Posted by: graemebird | February 27, 2009

Ending World Poverty Means Defeating The Devastating Flaws In Neoclassical Economics.

We will go deeper into just what these flaws consists of. But here is a post which alludes to this failure in analysis that we see with pretty much every neoclassical economist. Milton Friedman (great man that he was) not excepted.

Just as a make-believe revenue is no real cost….. Just as the concept of “human capital” is a travesty of a definition leading to bad analysis…….. in the same way it is unacceptable to call a long-term guaranteed tax exemption A SUBSIDY. It is also wrong to assume, as neoclassical analysis does, that “not one slave can be released until all slaves can be released at once”. Thats an analogy to say that neoclassicals, with their flawed analysis, get in the way of free trade areas and of special-purpose tax exemptions.

Here is a post which alludes to this wrong thinking based on these wrong conclusions which stem from a static-equilibrium approach to comprehending the economy:

We have an authentic environmental problem and its overfishing. Australia can do its best to alleviate this global problem by becoming, via tax exemptions and sound homesteading laws, the lowest cost producer of aqua-cultural products. Becoming the lowest cost producer in any area is essentially about accumulating the capital which allows one to do things more cheaply. So the idea is to get rid of any taxes on retained earnings should one wish to allow for that capital improvement. Or at least that is one of the measures necessary.

But neoclassical static-equilibrium models wrongly imply that tax exemptions create investment distortion. Always it goes without saying that good policy starts with mass-sackings and massive spending cuts. But that aside its a big problem when our economists have things so terribly wrong in general.

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The best thing Australia can do to alleviate world poverty is to become the lowest cost producer in synthetic diesel. This means getting to the point of using nuclear generated heat, hydrogen and electricity in converting carbon resources to synthetic diesel. Currently coal is being turned into syngas in some areas. But then the syngas is usually converted to ammonia or used for electricity generation. Hence much energy is lost in conversion. We need to change that metric so that nuclear is adding energy at every stage of the production process. The wider goal of becoming the lowest cost diesel producer also means getting to where nuclear has crowded out coal in electricity generation and liquified-coal exports have crowded out standard coal exports.

Now this is one possible future in many thousands. And one which requires a lot of work in government to at least make possible. In terms of persuasion persuasion persuasion……….

Since all localities have their own rules and the Feds cannot wave a magic wand and completely install property rights the only alternative is for them to negotiate with each locality to pre-approve areas for potential nuclear and coal-liquification use. The idea is to pre-approve thousands more territories then could possibly be used for this purpose so that its a buyers market. Or at least the real estate for this purpose isn’t a sellers market.

This pre-approval as a substitute for sound property-rights, which the Feds cannot realistically deliver on, is also necessary for such things as the building of excess wharf capacity.

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Above is an example of one of the many potential great futures we have in store for us. Carbon tax destroys this in the crib and for no reason. So the carbon-tax advocacy is the epitome of anti-economics. It fails to comprehend that economics is about things unseen and so we are watching Humphreys blithely angling to destroy opportunities he will never even imagine. Opportunities that lay far outside his imagination….. he is working to destroy….. through obliviousness and analytical failure.

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Responses

  1. http://graemebirdforum.wordpress.com/2009/02/23/open-forum-23-02-2009/#comment-652


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