Real-World Economics Review

from Lars Syll If you want to know what is “neoclassical economics” and turn to Wikipedia you are told that neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by cost-constrained firms employing available information and factors of production,...

from Maria Alejandra Madi After the 1920s, the theoretical and methodological approach to economics deeply changed. Based on a criticism of Marshall’s work and legacy, a new generation of American and European economists developed Walras’ and Pareto’s mathematical economics. As a result of this trend, the Econometric Society was founded in 1930. The constitutional assembly was held in  Cleveland, Ohio, during the annual joint meeting of the American Economic Association and the American...

from David Ruccio And as Angus Deaton reminds us, those struggling to survive in conditions of extreme poverty aren’t just “over there,” in the Third World. Notwithstanding the focus of the World Bank-sponsored campaign to eradicate extreme poverty and the ubiquitous appeals on behalf of the needy in poor countries, a large portion—approximately 14 million people—live in wealthy countries—some 5.3 million in the United States alone. Is there any more damning condemnation of contemporary...

from Lars Syll ‘Mr Brown has exactly two children. At least one of them is a boy. What is the probability that the other is a girl?’ What could be simpler than that? After all, the other child either is or is not a girl. I regularly use this example on the statistics courses I give to life scientists working in the pharmaceutical industry. They all agree that the probability is one-half. So they are all wrong. I haven’t said that the older child is a boy. The child I mentioned, the boy,...

from Michel Zouboulaki and RWER issue 82 An outstanding neoclassical microeconomist, Hal Varian, asked the emphatic question of “What use is economic theory?” To answer the question, he started by recognizing the obvious: “Economics is a policy science and, as such, the contribution of economic theory to economics should be measured on how well economic theory contributes to the understanding and conduct of economic policy” (1997, 109). But this acknowledgement should have led Varian in...

from Lars Syll The example is the derivation of a benevolent policy maker’s preferences from the utility function of the representative consumer assumed as part of the model, a line of research initiated by Michael Woodford. Before getting on to the values point, let me note that it is a good example of the primacy of internal consistency in microfoundations rather than the Lucas critique. Before Woodford’s work, microfoundations macroeconomists were embarrassed that they typically...

S Source (p. 32) Oops. Mark Gertler (with Kiyotaki and Prestipino) does it again: “There has been considerable progress in developing macroeconomic models of banking crises. However, most of this literature focuses on the retail sector where banks obtain deposits from households.” After ‘obtaining’ deposits, these banks are supposed to lend the ‘money’  to households and companies. Source: the 2000+ pages Handbook of [neoclassical, M.K.] Macroeconomics edited by John Taylor. As we know,...

from Lars Syll Thousands of people will gather next week in Davos. Their combined wealth will reach several hundred billion dollars, perhaps even close to a trillion. Never in world history will be the amount of wealth per square foot so high. And this year, for the sixth or seventh consecutive time, what would be one of the principal topics addressed by these captains of industry, billionaires, employers of thousands of people across the four corners of the globe: inequality… Only in...

Dr. Richard Bush, Dean, Baker College, Michigan, USA was the keynote speaker at the Yuvbharat'sInternational Startup Conference | 14, 15 December. 2017 | Visakhapatnam, India.

from Norbert Häring The governor of the Bank of England, Mark Carney has at least two things in common with Mario Draghi, the president of the European Central Bank (ECB): He worked for Goldman Sachs before becoming a central banker, and he is a member of the Group of Thirty. The EU-Ombudsman has just called it maladministration on the part of the ECB to let Mario Draghi be a member of that secretive bankers’ club. This should invite the question: What about Mark Carney and the Bank of...