Real-World Economics Review

from Lars Syll Being able to model a credible world, a world that somehow could be considered ‘similar’ to the real world is not the same as investigating the real world. The minimalist demand on models in terms of ‘credibility’ and ‘consistency’ has to give away to stronger epistemic demands. Claims in a ‘consistent’ model do not per se give a warrant for exporting the claims to real-world target systems. Questions of external validity are important more specifically also when it comes...

from Peter Radford Keeping the conversation going. Let’s start with Shannon, from his personal papers published in 1993 … “The word ‘information’ has been given different meanings by various writers in the general field of information theory.  It is likely that at least a number of these will prove sufficiently useful in certain applications to deserve further study and permanent recognition.  It is hardly to be expected that a single concept of information would satisfactorily account...

from Lars Syll Mathematical modelling has now dominated the economics academy for so long that younger people that emerge from economic studies who are dissatisfied with what they are taught, cannot think beyond the modelling. They have been immersed in it so long that it is a kind of common sense to them. The idea that modelling is bound to be almost always irrelevant just does not compute for many. Yet they recognize that modern academic economics mostly does not provide any insights....

from Edward Fullbrook Steve Keen’s new paper “The appallingly bad neoclassical economics of climate change,” would benefit humankind if it were widely read by economists.¹  There are two ways you can obtain it: Go here at Taylor & Francis and pay £35 Go here and download it for free. Here is its conclusion: Conclusion: drastically underestimating economic damages from global warming Were climate change an effectively trivial area of public policy, then the appallingly bad work done by...

from Peter Radford Kolmogorov, I think, hit the nail on the head when he said: “At each given moment there is only a fine layer between the ‘trivial’ and the impossible.  Mathematical discoveries are made in this layer.” He might just as well have said that life itself is discovered in this layer.  But let’s not get ahead of ourselves. A few days ago I tried to point our way towards an acceptance of a certain humility.  I used a couple of quotes, one from Durer and one from Soros, to...

from Lars Syll We have already shown that deficit spending increases our collective savings. But what happens if Uncle Sam borrows when he runs a deficit? Is that wht eats up savings and forces interest rates higher? The answer is no. The financial crowding-out story asks us to imagine that there’s a fixed supply of savings from which anyone can attempt to borrow … MMT rejects the loanable funds story, which is rooted in the idea that borrowing is limited by access to scarce financial...

from Yoshinori Shiozawa (originally a comment) At around the same time that Fred Lee and Lars Syll visited the University of California and talked long on Sraffa with Axel Leijonhufvud, a paper by Avi J Cohen appeared in Eastern Economic Journal: “The Laws of Returns under Competitive Conditions”: Progress in Microeconomics since Sraffa (1926)? (Vol. 9, No. 3, 1983, pp. 213-220). It was a short paper that counts only eight pages, but a decisive criticism of economics of perfect...

from Peter Radford I know, this is one of those more philosophical moments.  In my case prompted by my continued meditation on the deleterious effects of a belief in utopias.  Such beliefs seem always to end up with authoritarian consequences.  People can all too easily get swept up by the illusion of having solved life’s great mysteries.  It’s been going on for ages.  It appears to be a commonly held human attribute.  We need, apparently, to think we understand things that are,...

from Ikonoclast  (originally a comment) The whole idea that economics and the economy exist as a self contained discipline and a self-contained system respectively is absurd. First, there is a natural system, the biosphere, which contains economics activity and upon which economic activity is dependent. Second, there is politics and force (power) which condition economic activity. In relation to the second, Chomsky writes of: “…American Liberalism, reiterated… in the Clinton doctrine,...

from Lars Syll Many economists respond to criticism by saying that ‘all models are wrong’ … But the observation that ‘all models are wrong’ requires qualification by the second part of George Box’s famous aphorism — ‘but some are useful’ … The relevant  criticism of models in macroeconomics and finance is not that they are ‘wrong’ but that they have not proved useful in macroeconomics and have proved misleading in finance. When we provide such a critique, we often hear another mantra to...