Real-World Economics Review

from David Ruccio How bad have things gotten in the United States? Nitin Nohria [ht: ja], the dean of Harvard Business School, is sounding the alarm that “class lines. . .have become far more distinct and visible in recent years.” Nohria published his essay at the end of the same week that the U.S. Senate passed its version of the “Tax Cuts and Jobs Act,” which is nothing more than an enormous boon to large corporations and wealthy individuals under the guise of trickledown economics, ...

from Adam Fforde Whilst it may superficially appear clear, an alleged ability of a theory to predict is easily shown to depend upon a host of tangled factors, so things are not clear at all. At an extreme, to start with, a theory that is right 51% of the time could feasibly be described as predictive, but is not likely to be. Yet if the point is to win bets placed very many times, then it could be thought of as predictive. Theories from physics, such a Newton’s laws of motion, are widely...

from June Sekera The Denial Public non-market production makes up a quarter to a half or more of all economic activity among advanced democratic nation-states. Yet the public economy’s ability to function on behalf of the populace as a whole is seriously imperiled in many western democracies, and particularly jeopardized in the United States. The surging influence of mainstream economics has been a prime factor in the degradation of the public domain over the last several decades – a...

from Michael Joffe In 1978, not long after the death of Mao Zedong, economic reforms began to be implemented. The main changes were: (i) rural households were now allowed to keep their own surpluses (the “household-responsibility system”); (ii) Township and Village Enterprises were allowed to operate in a manner similar to capitalist firms; (iii) Special Economic Zones such as Shenzhen were set up, based on foreign capital and the export market; and (iv) State-Owned Enterprises were...

from David Ruccio Robert McElvaine, premier historian of the first Great Depression (whose books we have used to teach A Tale of Two Depressions), argues that Republicans today are repeating the same mistakes as the Republicans who were in charge during the 1920s, whose trickledown policies led to the spectacular crash of 1929.  As a historian of the Great Depression, I can say: I’ve seen this show before. In 1926, Calvin Coolidge’s treasury secretary, Andrew Mellon, one of the world’s...

from Lars Syll One may perhaps, distinguish between obscure writers and obscurantist writers. The former aim at truth, but do not respect the norms for arriving at truth, such as focusing on causality, acting as the Devil’s Advocate, and generating falsifiable hypotheses. The latter do not aim at truth, and often scorn the very idea that there is such a thing as the truth … The authors I have singled out are far from marginal, and in fact are at the core of the profession. Their numerous...

from Dean Baker As Congress debates plans to give even more money to the country’s richest people, it is worth briefly recounting where the economy is now, before we feel the effects of any tax plan. Basically, it is a pretty good story. The overall unemployment rate for October was 4.1 percent. This is the lowest unemployment rate since 2000. And that was an extraordinarily good year for the labor market. We would have to go back to 1970 to find the last time the unemployment rate had...

from Lars Syll Macroeconomics was born as a distinct field in the 1940s (sic!), as a part of the intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many...

from Matias Vernengo and Esteban Pérez Caldenteyand WEA Commentaries [Editor’s note: Here the authors summarise the main themes of their recently published book, Why Latin American Nations Fail(Matias Vernengo and Esteban Pérez Caldentey, 2017, University of California Press)] Institutions are central to explaining the way in which, nations grow and develop. Traditionally the study of institutional economics focused on a very broad range of interests and made contributions in several...

from Lars Syll I believe there is no other proposition in economics which has more solid empirical evidence supporting it than the Efficient Market Hypothesis. That hypothesis has been tested and, with very few exceptions, found consistent with the data in a wide variety of markets … Michael Jensen I am skeptical about the argument that the subprime mortgage problem will contaminate the whole mortgage market, that housing construction will come to a halt, and that the economy will slip...