Real-World Economics Review

from Lars Syll A more pluralist approach would take account of the complexity of markets, the constraints imposed by nature and rising inequality. So what needs to be done? Firstly, listen to consumers, because it is pretty obvious that they are unimpressed with what they are getting. The failure of the economics establishment to predict the crisis and its insistence that austerity is the right response to the events of a decade ago has meant the profession has rarely been less trusted …...

There we go again. According to mister Mersch, a central banker, the ECB only has to care about consumer price inflation and not about financial stability. Mister Mersch knows this isn’t right. Legally, the ECB do has to care about financial stability. It’s part of the mandate of the bank. In a practical sense, caring about financial stability is what central banks do. While they do not excel at influencing the rate of consumer price inflation (which is influenced by wages, profit...

IG: DEANRAVENBAKER Song: Every Time We Run Band name: Alter Ego Music Australia. Band Members: Dean Baker (vocals), Dan Bacon (guitar), Matty Ray (keys), Mike Walker Coulter (drums). The band was highly inspired by the likes of The Doors, Tea Party, Rolling Stones and INXS. "Alter Ego Music Australia eternalized its illusionary psychedelic rock blues sound through the evocation of the true self". - Dean Baker. This original song was first recorded around the year 1999-2000 and unlike...

from Lars Syll Commenting on the Stiglitz-Summers debate on secular stagnation, Roger Farmer writes: We cannot continue to make unfounded assertions about economic policy using the failed interpretation of the General Theory that evolved from John Hicks’ attempt to reconcile Keynes with the classics. The current manifestation of that approach is so-called New Keynesian Economics, which Summers himself has rightly rejected because it is inconsistent with secular stagnation. But it is not...

from Asad Zaman After the Global Financial Crisis, there has been a lot of re-thinking about Monetary Policy, as one might expect. In fact, in light of the magnitude of the failure, re-thinking efforts have been much less than proportional. There are many, many, different strands of thought, and personally, I do not have clarity on what needs to be done. Furthermore, the situation is rapidly changing, so that a solution for today would not be a solution for tomorrow.  The fundamental...

from Lars Syll Economics is perhaps more than any other social science model-oriented. There are many reasons for this — the history of the discipline, having ideals coming from the natural sciences (especially physics), the search for universality (explaining as much as possible with as little as possible), rigour, precision, etc. Mainstream economists want to explain social phenomena, structures and patterns, based on the assumption that the agents are acting in an optimizing (rational)...

from Maria Alejandra Madi Traditional epistemological theories have fostered an endless debate on dichotomies characterized by forms of objectivism, on the one hand, and forms of relativism/skepticism on the other. Currently, among the deep global social and cultural challenges, the crisis in epistemology is characterized by a radical questioning of the whole matrix within which such dichotomies have been drawn. Taking into account the evolution of Economics as a science, the need for a...

from David Ruccio I have long argued (e.g., here, here, and here) that capitalism involves a kind of pact with the devil: control over the surplus is reluctantly given over to the boards of directors of corporations in return for certain promises, such as just deserts, economic stability, and wage increases for workers. In recent years, as so often in the past, we’ve witnessed those at the top sabotaging the pact (simply because they have the means and interest to do so) and now, once...

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...