Thursday, November 27, 2008

Economics doesn't describe the real world

Michael Panzner has unearthed a couple of good items explaining how the assumptions of classical economics are plain wrong - we are not rational - and so the results are also wrong.

And there I was, planning to use some of my Christmas holiday reading an economics primer.

3 comments:

hatfield girl said...

You might like to find:

John KAY, The Truth About Markets: Their Genius, Their Limits, Their Follies, Allen Lane - The Penguin Press, London 2003.

in your stocking on Christmas morning, S.

Old Prof said...

I know a couple of academics studying this. Fundamentally, the markets are based on emotion, not on the strength of anything - hence the tulip frenzy, South Sea bubble, dotcom bubble, and the current housing bubble. It's why the money should (but never will be) controlled by the quantitative types, or at least the ones who don't care about money for its own sake.

Old Prof said...

The more I think about it, the more convinced I am that the great strength in the US economy over history is due to a number of scams - the Revolutionary and Civil Wars were funded by suspect bonds, there was a massive Florida land scam that pulled billions from Britain in the 1920's, Lend-Lease bankrupted (and also saved) Britain, the Marshall Plan gave Europe just enough money to buy American products, and now this - a massive scheme to destroy the Chinese banking system.