There have been frequent calls for a new approach to economics in the press. For this purpose, George Soros founded the “Institute for New Economic Thinking” (INET). I personally do not see this as a solution. Nobody knows what “new…
Economics as a cock fight In August last year, Raghuram Rajan, the current Head of the Indian Central Bank and previous Professor of Finance in Chicago, wrote an article that had attracted considerable attention about the “paranoid style” of economic…
Is the economy complex or merely complicated? The methodological approach of mainstream economists largely involves seeing an economy as either in a state of equilibrium or in a state of striving to reach an equilibrium. Economists analyse factors and chains…
These days economists have a bad reputation. And not only because almost all of their forecasts are wrong. They failed to predict both the financial crisis and the Euro crisis; indeed, most of them did not even have a vague…
A great video with Tim Harford from the FT, putting financial meltdowns into the broader context of complexity.
There is no sound empirical evidence and no convincing theoretical justification for why deflation is such a danger to the economy. Although deflation can be the result of an economic crisis, it can also be caused by cost reductions due…
There have been different stages of varying levels of inflation in world economic history, but also long periods of price stability. The present period, which is characterised by relatively moderate and constant inflation rates of about 2% p.a., is relatively…
The concept that very low rates of inflation are dangerous is closely related to the belief that there is some sort of an “optimum rate of inflation” for the economy, at which economic growth can progress at its smoothest. This…
For months now, we have been showered in a flood of press reports and comments by economists, warning us about the catastrophic effects of potential deflation. However, they never justify their statements to any great extent. As a rule, the…
Economic forecasts are not complete nonsense or impossible per se. Indeed, it is the way they are usually drawn up these days that can give rise to substantial problems. The quality of the underlying data is often poor. Or it…
With a Steady Hand 