Real-World Economics Review

from Lars Syll While the paternity of the theoretical apparatus underlying the new neoclassical synthesis in macro is contested, there is wide agreement that the methodological framework was largely architected by Robert Lucas … Bringing a representative agent meant foregoing the possibility to tackle inequality, redistribution and justice concerns. Was it deliberate? How much does this choice owe to tractability? What macroeconomists were chasing, in these years, was a renewed...

from Dean Baker While we all know that it is important for people to get a good education if they want to do well in today’s economy, it remains the case that who you know matters much more than what you know. Harvard has taught us this lesson well with the management of its endowment in recent years. Businessweek reported that the returns on Harvard’s endowment over the last decade averaged just 4.4 percent annually. This performance trailed both stock index returns and the returns...

Source: https://ftalphaville.ft.com/2018/01/04/2197227/eight-charts-on-inequality-in-the-us/

from Lars Syll Some time ago, Bank of England’s Andrew G Haldane and Benjamin Nelson presented a paper with the title Tails of the unexpected. The main message of the paper was that we should not let us be fooled by randomness: The normal distribution provides a beguilingly simple description of the world. Outcomes lie symmetrically around the mean, with a probability that steadily decays. It is well-known that repeated games of chance deliver random outcomes in line with this...

from Lars Syll A recent paper by Christiano, Eichenbaum and Trabandt (C.E.T.) on Dynamic Stochastic General Equilibrium Models (DSGEs) has generated quite a reaction in the blogosphere … Bradford Delongpoints out that new Keynesian models were constructed to show that old Keynesian and old Monetarist policy conclusions were relatively robust, and not blown out of the water by rational expectations … The DSGE framework was then constructed so that new Keynesians could talk to RBCites. None...

Source: http://wir2018.wid.world/executive-summary.html

from Dean Baker Donald Trump was apparently angry about the value of the Russian ruble and the Chinese yuan against the dollar. He complained in a tweet that both are playing the “Currency Devaluation game” in a tweet yesterday. Neil Irwin rightly points out that the complaint against Russia is bizarre, both because we don’t have much trade with Russia, but also because the most obvious reason its currency is falling is sanctions pushed by the United States and other western countries....

from Lars Syll Distinguished social psychologist Richard E. Nisbett has a somewhat atypical aversion to multiple regression analysis. In his Intelligence and How to Get It (Norton 2011) he writes: Researchers often determine the individual’s contemporary IQ or IQ earlier in life, socioeconomic status of the family of origin, living circumstances when the individual was a child, number of siblings, whether the family had a library card, educational attainment of the individual, and other...