Friday, February 27, 2009

Something kind of hilarious just struck me. About the blinkered thinking that economics can encourage.

The main claim for the virtue of markets is that they co-ordinate supply and demand. But the big political problem we face now in a recession is jobs and unemployment. In other words, supply and demand for labour.

And, while there are many interesting theories about the incentives for parents to have children, I'd bet that no-one believes that the birth-rate goes *down* in response to a drop in demand for labour.

So how the hell do economists go round claiming that a) markets are a successful economic institution, b) that the theory of markets "clearing" is a successful *explanation*, and c) that economics (as understood) should be a guiding star for political policy, when, in the most important, widespread economic relationship in the world (the sale and purchase of labour), markets DON'T co-ordinate supply and demand and the theory neither predicts nor explains the supplies and demands that occur?

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