Real-World Economics Review

from Ikonoclast The essential problem is that heterodox economics needs to develop an agreed ontology and agreed modeling methods, including broad agreements on the likely limits to modeling. Peter Radford has pointed out some of the ways (and reasons why) the economy cannot be modeled accurately in key respects. Orthodox economics has an agreed framework. Orthodox economists mostly agree on their framework and they accept their implied economic ontology, without question or discussion...

from Lars Syll To complete his theory, Keynes tied these elements together. The market for money determined interest. Interest (and the state of business confidence) determined investment. Investment, alongside consumption, determined effective demand for output. Demand for output determined output and employment. Consumption out of incomes determined savings. Employment determined the real wage. In this world, a change in monetary policy, such as a cut in interest rates leading to an...

from Blair Fix I’ve always been baffled why ‘modern monetary theory’ is called a theory. I don’t mean this in a disparaging way. As far as theories of money go, I think modern monetary theory (MMT for short) is the correct one. But having a correct theory of money is a bit like having a correct theory of traffic lights. Traffic lights (like money) are a social convention. We agree that red means stop and green means go. Why we’ve chosen these particular colors is an interesting question,...

from Lars Syll Public debt is normally nothing to fear, especially if it is financed within the country itself (but even foreign loans can be beneficent for the economy if invested in the right way). Some members of society hold bonds and earn interest on them, while others pay taxes that ultimately pay the interest on the debt. The debt is not a net burden for society as a whole since the debt ‘cancels’ itself out between the two groups. If the state issues bonds at a low-interest rate,...

from Dean Baker It is standard for economic reporters to treat higher stock prices as good news. A rising stock market is often touted in the same way that job gains or GDP growth are touted, as evidence of a stronger economy. This can be true. When the economy is growing at a healthy pace, the stock market is usually rising also. But the link is far more tenuous than is generally recognized. The market is in principle a measure of expected future profits. Policies that redistribute...

from Peter Radford Economists have been talking about complexity for a very long time.  This may surprise many of you given the state of mainstream economics, but it is true.  A good place to discover a preliminary history of complexity in economics would be the short volume edited by David Colander published in 2000.  The papers it contains were all presented at a History of Economics Society Conference in 1998.  Colander provides a good introduction and tries to put complexity into the...

from Lars Syll Alex Rosenberg — chair of the philosophy department at Duke University, renowned economic methodologist and author of Economics — Mathematical Politics or Science of Diminishing Returns? — had an interesting article on What’s Wrong with Paul Krugman’s Philosophy of Economics in 3:AM Magazine a couple of years ago. Writes Rosenberg: When he accepts maximizing and equilibrium as the (only?) way useful economics is done Krugman makes a concession so great it threatens to...

from Norbert Häring Ten years ago, the Rockefeller Foundation published the eerily prescient, autocratic Lock-Step-Scenario and, apparently, has been working to make it true. The most recent initiative in this regard is a cooperation of the Rockefeller-funded GAVI immunization alliance with Mastercard and a biometric ID company named TrustStamp. Before getting to this cooperation, let me briefly remind you of a selection of the assumptions of the Lock Step scenario builders have made...

from David Ruccio Since the first of June,Lost my job and lost my room.I pretend to try,Even though I tried alone. — Sufian Stevens, “Flint (For the Unemployed and Underpaid)” Yesterday morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 1.3 million American workers filed initial claims for unemployment compensation. That’s on top of the 48.7 million workers who were laid off during the preceding fifteen weeks. Here is a breakdown of...

from Lars Syll The atomic hypothesis which has worked so splendidly in Physics breaks down in Psychics. We are faced at every turn with the problems of Organic Unity, of Discreteness, of Discontinuity – the whole is not equal to the sum of the parts, comparisons of quantity fails us, small changes produce large effects, the assumptions of a uniform and homogeneous continuum are not satisfied. Thus the results of Mathematical Psychics turn out to be derivative, not fundamental, indexes,...