Real-World Economics Review

from Lars Syll The use of FWUTV — facts with unknown truth values — is, as Paul Romeer noticed in last year’s perhaps most interesting insider critique of mainstream economics, all to often used in macroeconomic modelling. But there are other parts of ‘modern’ economics than New Classical RBC economics that also have succumbed to this questionable practice: Statistical significance is not the same as real-world significance — all it offers is an indication of whether you’re seeing an...

Poll Results: Top 10 economics books of the last 100 years Summary of the Great Transformation by Polanyi      Asad Zaman Reflections on the “Inside Job”      Peter Radford The tiny little problem with Chicago economics      Lars Syll Money and the myth of barter     David Ruccio What is Post Keynesian Economics?     Lars Syll The seven countries most vulnerable to a debt crisis     Steve Keen The 15 largest arms exporters per capita     Joseph Buzaglo Re-thinking the definition of...

from Lars Syll So what’s wrong with the economy? … A 2002 study of United States fiscal policy by the economists Olivier Blanchard and Roberto Perotti found that ‘both increases in taxes and increases in government spending have a strong negative effect on private investment spending.’ They noted that this finding is ‘difficult to reconcile with Keynesian theory.’ Consistent with this, a more recent study of international data by the economists Alberto Alesina and Silvia Ardagna found...

from David Ruccio I continue to maintain that Congressional Republicans will stick with President Donald Trump until they get their favorite policies enacted—or until Trump’s missteps and declining popularity stand in the way of their getting what they want. And one of the things they want is tax reform—specifically, a cut in corporate taxes. Here’s the problem: U.S. corporations aren’t taxed too heavily. They’re taxed too little. As is clear from the chart above, corporate profits (as a...

Readers of this blog might have noticed that I prefer to detrend time series using a moving average – and not the advanced and routinely and widely used Hodrick-Prescott filter. Part of this was lazyness. But I also do not like the HP filter: what is it? Why does it wag its tails so much? What is the ‘right’ smoothing parameter? James D. Hamilton has answered my questions (while implicating that loads of research is at least suspect if not worthless): Why You should never use the...

from Maria Alejandra Madi As Edward Fullbrook highlights in his recent book Narrative Fixation in Economics, the Cartesian view of human reality has deeply shaped the way Neoclassical Economics theorizes about the economic and social existence (2016, p. 45). Indeed, while emphasizing the relevance of the pure thought of a disembedded human subject,  Neoclassical Economics has reinforced the relevance of the Cartesian method of inquiry  that moved the so called scientific (true) knowledge ...

from Dean Baker In his Washington Post column today George Will told readers that the problem of rising costs in the U.S. health care system is simply a case of Baumol’s disease. This refers to the problem identified by economist William Baumol (who recently died), that productivity in the service sector tends to rise less rapidly than productivity in the manufacturing sector. The implication is that if workers get paid the same in both sectors, then the cost of services will always rise...

from Lars Syll Some commentators on this blog — and elsewhere — seem to have problems with yours truly’s critique of the overly debonair attitude with which mathematics is applied to economics. In case you think the critique is some odd outcome of heterodox idiosyncrasy, well, maybe you should think twice …

from Asad Zaman Goethe starts his famous East-West Divan with a poem about the journey (Hegire), both physical and spiritual, from the West to the East. In this essay, we consider the analogous journey from Western to Eastern conceptions of development. This involves switching from viewing humans as producers of wealth, to viewing wealth as a producer of human development. To start with the Western conceptions, both Adam Smith and Karl Marx defined economic growth as the process of...

from Lars Syll The main reason why the teaching of microeconomics (or of “ micro foundations” of macroeconomics) has been called “autistic” is because it is increasingly impossible to discuss real-world economic questions with microeconomists – and with almost all neoclassical theorists. They are trapped in their system, and don’t in fact care about the outside world any more. If you consult any microeconomic textbook, it is full of maths (e.g. Kreps or Mas-Colell, Whinston and Green) or...