Real-World Economics Review

from Dean Baker In the last-half century, productivity has outpaced the growth of real compensation for the median worker by more than 40 percent. This means that if workers’ pay had kept pace with productivity, as it did in the three decades after World War II, it would be roughly 40 percent higher than it is today. This would mean that instead of a typical worker earning $34 an hour, they would be earning close to $48 an hour. That implies an annual wage of $96,000 a year for a worker...

from Lars Syll According to Keynes, financial crises are a recurring feature of our economy and are linked to its fundamental financial instability: It is of the nature of organised investment markets, under the influence of purchasers largely ignorant of what they are buying and of speculators who are more concerned with forecasting the next shift of market sentiment than with a reasonable estimate of the future yield of capital-assets, that, when disillusion falls upon an...

from Peter Radford When you are only concerned with one thing and have only one tool things can go awry quite easily.  So it is with our price theory friends.  They bask in the rigor of their thinking and look askance at the inability of regular folks to grasp the point of the logic of their so-called price mechanism — note the mechanical nature of it all.  The recent spate of snooty commentary aimed at Kamala Harris and her ideas about price gouging are a case in point.  I talked about...

from Lars Syll At a first glance, DSGE models seem to imply total ignorance because representative agents (or representative groups of agents with limited heterogeneity) featuring objective utility functions populate the literature. At a second glance, however, it becomes obvious that “methodological individualism” prevails and even dominates. To understand this dominance one only has to once again note that the representative agent has fixed properties only within any given model, or...

from Peter Radford Price-gouging is now a topic in politics.  Kamala Harris has put it there.  Naturally there has been the predictable outcry of opposition coupled with and equally predictable sneer of disapproval: how could she say something so uneducated?  Has she no grasp of Econ.101?  Oh the illiteracy! Perhaps even more predictable is that someone like John Cochrane has felt it necessary to write an article in praise of price-gouging.  After all, hard core libertarian economists are...

from Asad Zaman and current issue of RWER Our current environmental predicament is fundamentally a crisis of knowledge, rooted in the Enlightenment’s narrow conceptualization of epistemology. This shift fostered an illusion of objectivity that has since permeated our understanding of the world, particularly in the context of societal dynamics. The Enlightenment’s emphasis on objective knowledge marginalized the subjective realms of emotional intelligence, moral intuition, and diverse...

from Lars Syll To be fair to academia, it has realized that the pure DSGE model is incapable of explaining observable phenomena so they have introduced numerous amendments, known, oddly, as “imperfections” in the model. Long-term nominal contracts, other labour market frictions, imperfection in credit markets, all these and more are prayed in aid and, either rigorously or more usually ad hoc, introduced into the model, generating lags that mean it can be represented as fitting the data....

from Edward Fullbrook A few years ago, I wrote a novel that was published under a pen name and titled Two American Dreams; Which is yours?  Recently its publisher realized that, although set in the Sixties (mostly in Berkeley) this novel pertains to the coming US presidential election to a remarkable degree.  With that in mind, they submitted to Amazon a standard advertisement for the novel in both its paper and Kindle formats. Amazon says that such adverts are usually...

from Lars Syll To be fair to academia, it has realized that the pure DSGE model is incapable of explaining observable phenomena so they have introduced numerous amendments, known, oddly, as “imperfections” in the model. Long-term nominal contracts, other labour market frictions, imperfection in credit markets, all these and more are prayed in aid and, either rigorously or more usually ad hoc, introduced into the model, generating lags that mean it can be represented as fitting the data....

from Dean Baker The effort to bring back manufacturing jobs has been a major theme in the 2024 election. Both parties say they consider this a high priority for the next administration. However, there is a notable difference in that the Biden-Harris administration has actively supported an increase in unionization, while the Republicans have indicated, at best, neutrality if not outright hostility towards unions. This distinction is important in the context of manufacturing jobs. Many...