Real-World Economics Review

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from Richard Koo This golden era does not last forever. At  some  point, wages reach a level where foreign competition can gain a foothold. The first signs of a serious threat to Western economic growth appeared when businesses in  the  US and Europe encountered Japanese competition in the 1970s. Many in the West were shocked to find that Japanese cars required so little maintenance and so few repairs. The Germans may have invented the automobile, and the Americans may have established...

from Shimshon Bichler and Jonathan Nitzan and RWER current issue Foundation 2: The self-equilibrating economic machine This view emerged together – and remains deeply interlaced – with the mechanical cosmology of the seventeenth century. Throughout history, human beings, perhaps as a way of alienating themselves from nature, have tended to politicize their cosmos, imposing on their natural environment the power structures of their own society.[1] And this politicization continues in the...

from John Komlos and current RWER issue Cultural challenges are insurmountable The defective dominant ideology of neoliberalism characterized “by a huge overestimation of the wisdom of market processes,” has seeped into the popular culture to such an extent that it is difficult to make the citizenry understand that the best government is not one that governs the least.[1] It easy for market aficionados to label progressive politicians who aspire to improve the condition of the poor...

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This week we are getting the GDP growth data for the first quarter and it is expected to be very strong, reflecting once again that trickle down economics doesn’t work, and bottom up does. And this is the kind of information right wingers cannot abide. As the Right-Wing talk machine gears up for a full scale fear mongering assault on your soul about possible inflation... is it warranted? Regular guest Dean Baker, co-founder of The Center for Economic and Policy Research, is here to...

from Asad Zaman Launched in early 20th Century by Ragnar Frisch, econometric methodology was strongly shaped by the Cowles Commission (CC) in the 1960’s. The CC approach relied on structural equations, which embodied causal information known in advanced to the researcher. The goal was estimation of causal effects, and not discovery or assessment of the hypothesized causal structures. The oil shock of the 1970’s led to dramatic failures of macroeconomic regression models, leading to...

from Lars Syll In their quest for statistical “identification” of a causal effect, economists often have to resort to techniques that answer either a narrower or a somewhat different version of the question that motivated the research. Results from randomized social experiments carried out in particular regions of, say, India or Kenya may not apply to other regions or countries. A research design exploiting variation across space may not yield the correct answer to a question that is...

from Blair Fix If you’ve ever taken Economics 101, then you’re familiar with its jargon. In the course, you probably heard the words ‘supply and demand’ and ‘marginal utility’ uttered hundreds of times. As you figured out what these words meant, you gradually learned to speak a dialect that I call econospeak. Like all dialects, econospeak affects how you express ideas. The vocabulary of econospeak makes it easier to express certain ideas (such as ‘market equilibrium’), but harder to...