Real-World Economics Review

from Lars Syll What does concern me about my discipline, however, is that its current core — by which I mainly mean the so-called dynamic stochastic general equilibrium approach — has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with the precision that it has about the real one … The dynamic stochastic general equilibrium strategy is so attractive, and even plain addictive, because it allows one to generate...

from Dean Baker The Republicans and Donald Trump seem set on establishing a strategic crypto reserve. They are claiming this will somehow be an important source of economic security for the country. It’s clear that establishing the reserve will be an important way to give tens of billions of dollars to Donald Trump’s campaign contributors, but it is much harder to see how it will provide any economic security to the country. To better understand the logic of a strategic crypto reserve, it...

from Lars Syll The book’s argument is that in straining to peer through the chaos and confusion of the world to the underlying mechanisms, too much economic thinking, both in Ricardo’s day and ours, mistook a small, unrepresentative sample as the whole picture. This has distorted the vision of generations. If your scientific ideal is a simple, logical model, there is a tendency to focus on those parts of reality that are more regular or can be easily counted. The awkward aspects more...

from Peter Radford I am in a grim and introspective mood this morning.  I have been reflecting on how my father might react to where we are.  He was one of those who fought against fascism.    His life was shortened by being wounded during that fight.  As a result, I never knew him as a healthy person.  What, I wonder, would he make of America’s turn away from democracy and towards autocracy?  What would he make of the pillaging of Ukraine’s resources as payment for so-called “aid” given...

from Dean Baker (I saw that Jeff Bezos wants the Washington Post’s editorial page to run pieces touting the merits of free markets. Here’s my submission.) There are not many issues on which there is largely bipartisan agreement, so the story we tell about the origin of economic inequality stands out. Both sides agree that the increase in inequality of income and wealth is driven by an unfettered market. The difference is that conservatives say it is wise to accept the outcomes of the...

from Lars Syll  A science that fails to reflect on its own history and neglects critical methodological and theoretical questions about its practice is a science in crisis. As early as 1991, a commission led by Anne Krueger—featuring esteemed economists such as Kenneth Arrow, Edward Leamer, and Joseph Stiglitz—highlighted a fundamental weakness in graduate economics education. Drawing from their own experiences, they observed an alarming disconnect between theoretical and econometric...

from Asad Zaman The Puzzle of Newton’s Mind Isaac Newton is often celebrated as the ultimate rationalist, the scientist who unlocked the mysteries of the cosmos and ushered in the modern age. But there is a problem with this image—one that is so inconvenient that it has been quietly brushed aside. Newton, the father of modern physics, was also a theologian who wrote over a million words on religious matters. By sheer volume, he devoted more time to obscure theological debates than to the...

from Dean Baker CEOs and other top management in the U.S. are far more highly paid than their counterparts in Europe and Asia. NYT columnist Jeff Sommer had an entertaining piece on how many of the business leaders who eagerly embraced DEI a few years back are now being very quick to abandon it. This is not terribly surprising to those of us who never took the commitment to DEI very seriously, but there is an important aspect to his discussion that he leaves out. Sommer spends much of the...

from Peter Radford Yes, I am confused. At least I admit it. There’s a lot going on, and someone like me often wallows in the activity as a way of understanding.  I like to see the systemic rather than the particular.  I am very bad, I admit, at details.  I gravitate to the long term.  What, I usually ask, does all this imply for  what comes next?  And how does it connect with the past? This biases me towards the dramatic.  The swoosh of certainty when an avenue appears within the clutter...

from Lars Syll Back in 1991, when yours truly earned his first PhD​ with a dissertation on decision making and rationality in social choice theory and game theory, I concluded that “repeatedly it seems as though mathematical tractability and elegance — rather than realism and relevance — have been the most applied guidelines for the behavioural assumptions being made. On a political and social level, ​it is doubtful if the methodological individualism, ahistoricity and formalism is...