Real-World Economics Review

from Lars Syll A couple of weeks ago yours truly was sent a copy of the new edition of Chad Jones intermediate textbook Macroeconomics (4th ed, W W Norton, 2018). There’s much in the book I like, e. g. Jones’ combining of more traditional short-run macroeconomic analysis with an accessible coverage of the Romer model — the foundation of modern growth theory — and DSGE business cycle models. Unfortunately it also contains some utter nonsense! In chapter 7 — on “The Labor Market, Wages, and...

from Dean Baker In her Washington Post column, Catherine Rampell repeats some ill-founded conventional wisdom in telling readers that French president Emmanuel Macron’s plans to weaken labor unions and reduce restrictions on laying off workers are the path to revitalizing France’s economy. In fact, this claim is not supported by the evidence. There is little evidence that strong unions or labor market protections are associated with high unemployment. The most obvious reason that France...

from Lars Syll What is 0.999 …, really? Is it 1? Or is it some number infinitesimally less than 1? The right answer is to unmask the question. What is 0.999 …, really? It appears to refer to a kind of sum: .9 + + 0.09 + 0.009 + 0.0009 + … But what does that mean? That pesky ellipsis is the real problem. There can be no controversy about what it means to add up two, or three, or a hundred numbers. But infinitely many? That’s a different story. In the real world, you can never have...

from David Ruccio Apparently, Richard Reeves is worried that the top echelons of the U.S. middle class—those earning over $120,000—are separating from the rest of the country, and pulling up the drawbridge behind them. “The upper middle class families have become greenhouses for the cultivation of human capital. Children raised in them are on a different track to ordinary Americans, right from the very beginning,” he writes. The upper middle class are “opportunity hoarding” – making it...

from Dean Baker There has been a strange debate among many liberals and progressives since the election as to whether they should have empathy for the people who voted for Donald Trump. After all, Trump is a pretty reprehensible character who has pledged to do some pretty awful things in the White House. Is there a reason that people should have empathy for the voters who put him there? Whatever answer you pick to that question, there is another set of questions that should be simpler for...

from David Ruccio Most of us pay the taxes we’re required to pay. That’s because there aren’t many ways to avoid them. Sales, property, payroll, or income—the tax is paid at the time of the purchase, the amount is deducted from our paychecks, or the records go directly to the government. There’s no real way around them. And we pay those taxes out of wages and salaries more or less willingly, since that’s how government services are financed. Not so for those who are able to capture the...

from Lars Syll [embedded content] The above vidoe is one in a series of videos where Alex Tabarrok and Tyler Cowen present their economics textbook Principles of Economics. In a later video, ‘ideas’ are introduced into the Solow growth model. But, not with a single word does one acknowledge that this in total contradiction to the Holy Grail of their mainstream economics — the “iron logic of diminishing returns.” In Paul Romer’s Endogenous Technological Change (1990) knowledge is made the...

Recently the European Commission (EC) has published a “A possible roadmap towards the completion of the Economic and Monetary Union by 2025”. It is an important report. According to the report once Britain will have left the EU 85% of EU inhabitants will use the Euro. The future of these people is at stake. The report proposes: to introduce at least a bit of Eurozone level fiscal policy to introduce a kind of Eurobonds to introduce a system of unemployment insurance which, during...

from C.P. Chandrasekhar and Jayati Ghosh For several decades, the US economy functioned as the principal agent of global demand, sucking in vast amounts of imports from the rest of the world as it built up vast current account deficits. Of course, it was easily able to finance these deficits with capital inflows, benefiting from its status as the holder of the only viable global reserve currency. But just as the US was able to make the rest of the world in effect pay for its own domestic...

from Lars Syll John Maynard Keynes’s 1936 book The General Theory of Employment, Interest, and Money attempted to overthrow classical theory and revolutionize how economists think about the economy. Economists who build upon Keynes’s General Theory to analyze the economic problems of the twenty-first-century global economy are called Post Keynesians. Keynes’s “principle of effective demand” (1936, chap. 2) declared that the axioms underlying classical theory were not applicable to a...