Real-World Economics Review

from Peter Radford A little knowledge goes a long way.  That’s the saying, correct?  Well you’d never know it by looking at economics.  It’s hard to find knowledge anywhere. Now I’m not being facetious about the gaps in economic theory.  Let’s all give the discipline its due and say that it has done a masterful job of getting as far as it has based on the limitations it bounds itself with. It’s just that sometimes those limitations are glaring and can stop someone in their tracks if...

from Stuart Holland and Andrew Black and the current issue of Economic Thought When Janet Yellen questioned in her address to the Boston Fed in 2016 why there had been a lack of rethinking in economic theory since the financial crisis, she cited a host of macroeconomic analyses yet did not even refer to ‘too big to fail’. Whereas one of the reasons for seeking to redress the missing middle in mainstream economics relates to the increased concentration of banks in the US since the repeal...

from Lars Syll The financial crisis of 2007-08 hit most laymen and economists with surprise. What was it that went wrong with our macroeconomic models, since they obviously did not foresee the collapse or even make it conceivable? There are many who have ventured to answer this question. And they have come up with a variety of answers, ranging from the exaggerated mathematization of economics to irrational and corrupt politicians. But the root of our problem goes much deeper. It...

from C. P. Chandrasekhar and Jayati Ghosh Everyone seems to have woken up to the fact that global debt levels are too high and portent difficulties ahead. As Figure 1 indicates, the levels of credit to GDP, which were so high as to be unsustainable and resulted in the big crisis of 2008, have increased even more since then. There was a phase of deleveraging in the advanced economies until around 2014, and in developing countries and emerging markets until 2011, but since then, credit/debt...

from Maria Alejandra Madi Global warming and global CO2 emissions are interconnected. In 2018, heatwaves were observed in Europe, Asia, North America and northern Africa, while the extent of Arctic sea ice has been continuously dropping. According to the World Meteorological Organization (WMO), the last four years (2015-2018) have been the warmest years on record. In particular, between January and October 2018, global average temperature increased 0.98 degrees Celsius above the levels of...

from David Ruccio Mainstream economists continue to discuss the two great crises of capitalism during the past century like the pillars of society in the brothel—a “house of infinite mirrors and theaters”—in Jean Genet’s The Balcony.* The order they represent is indeed threatened by an uprising in the streets, and the only question is: can they reestablish the illusion of control? The latest version of the absurdist economic play opens with Brad DeLong, who dons the costume of the...

from Lars Syll Paul Krugman has repeatedly over the years argued that we should continue to use maistream economics hobby horses like IS-LM and AS-AD models. Here’s one example: So why do AS-AD? … We do want, somewhere along the way, to get across the notion of the self-correcting economy, the notion that in the long run, we may all be dead, but that we also have a tendency to return to full employment via price flexibility. Or to put it differently, you do want somehow to make clear the...

from Dean Baker There is an argument that carries considerable currency on the right about the need to force the poor to do things that are actually good for them. This comes up frequently in the context of work requirements for people receiving benefits like Medicaid or food stamps (the Supplemental Nutrition Assistance Program). The claim is that people will be made better off by working, since that will give them a foot into the labor market. They can eventually move up and earn enough...

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