Real-World Economics Review

from David Ruccio We’ve all heard it at one time or another. Why is the price of gasoline so high? Mainstream economists respond, “it’s the market.” Or if you think you deserve a pay raise, the answer again is, “go get another offer and we’ll see if you’re worth it according to ‘the market’.” And then there’s CEO pay, which last year was 271 times the average pay of workers. Ah, it’s what “the market” has determined the appropriate compensation to be. “The market” explains...

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from Lars Syll Yours truly had a post up the other day on John Rapley’s Twilight of the Money Gods. In the main I think Rapley is right in his attack on contemporary economics and its ‘priesthood,’ although he often seems to forget that there are — yes, it’s true — more than one approach in economics, and that his critique mainly pertains to mainstream neoclassical economics. Noah Smith, however, is not too happy about the book: There are certainly some grains of truth in this standard...

from Dean Baker As president, Donald Trump has continued to use the same protectionist rhetoric he used during the campaign, even though he has not done much to date to follow through with protectionist policies. Nonetheless, his comments have prompted outrage among most of the media, which is committed to supporting the trade policies of recent administrations. In this respect it is striking how the media slavishly follow the major features of recent trade agreements as the definition of...

from Peter Söderbaum, “Do we need a new economics for sustainable development?”, real-world economics review, issue no. 80, 26 June 2017, pp. 32-44. A proposed new theoretical perspective starts with a partly different definition of economics: “Economics is multidimensional management of (limited) resources in a democratic society” Why “multidimensional” management? Multidimensional goes against the one-dimensional analysis of neoclassical theory and method. “Monetary reductionism” is no...

from Asad Zaman This is a summary of the introduction/motivation part of Lecture 15 on Advanced Microeconomics II, delivered at PIDE in Spring Semester 2017.  The lecture is about 19th Century European History, and how it is deeply entangled with Modern Economic Theory. We cannot understand one without the other. 19th Century European Economic Ideas In Historical Context. “… the race is not always to the swift, nor the battle to the strong …” Ecclesiastes 9:11 In the late 19th century, a...

from Lars Syll Two hundred years ago, on 19 April 1817, David Ricardo’s Principles was published. In it he presented a theory that was meant to explain why countries trade and, based on the concept of opportunity cost, how the pattern of export and import is ruled by countries exporting goods in which they have comparative advantage and importing goods in which they have a comparative disadvantage. Although a great accomplishment per se, Ricardo’s theory of comparative advantage, however,...

from David Ruccio There is perhaps no more cherished an idea within mainstream economics than that everyone benefits from free trade and, more generally, globalization. They represent the solution to the problem of scarcity for the world as a whole, much as free markets are celebrated as the best way of allocating scarce resources within nations. And any exceptions to free markets, whether national or international, need to be criticized and opposed at every turn. That celebration of...

from Lars Syll The balanced budget paradox is probably one of the most devastating phenomena haunting our economies. The harder politicians — usually on the advise of establishment economists — try to achieve balanced budgets for the public sector, the less likely they are to succeed in their endeavour. And the more the citizens have to pay for the concomitant austerity policies these wrong-headed politicians and economists recommend as “the sole solution.” One of the most effective ways...

from Maria Alejandra Madi Bank transactions by internet and mobile banking have sharply increased since the 2008 global financial crisis. In this digital environment, new technologies – such as advanced analytics and big data, in addition to the use of robotics, artificial intelligence, besides new forms of encryption and biometrics – have been enabling changes in the provision of financial products and services. The current wave of financial innovations is being increasingly oriented to...