Real-World Economics Review

.[embedded content] from Lars Syll From a theoretical perspective, Simpson’s paradox importantly shows that causality can never be reduced to a question of statistics or probabilities. To understand causality we always have to relate it to a specific causal structure. Statistical correlations are never enough. No structure, no causality. Simpson’s paradox is an interesting paradox in itself, but it can also highlight a deficiency in the traditional econometric approach towards causality....

from Jonathan Nitzan and Shimshon Bichler Liberals insist that capitalism lifts all boats. It doesn’t, certainly not in the U.S. Since 1880, ‘real’ total returns on the S&P 500 rose, on an annual average, 4.6% faster than U.S. ‘real’ wages. The total returns/wage ratio today is 1,166 greater than in 1880.

from Lars Syll Researchers often determine the individual’s contemporary IQ or IQ earlier in life, socioeconomic status of the family of origin, living circumstances when the individual was a child, number of siblings, whether the family had a library card, educational attainment of the individual, and other variables, and put all of them into a multiple-regression equation predicting adult socioeconomic status or income or social pathology or whatever. Researchers then report the...

from Ken Zimmerman (originally a comment) Following the ‘Great Depression’ excessive wealth required justification. Otherwise those who possessed it were looked on as freeloaders and featherbedders who played no or little useful part in society. FDR came from one of America’s wealthiest family’s but proved himself by his work ethic, care for ordinary Americans, and work to save the USA. Even the wealthy who wanted to be ostentatious feared public rebuke and legal punishments if they...

from Dean Baker Yes, it is spring. The flowers are blooming, the birds are singing, and the deficit hawks are whining. The proximate cause is President Biden’s new budget, which will push the ratio of government debt to GDP to its highest level ever. The question is whether this should bother anyone who has a life? The projections show that the debt to GDP ratio will rise to 117 percent of GDP in 2031. If that sounds scary, consider that Greece’s debt to GDP ratio is over 180 percent....

from Lars Syll Analogue-economy models may picture Galilean thought experiments or they may describe credible worlds. In either case we have a problem in taking lessons from the model to the world. The problem is the venerable one of unrealistic assumptions, exacerbated in economics by the fact that the paucity of economic principles with serious empirical content makes it difficult to do without detailed structural assumptions. But the worry is not just that the assumptions are...

from Lars Syll Third, explanations fail by question (3.1) [“are the factors cited as possible causes of an event in fact aspects of the situation in which that event occurred?”] where the factors invoked as possible causes are idealisations. No doubt this claim will be considered contentious by some economists, accustomed as they are to explanations based on such dramatic assumptions as rational expectations, single-agent ‘economies’, and two-commodity ‘worlds’. The issue here turns on...

from Peter Radford Paul Krugman has been rightly skeptical about cryptocurrencies lately.  The extraordinary volatility in the price of Bitcoin, for example, has brought a bout of crypto mania to the fore in both the media and the marketplace.  And, as seems usual, various regulators around the world are arriving at the party about a decade after the launch of what their advocates call an alternative to the evils of fiat currencies. I suppose it would be churlish of me to remind us all...