Suggest me some economic concepts to learn

Cinitiator

Yes, I can dismiss arguments which lack definition, coherence and detail. This argument hasn't settled in Hayek's favor at all - a new synthesis had been created out of the economic calculation problem, which is the Lange Model, and which puts an end to the economic calculation debate.

Why are you implying that I dismissed it quickly and out of hand? It took me a long year of reading, studying, statistic searching and analyzing to dismiss this absolutely ridiculous argument, and to find a proposed solution to it.

Cinitiator

This is absolutely wrong - mathematics is necessary to understand the extent and magnitude of Pareto inefficiency of the capitalistic system - its irrational production quotas, its predisposition to perpetual crisis, its irrational income distribution and its undermining of potential growth rates, which could be far higher if a rational system would be put in place. Neoclassical economics is based on a set of models which allow for such analysis to be made.

John Creighto

The Lange Model still uses prices but it awkwardly tries to infer it from surplus/shortage, and creates the potential for bureaucratic abuse. What is to stop the bureaucrat from keeping prices too high to please producers or two low too please consumers? Anyway, there are more things to learn from Austrian economics then just this problem. For instance:

http://en.wikipedia.org/wiki/Hyman_M...ity_hypothesis

Cinitiator

"but it awkwardly tries to infer it from surplus/shortage"

Not more awkwardly than a capitalistic market. The Lange Model can be adapted to have a decentralized price system on each distribution center, which would adjust to supply and demand just like in capitalism, without a need to do so centrally (which could end badly due to information losses as the information moves up the hierarchy).

"What is to stop the bureaucrat from keeping prices too high to please producers or two low too please consumers?"

That's like saying "What's to stop the bureaucrat from covering the transport in feces to please the public and make it laugh and not those who use this transport?". The prices would be decentrally set by each enterprise and distribution center. All the profits would be sent to the state for re-investment - such enormous investment would cause enormous economic growth. There won't be any 'producers' to benefit, as the state would be the producer.

One should always remember that the state currently carried out very vital functions, and is responsible for education, transportations and various vital public services in most developed countries. As long as the state isn't very centralized, democratic, and is forced to release its information, then there shouldn't be a problem. There should always be a freedom of information, assembly, opinion, mass media, and so on, to keep the state in check.

BWV

The neoclassical economics which you rail against has a very elegant mathematical proof of the Pareto efficency of free markets - no one will trade unless they gain from the transaction therefore all trades improve the welfare of both participants therefore left to their own devices markets will optimally allocate resources. Of course the model is simply, like all economic models, a tautology based upon debatable assumptions.

the mathematics in economics is a metaphor to those who understand the issues and a fetish to those who don't because the basic variables - supply, demand etc. are immeasurable abstractions. the problems of economic modeling include but go beyond those of chaotic systems such as trying to capture all relevant variables and sensitivity to initial conditions - they also reflect the fact that the basic casual relationships are unknown and ultimately human behavior is not subject to mathematical laws. Models are useful tools for focusing on certain problems, but should not be confused with reality, nor can the be used reliably for engineering - no bridge ever failed because too many people tried to game the design, but of course this is perpetual problem with macroeconomic policy.

DrClapeyron

1. Supply and Demand
2. Trade Offs

Learn those two things and the rest is structure and relationships of markets and institutions.

BWV

who has heard of the Lange model? Its nearly 50 years old and I have never seen anyone mention it. I checked and there are all of six papers on SSRN.com that refer to it. Just because you found it a couple of days ago on Google does not make it the "end of the economic calculation debate".

John Creighto

You mean make the system even more like capitalism?
Why?

Aren't profits in a capitalist system reinvested?
And about state education how well do you think that is working? As for transportation, how much do you think bureaucrats are influenced buy business when awarding contracts? Do you think the roads are over maintained or under maintained and why?

There was a move to democratize business once and in some European countries (Yugoslavia perhaps) and I think it was taken to such a state as the janitor in an engineering company had as much a say in things as the engineers. This is second hand though from someone who use to live in that area.

dabble

The Law of Diminishing Returns.
The Law of Demand.
The Law of Marginal Utility.

Cinitiator

"You mean make the system even more like capitalism?" - No, I mean make it have a decentralized price system which would set a market clearing price on the lowest level, which would result in no shortages and surpluses being present.

"Aren't profits in a capitalist system reinvested?" - Only a part, and only with a goal of gaining more profit.

"There was a move to democratize business once and in some European countries (Yugoslavia perhaps) and I think it was taken to such a state as the janitor in an engineering company had as much a say in things as the engineers. This is second hand though from someone who use to live in that area." - I'm not talking about democratizing business - this is irrelevant - obviously those who aren't competent shouldn't take part in the microeconomic business decisions. I'm talking about civil liberties, which would allow the whole system pattern to be kept in check by the general population.


"And about state education how well do you think that is working? As for transportation, how much do you think bureaucrats are influenced buy business when awarding contracts? Do you think the roads are over maintained or under maintained and why?" - It's working very well. The private sector would be unable to educate such enormous masses of the people, and only a few would end up getting education, even if it would be of a slightly higher quality.

"Why?" - To attain a market equilibrium, and therefore clear the markets.

John Creighto

As an aside I hope that some moderator will be kind enough to separate posts (such as this one) about, the Lange model, from this thread, into a separate thread. Now to address the points:
Under perfect competition isn’t this, what is supposed to happen? Doesn’t government intervention reduce competition?
Aren’t the areas which have the greatest return on investment (where there are the greatest profits) the areas where the greatest investment is needed?

Who decides who is competent enough to make decisions about the business of a company and where does the divine wisdom of this person (the sorting hat), who decides who is and who is not worthy of participating in a business/engineering decision, derive their wisdom and authority from?

Given that we are supposed to learn to read write and do basic math in their first six years of education why are illiteracy rates so high? If someone knows how to read why can’t they learn everything else themselves, though books? Aren’t people who can self-educate superior learners to people who need to be trained? What is to stop parents from educating their own kids if they lack money for schooling say for high school?

Now the big question -- do we need as many people educated with post secondary degrees as we have today? There are so many degrees/programs where the amount of people graduating from the degree significantly exceeds the demand at current wage levels, but these wage levels are needed to pay for the degree.

In one of Ann Rand’s Essays contained in “Capitalism the Unknown Ideal” she compares our current system to guild socialism. Guild socialism is a system where through training (education) you are able to improve you situation but only marginally so. It promotes mediocrity because there is an interest in the guild (or profession/union/trade as we may call it today,) to closely follow past procedures.

But such standardization inhibits innovation. Unfortunately, for innovation to be successful; it requires people to often know well, more than just a small part of the solution; and even with such excellence: innovation is still a very risky endeavor. However, without innovation our economy and hence our wellbeing does not progress. Our education system does not aim to produce excellence it aims to leave no one behind.

The more engineers we train, the more administrative their roles become. The more administrative their roles become the more marginal/incremental becomes our progress. The best approach to innovation is not achieved by learning to apply a narrow set of skills. To lean both in great depth and with great breadth requires strategies to absorb and integrate significant amount of knowledge. These strategies will likely be to a degree unique to each individual.

Government mandates, are not likely to both help people discover the best strategies to them; and to help them utilize these strategies to their full potential. Therefore, to help find, the methods to best aid students in achieving their full potential; it is best to have options (competition) between schools, so that we can discover which methods are the most effective. Not only do we not know which people will be the future geniuses; but we also don’t know which methods of schooling is most likely to produce the most future geniuses. Education is an invention in and of it’s self and without multiple people pursing the best means to educate people we will not achieve the best results.
That’s your goal but you have not justified to me why bureaucratic mandate is the best way to achieve this goal. Not all problems can be solved through legislation.

delanis

Comparative Advantage

Bipolarity

You have a lot but are missing many important concepts from game theory and social choice theory, both of which are covered in microeconomics:
- Condorcet's Paradox (Paradox of voting)
- Arrow's Impossibility Problem
- Paradox of Value
- Action axiom
- Nash equilibrium
- Prisoner's dilemma
- Zero-sum game

You're also missing monetarism and supply-side economics, both of which are covered in macroeconomics:
- Money Supply
- Federal funds rate
- Discount rate
- Interest rate/Cost of liquidity
- Required reserve ratio
- Excess reserves
- Money Demand-Supply Equilibria
- Bonds and bond yield
- Open market operations
- Federal Reserve System
- Currency in circulation
- Bank deposits
- Bank reserves
- Equation of exchange
- Velocity of money
- Milton Friedman
- Phillips Curve
- Currency exchange
- Currency equilibria
- Demand and supply of foreign currency
- Dollar/Euro market
- Dollar/Pound sterling market
- Dollar/Yen market
- Dollar/Yuan market
- Global weighted currency
- Gold standard
- Foreign exchange deficit
- Foreign exchange surplus
- Relationship between foreign exchange deficit/surplus and inflation/unemployment.

BiP

nitsuj

lol, well in that case, supply / demand includes "trade offs".

John Creighto

For Ordinal Utility:

Parato Set (Parato optimal boundary)
Edgeworth box

For Wikipedia:
http://en.wikipedia.org/wiki/Edgeworth_box

also discussed in this lecture:
http://freevideolectures.com/Course/...-of-Politics/7