Real-World Economics Review

from Maria Alejandra Madi A relevant feature of the current crisis in economic knowledge is the recurrence of the  Ricardian Vice. Joseph A. Schumpeter coined this term in his book History of Economic Analysis when he criticized the habit assigned to Ricardo to represent the economy by a set of simplified assumptions and to use tautologies to develop practical economic solutions. Indeed, Schumpeter rejected the kind of economic thought that mainly favours deductive methods of inquiry –...

The ECB buys lots of bonds from large oil companies, not from small and medium enterprises. Rapid money supply growth does not cause inflation (measurements!) New UK guidelines on how to estimate natural capital. Surely worth the effort! But some things do not have a price for a good reason. And when you look really, really hard at statistics of the stock of capital it turns out that statisticians measure the value of rights to the monetary yield of ownership of certain items. And not any...

from Lars Syll Of course economics involves cases where economists appear too reluctant to give up their favoured models. You can find similar stories in the hard sciences. There will be more such stories in economics because the inexact nature of economics makes it easier to discount any single piece of evidence. What I cannot understand is what leads someone … to argue against the use of evidence, and instead that “economics is primarily a way of organizing one’s thinking”. Astrology is...

from David Ruccio As we know, the share of part-time faculty in U.S. higher education has increased dramatically over the past four decades. According to the latest report from the American Association of University Professors (pdf), Part-time faculty today comprise approximately 40 percent of the academic labor force, a slightly larger share than tenured and tenure-track faculty combined. While the category of part-time faculty includes professors temporarily teaching on a percentage...

from Peter Radford It is easy to be partisan. It is easy to believe in sweeping utopian solutions. It is easy to delude yourself that what you think is what everyone thinks, or, perhaps, what they ought to think. This is why I recoil from anyone offering definitive answers to complex questions. The truth is never so easily teased from reality. A healthy does of skepticism helps to keep us grounded. It seems we need that protection especially right now. Why now? Because I feel we are going...

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from Lars Syll One way that macroeconomics stands out from other fields in economics is in how often it produces forecasts. The vast majority of empirical models in economics can be very successful at identifying causal relations or at fitting explaining behavior, but they are never used to provide unconditional forecasts, nor do people expect them to. Macroeconomists, instead, are asked to routinely produce forecasts to guide fiscal and monetary policy, and are perhaps too eager to...

from David Ruccio Is it any surprise, as Christina Starman, Mark Sheskin, and Paul Bloom argue, that fairness is not the same thing as equality? There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be...

In 2008, conventional economics led us blindfolded into the greatest economic crisis since the Great Depression. Almost a decade later, with the global economy wallowing in low growth that they can’t explain, mainstream economists are reluctantly coming to realise that their models are useless for understanding the real world. How did mainstream economists not see the crisis coming? Was it unpredictable, as they now assert, or did their theory blind them to the real causes? Will another...

from Jayati Ghosh Mr Trump’s policy stance will, however, mean that the United States – which has been providing less and less of a positive demand stimulus to the rest of the world economy ever since the Global Financial crisis – will continue to shrink its import demand and add to the forces that are making global trade decelerate and even decline. What does all this mean for developing countries? First, that those who are worried are right to be worried, but perhaps not for the reasons...