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John Quiggin

Economics in Two Lessons, Chapter 7

by John Quiggin on March 27, 2018

Thanks to everyone who the first six chapters of my book, Economics in Two Lessons. That brings us to the end of Lesson 1: Market prices reflect and determine opportunity costs faced by consumers and producers.

Now its time for Lesson Two: Market prices don’t reflect all the opportunity costs we face as a society.

I’ll start with a brief intro and then the draft of Chapter 7: Property rights, and income distribution

As usual, I welcome comments, criticism and encouragement.
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Francis Bator has died

by John Quiggin on March 26, 2018

Francis Bator, the economist who popularized the term “market failure”, has died at the age of 92 after being hit by a car. His NY Times obituary is here.

Francis’ passing is a cause of sadness for me as my book, Economics In Two Lessons draws heavily on his work from the 1950s and 1960s. He had read excerpts on Crooked Timber and corresponded with me about it, much to my surprise and delight. I was looking forward to sending him the manuscript but now I won’t get the chance.

Economics in Two Lessons, Chapter 6

by John Quiggin on March 22, 2018

Thanks to everyone who the first five chapters of my book, Economics in Two Lessons. Now here’s the draft of Chapter 6: The opportunity cost of destruction This is the last part of the book devoted to Lesson 1 Market prices reflect and determine opportunity costs faced by consumers and producers. and the one where I agree mostly with Henry Hazlitt’s Economics in One Lesson. It seems particularly apposite 15 years after the beginning of the Iraq War.

As usual, I welcome comments, criticism and encouragement. I’d appreciate any comments on/ alternative suggestions for the opening quote – it’s not a perfect fit, but the best I could come up with.

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Economics in Two Lessons: Chapter 5

by John Quiggin on March 17, 2018

Thanks to everyone who the first four chapters of my book, Economics in Two Lessons. I’m continuing with policy applications of Lesson 1: Market prices reflect and determine opportunity costs faced by consumers and producers.
That will be followed by Lesson 2: Market prices don’t reflect all the opportunity costs we face as a society.

Now here’s the draft of Chapter 5. Again, I welcome comments, criticism and encouragement.
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Economics in Two Lessons: Chapter 4

by John Quiggin on March 15, 2018

Thanks to everyone who the first three chapters of my book, Economics in Two Lessons. I’ve learned a lot from the comments and made changes in response to some of them. These chapters have been a bit abstract, but now I’m moving on to some applications, which might be more interesting for some readers. Here’s the introduction to Part II

Lesson 1, Part II: Applications

The economic analysis showing how market equilibrium prices reflect the opportunity costs facing producers and consumers is elegant and, for a certain kind of mind, convincing.

For most of us, however, it’s more useful to see how the logic of prices and opportunity costs works in particular cases, sometimes in ways that conflict with strongly held intuitions. This will also give us more insight into the ways in which prices can fail to reflect opportunity costs for society as a whole, some of which we will examine in Lesson 2.
end

Now here’s the draft of Chapter 4:Lesson 1: Applications. Again, I welcome comments, criticism and encouragement.
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Economics in Two Lessons: Chapter 3

by John Quiggin on March 10, 2018

Thanks to everyone who commented on Chapter 2 of my book, Economics in Two Lessons. I’ve learned a lot from the comments but haven’t yet had time to respond to them.

Now here’s the draft of Chapter 3. Again, I welcome comments, criticism and encouragement.

The book so far is available
Table of Contents
Introduction.
Chapter 1
draft of Chapter 2
Feel free to make further comments on these chapters if you wish.

The Generation Game is over (at least for me)

by John Quiggin on March 7, 2018

For more than a generation, I have been railing against the Generation Game, that is, the insistence on dividing society into groups based on birth year and imputing different characteristics to each group. Today, I’m following the classic advice for those involved in an endless war: declare victory and get out. The basis for my claim is that I’ve managed to publish my latest critique in the New York Times, under the headline ‘Millennial’ Means Nothing (paywalled*). I expect this will reach more people than anything I could do with blog posts, so I will leave this topic and move on.

  • It’s fairly easy to get around, I believe.

Free speech, unfair dismissal and unions

by John Quiggin on March 4, 2018

I’m seeing a lot of comments from the political right and centre-right worrying about the possibility that workers may be fired for expressing conservative views. For example, here’s David Brooks (paywalled, I think) linking to Andrew Sullivan.

It strikes me that this would be a really good time for people like Brooks and Sullivan to campaign for an end to employment at will, and the introduction of the kind of unfair dismissal laws that protect workers in most democratic countries, but not, for the most part, in the US. Among other things, these laws prohibit firing employees on the basis of their political opinions. Better still, though, would be a resurgence of unionism. Union contracts generally require dismissal for cause, and unionised workers have some actual backup when it comes to a dispute with employers.

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A snippet on bounded rationality

by John Quiggin on March 1, 2018

A comment on my last post, about Chapter 2 of my book-in-progress, Economics in Two Lessons, convinced me that I needed to include something about bounded rationality. I shouldn’t have needed convincing, since this is my main area of theoretical research, but I hadn’t been able to work out where to work this into the book. I’m still not sure, but at least I’ve written something I’m reasonably happy with. Comments, praise and criticism welcome as usual.

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Economics in Two Lessons: Chapter 2

by John Quiggin on February 27, 2018

Thanks to everyone who commented on Chapter 1 my book, Economics in Two Lessons. I’ve benefited a lot from the comments and implemented quite a few changes.

The book so far is available
Table of Contents
Introduction.
Chapter 1
Feel free to make further comments on these chapters if you wish.

Moving along, here’s the draft of Chapter 2. Again, I welcome comments, criticism and encouragement.

Economics in Two Lessons: Draft Outline

by John Quiggin on February 20, 2018

At the suggestion of a reader , I’m posting a draft Table of Contents for Economics in Two Lessonshere
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Economics in Two Lessons: Chapter 1

by John Quiggin on February 19, 2018

Thanks to everyone who commented on the draft introduction to my book, Economics in Two Lessons. The revised introduction is here. Feel free to make further comments on it if you wish.

Moving along, here’s the draft of Chapter 1. Again, I welcome comments, criticism and encouragement.

Economics in Two Lessons

by John Quiggin on February 15, 2018

I’ve finally committed to delivering a manuscript of my long-overdue book Economics in Two Lessons. As part of the process, I’m going to post the chapters, one at a time, and ask for comments, criticism, encouragement and so on. To begin at the beginning, here’s the Introduction.

I have a piece in the New York Times looking at the implications for the bitcoin bubble for economic theory and, in particular, for the (Strong) Efficient (Financial) Markets Hypothesis (EMH) which states that prices determined in financial markets reflect all the available information about the value of any asset. If that’s true then governments can’t improve on a policy of allocating investment to those assets with the highest market return, which can be achieved by letting private capital markets determine all investment decisions.

Bitcoins have no inherent usefulness, being a record of pointless calculations. They are useless as a currency (their putative purpose) and are now being promoted as a store of value on the basis of scarcity alone. This leaves supporters of the EMH with a dilemma.

If Bitcoins are indeed worthless, then financial markets should price them at zero. But the introduction of futures trading actually boosted the price in the short run. Even after recent declines, there’s no sign that prices will reach zero any time soon.

On the other hand, if Bitcoins are valuable simply because people value them, then asset prices are entirely arbitrary. The same argument can be applied to any financial asset.

Dean Baker at CEPR has a nice followup, making the obvious but crucial point that, since financial services are an intermediate input to production, we want the financial sector to be as small as possible, consistent with doing its essential tasks. As the experience of the mid-20th century shows, a market economy can function perfectly well with a financial sector much smaller than the one we have today. As Bitcoin shows, the massive expansion since then is nothing but wasteful speculation. The financial sector should be cut down to (a small fraction of its present) size.
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The gig economy and the future of work

by John Quiggin on February 3, 2018

One of the things I do from time to time is write submissions to public inquiries, mostly those of our Senate, which has a committee system loosely modelled on that in the US. I’ve had a run of them lately, appearing (by teleconference) before two of them this week and making a submission to a third. The first two, on the Northern Australia Infrastructure Facility (a slush fund that may be used to finance coal projects) and one on the problems of vocational education

In addition, i completed a submission to the inquiry into the Future of Work and Workers, which is now available on the inquiry website. The submission is about the way in which technology and labor market institutions have interacted to generate the “gig” economy of insecure employment, continuously threatened by technological disruption. The key point is that decades of anti-union and anti-worker legislation and state action have created a situation where technological change is likely to harm rather than help workers. A summary is over the fold
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