Real-World Economics Review

from Ken Zimmerman Most economists (and policy makers) of the last 50 years see no difference between potato chips and microchips, favor unrestricted globalization, and celebrate the loss of US manufacturing jobs as a desirable evolutionary step toward a purely service economy. But human culture is invented by many people. Many of whom have never read economics and don’t spend much time with policy makers. They insist we pay attention to the basics. And the basics in this case is...

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from Lars Syll The fallacy of composition basically consists of the false belief that the whole is nothing but the sum of its parts.  In the society and in the economy this is arguably not the case. An adequate analysis of society and economy a fortiori can’t proceed by just adding up the acts and decisions of individuals. The whole is more than a sum of parts. This fact shows up when mainstream economics tries to argue for the existence of The Law of Demand – when the price of a...

from Ikonoclast In a television special about China, one patriotic Chinese commentator said: “China’s population is four times bigger than that of the USA, therefore China’s economy should be four times bigger than the USA’s.” On an equality basis he is justified. Why shouldn’t Chinese people, on a per capita basis, have the same wealth as citizens of the USA? On a realism basis, we would have to question how this would or could come about. If we were to ask Scotty of Star Trek fame what...

from Katharine Farrell Georgescu-Roegen’s call, echoed by many of his contemporaries, and today paid lip service to by most, if not all economist, was to give serious analytical attention to representing the role of biological dynamics in economic process. It was expressed in large part through his detailed and repeated reference to the second law of thermodynamics, which served as the basis for his proposal to radically reconfigure the mathematical foundations of economic analysis:...

On June 17 Olivier Blanchard, an influential economist, held a dinner speech at the ECB Sintra Forum. Weird. Nothing changed. No Hyman Minsky. No Claudio Borio. No Ulrich Bindseil and intertemporal instability of the asset side of bank balance sheets. No Flow of Funds. Nothing of the kind. His solution for the problems of the Eurozone: get relative prices right and, trust me, general neoclassical equilibrium will return. Just plain old 2007 macro-economics. The whole reason we’re stuck...

from Lars Syll Consider the problem of money. Money is of central importance to any modern capitalist market economy. Yet it is mainly sociologists, philosophers and dissenters that have maintained an interest in what money “is” with a view to continued critique and development … One might think this is because economics has already provided an agreed clear concept of money. But this is not the case. Contemporary economics defines money in terms of function (unit of account, store of...

from Asad Zaman During the last two semesters, I taught Macroeconomics based on a new approach which re-incorporates the history that Economists forgot (See  Method or Madness?). The central idea of the course is that economic theories cannot be understood outside of their historical context. Conversely, economic history cannot be understood except by studying the economic theories (right or wrong) which were used by contemporaries to shape policy responses to historical events. The...

from Ken Zimmerman Today and for the last 50 years economists have played a large part in increasing both the rate and impacts of poverty. Of the many factors involved in poverty, economists have increased the severity of three of these–unemployment, low wages, and poor health. Dominant economic theory today doesn’t even recognize the event unemployment, so its virtually impossible that these same economists can develop public policies to address the factors that lead to the rise of...

from Jorge Buzaglo Is it fake science? Is it magic realism? Or is it the launch of a serious, rational, open debate beyond establishment politicians, diplomats, and other amateurs? The following is (the internet translation of) an article published in the main Swedish morning newspaper by Mats Persson, economics professor and member of the Royal Academy of Sciences. According to him, it does not have to be painful and difficult to stop the climate catastrophe; on the contrary, it can be...