Real-World Economics Review

from Lars Syll Even if interest-rate cuts at all points proximately increase demand, there are substantial grounds for concern if this effect is weak. It may be that any short-run demand benefit is offset by the adverse effects of lower rates on subsequent performance … From a macro perspective, low interest rates promote leverage and asset bubbles by reducing borrowing costs and discount factors, and encouraging investors to reach for yield. Almost every account of the 2008 financial...

from Dean Baker In the United States, there has been much attention given to the various proposals for a Green New Deal. While there have been legitimate questions about paying for a large push to reduce greenhouse gas emissions, many accept the need for such measures for the survival of the planet. However, there has been less attention paid to the failure of European countries to act in this area, in spite of the fact that a substantial program would be virtually costless for Europe....

from Ken Zimmerman First, let’s get the story about climate change right before we look to the Amazon. Climate change will certainly impact the planet in dozens of ways. But it is extremely unlikely it will destroy the planet. So the slogan should be, “Save Sapiens.” Climate change impacts will make human life on the planet more difficult, perhaps even impossible. By fighting climate change, humans are fighting to save themselves. For us today, it’s sometimes difficult to comprehend just...

from Lars Syll How would you react if a renowned physicist, say, ​Richard Feynman, was telling you that sometimes force is proportional to acceleration and at other times it is proportional to acceleration squared? I guess you would be unimpressed. But actually, what most mainstream economists do amounts to the same strange thing when it comes to theory development and model modification. In mainstream economic theory,​ preferences are standardly expressed in the form of a utility...

from Dean Baker It’s probably too simple and obvious to be worth mentioning, but it seems none of the news coverage on the suits against opioid manufacturers say that the reason that companies like Purdue Pharma and Johnson & Johnson had so much incentive to push their drugs was that the government gave them patent monopolies that allowed them to sell their products for prices that were far above the free market level. While generic manufacturers also made money on opioids, the...

from Lars Syll There is a purist streak in economics that wants everything to follow from asumming things like ‘rationality’ and ‘equilibrium.’ That purist streak has given birth to a kind ‘deductivist blindness’ of mainstream economics, something that also to a larger extent explains why it contributes to causing economic crises rather than to solving them. But where does this ‘deductivist blindness’ of mainstream economics come from? To answer that question we have to examine the...

from Mark Weisbrot When people think of the damage that the high-income countries ― typically led by the US and its allies ― cause to people in the rest of the world, they usually think of warfare. Hundreds of thousands of Iraqis lost their lives as a result of the 2003 invasion, and then many more as the region became inflamed. But the rich countries also have considerable power over the lives of billions of people through their control over institutions of global governance. One of...

from Dean Baker The New York Times had a piece about a new law in China that reduced penalties for importing drugs that have not been approved by China’s regulatory agency. While it is not clear from the piece how far-reaching this change in the law will be in practice, the potential impact for both China and the world is enormous. India has continued to be a massive supplier of generic drugs, both to its own people, but also to the rest of the world. Many drugs that are subject to patent...

from Lars Syll Unless enforced by study design and execution, statistical assumptions usually have no external justification; they may even be quite implausible. As result, one often sees attempts to justify specific assumptions with statistical tests, in the belief that a high p-value or ‘‘nonsignificance’’ licenses the assumption and a low p-value refutes it. Such focused testing is based on a meta-assumption that every other assumption used to derive the p-value is correct, which is a...

from David Ruccio The same day I wrote that capitalism was coming apart at the seams, indicated by the shocking disparity between the compensation of corporate CEOs and workers, the Business Roundtable published its new statement of purpose of a corporation.* The 180 or so corporate executives who signed the statement declared that all their stakeholders, not just owners of equity shares, were important to their mission. Many business pundits, such as Andrew Ross Sorkin, greeted the new...