Real-World Economics Review

from Lars Syll How would you react if a renowned physicist, say, ​Richard Feynman, was telling you that sometimes force is proportional to acceleration and at other times it is proportional to acceleration squared? I guess you would be unimpressed. But actually, what most mainstream economists do amounts to the same strange thing when it comes to theory development and model modification. In mainstream economic theory,​ preferences are standardly expressed in the form of a utility...

from Dean Baker and Jared Bernstein The topic of economic inequality can appear complex, with many nuanced causes and outcomes. But while the two of us actively engage in that debate, we also strongly believe that there is one overarching factor that must not be, but often is, overlooked: worker bargaining power. On Labor Day, this problem of the long-term decline in workers’ ability to bargain for a fair share of the growth they have helped generate deserves a closer look. There is, of...

from Lars Syll In contrast to the experience of the Great Depression, which led to the emergence and acceptance of novel theoretical concepts on a large scale, the financial crisis and its consequences have, by and large, been rationalized with reference to existing theoretical concepts. Although we do observe a slight shift away from the idea that financial markets are efficient by default and prices only follow random walks, the basic conceptualization of (financial) markets as being...

from Asad Zaman Introduction: How does it happen that we have given our quiet assent to a situation where the richest 85 individuals have more money than the bottom 3.5 billion? Where vultures wait for starving children to die, while others eat luxurious meals on private resort islands? Where horrendous military and commercial crimes leading to deaths, misery, and deprivations of millions are routinely committed by highly educated men with multimillion dollar salaries in luxury corporate...

from Mark Weisbrot This Labor Day, the vast majority of Americans who need to work for a living still have a long way to go before they recover what they have lost over the past four decades. The real (inflation-adjusted) median wage is only about 10 percent above what it was in 1979. As economist Dean Baker has noted, we can also see part of this transformation of the United States into a more shamefully unequal society if we look at the distribution of national income between profits...

from Lars Syll If the observations of the red shift in the spectra of massive stars don’t come out quantitatively​ in accordance with the principles of general relativity, then my theory will be dust and ashes. Albert Einstein (1920)

from David Ruccio We’re ten years on from the events the triggered the worst crisis of capitalism since the first Great Depression (although read my caveat here) and centrists—on both sides of the Atlantic—continue to peddle an ahistorical nostalgia. Fortunately, people aren’t buying it. As Jack Shenker has explained in the case of Britain, one of the most darkly humorous features of contemporary British politics (a competitive field) is the ubiquity of parliamentarians, pundits and...

from Lars Syll Randomization is an alternative when we do not know enough to control, but is generally inferior to good control when we do. We suspect that at least some of the popular and professional enthusiasm for RCTs, as well as the belief that they are precise by construction, comes from misunderstandings about … random or realized confounding on the one hand and confounding in expectation on the other … The RCT strategy is only successful if we are happy with estimates that are...

from David Ruccio In a 1999 interview with Fortune, legendary investor Warren Buffett coined the term “economic moats” to sum up the main pillar of his investing strategy. He described it like this: The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats...