Real-World Economics Review

from Asad Zaman Continued from previous post on Subjectivity Concealed in Index Numbers. Because modern epistemology rejects values as being just opinions, and only accepts facts as knowledge, values have be to disguised in the shape of facts. What better way to do this than by embodying them in cold hard and indisputable numbers? This post discussed how the GDP embodies the values of a market society. From the sixteenth to the eighteenth century, the values of European societies were...

from Lars Syll Basically, the classical model is a model for a corn economy: households decide whether to consume the corn or to save it. If it is saved it can be supplied to investors who sow the grains, repaying to the households one period later the credit amount plus interest. In the Keynesian model the ‘funds’ exchanged on the capital market are made up of money—‘funds’ are bank deposits. Funds are not created here by a renunciation of consumption but by the banks granting credit …...

What has confused economists for centuries is that they’ve focused on what’s inside the fence of property rights, not the fence itself. And who can blame them? Historically, the things that were owned were easy to see. In contrast, the act of ownership — the institutional fence of private property — was abstract. And so economists tied wealth to property, not the property-rights fence. The confusion dates back to the physiocrats. They saw agricultural land and proposed that it was the...

from Asad Zaman This continues from the previous post on Lies, Damned Lies, and Statistics. More than 1.5 million copies sold, more than all other textbooks of statistics combined. Online copy The vast majority of our life experience is built upon knowledge which cannot be reduced to numbers and facts. Our hopes, dreams, struggles, sacrifices, what we live for, and what we are ready to die for – none of these things can be quantified. However, as we have discussed, logical positivists...

from Lars Syll In my view, scientific theories are not to be considered ‘true’ or ‘false.’ In constructing such a theory, we are not trying to get at the truth, or even to approximate to it: rather, we are trying to organize our thoughts and observations in a useful manner. Robert Aumann What a handy view of science … How reassuring for all of you who have always thought that believing in the tooth fairy make you understand what happens to kids’ teeth. Now a ‘Nobel prize’ winning...

      Source: Nitzan and Bichler, Capital as Power In 2005, Microsoft’s market value was 2,583% greater than that of General Motors. Mainstream economists would say that Microsoft therefore had more property than GM. But more of what? Nitzan and Bichler point out that when we look under the hood of market value, there’s nothing ‘real’ to back it up. Microsoft, for instance, has only 18% as many employees as GM. And it owns only 3% as much equipment (in dollar terms). So is this a...

from Asad Zaman From Ancient Greece to the late 19th century, rhetoric played a central role in Western education in training orators, lawyers, counsellors, historians, statesmen, and poets. However the rise of empiricist and positivist thinking marginalized the role of rhetoric in 20th Century university education. Julie Reuben in “The Making of the Modern University: Intellectual Transformation and the Marginalization of Morality” writes about this change as follows: “In the late...

from Lars Syll Everybody who takes regression analysis course, studies the assumptions of regression model. But nobody knows why, because after reading about the axioms, they are rarely mentioned. But the assumptions are important, because if any one assumption is wrong, the regression is not valid, and the interpretations can be completely wrong. In order to have a valid regression model, you must have right regressors, the right functional form, all the regressors must be exogenous,...

from Joachim H. Spangenberg and Lia Polotzek and WEA Commentaries  In recent WEA Commentaries, the issue of complexity theory and its implications for economics have rightfully gained some prominence. However, while the authors picked up some relevant points, the issue deserves a more comprehensive treatment in new economics, beyond mobilising some arguments to bolster ongoing debates. It should be recognised instead that complexity requires a different way of thinking, and of asking...