Real-World Economics Review

from Lars Syll The kinds of laws and relations that economics has established, are laws and relations about entities in models that presuppose causal mechanisms being atomistic and additive. When causal mechanisms operate in the real world they only do it in ever-changing and unstable combinations where the whole is more than a mechanical sum of parts. If economic regularities obtain they do it (as a rule) only because we engineered them for that purpose. Outside man-made “nomological...

from Dean Baker As can be easily shown the bulk of the upward redistribution from the 1970s was not due to a shift from wages to profits, it was due to an upward redistribution among wage earners. Instead of money going to ordinary workers, it was going to those at the top end of the wage distribution, such as doctors and dentists, STEM workers, and especially to Wall Street trader types and top corporate management. If we want to reverse this upward redistribution then we have to take...

from Peter Radford If you were to ask me what the greatest intellectual error of the past fifty years has been I wouldn’t hesitate.  Shareholder value.  It’s an easy response.  Yes, it reflects my own curious interest in the fundamentals of business and its intersection with economics, but it is also emblematic of so much more. Derived as it is from the wrong turn in economics and politics in the middle of the last century it carries with it so many of the ill founded ideas that have...

from Lars Syll Almost all mainstream macroeconomic theories are based on Milton Friedman’s permanent income hypothesis (PIH). It is mostly used in formulating the consumption Euler equations that make up a vital part of ‘modern’ New Classical and ‘New Keynesian’ macro models. So, what’s the problem with PIH? Well, only that empirical evidence have — again and again — falsified it! One implication of PIH is that current consumption is modelled as not being influenced by predictable changes...

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...

Source: Medecins san Frontiers, accessed 21 February 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...

from Lars Syll When I read in the 70s the publications of Sonnenschein, Mantel and Debreu I was deeply concerned. Up to the time I had the naive illusion that the microeconomic foundation of the GE model, which I had admired so much, does not only allow us to prove that the model and the concept of equilibrium are logically consistent (that equilibrium exists), but also allow us to show that the equilibrium is well determined (unique and stable). This illusion, or should I rather say,...

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...

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....