What’s Wrong with Econ 101?

Hendrickson responded recently to criticisms of Econ 101 made by Noah Smith and Mark Thoma. Mark Thoma thinks that Econ 101 has a conservative bias, presumably because Econ 101 teaches students that markets equilibrate supply and demand and allocate resources to their highest valued use and that sort of thing. If markets are so wonderful, then shouldn’t we keep hands off the market and let things take care of themselves? Noah Smith is especially upset that Econ 101, slighting the ambiguous evidence that minimum-wage laws actually do increase unemployment, is too focused on theory and pays too little attention to empirical techniques.

I sympathize with Josh defense of Econ 101, and I think he makes a good point that there is nothing in Econ 101 that quantifies the effect on unemployment of minimum-wage legislation, so that the disconnect between theory and evidence isn’t as stark as Noah suggests. Josh also emphasizes, properly, that whatever the effect of an increase in the minimum wage implied by economic theory, that implication by itself can’t tell us whether the minimum wage should be raised. An ought statement can’t be derived from an is statement. Philosophers are not as uniformly in agreement about the positive-normative distinction as they used to be, but I am old-fashioned enough to think that it’s still valid. If there is a conservative bias in Econ 101, the problem is not Econ 101; the problem is bad teaching.

Having said all that, however, I don’t think that Josh’s defense addresses the real problems with Econ 101. Noah Smith’s complaints about the implied opposition of Econ 101 to minimum-wage legislation and Mark Thoma’s about the conservative bias of Econ 101 are symptoms of a deeper problem with Econ 101, a problem inherent in the current state of economic theory, and unlikely to go away any time soon.

The deeper problem that I think underlies much of the criticism of Econ 101 is the fragility of its essential propositions. These propositions, what Paul Samuelson misguidedly called “meaningful theorems” are deducible from the basic postulates of utility maximization and wealth maximization by applying the method of comparative statics. Not only are the propositions based on questionable psychological assumptions, the comparative-statics method imposes further restrictive assumptions designed to isolate a single purely theoretical relationship. The assumptions aren’t just the kind of simplifications necessary for the theoretical models of any empirical science to be applicable to the real world, they subvert the powerful logic used to derive those implications. It’s not just that the assumptions may not be fully consistent with the conditions actually observed, but the implications of the model are themselves highly sensitive to those assumptions. The meaningful theorems themselves are very sensitive to the assumptions of the model.

The bread and butter of Econ 101 is the microeconomic theory of market adjustment in which price and quantity adjust to equilibrate what consumers demand with what suppliers produce. This is the partial-equilibrium analysis derived from Alfred Marshall, and gradually perfected in the 1920s and 1930s after Marshall’s death with the development of the theories of the firm, and perfect and imperfect competition. As I have pointed out before in a number of posts just as macroeconomics depends on microfoundations, microeconomics depends on macrofoundations (e.g. here and here). All partial-equilibrium analysis relies on the – usually implicit — assumption that all markets but the single market under analysis are in equilibrium. Without that assumption, it is logically impossible to derive any of Samuelson’s meaningful theorems, and the logical necessity of microeconomics is severely compromised.

The underlying idea is very simple. Samuelson’s meaningful theorems are meant to isolate the effect of a change in a single parameter on a particular endogenous variable in an economic system. The only way to isolate the effect of the parameter on the variable is to start from an equilibrium state in which the system is, as it were, at rest. A small (aka infinitesimal) change in the parameter induces an adjustment in the equilibrium, and a comparison of the small change in the variable of interest between the new equilibrium and the old equilibrium relative to the parameter change identifies the underlying relationship between the variable and the parameter, all else being held constant. If the analysis did not start from equilibrium, then the effect of the parameter change on the variable could not be isolated, because the variable would be changing for reasons having nothing to do with the parameter change, making it impossible to isolate the pure effect of the parameter change on the variable of interest.

Not only must the exercise start from an equilibrium state, the equilibrium must be at least locally stable, so that the posited small parameter change doesn’t cause the system to gravitate towards another equilibrium — the usual assumption of a unique equilibrium being an assumption to ensure tractability rather than a deduction from any plausible assumptions – or simply veer off on some explosive or indeterminate path.

Even aside from all these restrictive assumptions, the standard partial-equilibrium analysis is restricted to markets that can be assumed to be very small relative to the entire system. For small markets, it is safe to assume that the small changes in the single market under analysis will have sufficiently small effects on all the other markets in the economy that the induced effects on all the other markets from the change in the market of interest have a negligible feedback effect on the market of interest.

But the partial-equilibrium method surely breaks down when the market under analysis is a market that is large relative to the entire economy, like, shall we say, the market for labor. The feedback effects are simply too strong for the small-market assumptions underlying the partial-equilibrium analysis to be satisfied by the labor market. But even aside from the size issue, the essence of the partial-equilibrium method is the assumption that all markets other than the market under analysis are in equilibrium. But the very assumption that the labor market is not in equilibrium renders the partial-equilibrium assumption that all other markets are in equilibrium untenable. I would suggest that the proper way to think about what Keynes was trying, not necessarily successfully, to do in the General Theory when discussing nominal wage cuts as a way to reduce unemployment is to view that discussion as a critique of using the partial-equilibrium method to analyze a state of general unemployment, as opposed to a situation in which unemployment is confined to a particular occupation or a particular geographic area.

So the question naturally arises: If the logical basis of Econ 101 is as flimsy as I have been suggesting, should we stop teaching Econ 101? My answer is an emphatic, but qualified, no. Econ 101 is the distillation of almost a century and a half of rigorous thought about how to analyze human behavior. What we have come up with so far is very imperfect, but it is still the most effective tool we have for systematically thinking about human conduct and its consequences, especially its unintended consequences. But we should be more forthright about its limitations and the nature of the assumptions that underlie the analysis. We should also be more aware of the logical gaps between the theory – Samuelson’s meaningful theorems — and the applications of the theory.

In fact, many meaningful theorems are consistently corroborated by statistical tests, presumably because observations by and large occur when the economy operates in the neighborhood of a general equililbrium and feedback effect are small, so that the extraneous forces – other than those derived from theory – impinge on actual observations more or less randomly, and thus don’t significantly distort the predicted relationship. And undoubtedly there are also cases in which the random effects overwhelm the theoretically identified relationships, preventing the relationships from being identified statistically, at least when the number of observations is relatively small as is usually the case with economic data. But we should also acknowledge that the theoretically predicted relationships may simply not hold in the real world, because the extreme conditions required for the predicted partial-equilibrium relationships to hold – near-equilibrium conditions and the absence of feedback effects – may often not be satisfied.

21 Responses to “What’s Wrong with Econ 101?”

  1. 1 Dan June 17, 2016 at 3:21 am

    I emphatically and unqualifiedly agree with your conclusion.

    Critics would be well served to remember that econ is the best we have and the result of generations of rigorous work thought and analysis. It’s easy to point out flaws, it’s really hard to improve. I agree it helps when those with most expertise point out our knowledge isn’t yet complete. That should be exciting. There is challenging work left to do.

    Analyzing human behavior is hard. It’s harder than rocket science. It’s odd that econ has physics envy when the economists object of study is far more challenging and complex. But for either we sit on a Frontier of understanding that is very hard work to advance.

  2. 2 Philip George June 17, 2016 at 3:30 am

    Absolutely brilliant!

    You have almost completely answered the question: Why is it that the market for fish always clears but the market for labor does not?

    There is a perfectly classical explanation to the question. I know it but will not publish the answer until the next edition of my book.

  3. 3 JKH June 17, 2016 at 3:50 am

    Very nicely explained.

  4. 4 Henry June 17, 2016 at 5:51 am

    The problem with Econ 101 is that it reflects the problem with modern mainstream macroeconomics and that is that modern mainstream macro is founded on a classical/neoclassical pedestal and microeconomics is at the foundation of the classical/neoclassical paradigm. Econ 101 is the beginning training for the modern macroeconomist.

  5. 5 J. Stewart June 17, 2016 at 6:36 am

    Could you please direct me to the empirical evidence that equilibrium prices are determined by supply and demand curves as Econ 101 teaches?

    In what other science is such a fundamental proposition accepted as truth without empirical evidence supporting it?

  6. 6 kaleberg June 17, 2016 at 1:55 pm

    When I took Econ 101 (14.01) at MIT back in the early 70s, we were taught that the only market where the supply and demand curves we were learning about were meaningful was the market for marijuana.

  7. 7 Henry June 17, 2016 at 3:46 pm

    “we were taught that the only market where the supply and demand curves we were learning about were meaningful was the market for marijuana.”

    That’s odd? I would have thought there was a strong public good component to the consumption of marijuana.

  8. 8 Benjamin Cole June 17, 2016 at 6:09 pm

    I like this post, and I like econ 101.

    What bothers me is that upon teaching econ 101, the topic becomes the minimum wage.

    How about extensive pervasive and very stipulative property-zoning? Criminalizing push-cart vending? Extensive rural subsidies? Occupational licensing of lawyers?

    I would say at this point the empirical evidence is abundant that property zoning is a much greater hindrance to business development on the West Coast than the minimum wage.

  9. 9 doncoffin64 June 17, 2016 at 10:46 pm

    “All partial-equilibrium analysis relies on the – usually implicit — assumption that all markets but the single market under analysis are in equilibrium.”

    And this is where I first realized that I had a problem…If one market is not in equilibrium, then there must be at least one other market that is also not in equilibrium. Specifically, if at the existing price vector, there is an excess demand for one product, then there must be at least one product for which there is an excess supply (or, if you will, a negative excess demand)…because, in the system, excess demands must sum to zero.

    (I’ve also been thinking lately about the assumption that preferences can be treated as short-run stationary. That is a nice, useful assumption, but it’s also, I think, wrong. Tom Vanderbilt’s recent book, *You May Also Like* discusses the difficult of what it even means to *have* preferences; there’s a nice review in The New Yorker, June 20, beginning on p. 73. And if preferences aren’t stable and transitive, then what happens to the entire theory of demand? The mind boggles. Making me glad, once again, that I have mostly retired.)

  10. 10 Jeffrey Stewart, Ph.D. June 18, 2016 at 9:27 am

    Hey! Why didn’t you publish my comment? Are you censoring the views of people with whom you may not agree? What’s up with that?

    By the way, could you please direct me to the empirical evidence showing that equilibrium prices are determined by supply and demand curves? Please God in Heaven above, tell me where the evidence is.

    Thank you for your time and cooperation with my request.

  11. 11 Egmont Kakarot-Handtke June 18, 2016 at 1:06 pm

    What’s wrong with Econ 101? Economists, of course!
    Comment on David Glasner on ‘What’s wrong with Econ 101?’

    Imagine for a moment, you ask a pre-Copernican astronomer directly: Is Geo-centrism true or false? And imagine further he paraphrases David Glasner as follows: ‘Geo-centrism is the distillation of almost 1500 years of rigorous thought about how to analyze the behavior of celestial bodies. What we have come up with so far is very imperfect ― more than 20 epicycles are admittedly a bit awkward ― but it is still the most effective tool we have for systematically thinking about the behavior of celestial bodies.’ (See intro)

    This sounds good and reasonable and balanced, except for the fact that the answer is evasive. Worse, it is delusional. With hindsight we know that Geo-centrism had been axiomatically false and that the inconsistencies had not been localized over more than 1500 years but only papered over with epicycle upon epicycle. Eventually, though, Geo-centrism has been withdrawn from the corpus of scientific knowledge and fully replaced by Helio-centrism.

    The situation in economics is exactly the same, that is, pre-Copernican. Econ 101 is still at the proto-scientific level: “What is now taught as standard economic theory will eventually disappear, no trace of it will remain in the universities or boardrooms because it simply doesn’t work …” (McCauley, 2006, p. 17)

    Clearly, David Glasner, Noah Smith, Mark Thoma et al. do not want to go to such extremes. Therefore, they resort to rhetorical autotomy.*

    What is the lethal methodological error/mistake of Econ 101? The short answer is that it is behavior-centric, that is, it is based upon folk psychology and folk sociology. This approach does not have some minor weaknesses but is a complete failure. Therefore, the inescapable paradigm shift consists in moving from the behavior-centric approach to the structure-centric approach. This is comparable to the Copernican turn from Geo-centrism to Helio-centrism. Nothing less will do.

    The defenders of Econ 101 try to avoid the conclusion of absolute failure by freely admitting the most obvious weaknesses and by issuing a barrage of disclaimers which in sum amount to: If you take this stuff seriously it’s your own fault. Don’t blame us if it does not work.

    Many economists are well aware that they are scientifically lost in the wood. The problem is that they have no idea how to get out: “Yet most economists neither seek alternative theories nor believe that they can be found.” (Hausman, 1992, p. 248)

    So, the representative economist continues to do what he is since Jevons/Walras/Menger supposed to do: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals.” (Arrow, 1994, p. 1). What does methodological individualism mean in detail? All variants of orthodox economics are built upon this hard core set of foundational propositions, a.k.a. axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub, 1985, p. 147)

    It is pretty obvious to anyone with a modicum of scientific instinct that the axiomatic starting point of standard economics is methodologically forever unacceptable. HC2, HC4, HC5 are blatant nonentities, but the representative economist swallows them hook, line and sinker since more than 140 years. Note in particular that to take equilibrium into the premises is an elementary methodological mistake which is known since antiquity as petitio principii.** Therefore, all equilibrium models are a priori false and by consequence worthless.***

    To admit minor weaknesses is insufficient. The fact of the matter is that already elementary supply-demand-equilibrium is scientific garbage because it is built upon the unacceptable axiom set HC1 to HC5.

    David Glasner comes close to the crucial point: “The deeper problem that I think underlies much of the criticism of Econ 101 is the fragility of its essential propositions. These propositions, what Paul Samuelson misguidedly called ‘meaningful theorems’ are deducible from the basic postulates of utility maximization and wealth maximization by applying the method of comparative statics.”

    The point is: the essential propositions, a.k.a. axioms, are not fragile they are FALSE and forever unacceptable. The solution consists in moving from subjective-behavioral axioms (= microfoundations) to objective-structural axioms (= macrofoundations).

    By telling the world “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point” (Krugman) and by rationalizing the failure of this research programme economists confirm their hopeless scientific incompetence. The maximization-and-equilibrium approach has already been dead in the cradle. Standard economics is scientifically behind the curve since Adam Smith. That’s what is wrong with Econ 101.

    Egmont Kakarot-Handtke

    Arrow, K. J. (1994). Methodological Individualism and Social Knowledge.
    American Economic Review, Papers and Proceedings, 84(2): 1–9. URL http://www.jstor.org/stable/2117792.
    Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
    McCauley, J. L. (2006). Response to “Worrying Trends in EconoPhysics”. EconoPhysics Forum, 0601001: 1–26. URL http://www.unifr.ch/econophysics/paper/show/id/doc_0601001
    Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL

    * Autotomy: “Self amputation is the behaviour whereby an animal (e.g. gecko, lizard) sheds or discards one or more of its own appendages, usually as a self-defense mechanism to elude a predator’s grasp or to distract the predator and thereby allow escape. The lost body part may be regenerated later.” (Wikipedia)
    ** For details see ‘Petitio principii — economists’ biggest methodological mistake’
    *** See ‘Could we, please, all focus on the key question of economics?’

  12. 12 Warren Miller June 19, 2016 at 9:05 am

    If there is a difference between homodox economics today and astrology, I’m unable to spot it. For starters, in microeconomics, there is no room for a firm (only a ‘production function’), or for people, differentiation, strategy, etc. Moreover, its assumptions render it unrecognizable in the real world.

    Ditto for macroeconomics, which, as one wag noted, has predicted nine out of the last three recessions. As taught these days, macro more closely resembles high-level chicken-choking, but without the rigor.

    I believe that it is not just outrageous, but also unethical, to teach such rubbish to unsuspecting undergraduates, in particular. No wonder they come out of a bachelor’s degree program with little substantive knowledge or understanding of economics. The faux separation of macro and micro is ludicrous.

    The only economics that makes any real-world sense is the Austrian perspective. It is an accurate reflection of how free people make decisions and also how markets and industries actually work. Properly portrayed, basic economics is the study of human nature, pure and simple.

  13. 13 David Glasner June 21, 2016 at 1:23 pm

    Dan, Thank you. I agree that economics can’t be like physics. But let’s not get too self-congratulatory. I don’t think that there is enough recognition that economic theory is dealing with phenomena and complexity that means that we can’t just decide to be scientists and do what physicists do. And formalistic model building does not make us scientists.

    Phlip, Thank you. Please be sure to let us know when it’s published.

    JKH, Thanks.

    Henry, That modern macro doesn’t understand the limitations of microeconomics is not an indictment of microeconomics; it’s an indictment of modern macroeconomists. That seems obvious, but you seem to think otherwise.

    J. Stewart, I don’t know what you mean by evidence that prices are determined by supply and demand curves. Supply and demand curves are mental constructs, so I don’t know what evidence you could possibly be referring to? Are you talking about evidence that supports the predictions of supply and demand anlaysis? There is a ton of evidence. Look at Venezuela. Price controls have caused a complete breakdown of the economy. That’s pretty strong evidence. Perhaps you aren’t convinced, but maybe you aren’t convinced that the world is round.

    kaleburg, LOL

    Benjamin, I agree with you about zoning, but how do the effects of zoning tell us anything about the effect of miniumum wage laws?

    Don, You are right. If Walras’s law holds, as it surely does, an excess demand in one market (the nth) must correspond to an excess supply in some other market or markets. The assumption is (in system with n commodities, where n is large) that the excess supplies in the n-1 market corresponding to the excess demand in the nth market are so small that the effect is trivial on each of the n-1 markets. The assumption of preference stability is like the assumption that we start from a point of equilibrium necessary to derive some determinate results. Otherwise we couldn’t isolate any determinate effect on any endogenous variable from a parameter change. But you are right that in the real world there is no guarantee that preferences are stable.

    Jeffrey, Hey! Calm down.

    Egmont, Physics also makes assumptions that are literally false, e.g., there is no friction. And for some problems that does not invalidate the analysis; in other cases it does. A scientist has to know how to adjust the assumptions of his model to make it applicable to the problem he is trying to solve. I agree that too much of economic theory is devoted to analyzing problems for which the standard assumptions are not relevant.

    Warren, I agree that there is a lot to be desired in the current teaching of economics, and that Austrian economics, at its best, can provide worthwhile insight into many relevant problems, but it is silly to assume that only Austrian economists know what they are talking about. Indeed, the Austrians with the loudest mouths are usually the ones who know the least about what they are talking.

  14. 14 Henry June 21, 2016 at 2:13 pm

    “…it’s an indictment of modern macroeconomists. ”

    I agree. That’s what I thought I was saying.

  15. 15 ProfitMaximiser June 21, 2016 at 3:19 pm

    Often if you talk to heterodox types or people who are skeptical of economics as a whole you get the impression that orthodox neoclassical microeconomics finds essentially no empirical support, and that mainstream economists continue to believe it due to the elegance of the equations or “neoliberal ideology” or something like that.

    This impression is compounded by the fact that when economists try to defend neoclassical microeconomics they typically argue from an a priori basis, e.g. “rationality is a plausible assumption if agents have time to learn and are subject to competition etc.”. Not that a priori arguments don’t have value, but making a purely a priori case signals that the theory doesn’t fare well empirically which is why it’s not being mentioned.

    I am a non-economist who has learnt some economics as a hobby and have come to think that the theorems of neoclassical microeconomics have value both conceptually and empirically. But trying to look for the relevant evidence on the basic theorems has been much more difficult than it should be and it frustrates me immensely that no economist (as far as I’m aware) has ever tried to aggregate all the empirical evidence in favour of the basic theorems. When Darwinian evolution is attacked, biologists respond by writing books presenting all the evidence for evolution. I honestly cannot understand why economists don’t do the same.

    I was motivated to write this comment because of your statement:
    “In fact, many meaningful theorems are consistently corroborated by statistical tests”
    It would not be reasonable to expect you to digress into discussing all the examples of “meaningful theorems” which are supported by statistical evidence since that wasn’t the point of this post. However I find it exasperating that this is all I’ve ever seen economists do—make some brief and vague comment about how many neoclassical microeconomic models pass empirical tests.

    Friedman and Stigler believed that predictions rather than the realism of assumptions was what mattered when judging a theory. To take such a view without experiencing much cognitive dissonance you’d have to have seen a lot of instances of economic theory predicting correctly. But I have never seen in either Stigler or Friedman’s writings a list of such successful predictions. Stigler and Friedman are not dishonest people, so my only conclusion is that such successful predictions are common knowledge among economists and so not worth mentioning. But non-economists are certainly not aware of this, so someone should really try to distill this common knowledge into an accessible text.

    Also: if any economists in this thread know of any resources where I can find discussions on to what extent basic microeconomic theorems are supported by empirical evidence I would appreciate it.

  16. 16 David Glasner June 21, 2016 at 5:11 pm

    Henry, Then all is well. But it seemed that you were saying that somehow Econ 101 was responsible for the misdeeds of modern macroeconomics.

  17. 17 David Glasner June 21, 2016 at 7:36 pm

    Profit Maximizer, The best economics textbook ever written was University Economics by Armen Alchian and William Allen. A shorter version with just the micro chapters was published under the title Exchange and Production. I studied this book as a freshman and as a graduate student preparing for my preliminary exam in economic theory. Unfortunately it is no longer in print but you can probably still get a used copy on the internet. It does a wonderful job of bringing out the empirical implications of economic theory including the empirical implications of the failure of the standard assumptions about perfect information and zero transactions costs to obtain in the real world. Written for the most part in the late 1950s and early 1960s, some of the attempts at humor may now seem in somewhat bad taste, but those innocuous lapses should not deter anyone from the opportunity to learn what economics is all about.

  18. 18 Egmont Kakarot-Handtke June 26, 2016 at 12:07 pm

    David Glasner

    You say: “Physics also makes assumptions that are literally false, e.g., there is no friction. And for some problems that does not invalidate the analysis; in other cases it does.”

    Nothing is more ridiculous than to compare economics with physics. Just open the Principia and see that Newton made his counterintuitive “assumptions” (= axioms*) as rigorous as possible and then compare this with Adam Smith: “But he had no such ambitions; in fact he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter, 1994, p. 185)

    Economics did not recover from this abortive start and is still at the proto-scientific level of storytelling. The ultimate reason is that economists cannot tell the difference between an abstraction/limiting case and a nonentity. Your evasive argument delivers the proof. A friction-free motion is NOT literally false but is the normality in outer space; only under the special conditions of gravity and atmosphere is uniform motion an abstraction/limiting case* (see also Cohen, 1994, p. 77 for Newton’s methodology).

    So, the concept of friction-free motion does indeed have a counterpart in reality while the concept of constrained optimization or equilibrium has not. This is the defining difference between genuine science and the cargo cult science economics.

    Green cheese behavioral assumptions like utility maximization or rational expectations are NONENTITIES like angels, unicorns or the Easter Bunny. Nonentities have no counterpart in reality and are methodologically forever inadmissible. The brain-dead assumptions of standard economics are definitively NOT on the same footing with the abstractions/limiting cases of physics.

    Newton is famous for his ‘hypotheses non fingo’ which roughly translates to ‘I do not argue from feigned premises’, i.e., those that have no counterpart in reality. And he had been well aware that from nonentities (here = hypotheses) nothing but storytelling follows: “Those who take the foundations of their speculations from hypotheses, even if they then proceed most rigorously according to mechanical laws, are merely putting together a romance, elegant perhaps and charming, but nevertheless a romance.” (Roger Cotes, Preface, 1999, p. 386)

    Because it is based on nonentities Econ 101 is nothing more than a charming romance for scientifically retarded economics students.

    The precondition for economics to rise above the proto-scientific level is to replace subjective-behavioral microfoundations by objective-structural macrofoundations (2014). Econ 101 has never produced a “meaningful theorem” and is simply indefensible.

    Egmont Kakarot-Handtke

    Cohen, I. B. (1994). Natural Images in Economic Thought, chapter Newton and the Social Sciences, With Special Reference to Economics, or, the Case of the Missing Paradigm, pages 55–90. Cambridge: Cambridge University Press.
    Kakarot-Handtke, E. (2014). Objective Principles of Economics. SSRN Working Paper Series, 2418851: 1–19. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2418851
    Newton, I. (1999). The Principia; Mathematical Principles of Natural Philosophy. Berkley, CA, Los Angeles, CA, London: University of California Press.
    Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford University Press

    * See Wikipedia https://en.wikipedia.org/wiki/Newton%27s_laws_of_motion

  19. 19 ProfitMaximiser June 26, 2016 at 3:18 pm

    Thanks for your reply. I have actually been planning to write a post on my blog trying to explain to non-economists why I find economics fruitful and your recommendation will be a useful resource for that purpose. (The book is fortunately available at my university library.)

  20. 20 David Glasner July 5, 2016 at 10:20 am

    Egmont, I think that to say that nothing is more ridiculous than to compare economics to physics is a ridiculous statement that is easily refuted by listening for even two minutes to any random news account of the current election campaign for President of the US. Beyond that I was not even making a comparison between physics and economics, I merely noted that assumptions that are not strictly true are often usefully made in the natural sciences e.g., physics. When Newton posited his law of gravitation, gravity was a total unknown, a purely hypothetical entity like green cheese. The greatness of Newton was that he was able to imagine the existence of a force and have his intuition confirmed by researchers long after he died.

    ProfitMaximiser, Glad to be of service

  1. 1 What’s Wrong with Econ 101? | Mostly Economics Trackback on June 16, 2016 at 9:29 pm

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About Me

David Glasner
Washington, DC

I am an economist in the Washington DC area. My research and writing has been mostly on monetary economics and policy and the history of economics. In my book Free Banking and Monetary Reform, I argued for a non-Monetarist non-Keynesian approach to monetary policy, based on a theory of a competitive supply of money. Over the years, I have become increasingly impressed by the similarities between my approach and that of R. G. Hawtrey and hope to bring Hawtrey's unduly neglected contributions to the attention of a wider audience.

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