Real-World Economics Review

from Lars Syll The incorporation of new information makes sense only if the future is to be similar to the past. Any kind of empirical test, whatever form it adopts, will not make sense, however, if the world is uncertain because in such a world induction does not work. Past experience is not a useful guide to guess the future in these conditions (it only serves when the future, somehow, is already implicit in the present) … I believe the only way to use past experience is to assume that...

from Dean Baker Those of us who have spent decades trying to call attention to the situation of ordinary workers, and their stagnant wages over the last four decades, are glad to see the media’s newfound interest in real wages (the difference between wage growth and price growth). They have been anxious to highlight the fact that inflation has exceeded the rate of wage growth over the last year. While that is unfortunate, it is also the case that this is not unusual. Here’s the picture...

from Ken Zimmerman (originally a comment) At least part of the problem here is that these economists seem to have made up a way of doing science that exists nowhere else. To be sure their way existed once among some at or shortly after the beginning of science in Europe.  Scientists are depicted as patiently piecing together a giant puzzle. But with a puzzle you see the manufacturer has guaranteed there is a solution. Certainly not the case with the work of scientists. This view remains...

from Yanis Varoufakis It [capitalism] has always gained pace through the incessant commodification of everything, beginning with land, labour and technology before spreading to genetically modified organisms, and even a woman’s womb or an asteroid. As capitalism’s realm spread, price-less goods turned into pricey commodities. The owners of the machinery and the land necessary for the commodification of goods profited, while everyone else progressed from the wretchedness of the 19th...

from Ikonoclast (originally a comment) Comments are declining on this blog. People ARE hiding in their holes. Holes can be comfortably furnished. Just ask a hobbit. Of course, when the holes cease to be furnished and the supermarket shelves are empty then things get a little less comfortable. You will note I wrote, “Every well thought out effort at sustainability postpones catastrophe a little bit.” That is the essential nature of life in an existentialist sense: postponing catastrophe...

from Lars Syll Robert Lucas, one of the most creative model-builders, tells a story about his undergraduate encounter with Gregor Mendel’s model of genetic inheritance. He liked the Mendelian model—“you could work out predictions that would surprise you”—though not the lab work breeding fruit flies to test it. (Economists are not big on mucking around in the real world.) Over the weekend, he enjoyed writing a paper comparing the model’s predictions with the class’s experimental results....

from Ken Zimmerman (originally a comment) Uneconomic growth is growth that produces negative externalities which reduce the overall quality of life. This is also known as unsustainable growth, where the negative social and environmental consequences outweigh the short-term value of an extra unit of growth, making it uneconomic. But in spite of this quandary growth remains the primary goal. It holds that place because growth is equated with progress. The idea of  progress seems one of the...

from  Gregory A Daneke and WEA Commentaries As an academic discipline economics has actually been organized to have little use for the concepts of ecology (especially: population biology, systemic science, ethology, natural history or biogeography). With the rise of Neoclassical economics, it was specifically designed to be a sterilized, frictionless, and hermitically sealed void in which to suspend economic activity. But of course, this a-societal, a-political, a-historical enterprise...

I love the national accounts (NA). The NA focus on the money-economy. Total wages (who pays, who receives), profits, imports, exports, consumption, bank credit, the value and ownership of fixed and financial capital and (on the other side of the sectoral balance sheets) debts. By focusing on different kinds of money flows and stocks and by tracking flows between sectors the national accounts enable us to map the relations between economic sectors like construction and industry...

from Dean Baker There have been numerous news articles in recent years telling us that China faces a demographic crisis. The basic story is that the market reforms put in place in the late 1970s, together with the country’s one-child policy, led to many fewer children being born in the last four decades. As a result, the number of current workers entering retirement exceeds the size of the cohorts entering the workforce, leading to a stagnant or declining workforce. This is supposed to be...