Real-World Economics Review

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....

from Dean Baker I guess it is hard to get news at the world’s leading newspapers, but this lengthy podcast on Bill Gates and his efforts to make vaccines available to the developing world never once mentioned the vaccines developed by China or Russia. This is more than a bit incredible because at this point, far more of the Russian and Chinese vaccines are going to developing countries than the vaccines supplied by Western countries through COVAX, the international consortium set up the...

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...

The ILO (International Labour Organization) has published a ‘flagship’ report about the platform economy. You know, the ‘Deliveroo‘, ‘AirBnB‘, ‘Uber‘ and ‘Mechanical Turk‘ economy. This economy is rapidly growing and is already changing our way of life – and work. I’m not going to parse the report (the ‘executive summary’ is 10 pages for a reason) but I will investigate if the platform economy is a new ‘mode of production’. The first question is how to define a ‘Mode of...