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Internalizing “externalities”

4 days ago

From Victor Beker and RWER issue 106
There was a time when it was thought that the main task of economics was to assure economic growth. For example, John M. Keynes predicted that “the day is not far off when the Economic Problem will take the back seat where it belongs” (Keynes 1931: 6). Then, once scarcity has been overcome, mankind would devote most of its efforts to real problems, the problems of life and human relations (ibid,).
The impact of economic growth on the Earth environment was not an issue. This is no longer so. The ecological impact of economic activities can no longer be ignored. Ecological sustainability is an imperative if we want to preserve the planet for future generations. Ecological economics is a new subfield which addresses the challenge of introducing the

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“I object to the question on which this volume focuses.”

7 days ago

From Richard Norgaard and RWER issue 106
I object to the question on which this volume focuses. It assumes that biophysical limits are real and knowable rather than a human construct associated with a particular understanding of how natural systems might behave. Limits have been an extremely useful construct for critiquing the even simpler construct that assumes science and technology can provide unlimited economic growth. Nature, however, has zillions of limits that are crossed all of the time, and not only by people (Giorgos Kallis 2019). Nature is continually changing and reconstructing itself in response to zillions of events. The idea that people can affect nature and have it resiliently return to an historic equilibrium unless we affect it too much is a myth. Yes, nature

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Introducing nonlinear and non-equilibrium perspectives into ecological economics

10 days ago

From Ping Chen and RWER issue 107

Economic Complexity vs. Neoclassical Simplicity
Complexity science originated from astrophysics when Henri Poincaré discovered the three-body problem had no analytical solution in 1899. The discovery and development of deterministic chaos in the 1960s to 1990s found wide evidence that nonlinear deterministic systems only have limited predictability. Ilya Prigogine further recognized the important role of irreversibility in biological evolution since time’s arrow and history inherent to biological evolution works against thermodynamics equilibrium. In reality, non-stationarity is dominant in time series economics but absent in controlled experiments in physics and biology. In this sense economic complexity is more complex than physics and biology. In

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“Complexity” in economics

16 days ago

From Maria Alejandra Madi and RWER issue 106
Anthropogenic climate change and ecological breakdown are now major threats to human life and other species. It is widely acknowledged that mainstream economic theory and especially neoclassical theory lack adequate concepts to address these problems and arguably have contributed to them through misdirection and delay. “Complexity” sciences, however, are now widely adopted but have as yet made little impact on economics. In this short article I advocate the widespread adoption of “complexity” in the field of economics. Complexity means more than just acknowledgement that “it’s complicated”. Its greatest attraction in our current “climate emergency” is that it is capable of dealing with the interconnection and interdependence between the

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Basics of Monetary Economies

21 days ago

From Asad Zaman and WEA Pedological Blog
. . . conventional modern textbooks of economics do not correctly
describe monetary economies.. . .  For instance, a popular textbook
by Mankiw states that: . . .

I am planning to write a textbook on monetary economies. I will draft it section by section and chapter by chapter, and put down the drafts here for feedback and comments. The first section is given below – it is an introduction to the topic, and provides some motivation for the study, as well as hints of the methodology to be adopted.
Introduction & Motivation
A Monetary Economy is one in which the use of money is essential to the functioning of the economy. That is, without money, people would starve, and massive amounts of economic misery would result. Since monetary economies have

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A future threat has become a present reality and time is against us

21 days ago

From Jamie Morgan and RWER issue 106
‘How can we construct an economics consistent with the biophysical limits to economic growth?’. As any ecological economist is aware, this is a foundational issue not an afterthought chapter tacked on to the end of a textbook or delegated to a sub-disciplinary specialist who can ‘deal with that for us’. Doing either of those has been part of the problem. Mainstream economics takes as its primary focus the microeconomics of price signalling in systems of market exchange and assumes efficiencies in dynamic market processes are sufficient to ensure best use of resources and eventual development of alternative ways of achieving what we want and need (through a combination of behavioural change, investment and technology). At the same time, the

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I fear many economists are too caught up in their own survival

27 days ago

From Tony Lawson and RWER current issue
I fear, though, that many economists, even some that present themselves as radical thinkers, are too caught up in their own survival (or promotion ambitions, etc.) in the academy to move in a direction of any relevance. The convenient, often seemingly compulsory, recourse is to stay on the safe and (in truth far too) easy (if seemingly impressive to the non-mathematical) path to nowhere that is economic modelling. Already numerous self-styled heterodox economists of recent years have reverted to it. No doubt new models will be presented as different, radical and relevant. But how could they be relevant? If the ontological presuppositions are as wide of the mark as I have suggested, they simply cannot provide novel insight. This of course applies

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The aim of an economy should . . . . .

29 days ago

From Clive L. Spash and Clíodhna Ryan and RWER issue 106

The aim of an economy should not be to grow so that a welfare State can be funded to ameliorate the social, health and ecological impacts of growth, but rather to engage directly in social provisioning that avoids exploitation and deliberate harm. Long ago, Kapp (1970) emphasised the social ecological imperative for reorienting economics towards policies addressing needs, the requirements of human life and social minima. This remains largely off economists’ agenda, along with the topic of transforming economies away from divisive, destructive, exploitative, unjust and unethical provisioning systems.

A more foundational economic analysis is required that links to the physical basis of the system. Thus, the concept of social

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“Economics”, our master narrative manufacturing our demise

January 18, 2024

From Richard Parker and RWER issue 106

“If economists could manage to get themselves thought of as humble, competentpeople on a level with dentists, that would be splendid.” — John Maynard Keynes
I cite The Master because I don’t think economists, working within “economics” in its present form can really address the crisis of limits we’re facing—but I do think men and women who work as economists can.  But only if they behave like dentists.  Let me explain.
To review the last few years’ weather reports, read public polls about fears of “global warming”, or listen to scientists yet again explain the effects of carbon-loading on the Earth’s atmosphere—and ultimately the ability to sustain life—is, to say the least, quite unironically, chilling.
The UN lists five major consequences that

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Alternative provisioning systems

January 15, 2024

From Clive Spash and Clíodhna Ryan and RWER issue 106
Economics fails not merely to account for biophysical limits to growth but to account for actual and potential alternative provisioning systems. Instead, talk of ‘the economy’ makes an implicit ontological claim that there is only a singular form of modern economy: the capital accumulating, price-making market economy. Economics has then become limited to a discussion of market capitalism and how it can be maintained in light of its evident failings. Hence, a new critical orthodoxy has arisen that seeks to maintain ‘business as usual’. Recognising that there is considerable potential for alternatives to current economic systems is a first step beyond this orthodoxy. Economics must go much further to become a science of social

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Traditional economics vs. laws of scale

January 11, 2024

From Andri Stahel and RWER issue 106

Imagine some interstellar anthropologists trying to understand our tribe, the earthlings. On the one hand, they would see a part of the tribe devoted to understanding the functioning of all our Earth systems. Called ‘scientists’, these tribe members command great respect and funds. This function was once held by the shamans and sorcerers who claimed to speak to the spirits who inhabited it; then, it was taken by the priests and theologians claiming to know the will of God who created it. Now, the earthlings have decided to look to the scientists as their guide, believing that they are the best suited to unveil the laws governing their world and, thus, guide their actions. 
One common trait these anthropologists would detect in all scientific

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With one word economics lurched into fantasy

January 9, 2024

From Steve Keen and RWER issue 106

Human society is energy blind. Like a fish in water, it takes for granted the existence of that without which it could not survive.
As with so many of humanity’s problems, this conceptual failure can be traced back to an economist. However, the guilty party is not one of “the usual suspects”—Neoclassical economists—but the person virtually all economists describe as “the Father of Economics”, Adam Smith.
Smith led economics astray on the vital issue of energy in the very first sentence of The Wealth of Nations, when he stated that: 
THE annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes… (Smith 1776, p. 10. Emphasis added)
I emphasize “labour” in that

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What does it take to move towards the goals of a healthy economy?

January 8, 2024

From Neva Goodwin and RWER issue 106
A healthy economy is one that operates so as to achieve its goals, with relatively little of the overall economic activity working against them. There are obviously a great many things that can be said about what it takes to achieve this; here I will only address one set of requirements. This refers to the fourth essential economic activity mentioned above: maintaining the resources required for the other activities of production, distribution, and consumption of goods and services.
This context brings into focus the capital stocks that produce productive flows. For something to be named, within the discipline of economics, a capital stock, it must have the potential to produce something that is economically desirable. Some people reasonably object

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Another COP-out

January 5, 2024

From C.P. Chandrasekhar and Jayati Ghosh
Following the COP28 Summit, there is an attempt to establish that the conference was a significant step forward in the effort to address the causes and consequences of climate change. However, a reading of the actual outcome only illustrates how the resistance of the developed countries to own up to their historical responsibility as emitters is stalling the effort to combat climate change and manage the consequences of the changes already underway.
The COP process is ostensibly concerned with the global effort to move from an unsustainable trajectory to an acceptable one in terms of the ceiling on long-term warming (1.5-2°C). But in practice, it involves tweaking the way in which climate discourse is conducted, such that it is denuded of

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Textbook teaching in economics is not consistent with life processes and physical laws

January 4, 2024

From James Galbraith and RWER current issue
An economic theory that is consistent with life processes and physical laws is necessary for a simple reason:  the economic theory that underlies modern “mainstream” economics and practically all textbook teaching in economics is not consistent with life processes and physical laws. And this is a problem.
Human beings are living organisms. All human activities, including mental activities, are consistent with physical laws. It is natural to build an economic theory on the foundation of biology and physics. In my forthcoming book with Jing Chen, Entropy Economics, we undertake this task, for two foundational elements of economics: the theories of value and production.
Modern mainstream economics is a theory of balance, or equilibrium.  The

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The canonical growth imperative

January 2, 2024

From Gregory Daneke and RWER issue 102
Emerging ecological ideas . . .  rushed headlong into the canonical growth imperative of the mainstream. Anyone who uttered ecology and economics in the same breath was bullied and harassed going as far back as the 19th century, but the battering became more intense in the late 1970s as Neoliberalism was fully asserting itself in the halls of power (Reagan, Thatcher, etc.). The unrelenting and scurrilous ad-hominem attacks on the scholars associated with The Limits to Growth (Meadows, et al., 1972) and/or other Club of Rome studies is a clear case in point. Unlimited growth is so essential to the mainstream’s systems of power, it was cardinal sin to even broach the subject. One need not, apparently, concern themselves with distributional

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There is no economy which exists apart from the ecologies which sustain it

December 29, 2023

From Peter Newell and RWER issue 101
All wealth in the end is ecological. Economists contend that growth can continue indefinitely because they measure growth in terms of economic value rather than material throughput (Jackson and Victor 2019). Yet we diminish natural wealth and undervalue its exhaustion at our peril. Even in a highly financialised and service oriented economy, where direct connections to patterns of resource extraction and consumption are sometimes less observable, circulations of finance and the constant manufacture of ‘needs’ through advertising and exchange require resource inputs and lock in unsustainable behaviours. Assuming (often more by implication and neglect than explicitly), as many economists often do, that the environment is an infinite sink for waste and

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new and special issue of RWER

December 21, 2023

Please click here to support this open-access journal and the WEA
real-world economic review
issue no. 106
download whole issue
Special IssueHow can we construct an economics consistent
with the biophysical limits to economic growth?
Economics as if ecology matteredPeter Newell
An economic theory compatible with life processes and physical lawsJames Galbraith
Supporting well-being over time: Six kinds of capital required in a healthy economyNeva Goodwin
Oikonomics and the limits to growthAndri Werner Stahel
Reorienting economics to social ecological provisioningClive L. Spash and Clíodhna Ryan
An economics of deep transformationsHubert Buch-Hansen, Iana Nesterova, Max Koch
Will economics ever become

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Book review – Real-world economics for whom and for what?

December 14, 2023

From Yoshinori Shiozawa
Review of John Komlos, Foundations of Real-World Economics / What Every Economic Student Needs to Know, Third Edition, 2023
This review article must not be too long. Readers of this Real-World Economics Blog are accustomed to read posts less than one thousand words. I want to limit it within three thousand words. In view of the objective of the new book review series (to create a forum to inform each other), this must be too short. No detailed account is possible. Instead, the readers and the authors can pose questions, add supplementary comments, and raise new arguments. If our aim of book (or paper) review series is to make an interactive forum, full explanations would not be necessary. The role of the reviewer must be triggering animated

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Book reviews in the RWER Blog

November 20, 2023

Two days ago in a comment, Yoshinori Shiozawa offered the following suggestion.
I have proposed to create a forum in which heterodox economists can inform each other and discuss the future directions of heterodox economics.
The simplest and easiest [way] to start is to organize a series of book reviews (or paper reviews if necessary) in this RWER Blog. If the editors of this blog offer a space (a post for reviewing a book or a paper) once a month, or each two months, for example, it will not be very difficult to realize this proposition. [emphasis added]
I have checked if there are goods candidates for this attempt. Two books seem to be a good candidate for the discussion:
(1) Foundations of Real-World Economics (2019; 2023) by John Komlos.
(2) Economic theory for the real world (2024)

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Threats to the US dollar’s role as global reserve currency

November 13, 2023

From Maria Alejandra Madi and RWEA pedagogy Blog
2021 marked the 50th anniversary of the “weekend that changed the world”, when US President Richard Nixon suspended the convertibility of the dollar into gold. From a monetary point of view, since then there has been continued dominance of the dollar as a vehicle for international transactions. However, Is the dollar as the world’s reserve currency under attack?
The dollar’s dominance in global markets is still significant, with its role in trade invoicing, international debt, and cross-border non-bank borrowing outstriping that of the US. This dominance has been attributed to the absence of alternatives, such as an inadequate supply of investment-grade government securities or limited liquidity and availability by regulation.

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Weekend read – Blood and Oil in the Orient: A 2023 Update

November 10, 2023

From Shimshon Bichler and Jonathan Nitzan [1]
The Hamas-Israel War
The 2023 war between Hamas and Israel elicits many different explanations. As with previous regional hostilities, here too, the pundits and commentators have numerous overlapping processes to draw on – from the struggle between the Zionist and Palestinian national movements, to the deep hostility between the Rabbinate and Islamic churches, to the many conflicts between Israel and Arab/Muslim states, the contentions between the declining superpowers (United States and Russia) and their rising contenders (like China, Iran, Turkey), the rift between western and eastern cultures, and so on.
The experts also highlight the growing importance of local militias – from Jewish settler organizations, to ISIS, Hamas, Islamic Jihad,

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new RWER issue – 105

November 6, 2023

Please click here to support this open-access journal and the WEA
RWER issue no. 105

download whole issue
In Praise of Rebellion?Peter Radford2
Professor Stiglitz’s contributions to debates on intellectual propertyDean Baker
America’s trade deficits: blame U.S. policies – starting with tax lawsKenneth E. Austin
Extending the concept of inflation beyond consumer pricesMerijn Knibbe
History and origin of money in MMT and Austrian Economics:The difference methodology makes?Phil Armstrong
Ownership illusions: When ownership really matters for economic analysisCameron K. Murray
From original institutionalism to the economics of conventions and inventing value:An interview with Dave Elder-VassDave Elder-Vass and Jamie Morgan
Some questions to Edward Fullbrook

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Mainstream economics — a methodological strait-jacket

October 24, 2023

Jamie Morgan: To a member of the public it must seem weird that it is possible to state, as you do, such fundamental criticism of an entire field of study. The perplexing issue from a third party point of view is how do we reconcile good intention (or at least legitimate sense of self as a scholar), and power and influence in the world with error, failure and falsity in some primary sense; given that the primary problem is methodological, the issues seem to extend in different ways from Milton Friedman to Robert Lucas Jr, from Paul Krugman to Joseph Stiglitz. Do such observations give you pause? My question (invitation) I suppose, is how does one reconcile (explain or account for) the direction of travel of mainstream economics: the degree of commonality identified in relation to its

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Weekend read – The Great Gatsby curve among America’s über rich

October 20, 2023

From Blair Fix
Economists are not known for their literary imaginations. Flip through any economics textbook and you’ll find a barrage of terms like the ‘Philips curve’ and the ‘Fisher effect’. The jargon is simple enough — empirical relations are usually named after the person who discovered them. But this convention is neither descriptive nor fun.
The exception to this vanilla naming practice is a pattern called the ‘Great Gatsby curve’.1 It’s named after F. Scott Fitzgerald’s famous book The Great Gatsby, which explores the roiling inequality and tumultuous class dynamics of the 1920s. The Great Gatsby curve is an empirical relation between social inequality and social mobility. As inequality rises, social mobility tends to decline.
In this post, we’ll look at the The Great Gatsby

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Green education

October 10, 2023

From Maria Alejandra Madi

For instance, the growing quantity of legal proceedings pertaining to passivity on climate change represents a noteworthy advancement in the endeavour to safeguard the natural environment. The high-profile legal case known as the “Case of the Century” in France has garnered significant attention, as non-governmental organisations (NGOs) have levied accusations against the French state for its perceived inadequate efforts in addressing climate change. This litigation has propelled climate-related legal disputes to the forefront of public discourse. Over the past few years, there has been a significant increase in the volume of climate change-related legal cases, with numerous examples being observed globally. 

In her book titled “Justice Climatique:

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But critical thinking is not always appreciated

October 2, 2023

From Peter Soderbaum
Economists, like other people, are political economic persons guided by their ideological orientation. We are eager to become accepted in some social groups. Just as political parties often are afraid of departing too much from one another, an economist may prefer a comfortable life by positioning herself close to other economists with respect to conceptual framework and ideology. Accepting the norms and standards of neoclassical economics is rewarding and constitutes a natural way of life. And since students are not exposed to any alternatives to neoclassical economics, the acceptance of neoclassical theory is not necessarily the result of a conscious choice. At some stage, however, a person may feel that she or he is locked into this theoretical perspective and

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Weekend read – How the rich get richer

September 30, 2023

From Blair Fix
The rich get richer.
It’s a phrase that packs a lot of punch. It’s potent rhetoric, yet surprisingly accurate at describing how rising inequality plays out.
Of course, there’s nothing inevitable about the rich getting richer. We just happen to live in an age of growing corporate despotism. And our friends at Forbes have been there to document the disease.
Forbes who loves the free market. Forbes who loves obscene wealth. Forbes … the unwitting social scientist?
When Malcolm Forbes started publishing his rich list — the Forbes 400 — back in 1982, he surely wasn’t intending to do social science. By all accounts, Forbes simply loved opulence, and wanted to celebrate those who had the most of it.
It was part of a 1980s trend that fetishized obscene fortunes. For the

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The difference between a philosopher and a common street porter

September 27, 2023

From Adam Smith
The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause as the effect of the division of labour.  The difference between the most dissimilar characters, between a philosopher [economist] and a common street porter, for example, seems to arise not so much from nature as from habit, custom, and education.  When they came into the world, and for the first six or eight years of their existence, they were perhaps very much alike, and neither their parents nor play-fellows could perceive any remarkable difference.  About that age, or soon after, they come to be employed in

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Risk vs. Uncertainty

September 26, 2023

From Steve Keen

The key concept in Keynes’s summary was the impact of expectations upon investment, when those expectations were about what might happen in an uncertain future.
Investment is undertaken to augment wealth, and yet the outcome of any investment depends upon economic circumstances in the relatively distant future. Since the future cannot be known, investment is necessarily undertaken on the basis of expectations formed under uncertainty. Keynes was at pains to distinguish the concept of uncertainty from the simpler concept of risk.
Risk occurs when some future event can only be one of a number of already known alternatives, and when there is a known history of previous outcomes which enables us to assign a reliable and definite probability to each possible outcome. A

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