Real-World Economics Review

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...

The cemetery at Lampedusa were the locals and the drowned immigrants from Africa are buried.

from David Ruccio There are two sides to the recent China Shock literature created by David Autor and David Dorn and surveyed by Noah Smith. On one hand, Autor and Dorn (with a variety of coauthors) have challenged the free-trade nostrums of mainstream economists and economic elites—that everyone benefits from free international trade. Using China as an example, they show that increased trade hurt American workers, increased political polarization, and decreased U.S. corporate...

from Dean Baker While Trump is right to emphasize the need for more and better infrastructure, his program is not the way to address the problem. There is much research showing the benefits of spending on traditional infrastructure such as roads and bridges. There are also likely to be large gains from less traditional areas like broadband, where the U.S. ranks poorly among wealthy countries, and improving the quality of public drinking water to avoid more Flint disasters. Ideally, a...

Next year we’ll witness the hundreth anniversary of the Russian Revolution. Here a link from the Marginal Revolution blog. Below a letter by Pjotr Aleksejevitsj Prpotkin, a leading anarchist and one of the keenest scientific minds of the decades around 1900, to Vladimit Iljitsj Lenin. Note that he wrote this as early as March 1920, note also that at this time a civil war not completely unlike the present turmoil in Syria was raging in Russia. Read especially the last part. From Selected...

New paperback from WEA BooksNarrative Fixation in Economics by Edward Fullbrook Here are the book’s various Amazon pages: United States $20, Brazil, Canada, France, Germany,  India,  Italy,  Japan,  Mexico,  Spain,  United Kingdom £15 ContentsPreface Chapter 1: The narrative pluralism of physics Chapter 2: Intersubjective reality, intrasubjective theory Chapter 3: Concealed ideology Chapter 4: From the natural to the social Chapter 5: Narrative rationality Chapter 6: What is the...

Oké. I’m a teacher. So, I’m primed and educated to be an arrogant nitpicker. But let’s make the best of a this dire situation and trash the work of Ferdinando Giugliano and Christian Odendahl who defile the language of scientific economics. Which is not just a mistake but a dangerous act which might cause misunderstandings and destructive economic policies. On the website of the Centre for European Reform they state about Italy: “But Italy mostly has itself to blame. The abysmal...