Real-World Economics Review

from Peter Radford I suppose forecasting errors is one of those phrases that needs a bit of explanation.  Are we forecasting errors?  Or are we discussing the errors in forecasting?  I think it’s both. Take the current debate going on about Biden’s $1.9 trillion economic relief package. A few notable economists, including both Larry Summers and Oliver Blanchard, are arguing that Biden is proposing on spending too much.  This criticism is not based on any analysis of the level of...

from Lars Syll Unfortunately, the greater part of economic controversies arise from confronting dogmas. The style of argument is that of theology, not of science … In economics, new ideas are treated, in theological style, as heresies and as far as possible kept out of the schools by drilling students in the habit of repeating the old dogmas, so as to prevent established orthodoxy from being undermined … On the plane of academic theory, the importance of the Keynesian revolution was to...

from Dean Baker It seems that Larry Summers is worried that the stimulus proposed by President Biden is too large. I will say at the onset that he could be right. However, at the most fundamental level, we have to ask what the relative risks are of too much relative to too little. If we actually are pushing the economy too hard, the argument would be that we would see serious inflationary pressures, which could result in the sort of wage-price spiral we saw in the 1970s. As someone who...

from C. P. Chandrasekhar January proved to be an unusual month in the US equity market. The shares of GameStop, a brick-and-mortar retailer of gaming consoles and video games, had in the course of that month risen by close to 2000 per cent. The price of the share rose from around $5 in August 2020 to $350 in late January 2021, with much of the rise occurring towards the end of that period. Besides the fact that no set of fundamentals can justify that rise, this was intriguing because of...

from Peter Radford It’s been a month.  It seems a great deal longer. Trump has slunk off the stage and the first signs of what the post-Trump political arena might look like are emerging.  It isn’t hopeful.  Not if you’re looking for peaceful politics. As we become more able to adjust our focus and ask “what just happened?” with a better degree of clarity, it becomes more obvious, to me at least, that the entire movement that has come to be known as Trumpism was not actually Trump’s at...

from Norbert Häring Merkel, Macron, von der Leyen and other international leaders have described the Corona crisis as an opportunity to reorder world politics on the basis of multilateralism. The timing, shortly after the World Economic Forum’s meeting, and the echoes of the Great Reset proclaimed by the forum, are probably no coincidence, as an analysis of key passages will show. In a joint plea printed in a number of important international newspapers, António Guterres, Ursula von der...

from Lars Syll But why are DSGE models still in the mix at all, and in a key position? Given all the criticisms, what can such models tell us, even as a ‘first pass at important questions’? Multiple equilibria do allow for discussion of a wider range of scenarios, but any discussion of a particular scenario is still constrained by the requirements of general equilibrium theory. These requirements are at the root of the more fundamental critiques of DSGE. While Vines and Wills set out an...

from Dean Baker I have written repeatedly on how we should have been looking for a collective solution to the pandemic, where countries open-source their research and allow anyone with manufacturing capacity to produce any treatment, test, or vaccine. (We pay upfront, like with Moderna, for those wondering why anyone would do the work.) Anyhow, we obviously did not go that route under Donald Trump. Along with many others, I have argued that we should still go this route, sharing all our...

from Shimshon Bichler and Jonathan Nitzan Capital as power, differential accumulation and dominant capital According to the theory of capital as power (CasP), capitalists and corporations are driven not to maximize profit, but to ‘beat the average’. Their yardstick is not an unmeasurable theoretical abstraction, but the readily observable performance of others. Their aim is not to increase their ‘material gain’, counted in fictitious utils or socially necessary abstract labour time, but...

from Lars Syll Clearly, neoclassical economists believe that neoclassical microeconomic theory is theoretically coherent and provides the best explanation of economic activity; therefore there is no good reason to not teach it, if not exclusively. Many heterodox economists also broadly agree with this position, although not with all the particulars. However, sufficient evidence exists showing that as a whole neoclassical microeconomic theory is theoretically incoherent and without...