Real-World Economics Review

“As a mathematical discipline travels far from its empirical source, or still more, if it is a second and third generation only indirectly inspired from ideas coming from ‘reality’, it is beset with very grave dangers. It becomes more and more purely aestheticizing, more and more purely l’art pour l’art. This need not be bad, if the field is surrounded by correlated subjects, which still have closer empirical connections, or if the discipline is under the influence of men with an...

(Part of) the Dutch pension system will, if everything goes according to plan, soon be replaced with a new neoliberal system based upon, among other things, measured neoclassical ‘risk aversion’. However – economists are not yet able to measure this – which will lead to big problems. let me explain. The present system consists of: a social democratic element (the ‘first pillar’), a kind of not means tested basic income for everybody...

European Union Inflation Rate

from Lars Syll Ironically, the need for a theory of causation began to surface at the same time that statistics came into being … This was a critical moment in the history of science. The opportunity to equip causal questions with a language of their own came very close to being realized but was squandered. In the following years, these questions were declared unscientific and went underground. Despite heroic efforts by the geneticist Sewall Wright (1889-1988), causal vocabulary was...

from Dean Baker It’s pretty funny that we continually debate the causes of inequality when we routinely pass bills that redistribute income upward. The semiconductor bill about to be approved by Congress is the latest episode in this absurd charade. To be clear, the bill does some good things. It has funding both to subsidize manufacturing capacity for semiconductors in the United States and also for further research in developing better chips in the future. Both of these are positive...

from Jayati Ghosh Economic inequalities have increased substantially across the world in the past three decades and have deepened during the COVID-19 pandemic. Thomas Piketty and his colleagues at the World Inequality Lab at the Paris School of Economics (PSE), France, have been at the forefront of tracking these changes, providing extremely useful analyses based on careful aggregation of national data on income and wealth inequality from a multitude of sources. They have shown that...

from Lars Syll I make two main points that are firmly anchored in the econometric tradition. The first is that causality is a property of a model of hypotheticals. A fully articulated model of the phenomena being studied precisely defines hypothetical or counterfactual states. A definition of causality drops out of a fully articulated model as an automatic by-product. A model is a set of possible counterfactual worlds constructed under some rules. The rules may be the laws of physics, the...

Yanis Varoufakis . . . what is really going on? My answer: A half-century long power play, led by corporations, Wall Street, governments and central banks, has gone badly wrong. As a result, the West’s authorities now face an impossible choice: Push conglomerates and even states into cascading bankruptcies, or allow inflation to go unchecked. For 50 years, the US economy has sustained the net exports of Europe, Japan, South Korea, then China and other emerging economies, while the...

from Dean Baker I just read this NYT column by Bryan Stryker, on how Democrats can win back the working class. I have no idea how its proposals poll, but as an economic matter, they will do little to help the working class. The big problem with Stryker’s argument is that it assumes that the working class will somehow benefit from having more manufacturing jobs. This would have been true 20-years-ago when noncollege educated workers in manufacturing enjoyed a substantial pay premium over...

from Lars Syll Research shows not only that individuals sometimes act differently than standard economic theories predict, but that they do so regularly, systematically, and in ways that can be understood and interpreted through alternative hypotheses, competing with those utilised by orthodox economists. To most market participants — and, indeed, ordinary observers — this does not seem like big news … In fact, this irrationality is no news to the economics profession either. John Maynard...