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The “trickle down” assumption

3 days ago

From Ted Trainer and current RWER issue
The basic justification for conventional development is that although it mostly enriches the rich, in time “…wealth will trickle down to benefit all.” There is indeed a tendency for this to happen, but there are several reasons for rejecting this strategy.
Little trickles down
In the global economy the amount of benefit that trickles down is evident in the fact that one-fifth of the world’s people now receive about 70 times the amount of income the poorest one-fifth get, and according to a number of studies such as by Hickel (2017) the ratio is getting worse. Edward and Summer (2013) report that between 1990 and 2010 global consumption increased by $10 – $15 trillion, but 1% of people received 15% of it. The gain for each of them was 637 times as

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China’s dash for technological leadership

4 days ago

From C. P. Chandrasekhar and Jayati Ghosh
For quite some time, China was seen as a ‘threat’ by virtue of being a global manufacturing hub, embedding knowledge in production and riding on its cheap labour force and large volumes of foreign investment, to win a disproportionate share of global markets. But more recent declarations from official Western sources focus on the threat stemming either from China’s illegal appropriation or theft of intellectual property, or knowledge for production to move up the value chain, or from China’s misuse of technology (allegedly illustrated by Huawei) for espionage aimed at advancing its increasingly aggressive security interests.
These allegations are founded on one undeniable aspect of China’s manufacturing eco-system: its control by the Chinese

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Financialisation and bureaucracy have perverted higher education

5 days ago

From Steve Keen and RWER current issue
Steve: Yes, the financialisation of higher education has gone hand in hand with the growth of bureaucracy. More than all of the money raised from student loans has gone into the black hole of administration, so despite the increase in funding, there is less money going to education now than when universities were fully funded by the state. This has also perverted the educational process, for both administrators and students. Whereas administrators used to support the learning and research process, now they direct the fund-raising process; whereas students used to come for an education, they now come for vocational training. Stuck in the middle, academics are harried by performance targets and measurement metrics from above and “I’ve paid for my

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Weekend Read – The puzzle of western social science

8 days ago

From Asad Zaman
Introduction: Briefly, we can state the puzzle as: “Why does Social Science claim to be UNIVERSAL, when it is based on analysis of European historical experience?”. Many authors have recognized this problem, which manifests itself in many ways. For example, Timothy Mitchell (2002) writes: “The possibility of social science is based upon taking certain historical experiences of the West as the template for a universal knowledge.” Many other authors have recognized that Western Social Sciences is founded on European historical experience, and requires radical reconstruction. Our goal in this note is mainly to articulate this puzzle. Some suggestions on possible solutions are sketched in the concluding

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The sociopathic crisis

12 days ago

From Ken Zimmerman (formerly a comment)
Clearly sociopathic actions, right? “In a sociopathic society, sociopathic individual behavior is so pervasive and socially accepted that perpetrators don’t think of themselves as doing anything wrong. When cyclist champion Lance Armstrong first acknowledged in a 2013 interview with Oprah Winfrey that he had been doping—using performance-enhancing drugs—and lying about it for years, she asked him if he believed he was cheating.
Oprah: Did you feel you were cheating?
Armstrong: No. At the time, no. I viewed it as a level playing field. I looked up the definition of “cheat.” The definition of cheat is to gain an advantage over a rival or foe. I didn’t do that. I viewed it as a level playing field.”
Armstrong believed the rules of the game were such

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The biophysical resource limits of the planet

14 days ago

From Ted Trainer and current RWER issue
It is remarkable that the development literature has given so little attention to the “limits to growth” analysis of the global predicament. No other set of considerations has such profound implications for development in rich and poor worlds. Over the last fifty years there has accumulated an extensive and overwhelmingly convincing case that global resource consumption and ecological impacts are far beyond sustainable levels. This rules out any possibility of all the world’s people rising to the present material “living standards” presently enjoyed by the one-fifth who live in rich countries, let alone to the levels of consumption growth would lead them to (TSW, 2019).
The magnitude of the overshoot needs to be stressed.  The World Wildlife

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The sentiment behind eugenics thrives in human capital theory

16 days ago

From Blair Fix and current RWER issue
A key problem with eugenics is that it neglects the social nature of human traits. It assumes that productivity is an innate trait of the individual, and that breeding for this trait would lead to a better society. It is a seductive idea that is deeply flawed. In all likelihood, selectively breeding people for productivity would, like chickens, lead to a psychopathic strain of human.
The rise of human capital theory
After the horrors of the Holocaust, eugenics fell into disrepute. As a result, few people today dare argue that we should selectively breed humans for productivity. Still, the sentiment behind eugenics (that some people are far more productive than others) lingers on in mainstream academia. It survives – even thrives – in human capital

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A modest proposal for generating useful analyses of economies

17 days ago

From Geoff Davies and current issue of RWER
I propose that economists leave philosophy alone for a while and instead try analysing some actual economic observations.
I have observed much discussion among heterodox economists about what science comprises, whether one could do “scientific” economics, and what ontology, epistemology, etc., etc., might be involved. If, for example, economies are historically contingent, how could one hope to do a rigorous analysis. I have also observed much concern about the complications of people and societies and the resulting alleged need for elaborate statistical analyses to extract an object of interest, followed by the construction of an elaborate mathematical model that includes many nuances of human behaviour.
I think the challenge is not nearly

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18 days ago

From Duncan Austin and current issue of RWER
The key issue is not that economics is not a valuable way of thinking – it clearly is – but rather that the discipline lost sight of its boundaries and unwittingly propagated an exaggerated sense of its scope. Ironically, it achieved this by fatefully downplaying the significance of one of its own discoveries made a century ago. Given the profound influence of economics within modern culture, this oversight cannot be dismissed as mere academic error, for it has potentially existential real-world consequences.
In 1920, Arthur Pigou, a Cambridge economist, conceived the idea of externalities to describe how market transactions may create unintended harms or benefits for which no monetary compensation or reward occurs. Market exchanges

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issue no. 95 – Real World Economics Review

19 days ago

Download whole issue
Is a capitalist steady-state economy possible? Is it better in socialism? Theodore P. Lianos

The “ideal market” as a normative figure of thoughtTanja von Egan-Krieger

The rise of human capital theory Blair Fix

How downward redistribution makes America richerSteve Roth

The moral dilemma and asymmetric economic impact of COVID-19Constantine E. Passaris

Pigou and the dropped stitch of economicsDuncan Austin

Third world development: Simpler way critique of conventional theory and practiceTed Trainer

The American Gordian Knot and Alexander the Great is not in sightJohn Komlos

Unbridgeable: why political economists cannot accept capital as powerShimshon Bichler and Jonathan Nitzan

A modest proposal for generating useful

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US Stimulus: Setting a New Agenda?

20 days ago

From C. P. Chandrasekhar
With President Joe Biden having put through Congress and signed a $1.9 trillion American Rescue Plan, the world is set to experience one of the biggest fiscal boosts of recent times, larger than that resorted to in response to the 2008 Global Financial Crisis. Together with the $900 billion short term stimulus announced by the earlier administration end-December 2020, the level of pandemic induced Federal spending in the US is estimated at 13 per cent of GDP this year. Coming after the $2 trillion of fiscal spending last year, under the CARES Act, this is indeed a gigantic vote for big government in response to the pandemic.
The money would immediately unleash spending, with the key components of the package being a sum of $1,400 being paid to each individual

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Weekend Read – Flawed foundations of social sciences

23 days ago

From Asad Zaman
While the car is functioning well, one does not usually open up the engine. But when the car breaks down, it becomes necessary to open it up to see what is wrong. This is the situation today, as the failure of econometric models manifested itself in the global financial crisis, as well as many other occasions. The tragedy is that these same failed models continue to be used today; no serious alternatives have been developed. The reason for this is that the methodology used to develop these models is inherently flawed, and incapable of producing knowledge. It is necessary to understand the engine – the philosophy of science underlying statistics and econometrics – to see why this is so. A capsule summary outline of why it is necessary to discuss philosophy of science is

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Why are most textbooks still proprietary?

25 days ago

From Blair Fix
Today a rant about textbooks. Every year governments spend billions of dollars on public education, teaching students knowledge that was itself created by publicly funded research. Yet each year, university students must pay anew for this information by purchasing high-priced textbooks.
It needn’t be this way.
Most university textbooks are written by tenured (or tenure-track) professors. These are people who are paid by the public to generate and disseminate knowledge. Professors are expected to write academic articles for free. Why not add textbooks to the list?
With a stroke of the pen, universities could make writing open-access textbooks a part of tenure-track expectations. And if there are costs associated with creating textbooks, fine. We can have grants that cover

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The roaring revival of political economy

26 days ago

From Hardy Hanappi and Real-World Economics Review
For human societies, contrary to other species, the direction of their development is always co-determined by the way that their members produce a shared interpretation of their environment in order to achieve a common goal[1]. How to find a commonly shared view of our global society has become increasingly difficult in the decades since 1945. One reason certainly is the development of the global production system itself, which rapidly became so sophisticated and interwoven that even the most powerful global actors only can see a very small part of it. In most respects economic dynamics – those depending on different, semi-institutionalised market mechanisms – became intertwined with political dynamics – those where profit was to be

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Weekend Read – Energizing exchange: Learning from econophysics’ mistakes

March 12, 2021

From Blair Fix
Let’s talk econophysics. If you’re not familiar, ‘econophysics’ is an attempt to understand economic phenomena (like the distribution of income) using the tools of statistical mechanics. The field has been around for a few decades, but has received little attention from mainstream economists. I think this neglect is a shame.
As someone trained in both the natural and social sciences, I welcome physicists foray into economics. That’s not because I think their approach is correct. In fact, I think it is fundamentally flawed. But it is only by engaging with flawed theories that we can learn to do better.
What is important about econophysics, is that it demonstrates a flaw that runs throughout economics: the idea that we can explain macro-level phenomona from micro-level

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“How’s the economy doing?”

March 11, 2021

From Ken Zimmerman  (originally a comment)
If you had asked somebody 100 years ago, ‘How’s the economy doing?’ they would not have known what you were talking about. At the time, people talked about things like banking panics, and national wealth, and trade. But, according to Zachary Karabell, this thing we call the economy — this thing that we constantly measure with specific numbers — was not really invented until the 20th century. Specifically, around 1930. “It was invented because of the Great Depression,” says Karabell in his book called The Leading Indicators. He writes:
It was invented because there was clearly a perception that there was something really, really bad going on but they didn’t really know what. You could see there were homeless people on the street, you could see

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March 10, 2021

From Ikonoclast  (originally a comment)
I think I can give an example of why economic reductionism or economic simplism or economism do not work. It revolves around the fact that the world, even the socioeconomic world, is extremely (if not infinitely) complex and endlessly changing and mutating. There are numerous gradations and changes to every phenomenon possible.
About 25 years ago, I commissioned a house to be built. About 25 weeks ago I commissioned a landscape (hardscape and softscape) to be built. Leaving aside the facts that these are different projects of different sizes, complexities and technical issues, much has changed in the Australian political economy in the last twenty-five years. The differing difficulties I had with each of these projects suggest to me that subtle

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The production and distribution of Covid-19 vaccines has exposed and intensified global inequality.

March 8, 2021

From Jayati Ghosh 
This led to the rapid development of multiple Covid-19 vaccine candidates and even more rapid regulatory approval to several of them. Typically, vaccines take several years to be developed and approved, partly because of extended clinical trials to check for all possible responses. But some Covid-19 vaccine candidates were given official approval in Russia and China even before the essential Phase III trials were completed. Even in the US and Europe, regulatory processes were accelerated, sweeping aside the usual demands for complete data and without checking for possible side effects.
Despite such proactive policy, the production and distribution of Covid-19 vaccines has exposed and intensified global inequality. Three features stand out: blatant vaccine grab by

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A review of Carey King’s ‘The Economic Superorganism’

March 7, 2021

From Blair Fix
If you are interested in the megatrends of the 21st century, then Carey King’s new book The Economic Superorganism should be on your reading list. It is a well-written, meticulously researched opus on how to understand the sustainability problems that face humanity.
In many ways, the book covers well-trodden ground. King is an engineer who is trained in the systems thinking pioneered by MIT engineers Donella and Dennis Meadows. (The Meadows’ book The Limits to Growth was the original gauntlet drop in the debate about the future of economic growth). Like the Meadows, King is concerned with the biophysical limits of the economy, and how that relates to the exploitation of energy.
Several other recent books have delved into the role of energy in driving economic growth.

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The two hemispheres of the financial economy

March 6, 2021

From Joseph Huber 
Since the dotcom crisis (2000), subprime and banking crisis (2008) and the euro sovereign debt crisis (2010–12) the public is critical of the financial industry. Bubble economies should be prevented, money ought to serve the real economy rather than questionable financial dealings. However, putting it this way is not yet appropriate. One cannot separate the economy from its financing. The modern economy is a credit economy. Most invest­ments are paid only to a lesser extent out of current earnings and provisions made, while the bigger part is pre-financed by credit. Nevertheless, opposing the real economy to the financial sector has a point often disregarded by orthodox economics, which is, that wide areas of the financial economy no longer have anything to do with

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Neoclassical economics III: a machine to destroy the world

March 6, 2021

From Geoff Davies
The false nostrums of the pseudo-science of neoclassical economics have been used to create a system that promotes endlessly increasing consumption of resources and endless elaboration of technology. This system already operates far beyond the needs of people. Our survival requires that we rein in the machine and return to proven and durable, social and moral forms of organisation.
Growth has a fundamental place in the biological world, of which we humans are a part. Unchecked growth has no place, outside of the microbial world. Unchecked growth is called a plague, an epidemic or a cancer.
Growth, among mainstream economists, has become a reflexive, mindless goal, specifically growth of the Gross Domestic Product. Growth of the GDP is the dominant global criterion for

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What is a digital euro?

March 5, 2021

From Norbert Häring
Deposits at banks that are denominated in euro and can be used for all sorts of digital payments are already in existence. However, these deposits legally are only loans from the depositors to the banks which confer the right to be paid back with real money, i.e. physical euros issued by the central bank. A genuine digital euro would be digital money from the central bank.
So far, only banks have access to digital central bank money. They have account balances at the central bank through which they effect payment transactions among themselves. The main innovation of digital central bank money (for everyone) would be that everyone would have direct or indirect access to such central bank money, and could use it for digital payment transactions. There are two ways to

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Neoclassical economics II: pseudo-scholarship

March 4, 2021

From Geoff Davies
Neoclassical economics is without scholarly integrity. It does not belong in universities. It certainly should not be the dominant source of policy advice to governments.
Most scholarly disciplines, be they history, physics or ecology, have a conception of appropriate standards by which the evidential basis of an argument is presented and the reasoning leading to conclusions is explained. The goal is to shed light on the workings of the world, and a criterion for a successful study is that observations or records are consistent with the study’s conclusions.
Neoclassical economics, the strand of economics that has dominated world policies for several decades, fails these criteria. Its conclusions are regularly contradicted by developments in the real world. A dominant

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The ideological function of economic theories and models

March 3, 2021

From Andri Stahel
. . . economists seem to be undeterred by these new understandings brought to physics or even by the blow brought to Newton’s mechanics by 20th-century quantum physics and Einstein’s relativity. They continue to stick to classical mechanics as if nothing had changed in the way physician understand the physical world. Nor are they bothered by the way other social and political sciences came to understand the social world; or how in neurosciences and psychology, the understanding of the working of the human brain is undoubtedly far-removed from the assumption of “rational behaviour” economists like to base their models on. As have neoclassic economists never seriously asked themselves whether the mathematical equations resulting from leaving aside all potential friction

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Neoclassical economics I: farcical global warming analyses

March 2, 2021

From Geoff Davies
Analyses of the economic effects of global warming by prominent economists are based on patently invalid arguments, profound ignorance of the global response to solar energy and basic misrepresentation of scientific sources. Their conclusion that the effects are minor is egregiously in error and use of their analyses to advise governments has placed the world in peril.
Economist Steve Keen has published a critique (and summary) of analyses by William Nordhaus and others of the effects of global warming on the global economy. Those analyses, incorporated into official IPCC reports, suggest the effects of global warming are minor. Keen’s critique reveals the analyses to be absurdly deficient, reflecting not only profound ignorance but patently invalid arguments and a

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