Economic Reasoning

Structured, rational thinking about community, cooperation, and the market
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  • Per Bylund

Money as a Market Institution vs. Money as a Veil Sep 4, 2014

Money is generally referred to as the medium of exchange. Thus far most economists agree. Kind of. According to the Wikipedia article on money, which summarizes the common view, the functions of money are generally listed as "a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment." This makes it a little more open what "is" a money, but to be a medium of exchange certainly is a core attribute or function. And, one can argue, if it is the generally accepted medium of exchange then it also functions as a unit of...

By Per Bylund Vote4 1

The Process Logic of Economic Reasoning Sep 1, 2014

For anyone who has already acquired the skill, economic reasoning appears to be so obvious that it requires no explanation. But to anyone who has not yet learned this logic, it can appear all but intuitive - perhaps even unreasonable. The reason, I have come to understand, is the dynamic nature of any economic setting, which necessitates a process logic. While most people have no trouble with simple logic, where for example x -> y -> z and therefore x -> z, everything is typically interrelated and, to some degree or in some sense, interdependent in an economy. The market process, in...

By Per Bylund Vote4 0

What It Means to ‘Maximize Profit’ Aug 28, 2014

Economists are often accused by members of the general public, political pundits, and others for being overly simplistic, using outrageously foreign assumptions, and being too narrow in scope. It isn't all about money, they (non-economists) tell us (economists). Right, it isn't. Some of this criticism is unfortunately accurate. Looking at what goes as economics nowadays, it is hard to draw a line between economics in practice and the straw man of the discipline. In this sense, the criticism is about as accurate as economists can expect - and deserve. Yet economics is much larger than the mainstream "mathturbation" with formalized models....

By Per Bylund Vote4 0

Understanding Resources Aug 25, 2014

I have recently experienced a discussion with environmentalists, which was as frustrating as it was educational. The discussion started around the concept of economic growth, to which environmentalists are often ideologically opposed, but quickly turned into a rather cross-paradigmatic attempt at educating the other side really only talking past each other. I, as an economist, was quickly dismissed by the environmentalists for being an economist and for that reason "fundamentally naïve" and "completely in lack of knowledge" of economics. The reason? I did not realize, they claimed, the strictly physical limitations to economic reasoning. While I didn't take their word...

By Per Bylund Vote23 3

Fractional Thinking about Banking Aug 21, 2014

In a very long article in today's Forbes, online edition, John Tamny writes on the Closing of the Austrian School's Economic Mind. Tamny finds the "modern evolution" of the school "disappointing" in its "more and more ... statist, monetarist" appearance. He especially addresses the never-ending debate on fractional reserve banking (and manages to find a single misspelling in an article referring to "fractural" such, which he makes fun of), and the "error" of Austrians who see something wrong with it. One cannot create money, Tamny informs us, so banks don't. I must admit that I haven't read all of Tamny's very long...

By Per Bylund Vote7 2

What Is Economics? Aug 14, 2014

A lot of people seem to believe that economics is the study of how one makes money. It is difficult to understand where this notion comes from, but since the price mechanism is prevalent and fundamental to what makes a market, perhaps the layman's definition isn't completely wide of the mark. However, money is neither necessary nor sufficient for the study of economics. Economics studies value, for which money may be a proxy. But a proxy is not that which it represents, just like a receipt may represent or even prove a purchase but isn't, in itself, the purchase. Wikipedia notes JB Say's...

By Per Bylund Vote7 0

What Is Entrepreneurial Judgment? Aug 11, 2014

While Israel Kirzner asserts "alertness" as a quality among entrepreneurs that allow them to recognize (and then correct) errors through arbitrage, others (like Nicolai J. Foss and Peter G. Klein) rely on "judgment" as the distinctly entrepreneurial quality that explains success. While the latter is arguably a thicker conceptualization of what entrepreneurship entails than the former, both are supposedly derived from Ludwig von Mises's theorizing on the entrepreneur as the "driving force" of the market - the "creator" of the market process. Kirzner's "alert" entrepreneur has been both adopted and reinterpreted in the mainstream entrepreneurship literature (see here, ungated version...

By Per Bylund Vote5 0

Diminishing Marginal Utility – What Does It Mean? Aug 7, 2014

Economists talk about diminishing marginal utility, which is a generic way of saying that we value stuff less the more we already have of that particular "stuff." In other words, if I have three eggs, a fourth egg is worth less to me that the third one (which is worth less than the second one, which is worth less than the first one). Perhaps you buy this without need for further argument, but many don't. And the concept is actually problematic unless we already think as economists. The reason for this is that when illustrating economic problems we tend to use everyday examples...

By Per Bylund Vote6 2

Insurance, What It Really Means Jul 31, 2014

America has become known worldwide for a high-quality failing health care system. As a foreigner moving to the United States, the enormous cost (to consumers) of health care and dental care are mind-boggling. Even with very expensive health care insurance offered through employers (and, lately, by government decree), one ends up paying quite a bit out of pocket. And pretty much all insurance policies include a maximum lifetime benefit amount as well as a cap for treatments. This raises a very interesting - but seldom raised - question: what is insurance? To make sure we are all on the same...

By Per Bylund Vote4 0

Real Science Is with the Critics Jul 28, 2014

Science is becoming ever more politicized. Or perhaps it always was, but we're only now finding out thanks to hyper communication via the Internet. In either case, it makes it necessary for a consumer of ostensibly true (or at least fact-based) reporting to have a critical mind and be careful about the source of a claim or "fact." Unfortunately, it is almost impossible to get a balanced view from someone else, so one must figure some kind of short hand for finding truth. This is vital when consuming debates with political implications (or even claims), and a lot of what is...

By Per Bylund Vote5 0

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