Real-World Economics Review

Review of Power and Progress, by Daron Acemoglu and Simon Johnson from Dean Baker When I saw that two of the country’s most prominent economists wrote a book on “our 1000-year struggle over technology and prosperity,” I expected a lot. I was disappointed. To be clear, there is much here to like and I’m sure that most readers will get much from it, as I did. But, the book fails to follow through adequately on the key point in its analysis, which is that the gains from technology are a...

from Lars Syll Economic theory, like anthropology, ‘works’ by studying societies which are in some relevant sense simpler or more primitive than our own, in the hope either that relations that are important but hidden in our society will be laid bare in simpler ones, or that concrete evidence can be discovered for possibilities which are open to us which are without precedent in our own history. Unlike anthropologists, however, economists simply invent the primitive societies we study, a...

from Asad Zaman In my article on “Education of an Economist”, I have explained how I gradually came to realize that all I had learnt during my Ph.D. training at Stanford University was false. I would like to make this more specific and concrete, by providing some examples. A leading example is a paper on Power and Taxes which I studied as a graduate student. But, let me start from the beginning. Leijonhufvud, in his classic “Life Among the Econ” explains how the priestly caste of the...

from Lars Syll American economist Hyman Minsky described capitalism as a “two price” system. On one side are asset prices—both financial, like government or corporate bonds, and physical like residential or commercial property. On the other, there are consumer prices—goods and services that determine current output and consumer price inflation. In the contemporary global economy, asset prices are much more sensitive to interest rate adjustments than consumer prices. The present value of...

Recently, Robert Lucas, who was called an economist, died. This is not about him, but about his kind of economics as tweets and obituaries show that it is not yet generally understood what kind of science the neoclassical macro-economist like him produced. Their most egregious failure: after decades of work, they do not even have a shimmer of anything which could pass for a neoclassical way to estimate the macro economy, even when their ideas are squarely at odds with the macro economy...

from Asad Zaman This is part 3 of a talk on Current Economic Crisis in Pakistan and Solutions, from an Islamic Perspective. A summary of the first two parts is given below. This third part explains that colonization requires the assent of the colonized, which is achieved by an educational system which teaches the inherent superiority of the colonizers, and the inferiority of the colonized. To solve the problems created by colonial institutions meant for extraction of resources, we must...

from Lars Syll People sometimes speak as if random variables “behave” in a certain way, as if they have a life of their own. Thus “X is normally distributed”, “W follows a gamma”, “The underlying distribution behind y is binomial”, and so on. To behave is to act, to be caused, to react. Somehow, it is thought, these distributions are causes. This is the Deadly Sin of Reification, perhaps caused by the beauty of the mathematics where, due to some mental abstraction, the equations undergo...

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...