My interest in economics was caused by the economic crisis in 2008. How could such a thing happen? How could it be that most economists didn't see it coming or even said they could not have seen it coming? How could we have prevented it? Why is everything slowly reverting to the situation before the crisis and why isn't policy fundamentally changed?

I am not an economist and I do not have a scientific degree [mytitles]. Let's get that over with. I do like to dive into a problem and analyze it. So I decided to designate some of my spare time to economic research.

Economics is probably one of the most influential sciences, as it influences politics, journalism and thus society as a whole. That is a huge responsibility. Friedrich August von Hayek acknowledged this when he won the Nobel Memorial Prize in Economic Sciences in 1974 [hayek][nobelprize].

Since the crisis of 2008, a lot of critique has surfaced from within the economic science. Most economists didn't see the crisis coming and some even claimed that they couldn't have seen it coming. That, I did not believe. It seemed that mostly mainstream economics [mainstream] didn't see it coming. I read the book Debunking economics by Steve Keen [keen]. I do not like his style of writing and also prefer a triffle of math above lengthy proza with large tables, but I understand that triffle of math would scare away part of the audience. Keen builds on a theory that was developed in the seventees by Hyman Minsky. That theory tells us that a debt-driven economy – that most Western countries have – is inherently instable. He published that in 1992 as the Financial instability hypothesis [minsky]. Keen says that the critique has always been there and that even mainstream economists have discovered some of the fallacies in fundamental principles (more about that in demand and supply) but it never seems to reach a bigger audience.

So there is debate amongst (at least some) economists about even the most fundamental theory. That leads to some economists finding it not yet a science and others warning about giving economists too much influence. Others find that most fundamental principles commonly accepted by economists, are not properly founded and are the result of improper application of mathematics.

So what to believe?

My playground

Seeing is believing. This section about economics is my playground. In this playground, the laws of demand and supply will be explored, as well as the market with monopoly and perfect competition. This exploration is done in a lightweight-mathematical fashion that any undergraduate student of an exact field should understand. This is a personal choice. Though I understand why a lot of authors do it, I do not like lengthy proza with large tables with pre-calculated values. Oh, if only the used functions were mentioned! I like a hort explanation:

“The marginal cost \(c_m\) is defined as $$ c_m = \frac{dc}{dq} $$ where \(c\) is the total cost as a function of the quantity \(q\).”

As of this writing, April 2015, this section is far from finished!

Nobel?

There is no real Nobel prize of economic sciences and according to Friedrich Hayek [hayek] – who ironically won this Nobel Memorial Prize in Economic Sciences [nobel] in 1974 – such a prize should not exist. He thinks that winning this prize provides economists a prestige that strengthens their influence, something he deems dangerous.