Real-World Economics Review

from Lars Syll There is first of all the central question of methodology — the logic of applying the method of multiple correlation to unanalysed economic material, which we know to be non-homogeneous through time. If we are dealing with the action of numerically measurable, independent forces, adequately analysed so that we were dealing with independent atomic factors and between them completely comprehensive, acting with fluctuating relative strength on material constant and homogeneous...

from Dean Baker I saw this piece last week on the soaring price of baseball cards, and naturally started thinking about Bitcoin. The article begins with a story about how a rare LeBron James trading card (it’s all sports cards, not just baseball cards) would now sell for over $3 million, more than ten times its price in 2016. It then reports on how the prices for rare cards of other famous players have also gone through the roof, with even cards of less great players selling for several...

from Peter Radford Are they associated? We all know that one of the central problems of economics is the existence of uncertainty.  At least since Frank Knight’s work in the 1920s, uncertainty has been something of concern to economists.  Knight’s description of uncertainty as being a condition in which no probability distribution existed, or could exist, has led some of the most eminent theorists of economics to argue that theorizing is simply not possible.  Which is a rather formidable...

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...