Real-World Economics Review

from David Ruccio The official unemployment rate continues to fall in the United States. And everyone, at least among top policymakers and the business press, has been promising that workers’ wages will finally break out. As it turns out, the unemployment rate (the red line in the chart above) in September was 4.1 percent, far below the high of 10 percent in October of 2009 and a new low for the so-called recovery from the Second Great Depression. However, hourly wages (for production and...

from Lars Syll In advanced economics the question would be: ‘What besides mathematics should be in an economics lecture?’ In physics the familiar spirit is Archimedes the experimenter. But in economics, as in mathematics itself, it is theorem-proving Euclid who paces the halls … Economics … has become a mathematical game. The science has been drained out of economics, replaced by a Nintendo game of assumption-making … Most thoughtful economists think that the games on the blackboard and...

One of the advantages of marketeers, compared with neoclassical economists, is that they do not assume things about consumers but observe them or ask them questions. So did Nielsen India, a large marketing company, less then a month after the infamous Indian demonetisation. The report is ungated and, for one thing, contains valuable information about the female experience. An excerpt PART B: DECODING CONSUMER SENTIMENT (Source: Nielsen India)To pick up the consumer sentiment at this point...

from David Ruccio Mainstream economics lies in tatters. Certainly, the crash of 2007-08 and the Second Great Depression called into question mainstream macroeconomics, which has failed to provide a convincing explanation of either the causes or consequences of the most severe crisis of capitalism since the Great Depression of the 1930s. But mainstream microeconomics, too, increasingly appears to be a fantasy—especially when it comes to issues of corporate power. Neoclassical...

from Edward Fullbrook Determinism, the idea that everything that happens must happen as it does and could not have happened any other way, and atomism, the idea that the world is made up of entities whose qualities are independent of their relations with other entities, are fundament components of classical mechanics. Atomism is also central to the concept of mind developed in John Locke’s An Essay Concerning Human Understanding, published (1690) three years after Newton’s Principia....

from David Ruccio    Inequality in the United States is now so obscene that it’s impossible, even for mainstream economists, to avoid the issue of surplus.   Consider the two charts at the top of the post. On the left, income inequality is illustrated by the shares of pre-tax national income going to the top 1 percent (the blue line) and the bottom 90 percent (the red line). Between 1976 and 2014 (the last year for which data are available), the share of income at the top soared, from...

from Dean Baker The most popular explanation for the sharp rise in inequality over the last four decades is technology. The story goes that technology has increased the demand for sophisticated skills while undercutting the demand for routine manual labor. This view has the advantage over competing explanations, like trade policy and labor market policy, that it can be seen as something that happened independent of policy. If trade policy or labor market policy explain the transfer of...

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...