As important as the role that free markets play in people’s lives, most people do not know or appreciate how markets function. Most commentators seen and read in the media do not help clear up this widespread misunderstanding. They do not examine their erroneous or outdated mental models of markets.
This blog exists to encourage readers to question everything they currently believe, hear, or read about markets. I will refer to markets rather than economics consistently. Common usage has given the word “economics” meanings that can lead people astray from what happens in markets.
In this blog, I have these 5 objectives:
I will discuss topics that play an essential role in understanding markets. I will make my posts topical when that serves the purpose, but I do not intend to make this Journal a Market newsletter.
Thomas Carlyle reputedly referred to economics as the “dismal science.” This description rings true only in the failure of people to understand a subject that relates to essential facets of their lives. I will make my presentations of these topics interesting.
I promise to not drown readers in data, but when I must, I will strive to make that data as accurate as I can. I have carefully avoided referring to “facts.” What consists of “fact” requires the application of theories, which I will mention below.
Many statements that I hear about markets do not hold up to logical scrutiny. I will point out logical inconsistencies when I see them, and I will rigorously apply logic to statements I make here.
I include this objective because I frequently hear misuse of the term “theoretical.” People frequently use the word “theory” when they mean “hypothesis.” Theories consist of statements that accurately explain past patterns of behavior and help predict future patterns of behavior. People develop theories through rigorous use of logic, research, and reason. Hypotheses represent reasoned “guesses” about patterns of behavior, but they have not been subjected to the rigorous analysis of theories.
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