Real-World Economics Review

from Lars Syll As has become abundantly clear during the last couple of years, it is obvious that most mainstream economists seem to think that Modern Monetary Theory is something new that some wild heterodox economic cranks have come up with. That is actually very telling about the total lack of knowledge of their own discipline’s history these modern mainstream guys like Summers, Rogoff and Krugman have. New? Cranks? Reading one of the founders of neoclassical economics, Knut Wicksell,...

from Lars Syll In a word, Economics is an Impossible Science because by its own definition the determining conditions of the economy are not economic: they are “exogenous.” Supposedly a science of things, it is by definition without substance, being rather a mode of behavior: the application of scarce means to alternative ends so as to achieve the greatest possible satisfaction—neither means, ends, nor satisfaction substantially specified. Exogenous, however, is the culture, all those...

from Asad Zaman and WEA Pedagogy Blog The Most Valuable Kind of Knowledge These lectures aim to provide the reader with knowledge. But what is knowledge? Our lives consist of a small number of infinitely precious moments. What makes it worthwhile to invest these moments in the acquisition of knowledge? Is it the kind of knowledge that can teach us how to lead better lives—how to make the most of the few moments that we have? This has been the central preoccupation of philosophers and...

from Dean Baker New York Times columnist Peter Coy did a piece yesterday questioning the existence of a gap between productivity growth and the typical worker’s pay. This gap was established decades ago by my friends and former colleagues at the Economic Policy Institute (EPI). The fact that it is now being questioned says a lot about economics and even more about politics in this country. First, let me be clear, my purpose is not at all to beat up on Coy. I’ve known him for many years...

To the death toll of the violence in Gaza, around 15.000 additional deaths of infants and children between 1 and 5 have to be added. This is a rough and, in my opinion, a lower-bound estimate. However, the calculations are based on robust information, and sizeable additional mortality in infants and young children in Gaza is real. Next to the direct victims of war, there are indirect victims who die because of lack of proper medical care or because of harsh circumstances. Here, I´ll...

from Edward Fullbrook Humankind urgently needs a new discipline.  Our very survival may depend on it.  Natural science tells us that the economy now threatens humanity with calamity and potentially with extinction; and the daily news tells us that the economy’s forty-year upward redistribution of wealth, income and power threatens democracy and social order.  But meanwhile the only discipline that directly engages with today’s economy is the one whose “wisdom” has guided it to its present...

from Lars Syll Recognition of the speculative value of counterfactualizing provides the grounding for a defense of theoretical pluralism in economics. The existence of multiple contending theories in economics is inconvenient, of course. It casts doubt on the truth content of the counterfactual scenarios generated by the predominant approach and challenges the predominant causal claims … But that is precisely the virtue of contending theoretical perspectives in economics. They serve to...

from Lars Syll In practice, what math does is let macro-economists locate the FWUTVs [facts with unknown truth values] farther away from the discussion of identification … Relying on a micro-foundation lets an author say, “Assume A, assume B, … blah blah blah … And so we have proven that P is true. Then the model is identified.” … Distributional assumptions about error terms are a good place to bury things because hardly anyone pays attention to them. Moreover, if a critic does see that...

from Jayati Ghosh The international-development sector has become fixated on calculating financing gaps. Hardly a day goes by without new estimates of the funds low- and middle-income countries (LMICs) need to meet their climate targets and achieve the United Nations Sustainable Development Goals (SDGs). The Independent High-Level Expert Group on Climate Finance, for example, estimates that developing and emerging economies (excluding China) need $2.4 trillion annually by 2030 to close...

Some time ago, I delved into the unique advantages of the Theil index of inequality over the Gini index, when data is available. The Theil index offers a distinct advantage in its ability to provide a consistent quantitative deconstruction of inequality. It does so by utilizing various concepts such as class, region, gender, or any other relevant factor. This feature allows for a comprehensive explanation of (changes in) inequality using the same set of concepts. The Theil index...