Nonsense economics

20 July, 2015 at 16:27 | Posted in Economics | 3 Comments

It is, perhaps, not uninteresting to point to some of the economic implications which are included in “perfect foresight”. It will immediately be recognized that this assumption could never lie at the basis of the theory of equilibrium, and they who attribute this to such authors as Walras and Pareto, who are included as representatives of equilibrium theory, are in error. ln the first place, strange to say, it happens that even material assertions can be made about such an economy on the basis of the assumption of perfect foresight.morgensternThey are fundamentally of the negative type. For example, no lotteries or gambling will exist, for who would play if it were well-established where the profit went? Telephone, telegraph, newspapers, bills, posters, etc. would, likewise, be superfluous, obviously; but, also, the very important industries, based on them, with all their affiliated industries, would be absent. Only packages and letters implying documentary evidence would need to be delivered by post, for to whom would letters be written? The tale need not be carried further, for it is obvious how little considered are the “fundamental assumptions” so frequently employed in theoretical economics, where really a matter of nonsense is at issue.

Oskar Morgenstern

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  1. This was a fantastic article regarding nonsense economics, one that I really enjoyed. I especially liked the concise way in which it conveyed all the information required succinctly. I’m a 15 year old with a blog on finance and economics at shreysfinanceblog.com. It would be very much appreciated if you could read and reblog one of my articles! Thanks again for this great article.

  2. So strange. Why is so much time spent worrying about the assumptions that underlie equilibrium?

    Observe the world. If you see equilibrium, then fine, theorize about it. But you never will observe it. So Oskar Morgenstern above is talking nonsense about nonsense. That is not interesting.

  3. Great piece.


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