Tag Archives: Economics

I'm sitting in a coffee shop opposite Haymarket Station in Edinburgh. Just up the road, the Institute for New Economic Thinking (INET) is holding its conference. I'm supposed to be there, as I was yesterday and the day before. But I am not at all sure I want to go. The last two days have left a very bitter taste.This conference, grandly entitled "Reawakening", is supposed to be a showcase for the "new economic thinking" of INET's name. I hoped to hear new voices and exciting ideas. At...

When Marx’s theory of value is interpreted in a simultaneist way, it is relatively easy to calculate the ‘monetary expression of labor time’ (or MELT). It is simply new value added, measured in monetary terms, divided by productive employment. If it were not for the ‘productive’/’unproductive’ distinction, the simultaneist MELT could readily be calculated from the National Accounts as the ratio of Net Domestic Product at current prices to Total Employment. Retaining the...

‘Laws of economics’ — a fictional cage Increasingly, our debates about — and our solutions to — pressing issues such as immigration, budgets and debt are framed in the context of all-powerful economic laws that dictate what is and is not possible. There’s just one slight problem: There are no laws of economics. Referencing “the laws of economics” as a way to refute arguments or criticize ideas has the patina of clarity and certainty. The reality is that...

Do unrealistic economic models explain real-world phenomena? When applying deductivist thinking to economics, neoclassical economists usually set up ‘as if’ models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. The beauty of this procedure is, of course, that if the axiomatic premises are true, the conclusions necessarily follow. The snag is that if the models are to be relevant, we also have to argue...

Galbraith vs Buckley on Good Society  [embedded content] div{float:left;margin-right:10px;} div.wpmrec2x div.u > div:nth-child(3n){margin-right:0px;} ]]> Advertisements

Why economists can’t predict the future  [embedded content] Economic predictions and forecasts have little value. They usually amount to nothing more than intelligent guessing. Making forecasts and predictions obviously isn’t a trivial or costless activity, so why then go on with it? The problems that economists encounter when trying to predict the future really underlines how important it is for social sciences to incorporate Keynes’s far-reaching and...

Modern economics has become increasingly irrelevant to the understanding of the real world. In his seminal book Economics and Reality (1997) Tony Lawson traced this irrelevance to the failure of economists to match their deductive-axiomatic methods with their subject. It is — sad to say — as relevant today as it was twenty years ago. It is still a fact that within mainstream economics internal validity is what really counts and external validity is only rarely discussed. Why...

‘New Keynesian’ macroeconomists have for years been arguing (e.g. here) about the importance of the New Classical Counter-Revolution in economics. ‘Helping’ to change the way macroeconomics is done today — with rational expectations, Euler equations, intertemporal optimization and microfoundations — their main critique of New Classical macroeconomics is that it didn’t incorporate price stickiness into the Real Business Cycles models developed by the New Classicals. So — the...

Joan Robinson and the inadequacies of revealed preference theory We are told nowadays that since utility cannot be measured it is not an operational concept, and that ‘revealed preference’ should be put in its place. Observable market behaviour will show what an individual chooses … It is just not true that market behaviour can reveal preferences. It is not only that the experiment of offering an individual alternative bundles of goods, or changing his...

Paul Romer on Richard Thaler I understand the purely aesthetic appeal of a convincing scientific explanation … The problem is that people can derive aesthetic pleasure from many different types of “explanation.” After all, the problem with the traditional choice model based on conscious utility maximization is not that it is ugly. And, on grounds of mathematical beauty, no economic model can touch a theory of perfect competition grounded in convex duality....