Tag Archives: Economics

What went wrong with economics To be ‘analytical’ is something most people find recommendable. The word ‘analytical’ has a positive connotation. Scientists think deeper than most other people because they use ‘analytical’ methods. In dictionaries, ‘analysis’ is usually defined as having to do with “breaking something down.” But that’s not the whole picture. As used in science, analysis usually means something more specific. It means to separate a problem...

In his history of experimental social science — Randomistas: How radical researchers are changing our world (Yale University Press, 2018) — Andrew Leigh gives an introduction to the RCT (randomized controlled trial) method for conducting experiments in medicine, psychology, development economics, and policy evaluation. Although it mentions there are critiques that can be waged against it, the author does not let that shadow his overwhelmingly enthusiastic view on RCT. Among...

The Coase theorem and the legitimacy of property rights From the perspective of the Coase theorem, it becomes ‘natural’ to consider the task of legislators as mainly deciding for which part externality rights have the greatest value and then distribute the rights accordingly. Sounds ‘natural’ to mainstream economists, but maybe one should think twice … There are very good reasons for not making a god of efficiency … Keeping old people in old people’s homes...

‘New Keynesianism’ — the art of making relevance irrelevant There really is something about the way macroeconomists construct their models nowadays that obviously doesn’t sit right. Empirical evidence still only plays a minor role in mainstream economic theory, where models largely function as a substitute for empirical evidence. One might have hoped that humbled by the manifest failure of its theoretical pretences during the latest economic-financial...

Chicago economics — garbage in, gospel out Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both. This form of “crowding out” is just accounting, and doesn’t rest on any perceptions or behavioral assumptions. John...

Sweden would have been poorer with the euro new study shows Sveriges ekonomiska utveckling har varit starkare tack vare att landet avstått från att införa euron. Sammantaget under perioden 2003–17 har tillväxten i ekonomisk aktivitet varit mellan en och en halv till tre gånger högre än om Sverige infört euron … Empirin och teorin talar för att Sverige har gynnats av att stå utanför valutasamarbetet och att landet har goda skäl att invänta såväl det...

Some limitations of the experimental approach Without question, the experimental approach has produced genuine insights … All the same, there are serious limitations to a strategy centered on experimental design: 1. Good experimental design results in internal validity, where measurements actually measure the things they’re supposed to and confounding influences are suppressed. External validity, the extent to which results can be generalized to a wider...

Mandatory econ textbook supplement

Guest post by Jeff Mosenkis of Innovations for Poverty Action. A few years ago, Liberia, whose educational system has been troubled to say the least, tried an experiment. In the face of under-resourced and underperforming public schools, they wondered if private education providers could run public schools better than the government was? The country announced that it was going to outsource the whole country’s schools to one American company, but after public outcry the plan was scaled back...

 [embedded content]