Real-World Economics Review

from Ping Chen and RWER issue 107 Economic Complexity vs. Neoclassical Simplicity Complexity science originated from astrophysics when Henri Poincaré discovered the three-body problem had no analytical solution in 1899. The discovery and development of deterministic chaos in the 1960s to 1990s found wide evidence that nonlinear deterministic systems only have limited predictability. Ilya Prigogine further recognized the important role of irreversibility in biological evolution since...

from Dean Baker In prior decades we in the US used to try to restrict the ability of the rich and very rich to buy elections. We have limits on campaign contributions to candidates and political parties. Until the Supreme Court’s 2009 decision in Citizens United case, corporations were prohibited altogether from contributing to politicians and political campaigns. This is no longer the case. The rich have found ways to largely circumvent campaign funding restrictions with independent...

from Asad Zaman and WEA Pedological Blog In the previous section, we saw how economic theories changed from classical to Keynesian to Monetarist over the course of the 20th century. These changes were driven by historical events. Taking this historical context into account deepens our understanding of economic theories. This contrasts with conventional methodology of economic textbooks, which treats economic theories as scientific laws, which are universally applicable to all societies....

from Maria Alejandra Madi and RWER issue 106 Anthropogenic climate change and ecological breakdown are now major threats to human life and other species. It is widely acknowledged that mainstream economic theory and especially neoclassical theory lack adequate concepts to address these problems and arguably have contributed to them through misdirection and delay. “Complexity” sciences, however, are now widely adopted but have as yet made little impact on economics. In this short article I...

from Lars Syll To achieve explanatory success, a theory should, minimally, satisfy two criteria: it should have determinate implications for behavior, and the implied behavior should be what we actually observe. These are necessary conditions, not sufficient ones. Rational-choice theory often fails on both counts. The theory may be indeterminate, and people may be irrational. In what was perhaps the first sustained criticism of the theory, Keynes emphasized indeterminacy, notably because...

from Peter Radford I wonder why it is that neoliberals so reject the label we have given them.  Is it because they’e embarrassed?  I don’t think so.  They all seem very proud of their attachment to the old order.  Every so often one of them will surface and proclaim bitterly that they are misunderstood and they they don’t deserve the opprobrium piled on them by those nasty “leftists” who want to sully the pristine reputations of people like Mises and Hayek.  Poor dears.  Are we to feel...

from Asad Zaman and WEA Pedological Blog . . . conventional modern textbooks of economics do not correctly describe monetary economies.. . .  For instance, a popular textbook by Mankiw states that: . . . I am planning to write a textbook on monetary economies. I will draft it section by section and chapter by chapter, and put down the drafts here for feedback and comments. The first section is given below – it is an introduction to the topic, and provides some motivation for the study,...

from Jamie Morgan and RWER issue 106 ‘How can we construct an economics consistent with the biophysical limits to economic growth?’. As any ecological economist is aware, this is a foundational issue not an afterthought chapter tacked on to the end of a textbook or delegated to a sub-disciplinary specialist who can ‘deal with that for us’. Doing either of those has been part of the problem. Mainstream economics takes as its primary focus the microeconomics of price signalling in systems...

from Lars Syll The impossibility of proper specification is true generally in regression analyses across the social sciences, whether we are looking at the factors affecting occupational status, voting behavior, etc. The problem is that as implied by the three conditions for regression analyses to yield accurate, unbiased estimates, you need to investigate a phenomenon that has underlying mathematical regularities – and, moreover, you need to know what they are. Neither seems true … Even...

from Tony Lawson and RWER current issue I fear, though, that many economists, even some that present themselves as radical thinkers, are too caught up in their own survival (or promotion ambitions, etc.) in the academy to move in a direction of any relevance. The convenient, often seemingly compulsory, recourse is to stay on the safe and (in truth far too) easy (if seemingly impressive to the non-mathematical) path to nowhere that is economic modelling. Already numerous self-styled...