Economic Fallacy VII: The Net Economic Gain through Pharmaceuticals

Are double-blind studies of pharmaceuticals enough to prove the efficiency of a new drug? You may be surprised to hear that potentially 90% of such studies could be flawed.

Economic Fallacy VI: The Divisive Multiplier

There is a widespread believe that if governments inject a certain amount of money into “an” or “their” economy, it will miraculously multiply and bear fruit beyond what was invested. This is one of the mainstays of Keynesian economics in that it justifies state subsidies, public works, in short just any intervention by a state in the realm of private enterprise on the expenditure side.

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Economic Fallacy V: Can CPI measure Deflation?

In a recent post Woodford warns of deflation threat as CPI drops to 3% CrisisMaven found another instance of the widespread belief that not only sinking prices (misspelt “deflation”) are harmful as they cause buyers “to strike” but that the housing market has “deflated”.

Economic Fallacy IV: Buyers’ Strike during Deflation?

If buyers don’t buy during a period of deflation why would sellers sell during periods of inflation?

Economic Fallacy III: Looming Deflation?

There is a wide-spread fear, not the least among leading Fed staff and many economic pundits, that we are in a period of deflation, not inflation, or, when it comes to testifying in Congress, we are only not in a period of deflation because the Fed, unlike 1929 and the years following, actively prevented it by (re)inflating the money supply, stimulating credit etc.

However, they say, things haven’t yet worked out so well that the threat of deflation has already been banned successfully. But was there ever any threat?

Economic Fallacy II: Speculation is Harmful?

Apart from outright naval blockade or sieges there has probably been hardly another operation considered as deadly and therefore been at times revenged than what is deemed “profiteering” speculation. The idea to many is that speculation robs honest people of their livelihood. Alleged speculators have been tortured, hanged, disenfranchised, robbed, denigrated, banned, imprisoned, scandalised and impoverished throughout human history and still today economic policy is rife with discussions on how to curb “illicit” forms of speculation.

Economic Fallacy I: Harmful Currency Undervaluation?

This is the first article in the “Economic Fallacies” series. An economic fallacy is a concept of economic policy or a statement of “fact” or the proposition of an economic “law” which often sound very convincing while being at least incomplete if not utterly false and thus leading to ineffective, wrong, counter-productive, in short: to mostly harmful economic policies.

One of the more dangerous concepts is the myth of the effects of currency undervaluation, i.e. currency pegs at an exchange rate that tries to keep a currency lower than an unfettered market exchange would effectuate.