I rather think that in the aftermath of the financial crisis there will be much rethinking about economics. Many of the current economic models did not fare well in either predicting or explaining what happened. The initial response, that the crisis was caused by greedy bankers taking too large risks under too light a regulatory framework, has increasingly given way to a view that points to the part played by governments and their central banks in making credit too easy and money too cheap. People responded to the signals this sent out, making loans that would not have been made had credit been tighter, and incorporating poorly quantified risks they would have been more cautious of had money been harder to get.
I intend to make a series of philosophical observations that do not purport to be original insights, but which, taken together, bear on the nature and study of economics.I will set them out in a series of short pieces over the next few days. They are not asserted as necessary truths, but rather as suppositions which seem to be supported by the evidence. Inputs, constructive criticism, and further similar observations from others are all welcome.
1. There is no such ‘thing’ as value.
2. People seek to improve their lives.
3. Every economic activity uses energy and resources that might have sustained other economic activity.
4. Price is transient.
5. For every multiplier there is a de-multiplier.
6. Inflation is not a cost-push phenomenon.
7. There is no equilibrium position in economic activity.
8. Inflation and unemployment are not inversely related.
9. Economic statistics are a subset of history.
10. Most economic factors change when time is entered into them.