Real-World Economics Review

from Lars Syll One of the most beautiful results of probability theory is Markov’s inequality (after the Russian mathematician Andrei Markov (1856-1922)): If X is a non-negative stochastic variable (X ≥ 0) with a finite expectation value E(X), then for every a > 0 P{X ≥ a} ≤ E(X)/a If the production of cars in a factory during a week is assumed to be a stochastic variable with an expectation value (mean) of 50 units, we can – based on nothing else but the inequality – conclude that the...

Merry christmas and a happy new year! And a picture of an off the shelf heart shaped 2018 Christmas adornment which managed to twinkle 365/24/7 (even when not very bright) on one off the shelf battery, showing the power and the glory of modern contemporary off the shelf led and battery technology. Let’s embrace and welcome the next 365. And dump the last remaining 19th century technology totally outdated short lived energy wasting heat squandering incandescent light bulbs before the next...

from David Ruccio There is a specter haunting capitalist development around the globe. In fact, the latest Human Development Report begins by naming that menacing apparition: The wave of demonstrations sweeping across countries is a clear sign that, for all our progress, something in our globalized society is not working. Different triggers are bringing people onto the streets: the cost of a train ticket, the price of petrol, political demands for independence. A connecting thread,...

According to some economists, ‘Divisia money’ is, as a monetary aggregate, a superior and neoclassical alternative to the more often used M2 or M3 ‘single sum’ aggregates. But looking at such money aggregates in isolation prevents economists from analyzing monetary developments using the integrated and statistically coherent Flow of Funds framework which ties the growth of money to the growth of credit. Divisia money is not a sound alternative. The Flow of Funds are. The graph shows that...

from Lars Syll As a result of the three waves of new classical economics, the field of macroeconomics became increasingly rigorous and increasingly tied to the tools of microeconomics. The real business cycle models were specific, dynamic examples of Arrow–Debreu general equilibrium theory. Indeed, this was one of their main selling points. Over time, proponents of this work have backed away from the assumption that the business cycle is driven by real as opposed to monetary forces, and...

from Asad Zaman  7. Differentiating Between Choice and Preference 8. The Nature of Probability  9. Subjective Probability Does Not Exist

from Dean Baker In debates over protecting the environment, and especially global warming, it is standard practice to refer to the pro-protection side as being in favor of government regulation and the anti-protection side as being pro-free market. This is nonsense and it is nonsense in a way that strongly benefits the enemies of environmental protection. There is a simple way to think about environmental protection. If I build a home and want to dispose of my sewage in the cheapest...

Lars Syll Since there will generally be many micro foundations consistent with some given aggregate pattern, empirical support for an aggregate hypothesis does not constitute empirical support for any particular micro foundation … Lucas himself points out that short-term macroeconomic forecasting models work perfectly well without choice-theoretic foundations: “But if one wants to know how behaviour is likely to change under some change in policy, it is necessary to model the way people...

from David Ruccio There aren’t many ways ordinary Americans have a say in what happens to the surplus that determines their fate. Most of the surplus in the United States is appropriated by the boards of directors of large corporations. But most employees are excluded from the decisions in their workplaces about what’s done with that surplus. Their local communities, where the corporations operate, don’t have much of a say either. That leaves federal taxes. Corporate income taxes are...