Real-World Economics Review

from Dean Baker Economics famously suffers from a “which way is up?” problem. The issue is whether an economy is suffering from too much demand or too little demand. On its face, that seems like it should be a very simple question, but in fact it can be complicated and people often get it wrong, with very serious consequences. The Great Depression was the classic too little demand story. We had millions of people out of work through the decade of the 1930s because there was not enough...

from Norbert Häring The Central Bank of Kazakhstan published a report in July 2022 that developed the criteria for deciding on the design of the planned digital tenge. The tenge is the national currency of Kazakhstan. At the heart of the report is the conceptual groundwork of two guides from the International Monetary Fund and the World Economic Forum, the lobby of the 1,000 largest international corporations. The World Economic Forum’s guide is the one which is quoted more...

from Lars Syll Mainstream economists do not believe that “countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt.” Looking at the result from a survey, not a single economist agreed with that statement. If these economists had been right, we would see lots of governments running out of money in 2020 and 2021. After all, tax revenues collapsed, government spending was increased and accordingly public...

from Asad Zaman The truth-sensing section of the brain is lobotomized by Friedman’s methodology, according to which wildly inaccurate assumptions lead to the most significant theoretical advances. But also, complete omission of power and class struggle makes it impossible to find solutions to our economic problems.[embedded content] Even though the current economic crisis in Pakistan has a simple cause, and an equally simple solution, policy debate in Pakistan focuses almost entirely on...

On this blog, I’ve stated that economics needs a ‘periodic table of prices’. There are many different prices beyond ‘market prices’: Cost prices, Administrated prices, Government prices, Factor prices and whatever. We need a grid which enables a classification. As I, clearly, do not seem to be your average inspiring charismatic direction setting economists, nobody followed up on my statements…. With this blog, I want to start my journey towards the framework, to boldly go from where...

from Dean Baker We have long known that people in policy debates have difficulty with arithmetic and basic logic. We got yet another example today in the New York Times. The NYT profiled Geoffrey Hinton, who recently resigned as head of AI technology at Google. The piece identified him as “the godfather of AI.” The piece reports on Hinton’s concerns about the risks of AI, one of which is its implications for the job market. “He is also worried that A.I. technologies will in time upend the...

from Lars Syll Trygve Haavelmo — with the completion (in 1958) of the twenty-fifth volume of Econometrica — assessed the role of econometrics in the advancement of economics, and although mainly positive of the “repair work” and “clearing-up work” done, he also found some grounds for despair: We have found certain general principles which would seem to make good sense. Essentially, these principles are based on the reasonable idea that, if an economic model is in fact “correct” or “true,”...

from Peter Radford I have been reminded by Tyler Cowen of Bryan Caplan’s simplistic theory of left and right.  It’s short and to the point.  Leftists are, he says, “anti-market”. He is wrong. Leftists are anti-market obsession.  They are anti-market fanaticism.  They are anti-market worship.  Specifically, they are opposed to the form of idealization used to articulate “the market” in economics. There’s a difference.  And I assume Bryan Caplan knows as much. There has been a recent...

from Dean Baker Last week, David Brooks had a column that was quite literally a celebration of American capitalism. He makes a number of points showing the U.S. doing better than other wealthy countries over the last three decades. While his numbers are not exactly wrong, they are somewhat misleading. (I see Paul Krugman beat me to the punch, so I’ll try not to be completely redundant.) Brooks points to the faster GDP growth in the United States than in other wealthy countries. As Krugman...

from Asad Zaman  This is the first of a sequence of posts on the current economic crisis in Pakistan. Although the discussion is in the context of Pakistan, all the poor countries in grips of the modern neo-colonial global system face essentially the same problems. The financial basis of the system is outlined by Jason Hickel in Aid-in-Reverse: How the Poor Countries Develop the Rich. He describes how the poor countries receive 1.3 Trillion USD in financial inflows, aid, etc. from the...