Sunday, August 03, 2008

Limiting Economics

Those who know least about economics are often the first to attack it - generally to limit the scope and applicability on policy initiatives that they champion. Emotionally blathering on about "feelings" they often go on to propose some immensely impractical idea that generally means everyone would be worse off - often particularly those they propose to help, and by limiting the scope and applicability of economics that will often predict these outcomes (e.g. tax rebate cheques to "stimulate the economy"), they feel they can insulate their silly ideas.

From the blog Economics of Contempt: "The one criticism of economics that annoys me the most is the charge that economics is unrealistic because economists think people are only motivated by money [...] This is stupid. Basic economic theory says that people seek to maximize utility, which is generally defined as a person's level of satisfaction [...] if you think basic economic models assume that people are only motivated by money, then I'm sorry, but you fundamentally don't understand what economics is all about." (Read the whole thing - it's fairly short)

While sometimes the prescriptions are funny on their face, other times they have far more dire consequences. From Adam Smith Institute's Blog:

Taking lessons from Cuban agriculture with the low level malnutrition there doesn't sound all that wise. The compulsion that accompanies the WWII style mobilisation (yes, they do make a direct comparison) they urge is of course anathema to anyone with the least pretence to a concern for liberty or freedom. Their ideas on how to reform the financial system actually brought on a bout of hysteria: they want credit controls, they want to lower the interest rates so that green schemes appear profitable and they want to divert pensions into such green schemes. They then have the audacity that stuffing your money in to low return green schemes will provide you with a decent pension. Eh? The hysteria turned to giggles when they described the capital controls needed to increase the amount of money available for such investments. Leave aside their both socialist and nationalist insistence that your money must be placed at the use of the nation rather than your use and think instead of this.

[...] Hmm, I wonder what the next argument the millenarian socialists will use as a reason we must destroy civilisation will be?

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