Real-World Economics Review

from Maria Alejandra Madi Since the 2008 global financial crisis, the financial regulation scenario faces new drivers and challenges.  Bank transactions by internet and mobile banking have sharply increased. In this digital environment, new technologies – such as advanced analytics, big data, in addition to the use of robotics, artificial intelligence, new forms of encryption and biometrics – have been enabling changes in the provision of financial products and services. The current wave...

from Asad Zamzn Continuing from the previous post on The WHY of Crazy Models, I attribute a large portion of the blame to massively wrong theories of knowledge. A little bit of study of epistemology is enough to give anyone a headache. Because of this, instead of investing the time and effort to decipher what the philosophers are saying, the rest of us are willing to take it on faith. No one is aware of the massive amount of damage done by philosophers – most philosophers themselves are...

from Lars Syll There is also a practical problem, if economics as a discipline is to survive. There is a huge amount of junk in the peer-reviewed economics literature -– the reviewing process is no protection when the reviewers themselves are prejudiced. A comparison that comes to mind is the collapse of “scientific” eugenics. There were vast amounts of that written, and now it is only read as an object example of the capture of a social science by prejudice and authoritarianism. For...

from Blair Fix and RWER issue #90 Is it obvious to you that humans are evolved social animals? Is it also obvious that our sociality is central to how we distribute resources? If you think so, you’re probably not an economist. Through years of schooling, mainstream economists are trained to ignore the obvious facts about human nature. The theories that economists learn make it impossible for them to understand human sociality. Economists are trained that humans are asocial “globules of...

from Lars Syll Analogue-economy models may picture Galilean thought experiments or they may describe credible worlds. In either case we have a problem in taking lessons from the model to the world. The problem is the venerable one of unrealistic assumptions, exacerbated in economics by the fact that the paucity of economic principles with serious empirical content makes it difficult to do without detailed structural assumptions. But the worry is not just that the assumptions are...

from Asad Zaman I was professionally trained as an economist, and learned how to build models with the best. As described in detail in a previous post on “The Education of An Economist“, it was only by accident that, a long time after graduate school, I learned of glaring conflicts between the theory I had been taught, and the historical evidence about effects of free trade and trade barriers. Further exploration along this direction dramatically widened the chasm between the economic...

from Dean Baker It is popular for people, especially economist-type people, to claim that technology has been a major driver of the increase in inequality over the last four decades. This view is very convenient for those on the winning side of the inequality divide, since it implies that the growth in inequality was largely an organic process independent of government policy. Inequality might be an unfortunate outcome, but who would be opposed to the advance of technology? However...

from Herman Daly and RWER issue #90 Regarding quantification ecological economists distinguish growth from development. Growth is increase in size by assimilation or accretion of matter – it is quantitative. Development is qualitative improvement in design, priorities, or purpose. Growth is easier to measure than development, but development is more important for the future. Sustainable development, so-called, is qualitative improvement without quantitative growth in scale beyond...

from Lars Syll Not accounting for uncertainty may result in severe confusion about what we do indeed understand about the economy. In the financial crisis of 2007/2008 the demon has lashed out at this ignorance and challenged the credibility of the whole economic community by laying bare economists’ incapability to prevent the crisis … Economics itself cannot be regarded a purely analytical science. It has the amazing and exciting property of shaping the object of its own analysis. This...