The Most Important Economic Schools of Thought | Economics Explained
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An economy is a collection of production and consumption processes that are all working towards solving the central economic problem.
The problem is that we only have access to a finite amount of resources, but the potential for human consumption of goods and services is pretty much limitless.
This is the foundation of economics, every study, every paper, every theory, economic policy, or experiment is ultimately an attempt to find a solution to a problem, that by its very nature, has no solution.
Economics is considered a social science, and although some other scientists from more “rigorous” fields don’t always welcome it into their little club, it still follows the same processes to explore the world around us.
And, as with science, or anything that is extremely complex for that matter, there are disagreements between practitioners at all levels of academia and throughout the entire history of the subject.
The economic schools of thought are very broad ways that economists are clumped into basic groups.
Now the first thing to know about all of these schools of thought is that they all agree with one another on most issues.
In the same way that two physicists will obviously agree with one another that and object at rest will remain at rest, but might disagree about string theory. Two economists will obviously agree that there are opportunity costs for every unit of production, but they might disagree on the long term implications of a consumption tax.
The economy impacts our financial situations, our governments, retirements, environments, crime rates, and basically anything else that is going to make news headlines.
As with anything that people are invested in they form opinions around it. And those opinions are held by everybody from Nobel laureate career economists to that crazy guy advocating for a seed-based economy.
If this contention wasn’t enough then there is one other issue that makes these schools of thought difficult to deal with, and that is that there are no strong borders between them.
There are plenty of economists that agree with some of the principles of one school of thought and then disagree wildly on some other areas. Which is actually a good thing. But more on that later.
For now, to try and make sense of this wild world we are going to look at three major schools, Classical, Austrian, and Keynesian.
To show the differences between these schools we are going to look at the way they suggest solving the central economic problem in key areas.
What they suggest the role of government is.
What do they think the role of the individual is.
What they propose doing in an economic crisis.
And finally what is the key to delivering a wealthier happier economy?
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If you’d like to dive deeper in to the topics discussed in this video, we recommend checking out these fantastic books:
📚 Wealth of Nations by Adam Smith - amzn.to/3ihm0U8
📚 The General Theory of Employment, Interest and Money by John Maynard Keynes - amzn.to/3ihms4M
(Note: as an Amazon Associate, we earn from qualifying purchases).
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#Austrian #Keynesian #Economics
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_"Acorns makes investing as easy as spending",_ but should investing *be* easy, at all?
Can you do a video on the Chicago school of economics?
*Taxation is theft.*
Where is the vig in Acorns?
@@andreylucass Property is theft
"Ask five economists and you'll get five different answers - six if one went to Harvard." - Edgar Fiedler
Why Harvard
@@AdityaDeo-cg6eu
They teach and make students understand multiple schools of thought very well that they basically become indecisive. Hence, instead of 5 people and 5 answers, its 5 people and 6 answers because one can't make his mind up on 2 answers from 2 different thought processes.
@@sciencemanguy There's a big difference between being indecisive and recognizing that one problem might not have just a single viable answer. This is actually something taught in math classes in middle schools.
@@dontmisunderstand6041
It... it's also a joke... It's not supposed to represent reality 100% accurate, rather, just poke fun at something you observe...
@@sciencemanguy The original comment was a joke, but your reply seemed more like an explanation. So I treated it as such. I would hope the irony of your response to me isn't lost on you in this situation, because I found it pretty amusing.
“All models are wrong, but some are useful.”
--George E. P. Box
True but it often depends upon the requirements of a proof and conditions under which the proof is made.
"Have many theories but tell people you have the right one." - Phillip Mirowski
For controlling society*****
@@MrPinguinzz Yeah, that's what it's all about. If we could trust politicians to be responsible, fiat wouldn't be a problem. Since we obviously cannot, we need honest money with finite resource backing. If only the paper commodities market weren't so derivative and fake, fiat would have been taken down by the Hunt brothers.
@@ysdom Just be aware that the finite resource chosen will then be no longer available for industrial use, may end up being too finite to service the economy and will make to currency vulnerable to destabilisation due to fluctuations in resource scarcity.
More of this style, please. The country videos are cool for exploring specific subjects and reinforcing those ideas with specific case studies. But these in-depth videos on the basic terminology help a layperson like me understand what each position in the discourse is even referring to. Thanks for doing what you do!
Try to get Keynesians and Austrians to agree on what inflation is: Keynesian economics believes that inflation is "meh rising prises tho"; Austrian economics knows it's the expansion of the money supply, thus resulting in rising prises
Austrian economics would describe inflation as increased money supply that has various consequences, and a general level of higher prices is one of them..I think of this as the currency loses value relative to everything else.
@@jerryware1970Correct, and the reason why it doesn't loses value at an even faster pace, it's because the production and logistics technology gets better overtime. So if expanding the money supply (printing money) wasn't a thing, the norm would be for currency to increase in value.
Keyesian>Austrian
You speak as if these two are not concordant. Inflation is rising prices, caused by growth in money supply. One is a definition, the other is the reason.
@@so6568Growth in money simply not backed by increase production *
I feel like I am about to be very unpopular with 2/3rds of viewers all of a sudden.
I like your content also be safe from covid-19
Nah, mate you are doing a fine job. Would love if you did a video on Anarcho-Communist and Anarcho-Capitalist Economies
Ask chi-na
Don't worry mate. As a science student I already have a strong disdain for you just because you're an economist and what passes for 'science' in your field reads like a bad joke to the rest of us.
It'd be hard to make my opinion of you any worse. ;p
You just need to block out the haters with the sounds of the collapsing world economy
I cant believe I ever thought economics was boring. Thank you for making it so fascinating and well; down right addictive.
Glad you enjoyed it!
Yay? Is this form of addictive good? Or should we put it in the Anarcho-Capitalist corner?
Bro, I'm only 17. But understanding is so important. Get into it, watch videos about it, learn its history also its social impacts, and it will change the way you view the world.
All comes down to presentation. I think a lot of math is interesting, but I also think many math teachers should be flogged and banned from schools.
Ever since being a kid I was fascinated by articles on economics. The authors on mises.org do well in explaining complex concepts in simple terms.
Carl Menger's Principles of Economics is such a great book
I love fiction books too!
@@Amquacktador Care to expand on that sarcasm or are you just trolling?
@@edmundironside9435 Sorry, but the subjective theory of value just doesn't hold on for me
@@Amquacktador How so? Am I to believe that you don't think that value is a subjective concept?
@@edmundironside9435 of course value is a concept full of different meanings, and there are almost a whole library dedicated to that only, but i didn't meant the concept but the theory as a whole
7:50 That reminds me of the essay "I, Pencil", one that I absolutely adore. Since I'm no economist, I never realized that Leonard E Read's phenomenal essay was directly based on the principle by Adam Smith!
EE: "If the experiment doesnt work, well you just destroyed a nation"
Argentinian economists: well, is worth the shot
@Bubonic SoS It's not even a new experiment. Oops venezuela failed, meh let's try again, it will be different this time!
Economist Simon Kuznets said that there are four kinds of countries: developed countries, underdeveloped countries, Japan - nobody knows why it grows - and Argentina - nobody knows why it doesn't
reaganomics economist said the same thing
samantha chong lets not exaggerate Americas doing pretty well
Sadly, they're not experimenting, they're just doing the same mistakes over and over again
"Why Economists Never Agree on Anything?"
Me, an intellectual: *"Well they'll never agree on that statement"*
Talking Rubbish Again !
You, not an intellectual: thinking a question is a statement
@@lights473 you: even less of an intellectual: failing to see that the question has a clear premise, that is the statement to which the non-intellectual is referring.
@@yevgeniygorbachev5152 no, a statement is not a question, ever. It is a true or false sentence.
Yes they will.
0:00: 📚 Economics is a complex social science with no definitive solution, leading to disagreements among practitioners.
4:28: 📚 The classical school of economics, led by Adam Smith, emerged in the 18th century and challenged the flawed mercantilist system, focusing on increasing the wealth of nations through mass creation of wealth.
7:27: 💰 The early philosophers and economists believed in the importance of an optimal distribution of wealth and division of labor for economic growth.
11:29: 📚 The Austrian School of Economics challenged classical economics by introducing the theory of marginal utility.
14:11: 📚 The Austrian School of economics emphasizes the importance of subjective value and rational consumer decision-making.
17:26: 💡 Keynesian economics introduced countercyclical fiscal policy to smooth out the business cycle and manage economic affairs.
21:10: 📚 Economists have different opinions and approaches, but they all work towards solving the central economic problem and agree on the importance of investing in the future.
Recap by Tammy AI
👍
Actually, Austrian econ is mostly concerned with having governments empower bank CEOs to determine public policy by determining what public goods get funded when banks make loans.
Austrians despise federally funded public goods that reduce household reliance on bank loans.
They think our government should only fund narrow interests when it issues our currency and only pretend to despise government spending more generally
Because our elites actually do understand that we use government issued 💵 to shop, pay our banks back, pay tax & net save.
In this sense, Austrian thought leaders are just a bunch of demigods
Thank you 😊
What I would add to the problem of "economics is really hard to experiment on" is also that even if you get the law passed and study the results, there are so many other variables that economists can always plausibly argue that the results actualy does not support/disprove the hypothesis since they were caused by other aspects... Say you had an idea for new brilliant taxation scheme and got a country to pass these with effect since 1.1.2019 . You study it's results now and obviously the country is very much not better then before, but odds are it has more to do with covid then your taxation scheme...
"The Pretense of Knowledge" is all you need to know about these economic "sciences".
Not to negate your general point, but in your specific example, you could compare to similar countries who were affected by COVID but didn’t implement this fabulous new tax.
Or the fact that there are literally 10’s of millions of variables, each and every individual in said country and 100’s of millions in some.
Economists be like: "I may be wrong but... ugh, darn it. Just destroyed another nation." ¯\_(ツ)_/¯
"How was your day honey?" - "Well, turns out my theory about taxation was wrong... and I may have just started a civil war."
Talking Rubbish Again !
Friedman, we got a dictator to take Allende out of Chile. Argentina's following soon. You can send your boys in, test out your Austrian school based theories there. If it doesn't work out and the governments actually have to step in with fiscal policy, we'll just lie and say it was a success.
The Chicago school is just this without the "I may be wrong ... ugh, darn it" bit
This is true especially in some developed nations.
“He uses statistics like a drunken man uses a lamp post, more for support than illumination.”
-- Andrew Lang
Is he related to Yang?
Mises in Human Action says statistics and cardinal math (1, 2,3, not 1st, 2nd, 3rd) are valid in economic history, not economics. Even the most fanatical econometrician needs theory to explain statistics but they evade that. Theory in economics is abstraction from observing and conceptualizing production for a market. Theory says what necessarily happens. Statistics says how much happened in a concrete situation. Pikettys Capital is statistics w/o theory, signifying nothing except political correctness.
Trade-Richard Cantillon
Treatise Political Economy-Say
Principles Economics-Menger
Individualism-Hayak
Capitalism-Rand
Statistics identify coincidences, not causes.
@@TeaParty1776 naw it can def identify causes, look up causal inference...
@@El_Jefe_Maestro Evidence for statistics identifying cause? Statistics can say identify the price of bread in late 19th century rural France but it cant say that it had to be that price. Moderns confuse cause w/coincidence.
10 days before Keynes died, he admitted that Hayek and the 'Invisible Hand' theory had been correct all along. Better late than never i guess.
That doesn't mean Hayek is right just that Keynes thought he was wrong lol. What if Marxian economics is more correct? Frankly I don't think both schools are showing there age.
is this true?
To be honest, the last 100 years and and the unending misery that communism provides have already proved Marx wrong...
@@FKaps16
The 100 years of communism already went against whatever Marx wanted to have as he predicted a revolution would occur in highly industrialized countries like Western Europe and the US not some backwater like Russia and China the idea of which is wrong in itself as people in a highly industrialized country would been too comfortable and have more too loose than to gain
@MX 3 lol the ussr never surpassed us in gdp growth and was much less efficient industry wise than the us, China has a majority private economy
Kudos, to you. As I'm weird, I'm currently watching your channel for entertainment whilst on holidays lol!
I've also recommended your channel to my eldest, who recently completed an undergraduate degree in public health and is doing her Masters next year. In this era of globalisation, I believe all the social sciences are interlinked... your channel is very accessible to those without a background in economic theory. And compulsive viewing. Live long and prosper!
I don't think there is enough emphasis on the fact that economics is fundamentally a social science. No matter what there will be chaos in the economy because people are chaotic
And therefore it can't be treated like physics or mathematics. There is no need for calculations and you can't do experiments like in physics because the lab is the humanity and the variables are too many.
@@enixfu It can and should be treated with some mathematics, yet those results are only observations of historic developments, IF those data were measured in the first place of course. What those observations do not deliver, alas, is explanations. We only know WHAT happened but not WHY, because the chain of causality is, as EE said: unanswerable. I like the systematic approach of his video in the 4 chapters.
If all math is thrown out of the window, then economics becomes religion. That is the worst that can happen to it.
@@enixfu Math is just a language. It can describe chaos just as well as it can certainty. I'd encourage you to be more open minded... any problem can be solved with math, even answers to chaotic or irrational questions. Even questions that have more than one definitive answer, and especially questions that have zero answers.
The Austrians did address this with Praxeology.
In the past I think this was true, but I think things may change soon. Turns out people and populations are far easier to model and predict with machine and deep learning algorithms than weather patterns for example.
It was always believed meteorology and social sciences were more in common, but I've worked with research psychologists (I'm a clinical psychologist myself, but still get to study with those folks :)), and they're pretty much admitting the best results they're getting now are from their collaborations with computer science majors.
The gap is closing on the days when we thought humans were special in a non-mechanical sense. Determinism is going to become a very harsh reality in the not too distant future if some of what I've seen is any indication, and people are going to learn they really are extremely basic, simple, predictable, manipulable, and ultimately naive entities that can be very well defined and controlled like any other variable in our more hard sciences.
Granted, we won't be getting 5 sigma results in social sciences for a long time to come, but what's interesting is while it was once thought probably impossible, I think uncertainty is building in that area, and we may very well discover that while we can't explain the black boxes that pump out the predictions of human behavior we create, they actually might be able to get accuracy on that order of magnitude given enough time to learn about us.
Once psychology gives way, sociology and economics will follow naturally... Also probably those two will give way before psychology frankly, just because noise can wash out in larger trends, and if you're just looking for large scale accurate predictions with a reasonable margin of error (Which is generally what sociology and economics is doing), you don't need near the accuracy you need for individual psychology.
This is all VERY speculative based purely on what I've seen by the way... But... I think if you explore these sciences you might at least understand why I'm so persuaded, even if you conclude I'm wrong.
I understand you needed to prioritize certain information, but I think it would have been great to point out why Keynes and Hayek disagreed soo much. For Hayek, the entire reason that the business cycle of ups and downs existed in the first place was because the state intervened to control currency and its ease of access (federal interest rates), which lead to systemic malinvestment. Keynes looked at the business cycle as it was and proposed a solution to the question of how to minimize the symptoms of that intervention, but the Austrians largely felt he was ignoring the root causes of the the problem and proposing a bandaid solution that would leave us worse off in the long run.
Comment was more informative than the entire video. I'm reading How Markets Fail by John Cassidy which has been very hard to slog through, but has highlighed that fact.
And it is worse in the long run, just look at Japan, the whole economy is a zombie, with already negative interest rate and it's stagnating.
@@Gadottinho Japan is a unique case. Culture has a habit of interfering with otherwise rational economic models, which is largely what we are seeing the impact of in Japan. They have low employment and business dynamism because their society created social consequences for leaving your employer for a better wage, or taking a risk on a startup with the banks money, which means there's little change in wages or production. Couple that with very low birth rates, no immigration, the need to care for the elderly, and Japan never really had a chance. Their problems are far from being caused by some business cycle, their currency has been stable for quite a while.
And then he said that we all would be dead in the long run so who cares
Would you call this the “political business cycle”?
An interesting quote about the 1930s depression compared with the fed’s action in 2020:
“Economists Milton Friedman and Anna Jacobson Schwartz showed that the Fed helped turn an ordinary recession into the Great Depression. In a speech given in honor of Friedman’s 90th birthday, Ben Bernanke, a governor of the Federal Reserve Board who later served as chairman, said, “I would like to say to Milton and Anna: Regarding the Great Depression, you’re right. We did it. We’re very sorry.” In the current crisis, by contrast, the Fed acted swiftly and aggressively to shore up the financial system. The central bank took such unprecedented steps as massive purchases of corporate bonds, even including some below-investment-grade issues.”
Sending you love, brother. I've been there too. For what it's worth, you are seen in my heart. May you find peace.
I enjoy your videos. Probably mostly because I enjoy your accent and enunciation so much, but also believe I learn things from you.
I’ve read a lot of the comments and I’m disappointed that no one criticized your talking about Adam Smith’s pin making breakdown, while illustrating it with videos of needles.
cause it doesn't matter in the context of the video as a whole. keep useless negativity at home
I will never understand why economist want to be scientists so badly.
Even Engineering is not a science! And engineers do deliver.
Hahaha fair enough. :(
"Even Engineering is not a science! And engineers do deliver.
"
But imagine engineering in a world without scientists. It wouldn't really work that well.
So even if economists were supposed to be more like engineers; who would be their equivalence to scientists?
@@josephburchanowski4636 I dunno, the Romans managed well enough
@@ungainlytitan1460Trail and error can get you a decent bit, especially if you record it loosely. Although if you were to attempt modern civil without any scientists or physics, it wouldn't go that well. Do remember you don't get to see all the structures the romans failed at; survivorship bias.
Because science is based on tangible, empirical evidence (or the closest we can get to that). If you want to have somebody adopt your definition of what you think the world is/should be, they cannot argue with empirical proof.
“All governments around the world are lowering taxes” “Governments are very quick to lower taxes but often forget to raise them later” *laughs in Argentina*
USA has collected more taxes most every year since forever. Including 21019. They just abuse the budgets even more.
ROFL in all Latin-American countries
Argentina is very quick to raise taxes, and never forgets to raise them later.
@@Tenebrousable 21019 was quite the year.
If you have an "Austrian" party and a "Keynesian" party, guess who gets elected in good time, and who gets elected in bad time?
“I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”
Milton Friedman
That idea destroyed chile
@@forzaacmilan36 not true. How would lower taxes destroy a nation?
@@forzaacmilan36 the most important part here is “whenever it’s possible”,” cutting taxes at a wrong time will lead to bad consequences
@@forzaacmilan36 Chile now is worst than 10 years ago so I would reconsidering it. Not having a perfect society at the time does not mean the economy was destroyed. It was one of the best of South America and still was growing. With your last few socialist governments shift you stoped that progress and are going in the wrong direction. Now there is more inequality than 10 years ago. Typical socialist governments doing the opposite of what they claim to change, good intentions but not enough if you ignore classic economics.
EE: "Economics is a science"
Milton Friedman: "Economists shouldn't concern themselves with real-world data."
This is a really great video. I think about the differences in these ideologies all the time but you compiled and explained them very well in just a 27 min video!
I will not allow you to make fun of Keynes vs Hayek. That work of art has given me more knowledge in 10 minutes than a certain smooth talking kangaroo has in all of his videos.
:(
Well it equalized both but it’s like saying Einstein’s vs Newton’s theory of gravity.
They are on different levels Keynes has founded a new Macroeconomic perspective just like Einstein showed a new perspective on gravity.
The producers were Hayekians either way so there is that. But at least you could learn 1/10th of the Keynesian Theory Building.
Marc T wrong, Keynes and Post-Keynesians proved predicted that there is no Labour Market in the Classical Economic Thinking. As if you cut wages, to lower the price of Labour to get full employment, you also cut demand in the market, so you have less economic activity and create more Unemployment.
Just like we saw in Greece, in the US during the Great Depression, and in every other country that cut wages while productivity rose.
Through lower wages we could also see that companies invested fewer and instead put their money into banks, without the banks being able to find investors as companies were saving instead of investing. The Banks then gambled in The financial sector’s creating bubbles after bubbles to keep the economy running. Same thing happened from 1919 to 1929-1933 when the bubble finally burst and Roosevelt was elected. Starting the great Keynesian era
"Smooth talking Kangaroo"
Really had to do my mans like that? 💀
Keynes: A war save the economy.
that's all folks
What's so crazy about a seed based economy?
-Birds
SEED BASED ECONOMY, NOW!
Yeah, that is less crazy than gold based economy that medieval Europe had
Talking Rubbish Again !
@@ritwikreddy5670 What's even crazier is NOT having a gold-standard. Normies will catch-up soon enough.....
Japanese rice based feudal economy *sweating*
If you were my lecturer I wouldn't be leaving my assignments to the last second every single time! Great job!
Great video, I've been looking for a channel like this for a long time. That being said, I think it's incomplete. You stop the "Evolution of the economic science" On Keynesianism without any mention not so over to the flaws that Economist from Uchicago pointed out and demonstrated decades later with contributions to Economy that earned them the Nobel Prize(Von Hayek, Coopsman, Simon and Friedman).
I would really like a third part of this series of videos.
You make me want to pursue an economics career in the future.
Well it certainly isn't going anywhere :)
I’ve got the same feeling from these videos, he’s like the Bill Nye of economics
@@ahumanpeople Bill Nye? Don't insult EE.
Grade requirements for economics tend to be high 😭
@@sajanator3 *laughs in econometrics*
Pretty much everything in Economics is a trade-off. Pair that with the different knowledge of people and you get a good mess!
*cough**cough* America's definition of communism
Im American and i can vouch for that
Windigo Jones public healthcare is a thing many americans accuse of being communist, and that’s not strictly about taxing the rich to give to poor people. It’s more of a trade-off.
But it may just be a thing in the media and layman’s opinion. I’m not sure if that is a widely held view in the USA because I don’t live there. And by the way, I don’t see how you took his comments as saying communism is about trade-offs? Maybe I’m just confused.
I disagree
Rodrigo Andrade i don’t know who told u that Americans think it’s communist, but those aren’t the main reasons Americans are against it. A lot of it has to do with taxes and government efficiency
Thank you to our host for this thoughtful presentation. Your graphics are the best ever. Learned a lot
Different economic schools views on, handling of, or subject-skirting can differ greatly when it comes to the very core of the point of having economics as a discipline in the first place: the information problem. Some schools are far more honest than others when it comes to recognizing the breadth and depth of its impact, the angles at which they address it, and subsequent proposed solutions/work-arounds to it. The irony is in that the problem is incapable of being solved; no one, whether on the individual scale, or on the massive nation-state scale, is capable of perfect information. This is absolutely key to recognize.
Just a commentary. In the marginal revolution there were two visions: Carl Menger (Founder of Austrian School) and Walras & Jevons. Menger's explanations didn't use math formulas, didn't start with idea of "Markets in equilibrium", didn't think of economics as something static, didn't think as individuals to be rationally perfect, etc. Don't mix marginals schools.
Right. It seems contradictory to say that value is subjective but individuals are all rational economic actors.
As an Econ student who got very tired of hearing “this is important because this S&D graph represents what a monopoly would look like”, it’s very refreshing to see your videos!
This popped in on my feed. I realized what I was listening a minute or 2 in and was like boom sub. My brain loves delicious info snacks in this format! You've got a like sub abd a bell out of me
Excellent video. Gave more time to know more how economics is far more interesting than I thought
Japan's economy stagnated massively since they adopted keynesian economics back in the 90s.
I think he said that is the whole point of Keynesian theory, it smooths out the Boom and Bust.
We are getting there...
Fed: QE to Infinity!!! Fire up the Money Printer!!!
They did it too late, years late, that was the bane of the Japanese economy
Japan has a problem that it has reached the technologic frontier, has aging and shrinking population, they really cant grow much more than 1 or 2%. But you can find many developing countries using Keynesian tools that have high growth rates.
sim l 0% growth isn’t smoothing out irregularities
@@GhPadua Like which Country? Do those countries also have a huge Bust Cycle though? The only Country I can think if is Australia which avoided the recession for almost 3 decades.
But those countries piggybacked their growth off the rise of China, Australia for is absolutely did. Right now China is about to hit a brick wall, and rising tension between China and the West will throw another wrench into the mix. We will see how it goes.
Classical: hard work and produce as much stuff
Austrian: smart work and be selective about what’s produced
Rationalism moment
Keynesian: hard work to produce nothing of value, get paid by the government with other people's tax money
@@davigurgel2040 incel detected
@FagundaioFagundes imagine using “cuck” unironically, nowadays I have come around to the idea that taxation by a bourgeois government is theft (became a communist). However you still radiate incel energy
Keynsian: Money printer go brrr
Man I wish my econ professor introduced Economics like you just did.
Excellent video. One observation: JM Keynes deserves full credit for reintroducing it in the 20th century, but note that counter-cyclic governmental intervention economic theory goes back thousands of years.
Yes, oppressing the successful and punishing them with theft (taxation) hidden robbery (inflation) and worthless speculations (interest rates) had been a strategy amongst ruling demons for thousands of years, though thanks to that Arch-Demon Kynes the retard did it all surface back after Laissez-faire had done so much good for the people of the earth.
EE: "In the next video: the comment section is a free for all brawl!"
Last time I was this early, economics were not a thing.
ahhh a mercantalist I see!
Hunter-gatherer I see
return to monke
Return to your hovel you serf!
Thank you EE for such a great video! However, I have a small in objection to do.
The true founders of economics where the Spanish scholastic. Francisco de Victoria and other members of the University of Salamanca were not economist as such, but were led to economic reasoning as a way of explaining the world around them. They were at least as pro-free market as the Scottish tradition come to be centrifuges later. Plus, their rhetorical foundation was even more solid. They anticipated the theories of value and price of the “marginalists” of late-nineteenth-century Austria.
Sorry but as a Spaniard, I couldn’t keep it to myself. 😬
I think there's another reason that wasn't mentioned in the video: economics is a relatively young science. It's been only 250 years since Wealth of Nations. For all the comparisons to physics that scholars like to make, physics has been studied in one form or another for more than 2000 years, going back to the first astronomers studying the regularity of the planets' and stars' movements. Even then, there were enormous disagreements about fundamentals for hundreds of years. To expect a similar sort of consensus from economics is silly, despite the relative ease with which information is transmitted since its inception. Econ is going to achieve similar levels of understanding and consensus, but it will take time.
As someone who has a very rudimentary understanding of economics, I welcome the broader scope of this lesson as opposed to the regular case studies and topical discussions (which are still really good).
If you want a general understanding of the dialog around theory, then bear in mind that talking about Keynes is really talking about Karl Marx. Keynes was a Marxist. Some economists admit this, but most don't because it's politically divisive. Keynes was controversial during his time, was admittedly a socialist, and was aligned with socialist causes. Like all influential thinkers, Marx was wrong about some things. But he was right about democracy and capitalism successfully coexisting only if political equilibrium between the social classes is established. That translated to the famed 1950s middle class. Socialism and capitalism are addressed in black & white terms mainly for the sake of keeping voters divided.
"WE NEED TOILETPAPER!", shout the Consumers while the economists cry in a corner
"And that's how you know value is subjective"-Austrians, probably.
@@ingold1470 well....my parents did panic-buy toiletpaper......but we're not rich yet. :(
but we still have tp left from last year xD
best feeling when you can spot your home in the vienna footage
Economics is a human driven thing, that's why we or atleast the scientific community doesn't welcome it. It's simply too human centric therefore not standardizable and testible and reproducible.
Not welcome in the scientific community ? Economics is about concluding and reaching optimal solutions based on scientific hypothesis. It uses scientific tools to calculate hypothesis and proves the validity of economic theories.
I think you never heard of econometrics before
@@midogarf9366 Isn't it the other way around?
@@midogarf9366 it's not. Cannot do that with human behavior
@@Dan16673 you can do that with human behavior. You don't get precise and specific answers. However, you get ranges and estimates that you can base your decisions on.
That would put you in the best statistical situation
@@midogarf9366 nah. It's just math-ter-bation. If so we could predict the future with good accuracy.
Oh good, I'm sure the comments underneath your Marxism vs laissez-faire video are going to be *totally* civilised...
I just hope he accurately represents the labor theory of value.
@@lysergidedaydream5970 Yeah lol.
@@lysergidedaydream5970 I would also like to see if he contrasts the different forms of socialism (centrally-planned state socialism/communism, syndicalism, market socialism, etc.).
@@ShnoogleMan
That would be awesome, but I doubt he will. Here's hoping.
@@ShnoogleMan I would like to see this too. I'm an AnCap, but Im usually pretty disgusted at how anarcho syndaclists are immediately dismissed. I dont agree with any of the more nuanced implementation details of socialist thought, but I think its pretty disingenuous to lump all of that in with Stalinism.
Much like supporters of different economic theory, different classes of professionals will discredit each other because they're defined by difference. It is better for everyone when we specialize in profession, but there is really no need to hate on different professions with their own complexities, even if you cant see them. My career path is in engineering, but I still try to learn as much as I can of different fields. I appreciate the emphasis of the empirical side of economics; at lot more of it makes sense when considering the workarounds of studying people.
great ! It was great explanations with super understandable and releatable examples. its hard today to come across videos like this .
I’m sure videos will eventually be made about this on your channel but I’d love to see you take on the neoclassical, heterodox, and Marxist schools of economics. Especially talking about the socialist calculation debate in the context of data analytics would be fun
EDIT: Marxism vs laissez-faire might address these concepts so I’m pumped!
Isn't classical just lassez faire?
@@drake1896 no. Classical is a branch of laissez faire. Austrian economics is a positive(no value judgement on action) view of economics that leads to laissez faire conclusions.
@Yellow Gary so classical is a school of economics that believes laissez-faire is ideal
@@YellowgaryIn fact there is Distributism/Corporativism that makes way more sense. But the best proved economic system of the XX and XXI centuries have been National-Socialist economy, with MEFOs, leasing in the international market, a money based on work and not on gold or debt etc.
The austrian painter was a f*cking genius. The true austrian school of economics.
Marxism belongs in theological discussions and not economics.
Adam Smith's economic theories work incredibly well for consumer markets. The problem is they pretty much overlook that the labor market is completely different.
What school looks at what happens to excess material waste? What school concerns itself with clean air, water and soil? Sick people don't produce much of anything. Sick soil produces empty food. They're way too narrow minded.
@@gaslitworldf.melissab2897 Environmental economics and Ecological economics.
Both schools are relatively new and brilliant, but they're viewed with skepticism by the mainstream schools of economics(or in the case of the more laissez-faire schools, outright hostility), because as you rightly pointed out, many economists are too narrow minded and seem to rely on a certain set of assumptions, generalizations and abstractions about both the natural world and human behavior towards it, when confronted with difficult ecological and environmental issues.
To much models and assumptions about the limits and capabilities of people and environment, based on armchair theorizing in academic ivory towers that are completely detached from real world ecological and environmental issues.
Labour is a commodity (a lot of people don't like this fact). It is exactly the same as the toothpaste market.
No no no.... Labor is the same. Its just being stomped on, because it doesn't line the "stockholder's" pockets, or the CEO's, CFO's and board members. Unionizing is now a legal gray area due to now trillions of dollars of lobbying.
Its not being VIEWED as the same. But know your worth and your rights, don't let yourself be bullied, make a paper trail so they can't make a different one.
@Loganls I heard that same argument by unions and the government in my home town. Their belief lead to the results. If you think that is a good thing, move to Detroit.
Economics is OF COURSE a philosophy. The same way any deductive/inductive rational thinking is. Experimental science is a branch of philosophy. What they should have said is that "Classical theory is a branch of metaphysics (sic!)".
I noticed footage of an API20 microbial test battery in this video. They make identifying bacteria so much easier, but they tend to be more expensive than slower methods. Thus, they tend to only be used when really needed, like in some hospital settings.
I think you should do at least a video for each one of those theories,a single video is just not enough to talk about all they argue for,and also a video for the neoliberal school of though and how it diverses from the new liberal model
I think it's coming. He ended on Hayek. He's going onto the debate between free market and socialism. There's a chronology here...
This. As it stands it leads the viewer to believe that the three schools are just stages of evolution, each fully replacing the last much like the different theories of the atom.
Wow! You are really a great communicator.
Learning some basics about economics with these videos is really easy and pleasant.
It won't make me an expert but increses my general knowledge.
Keep up the good work.
Always the best explanation of the fundamentals. Thanks
This video is so brilliant. Thank you so much for making it. I have a few random questions...
What are the differences and/or similarities between the British Commonwealth and the EU? Are they both economic unions? How do they work? Next, what are the economics of making TH-cam videos?
In summary:
Classical - A foundation that needs improvement
Austrian - A fringe theory
Keynesian - Defined the way that almost all governments manage their economy
Guys, I suspect he is Keynesian...
I mean, you can acknowledge that an idea is *influential* without thinking it is *correct.*
Because the comparison of these different schools of thought line up very nicely with the progression of time and increasing complexities and wealth of economies, and that it is therefore the natural progression of economics and not some choice between operational differences or comparisons that can be held in equal regard. If Austrian or Classical really were superior schools of thought for operating a modern economy, then we would see those in action and countries would naturally gravitate towards them to get a competitive advantage over other countries following other schools of thought. The fact that we dont proves that Austrian is in fact a fringe theory, and classical is so basic in nature that it would not be suited well for dealing the problems of the modern economy.
@@elegantbiscuit2771 not really, the reason the Austrian school is so fringe is mainly because it is very anti-goverment, why would any goverment want to follow an economic theory that basically advocates for the abolition of goverment? Of course politicians wouldn't follow it, they would much rather follow Keynes' ideas so they can justify higher spending and more power.
Well they only adapted half of Keynesianism today, they cut a lot of thing off in the 70‘s, like increasing real wages and high taxation of massive wealth and companies to force them to invest with debts.
All this was cut away from Keynesianism, so it’s no surprise for Keynesians that they can’t pay back their debts.
@@lorenzoaste9173 No it is cause it does not really work and makes too many assumptions that have it fall apart in the end.
Best way to look at it Austrian assumes people are rational while Keynesian does not.
“Fiscal policy didn’t matter during mercantilism”
Tell that to the spanish lol
But for the most part that seems legit
The criticism levied at the Austrians that their theories are not “falsifiable” and that the Austrian school is more like philosophy is correct, but not really a criticism. No economic theory is falsifiable because you can’t isolate variables properly in an economy. Even if you pass a policy to test a theory, you can’t really isolate it’s effects. That’s my opinion, at least, as someone with a background in “harder” science.
But that's because people assume the base issues of basic economic woes are solvable, when they aren't, if we in practice had the PERFECT economic system, there would still be poverty, there would still be wars, there would still be the problems associated with human nature and people would demand "solutions" to such things, and a politician will answer with a "economic solution". This is because people assume poverty is something that needs explaining yet humanity began in poverty and it's more about creating prosperity, not removing poverty.
Do you ever discuss Polanyi and the correctness of the statement that opens the video in economics these days? Also what about new (and old) institutional economics? Genuinely interested.
“Well you just destroyed a nation” 😂
#oops
Economics Explained I love your channel a lot. It’s amazing
And really, a destroyed nation is such a small sample size. To prove a theory, you must destroy *many* nations.
@@Reavenk
*Authoritative economics like Nazism (more political, but still economical theories), Stalinism, Maoism, and Pinochet has entered the chat.*
@@Reavenk I think we’ve had a large enough sample size to know Marxism is terrible 😂
Just to note: scientists do argue about quite new theories in many aspects but it does get settled after more evidence comes up.
Economics on the other hand...
That wasn't a true communism! Next time it will work!
@@S3Mi87 a mass starvation and multiple dissolved nations later
You have just become my favorite TH-cam chanel.
I can find not reference attributed to Kant having writing or saying, "all crafts, trades and arts have profited from the division of labour..." but, I can fin Adam Smith's quote from Wealth f Nations where he wrote, "The greatest improvements in the productive powers of labour, and the greater part of the skill, dexterity, and judgement with which it is anywhere directed or applied, have been the effects of division of labour." which I believe is saying pretty much the same thing.
15:36 - Rational consumers - Background full of vodka bottles
That is fine.
The marginal utility of alcohol is infinite.
@@rwatertree Ha, 😂 I like that,
Here's to hoping that sometime between now and the eventual heat-death of the universe that Economics Explained will rank the economies he already covered.
Anyways, great video. You're always great at teaching economics in both a captivating and informative way!
I mean, if the multiverse theory is correct, we could just move humanity to a more stable universe not undergoing heat death and survive as a species.
Economics explained: there's only so much tea and coffee a person really needs
coffee and tea lovers: are you sure
🍵
Geez I’ve been waiting all my life for acorns, I can set this up for my son
One of the best videos of this channel yet! Can we get one on Milton Freidman's Moneterism?
And his ultimate crusade for the privatization of state education.
@@ddobefaest9334 Yassss!!!!!!!!1
Moneterism vs. Charterlism would be actually very interesting.
I love this channel. Always learning so much.
If you learn so much from this imagine reading books... Maybe like Human Action by Ludwig von Mises. :P I'm not fully convinced EE has read this book yet.
A fantastic explanation, thank you so much!
Classical and Austrian Economics are the only ones that make sense, honestly, and are consistent with first principles.
Should’ve included Chicago school of thought and it would also be useful to do a video of saltwater vs freshwater economists
Chicago school, an attempt at bridging the doctrines between Neoclassical and Neoliberal thought if I'm correct?
chicago school is part of neoclassical econ
@@marinstinic5206 ah. 👍
@@marinstinic5206 more specifically monetarism
I'm really glad to see the Austrian school being compared side by side to those giant economic schools, maybe we are slowly entering the mainstream after all.
By the way, I totally agree that Austrian economics would be more suited as philosophy, but I don't really think that is a bad thing, quite the opposite
Philosophy of Austrian Economics-Richard Salsman, online someplace
Economic Theory And Conceptions Of Value: Rand And Austrians Vs. The Mainstream-Roberr Tarr
What Is Capitalism-Ayn Rand
@@TeaParty1776 Ayn Rand was way too undisciplined and impatient to be called a philosopher. She was a pundit.
@@KRIGBERT Your faith is strong. Evidence would only corrupt it.
@@TeaParty1776 Corrupt away
@@KRIGBERT Rand created an objective and rationally _systematic_ guide to life, from metaphysics to esthetics, inc/a rational morality.
If Keynesian economics basically enabled the government to spend more money (by inflating the currency), and we know the government funds our colleges and student loans, what economic model do you think academics are going to support when they are looking for government funding for their college programs?
But when they manipulate the currency for the elites (all the time), u have no criticism. Nice.
exactly!!!
Thanks for the amazing views of Vienna, really glad to be living here 😄
16:35 - Austrian economics is NOT non-falsifiable. Since Austrian economics is basically a line of logical steps from the Action Axiom, you can falsify it at any point by finding flaws in the logic. The real problem is thinking that statistics can completely falsify an economic theory.
'We can say confidently that, all other things being equal, an increase in the demand for bread will raise its price. This conclusion is true, and not tentative. Will the price of bread go up tomorrow, or sometime in the future? This cannot be established by the theory of supply and demand. Should we then dismiss this theory as useless because it cannot predict the future price of bread? According to Mises, 'Economics can predict the effects to be expected from resorting to definite measures of economic policies. It can answer the question whether a definite policy is able to attain the ends aimed at and, if the answer is in the negative, what its real effects will be. But, of course, this prediction can be only "qualitative."'"
"One example that Mises liked to use in his class to demonstrate the difference between two fundamental ways of approaching human behavior was in looking at Grand Central Station behavior during rush hour. The 'objective' or 'truly scientific' behaviorist, he pointed out, would observe the empirical events: e.g., people rushing back and forth, aimlessly at certain predictable times of day. And that is all he would know. But the true student of human action would start from the fact that all human behavior is purposive, and he would see the purpose is to get from home to the train to work in the morning, the opposite at night, etc. It is obvious which one would discover and know more about human behavior, and therefore which one would be the genuine 'scientist.'"
I was about to comment in the same lines. But I think the "other" two groups would have similar objections to the way their point of view was explained. I think there's no way to make justice to the Austrian school in one single video. Much less to three different schools.
Your second quote demonstrates exactly the problem the video was pointing out. The example speculates based on very few premises and somehow gets one conclusion without bothering with whether it's actually sound. How did the observer know which destination the humans were going to at each time of day, and why did the observer assume it'd be consistent? Further, why "work"? Why not "school" or "mandatory prayer"? These are all thing an "objective" behaviorist would likely look into. Without further empiricist effort, there just isn't enough information to either prove or disprove the conclusions. This is reflected in actual formal logic in that an invalidated theory can't be assumed false. It's just not useful.
Also, there's no point in using direct quotes if you don't say where they came from.
@@biggerdoofus The point of the quote is that the only assumption is the action axiom "humans use means to achieve ends, all human behavior is purposive, etc." The Austrians are not opposed to empiricism, they are opposed to empiricism to establish a law. Empiricism can SOMETIMES be used as evidence that your law is true, but fundamentally it cannot be used to create new economic laws. The example is a good way of showing that you must first establish an axiom before you can even begin to discuss what those people are walking towards.
The axiom comes FIRST. The geometry comparison is good to use here (sort of, though obviously it isn't 1-to-1). When you look at something in the real world and say "that thing is flat and has three sides - its a triangle" the axiom of a triangle being a flat polygon with 3 sides is established FIRST. The concept of a triangle is not developed empirically. It begins with an axiom, and then that axiom is expanded upon using logic (once a triangle is defined as a polygon having 3 sides, then you can prove logically that the 3 internal angles add up to 180 degrees).
Austrian economics begins with the action axiom, and all laws are logically developed from there. You can falsify ANY of the laws by showing that the logic is faulty. Or you can argue philosophically against the action axiom (it is what Kant would label as synthetic a priori knowledge).
If you get anything from my reply here, let it be this example: think about how you would falsify supply and demand with only empiricism. Supply and demand is only even observable at the point of sale, EVEN IF YOU COULD READ MINDS, buyers and sellers don't even necessarily know internally what they are willing to exchange until the moment of exchange. So how would you falsify it empirically? Its crazy to me that only the Austrians seem able to see this. Everybody else wants to "play physicist" but economics is not physics.
The quote was not fully fleshing out the entire thing, its just supposed to be a simple example. Obviously with just the observation of people walking and accepting the axiom that all human behavior is purposeful, that wont tell you where they are walking to. But economics isn't about predicting where the people are going to go, its about describing the laws that define that under such and such circumstances, such and such a result will always occur. If this were not the case, we would rank the "best" economists based on how much money they make from their predictive abilities. Sadly, instead, we rank our economists based on how much ideological justification they are willing to provide to states to spend more, take on more debt, and manipulate interest rates.
BTW: No Behaviourist would accept his premise. Mises is playing a semantic game (and not very honestly). He takes the behaviour of a crowd, and then says that a specific psychological model of the individual cannot explain the crowd. Well, Duh. It's not trying to, and it's not meant to. Also: Behaviourism as a psychological model for humans was abandoned about 70 years ago, because it could not explain (inter alia) the kinds of complex activities like those that are at issue here - so today it's a total straw man argument, with no-one is around to contradict it.
@@otsoko66 I don't know about behaviorist economics, but behaviorism is still something you can get PHDs in, research is still being done, papers are still published, and behaviorist theory is used for a number of things -- like games, educational programmes, online stores and social media platforms.
It's not always wonderful the way it's used, it gets a lot of deserved criticism, but it's definitely not abandoned.
I remember requesting a similar video over a year ago and was greeted with a yes, finally it has arrived :-)
Hope you enjoyed it! Hope it was worth the wait!
@@EconomicsExplained Definitely, not only did I get a video but a whole series! Thanks for the high quality content, just started my BSc in Economics 2 weeks ago
I firmly believe that counteracting the natural cycle of economics is the worst thing we could have ever done. It's created bigger crashes, prevented new growth by protecting the old businesses that should have failed, created megacorperations and all their evils, and is pushing the world off the cliff at the end of "infinite growth". It's also the root cause of inflation outstripping income, the housing crisis, and generational wealth inequality.
I was listening along (not watching the screen) and when you said "mercantilism" I didn't have a clue what you were saying because I have never heard your interesting Aussie pronunciation of the word. 😂 BTW, Hayek and Von Mises are the best.
I'd argue that economics is less a social science, and more logical philosophy. A person's view on an economy will almost exclusively depend on what they believe an economy's purpose is and what an economy's purpose should be. As such, it is always a question of belief, not fact.
It's important to distinguish between means and ends. Yes, the ends or purposes of economic activity are subjective, but the means to achieve those ends are objective, facts.
Most people will agree that general welfare is preferable to any alternative, they all disagree on the means for such.
@@luisgbgamer To an extent, but not exactly... which is why I view it as philosophy based in reason, instead of a logical extrapolation of the facts of our lives. The "facts" that economics deal with are subjective in nature, fundamentally. To form the basis of economic theory, economists make false assumptions... key among those being that all humans are omniscient, infallible, and operate purely on rationality. They make those assumptions for the purpose of creating a baseline for a model that might be adjusted by removing those assumptions. Thus, it is not fact that drives economic theory, but belief.
One small correction, it's not Adam Smith who invented economics , in India during the Maurya Empire in 322 BC , A man called Chanakya ( he was King's right hand man and the brains behind the rise of Maurya Empire) , already made an entire book about administration called Arthashastra , in that book he very specifically mentioned about what is economy and how to manage it and it was theoretical very close to the Austrian model of economics.
Thank you for this info
India should've listened to BR Shenoy.
I like economics because, although it covers controversial subjects, it does so in a dispassionate scientific matter. I took several economics courses.
Great video. Thanks for uploading.
In response to the statement at 7:00 The WEF seems to be trying to get the majority of the world's population to just "forget" the unhappy part & just tell people "You Will Own Nothing and be Happy..." 😆
I feel like this one-sided Keynesian economic system of only dampening the bad times is gonna result in a wound-up rubber band slamming the global economy all at once.
Thank you! This is a very good and simple overview of economics. By the way: I don`t see a real contradiction between Austrians and Keynesians as long as both stick to their specific aspect of economics. Austrians have the perfect explanation for how value is defined (namely by the individual consumer). Their field is micro economics. Keynsians are macro-economists. Till now they claim to have (and probably do have) the best recipes how to handle boom and bust cycles. If during an economic downturn the government would pay workers to dig useless holes that would of course be a waste of money but paying workers instead to build necessary public infrastructure (which the market cannot provide anyway) for example would be a perfectly sensible way to avoid or at least dampen a recession.
They are inherently contradictory.
A) Austrians disagree on the validity of macroeconomic as it and it’s formulas are based on (mathematical) canceling
B) Austrians see (central bank) policies prescribed by Keynesian as the root of the business cycles as it sets artificial non-equilibrium prices for money and thus creates artificial oversupply/shortages.
C) Austrians certainly do not agree with the idea of the Keynesian multiplicators realizing the higher opportunity cost surpassed by taxing the money away from people.
Apart from that, it is highly questionable whether Keynesian economics works best to tackle crises. It is mostly base don the misconception that the Great depression was caused and heightened by laissez faire government policy. A claim which does not stand the test of reality.
Thank you for the explanations. As an Austrian I am inclined towards Austrian Economics, but not without checking contradictions to certain positions which might arise from actual economic developments. @@fabianbogg9382
Beautifully explained! Thanks a bunch!
I really enjoyed the 4 minute ad in the end 😊👍
Last time I was this early, countries were still hoarding gold and silver!
Not even a mention of the Austrian business cycle theory and Ludwig von Mises and Friedrich Hayek? Can't believe this. This is by far their most underrated contribution.
Hayek was mentioned in Keynes part.
1:54 the good news is that a lot of professionals are starting to realize that just because economics is hard to experiment with, does not mean there is no value in it. I mean take a look at the 2019 Economics Nobel Prize winners, who won it because of their experimental approach regarding global poverty. Will economic experiments ever be as concrete as a physics experiment? Of course not, because physics will always respond exactly the same way if you set up identical conditions, but while there is a lot more ambiguity to economics, it is still to our benefit to take experimental approaches when practical. It might not be able to 100% prove something, but it can give some insight to how people respond to new economic strategies.
Hey im happy you got acorns i use them and like them.
good vid btw.
Please do a video on the economy of Finland🇫🇮
we will do every country eventually :)
@@EconomicsExplained no, you already have stock footage of Austria ready. Do Austria first
@@EconomicsExplained what if new countries are formed in the meantime?
Hey could you do a video on the effectiveness of worker co-ops or the validity of the labour theory of value?
The labor theory of value is pretty much 100% *invalid* by the definition of the word "value."
I don't think the labour theory of value has much redeeming qualities, but it is worth making a video on
Of course, my gift is to refine things. Your depiction of Classical and Austrian is excellent. You omit the fundamental question that drove their respective, become collective, investigations. Namely, "What is the source of value?" The Mercantilists believed it was gold as you said, and/or whatever could be traded for gold because conversely, gold could be traded for anything, duh. For your reasons cited, Adam Smith et al realized nope, it wasn't gold but labor (your depiction of "production"), or the turning of useless raw materials into useful stuff. A log is useless whereas lumber is useful, therefor labor is the pixie dust that makes something "valuable." The trouble was the uneven distribution of just how useful/valuable a given thing could be across diverse populations. The quandary was summed up by the infamous water diamond paradox. How can the most useful thing to humans, water, be so cheap while the most useless thing (at the time), diamonds, be so expensive? How can diamonds be more "valuable" than water? As you say, the Austrians stumbled upon the idea of "utility," which today means "usefulness", but back then had a broader meaning of "serves your desires". Utility explained how the same object, like a porcelain figurine of a dog, could be valued highly by one person and absolutely worthless to another person. This was their "discovery" of the "individual", of the power of individual wants and needs. It was the cap stone principle in the collection of broad sweeping changes called The Reformation; the transition from the idea that the individual's purpose is to serve/maximize the group to the idea that the group's purpose is to facilitate the potential of the individual. The overarching quest of Mercantilists, Classicists, and Austrians was to explain the source of "value." That, however, was not Keynes' question.
Sources and explanation about The Reformation being about individuals and groups, please? Really liked the way you explain
@@Copperhell144 The source is my brain filled by 50 years of reading most everything on political economy from the Magna Carta to the Federalist Papers. In short, The Reformation was the movement to break the political stranglehold of the Catholic Church over Europe, which power the Church maintained via religious hegemony. We know the Catholic protestors today by the religious name Protestants. The root idea which spread like wild fire was, the individual can approach God himself without the need of The Church to do so on his behalf. This had huge political ramifications because no government in Europe existed without the sanction of the Catholic Church; the Church and State were married and the Church was a polygamist. But more importantly, it had a huge effect on the psyche. You had to think for yourself if there was no Priest to intercede for you. Thinking for yourself was heresy, execution level heresy. The Reformation essentially made it okay to think for yourself. HUGE mind shift, absolutely huge, almost incomprehensible to Westerners today. This awakening of the human mind, over roughly a 100 years, laid the foundation for The Enlightenment; the birth of "science." The classical economists like Smith and Riccardo flower and bear fruit in this period. But they never would have without The Reformation breaking the Catholic Church's mental chains on the human mind & spirit.
One insight of Von Mies that is seldom mentioned but seems especially relevant these days is the notion that the market is a method of decentralising decision making to the person or persons with the information needed to come to the best decision. This calls for regulation to ensure that decision makers have the information they need.
Also some decisions are in fact best made at a higher central level and not by the market.