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The wayward rise of machina-economicus

7 days ago

From Gregory Danake and RWER issue 93
The nexus of mainstream (or neoclassical) economic theory is “homo-economicus” (or economic person). It is a super being who dwells in a fairy tale land with complete information and is obligated to act hedonistically (maximizing their individual utility at the margin). Neoclassic economists merely stamp out this little cookie person, and then chuck out all the inconvenient dough, including: altruism, reciprocation, and “moral sentiments” (as Adam Smith suggested in his virtually unknown first volume), not to mention behavioral proclivities and a modicum of concern for the natural environment. Their poor little cookie person has been bludgeoned to crumbs on empirical as well as philosophical grounds for decades (see, Fleming, 2017), and yet its

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TRADE WARS AFTER CORONAVIRUS – online WEA Discussion Forum opened today

7 days ago

Economic, political and theoretical implications
An online conference from the WEA, 19th October to 5th December, 2020

The current correlation of forces in the struggle for global economic hegemony
Juan Vázquez Rojo
The objective of this paper is to analyze the current correlation of forces between China and the United States to verify whether this distribution of power corresponds to the current hegemonic order. Starting from the concept of interstate hegemony and …

The objective of this paper is to analyze the current correlation of forces between China and the United States to verify whether this distribution of power corresponds to the current hegemonic order. Starting from the concept of interstate hegemony and …

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Humanism or racism

8 days ago

From Hardy Hanappi and issue 93 of RWER
The state of the global political economy is producing an extremely dangerous dynamic. The human species has conquered the planet, its productive forces are reaching ever more sophisticated levels and are arranged in a global network that would be able to transform growth of profits into growth of general welfare. But such a transformation needs a political agent, which is powerful enough to defeat the forces, which currently exploit large parts of the human population just to accumulate profits in the hands of some small, globally ruling classes.
The essential characteristic of the human species is that its members are using internal mental models to choose their actions. These models mostly are learned and shared by groups, constituting what in

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Artificial intelligence and the future of economics?

18 days ago

From Gregory Daneke and RWER issue 93
The global financial crisis that began in earnest in 2008 (and is yet to be resolved) prompted significant challenges to the theory and methods of mainstream or orthodox (also known as Neoclassical and/or Neoliberal) economics. Even distinguished orthodox economists, Paul Krugman (2009) Joseph Stiglitz (2017), and Paul Romer (2020) have joined with the crescendo of obscure, yet profound, voices, such as: “institutionalist” (e.g. Hodgson, 2004), “heterodox” (e.g. Keen, 2001; and E. Smith, 2010), and “ecological” (e.g. Constanza, et al., 1997; and Fullbrook and Morgan, 2019), as well as Marxist economists.
One especially promising alternative to mainstream economics grew out of work in nonlinear dynamics and systems theory (see, Daneke, 1999), and

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Wealth that results only from a change in the exchange-value of some goods relative to others

23 days ago

From Andri Stahel and RWER issue 93
As will be argued, a great part – and increasingly so – of the capital gains result from an inflationary increase in the monetary value of given financial assets and not from productive employment of capital, generating both capital-income and new wealth on its wake. Thus, we overlook the effect of the different kinds of capital both in fostering or not overall economic activity and the effect of that which has been termed “financialisation” on the wealth-inequalities in our contemporary world. “A pattern of accumulation in which profits accrue primarily through financial channels rather than through trade and commodity production”, as defined by Greta Krippner following Arrighi (Arrighi 1994; Krippner 2005, p. 174).
While in the case of capital

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issue no. 93 of RWER

26 days ago

Download whole issue

Why are the rich getting richer while the poor stay poor?      2Andri W. Stahel
Machina-economicus or homo-complexicus:
Artificial intelligence and the future of economics?      18Gregory A. Daneke
Maybe there never was a unipower      40John Benedetto
Empirical rejection of mainstream economics’ core postulates –
on prices, firms’ profits and markets structure      61Joaquim Vergés-Jaime
Humanism or racism: pilot project Europe at the crossroads      76Hardy Hanappi
Towards abolishing the institution of renting persons:
A different path for the Left      90David Ellerman
Simpler way transition theory      96Ted Trainer
Book Review Degrowth: necessary, urgent and good for you     113Jamie Morgan
Minimum wages and the resilience of neoclassical labour market

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The problems of economics as an academic pursuit have a sociological origin

September 26, 2020

From Gerald Holtham (originally a comment)
The problems of economics as an academic pursuit have a sociological origin. The subject matter of economics is of interest to nearly everyone who lives in a commercial society and has to make a living. Intelligent people develop opinions about it and advance opinions in a way they would not do about astronomy or quantum physics. Similarly every politician has a story about the economic policy to be followed. This situation has created a strong form of credentialism among academic economists, evidenced by the use in the USA of the term “PHD economist” i.e. distinguishing a “real” economist from an economic journalist or mere informed commentator. This desire to define and secure a profession of economists has led not only to credentialism but

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Human rights and fiscal policy: a necessary link

September 15, 2020

From Grazielle David, Pedro Rossi,and Sergio Chaparro and WEA Commentaries
Human rights and the economy are intrinsically linked issues. There is an important economic dimension to human rights in terms of the resources needed to guarantee rights and how they can be socially allocated for this purpose. On the other hand, human rights are, or should be, an important normative parameter for the organization of activities and the economic system itself. However, the fiscal implications of human rights obligations are not fully systematized and are not regularly considered. This “disconnection” has many negative consequences, which are aggravated in contexts of instability or economic crisis and in the face of fiscal austerity measures.
The evident analytical, academic and political

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New book from WEA Books

September 13, 2020

Public law and economics after the financial crisis
Mstis Fernanda Madi, Renny Reyes, and Vicente Bagnoli (editors)
Kindle Edition $5.89 –  US  UK  DE  FR  ES  IT  NL  JP  BR  CA  MX  AU  IN

Paperback $12.99 –  US  UK  DE  FR  ES  IT  JP  CA

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Is this the end of globalisation (as we know it)?

September 10, 2020

From  Karim Errouaki and WEA Commentaries
The health, economic, social and political crisis created by the COVID-19 pandemic will reconfigure the geopolitics of international relations and globalization. We are only at the beginning of this crisis, particularly on the economic and social fronts. Many sectors, such as tourism, transportation and entertainment, will only recover over a very long time; many jobs will be destroyed. In contrast, other sectors are insufficiently developed and cruelly lacking in production. Therefore, we must act now to give the economy a new direction and to harness new engines of development.
French Economist Patrick Artus (2020) argued that the current pandemic and its consequences could precipitate a slowdown in ‘’Globalization’’ or even result in a

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September 10, 2020

This conference is open for submissions  SUBMIT YOUR PAPER
Call for Papers
The United States declared an economic war on China in early 2018. Economic warfare is a unilateral action that questions the existence of multilateralism and places the question of what regime we are about to enter after the weakening of the existing multilateral trade agencies. US trade policy opens the door for new relationships between emerging market economies and international financial institutions on issues of liberalisation but mostly it ends a period started in the 1980’s of unregulated international trade and opens a new one. The solution to the structural economic problems of the US, similar to those of Britain in the 1960’s is not tariffs and trade restrictions. The trade war is above all a war

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“David Graeber, Caustic Critic of Inequality, Is Dead at 59”

September 7, 2020

From The New York Times

David Graeber, the radical anthropologist, provocative critic of economic and social inequality and self-proclaimed anarchist who was a coiner of “We Are the 99 Percent,” the slogan of the Occupy Wall Street movement, died on Wednesday at a hospital in Venice. He was 59.
His death was announced on social media by his wife, Nika Dubrovsky, an artist. She did not specify the cause, but Dr. Graeber reported on YouTube last week that he had been feeling ill.
A public intellectual, professor, political activist and author, Dr. Graeber captivated a cult following that grew globally over the past decade with each book he published.
In “Debt: The First 5000 Years” (2011), he explored the changing definitions of borrowing and who owed what to whom. He advocated a

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Branding debt as a Chinese weapon

September 6, 2020

From C. P. Chandrasekhar
Declared the leading threat to global stability by the United States and a group of its allies, China has been accused of transgressions varying from stealing hi-tech secrets, spying, and interfering in domestic politics abroad to spreading viruses. Sometimes, even normal measures adopted by countries as part of their international economic relations are presented as crimes when practised by China. A case in point is lending abroad, especially to developing countries, including the poorest among them. China, of course, deploys its hard currency surpluses in multiple forms in a wide range of countries, including the US, with a small share flowing to developing country partners. Rather than being seen as an inevitable fall-out of China’s successful accumulation

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new issue of WEA Commentaries

September 2, 2020

WEA CommentariesVolume 10, Issue 3  –    August 2020download the whole issue
Human rights and fiscal policy: a necessary link           – Grazielle David, Pedro Rossi, Sergio ChaparroMitja Stefancic interviews Guy Standing
Pandemic Musings           – Peter RadfordIs this the end of globalisation (as we know it)?            – Karim Errouaki
WEA Conference: Trade Wars After Coronavirus

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The two-party, one-ideology, neoliberal state

September 1, 2020

From Ikonoclast – Origianlly a comment on Are corporate CEOs worth $20 million?
The time for nice debates alone is over. The time for voting and direct action to radically change our entire political economy has arrived. Debates, voting and direct action all have to operate in concert. Any one or two are powerless on their own. In a two-party, one-ideology state, where the wealth and power elites have captured the parties, voting on its own is useless. No matter who you vote for you still get a neoliberal capitalist apologist or right wing reactionary. The two-party, one-ideology, neoliberal state, is a ratchet and hold system. The right (or ultra-right as it is now) ratchets up the neoliberal measures and tightens the law and order screws on the people. The faux-center (really a

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Supply and demand deconstructed

August 26, 2020

From Blair Fix
Prices are caused by supply and demand, right? So say neoclassical economists. If you’ve bought their fairy tale, I recommend you watch this video. In it, Jonathan Nitzan demolishes the neoclassical theory of prices. It’s a master lesson in how to deconstruct a theory.
Here’s the 100-word summary. Nitzan shows that the neoclassical theory of prices fails in six ways:
Neoclassical theory hinges on utility that cannot be measured
It relies on demand and supply curves that cannot be observed
It depends on equilibrium whose existence it cannot confirm
It requires but cannot show that demand and supply are mutually independent
It requires but cannot demonstrate that the market demand curve slopes downward
And it must but cannot measure capital and therefore cannot draw the

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A new real-world economics text book

August 25, 2020

The 2008 financial crisis, the rise of Trumpism and the other populist movements which have followed in their wake have grown out of the frustrations of those hurt by the economic policies advocated by conventional economists for generations. Despite this, textbooks continue to praise conventional policies such as deregulation and hyperglobalization.
This textbook demonstrates how misleading it can be to apply oversimplified models of perfect competition to the real world. The math works well on college blackboards but not so well on the Main Streets of America. This volume explores the realities of oligopolies, the real impact of the minimum wage, the double-edged sword of free trade, and other ways in which powerful institutions cause distortions in the mainstream models. Bringing

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Why do we need to Transform Economics, and how do we do it?

August 23, 2020

From Jayati Ghosh
It’s truly a delight for me to be able to address the UNCTAD-YSI Summer School. This is not only because these are two groups that I have huge respect for and sympathy with. It’s also because the theme of this Summer School is something very close to my heart, something I and some of my colleagues have been grappling with for decades. It’s really quite energising to realise that there are so many young people willing to engage in this project. So I am going to treat this as an opportunity for me to think through some of the concerns I have, in the hope that all of you are going to be the ones taking forward this transformation.
Mainstream economics, why do I not love thee? Let me count the ways.
First, a lot of it is simply wrong: that is, it is misleading about how

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Paul Samuelson and the Cold War rebirth of David Ricardo

August 14, 2020

From Erik Reinert and issue 92 of RWER
In complete contradiction to the ruling practice of the Marshall Plan at the time, Paul Samuelson started building what was to become Cold War economic theory with two articles in The Economic Journal in 1948 and 1949. Communism advanced under the utopian slogan “from each according to his ability, to each according to his needs”. With his renewed interpretation of David Ricardo, Paul Samuelson produced a counter-utopia: under the standard assumptions of neo-classical economics free trade would produce a tendency towards factor-price equalization: the prices of labor and capital would tend to equalize across the planet. This became the noble lie of the neo-classical economics and of neoliberalism as the West faced the evils of communism.

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Inequality and morbid symptoms of a financialised system

August 13, 2020

From Ann Pettifor and issue 92 of RWER
Today as the world endures the crisis of a global pandemic, “an old order is ending in convulsions”. So writes Rebecca Spang, historian of the French revolution in The Atlantic (Spang, 2020). In the 1790s, money, debt and the non-payment of taxes by France’s rentiers, played a critical role in revolutionizing France. Today purveyors of money and debt – creditors, investors and speculators – both avoid taxes and prey on a global economy radically weakened by the Great Financial Crisis and the policy response to the events of 2007-9. As a result, and unsurprisingly, the international economic system is  both unprepared for, and prone to increasingly frequent “convulsions”. COVID19 is but the latest, and will cause long-lasting economic damage. Above

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A brief history of inequality in modern economics

August 9, 2020

From James Galbraith and Jaehee Choi and issue 92 of RWER
In the years following World War II the division of labor between neoclassical micro- economics and pseudo-Keynesian macroeconomics was pioneered at MIT and disseminated worldwide from there. Macro held a narrow strip of economic territory: unemployment, inflation, interest rates and money supply, the business cycle, the rate of growth and their interrelations through the quantity theory, the Phillips Curve and Okun’s Law. The personal distribution of income fell squarely into the microeconomics of labor markets, governed by supply and demand for various levels of skill, alongside such ad hoc matters as firm-size effects, industry-specific labor rents, imperfect competition and efficiency wages. A theory of changing inequality

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Wages and productivity

August 8, 2020

From David Ruccio and issue 9 of RWER
Mainstream economists continue to insist that workers benefit from economic growth, because wages rise with productivity.
Here’s the argument as explained by Donald J. Boudreaux and Liya Palagashvili: 
Firms cannot afford a misalignment of their workers’ pay and productivity increases – the employees will move to other firms eager to hire these now more productive workers. Higher economy-wide productivity, after all, means that workers add more to the bottom lines of employers throughout the economy. To secure the services of these more-productive workers, firms bid up worker pay. This competition for labor services is what links pay to productivity.
Except, of course, the link between wages and productivity has been severed for decades now, going

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Inequality challenge in pursued economies

August 7, 2020

From Richard Koo and issue 92 of RWER
Income inequality has become one of the hottest and most controversial issues in economics not only in the developed world but also in China and elsewhere as well. Many are growing increasingly uncomfortable with the divide between the haves and the have-nots, especially after Thomas Piketty’s Capital in the 21st Century2sparked a fresh debate on the optimal distribution of wealth, an issue that had been largely overlooked by the economics profession.
This paper argues that the determinants of income inequality changes depending on the stage of economic development. The three stages of industrialization identified for this purpose are: urbanizing era, when the economy has yet to reach the Lewis Turning Point (LTP), post-LTP maturing or golden era

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Global inequality in a time of pandemic

August 3, 2020

From Jayati Ghosh and issue 93 of RWER
A global pandemic is a particularly bad time to be reminded of existing inequalities. But there is no doubt that the Covid-19 pandemic has highlighted the extent of inequalities between and within countries. Whatever may be the fond sentiments expressed by at least some global leaders, we are clearly not “all in this together”. It is true that in principle, a virus is no respecter of class or other socio-economic distinctions: it enters human hosts without checking for such attributes. And the rapid global spread of this particular virus has shown that it is no respecter of national borders either, which points to the more fundamental truth that as long as anyone anywhere has a contagious disease, everyone everywhere is under threat. This should

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Heterodox economics needs to develop an agreed ontology and agreed modeling methods

July 20, 2020

From Ikonoclast
The essential problem is that heterodox economics needs to develop an agreed ontology and agreed modeling methods, including broad agreements on the likely limits to modeling. Peter Radford has pointed out some of the ways (and reasons why) the economy cannot be modeled accurately in key respects.
Orthodox economics has an agreed framework. Orthodox economists mostly agree on their framework and they accept their implied economic ontology, without question or discussion for the most part. Of course, the problem is that their framework lacks an empirically supportable ontology and thus is itself entirely un-empirical. Orthodox economists can’t see it. Every scientist and philosopher of the sciences and social sciences can see it. But while political power supports false

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Why isn’t Modern Monetary Theory common knowledge?

July 17, 2020

From Blair Fix
I’ve always been baffled why ‘modern monetary theory’ is called a theory. I don’t mean this in a disparaging way. As far as theories of money go, I think modern monetary theory (MMT for short) is the correct one. But having a correct theory of money is a bit like having a correct theory of traffic lights.
Traffic lights (like money) are a social convention. We agree that red means stop and green means go. Why we’ve chosen these particular colors is an interesting question, as is why we choose to put traffic lights where we do. But the fact that red means stop and green means go just is. It’s something we’ve defined to be true. The workings of money are similar. True, money is more complex than a traffic light — but only in application. In conceptual terms, money is

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Income inequality between North and South in relation to global income inequality

July 8, 2020

From Robert Wade and RWER issue no.92
The bottom line is that North and South are coherent blocs in important ways. The income gap between the North-South blocs is – persistently – larger than the income gaps within them. If we plot the share of world population living in countries arranged by average income we see a pronounced bimodal distribution, with not much population in between.
Countries of the North enjoy common economic benefits from their superior position in the world hierarchy, making for common interests in protecting their position from challengers. They translate common interests into political treaties, such as free trade agreements (e.g. NAFTA), political federations (eg European Union), and security agreements (eg NATO); and into common agreements linking groups of

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There is something new about unemployment today

July 8, 2020

Fred Zimmerman  (originally a comment)
Taken together, the chapters of Anthropologies of Unemployment, New Perspectives on Work and Its Absence, edited by Jong Bum Kwon and Carrie M. Laneby reveal that there is something new about unemployment today. It is not a temporary occurrence, but a chronic condition. In adjusting to persistent, longstanding unemployment, people and groups create new understandings of unemployment as well as of work and employment; they improvise new forms of sociality, morality, and personhood. Ethnographic studies such as those found in Anthropologies of Unemployment are crucial if we are to understand the broader forms, meanings, and significance of pervasive economic insecurity and discover the emergence of new social and cultural possibilities.

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Something must give at this point

July 7, 2020

From Ikonoclast  (originally a comment)
n C21 Piketty was exposing the automatic outcomes of an axiom-based legal law, regulation and financial system. The real economy is a real system (obviously). The financial economy is a formal system whose operations are prescribed by its axioms. Our system of legal laws, regulations, financial rules and financial calculations (bookkeeping and national accounts) is a formal, prescriptive system founded on ideological property axioms and calculated out via prescribed operations in the numéraire (money or financial capital). The RWER article even happens to mention one property axiom of the modern system: the axiom “for unlimited private accumulation.”
The expression r>g was not put forward by Piketty as a “law”. He put it forward as a tendency

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Thomas Piketty’s changing views on inequality

July 4, 2020

From Steven Pressman and RWER issue no.92
Thomas Piketty established his professional reputation by using income tax returns to measure income distribution over long time periods in several nations. Long before Capital in the Twenty-First Century (hereafter C21) appeared, Piketty (2001; 2003; & Saez, 2003) showed that, in many capitalist countries, income flowed to the top 1% (really the top .1%). C21 made two new contributions – a theory to explain this phenomenon, r>g, and a policy solution, taxing wealth.
Surprisingly, C21 became an international best seller. Nonetheless, it was criticized by a broad array of economists. Heterodox economists objected to the economic theory Piketty used to explain rising inequality. Neoclassical economists disliked his policy proposal and understood

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