George Selgin expands even further our knowledge of banking (and of history and of economics).
Man, the June 2011 issue of The Freeman is loaded with good stuff. But I want here to single out Bob Higgs’s deeply profound analysis – “James Buchananian,” I would say – of how economic theory often sets itself up to be used (and misused) to unleash mischief. Here’s a central selection:
Had economic theorists [in the 1960s] rested content with using the microeconomics of the Neoclassical Synthesis strictly as a conceptual device employed in abstract reasoning, it might have done little damage. However, as I have already suggested, this type of theory cried out for application—which, in practice, was nearly always misapplication. The idealized conditions required for theoretical general-equilibrium efficiency could not possibly obtain in the real world; yet the economists readily endorsed government measures aimed at coercively pounding the real world into conformity with these impossible theoretical conditions.
Closely examined, such efforts represented a form of madness. As the great economist James Buchanan has observed, the economists’ obsession with general equilibrium gives rise to “the most sophisticated fallacy in [neoclassical] economic theory, the notion that because certain relationships hold in equilibrium the forced interferences designed to implement these relationships will, in fact, be desirable.”
Speaking of “Buchananian” political economy, one of Jim’s premier students from Jim’s time at the University of Virginia, Dick Wagner (one of my colleagues at GMU Econ), explores in this paper the complexity of political fiscal-decision-making in democratic societies.
Jonah Goldberg takes on the dangerous and fact-challenged notions that motivate Thomas Friedman’s recent – and indescribably awful – New York Times column entitled “The Earth is Full.” If time allows, I plan my own response to Friedman’s historically uninformed and economically idiotic fear-mongering. Where O where is today’s Julian Simon?!
John Stossel raises awarness of the need for a cure for the cancer of government regulation.
