Elsewhere

• Benedict's encyclical letter, "Charity in Truth". (Comments on the encyclical at Open Economics.)
• James Galbraith's "No Return to Normal: Why the economic crisis, and its solution are bigger than you think", in the Spring 2009 issue of Democratic Left, the national magazine of Democratic Socialists of America (DSA).
• Steve Keen's "The Creative Destruction of G8 Economics: A plan to shift the theoretical foundations of our global system", in the current issue of Adbusters. (The September/October issue will explore alternatives to the neoclassical economic paradigm.)
• A Warning label: "This economics textbook is for entertainment purposes only..." for your mainstream economics textbook.

Labor Demand Curves Slope Down?

Consider the consequences of capital-reversing. I like to say that one is that explaining wages and employment by well-behaved supply and demand functions for labor is of doubtful logic. Here's what some others have had to say:

"the pattern of activities adopted in the face of long-run factor-price changes can be complicated and counterintuitive. Consequently, the long-run demand for factors can be badly behaved functions of factor prices." -- Michael Mandler (1999) Dilemmas in Economic Theory: Persisting Foundational Problems of Microeconomics, Oxford University Press.

"However, as was argued in Section 3 with regard to 'perversely' shaped, that is, upward sloping, factor-demand functions, this possibility would question the validity of the entire economic analysis in terms of demand and supply." -- H. D. Kurz and N. Salvadori (1995) Theory of Production: A Long Period Analysis, Cambridge University Press

"The essential point of the criticism concerns the factor demand curves. The discovery that factor demand curves may be positively sloped in the relevant range, not negatively..." -- Bertram Schefold (1990) "Joint Production, Intertemporal Preferences, and Long-Period Equilibirum," Political Economy: Studies in the Surplus Approach, V. 6, 1990, pp. 162-163.

"there is not necessarily an inverse monotonic relation between the cost-minimizing quantity of an input and its price... Figures 6.17a-6.17c can be interpreted as demand curves for labour... in Figure 6.17b, ...the sectoral demand curve is upward-sloping... I have shown in Figure 6.17c that the aggregate demand curve is not downward-sloping in the presence of reswitching: indeed, like the sectoral demand curve, it is not even monotonic. Reswitching is sufficient, not necessary, for the aggregate demand curve for labour not to be downward-sloping: to see this, consider Figure 6.18..." -- J. E. Woods (1990) The Production of Commodities: An Introduction to Sraffa, Humanities Press

It is a theme of this blog that mainstream economists have yet to integrate this challenge into their theories and teaching.

Principles of Neoliberalism

Some of these strike me as too absurd (e.g., 7, 9) to bother refuting:

1. "...contrary to classical liberal doctrine, [the neoliberal] vision of the good society will triumph only if it becomes reconciled to the fact that the conditions for its existence must be constructed and will not come about 'naturally' in the absence of concerted political effort and organization...
2. ...'the market' is posited to be an information processor more powerful than any human brain, but essentialy patterned on brain/computational metaphors... The market always surpasses the state's ability to process information...
3. ...for purposes of public understanding and sloganeering, market society must be treated as a 'natural' and inexorable state of humankind...
4. A primary ambition of the neoliberal project is to redefine the shape and functions of the state, not to destroy it...
5. ...Neoliberals treat... politics as if it were a market and promoting an economic theory of democracy...
6. Neoliberals extol freedom as trumping all other virtues, but the definition of freedom is recoded and heavily edited within their framework... Freedom can only be 'negative' for neoliberals (in the sense of Isaiah Berlin)...
7. ...capital has a natural right to flow freely across national borders. (The free flow of labor enjoys no similar right.)...
8. ...pronounced inequality of economic resources and political rights [is] not ... an unfortunate by-product of capitalism, but as a necessary functional characteristic of their ideal market system...
9. Corporations can do no wrong, or at least they are not be blamed if they do...
10. The market (suitably reengineered and promoted) can always provide solutions to problems seemingly caused by the market in the first place...
11. The neoliberals have struggled from the outset to make their political/economic theories do dual service as a moral code..."

-- Philip Mirowski, "Postface", in The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective (edited by Philip Mirowski and Dieter Plehwe), Harvard University Press (2009)

(I've miscategorized this post since neoliberalism encompasses more than economics.)

Four Papers On Henry George

I have never been enamored of Henry George. But for those who like him, the recent History of Economics Society Annual Conference (Denver, CO, 26-29 June 2009) had a session on "Henry George and the Concept of the Commons", with four papers:

• Lew Daly, "Creation Ethics and the Distribution of Wealth from Genesis to Cyberspace"
• Neil B. Niman, "Henry George and the Intellectual Foundations of the Open Source Movement"
• William S. Peirce , "Allen Ripley Foote and the Revenues for the Progressive State"
• Francis Peddle, "Henry George and the Open Knowledge Commons"

I guess one can get the following from George: Many do not legitimately contribute to production, but merely charge those who do work a toll for access to the property with which they work. I can get the same idea, however, from P. J. Proudhon's What is Property?; Karl Marx's idea of the worker's "double freedom" (in chapter VI of Capital, Volume 1) to sell his labor power and of ownership of other commodities for sale; and of Thorstein Veblen's concept of business as sabotage, in contrast to industry. What do I need Henry George for, at least with respect to this idea?

Elsewhere

I have added the blog of some economists at the University of Missouri-Kansas City to my blogroll. That blog is more policy-oriented than this. Bill Mitchell blogs from Australia, also more about policy than I do. Grupo Lujan-Circus seems like a blog of interest to me, but I can read only the names. The same remark applies to the blog of the Italian Association for the History of Political Economy.

Occasionally I stumble across curious articles in Wikipedia. The one on Surplus economics references Paul Baron and Paul Sweezy. It doesn't describe their ideas very well, and could do with some reference to Sraffa too. The entry on Newtonian time in economics seems to have been written by Austrian fanboys who, typically, know about neither Joan Robinson's distinction between logical and historical time nor Paul Davidson's attack on the Austrian school.

Current Events Foreseen

First Instance

"[Condolences]
G.O.P.Y.T.

A letter from Ronald Reagan to Michael Jackson, dated 1 February, 1984, five days after the singer's hair was set afire by pyrotechnics during the filming of a Pepsi commercial...

Dear Michael,

I was pleased to learn that you were not seriously hurt in your recent accident. I know from experience that these things can happen on the set - no matter how much caution is exercised. All over America, millions of people look up to you as an example. Your deep faith in God and adherence to traditional values are an inspiration to all of us, especially young people searching fro something real to believe in. You've gained quite a number of fans along the road since "I Want You Back", and Nancy and I are among them. Keep up the good work, Michael. We're very happy for you.

Sincerely,
Ronald Reagan" -- Harper's Magazine (June 2009)

Second Instance
This was almost certainly not written last week:

"[James Hansen] said that he was thinking of attending another deomonstration soon, in West Virginia coal country." -- Elizabeth Kolbert, "The Catastrophist", The New Yorker (June 29, 2009): 39-45

And here we have some news:

"SUNDIAL -- Coal miners confronted environmental protesters June 23 during a sometimes tense standoff at a focal point in the battle over mountaintop mining -- a protest that attracted one of the nation's foremost experts on global warming.

NASA climate scientist James Hansen was among the protesters, and West Virginia State Police arrested him during a planned act of civil disobedience. While upstaged in the media spotlight by actress Daryl Hannah, who also was arrested, it was Hansen's presence at the rally that drew widespread interest in the event from the environmental community..." -- Walt Williams

Suppressed Empirical Results

"An overwhelming majority of the entrepreneurs thought that a price based on full average cost (including a conventional allowance for profit) was the 'right' price, the one which 'ought' to be charged...

...the procedure can be not unfairly generalized as follows: prime (or 'direct') cost per unit is taken as the base, a percentage addition is made to cover overheads (or 'oncost' or 'indirect' cost), and a further conventional addition (frequently 10 per cent.) is made for profit. Selling costs commonly and interest on capital rarely are included in overheads; when not so included they are allowed for in addition for profits." -- R. L. Hall and C. J. Hitch, "Price Theory and Business Behavior", Oxford Economic Papers, (May 1939): 12-45

These findings motivated Milton Friedman in his badly-argued work on methodology.