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,...
Read More »The problem with ‘Divisia’ money
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...
Read More »RBC models — willfully silly obscurantism
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...
Read More »Foundations of probability 7-9
from Asad Zaman 7. Differentiating Between Choice and Preference 8. The Nature of Probability 9. Subjective Probability Does Not Exist
Read More »Greenhouse gas emissions and the right to dump sewage on your lawn
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...
Read More »Microfoundations and economic policy choices
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...
Read More »Taxing the surplus—not
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...
Read More »Can governments ever run out of money?
from Lars Syll Whether it’s more nurses, frozen tax promises, free broadband internet or more social housing in the UK; or tax cuts and green energy investments in America, public spending is set to surge. This sudden abandonment of fiscal rectitude comes amid the rise in prominence of a way of thinking about money, spending and the economy – Modern Monetary Theory (MMT). According to its key architect, US businessman Warren Mosler, it is based on a simple idea – that countries that...
Read More »The EU Green New Deal. Fallen fruit first. And now.
from Merijn Knibbe The EU has announced a ‘Green Deal‘. Good. But at this moment, this only a plan for a plan. But there’s no time to waste. So, what to do while we wait? Let’s unleash the economists’ neurotic obsession with efficiency! Identify ‘fallen fruit’, energy gobbling activities which shouldn’t have been there in the first place. And get rid of it. Three examples, non of which requries massive investment or path breaking research: Media boxes. Problem: extreme stand by use....
Read More »The social environment as a cause in economics
from Blair Fix Have you noticed that economists are missing a word in their vocabulary? In microeconomics you’ll see words like ‘individual’, ‘utility’ and ‘maximize’. But you won’t see the word ‘environment’ anywhere. It seems that in microeconomics, individuals maximize their utility in a void. [1] This lobotomy of the environment has led economists astray. By focusing only on differences between individuals, economists ignore a major part of human behavior. Individual differences are...
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