Tag Archives: Economics

This paper examines the relationship between inequality and growth in the neo-Kaleckian and Cambridge growth models. The paper explores the channels whereby functional and personal income distribution impact growth. The growth – inequality relationship can be negative or positive, depending on the economy’s characteristics. Contrary to widespread claims, inequality per se does not impact growth [...]

The real tail wagging Keynes’s intellectual revolution was to shift economists from thinking normally in terms of a model of reality in which a dog called savings wagged his tail labelled investment to thinking in terms of a model in which a dog called investment wagged his tail labelled savings James Meade

From the times of Galileo and Newton, physicists have learned not to confuse what is happening in the model with what instead is happening in reality. Physical models are compared with observations to prove if they are able to provide precise explanations … Can one argue that the use of mathematics in neoclassical economics serves similar purposes? … Gillies‘s conclusion is that, while in physics mathematics was used to obtain precise explanations and successful predictions, one cannot...

Robert Lucas’s forecasting disaster In Milton Friedman’s infamous essay The Methodology of Positive Economics (1953) it was argued that the realism or ‘truth of a theory’s assumptions isn’t important. The only thing that really matters is how good are the predictions made by the theory. Please feel free to apply that science norm to the following statement by Robert Lucas in Wall Street Journal, September 19, 2007: I am skeptical about the argument that the subprime mortgage problem will...

The construction of theoretical models is our way to bring order to the way we think about the world, but the process necessarily involves ignoring some evidence or alternative theories – setting them aside. That can be hard to do – facts are facts – and sometimes my unconscious mind carries out the abstraction for me: I simply fail to see some of the data or some alternative theory. Robert Lucas And that guy even got a ‘Nobel prize’ in economics …

Economists — math-heavy astrologers Ultimately, the problem isn’t with worshipping models of the stars, but rather with uncritical worship of the language used to model them, and nowhere is this more prevalent than in economics. The economist Paul Romer at New York University has recently begun calling attention to an issue he dubs ‘mathiness’ – first in the paper ‘Mathiness in the Theory of Economic Growth’ (2015) and then in a series of blog posts. Romer believes that macroeconomics,...

Reinhard Sippel’s modern classic The experiment reported here was designed to reflect the fact that revealed preference theory is concerned with hypothetical choices rather than actual choices over time. In contrast to earlier experimental studies, the possibility that the different choices are made under different preference patterns can almost be ruled out. We find a considerable number of violations of the revealed preference axioms, which contradicts the neoclassical theory of the...

Why monetarism — and ‘New Keynesianism’ — failed Paul Krugman has a post up today on why monetarism has more or less disappeared from economics nowadays. Milton Friedman’s project was, according to Krugman, doomed to failure. The key point for this argument is the following: On the intellectual side, the “neoclassical synthesis” — of which Friedman-style monetarism was essentially part, despite his occasional efforts to make it seem completely different — was inherently an awkward...

Uncertainty — the crucial question It may be argued … that the betting quotient and credibility are substitutable in the same sense in which two commodities are: less bread but more meat may leave the consumer as well off as before. If this were, then clearly expectation could be reduced to a unidimensional concept … However, the substitutability of consumers’ goods rests upon the tacit assumption that all commodities contain something — called utility — in a greater or less degree;...

Yours truly håller ett föredrag/seminarium onsdagen den 27 april kl. 15.30 i Hedénsalen på ABF-Stockholm (Sveavägen 41). Ämnet som avhandlas är VAD ÄR EN POST-KEYNESIANSK NATIONALEKONOMI? Kom gärna och lyssna och diskutera. Behovet av ökad pluralism inom nationalekonomin diskuteras numera intensivt bland ekonomer och studenter världen över. Så ta chansen att lära känna ett av de viktigare heterodoxa alternativen till den förhärskande neoklassiska teoribildningen inom den moderna...