Real-World Economics Review

from David Ruccio The timing could not have been better, at least for me. It just so happens I’m teaching Thorsten Veblen’s Theory of the Leisure Class this week. It should become quickly obvious to students that, as I have argued before on this blog, we’re now in the midst of a Second Gilded Age.   This is confirmed in a new report by UBS/PwC, according to which, after a brief pause in 2015, the expansion in billionaire wealth around the world has resumed. Thus, billionaire wealth rose...

from Asad Zaman Varian start his intermediate micro text by stating the maximization and equilbrium are the core principles of micro. Krugman recently stated that I am a “maximization and equilibrium” kind of guy. The goal of this lecture is to show that these two principles fail completely to help us understand behavior is a very simple model of a duopoly. In last lecture (AM03), we introduced a simple duopoly model. Two ice-cream vendors buy ice-cream wholesale and can sell at any...

from Lars Syll Applied game theory is a theory of real-world facts, where we use game theoretical definitions, axioms, theorems and (try to) test if real-world phenomena ‘satisfy’ the axioms and the inferences made from them. When confronted with the real world we can (hopefully) judge if game theory really tells us if things are as postulated by theory. But there is also an influential group of game theoreticians that think that game theory is nothing but pure theory, an...

from David Ruccio The world joined most South Africans in cheering when Nelson Mandela was finally released from prison, the apartheid regime was largely dismantled, and multiracial elections were eventually held. Then, of course, the really hard work of restorative justice began, under the aegis of the Truth and Reconciliation Commission. To avoid victor’s justice, no side was exempt from appearing before the commission, which heard reports of human rights violations and considered...

from Jayati Ghosh The Modi government made its supposed determination to end corruption in India its signature theme. The massive damage done by demonetisation as well as the continuing chaos produced by the flawed introduction of the Goods and Services Tax have all been justified on the grounds of reducing possibilities of corruption and tax avoidance. Similarly, the imposition of Aadhaar requirements on the population for access to all manner of publicly provided goods and services is...

from Lars Syll Mainstream macroeconomics has always had problems with the notion of involuntary unemployment. According to New Classical übereconomist Robert Lucas, an unemployed worker can always instantaneously find some job. No matter how miserable the work options are, “one can always choose to accept them,” according to Lucas: KLAMER: My taxi driver here is driving a taxi, even though he is an accountant, because he can’t find a job … LUCAS: I would describe him as a taxi driver...

from Robert Locke In my October 24 posting, Sapiential Economics, I plug for the inclusion of tacit as well as explicit analysis in the treatment of economics.  This posting illustrates my case through example. French Revisionism, explicit knowledge and the stagnation thesis In 1976 Explorations in Economic History published Richard Roehl’s article using statistics to refute the view of French economic stagnation. “The conventional picture,” he states, “Is roughly as follows. The French...

from David Ruccio Social Security may have decreased the rate of poverty among retirees in the United States.* But it certainly hasn’t solved the problem of inequality. As is clear from the chart above, from a recent report from the Organisation for Economic Co-operation and Development, old-age inequality among current retirees in the United States is higher than in all other OECD countries, except Chile and Mexico. But wait, it’s probably going to get worse. That’s because, within...

What I did not expect: In my lifetime I’ve seem countries in and around Europe disintegrate. The Soviet Union. Yugoslavia. Czechoslovakia. Iraq. Syria. And, work in progress, the UK. Spain seems to be next in line. In many fo these countries this process was accompanied by war. Vaclav Havel was the last president of Czechoslovakia and strongly opposed splitting up. Being a wise man, he resigned instead of using violence when he saw that it had become inevitable. Thanks to him we know that...

from Lars Syll Modern economics has become increasingly irrelevant to the understanding of the real world. In his seminal book Economics and Reality(1997) Tony Lawson traced this irrelevance to the failure of economists to match their deductive-axiomatic methods with their subject. It is — sad to say — as relevant today as it was twenty years ago. It is still a fact that within mainstream economics internal validity is what really counts and external validity is only rarely discussed. Why...