The False Economist

Monday, October 17, 2011

Nobel Prize for Economics : Sargent and Sims

This is the real start of the awards season people with Thomas Sargent and Christopher Sims winning the prize this year.

The Marginal Revolution blog has a very easy to follow of explanation of what it is these chaps have done to win a prize that so pisses off physicists, chemists and other "real" scientists the world over. Check it out here.

And for all you "real" scientists out there, please enjoy Dilbert cartoon

Saturday, October 1, 2011

Oh right, the blog...Sorry about that.

Having taken a career break from the blog (i.e. I got a career) I thought I would try and get things moving back here before you go off and hang out with those no-goodniks over at the Irish Economy blog.

So here are a few things I came across recently that may be of interest:

The first is taken from Paul Krugman's blog in which he cites a paper by Muller, Mendelsohn, and Nordhaus who use the example of air pollution* and how this side-effect of production affects society and how this does (or doesn't) impact on policy makers and potential contradictions in their ideology.

They find that in a purely monetary sense the cost to society is huge with a number of industries inflicting more damage in the form of air pollution than the value-added by these industries at market prices. The argument, Krugman explains, is as follows "consumers are paying much too low a price for coal-generated electricity, because the price they pay does not take account of the very large external costs associated with generation. If consumers did have to pay the full cost, they would use much less electricity from coal — maybe none, but that would depend on the alternatives."

Ah. So we tax them then to make up for this disparity and offset the detrimental impact of air pollution. A response to such a market failure is required but this will be shot down by those who think Adam Smith was a leftie-pinko interventionist. 

An interesting examination of how one's ideology and need to be right can hinder them from doing what is most efficient. Not necessarily a trait only found in conservatives though...

Secondly Yoram Bauman, PhD., is the (sigh) Stand Up Economist. Moreover, he is not dreadful, in fact he's actually pretty good. Unlike that bloke at Guy's Econometrics blog who changes the lyrics of popular songs to econometrics terms...Bleugh.

Check out the Bauman's explanation of the Greg Mankiw's 10 Principles of Economics here. I especially like his footnote joke. I mean, seriously some of the footnotes in my old macro book were straight out of the Third Policeman.

* = always the staple for discussing external costs to society, just like cakes are always the example used when discussing diminishing marginal utility.