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Are the new national accounts guidelines any good? 5. The (not so) informal economy | Real-World Economics Review Blog
Summary: the formal-informal dichotomy is not fit to distinguish economic activities in a coherent way and has to be replaced by a scheme that shows out how rules guiding and embedding market and non-market transactions are set and enforced The new guidelines state that we have to measure the ´informal economy´. Of course. The informal…
Reality — a virulent virus afflicting mainstream economics | Real-World Economics Review Blog
from Lars Syll An examination of the contributions of famous mainstream economists reveals no clear indication that their work produces rigorous and successful explanations or predictions of real-world phenomena. The situation in physics is markedly different. There, the application of mathematics has often yielded both rigorous and successful explanations and predictions. Of course, the material…
Patent monopolies are a main reason science is broken: Why can’t we talk about them? | Real-World Economics Review Blog
from Dean Baker Earlier this week The New York Times ran a big think piece by The New Atlantis editor Ari Schulman, on whether “science is broken,” and whether NIH director Jay Bhattacharya can fix it. Incredibly, the word “patents” did not appear once. That is incredibly bizarre. The high prices for drugs and other innovations that patent monopolies allow companies to…
Utility theory — explaining everything and nothing | Real-World Economics Review Blog
from Lars Syll The methodological structure of mainstream economics often relies on axioms and theorems that are tautological by design, which severely limits their informational content. A prime example is modern expected utility theory. Its core weakness lies in the minimal constraints placed on individual preferences; this extreme flexibility allows the theory to be reconciled…
Are the new national accounts guidelines any good? 4. Households. | Real-World Economics Review Blog
Recently, new national accounts guidelines have been published. The national accounts distinguish, within states, several sectors: the Government, Non-financial companies, Financial companies, Non-profit institutes Serving Households (from churches and commons to your local amateur soccer club) and Households. Today: What do the new 2025 guidelines state about Households? Do they advise estimating inequality? Do they…
Why the bursting of the AI bubble would be good for the economy | Real-World Economics Review Blog
from Dean Baker It has become common in recent months for people in the business press to note both that AI stocks seem to be in a bubble and that this bubble is driving the economy. In many ways this situation looks similar to the late 1990s tech bubble. At that time, price-to-earnings ratios in…
Econometrics — the hope that never came true | Real-World Economics Review Blog
from Lars Syll In 1958, with the publication of the twenty-fifth volume of Econometrica, Trygve Haavelmo assessed the role of econometrics in advancing economics. While he praised its ‘repair work’ and ‘clearing-up work,’ he also found reason for despair: We have found certain general principles which would seem to make good sense. Essentially, these principles are based on…
Trump is raising unemployment: He wants a new scorekeeper | Real-World Economics Review Blog
from Dean Baker When a football team keeps losing, the cry usually goes out for a new coach, or at least a new quarterback. Alternatively, there is the Trump route: Get a new scorekeeper. That is apparently the story, with Trump reportedly looking to overhaul the Bureau of Labor Statistics (BLS), the statistical agency that…
The Road Not Taken | Real-World Economics Review Blog
from Lars Syll Had the whole discipline catastrophically misunderstoodKeynes’ deeply revolutionary ideas? We heterodox economists, who have chosen the road less travelled, are acutely aware of its costs: fewer opportunities for ample research funding or positions at prestigious institutions. Yet, I suspect few of us truly regret our choice. One does not bargain with one’s…
The many publications of Lisa Cook, economic historian. | Real-World Economics Review Blog
Chris Brunet (male, white), who advertises himself as an ´independent investigative journalist´, did an embarrassingly bad job investigating the number of publications of Lisa Cook (member of the board of the US central bank, female, black). The proverbial ´1 minute on the internet´ would have saved him the embarrassment. Based on distinctly incomplete data, he…
Are the new national accounts guidelines any good? 3 – valuing resource depletion | Real-World Economics Review Blog
part 1, part 2. In 1921, Wesley Clair Mitchell, Wilford Isbell King and Frederick R. Macaulay published the landmark national accounts study Income in the United States: Its Amount and Distribution, 1909-1919. It´s a high-quality publication, but they mention some drawbacks. One of these: The depletion of natural resources is not included as a ´minus´…
What MMT really is about | Real-World Economics Review Blog
from Lars Syll MMT is fundamentally a reaction to the way money is described in mainstream economic theory, where money is seen as something that people save by depositing it in banks, and which banks in turn can lend out by creating credit. Thus, the money creation by banks presupposes that private individuals save. But…
MAGA 2.0: Making China Great Again | Real-World Economics Review Blog
from Dean Baker In Donald Trump’s make-believe world, prices are falling, the economy is booming, he is bringing peace all around the world, and gas costs less than $2.00 a gallon. But here in the real world, inflation is increasing, the economy is stalling, wars are continuing, and gas costs more than $3.00 a gallon. Ordinarily, we…
Are the new 2025 National Account measurement guidelines any good? | Real-World Economics Review Blog
There´s a draft version, published by the United Nations, of new guidelines for the national accounts. I´m going to comment on these in a series of blogs. We´ll start at the very beginning (the picture below) and end at the last page (1.260). At first sight, considering the organisations that publish it, it seems to…
Are the new 2025 national accounts guidelines any good? Part 2. National accounts are political accounts. | Real-World Economics Review Blog
One of the great accomplishments of non-university macroeconomics is the establishment of a coherent and consistent set of macroeconomic accounts. These are based on a published and consistent set of concepts and definitions established by cooperating experts in the field. Many sciences have comparable foundational documents. Psychiatrists and psychologists have their Diagnostic and Statistical Manual…
Keynes — a notable exception | Real-World Economics Review Blog
from Lars Syll The great difficulty in the social sciences (if we may presume to call them so) of applying scientific method, is that we have not yet established an agreed standard for the disproof of an hypothesis. Without the possibility of controlled experiment, we have to rely on interpretation of evidence, and interpretation involves…
Economics education is broken — only a revolution can save it | Real-World Economics Review Blog
from Lars Syll Today, economics education has all but erased courses on the history of economic thought and economic methodology. This is not just an oversight — it is an intellectual crisis. A discipline that fails to reflect on its own foundations, that neglects to question its methods and assumptions, is a discipline in decline.…
Explaining the valuable work of the US Bureau of Labor Statistics | Real-World Economics Review Blog
The US Bureau of Labor Statistics (BLS) recently published data which made the present US economy look lackluster. The graph below shows the month-on-month (not the year-on-year!) change in the number of US jobs. The July data were quite low, while the May and June data were revised downwards. The total number of jobs is,…
Conversations in Real-World Economics | Real-World Economics Review Blog
Conversations in Real-World Economics: A collection of interviews by Jamie Morgan US $9.99 / $22.00 UK DE FR ES IT NL JP BR CA MX AU IN The interviews in this collection were conducted with prominent thinkers, such as Steve Keen, Herman Daly and Jayati Ghosh, with important things to say on areas of economy often…
What if the stock bubble bursts? | Real-World Economics Review Blog
from Dean Baker That’s the positive story for 2025 and 2026, but suppose the AI-driven stock bubble bursts? As many commentators have pointed out, the stock market today is starting to look a lot like it did in the late 1990s bubble, which peaked in March of 2000. It eventually plummeted with the S&P losing close to…
The long term damage of austerity in southern Europe | Real-World Economics Review Blog
Did austerity after the Great Financial Crisis lead to permanent damage? Yes, it did, especially in southern Europe. Labour market series for Spain, Italy and Greece show large negative discontinuities that have lasted to today. Greece. Unemployment in Greece is relatively low at the moment in a historical context. It is also low compared to…
Is poverty in Argentina falling? | Real-World Economics Review Blog
As is well known, Javier Milei, president of Argentina, tries to kick start the economy by slashing rules, government spending and bureaucracy, and to get inflation down. To do this, he is pursuing what he portrays as ´chainsaw´ policies, which, however, are more thoughtful than the ´colossal fail´ of the DOGE policies in the US.…
The “unidimensional” view of development | Real-World Economics Review Blog
from Ted Trainer and RWER issue 111 The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2024 (economists like to refer to this as a straight Nobel Prize – it isn’t) was awarded to Daron Acemoglu, Simon Johnson and James Robinson. According to the press release the prize was awarded for helping…
Debunking mainstream economics | Real-World Economics Review Blog
from Lars Syll An economic theory that does not go beyond proving theorems and conditional ‘if-then’ statements — and does not make assertions and put forward hypotheses about real-world individuals and institutions — is of little consequence for anyone wanting to use theories to better understand, explain or predict real-world phenomena. Building theories and models…
A fork in American history | Real-World Economics Review Blog
In the United States, income inequality rose steadily from the 1980s onward (as shown by the blue line). But, at least on paper, it’s easy to imagine a version of the US in which this experiment didn’t’ happen. For example, the red line imagines a world in which US income inequality remained fixed at the…
In Trump’s competition with China, China is winning | Real-World Economics Review Blog
from Dean Baker Donald Trump doesn’t have much interest in numbers and the real world, but that is where the rest of us live so it is worth checking in periodically. Trump and many others — including many Democrats — are anxious to see the United States as engaged in a Cold War-type competition with China. I have…
Well said Ha-Joon Chang! | Real-World Economics Review Blog
from Peter Radford I shouldn’t. But I will Well, well. Is there life in economics yet? Not so fast. My own journey into the swamp of economics began in the late 1980s when, out of the blue, my boss at the bank decided that because I had attended LSE I ought to be conversant with…
Credit, capital, and the engine of war: | Real-World Economics Review Blog
from Asad Zaman and WEA Pedagogy Blog Money Transformed in Early Modern Britain A Guided Reading of Glyn Davies’ A History of Money, Part 3 For millennia, money was anchored in the tangible: silver, gold, cattle, grain. It served religious rituals, enabled imperial taxation, and, above all, funded the machinery of war. But with the arrival of the Industrial…
The possibility of the impossibility of economics | Real-World Economics Review Blog
from Lars Syll Economic models are not expected to be even approximately true, and Hausman’s idea that even the ceteris paribus laws in economics are vague as to what exactly has to be equal makes it clear that economic laws must be abstract rather than idealized. This leads us to the question: What are the…
DeLong steps in it | Real-World Economics Review Blog
from Peter Radford This is second stab at a question that vexes me … I have been reading too many historians lately. So when I read the usually very smart Brad DeLong say something that seems straight from Hayek I get a greater jolt than I used to. And that’s saying something. This is what…
“Crypto” is Silicon Valley speak for waste, fraud, and abuse | Real-World Economics Review Blog
from Dean Baker The Republicans in Congress, along with many Democrats, are rushing ahead with legislation to promote crypto currencies in various ways. Their motivation is not hard to understand; they got hundreds of millions of dollars in campaign contributions from the industry. In terms of economic policy, the effort to promote crypto is taking the country…
Prodding Krugman | Real-World Economics Review Blog
from Peter Radford Paul Krugman has been on a mission lately. He has been writing extensively about inequality in America. As we all know it’s an ugly picture, and as we would all expect Krugman has dug out endless statistics to demonstrate just how ugly. From my perspective inequality is the most salient economic fact…
Science, politics, and ideology in economics | Real-World Economics Review Blog
from Lars Syll During my whole career, I have considered myself somewhat of a schizophrenic, which might be a universal characteristic. On the one hand, I was interested in science qua science, and I have tried — successfully I hope — not to let my ideological viewpoints contaminate my scientific work. On the other, I felt deeply…
The Strain is too much | Real-World Economics Review Blog
from Peter Radford Picking up where I left off … And, just for fun … We need more billionaires! No. Really. That’s the message delivered by Michael Strain last week in the Financial Times. After all, where would be without them? Strain is, as we all know, associated with the American Enterprise Institute, and is…
Mainstream economics — kick it over! | Real-World Economics Review Blog
from Lars Syll The more I learned about economics, the more I discovered a landscape that is surpassingly strange. Like the land of Mordor, it is dominated by a single theoretical edifice that arose like a volcano early in the 20th century and still dominates the landscape. The edifice is based upon a conception of…
GOP spending bill: how many people have to die? | Real-World Economics Review Blog
from Dean Baker That’s the question Republicans in Congress are debating as they struggle to put Donald Trump’s “Big Beautiful Bill (BBB)” in final form to pass and send to his desk in the next few days. The essence of the bill should be well known at this point. It extends Trump’s 2017 tax cuts…
How capitalism shapes our world—And how we can reshape it | Real-World Economics Review Blog
from Asad Zaman Prologue: The North Star Is it truly necessary for billions to live in poverty while a few enjoy unimaginable wealth? Could the world be different—and could we help make it so? Utopians dream of a better world but lack a route map. Pragmatists move with precision but forget to ask where they’re…
Econometrics — a severe case of mock empiricism | Real-World Economics Review Blog
from Lars Syll According to Guy Routh, econometrics is nothing but “mock empiricism, with statistics subjected to econometric torture until they admit to effects of which they are innocent.” Similarly, Mark Blaug in his The Methodology of Economics argued that econometric testing is like “playing tennis with the net down.” Although these are rather harsh judgments, I…
The world is facing a looming crisis of inequality | Real-World Economics Review Blog
Dear World Leaders, There is a crisis in multilateral cooperation and in the financing of global public goods and development aid — one that is compounding the already worsening challenges of poverty, ill health, illiteracy, and environmental breakdown. From surging droughts and floods to raging fires, the evidence of our planetary emergency is clear. Unfortunately,…