Sunday , June 20 2021
Home / Frank Shostak
Frank Shostak

Frank Shostak



Articles by Frank Shostak

People Change Their Minds. That Doesn’t Make Them Irrational.

4 days ago

According to a relatively new field of economics called behavioral economics (BE), emotions play an important role in an individual’s decision-making process. On this the Nobel laureate Vernon Smith writes,  People like to believe that good decision making is a consequence of the use of reason, and that any influence that the emotions might have …

Read More »

Why Monetary “Stimulus” Won’t Prevent an Economic Bust

11 days ago

The increase in the growth rate of the Consumer Price Index (CPI) has fueled concerns that if the rising trend were to continue the Fed is likely to tighten its interest rate stance. Observe that the yearly growth rate in the CPI climbed to 4.2 percent in April from 2.6 percent in March and 0.3 …

Read More »

Entrepreneurs Are Motivated by Profit, Not Risk

18 days ago

According to modern portfolio theory (MPT), financial asset prices fully reflect all available and relevant information, and any adjustment to new information is virtually instantaneous. For instance, if the central bank raises interest rates by 0.5 percent, and if market participants anticipated this action, asset prices will reflect this expected increase prior to the central …

Read More »

Why Economic Models Can’t Provide a Realistic Picture of Human Behavior

21 days ago

Mises: “The experience with which the sciences of human action have to deal is always an experience of complex phenomena. No laboratory experiments can be performed with regard to human action.” Original Article: “Why Economic Models Can’t Provide a Realistic Picture of Human Behavior” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated …

Read More »

Why Economic Models Can’t Provide a Realistic Picture of Human Behavior

25 days ago

While in the natural sciences a laboratory experiment can isolate various elements and their movements can be followed through, there is no equivalent in the economic discipline. The introduction of econometrics and model building is an attempt to produce a laboratory where controlled experiments can be conducted. The idea of having such a laboratory is …

Read More »

Boom to Bust: How Inflation Turns into Deflation

May 12, 2021

In order to understand the effects of inflation it is helpful to understand that inflation is not a general rise in prices as such, but an increase in the supply of money which then sets in motion a general increase in the prices of goods and services in terms of money. Consider the case of …

Read More »

Monetary Pumping and Idle Resources

May 5, 2021

As a result of the recent stimulus policies employed by the US government and the Fed, most commentators are of the view that the risk of a deepening slump in the US economy on account of the covid-19 pandemic has now receded. Some other commentators are not so certain that the risk has declined, arguing that …

Read More »

Monetary Savings versus Real Savings

April 28, 2021

According to the National Income and Product Accounts (NIPA) the US personal savings rate stood at 13.6 percent in February 2021 against 8.3 percent in February 2020. Since consumption expenditure is considered as the driving force of the economy, obviously a strengthening in savings, which implies less spending, cannot be good for economic activity, so it is …

Read More »

Biden’s Big Spending Plans Will Not Revive the Economy

April 20, 2021

On March 11, 2021, US president Biden introduced his $1.9 trillion covid-19 stimulus plan. The president also announced a plan of more than $2 trillion to rebuild US infrastructure, which includes repairing roads and bridges, as well as expanding access to long-term care services under Medicaid, building schools, and expanding internet access across the US. It is …

Read More »

Printing Money Can’t Replace Real Savings

April 13, 2021

Between January 1970 and December 2020 on average changes in money supply preceded changes in real economic activity by fourteen months, as depicted by real gross domestic product (GDP). Based on this it is tempting to suggest that a strengthening in the growth rate of money supply will result in the strengthening of real economic growth. Conversely, …

Read More »

Fed Transparency Won’t Get Us out of the Mess the Fed Created

April 6, 2021

In an interview with National Public Radio’s “Morning Edition” program on Thursday, March 25, 2021, Fed chair Jerome Powell said that even with the economy rebounding faster than expected, any change in monetary policy would happen “very, very gradually over time and with great transparency. Rate increases would only be considered when the economy is …

Read More »

Real Savings Are at the Heart of Lending

March 30, 2021

After climbing to 12.2 percent in April last year, the yearly growth rate of combined commercial bank real estate and consumer and business loans plunged to –2.6 percent in early March. For most commentators an important factor in setting economic prosperity in motion is bank lending. Hence, this sharp decline in the yearly growth rate in bank loans …

Read More »

The Destructive Power of Keynesian Spending Plans

March 17, 2021

According to John Maynard Keynes, The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some …

Read More »

What Does GDP Really Tell Us?

March 10, 2021

To gain insight into the state of an economy, most financial experts and commentators rely on a statistic called the gross domestic product (GDP). The GDP framework looks at the value of final goods and services produced during a particular time interval, usually a quarter or a year. This statistic is constructed in accordance with …

Read More »

No, Drops in Money Velocity Don’t Offset Money Printing

February 23, 2021

At the end of January, the yearly growth rate of our measure of US money supply (AMS) closed at 76.7 percent, against 4.8 percent in January 2020. It is tempting to suggest that this massive increase in the growth rate of money supply is likely to result in massive price inflation in the months ahead. …

Read More »

Technology Alone Won’t End Poverty. We Need Savings First.

February 16, 2021

According to some commentators such as economics Nobel Laureate Paul Romer, technical knowledge is key to economic growth. But if this is the case, why do third world economies continue to experience poverty? After all, individuals in these economies have access to the same technical knowledge as the developed world. Careful examination, however, shows that a key …

Read More »

Understanding Minimum Wage Mandates: Empirical Studies Aren’t Enough

February 12, 2021

It is only through the increase in capital goods, i.e., through the enhancement and the expansion of the infrastructure, that labor can become more productive and earn a higher hourly wage.  Original Article: “Understanding Minimum Wage Mandates: Empirical Studies Aren’t Enough” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack. …

Read More »

Understanding Minimum Wage Mandates: Empirical Studies Aren’t Enough

February 9, 2021

President Joe Biden has promised to raise the minimum wage from $7.25 to $15 per hour.  Some economists are of the view that the increase in the minimum wage could cause an increase in unemployment. Other economists think that the increase is unlikely to harm the labor market. Hence, they are of the view that …

Read More »

What to Expect from Bidenomics

February 2, 2021

In order to prevent the economy sinking into a lasting state of stagnation, what is required is to reduce both government spending and government regulation, and to rein in the Fed. Original Article: “What to Expect from Bidenomics” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.  

Read More »

There Is No “Optimum” Growth Rate for the Money Supply

February 1, 2021

Most economists hold that a growing economy requires a growing money stock on the grounds that growth gives rise to a greater demand for money that must be accommodated. Failing to do so, it is maintained, will lead to a decline in the prices of goods and services, which in turn will destabilize the economy …

Read More »

What to Expect from Bidenomics

January 27, 2021

On Tuesday, January 19, 2021, the Treasury secretary designate Janet Yellen outlined before the Senate Finance Committee the likely course of President Joe Biden’s economic policies in the months ahead. Given the fragile state of the US economy as a result of covid-19, Yellen favors Biden’s $1.9 trillion spending plan to provide support to the economy. …

Read More »

Time Preference, Interest Rates, and Stagflation

January 24, 2021

As a result of past reckless fiscal and monetary policies the pool of real wealth could be declining. If so, stagflation will result. Original Article: “Time Preference, Interest Rates, and Stagflation” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.  

Read More »

Time Preference, Interest Rates, and Stagflation

January 20, 2021

A common conception is that the central bank is a key factor in the determination of interest rates. In this way of thinking, the key role of the central bank is to make sure that the so-called economy is placed on a trajectory of stable economic growth and stable inflation. If for whatever reason the …

Read More »

Fiscal Stimulus vs. Economic Growth

January 14, 2021

We’re told more government spending will get the economy back on track. But increasing government spending weaken the process of wealth creation.  Original Article: “Fiscal Stimulus vs. Economic Growth” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.  

Read More »

Why the Corporate Paradox of Thrift Isn’t Really a Problem

January 12, 2021

Corporate cost cutting sets the stage for future gains in profitability and productivity, and there is no resulting “paradox of thrift” requiring easy money policies to “fix” the problem. Original Article: “Why the Corporate Paradox of Thrift Isn’t Really a Problem” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack. …

Read More »

Fiscal Stimulus vs. Economic Growth

January 11, 2021

For most experts a key factor that policymakers should be watching is the ratio between actual real output and potential real output. The potential output is the maximum output that the economy could attain if all resources are used efficiently. In Q3 2020, the US real GDP–to–potential US real GDP ratio stood at 0.965 against …

Read More »

Subjective Value Is Not the Same as Arbitrary Value

January 5, 2021

Why do individuals pay much higher prices for some goods versus other goods? To provide an answer to this question economists refer to the law of diminishing marginal utility. Mainstream economics explains the law of diminishing marginal utility in terms of the satisfaction that one derives from consuming a particular good. For instance, an individual …

Read More »

Why the Corporate Paradox of Thrift Isn’t Really a Problem

December 29, 2020

According to some commentators, cost cutting by companies in order to protect profits can in fact set in motion an economic slump. It is held that if everyone tries to cut costs and save more, demand for goods and services from retrenched workers weakens, and as a result corporate revenues and profits come under pressure. …

Read More »

Quantitative Methods in Economics Can Describe—but Not Explain—Events

December 19, 2020

Most economists regard the use of mathematical and statistical methods as the key to understanding the complexities of economics. They are of the view that in order to be scientific, economics should follow in the footsteps of natural sciences. By means of mathematical and statistical methods, an economist establishes relationships between various variables. For example, …

Read More »