Category: Economic Theory

Discussion of various points of free markets. See Government Economic Policy for US Government’s significant role.

Creative Destruction and the Social Contract

We are rightly proud of the economic achievements capitalism and hard work has brought to the US, but free market capitalism is not a flawless mechanism. I have posted elsewhere about income inequality. Here I want to focus on a flaw in creative destruction.   Here’s the definition from MIT economics. Creative destruction refers to…

Government Economic Policy Importance

20% of Economy. US Federal Government Economic Activity

The federal government must sensibly handle its huge budget. Its selection of projects of national interest is immensely important. Lastly, but not least, it must regulate some economic activities to ensure that free markets are not distorted by hidden information.

Good For One

Positive + positive + positive + … = negative

That doesn’t sound like the old math, 1+1 = 2, does it?

The Invisible Hand and Its Scar

Thumb on the Scale of Justice

If you’ve studied economics or the business pages, you’ve probably heard of the Invisible Hand. Adam Smith introduced the metaphor in The Wealth of Nations two hundred and fifty years ago. It’s been elaborated on and developed into a basic justification of unfettered free market economy. The Invisible Hand The invisible hand is a metaphor…

Invisible Hand

The Invisible Hand (from Scrooge McDuck-looking character hoisted aloft on the Invisible Hand, looking down at 5 identical factories with tall chimneys spewing smoke in their industrious pursuits

We should not alter societal needs—equality of opportunity and equal reward for equal work—allowing a mythical Invisible Hand the power to stifle changes to the economic marketplace.

OPEC Extra Cost

High Prices

Not stressed enough is the effect the oil price had on economic activity from 1973 to last year. The artificially high price of oil and energy caused GDP growth to be less each year that the economy labored on OPEC-inflated oil costs.

Fed Call for 2 Per Cent Inflation

The Fed’s call for 2% inflation is an indication that economists don’t have a complete economic theory that explains both production and price changes. If they did, they would advocate 0% inflation.

The great bulk of real inflation since 2009 has been in the stock market, making people who already own stock wealthier.