Real-World Economics Review

from Dean Baker Most of us are willing to help out those who are less well off. Whether it comes from religious belief or a sense of basic decency we feel are an obligation to provide the basic necessities of life for the poor. But how would we feel about being taxed $1,000 a year to provide six figure salaries to people in the financial sector? Although no candidate to my knowledge has ever run on this platform, this is the nature of the retirement system the federal government has...

from David Ruccio As I tell my students, nothing gets a mainstream economist frothing at the mouth quite like mentioning Karl Polanyi. Or at least it used to, when mainstream economists actually knew who Polanyi was and grasped—however dismissively—what he wrote about the history of capitalism. To his credit, Eric Hilt (pdf) appears to know something about the author of The Great Transformation and how his work influenced the new history of capitalism. And his review of ten recent books,...

from Andrew Vonnegut and WEA Commentaries My work over almost 20 years would have pegged me as a pretty mainstream economist. I worked in company and market due diligence and risk analysis in emerging markets finance, then for two large international consulting firms in emerging markets policy advisory. A regular, mainstream, practicing economist. Then I returned to the United States, started teaching a global economics class, and looked for a text. Like my texts 25 years ago, materials...

from Lars Syll Well, if we are to believe most mainstream economists, models are what make economics a science. In a recent Journal of Economic Literature(1/2017) review of Dani Rodrik’s Economics Rules, renowned game theorist Ariel Rubinstein discusses Rodrik’s justifications for the view that “models make economics a science.” Although Rubinstein has some doubts about those justifications — models are not indispensable for telling good stories or clarifying things in general; logical...

from David Ruccio There are plenty of reasons to be interested in—and, even more, concerned about—Facebook. Many of them are raised in the recent review of Facebook-related books by John Lanchester [ht: db]: the fragmentation of the polity (via the targeting of posts), the dissemination of “fake news” (which played an important role in the 2016 U.S. presidential election), the undermining of other livelihoods (such as journalism and music), the level of surveillance of users (much more...

from David Orrell and WEA Commentaries There is a growing trend for economists to write articles criticising the critics of economics. These articles follow a similar pattern. They start by saying that the criticisms are “both repetitive and increasingly misdirected” as economist Diane Coyle wrote, and might complain that they don’t want to hear one more time Queen Elizabeth’s question, on a 2008 visit to the London School of Economics: “Why did nobody see it coming?” Economist Noah Smith...

from Lars Syll

from  Merijn Knibbe “Everyone can create money; the problem is to get it accepted.“ Hyman Minsky Summary. Central banks the world over publish sophisticated Flow of Funds data which shows who and how and, to an extent, why all kinds of money are created and used and if stocks and flows of debt and money are becoming a threat to stability. Institutional analysis of these data, which looks at different kinds of credit as well as at different kinds of money and using a grid which enables the...

from David Ruccio John Hatgioannides, Marika Karanassou, and Hector Sala are absolutely right: mainstream macroeconomists and policymakers never venture beyond the “holy trinity” of economic growth, inflation, and unemployment.* Everything else, including the distribution of income and wealth, is relegated to the fringes.  This problem, while always serious, has been magnified in recent decades as inequality has grown to obscene levels, particularly in the United States. The labor share...

from Lars Syll Stage 0. Late 1960’s. The Phelps volume, and Milton Friedman’s paper (pdf), both thinking about the microfoundations of the Phillips Curve, the difference between actual and expected inflation, and the role of monetary policy. This was the ancestral homeland of both New Keynesian and New Classical macroeconomics, which could not be distinguished at this stage … Stage 1. Mid 1970’s. Now we see the difference. A distinct New Keynesian approach emerges. New Keynesians assume...