrasted the same keywords: scarcity and growth.

  5. I especially loved A Fine Theorem making the following comment, at one of the links:
    "I have no idea why economics attracts so many cranks, where I’m defining crank as anyone who believes an entire field of people for a century are consistently making elementary mistakes."