The Quantity Theory of Money and Fears of Inflation Are Nonsense

We rarely get to conduct scientific experiments in economics, but for the last 3+ years The Federal Reserve has unintentionally conducted a test of an economic theory called the "Quantity Theory of Money" (QTM). QTM makes some very specific predictions - predictions that Ron Paul, conservatives on Wall Street, and others have been repeating a … Continue reading The Quantity Theory of Money and Fears of Inflation Are Nonsense

Brief History of Macroeconomics and The Origins of Freshwater vs. Saltwater Economics

I and others, particularly Paul Krugman, occasionally make reference to "freshwater" vs. "saltwater" economics.  Here's a little background to explain the terms and, I hope, shed a little light on current disputes in macroeconomic theory. First, let's go back in time.  The stuff that economists study, namely the economy, economic behavior, and markets, really emerged as it's … Continue reading Brief History of Macroeconomics and The Origins of Freshwater vs. Saltwater Economics

Choice and Welfare

Is Economics (mainstream, neo-classical economics) moral?  Does increasing choices necessarily increase welfare? Professor Ed Glaeser of Harvard defends his view of the economics profession in the New York Times recently against charges that economists have "no moral compass or core". He maintains that: Improvements in welfare occur when there are improvements in utility, and those … Continue reading Choice and Welfare