Real-World Economics Review

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...

from Dean Baker Last month George Soros had a New York Times column arguing that Mark Zuckerberg should not be running Facebook. (Does the NYT reserve space on its opinion page for billionaires?) The gist of Soros’ piece is that Zuckerberg has made a deal with Trump. He will allow all manner of outrageous lies to be spread on Facebook to benefit Trump’s re-election campaign. In exchange, Trump will defend Zuckerberg from efforts to regulate Facebook. Soros is of course right. Zuckerberg...

from Grazia Ietto-Gillies and WEA Commentaries  There is now a very large body of literature on theories of the transnational corporation (TNC) and the subject has reached a suitably mature stage to have a history of economic thought about it.2 The first theory of the ‘International Firm and its Operations’ was developed in 1960 by Steven Hymer, a Canadian student working for a doctorate under the supervision of Charles Kindleberger at the Massachusetts Institute of Technology. A British...

from Lars Syll Most work in econometrics and regression analysis is — still — made on the assumption that the researcher has a theoretical model that is ‘true.’ Based on this belief of having a correct specification for an econometric model or running a regression, one proceeds as if the only problem remaining to solve have to do with measurement and observation. When things sound to good to be true, they usually aren’t. And that goes for econometric wet dreams too. The snag is, of...