Real-World Economics Review

from Lars Syll It should be emphasized that the equality between savings and investment … will be valid under all circumstances. In particular, it will be independent of the level of the rate of interest which was customarily considered in economic theory to be the factor equilibrating the demand for and supply of new capital. In the present conception investment, once carried out, automatically provides the savings necessary to finance it. Indeed, in our simplified model, profits in a...

from Trond Andresen, Steve Keen and Marco Cattaneo A new means of payment can be part of the solution for the eurozone’s unemployed. We have now seen nine years of social crisis and huge unemployment in many euro countries. An entire youth generation has barely experienced anything but being out of work. Still no solution has been found or implemented. The time is overdue to think outside the box. We propose a solution that has circulated internationally for several years: some of us have...

from David Ruccio and Jamie Morgan and the current issue of RWER What we’re seeing then, especially in the United States, is a self-reinforcing cycle of high profits, low wages, and even higher profits. That’s why the labour share of business income has been falling throughout the so-called “recovery”:[1] Eric Levitz in a July 2018 article in New York Magazine states that in the end this is political, as “American policymakers have chosen to design an economic system that leaves workers...

from John Balder and the current issue of RWER To explore the origins of the global financial crisis, the first step is to specify the relationship between banking, money and credit. According to the mainstream view, a bank serves as an intermediary between a borrower and a lender. As a pure intermediary, a bank has no impact on real economic activity. This view – taught in most Economics 101 textbooks – implicitly assumes that money is available in finite quantities that are regulated by...

from Lars Syll One of the few statisticians that yours truly have on the blogroll is Andrew Gelman. Although not sharing his Bayesian leanings, I find his open-minded, thought-provoking and non-dogmatic statistical thinking highly recommendable. The plaidoyer below for ‘reverse causal questioning’ is typical Gelmanian:  When statistical and econometrc methodologists write about causal inference, they generally focus on forward causal questions. We are taught to answer questions of the...

from Dean Baker The folks who remain determinedly ignorant about the financial crisis and Great Recessioncontinue to look for another crisis where it isn’t. Much of the latest effort focuses on corporate debt. There are four big reasons why corporate debt does not pose anything like the same sort of problem that mortgage debt did during the housing bubble years. First, many companies took on large amounts of debt for a simple reason, it was very cheap. The debt was not a necessity for...

from Asad Zaman   Lecture 8A of Advanced Macroeconomics   — Outline below covers the first 17m of the lecture linked below at bottom of post. 1. EXCESS Savings reduce Effective Demand, Normal Savings Do Not It seems clear that shortfalls in aggregate demand can lead to recessions, but only in presence of fixed prices. Furthermore, normal levels of savings cannot create such shortfalls – an abnormally high level of savings is required. This is because of factors discussed in “ The...