Real-World Economics Review

from David Ruccio Narayana Kocherlakota, professor of economics at the University of Rochester and past president of the Federal Reserve Bank of Minneapolis, is right: in some ways, the 2007-08 was worse than the Great Depression.   It certainly has been worse for average households in the United States. Real median household income (the red line in the chart above) is still below what it was in 2007—and lower still from what it was even earlier, in 1999. But it hasn’t been a lost decade...

from Lars Syll Short-term weather forecasting is possible because most of the factors that determine tomorrow’s weather are, in a sense, already there … But when you look further ahead you encounter the intractable problem that, in non-linear systems, small changes in initial conditions can lead to cumulatively larger and larger changes in outcomes over time. In these circumstances imperfect knowledge may be no more useful than no knowledge at all. Much the same is true in economics and...

from Jayati Ghosh Meetings of global leaders – such as recently occurred in the G20 meeting at Hamburg – increasingly have a ring of farce about them. The inability to come to agreement on pretty much anything of significance is leavened only by sideshows and media obsession with which global leader met with whom for how long, who sat in for which President at the “high table”, and similar trivia. Meanwhile, there is abject failure on the part of these leaders to recognize the pressing...

from David Ruccio Back in April, Raumplan and Cascina Cuccagna organized an exhibit for Milan Design Week titled “Capitalism is Over.” The basic argument was that, while capitalism may have worked in the first few decades of the postwar period, during the “Golden Age” of capitalism—when “the demand for products and everyday objects rose to never before attained summits”—since the late 1970s, growth has slowed down and “following the neoliberal theories, governments promoted policies that...

from Lars Syll Along with the Arrow-Debreu existence theorem and some results on regular economies, SMD (Sonnenschein-Mantel-Debreu) theory fills in many of the gaps we might have in our understanding of general equilibrium theory … It is also a deeply negative result. SMD theory means that assumptions guaranteeing good behavior at the microeconomic level do not carry over to the aggregate level or to qualitative features of the equilibrium. It has been difficult to make progress on the...

Some ‘alternative economics’ have reently been published: we are moving from criticism to alternatives. Which is a good thing: Kate Raworth broke ground with Doughnut economics. Jamie Morgan et all recently published ‘Quest for a new paradigm in economics. A synthesis of views of the New Economics working group’. We can also mention the people publishing in the Journal of Industrial Ecology, who do not look at the circular monetary economy but at the circularity (or not) of flows of...

from  Nature Climate Change  Less than 2 °C warming by 2100 unlikely Adrian E. Raftery, Alec Zimmer, Dargan M. W. Frierson, Richard Startz & Peiran Liu The recently published Intergovernmental Panel on Climate Change (IPCC) projections to 2100 give likely ranges of global temperature increase in four scenarios for population, economic growth and carbon use1. However, these projections are not based on a fully statistical approach. Here we use a country-specific version of Kaya’s...

from David Ruccio Culture, it seems, is back on the agenda in economics. Thomas Piketty, in Capital in the Twenty-First Century, famously invoked the novels of Honoré de Balzac and Jane Austen because they dramatized the immobility of a nineteenth-century world where inequality guaranteed more inequality (which, of course, is where we’re heading again). Robert J. Shiller, past president of the American Economic Association, focused on “Narrative Economics” in his address at the January...

from Gary Flomenhoft, “The triumph of Pareto”, real-world economics review, issue no. 80, 26 June 2017, pp. 14-31. There are several serious problems with the use of Pareto Optimality as the central goal of economics. One of the primary implications of “Pareto Optimality” is that it accepts the current distribution of wealth as a given. If any income distribution can lead to an “optimal” outcome, there is no need to be concerned about just distribution. Mainstream economists generally...

from Asad Zaman As a preliminary demonstration, and an explanation of the “Three Methodologies“, we assess how they work in primitive hunter-gatherer societies. A hunter-gatherer is a human living in a society in which most or all food is obtained by foraging (collecting wild plants and pursuing wild animals), in contrast to agricultural societies, which rely mainly on domesticated species. There are many characteristics of such societies forced by the material conditions of production....