General Economic Theories Thread

[chimpburgers]

Looking at the minimum wage thread, I noticed that there weren't really many threads in Deep Thoughts where people can discuss economic theories and the various approaches that economists from all ends of the spectrum conduct their analysis when looking at economies.

There are several different schools of thought out there related to economics. When it comes to macroeconomics, the two main schools of thought that are most prevalent are the freshwater and saltwater schools. The freshwater school relates to the economics taught at universities like Carnegie Mellon and the University of Chicago and associated with the monetarist position and a general push towards more laissez-faire policies.

The saltwater school is also related to macroeconomics, but it is much more associated with Harvard, MIT, and several of the other Ivy League Schools and emphasizes more government intervention in the economy to control interest rates. This is associated with New Keynesian economic policies.

Based on the two economics courses that I have taken in college, it seemed to be very focused on neoclassical economics, which is arguably one of the most widely taken approaches to looking at economics, which is based from the following assumptions:

1. People have rational preferences among outcomes. 2. Individuals maximize utility and firms maximize profits. 3. People act independently on the basis of full and relevant information.

Source: http://www.econlib.org/library/Enc1/NeoclassicalEconomics.html

To summarize this part, it's the kind of economics that most people are familiar with or have seen the most concepts from. It contains ideas from different schools of economic thought and is most prevalent in microeconomics. There have also been a neoclassical synthesis that essentially combines elements from neoclassical economics with the ideas from John Maynard Keynes, and arguably still has an impact on the way that economics is taught at the university level.

Outside of this, you also have heterodox economics, which includes post-Keynesian economics, Austrian economics, Georgism, Marxism, and socialism. All of these economic schools of thought are considered outside of mainstream economic thought, though in recent years, there has been a rise in the number of people who would consider themselves Post-Keynesians (and in some cases, they are more specifically into Modern Monetary Theory or chartalism, though these groups generally tend to agree with each other on many points) or Austrians. Some of these heterodox economic schools of thought have been critical of the neoclassical approach.

Now that I've given a basic rundown of some of the economic theories and schools of thoughts that are out there, I think this would be a good place to have a discussion on economics and hopefully other issues related to it and what your experiences have been with the subject as a whole. You can also discuss the economics blogs that out there from individuals who are working in the field and who hold varying positions on economic issues.

 

[GS 281]

Marx - emotion = a good start. Unless someone is a professional economist, I really don't think that there is a great deal more you need to understand, just read it and don't try to understand capitalism as good or bad. Understand it as "it is what it is".

Another thing, when discussing socioeconomic models such as capitalism and socialism, please understand that these are concepts constructed based on theory and observation, and that they are not hard models where everything must fit 100% or someone isn't capitalist or something isn't socialist. It goes without saying that no system completely conforms to one model or another, it is more productive to understand the true nature of the economic system if you really care about discussing useful change. How it is that the political, economic, social and technological factors of a country align and form the current trajectory is how you begin to understand the changes that should take place, not by saying that guy X says or guy Y says. The concepts can help, but time and place is so numerous and nothing works the same anywhere.

 

[autisticdragonkin]

I would consider myself to be a Georgist at the time.
But I doubt that only taxing land will provide sufficient revenue

 

[autisticdragonkin]

I find the formula for calculating market elasticity to be kind of annoying

 

[Holdek]

I think economics should be called "the dismal science" also because its models assume perfect information and rational human behavior. Even if you make adjustments for information asymmetry you still have to account for social and individual psychology, another soft science with multitudes of variables.

I believe you can draw some very general conclusions with economics that can guide blunt force instruments like interest rates, deficit spending, and that information conveyed through market pricing is more accurate than central planning (and even these are disputed by heterodox schools), but beyond that it's a bit of a crap shoot.

Speaking of, I'm concerned about the resurrection of these debunked heterodox schools. It's reduced Nobel Laureates like Paul Krugmen to writing years worth of columns complaining about zombies, as well as people like Hugo Chavez being (mostly) democratically elected on communist platforms multiple times only to drag their countries down into an almost failed states.

I would consider myself to be a Georgist at the time.
But I doubt that only taxing land will provide sufficient revenue

The problem with Georgism is the definition of "rent" varies according to whom you're asking,

 

[GS 281]

@Geo

 

[Dudeofteenage]

Marx - emotion = a good start

I have to say I don't think Marx is a particularly emotional economist.

There's this pervasive critique of Marxism from the centre and right that its fatal flaw is its incredibly rosey view of human nature and that communism would work if we were perfect selfless angels but we're not so better stick with capitalism. But Das Kapital isn't exactly full of rhapsodies about how awesome human beings are.

I think economics should be called "the dismal science" also because its models assume perfect information and rational human behavior.

Firstly, I think you're talking about Chicago-school liberal market economics, not economics generally. (As was originally said, Marx was as much an economist as anybody ever was). But even then, much as I dislike Chicago school, its theorists do accept that perfect information doesn't exist, and their models don't rely on it.

 

[autisticdragonkin]

I would consider myself to be a Georgist at the time.
But I doubt that only taxing land will provide sufficient revenue

I completely changed and am now supportive of generating revenue through poll taxes rather than land taxes.

I find the formula for calculating market elasticity to be kind of annoying

I managed to sort of grasp it now but I still prefer to just use the utility function