Although Considered By A Few Critics That The Sentence Structures Of The Book Are Quite Incomprehensible And Almost Unbearable To Read, The Book Is An Essential ...

F. A. Hayek's realistic economic theory has been replaced by the formalistic use of equlibrium models that bear little resemblance to reality. These models are as serviceable to the right as to the left: they allow the economist either to condemn capitalism for failing to measure up to the model of perfect competition, or to praise capitalism as a utopia of perfect knowledge and rational expectations. Hayek, by contrast, used equilibrium to show that while capitalism is not perfect, it contains (...) error‐correcting institutions that bring it closer to perfection than is intuitively apparent. (shrink)

F. A. Hayek's realistic economic theory has been replaced by the formalistic use of equlibrium models that bear little resemblance to reality. These models are as serviceable to the right as to the left: they allow the economist either to condemn capitalism for failing to measure up to the model of perfect competition, or to praise capitalism as a utopia of perfect knowledge and rational expectations. Hayek, by contrast, used equilibrium to show that while capitalism is not perfect, it contains (...) error‐correcting institutions that bring it closer to perfection than is intuitively apparent. (shrink)

Vedder and Gallaway are mistaken in their attempted demonstration that government policies to raise real wages have been the source of most or all U.S. unemployment in the twentieth century. Their case depends on a presumed correlation between high unemployment and high real wages that has not existed since World War II, and on a naive confusion between correlation and causation: just because real wages and unemployment were both relatively high during the Great Depression does not mean that high real (...) wages were the cause of high unemployment. More likely, the reverse is true. The ascription of high unemployment to higher‐than‐equilibrium real wages is not always in error. But there is no reason whatsoever to believe Vedder and Gall‐away's claim that the government's policies to raise wages have been “the major cause of high unemployment in the United States.”. (shrink)