Real-World Economics Review

from Lars Syll Modern mainstream economics relies to a large degree on the notion of probability. To at all be amenable to applied economic analysis, economic observations have to be conceived as random events that are analyzable within a probabilistic framework. But is it really necessary to model the economic system as a system where randomness can only be analyzed and understood when based on an a priori notion of probability? When attempting to convince us of the necessity of founding...

from Dean Baker Wars always have unpredictable outcomes. It is unlikely that George W. Bush anticipated that the Iraq war would destabilize the Middle East for two decades, and possibly quite a bit longer. World War I resulted in the collapse of four European empires and emergence of the Soviet Union as a world power. In this vein, we can hope that something positive may emerge from Donald Trump’s ill-conceived trade war. Specifically, it may lead the United States and the world to...

from Lars Syll Milton Friedman’s Permanent Income Hypothesis (PIH) says that people’s consumption is not affected by short-term fluctuations in incomes since people only spend more money when they think that their lifetime incomes change. Believing Friedman is right, mainstream economists have for decades argued that Keynesian fiscal policies, therefore, are ineffectual. As shown over and over again for the last three decades, empirical facts totally disconfirm Friedman’s hypothesis. The...

from David Ruccio Liberals like to talk about all kinds of social ills and identity-laden tensions—but not class struggle. That’s their persistent and enduring blindspot. Except, it seems, when it comes to Donald Trump.  Thomas B. Edsall is a good example. Over the years, he’s produced a series of solid, insightful surveys of liberal research and analysis on a wide variety of economic and political topics. But he hasn’t written much if anything about class—until his latest, titled “The...

from Lars Syll 1. Change the goal: from GDP growth to the Doughnut. For over half a century, economists have fixated on GDP as the first measure of economic progress, but GDP is a false goal waiting to be ousted. The 21st century calls for a far more ambitious and global economic goal: meeting the needs of all within the means of the planet. Draw that goal on the page and – odd though it sounds – it comes out looking like a doughnut … 2. See the big picture: from self-contained market to...

from David Ruccio Forget Bitcoin. It’s the underlying technology, blockchain, that is generating the most excitement. Even utopia! Bitcoin is a digital currency that was invented in 2009 by a person (or group) who called himself Satoshi Nakamoto. His stated goal was to create “a new electronic cash system” that was “completely decentralized with no server or central authority.” After cultivating the concept and technology, in 2011, Nakamoto turned over the source code and domains to...

Considering the present architecture of the Eurozone – there is according to Erwan Mahé no obvious way to solve the Italian Euro crisis… From: Erwan Mahé I sent this little collage on 25 May, via IB Bloomberg chat, as the BTP began to decline, since it seemed to sum up the best attitude to take towards the near hysteria afflicting the Italian debt market at the time. From a high of 132.88 on Monday 25 May, it plunged to as low as 120.10 the next day, reflecting a full one per cent rate...

from Lars Syll [embedded content] The people behind the proposal​ in Switzerland​ are effectively trying to get gold back into the monetary system. This is an extremely​ bad idea. Eighty-seven years ago Keynes could congratulate Great Britain on finally having got rid of the biggest ”barbarous relic” of his time – the gold standard. He lamented that advocates of the ancient standard do not observe how remote it now is from the spirit and the requirement of the age … [T]he long age of...

On Voxeu, Hervé Boulhol and Christian Geppert  published an article a about population ageing and pensions which tries to scare us: “on average in the OECD, stabilising the old-age dependency ratio between 2015 and 2050 requires an increase in retirement age of a stunning 8.4 years. This number far exceeds the projected increase in longevity and increases in retirement age driven by pension reforms alone.”. The pension age has to go up. But not for the reasons and by the amount they...

from Lars Syll Paul Krugman has a piece up on his blog arguing that the ‘discipline of modeling’ is a sine qua non for tackling politically and emotionally charged economic issues: You might say that the way to go about research is to approach issues with a pure heart and mind: seek the truth, and derive any policy conclusions afterwards. But that, I suspect, is rarely how things work. After all, the reason you study an issue at all is usually that you care about it, that there’s...