Real-World Economics Review

from Dean Baker The stock market enjoys a mythological place not only among mainstream media types, but also among many progressives. For some reason this measure of expected future corporate profits is taken as a measure of economic well-being. The fact that the media obsesses over the stock market hardly needs to be mentioned. If there is one item about the economy that we can be sure will be repeated every day, it is the movement in the Dow or the S&P 500. And, needless to say, an...

from Lars Syll Statistical science is not really very helpful for understanding or forecasting complex evolving self-healing organic ambiguous social systems – economies, in other words. A statistician may have done the programming, but when you press a button on a computer keyboard and ask the computer to find some good patterns, better get clear a sad fact: computers do not think. They do exactly what the programmer told them to do and nothing more. They look for the patterns that we...

from Dean Baker Last week, we saw the media terrified over a plunge in the stock market following an escalation of Donald Trump’s trade war with China. There are good reasons to be concerned about Trump’s ill-defined trade war and reality TV tactics, but the plunge in the stock market is not one of them. While the idea that the stock market is a measure of the health of the economy permeates news reporting and popular understanding, it has no basis in economics. The stock market is a...

from Lars Syll Mathematics, especially through the work of David Hilbert, became increasingly viewed as a discipline properly concerned with providing a pool of frameworks for possible realities. No longer was mathematics seen as the language of (non-social) nature, abstracted from the study of the latter. Rather, it was conceived as a practice concerned with formulating systems comprising sets of axioms and their deductive consequences, with these systems in effect taking on a life of...

from David Ruccio Richard Reeves is right about one thing: time is crucial to capitalism’s legitimacy. The premise and promise of capitalism are that the future will be better than the present. And “if capitalism loses its lease on the future, it is in trouble.” The fact is, things are not getting better for the vast majority of American workers. They’re falling behind. For example, as is clear in the chart above, the labor share in the U.S. nonfarm business sector has fallen more than...

from Dean Baker I am a big fan of expanding the welfare state but I am also a big fan of reality-based analysis. For this reason, it’s hard not to be upset over yet another column telling us that the robots are taking all the jobs and that this will lead to massive inequality. The first part is more than a little annoying just because it is so completely and unambiguously at odds with reality. Productivity growth, which is the measure of the rate at which robots and other technologies are...

from Lars Syll Eminent statistician David Salsburg is rightfully very critical of the way social scientists — including economists and econometricians — uncritically and without arguments have come to simply assume that they can apply probability distributions from statistical theory on their own area of research: We assume there is an abstract space of elementary things called ‘events’ … If a measure on the abstract space of events fulfills certain axioms, then it is a probability. To...

from Lars Syll Because I was there when the economics department of my university got an IBM 360, I was very much caught up in the excitement of combining powerful computers with economic research. Unfortunately, I lost interest in econometrics almost as soon as I understood how it was done. My thinking went through four stages: 1.Holy shit! Do you see what you can do with a computer’s help. 2.Learning computer modeling puts you in a small class where only other members of the caste can...

from Jason Hickel Most everyone who’s interested in global inequality has come across the famous elephant graph, originally developed by Branko Milanovic and Christoph Lakner using World Bank data. The graph charts the change in income that the world’s population have experienced over time, from the very poorest to the richest 1%. We can update the elephant graph using the latest data from the World Inequality Database (WID), which covers the whole period from 1980 to 2016 using a...

from Lars Syll Distinguished Professor of social psychology Richard E. Nisbett takes on the idea of intelligence and IQ testing in his Intelligence and How to Get It (Norton 2011). He also has some interesting thoughts on multiple-regression analysis and writes: Researchers often determine the individual’s contemporary IQ or IQ earlier in life, socioeconomic status of the family of origin, living circumstances when the individual was a child, number of siblings, whether the family had a...