Real-World Economics Review

from Lars Syll That is the great thing about abstraction. Working with what can be called ‘flex price’ models does not imply that you think price rigidity is unimportant, but instead that it can often be ignored if you want to focus on other processes. Simon Wren-Lewis When applying deductivist thinking to economics, mainstream economists like Wren-Lewis usually set up ‘as if’ models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. The...

from Mark Weisbrot Every week, and often more than once a week, there is another article in the major media or in foreign policy publications about the demise of the post-World War II Anglo-American world order. These analyses typically single out the Transatlantic Alliance between the US and Europe ― two of the world’s largest economies ― for special concern and anxiety as the underpinning of this world order. Not surprisingly, President Trump’s wildly fluctuating comments on NATO...

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from Norbert Häring                                                                                              part 1 The winner takes all is a basic rule of the digital economy. Whoever is ahead has a large advantage, just from being ahead, and has a good chance to end up as a quasi-monopolist. This has two main reasons, called network effects and economies of scale. Network effects make digital services more attractive, if more people use them. This is true for social media or trading...

from Lars Syll Deductivist modeling endeavours and an overly simplistic use of statistical and econometric tools are sure signs of the explanatory hubris that still haunts mainstream economics. In an interview Robert Lucas says the evidence on postwar recessions … overwhelmingly supports the dominant importance of real shocks. So, according to Lucas, changes in tastes and technologies should be able to explain the main fluctuations in e.g. the unemployment that we have seen during the...

from Dean Baker As we know, Donald Trump is not very good with numbers. He gave more evidence of this fact when he told a campaign rally in West Virginia: “When I came, we were heading in a certain direction that was going to allow China to be bigger than us in a very short period of time …That’s not going to happen anymore.” Actually, China’s economy is already considerably bigger than the US economy. Using the purchasing power parity measure, which is recommended by most economists and...

from Lars Syll The largest problem with the economics profession’s focus on general equilibrium theory is the opportunity costs of that exploration. Important policy problems are not addressed. Consider Pareto optimality and the welfare theorems, which Fisher sees as the underpinnings of Western capitalism. In a world, such as ours, where property rights cannot be allocated effortlessly and costlessly, economist’s welfare theorems have little policy relevance. Does a policy maker care...

from David Ruccio The argument I’ve been making during this series on utopia is that the utopian moment of the Marxian alternative to mainstream economics is critique.* Let me explain. All modern economic theories have a utopian moment. In the case of mainstream economics, that moment is a full-blown utopianism—the idea that there is, or at least in principle can be, a perfectly functioning economic and social order. Such an order is both envisioned as a model within the theory (often by...

from Lars Syll Having gone through a handful of the most frequently used textbooks of economics at the undergraduate level today, I can only conclude that the models that are presented in these modern mainstream textbooks try to describe and analyze complex and heterogeneous real economies with a single rational-expectations-robot-imitation-representative-agent. That is, with something that has absolutely nothing to do with reality. And — worse still — something that is not even amenable...

from Norbert Häring My book in German with the translated title: “Brave New Money: PayPal, WeChat, Amazon Go – A Totalitarian World Currency in the Making” has just been published by Campus. I have tanslated the “Introduction and Overview” and part of Chapter 1. I will publish this translation in two parts over the next few days. This is part 1. The future of payments has arrived in early 2018, when the first Amazon Go store opened its gates for the general public in Seattle. If you shop...