Tag Archives: Economics

On the dynamics of wealth inequality Over the last three decades, Atkinson et al. (2011) find that there has been an increase in the concentration of income in many countries while Wolff (2010) describes a similar though smaller increase in the concentration of wealth in the United States. Motivated by these stylized facts, we develop a model in which infinitely lived households face idiosyncratic investment risk, and we examine the dynamic behavior of the distribution of wealth over time....

The Greek word “empiric” refers to ancient physicians who based their medical advice on experience, not theory. Medieval empirics came to the conclusion that blood-letting caused improvements in health because the health of the patients often improved after the blood was let. But we know now that temporal orderings do not imply causation, even though we give Nobel prizes [Clive Granger] to folks who use temporal orderings to infer causation. Just to make sure, we call it a fallacy and...

Probability and economics (wonkish) Modern neoclassical economics relies to a large degree on the notion of probability. To at all be amenable to applied economic analysis, economic observations allegedly have to be conceived as random events that are analyzable within a probabilistic framework. But is it really necessary to model the economic system as a system where randomness can only be analyzed and understood when based on an a priori notion of probability? When attempting to convince...

Look who’s lecturing who!  [embedded content] A must-see! Rethinking economics student vs. mainstream economics professor: 10–0.

What is wrong with economists’ modelling? Why do I suppose that mathematical deductivist modelling of the sort pursued by economists is a problem in itself? … My answer, simply put, can be expressed in the following three propositions: (i) The sorts of mathematical deductivist methods that economists use are, like all research methods, types of tools. (ii) All tools are appropriate to dealing with but a limited set of tasks, involving a limited set of phenomena, in a limited set of...

While visiting Germany in the summer, I was struck by the prevalence of adverts saying something on the lines of "Sie sparen können". I've never seen a society so obsessed with saving, not in the sense of putting money away (though they do that too) but in the sense of reducing costs. Never mind the quality, look  at the price. "You can save". Always.Penny-pinching is by no means limited to German households. Ever since we collectively decided, on September 16th 2008, that the money had run...

Deductivism — the original sin of ‘modern’ economics For many people, deductive reasoning is the mark of science: induction – in which the argument is derived from the subject matter – is the characteristic method of history or literary criticism. But this is an artificial, exaggerated distinction. Scientific progress … is frequently the result of observation that something does work, which runs far ahead of any understanding of why it works. Not within the economics profession. There,...

Ten years ago (September 2005) I launched my website. To mark this anniversary, here are ten postings that I think got it right. Many of them are included in my book, The Economic Crisis: Notes From The Underground (2012). 1. Keynesianism: what it is and why it still matters (September 18, 2005). My first post. [...]

Modern economics — an assumption-making Nintendo game In advanced economics the question would be: ‘What besides mathematics should be in an economics lecture?’ In physics the familiar spirit is Archimedes the experimenter. But in economics, as in mathematics itself, it is theorem-proving Euclid who paces the halls … Economics … has become a mathematical game. The science has been drained out of economics, replaced by a Nintendo game of assumption-making … Most thoughtful economists think...

Relevance is not irrelevant What is science? One brief definition runs: “A systematic knowledge of the physical or material world.” Most definitions emphasize the two elements in this definition: (1) “systematic knowledge” about (2) the real world. Without pushing this definitional question to its metaphysical limits, I merely want to suggest that if economics is to be a science, it must not only develop analytical tools but must also apply them to a world that is now observable or that...