Real-World Economics Review

from Asad Zaman My paper is a survey of the huge amount of solid empirical evidence against the utility maximization hypothesis that is at the core of all microeconomics currently being taught today in Economics textbooks at universities all over the world. It is obviously important, because if what it says is true, the entire field of microeconomics needs to be re-constructed from scratch. Nonetheless, it was summarily rejected by a large number of top journals, before being eventually...

from Lars Syll In science we standardly use a logically non-valid inference — the fallacy of affirming the consequent — of the following form: (1) p => q (2) q ————- p or, in instantiated form (1) ∀x (Gx => Px) (2) Pa ———— Ga Although logically invalid, it is nonetheless a kind of inference — abduction — that may be factually strongly warranted and truth-producing. Following the general pattern ‘Evidence  =>  Explanation  =>  Inference’ we infer something based on what would...

from David Ruccio In a recent article, Dan Falk [ht: ja] identifies a fundamental problem in contemporary physics: many physicists working today have been led astray by mathematics — seduced by equations that might be “beautiful” or “elegant” but which lack obvious connection to the real world. What struck me is that, if you changed physics and physicists to economics and economists, you’d get the exact same article. And the same set of problems.  Economists—especially mainstream...

from Dean Baker Policy wonks and pundits have been nearly unanimous in their condemnations of Donald Trump’s trade war and his primary weapon of tariffs. Tariffs are a tax increase on US consumers, raising the price of imports and the domestically produced goods with which they compete. Retaliation by other countries will reduce US exports, costing jobs in other sectors. This is not likely to lead to good outcomes, especially when the basis for Trump’s complaints is vague, constantly...

from David Ruccio Most Americans are not loading sixteens tons of coal. But they are, even in the midst of the recovery from the Second Great Depression, sinking deeper and deeper into debt. According to a recent analysis by Reuters [ht: ja], the bottom 60 percent of income-earners have accounted for most of the rise in consumption spending over the past two years even as their finances have worsened.* The data show the rise in expenditures has outpaced before-tax income for the lower 40...

from Jorge Buzaglo “Under the gold standard the leaders of the financial market are entrusted, in the nature of things, with the safeguarding of stable exchanges and sound internal credit on which government finance largely depends. The banking organization is thus in the position to obstruct any domestic move in the economic sphere which it happens to dislike, whether its reasons are good or bad. In terms of politics, on currency and credit, governments must take the advice of the...

from Lars Syll The standard NK [New Keynesian] model, like most of its predecessors in the RBC literature, represents an economy inhabited by an infinitely-lived representative household. That assumption, while obviously unrealistic, may be justified by the belief that, like so many other aspects of reality, the finiteness of life and the observed heterogeneity of individuals along many dimensions … can be safely ignored for the purposes of explaining aggregate fluctuations and their...

In October 2015 I wrote a post in which I compared Bitcoin with Yap island stone money. Farfetched? No. Today, Sciencenews published an article by Bruce Bower. He states that archeologists nowadays argue the same thing. An excerpt: Archaeologist Scott Fitzpatrick and finance professor Stephen McKeon, both of the University of Oregon in Eugene, see parallels between the public, decentralized way in which rai limestone money on the island of Yap was valued and distributed and the modern-day...

from Dean Baker Donald Trump made his opposition to much of America’s international trade policy a central theme in his presidential campaign, and his position almost certainly played a major role in his victory in key industrial states like Michigan, Ohio, and Pennsylvania. But the public now seems largely opposed to his recent tariffs against our major trading partners. It is possible to make sense of these seemingly contradictory facts. First, most people are not policy wonks. They...

from Asad Zaman This is an assorted collection of quotes I have found useful from time to time in different contexts. I am putting them all together for my own reference, as well as for the benefit of others who may find them similarly useful to make points. JM Keynes Quotes (mostly from General Theory GT): The composition of this book has been for the author a long struggle of escape, and so must the reading of it be for most readers if the author’s assault upon them is to be...