Tag Archives: Economics

Walked-out Harvard economist Greg Mankiw has more than once tried to defend the 1 % by invoking Adam Smith’s invisible hand: [B]y delivering extraordinary performances in hit films, top stars may do more than entertain millions of moviegoers and make themselves rich in the process. They may also contribute many millions in federal taxes, and other millions in state taxes. And those millions help fund schools, police departments and national defense for the rest of us … [T]he richest 1...

Trickle-down economics — neoliberal mumbo jumbo  [embedded content]

The advocates of free markets in all their versions say that crises are rare events, though they have been happening with increasing frequency as we change the rules to reflect beliefs in perfect markets. I would argue that economists, like doctors, have much to learn from pathology.We see more clearly in these unusual events how the economy really functions. In the aftermath of the Great Depression, a peculiar doctrine came to be accepted, the so-called “neoclassical synthesis.” It...

October’s employment report was strong with regard to both jobs and wages, which is good news. But the report also reveals the contradictions in our economy. Good news for Main Street is interpreted as bad news by Wall Street. The challenge for the Federal Reserve, and the standard by which it will be judged, is [...]

The irony of the program of microfoundations is that, in the name of preserving the importance of individual intentional states and preserving the individual economic agent as the foundation of economics, it fails to provide any intelligible connection between the individual and the aggregate. Instead, it embraces the representative agent, which is as close to an untethered Hegelian World (or Macroeconomic) Spirit as one might fear in the microfoundationist’s worst nightmare. Kevin...

Big Think on Keynes  [embedded content]

In his new book — Why Minsky Matters — L. Randall Wray tries to explain in what way Hyman Minsky’s thoughts offer a radical challenge to mainstream economic theory. Although there were a handful of economists who had warned as early as 2000 about the possibility of a crisis, Minsky’s warnings actually began a half century earlier—with publications in 1957 that set out his vision of financial instability. Over the next forty years, he refined and continually updated the theory. It is not...

The most devastatingly important trade-off in mainstream economics Using formal mathematical modeling mainstream economists sure can guarantee that the conclusion holds given the assumptions. However, the validity we get in abstract model worlds does not warrantly transfer to real world economies. Validity may be good, but it isn’t enough. From a realist perspective both relevance and soundness are sine qua non. In their search for validity, rigour and precision, mainstream macro modellers...

Larry Summers — ‘New Keynesian’ economics needs to be replaced Standard new Keynesian macroeconomics essentially abstracts away from most of what is important in macroeconomics. To an even greater extent, this is true of the dynamic stochastic general equilibrium (DSGE) models that are the workhorse of central bank staffs and much practically oriented academic work. Why? New Keynesian models imply that stabilization policies cannot affect the average level of output over time and that the...

Empirical macroeconomics — a scientific illusion Theoretical particle physicists wait anxiously to see whether experimentalists will be able to identify the particles their theories postulate. The image of an economic theorist nervously awaiting the result of a decisive econometric test does not ring true. The negligible impact of formal econometric work on the development of economic science is manifest in a number of ways … In the natural sciences, investigators rush to check out the...