Real-World Economics Review

from Dean Baker Donald Trump’s tariffs on steel have elicited near universal condemnation. In addition to issuing warnings from retaliation by our trading partners, the media have also been giving us economics lessons on how steel tariffs will mean higher prices for consumers. If we pay 10 percent more for our steel, then the price of cars and other items that use large amounts of steel can be expected to rise. This will reduce demand for these products and might cause consumers to buy...

from Lars Syll Everything we know is not just wrong – it’s backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There’s really no limit on how much banks could create, provided they can find...

Source: Emmanuel Saez, UC Berkeley

from David Ruccio This is the first in a series of blog posts on the utopian dimensions of healthcare. I’ve written quite a bit about the U.S. healthcare dystopia over the years—including a seven-part series back in 2016.* But I haven’t yet addressed the utopian dimensions of healthcare reform. The appearance of the new issue of Jacobin Magazine, titled “The Health of Nations,”  is a good occasion to start that discussion. Adam Gaffney starts with much the same question that provoked my...

from Lars Syll Because I was there when the economics department of my university got an IBM 360, I was very much caught up in the excitement of combining powerful computers with economic research. Unfortunately, I lost interest in econometrics almost as soon as I understood how it was done. My thinking went through four stages: 1. Holy shit! Do you see what you can do with a computer’s help. 2. Learning computer modeling puts you in a small class where only other members of the caste...

from Malgorzata Dereniowska That economics is a value-laden science is not a new idea. Most of the prominent economic thinkers were also philosophers, wary of moral and philosophical content of scientific assumptions, models, and theories. That economics needs philosophy, and the separation between these two cannot be maintained any longer, is gaining recognition, and has become a subject of debates in the field of philosophy of economics that brings together (to various extends)...

WEA Commentaries Formerly the World Economics Association NewsletterVolume 8, Issue No. 1  Download the issue as a PDF In this issue How to Inspire and Motivate Students Asad Zaman Redefining Governance in Cooperative BanksMitja Stefancic, Silvio Goglio, and Ivana Catturani The Biophysical Basis of Production and the Public Economy June Sekera Tesla, Amazon, Bitcoin, Efficient Markets and FTT Dean Baker Keynes and Econometrics Maria Alejandra Madi Corrupted Economic Research—two...

According to the accepted narrative after about 1950 female participation rates started to rise thanks to inventions like the washing machine and kept rising forever after. Reality is more confusing. According to a recent book by Julia Sophie Wörsdorfer, washing machines were, contrary to the ideas of Ha-Joon Chang, not that important. Neither cross sectional data nor time series analysis yields a strong correlation between ownership of a washing machine and high female labour force...

from Lars Syll We are not going to get out of the economic doldrums as long as we continue to be obsessed with the unreasoned ideological goal of reducing the so-called deficit. The “deficit” is not an economic sin but an economic necessity … idle all around us. Alexan The administration is trying to bring the Titanic into harbor with a canoe paddle, while Congress is arguing over whether to use an oar or a paddle, and the Perot’s and budget balancers seem eager to lash the helm...

from David Ruccio Chris Rock may be right. Still, Americans are well aware that economic inequality in their country is obscene, even though they often underestimate the growing gap between the poor and the rich.  But it’s Frank Rich, who conducted the interview with the American comedian, who made the more perceptive observation: For all the current conversation about income inequality, class is still sort of the elephant in the room. All the experts agree—from Thomas Piketty and the...