Real-World Economics Review

from Lars Syll Little in the discipline has changed in the wake of the crisis. Mirowski thinks that this is at least in part a result of the impotence of the loyal opposition — those economists such as Joseph Stiglitz or Paul Krugman who attempt to oppose the more viciously neoliberal articulations of economic theory from within the camp of neoclassical economics. Though Krugman and Stiglitz have attacked concepts like the efficient markets hypothesis … Mirowski argues that their attempt...

Today: 2 graphs. And do I really have to write this blog? Yes, I have. At this moment the USA government seems to target bilateral trade balances: these should be more or less balanced. To quote a Trumptweet (January 27, 2017): “The U.S. has a 60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers…”.  But it does not work that way. Bilateral trade deficits are not the right measure to estimate if trade is one-sided...

The coming days I will post some graphs. The first I made to answer the question if East German unemployment was finally coming down.  East Germany has experienced sky-high unemployment for decades despite massive transfers and despite a wage level which is supposed to be 25% lower than in West Germany. But at this moment, East German über-unemployment has more or less disappeared, at least compared with the German version of the rust belt (Stainless steel belt? Nutzeisen belt?). Two...

from Lars Syll Oxford professor Simon Wren-Lewis isn’t pleased with heterodox attacks on mainstream economics. One of the reasons is that he doesn’t share the heterodox view that mainstream economics and neoliberal ideas are highly linked. In a post on his blog, Wren-Lewis defends the mainstream economics establishment against critique waged against it by Phil Mirowski: Mirowski overestimates the extent to which neoliberal ideas have become “embedded in economic theory”, and...

from David Ruccio It is likely, if some version of Trump/Ryancare is approved in the United States, millions more people will not be able to purchase the insurance necessary to receive adequate healthcare.   The problem is, the United States is already an outlier when it comes to the relationship between health expenditures and health outcomes—measured in this case by life expectancy. As Esteban Ortiz-Ospina and Max Roser explain, all countries in this graph have followed an upward...

from Peter Radford We all ought calm down about the Trump budget. Presidential budgets never, ever, get put into practice. They are simply exercises in politics. They simply give us insight into presidential goals. In Trump’s case there is nothing that we didn’t already know. He wants to slash domestic programs, especially those niggling ones that offend his far right fans, and pile on the offensive weaponry for the Pentagon. As I said: no big surprise. Here’s a very short synopsis of the...

from Lars Syll Currently the dominant formalism for treating the [general gamble] problem is utility theory. Utility theory was born out of the failure of the following behavioral null model: individuals were assumed to optimize changes in the expectation values of their wealth. We argue that this null model is a priori a bad starting point because the expectation value of wealth does not generally reflect what happens over time. We propose a different null model of human behavior that...

from Dean Baker Over the past two decades, the economics profession has compiled an impressive track record of getting almost all the big calls wrong. In the mid-1990s, all the great minds in the field agreed that the unemployment rate could not fall much below 6 percent without triggering spiraling inflation. It turns out that the unemployment rate could fall to 4 percent as a year-round average in 2000, with no visible uptick in the inflation rate. As the stock bubble that drove the...

from Erik Reinert, Jayati Ghosh and Rainer Kattel and WEA Commentaries We have recently co-edited a book (The Handbook of Alternative Theories of Economic Development, Edward Elgar 2016, also available as an e-book on http://www.ebooks.com/95628740/handbook-of-alternative-theories-of-economic-development/reinert-erik-s-ghosh-jayati-kattel-rainer/) that seeks to bring back the richness of development economics through many different theories that have contributed over the ages to an...

from David Ruccio   One of the courses I’m offering this semester is A Tale of Two Depressions, cotaught with one of my colleagues, Ben Giamo, from American Studies. It’s a comparison of the conditions and consequences of the two major crises of capitalism during the past hundred years, the 1930s and the period after the crash of 2007-08.* It just so happens the Guardian is also right now revisiting the 1930s. Readers will find lots of interesting material, from some evocative street...