Real-World Economics Review

from Lars Syll Source As we’ve noticed, again and again, correlation is not the same as causation … If you want to get the prize in economics — and want to be on the sure side — yours truly would suggest you complement  your intake of chocolate with a move to Chicago. Out of the 78 laureates that have been awarded “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel,” 28 have been affiliated to The University of Chicago — that is 36%. The world is really a small...

from David Ruccio Mainstream economists and politicians have answers for everything. Lose your job? Well, that’s just globalization and technology at work. Not much that can be done about that. And if you still want a job? Then just move to where the jobs are—and make sure your children go to college in order to prepare themselves for the jobs that will be available in the future. The fact is, they’re not particularly good answers. And people know it. That’s why working-class voters are...

High powered money in Greece. The EU is re-financing 8,5 billion of Greek debt. About 7 billion of this is just trading in one kind of government bonds for another kind of government bonds. Much ado about less than nothing. There is some welcome softening of the terms – but not enough. However: About 1,6 billion has to be used to pay overdue bills which have to be paid by the government. This exchanging private debt for government bonds and will lead to an injection of highly powered...

from Dean Baker In their desperation to provide $600 billion in tax cuts to their rich campaign contributors, the Republicans have decided to abandon all the standard rules by which Congress has governed itself. The actions might seem extraordinary, but we know how desperately the richest people in the country need tax cuts, so who can complain if the normal procedures are not being followed? Unfortunately the debate over the “repeal and replacement” of Obamacare is being confused with a...

from Lars Syll Much of current academic teaching and research has been criticized for its lack of relevance, that is, of immediate practical impact … I submit that the consistently indifferent performance in practical applications is in fact a symptom of a fundamental imbalance in the present state of our discipline. The weak and all too slowly growing empirical foundation clearly cannot support the proliferating superstructure of pure, or should I say, speculative economic theory …...

from Lars Syll Ed Leamer’s Tantalus on the Road to Asymptopia is one of my favourite critiques of econometrics, and for the benefit of those who are not versed in the econometric jargong, this handy summary gives the gist of it in plain English: Most work in econometrics and regression analysis is — still — made on the assumption that the researcher has a theoretical model that is ‘true.’ Based on this belief of having a correct specification for an econometric model or running a...

from David Ruccio One of the most pernicious myths in the United States is that higher education successfully levels the playing field across students with different backgrounds and therefore reduces wealth inequality. The reality is quite different—for the population as a whole and, especially, for racial and ethnic minorities.  As is clear from the chart above, the share of wealth owned by the top 1 percent has risen dramatically since the mid-1970s, rising from 22.9 percent in 1976 to...

paperback now available from the Amazon pages listed below 508 pages Here are links to the book’s pages on the various AmazonsUnited States $28, Brazil, Canada, France, Germany, India, Italy, Japan, Mexico, Spain, United Kingdom

from Edward Fullbrook Scientific education entails taming the authority of one’s intuition.  Responsible citizenship in a democracy may entail it as well. Keynes argued that markets often create inaccurate expectations of economic reality which people then act upon thereby changing reality.   This reflexivity that Keynes identified as central to capitalist markets is the opposite of the basic process described by traditional economic theory, both in Keynes’ day and in our own, whereby it...

from Lars Syll So in what sense is this “dynamic stochastic general equilibrium” model firmly grounded in the principles of economic theory? I do not want to be misunderstood. Friends have reminded me that much of the effort of “modern macro” goes into the incorporation of important deviations from the Panglossian assumptions that underlie the simplistic application of the Ramsey model to positive macroeconomics. Research focuses on the implications of wage and price stickiness, gaps and...