You are browsing the archive for 2014 September 22.

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Austrian Economics vs. Keynesian Economics in One Simple Chart

September 22, 2014 in Economics

By Jeff Deist

AE vs. KE

Courtesy of The Austrian Insider.

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Source: MISES INSTITUTE

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Entrepreneurship Can Be Hazardous to Your Health

September 22, 2014 in Economics

By Matt McCaffrey

The Economist ran a good article last week about the enormous difficulty of being an entrepreneur. In particular, the piece emphasizes the importance of doing away with the mythology of entrepreneurship as a life of romance, adventure, and the heroic pursuit of greatness. In reality, entrepreneurship is grueling and unforgiving, and can destroy not only an entrepreneur’s finances, but her mental and physical health as well.

Now, there’s irony in the fact that the article appears on The Economist’s Schumpeter Blog, given that Schumpeter himself helped popularize the romantic view of entrepreneurship. But the article rightly points out that thinking about entrepreneurship in idealistic terms glosses over the harsh truth:

It is fashionable to romanticise entrepreneurs. Business professors celebrate the geniuses who break the rules and change the world. Politicians praise them as wealth creators. Glossy magazines drool over Richard Branson’s villa on Lake Como. But the reality can be as romantic as chewing glass: first-time founders have the job security of zero-hour contract workers, the money worries of chronic gamblers and the social life of hermits.

It’s the romantic view that encourages individuals and institutions to throw mountains of resources into “being more entrepreneurial,” without thinking about the cost of that behavior. Yes, entrepreneurs have a profound impact on our lives, but it’s important to come to grips with the practical implications of that fact, and not get lost in idealizations based on a few extreme examples of success.

This is one reason entrepreneurship is best understood in economic terms: when we reduce it to its basic elements, it’s much easier to see the fundamental contribution entrepreneurs make to human welfare. Judgment and economic calculation may be “mundane” concepts, but they are the indispensable core of the market process. Naturally enough, taking a sober approach, such as the Austrian view, reveals more about the world than the idealized picture:

The paradox of the current, romantic view of entrepreneurs is that it leads us to undervalue their achievements. It is easy to envy people if you focus on a handful of success stories.

The implication is that once we understand what entrepreneurs truly give up, personally and professionally, in order to achieve success in the market, we will value their efforts—and even their failures—all the more, even if it means we envy them less. Austrians should appreciate this insight, given that it adds extra weight to Mises’ saying that entrepreneurship is the …read more

Source: MISES INSTITUTE

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Mateusz Machaj and Tom Woods Discuss the Taylor Rule

September 22, 2014 in Economics

By Ryan McMaken

As a follow-up to his recent Mises Daily article on the topic, Mateusz Machaj and Tom Woods discuss the Taylor Rule, its history, and its errors.

Also here.

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Source: MISES INSTITUTE

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How Third-Party Payers Drive Up Medical Costs

September 22, 2014 in Economics

By Ryan McMaken

Caduceus Medical Symbol chrome

Mises Daily Monday by Willem Cornax:

The modern health insurance industry, a by-product of government regulation and tax policy, has led to a system in which the consumer of medical services doesn’t know the costs or final prices charged for services. Without a functioning system of price signals, prices cannot be contained.

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Source: MISES INSTITUTE

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The Most Dangerous World Ever?

September 22, 2014 in Economics

Dire warnings about our uniquely dangerous world are ubiquitous. But do we actually live in a uniquely dangerous world? And, if we do not, why do we believe that we do? In the new issue of Cato Policy Report, Cato scholar Christopher Preble puts today’s threats in perspective, and argues, “Tragic, even horrifying, stories of human suffering do not portend that we are living in a more dangerous world. In most respects, we are living longer, better lives.” Also in this issue, Cato chairman Robert A. Levy looks at the expansion of executive powers under President Obama.

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Source: CATO HEADLINES

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Transforming China from within: Chinese Students Head to American Universities

September 22, 2014 in Economics

By Doug Bandow

Doug Bandow

Beijing—China’s economy is growing. So is the country’s university system. However, the latter still lags behind the U.S. and other Western nations. With few spots available at top schools, Chinese students increasingly are heading to America for higher education.

While recently playing tourist in Beijing I spoke to a number of young Chinese. They tend to be bright and inquisitive, ambitious and nationalistic. They worry about finding good jobs and are irritated by government restrictions on their freedom. For many the U.S. offers the yellow brick road to the fabled Emerald City. This educational exodus benefits Americans as well as Chinese.

The People’s Republic of China is the world’s most populous nation with, by some calculations, the world’s largest economy. It continues to gain international influence. Much depends on where the PRC is headed.

But no one knows where that is. Economic problems loom: official growth rates are overstated, “ghost” cities abound, overextended banks threaten, state enterprises distort development. The “one child” policy has created a demographic cliff: the PRC’s workforce is shrinking and China might grow old before it grows rich.

Chinese politics also is unsettled. President Xi Jinping launched a far-reaching campaign against corruption and targeted a number of party potentates. However, observers disagree whether he is becoming a modern emperor or facing a dramatic fall.

The PRC has become the largest exporter of students around the world.”

Despite the unsettled environment at home, Beijing has become more assertive, even confrontational, abroad. China has increasingly challenged several of its neighbors over contested territories in the Sea of Japan and South China Sea. The PRC’s relations with North Korea and Taiwan are even more complicated. Most important, Beijing is no longer willing to defer to the U.S.

However, China’s global influence depends upon domestic economic growth and political stability. And that ultimately depends upon China’s young. Do they want open markets or state leadership for the economy? Do they want a liberal or an authoritarian society? Do they want continued peaceful international rise or are they prepared to risk war to achieve national ends?

China’s university students today are most likely to become the PRC’s leaders tomorrow. Beijing is investing about $250 billion annually in higher education. Over the last decade the number of universities has doubled to more than 2400. The number of college graduates has increased to seven million, a four-fold jump over the same period. The comparable U.S. number is roughly three …read more

Source: OP-EDS