Fifty Economic Fallacies Exposed (Occasional Papers)
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Aimed at exposing popular economic fallacies, this revised edition clarifies basic concepts while demonstrating the practical uses of economic theory. Topics touched upon include the supposed dangers of free trade, the abilities of governments to control the economy, the effects of government regulation, and whether millions of jobs depend on our continued membership of the European Union. These lucid and stimulating articles are invaluable to anyone struggling to master some of the complexities of economic theory and its applications.
individual goods. That pattern, some prices rising, some falling, can take place around any average at all – zero or hundreds or thousands of percent per year. That average is determined by one factor, and relative price changes by other, quite different, factors. The price rises noted in the above quotation were imposed by the government, and were not the result of the voluntary actions of individuals interacting via supply and demand to determine price. But an increase in the relative price of
least as productive as private investment. To summarise, there is nothing special or long-established about the Chancellor’s ‘rule’. Governments should borrow so that fluctuations in income produce fluctuations neither in spending nor in taxes. That may lead to no net borrowing over the business cycle, but it need not. Public investment should be financed by borrowing, to ensure that future recipients of benefits pay for them. But again, following that rule is no guarantee of prudence. The rule
his study. Firms should not make profits There seems to be an idea about that firms should not make profits. Railway companies are criticised for making profits. That a company which aimed not to make profits did not win the first franchise to run Britain’s national lottery was thought by some to be undesirable, even disgraceful. Utility companies are condemned for making profits. But all this barrage of criticism is based on a fundamental misunderstanding; profits are a useful, indeed
compromised the independence of small countries, he retreated from that idea, and said Scotland would use sterling. Here he was promptly rebuffed. On pages 156–159, it has been shown how under present monetary arrangements a ‘Scottish’ vote on the Monetary Policy Committee (MPC) does not make sense, as that group of experts is trying to conduct monetary policy for the UK as a whole, not a collection of regional representatives. They aim to achieve roughly stable prices for the whole of the UK,
including prices in Scotland were targeted would Scotland have an influence on policy decisions. And of course the influence would be indirect, and not exerted through discussion and voting at the MPC. (That, incidentally, would under present rules continue to be the case if someone resident in Scotland were to be appointed to the MPC.) There is, however, another way in which Scotland could continue to use sterling. Suppose you make a trip to, say, Jersey or Guernsey, you would find the bank