Creative Deduction

One of the most stubborn misconceptions in economics is that unemployment is caused by insufficient aggregate demand. In “The Theory of Idle Resources” (1939) William H. Hutt offers an alternative perspective: unemployment is a symptom of mispricing of labour. The traditional Keynesian explanation is that when consumers and businesses spend too little, firms cut production and lay off workers. Governments should increase spending to stimulate demand and restore employment. Hutt argues that unemployment is rarely the result of a mysterious shortage of demand. Instead, it arises because labour is priced above the level at which employers are willing to hire. Workers become unemployed not because society has stopped wanting goods and services, but because wages fail to adjust to changing market conditions. Hutt distinguishes between desired idleness, where individuals choose not to work at prevailing wages, and withheld capacity, where labour remains unemployed because wages are kept artificially high by unions, regulation or government intervention. Without government intervention, the market naturally tends towards full employment ,if only prices and wages are allowed to adjust freely. Hutt's critique remains highly relevant. Rather than treating unemployment as evidence of market failure requiring government stimulus, he saw it as a consequence of interventions that prevent labour markets from clearing. His work reminds us that prosperity comes not from boosting spending, but from allowing markets to coordinate prices, wages and resources efficiently.

@pjv1968 This is probably the most obvious and yet most under-appreciated fact, which the modern left still won’t accept - because it undermines everything they stand for.

@CreativeDeduct “The Economic Calculation Problem: He proved that socialism cannot work. Without private property and genuine market prices, rational resource allocation cannot occur. Central planners have no way to know what should be produced or in what quantities.”

The most important economist of the 20th century is mostly ignored by both politicians and academia – and there is a good reason for that: Ludwig von Mises destroyed the idea that they should be in charge of the economy. While much of the economics profession fell in love with socialism and central planning, Mises stood virtually alone in defending reason, liberty and the free market – and he did so with unmatched clarity and courage. Mises made three revolutionary contributions that reshaped economic thought: Praxeology: He developed a deductive science of human action based on the self-evident truth that humans act purposefully. This method produces timeless, certain economic laws rather than fragile statistical correlations. The Economic Calculation Problem: He proved that socialism cannot work. Without private property and genuine market prices, rational resource allocation cannot occur. Central planners have no way to know what should be produced or in what quantities. Business Cycle Theory: Mises showed how central banks create artificial booms through credit expansion, which must end in recession. This theory remains the strongest explanation for financial crises and the boom-bust cycle. Beyond these technical achievements, Mises offered a powerful philosophical defence of capitalism as the only system consistent with human freedom and prosperity. He trained and inspired thinkers like Friedrich Hayek and Murray Rothbard, and his work provided the intellectual backbone for the post-war revival of classical liberalism. In an age when intellectuals were convinced that central planning represented the future, Mises insisted that only free markets, private property and sound money could sustain civilisation. Time has repeatedly vindicated him.

@MothinAli Yet another example of how multiculturalism just doesn't work. We can't force vastly different cultures to blend seamlessly. Instead, we get bigotry and violence. Multiculturalism had failed.

One of the largest gatherings of Muslims targeted by far right terrorists and we have close to radio silence... The media, politicians from across the board, pundits... all seem to be taking a minimalist approach... This is how institutional Islamophobia works.

@David__Osland Well, we lost more millionaires last year than any other country.

Rightwing newspapers have been running 'Wealthy preparing to leave Britain if ...' stories for decades. Yet somehow they're still here.

No. It consistently has the highest growth rate in the West, a famously entrepreneurial and innovative culture, the deepest talent pool in the world, the world's most liquid and highly valued stock market, the world's largest investors, global leaders in almost every industry, cheap energy...

@CreativeDeduct @JaxRyan The US is one of only a tiny handful of places that taxes citizens and long-term residents on worldwide income. It also levies a one-time capital gain tax on worldwide assets upon exit. Is America one of the worst destinations in the world for direct foreign investment?

Problem with this interview is Paddy doesn't fully understand the topic. Wealth taxes reversed when not implemented effectively. Worried about rich leaving? 1/Like US, ask UK citizens who live or move abroad to file tax return and pay any tax due on UK assets. 2/ Exit tax too

This is so crazy, & so obviously crazy & wildly damaging in its inevitable consequences, that I struggle to know how to argue against it, because no-one could fail to see how crazy it is so those in favour must *want* those consequences or at least not care about them.

Will someone please explain what the end game is here? Because I’m genuinely struggling to see how this leads to anything other than catastrophe.

@DEhnts Printing money is an example of a not credible economic policy.

The Bank of England was nationalised on March 1, 1946, under the Bank of England Act 1946. What is "credible economic policies" even supposed to mean? The Bank of England is the monopoly currency issuer and the UK Government cannot run out of pound sterling.

🚨NEW: One of Keir Starmer's last acts will be a massive expansion of 'work of equal value' pay claims that are already bankrupting local councils to cover race too. All this will do is cost taxpayers and consumer more, and encourage divisive identity politics in the workplace.

The world is improving – not just for the rich, but also especially for the world’s poor. Read my peer-reviewed article: sciencedirect.com/science/articl…

@NoLimitGains Javier Milei was inaugurated on 10 Dec 2023.

Argentina's Peso is officially worthless.

@AaronBastani The crazy thing is that it’s the greens, who would go further in the destruction that Khan has done, who’s the main challenger.

Crazy, really. London has gotten so much worse for working Londoners in the last 15 years. The numbers don’t lie.

@AaronBastani Yep, a number of constituencies are now captured by sectarian politics and elections for the British Parliament are decided on a candidate's position on one issue 3,500km away. Grotesque.

Labour’s blanket support for Israel is going to cost them seats, whoever is in charge.

@robprogressive Because all taxes don’t have to be progressive?

Council Tax is one of the strangest taxes in Britain. Two neighbours can live in homes worth millions And pay almost the same as someone in a property worth a fraction of that How is that logical?

@Admalez She was a devout Catholic, I now learn. I can think of some religions where outdated attitudes are considered justifiable because we have to tolerate religious differences (well, I can think of one religion, to be specific).

@CreativeDeduct I have long found her sincerity, boldness, and principled nature refreshing, even if I strongly disagree with what she is saying, especially when so many politicians are tools who seemingly have little, if any, principles but just hold the party line.

I always considered Ann Widdecombe a bit of a joke, but seeing how her death is being celebrated by some of the absolute worst people, I must admit that she probably was a much more impactful and important political personality than I gave her credit for. May she rest in peace.

@ChrisWagter And if wages are hiked, supply dries up. But there's a clearing price where demand and supply meet.

@CreativeDeduct If wages are lowered, demand dries up. It is a closed system…

One of the most stubborn misconceptions in economics is that unemployment is caused by insufficient aggregate demand. In “The Theory of Idle Resources” (1939) William H. Hutt offers an alternative perspective: unemployment is a symptom of mispricing of labour. The traditional Keynesian explanation is that when consumers and businesses spend too little, firms cut production and lay off workers. Governments should increase spending to stimulate demand and restore employment. Hutt argues that unemployment is rarely the result of a mysterious shortage of demand. Instead, it arises because labour is priced above the level at which employers are willing to hire. Workers become unemployed not because society has stopped wanting goods and services, but because wages fail to adjust to changing market conditions. Hutt distinguishes between desired idleness, where individuals choose not to work at prevailing wages, and withheld capacity, where labour remains unemployed because wages are kept artificially high by unions, regulation or government intervention. Without government intervention, the market naturally tends towards full employment ,if only prices and wages are allowed to adjust freely. Hutt's critique remains highly relevant. Rather than treating unemployment as evidence of market failure requiring government stimulus, he saw it as a consequence of interventions that prevent labour markets from clearing. His work reminds us that prosperity comes not from boosting spending, but from allowing markets to coordinate prices, wages and resources efficiently.

@SijianLee What do you mean "artificially"? Employers want low wages, workers want high wages. Supply and demand will meet at a clearing price. That's how it's supposed to be.

@CreativeDeduct Shortages of labour remains because wages are kept artificially low by employers. Without government intervention, the market naturally tends towards shortages of labour, if only prices and wages are allowed to adjust freely upwards to meet demand.

@MedicGrandpa @remigrationbob Good. Tolerance is overrated. We should discriminate. That's the only way to preserve what's good and and defeat what's bad.

@remigrationbob lol… Motherfucker when did I claim to be tolerant? Fuck her and fuck all you right wing bigoty dickheads. 🤷‍♂️

Getting tired of idiots thinking I have to show respect for Anne Widdecombe. She was a vile bigot who argued for damaging policies against the LGBTQ+ community. She was a racist, a xenophobe & a genocide endorser. She wasn’t a batty old aunt, she was an evil cunt. Fuck her.