Real-World Economics Review

fro Norbert Häring If the trend of the last two decades continues, index funds could control 40 percent of the voting rights in the largest corporations by 2040.The share is already up to 25 percent in the US. There a two perspectives on this. Some scholars say it threatens shareholder value, others fear it will lead to too much of it. I side with the latter. … Law-and-economics professors Lucian Bebchuk and Scott Hirst from the Universities of Harvard and Boston make the extrapolation of...

from Lars Syll The gender pay gap is a fact that, sad to say, to a non-negligible extent is the result of discrimination. And even though many women are not deliberately discriminated against, but rather self-select into lower-wage jobs, this in no way magically explains away the discrimination gap. As decades of socialization research has shown, women may be ‘structural’ victims of impersonal social mechanisms that in different ways aggrieve them. Wage discrimination is unacceptable....

from Asad Zaman This is a continuation of previous post on “The Knowledge of Childless Philosophers“. I would like to clarify some aspects of the theory of knowledge which have become muddled and confused because childless philosophers did not observe how children learn about the world, and acquire knowledge starting from scratch. If they had taken this as the basic model for how we acquire knowledge, they would have been able to avoid a huge number of mistakes. A realist methodology for...

from Blair Fix I confess that I have a recurring nightmare. In it, I realize that everything I’ve ever written about economics is wrong. Neoclassical economics is not, as I’ve repeatedly claimed, a pile of bullshit. In this nightmare, neoclassical economics is correct. And as a strident critic of neoclassical theory, I realize the horrible truth. I’m a crank! I wake up in a cold sweat, wondering if I’m wasting my life. Then, as rational thought returns, my fears ebb away. I think about...

The ECB rightly wants to pay more attention to costs of ‘owner occupied houses’ (OOH) when it comes to inflation. Statisticians often use ‘imputed rents’ to do this. The ECB shouldn’t do this but should look at actual costs of owners of houses. Rents and monetary costs of OOH do not develop in the same way. Also, rented houses are not inhabited by the same social and demographic groups as owner occupied houses. Which means that using rents to gauge the costs of OOH, as happens in many...

from Lars Syll When we cannot accept that the observations, along the time-series available to us, are independent, or cannot by some device be divided into groups that can be treated as independent, we get into much deeper water. For we have then, in strict logic, no more than one observation, all of the separate items having to be taken together. For the analysis of that the probability calculus is useless; it does not apply. We are left to use our judgement, making sense of what has...

from Blair Fix and RWER issue #90 Modern economics, I have come to believe, resembles pre-Darwinian biology. By this, I mean that economics is captivated by an ideology that is stopping scientific progress. Let’s look at the parallels. Before Darwin, biologists believed that life on Earth was created by God. This seductive idea stunted scientific progress for centuries. Much of the evidence for evolution – the fossil record, the similar anatomy of different species – was staring...

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...