How Should Prices Be Determined?

by Henry Hazlitt

"How should prices be determined?" To this question we could make a short and simple answer: prices should be determined by the market.
The answer is correct enough, but some elaboration is necessary to answer the practical problem concerning the wisdom of government price control.
Let us begin on the elementary level and say that prices are determined by the supply and demand. If the relative demand for a product increases, consumers will be willing to pay more for it. Their competitive bids will both oblige them individually to pay more for it and enable producers to get more for it. This will raise the profit margins of the producers of that product.

Economics and Armchair Psychology

By John Kozy

“Economics is haunted by more fallacies than any other study known to man.”― Henry Hazlitt

Over millennia, numerous enterprises have sought the status of science. Few have succeeded because they have failed to discover anything that stood up to scrutiny as knowledge. No body of beliefs, no matter how widely accepted or how extensive in scope, can ever be scientific.

In the Ptolemaic system of astronomy, the epicycle is a geometric model of the solar system and planetary motion. It was first proposed by Apollonius of Perga at the end of the 3rd century BCE and its development continued until Kepler came up with a better model in the 17th century, and the geocentric model of the solar system was replaced by Copernican heliocentrism. In spite of some very good approximations to the problems of planetary motion, the system of epicycles could never get anything right.

Let the Markets Clear!

by Ron Paul - Daily Paul

French businessman and economist Jean-Baptiste Say is credited with identifying the fundamental economic principle that aggregate demand for goods in an economy will equal the aggregate supply of goods when markets are permitted to operate. Or in Say’s words, “products are paid for with products.”

English classical economist David Ricardo, among others, more fully developed this principle into what has become known as “Say’s Law.” Say’s Law, according to Ricardo, leads us to understand that market equilibrium for goods is constant. This simply means that markets, when left alone by government planners or other fraudulent actors, inexorably tend toward an “equilibrium price” which eventually balances supply and demand for any particular good. Thus markets will clearthemselves of any surpluses or shortages in the form of excess supply and demand.

The Broken Window Fallacy

This short video explains one of the most persistent economic fallacies of our day.

Made by Sam Selikoff and Luke Bessey.
See Luke's page: http://www.youtube.com/lukebessey
See Sam's blog: http://lonelyliberal.tumblr.com/

Against the Hurri-Keynesians

by Mark Thornton

It seems that we may never rid ourselves of the broken-window fallacy.
Hurricane Katrina certainly did not stop economists from proclaiming the silver lining of natural disasters. On September 9, 2005, Labor Secretary Elaine Chao told USA Today that demand could create a labor shortage that could push up wage rates and that "We're going to see a tremendous boom in construction." On December 3rd, 2005, Nigel Gault, chief domestic economist at Global Insight, said, "We are now at the point where Hurricane Katrina's effects are adding to job creation rather than detracting from it."
And it's not only that disasters just have a silver lining: economists have long believed that natural disasters and wars are actually good for the economy! Until recently they have not made any attempt to empirically test their views. However, in 2002 Mark Skidmore and Hideki Toya published a paper where they found a positive correlation between disasters and human capital, productivity, and GDP growth.