Marcellus Andrews I am sorry to say that I am about to confirm my marginal status in the economics profession by digging into a most unpleasant aspect of the already far too scary matter of climate change. I am going to consider why climate change will inevitably shred the contemporary American social contract – that evolving mix of markets and violence that creates knowledge and wealth, billionaires and prisoners, opportunity and social death in ways that fascinate and horrify the rest...
Read More »Debt, levered losses, & unemployment
from Asad Zaman A previous post on “Causes of the Global Financial Crisis” provided a detailed summary of the first three chapters of “House of Debt” by Mian and Sufi. This post provides a brief summary of Chapters 4 and 5, in which they present a theoretical framework which explains why leveraged debt leads to high unemployment following a shock to asset prices. The main insight is that the problem is caused by interest-based debt contracts which put most of the risks of default on the...
Read More »Little value from Global Chains
from C. P. Chandrasekhar On December 12, in an outburst of suppressed anger, workers employed at a factory assembling iPhones in Narasapura near Bengaluru ransacked its premises and damaged parked vehicles. The facility is a unit of Wistron, a Taiwanese vendor engaged in assembly of Apple iPhones, that had begun commercial operations only recently. This made the worker action surprising to say the least. Workers recently employed in a known foreign-invested firm are not likely to turn...
Read More »China has the world’s largest economy: Get over it
from Dean Baker It is more than a bit annoying to hear reporters endlessly refer to China as the world’s second largest economy. It isn’t. It’s the world’s largest economy and has been since 2017. Here are the data from the International Monetary Fund. Source: International Monetary Fund. As the chart shows, China’s economy first passed the U.S. in 2017. It is projected to be more than 16 percent larger this year, and by 2025 is projected to be almost 40 percent larger by 2025....
Read More »Econometrics — the art of pulling a rabbit out of a hat
from Lars Syll In econometrics one often gets the feeling that many of its practitioners think of it as a kind of automatic inferential machine: input data and out comes causal knowledge. This is — as Joan Robinson once had it — like pulling a rabbit from a hat. Great — but first you have to put the rabbit in the hat. And this is where assumptions come in to the picture. The assumption of imaginary ‘superpopulations’ is one of the many dubious assumptions used in modern econometrics, and...
Read More »Time to end patent monopolies
from Dean Baker For several years the opioid crisis has been recognized as a major national catastrophe. Millions of people have become addicted to the new generation of opioid drugs. In many cases, this addiction has led to the destruction of families, job loss, crime, and suicide. At the peak of the crisis in West Virginia, the hardest hit state, the death rate from overdoses alone, was more than 41 people per 100,000. This is more than 70 percent of its fatality rate from the...
Read More »Christmas, Greece, 2020
Differentiating social, market, and government debts
from Asad Zaman In a previous post on “ABC’s of MMT”, I explained the basics of MMT as a preliminary to a critique of Raghuram Rajan’s article on “How Much Debt is Too Much?”. A significant part of the discussion on this post consisted of debates over words and their meanings. My use of words like assets, savings, wealth, liability, and debt was contested, and alternative usages were offered. It seems necessary to pause for a discussion of these terminological confusions, prior to going...
Read More »Why everything we know about modern economics is wrong
from Lars Syll The proposition is about as outlandish as it sounds: Everything we know about modern economics is wrong. And the man who says he can prove it doesn’t have a degree in economics. But Ole Peters is no ordinary crank. A physicist by training, his theory draws on research done in close collaboration with the late Nobel laureate Murray Gell-Mann, father of the quark … His beef is that all too often, economic models assume something called “ergodicity.” That is, the average of...
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