Real-World Economics Review

from David Ruccio The capitalist machine is broken—and no one seems to know how to fix it. The machine I’m referring to is the one whereby the “capitalist” (i.e., the boards of directors of large corporations) converts the “surplus” (i.e., corporate profits) into additional “capital” (i.e., nonresidential fixed investment)—thereby preserving the pact with the devil: the capitalists are the ones who get and decide on the distribution of the surplus, and then they’re supposed to use the...

from  Norbert Haering In early November, without warning, the Indian government declared the two largest denomination bills invalid, abolishing over 80 percent of circulating cash by value. Amidst all the commotion and outrage this caused, nobody seems to have taken note of the decisive role that Washington played in this. That is surprising, as Washington’s role has been disguised only very superficially. US-President Barack Obama has declared the strategic partnership with India a...

from Peter Radford I am not going to become involved in endless analysis of Trump’s presidency. I think we ought let it speak for itself. Nor am I going to waste space critiquing the huge contribution that academic economics has made to Trump’s rise to power. I think the anti-democratic nature of mainstream economics is both palpable and speaks for itself too. Economics is largely a libertarian discipline and sneers at anything remotely involving “we the people” unless it can re-package...

from Dean Baker Breaking the taxi industry cartel’s and promoting Uber has been somewhat of a cause celebre among economists in recent years. Any card carrying economist can give you the two minute tirade on the evils of the taxi cartel and the benefits of Uber. (I can too, but the argument should be for modernized regulation, not Uber gets to do whatever it wants because it’s Uber, see pieces here, here, and here.) What is striking is that the enthusiasm for the virtues of competition...

from David Ruccio When it comes to artificial intelligence and automation, the current White House seems to want to have it both ways. On one hand, it warns about the potentially unequalizing, “winner-take-most” effects of the economic use of artificial intelligence: Research consistently finds that the jobs that are threatened by automation are highly concentrated among lower-paid, lower-skilled, and less-educated workers. This means that automation will continue to put downward pressure...

from Lars Syll The correlation between high executive pay and good performance is “negligible”, a new academic study has found, providing reformers with fresh evidence that a shake-up of Britain’s corporate remuneration systems is overdue. Although big company bosses enjoyed pay rises of more than 80 per cent in a decade, performance as measured by economic returns on invested capital was less than 1 per cent over the period, the paper by Lancaster University Management School says. “Our...

The employment rate in Finland: from a high level equilibrium to a low level equilibrium Is it possible for an economy to suddenly switch from a rather stable situation of high employment and prosperity to another rather stable situation of low unemployment which, surely in the longer run, puts the prosperity or large groups of people into jeopardy? Neoclassical economists say; ‘NO’! Lasting high unemployment is caused by real wages which are too high, which lures too many people into the...

from David Ruccio During the recent presidential campaign, Donald Trump promised to revitalize American manufacturing—and bring back “good” manufacturing jobs. So did Hillary Clinton. 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. As is clear from the chart above, manufacturing output has grown (by about 21 percent) since the end of the recession and is now...

from Jonathan Nitzan Theories of Military Keynesianism and the Military-Industrial Complex became popular after the Second World War, and perhaps for a good reason. The prospect of military demobilization, particularly in the United States, seemed alarming. The U.S. elite remembered vividly how soaring military spending had pulled the world out of the Great Depression, and it feared that falling military budgets would reverse this process. If that were to happen, the expectation was that...

from Asad Zaman This 7th post in a series about re-reading Keynes, starts the discussion of Chapter 2 of General Theory, which deals with the Classical (and neoclassical) Postulates characterizing the Labor market. The astonishing fact is that Keynes central arguments regarding how the labor market can fail to be at equilibrium, despite flexible wages, were never understood. As a consequence, the theory of the labor market is taught today exactly as it was prior to Keynes, and completely...