Real-World Economics Review

“Our major competitor is cash. Cash is what we seek to eliminate” Recently, the Indian government overnight abolished most cash. With dire consequences. What are the economic consequences, why did the Indian government do this? Economies like those of India have, for a bunch of reasons, often relatively high rates of inflation. After the abolishing of cash, India suddenly experienced ‘ugly’ deflation (‘ugly’ i.e. provoked by a fall in demand as well as contributing to this fall in...

from Maria Alejandra Madi By 2020, the largest pools of pension fund assets are projected to remain concentrated in the US and Europe. In North America, pension fund assets reached $19.3 trillion in 2012 and PwC estimates that by 2020, pension fund assets will rise by 5.7 percent a year to achieve over $30 trillion of the $56.5 trillion in total global assets, more than 50 percent of the global total. Indeed, according to the PwC report, Asset Management 2020: A Brave New World,...

from Dean Baker Yes, as Un-American as that may sound, Bill Gates is proposing a tax that would undermine Donald Trump’s efforts to speed the rate of economic growth. Gates wants to tax productivity growth (a.k.a. “automation) slowing down the rate at which the economy becomes more efficient. This might seem a bizarre policy proposal at a time when productivity growth has been at record lows, averaging less than 1.0 percent annually for the last decade. This compares to rates of close to...

From The lancet Remarkably, 8 years after the onset of the global financial crisis, the consequences for health are still being debated, even in Greece, the country most severely affected by the economic downturn. There can be few better indications of the low priority accorded to health within governments than the difference between the concerted efforts dedicated to understanding the state of the economy and the apparent scarcity of concern about the health of populations. Economists...

Ideas Towards a New International Financial Architecture (Wea-Books) Paperback – February 2017 by Oscar Ugarteche (Editor), Alicia Payana (Editor), Maria Alejandra Madi (Editor) In the short span of a few essays, this book takes the reader on a trip from the historical roots of the current financial architecture to the imaginable futures one can envision for it, only if there is the political will to change it. If we accept that, as put by the editors, financial markets’...

from David Ruccio The latest Quarterly Report on Household Debt and Credit (pdf) from the New York Fed’s Center for Microeconomic Data showed a substantial increase in aggregate household debt balances in the fourth quarter of 2016 and for the year as a whole. As of 31 December 2016, total household debt stood at $12.58 trillion, an increase of $226 billion (or 1.8 percent) from the third quarter of 2016. Total household debt is now just 0.8 percent ($99 billion) below its third quarter...

from Lars Syll If all agents are supposed to have rational expectations, it becomes convenient to assume also that they all have the same expectation and thence tempting to jump to the conclusion that the collective of agents behaves as one. The usual objection to representative agent models has been that it fails to take into account well-documented systematic differences in behaviour between age groups, income classes, etc. In the financial crisis context, however, the objection is...

from David Ruccio Mainstream economics presents quite a spectacle these days. It has no real theory of the firm and, even now, more than nine years after the Great Recession began, its most cherished claim to relevance—the use of large-scale forecasting models of the economy that assume people always behave rationally—is still misleading policymakers. As if that weren’t embarrassing enough, we now have a leading mainstream economist, Havard’s Martin Feldstein, claiming that the “official...

from Lars Syll Scientific progress … is frequently the result of observation that something does work, which runs far ahead of any understanding of why it works. Not within the economics profession. There, deductive reasoning based on logical inference from a specific set of a priori deductions is “exactly the right way to do things”. What is absurd is not the use of the deductive method but the claim to exclusivity made for it. This debate is not simply about mathematics versus poetry....

from Jayati Ghosh There is a lot of buzz globally around the idea of a Universal Basic Income (or UBI). It is perceived as one way of coping with technology-induced unemployment that is projected to grow significantly in the near future, as well as reducing inequalities and increasing consumption demand in stagnant economies. Certainly there is much to be said for the idea, especially if it is to be achieved by taxing the rich and particularly those activities that are either socially...