2015-01-27
W hat is economics? In his Principles of Economics , Carl Menger tells us that his goal is to “reduce the complex phenomena of human economic activity to the simplest elements that can still be subjected to accurate observation, to apply to these elements the measure corresponding to their nature, and constantly adhering to this measure, to investigate the manner in which the more complex...
2015-01-21
Unlike in other fields of study, in economics we do not study objective reality. We study agents functioning subjectively within a given objective reality. As Kant argued in his Critique of Pure Reason , “Let us then make the experiment whether we may not be more successful in metaphysics, if we assume that the objects must conform to our cognition ( 13 ).” Whether in search of a metaphysic, or a...
2015-01-19
How is a pencil created? This question was posited by Leonard Read in his popular story, “ I, Pencil ”. A pencil is a relatively simple product – relatively meaning, “in comparison to other products.” Still, it would be difficult for any one person to oversee the entire process of producing a pencil. Where does the wood for the pencil come from? How is it processed? How do the lumberjacks acquire...
2014-11-10
Formulating the blueprints of a commodity reserve standard with a fixed reserve ratio has proven to be more difficult to detail than I first imagined. In spite of that, I believed I have worked out the most important details. 1) The central bank holds a bundle of commodities as a part of its reserves. The fraction of central bank notes and credits that these reserves represent must stay...
2014-11-10
After waiting a couple days and receiving no response, I was beginning to think I might not get a response from David Glasner. This would be, I believe, the first time. It wasn't. In fact, Glasner had 17 comments on his thread and took the time to go through each of them . You can find his response to me if you want to read through. Jim, You are right, the Swiss central bank is not bound by a...
2014-11-08
I seem to have developed a reputation as being a "market monetarist" but not being an Austrian economist according to one corner of the web . I am far more interested in the principles behind policy rules than the rules themselves. In fact, I have been considering the nature of a proposal different than a nominal income target, but which is derived from the same principles. This proposal came to...
2014-11-04
We have left to consider the a defense of an endogenous fiat money base. Like the gold standard, but more responsive, a nominal income standard will alleviate excess demand for money. Sumner argues that nominal income targeting provides a nominal anchor, meaning that it prevents dramatic swings in prices that would otherwise result from an unstable demand for money ( 2012 , 152). He notes that...
2014-11-03
Pascal Salin’s “ Money and Micro-Economics ” is now online. I was hoping to find some insights into market process oriented macro, but instead found a blasé overview with a weak critique of market monetarism. Perhaps nothing stands out more than Salin’s distaste for monetary expansion. This attitude is reflected clearly in Salin’s suggestion that market monetarism should be called “market...
2014-10-24
I have heard some say, “if you can’t measure it, it doesn’t exist.” At first look, the statement seems innocuous. If you cannot measure something, how do you know that it exists? Empirical-realism attempts to measure the world directly through the five senses. It requires some “objective” measurement. Not all causation can be measured. Some structures in society only evidence themselves through...
2014-10-09
Yesterday I laid out the basics of a fixed reserve ratio commodity reserve standard. The basic idea is that the central bank hold a broad basket of commodities. It does not attempt to stabilize the price of the basket. Instead, it buys or sells the basket as the reserve ratio deviates from its target, and only does so until the official reserve ratio has been reestablished. I did not fully lay...