Real-World Economics Review

from Peter Radford It seems appropriate to mention increasing returns today.  After all, this is the day on which several of our modern titans of industry are appearing before Congress to respond to the concerns raised by the gargantuan size that their respective businesses have grown to become.  The CEOs of Apple, Amazon, Google, and Facebook are all under the gun to defend the enormous clout that each wields in the modern marketplace.  Today is the culmination of a long investigation by...

from Dean Baker The saving rate hit a record 25.7 percent level in the first quarter, indicating that few of the pandemic checks were spent The Gross Domestic Product (GDP) shrank at a record 32.9 percent annual rate in the second quarter. While almost all the major categories of GDP fell sharply, a 43.5 percent drop in consumption of services was the largest factor, accounting for 22.9 percentage points of the drop in the quarter. Nonresidential fixed investment also fell sharply,...

from David Ruccio Capitalism’s crises are clearly becoming deeper and more severe. After the crash of 2007-08, the United States (and much of the rest of the world) was subjected to the Second Great Depression, the worst economic downturn since the depression of the 1930s. Now, in the midst of the novel coronavirus pandemic, business activity has ground to a halt and unemployment has soared to levels reminiscent of the first Great Depression. Not surprisingly, both Main Street and Wall...

from Lars Syll In a word, Economics is an Impossible Science because by its own definition the determining conditions of the economy are not economic: they are “exogenous.” Supposedly a science of things, it is by definition without substance, being rather a mode of behavior: the application of scarce means to alternative ends so as to achieve the greatest possible satisfaction—neither means, ends, nor satisfaction substantially specified. Exogenous, however, is the culture, all those...

from Dean Baker I just finished reading Carter’s book and I will agree with the general assessment. It is an outstanding book that brings together much useful material on the life and influence of Keynes. While I am of course familiar with Keynes’ history and the history of Keynesianism, there is much that I learned here. In particular, I am impressed with the importance he gives Joan Robinson in spreading the ideas of Keynes, especially to followers from the United States. When I first...

from Lars Syll In Radical Uncertainty, John Kay and Mervyn King, two well-known British economists, state that rather than trying to understand the ever-changing, uncertain and ambiguous environment by trying to understand “what’s going on here”, the economics profession has become dominated by an approach to uncertainty that requires a comprehensive list of possible outcomes with well-defined numerical probabilities attached to them. Drawing widely on philosophy, anthropology,...

from Lars Syll As time goes on, and 2020 turns into 2021, the long-held idea that governments are like households and businesses that have to repay their debts, or even that government deficits must be financed by debt at all, will increasingly be exposed as a mistake. It will be more or less a return to Keynes, except with the twist that the Keynesian aim of balancing the budget over the course of the cycle – deficits in bad times, surpluses in good times – doesn’t matter, not that...

from Dean Baker The push for a $15 an hour minimum wage has developed considerable political momentum over the last decade. It is a very real possibility that we will see legislation imposing a national minimum wage of $15 an hour by 2024 if Joe Biden wins the election this fall. That would be a great thing, it would mean a large increase in pay for tens of millions of workers, but it is still very modest compared to what the minimum wage would be if it had kept pace with productivity...

from Peter Radford The collection of papers edited by Uskali Mäki and published in 2001 under the title: “The Economic World View, Studies in the Ontology of Economics” seems to be quite pertinent given the reaction to my recent comments on complexity.  It is a wonderfully rich source of thought about what, exactly, economics is, which is something that seems to confound a great number of people.  Quite often I get the sense that some critics are upset with economics because it isn’t...

from David Ruccio The existing alphabet soup of possible recoveries—V, U, W, and so on (which I discussed back in April)—is clearly inadequate to describe what has been taking place in the United States in recent months. That’s because there’s no single path of recovery for everyone. For some, the recovery from the pandemic crisis has been just fine, while for many others there has been no recovery at all. Instead, things are going from bad to worse. In other words, there’s a growing gap...