"To defend the truth, to articulate it with humility and conviction, and to bear witness to it in life are therefore exacting and indispensable forms of charity."

H. H. Benedict XVI. Caritas in Veritate Encyclical. June 29, 2009

Saturday, July 24, 2010

Market as an information system

A market is a system of creation and spread of information. No more, no less.

Logic versus obvious

Some critics of pure logic of choice could be caught saying that it can not create "information" but only rephrase it. Those people should begin to have clear that "logic" is not the same than "obvious".

Saturday, July 17, 2010

Market and freedom

The only condition for a market is freedom to exchange.

Economics versus statistics

No truly economic assertion can be said merely by quantities.

Every single economic assertion needs recourse to purpose. That's necessary. That's sufficient.

There's really nothing more to economics than pure logic of choice. Everything else, even if useful, is in the aim of statistics. And (it should be patently obvious but regretfully isn't), economics is not statistics.

Wednesday, July 14, 2010

Good education

The good pupil must be totally docile to the form in which he is taught and totally rebel to the teaching itself.

The good teacher must use authority exclusively for the aim of teaching.

The good pupil must be a good pupil only to a good teacher.

The way in which something is taught is part of the teaching.

Saturday, July 10, 2010

Profit and loss

Expenditure (paid price) is chosen sacrifice. The agent can only choose sacrifice if he expects the value of expenditure (cost) to be worse than the value of the income (revenue). Ex post, cost can be better than revenue, but ex ante this can not be planned. Loss is exclusively an ex-post phenomenon. Ex ante, the agent only acts on grounds of profit.

Cost determines price

In the long run, expenditure (whose value is cost) determines price. This doesn't opposes at all to the theory that, given a production-possibility frontier, value alone determines prices. It is just an assertion that has to be interpreted very carefully and with a lot of subtlety. It means that, in the long run, it is not the concrete (as disconnected from anything else) value ascribed to a good what determines its price but that value in the context of comparison with the rest of goods (general equilibrium). This is how we have a remembrance, a warning, that whenever we make an analysis allowing for enough time as to everything to adjust, we can not forget general equilibrium. Partial equilibrium analysis is just the the first stage of general equilibrium analysis.

Sunday, July 4, 2010

Short run

Short run is usually presented as one in which some expenditure can not be avoided. However, if such expenditure can not be avoided, its value can not account for cost.

I propose to interpret the short run rather as one kind of production engineering in which some expenditure is common to all production or independent of the quantity of produced units. In such a case the value of such common expenditure has to be regarded as cost.

This, however, implies that it can not be accepted in praxeology such a category as ex-ante losses in the short run (neither in the long run). When the agent is choosing between producing or not, he is free for disposing of common expenditure. He has to decide between producing (in which case he will have to incur in common expenditure as well as expenditure particular for each unit produced) or not producing (remaining, this way, without the charge even of common expenditure).

So, the short run supply function does not exist for magnitudes of the marginal (particular) expenditure above the average particular expenditure but only for magnitudes of that marginal expenditure above the average total expenditure.

By the way, it has to be remembered that such supply is not a supply of previously produced goods (in which case there would be a produced stock and the supply would depend exclusively on the owner-supplier's preference). The short run (as well as the long run) supply functions are necessarily supplies of not yet produced goods; i.e. they are no more than schedules in the head of the deliberating agent confronting the decision of whether producing or not. He will produce (and eventually supply) exclusively if he expects to earn a profit.

If the producer actually faces a situation in which he can not change certain element adjuvant in the production process, that is not a matter of cost but one of production function's shape, of technology, of the information the agent has in order to produce. What happens can be modeled as producer ignorance regarding how to push the production opportunities out, as the arriving at the production-possibility frontier. It can, however, not possibly be modeled as a "fixed cost", which is an oxymoron. Cost only emerges when there is choice, when the option can actually be rejected, when it is "flexible", when it is "not fixed". If the situation is given, fixed, you are not talking about cost, you are talking about a general condition of welfare. You maybe are in the realm of a science of happiness or welfare but you are certainly no more in the realm of a science of purposeful behavior, of economics.

Other feature about the relation between common and particular expenditure, not usually taken into account, is that there can be expenditure common only to certain quantities of production, a sort of "crawlingly-pegged" expenditure.