Real-World Economics Review

from Lars Syll There’s no question that mainstream academic macroeconomics failed pretty spectacularly in 2008 … Many among the heterodox would have us believe that their paradigm worked perfectly well in 2008 and after … This is dramatically overselling the product. First, heterodox models didn’t “predict” the crisis in the sense of an actual quantitative forecast. This is because much of heterodox theory is non-quantitative. Basically, people write down English words explaining their...

from Dean Baker With the Trans-Pacific Partnership now definitely dead and Donald Trump pushing for a renegotiation of NAFTA, many progressives are looking for a fundamental re-examination of trade deals. As supporters of international cooperation rather than narrow nationalists, progressives have often felt uncomfortable opposing trade deals. While there is no reason to be defensive about opposing trade deals that favored business interests at the expense of workers, consumers, and the...

from Peter Radford Well, the wait is over. We now know what the Republican health care plan looks like. It’s early days and the inevitable compromises will have to be made, but the Republican seven year crusade is reaching its climax. Or not. The problem is this: as we have discussed many times, any credible health care plan needs a number of key features. Three stand out: You need to ensure the biggest insurance pool you can. In an ideal world this pool would be the entire population of...

from David Ruccio According to recent news reports, Kevin Hassett, the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (no, I didn’t make that up), will soon be named the head of Donald Trump’s Council of Economic Advisers. Yes, that Kevin Hassett, the one who in 1999 predicted the Down Jones Industrial Average would rise to 36,000 within a few years. Except, of course, it didn’t. Not by a long shot. The average did reach a record...

from Lars Syll In his book Why Minsky Matters L. Randall Wray tries to explain in what way Hyman Minsky’s thoughts offer a radical challenge to mainstream economic theory. Although there were a handful of economists who had warned as early as 2000 about the possibility of a crisis, Minsky’s warnings actually began a half century earlier—with publications in 1957 that set out his vision of financial instability. Over the next forty years, he refined and continually updated the theory. It...

from Norbert Häring To “prepare the next generation of world leaders”, the Massachusetts Institute of Technology (MIT) will hold its 2017 MIT India Conference, this time  on “Digital India”. Members of the Indian government and CEOs are travelling to Cambridge to report on the “success” of the US inspired crackdown on the use of cash. As usual, the plight of the cash-using poor and the data-security and privacy nightmare resulting from mandatory biometric identification are unlikely to be...

from David Ruccio It comes as no surprise, at least to most of us, that corporations are getting larger and increasing their share in many different industries. We see it everyday—when we buy plane tickets or try to take out a loan or just make a purchase at a retail store.   We know it. And now, it seems, economists and the business press have finally taken notice. According to recent research by Gustavo Grullon, Yelena Larkin, and Roni Michaely, More than 75% of US industries have...

Below, three sets of graphs from three ‘structural’  seconomic tudies which show that the celebrated concept of NAIRU, as defined in these general equilibrium models is little more than a complicated running average of the level of estimated unemployment (though, quite unscientific, economics does not even seem to have an agreed upon algorithm to calculate this average). This a consequence of the assumption of these models that unemployment is a voluntary state of existence. Yesterday,...

from Lars Syll Again and again, Oxford professor Simon Wren-Lewis rides out to defend orthodox macroeconomic theory against attacks from ‘heterodox’ critics like yours truly. A couple of years ago, it was the rational expectations hypothesis (REH) he wanted to save: It is not a debate about rational expectations in the abstract, but about a choice between different ways of modelling expectations, none of which will be ideal. This choice has to involve feasible alternatives, by which I...

from David Ruccio There doesn’t seem to be anything remarkable about mainstream economists’ rejection of the new populism. Lest we forget, mainstream economists in the United States and Europe (and, of course, around the world) mostly celebrated current economic arrangements. As far as they were concerned, everyone benefits from contemporary globalization (the more trade the better) and from the distribution of income created by market forces (since everyone gets what they deserve). To be...