Real-World Economics Review

from Lars Syll Economics has become a rather quaint and highly guarded discipline. We urgently need to update economics education to change this – because economics, as taught in universities, does not reflect or speak to many of the issues of the real world, be they political, environmental or social. Take the tricky entanglement between politics and economics, which economists tend to try to avoid. Such an attempt is futile. Sidelining politics, history and broader ideas while teaching...

from Julie A. Nelson Since the 1990s, I and some other feminist economists have been pointing out that the mainstream discipline of economics has a profoundly masculinist bias. That is, aspects of human nature, experience, and behavior that fit a culturally “macho” mold have been emphasized and elevated, while those that are culturally associated with a lesser-valued femininity have been ignored. The neoclassical orthodoxy focuses on markets and perhaps the public sphere, but categorizes...

from Lars Syll Although expected utility theory is both theoretically and descriptively inadequate, mainstream economists gladly continue to use it, as though its deficiencies were unknown or unheard of. Daniel Kahneman writes — in Thinking, Fast and Slow — that expected utility theory is seriously flawed since it doesn’t take into consideration the basic fact that people’s choices are influenced by changes in their wealth. Where standard microeconomic theory assumes that preferences are...

from Richard Smith If the bulk of CO2 emissions from cars are produced before the car leaves the showroom then, obviously, the best way to suppress vehicle emissions is to produce as few cars as we need and make them last as long as possible. But of course that runs directly counter to the needs of the capitalist auto industry which must seek to maximize sales by driving repetitive consumption, the faster the cycle the higher the profits. Ever since the 1920s, the auto industry has been...

from Lars Syll SMD theory means that assumptions guaranteeing good behavior at the microeconomic level do not carry over to the aggregate level or to qualitative features of the equilibrium. It has been difficult to make progress on the elaborations of general equilibrium theory that were put forth in Arrow and Hahn 1971 … Fifteen years after General Competitive Analysis, Arrow (1986) stated that the hypothesis of rationality had few implications at the aggregate level. Kirman (1989) held...

from Dean Baker You have to love Robert Samuelson. He writes a column noting that baby boomers are leaving the workforce, and some are dying off, leaving the country to our children and grandchildren. He concludes the piece with a comment on the national debt. “To boot, there’s also a massive federal debt. Good luck.” Given the enormous damage that we have done to the environment, our children and grandchildren would be enormously forgiving if all they blamed us for is the national debt....

from Lars Syll Data without theory can lead to bogus inferences … Before being comforted or alarmed, consider whether it makes sense to extrapolate. Is there a persuasive reason why the future can be predicted simply by looking at the past? Or is that wishful thinking? Or nothing at all? … Remember that even random flips can yield striking, even stunning, patterns that mean nothing at all … A statistical comparison of two things is similarly unpersuasive unless there is a logical reason...