Real-World Economics Review

from Lars Syll In an interview a couple of years ago, Robert Lucas said he now believes that “the evidence on postwar recessions … overwhelmingly supports the dominant importance of real shocks.” So, according to Lucas, changes in tastes and technologies should be able to explain, e.g., the main fluctuations in unemployment that we have seen during the last seven decades. Let’s look at the facts and see if there is any strong evidence for this allegation. Just to take an example, let’s...

from David Ruccio Donald Trump promised to bring back “good” manufacturing jobs to American workers. So did Hillary Clinton. Both, as I argued back in December, were wrong.   What neither candidate was willing to acknowledge is that, while manufacturing output was already on the rebound after the Great Recession, the jobs weren’t going to come back. They were also wrong, as I argued in November, about there being anything necessarily good about factory jobs. But perhaps even more...

from Peter Radford Nothing could possibly give us more insight into the ineptitude and unpreparedness of Trump for high office than his comment yesterday: “It’s an unbelievably complex subject. Nobody knew health care could be so complicated.” Really? Everyone knew. Everyone. Except for Trump who has blithely been assuming that his bully-boy attitude could translate easily from his real estate business into the White House. He, like a lot of others in recent years, reacted to the gridlock...

from David Ruccio Noah Smith is right about one thing: mainstream economists tend to use the word “capital” pretty loosely. It just means “anything you can spend resources to build, which lasts a long time, and which also can be used to produce value.” That’s really broad. For example, it could include society itself. It also typically includes “human capital,” which refers to people’s skills, talents, and knowledge. But then Smith proceeds, like the neoclassical equivalent of Humpty...

from Lars Syll [embedded content] From a more theoretical perspective, Simpson’s paradox importantly shows that causality can never be reduced to a question of statistics or probabilities, unless you are — miraculously — able to keep constant all other factors that influence the probability of the outcome studied. To understand causality we always have to relate it to a specific causal structure. Statistical correlations are never enough. No structure, no causality.   Simpson’s paradox is...

from Dean Baker Last week Bill Gates called for taxing robots. He argued that we should impose a tax on companies replacing workers with robots and that the money should be used to retrain the displaced workers. As much as I appreciate the world’s richest person proposing a measure that would redistribute money from people like him to the rest of us, this idea doesn’t make any sense. Let’s skip over the fact of who would define what a robot is and how, and think about the logic of what...

from Norbert Häring With big fanfare, Deutsche Bundesbank announced on February 9 that ahead of plan they had repatriated 300 tons of gold from New York. This put a positive spin on a rather disturbing fact –1236 tons of gold that is supposed to be part of Germany’s currency reserve will continue to be kept outside of German control in New York – indefinitely. The German gold in question is being kept in storage at the New York Fed, an institution that is owned and controlled by...

from Lars Syll Vielleicht ist diese Grundperspektive der radikalen Trennung von Form und Gehalt hilfreich, einige zunächst überaus paradoxe Äußerungen von Lucas etwas zu erhellen. Erinnert man sich der Forderungen von Lucas, die Makroökonomik zwingend auf Basis der klassischen Postulate, die Lucas und Sargent (1978) als (a) „Markträumung“ und (b) „Eigennutz“ umrissen hatten, zu errichten, so erstaunt man doch angesichts Passagen wie der folgenden: “In recent years, the meaning of the...

Sung on May 31, 2016

from David Ruccio In his Prison Notebooks, Antonio Gramsci wrote: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum morbid phenomena of the most varied kind come to pass.”* The world is once again living an interregnum. It is poised between the failed economic model of recovery from the crash of 2007-08 and the birth of a new model, one that would actually work for the majority of Americans.** Morbid symptoms abound,...