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Weekend read – Economics after empire: Rebuilding the discipline on moral foundations | Real-World Economics Review Blog
from Asad Zaman and WEA Pedagogy Blog Section 1: Introduction — Questioning the Grand Narrative According to the standard narrative, Europe’s rise was driven by superior institutions, rational governance, and scientific advancement. Wealth, power, and modernity are seen as the natural outcomes of internal European virtues—innovation, efficiency, and discipline. Implicitly or explicitly, social sciences –…
Garbage Time: running out the clock on America? | Real-World Economics Review Blog
from Peter Radford “Do you not weep? Other sins only speak, murder shrieks out” Webster is well known for the darkness of his plays. When he says murder shrieks out, I wonder which murder he is referring to. Or, perhaps, what is being murdered? These are dark days for freedom and democratic governance. Yes. I…
Economics textbooks — peddling lies about money and finance | Real-World Economics Review Blog
from Lars Syll For several years now, yours truly has been teaching an introductory economics course every fall for future social studies teachers. Alongside a few of my own books, Klas Eklund’s Vår ekonomi (Our Economy) is also on the reading list. The book was released in its 16th revised edition in December 2024—an impressive feat and…
The deep roots of fascist thought | Real-World Economics Review Blog
from Blair Fix For decades, the word ‘fascist’ existed solely as a hyperbole — a term meant to insult rather than describe. But lately, politics have grown so hyperbolic that the label looks increasingly sincere. For example, when a powerful man advocates far-right politics and brazenly performs Nazi salutes in front of a cheering crowd, it…
Rational expectations, uncertainty, and learning | Real-World Economics Review Blog
from Lars Syll The rational expectations hypothesis presupposes — basically for reasons of consistency — that agents have complete knowledge of all of the relevant probability distribution functions. When trying to incorporate learning in these models — trying to take the heat of some of the criticism launched against it up to date — it…
American plutocracy | Real-World Economics Review Blog
Now to American plutocracy. As the bottom panel in Figure 3 illustrates, the fall and rise of Republican fortunes mirrors another important U-turn: the fall and rise of US income inequality, measured here in terms of the top 1% share of income. Figure 3: In postwar American, the fall and rise of the Republican party mirrors the…
The economic fallout of European rearmament | Real-World Economics Review Blog
from C. P. Chandrasekhar With US President Donald Trump leaning towards Russia when advocating a stop to the war in Ukraine and making clear that the US will no longer foot the bill to ensure Europe’s security, talk of “Russian expansionism” in Europe has become louder. This has fuelled calls for Europe to rearm itself. However, there…
Ignoring patent monopolies: free trade retaliation against Trump | Real-World Economics Review Blog
from Dean Baker Most forms of retaliation that countries are planning in response to Donald Trump’s tariff-fest involved higher tariffs and import restrictions. These measures may hurt the US economy, but they will also hurt the country imposing them. The logic is that the measures will be crafted so that the pain in the US…
Who’s afraid of Trump’s tariffs? | Real-World Economics Review Blog
from C. P. Chandrasekhar and Jayati Ghosh The weaponization of tariffs by US President Donald Trump has clearly generated fear and loathing across the world. These threats are not only purely performative; nor are they just transactional in nature. The logic of these tariff threats in most cases is questionable at best, and the declared…
Patents and the Abundance Agenda | Real-World Economics Review Blog
from Dean Baker I haven’t read Ezra Klein and Derek Thompson’s new book Abundance, but everyone I know seems to be talking about it. Therefore, I thought I would throw in my two cents, not on the book for obvious reasons, but on what a serious Abundance Agenda (AA) should look like. Specifically, I want to…
Trump — uncertainty and chaos | Real-World Economics Review Blog
from Lars Syll Uncertainty and chaos are the final factors in Trump’s operation. The winners, broadly, will be financial speculators with fast fingers and (especially) inside knowledge. Those in position to move quickly in and out of stocks, bonds and real estate—and perhaps even in and out of the dollar from a base in crypto—could be the…
Trump 2.0: An inflection point for global capitalism? | Real-World Economics Review Blog
from C. P. Chandrasekhar If the first month of Donald Trump’s second stint as President of the United States is indicative, then it appears that global capitalism with the US as hegemon is in the process of an endogenously triggered process of restructuring. Among the many early signals from the Trump administration to switch US…
The pretence-of-knowledge syndrome | Real-World Economics Review Blog
from Lars Syll What does concern me about my discipline, however, is that its current core — by which I mainly mean the so-called dynamic stochastic general equilibrium approach — has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with…
The Trump dream of balanced trade | Real-World Economics Review Blog
from Dean Baker Donald Trump constantly complains about our trade deficit, promising us the good life of balanced trade. I’m not sure exactly how he sees ending our trade deficit as the key to prosperity, but let’s play the game. What does the world look like if Trump, through his tariffs, threats, and promises, gets…
American Monarchy | Real-World Economics Review Blog
from Peter Radford Let’s get to the heart of the situation: the American government is not functioning as a liberal democracy. That much is clear. There is no oversight, no communication, and no process. It is all diktat and tyranny. It is neither liberal in that it now supports tyrants around the world. Nor democratic…
The pretence-of-knowledge syndrome | Real-World Economics Review Blog
from Lars Syll What does concern me about my discipline, however, is that its current core — by which I mainly mean the so-called dynamic stochastic general equilibrium approach — has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with…
Crypto and Donald Trump’s strategic baseball card reserve | Real-World Economics Review Blog
from Dean Baker The Republicans and Donald Trump seem set on establishing a strategic crypto reserve. They are claiming this will somehow be an important source of economic security for the country. It’s clear that establishing the reserve will be an important way to give tens of billions of dollars to Donald Trump’s campaign contributors,…
How economists forgot the real world | Real-World Economics Review Blog
from Lars Syll The book’s argument is that in straining to peer through the chaos and confusion of the world to the underlying mechanisms, too much economic thinking, both in Ricardo’s day and ours, mistook a small, unrepresentative sample as the whole picture. This has distorted the vision of generations. If your scientific ideal is…
My Father’s Disgust | Real-World Economics Review Blog
from Peter Radford I am in a grim and introspective mood this morning. I have been reflecting on how my father might react to where we are. He was one of those who fought against fascism. His life was shortened by being wounded during that fight. As a result, I never knew him as…
The elites’ big lie on inequality | Real-World Economics Review Blog
from Dean Baker (I saw that Jeff Bezos wants the Washington Post’s editorial page to run pieces touting the merits of free markets. Here’s my submission.) There are not many issues on which there is largely bipartisan agreement, so the story we tell about the origin of economic inequality stands out. Both sides agree that…
Best advice to an aspiring economist — don’t be an economist! | Real-World Economics Review Blog
from Lars Syll A science that fails to reflect on its own history and neglects critical methodological and theoretical questions about its practice is a science in crisis. As early as 1991, a commission led by Anne Krueger—featuring esteemed economists such as Kenneth Arrow, Edward Leamer, and Joseph Stiglitz—highlighted a fundamental weakness in graduate economics…
Newton’s lost revolution: Why his most radical work remains unread | Real-World Economics Review Blog
from Asad Zaman The Puzzle of Newton’s Mind Isaac Newton is often celebrated as the ultimate rationalist, the scientist who unlocked the mysteries of the cosmos and ushered in the modern age. But there is a problem with this image—one that is so inconvenient that it has been quietly brushed aside. Newton, the father of…
Businesses and DEI: Corporations don’t maximize shareholder value | Real-World Economics Review Blog
from Dean Baker CEOs and other top management in the U.S. are far more highly paid than their counterparts in Europe and Asia. NYT columnist Jeff Sommer had an entertaining piece on how many of the business leaders who eagerly embraced DEI a few years back are now being very quick to abandon it. This is not…
Weekend read – An ignorance of merit … I am confused | Real-World Economics Review Blog
from Peter Radford Yes, I am confused. At least I admit it. There’s a lot going on, and someone like me often wallows in the activity as a way of understanding. I like to see the systemic rather than the particular. I am very bad, I admit, at details. I gravitate to the long term. …
Here we are | Real-World Economics Review Blog
from Peter Radford Random thoughts on day one of America’s war on the world. This is my way of summarizing, it is not definitive by any means! I wrote in haste. Here’s a quote to get us started: “What made fascism attractive in Europe and elsewhere was its combination of national autarkic aims, militarism, statism,…
What is wrong with game theory | Real-World Economics Review Blog
from Lars Syll Back in 1991, when yours truly earned his first PhD with a dissertation on decision making and rationality in social choice theory and game theory, I concluded that “repeatedly it seems as though mathematical tractability and elegance — rather than realism and relevance — have been the most applied guidelines for the…
Real corruption that could meet republican cost-saving targets | Real-World Economics Review Blog
from Dean Baker The news has been filled with stories in recent days about Republicans desperately hunting for $2.0-$2.5 trillion (2-3 percent of the budget) in budget cuts over the next decade to cover the cost of extending tax cuts to the rich. While Elon Musk and his DOGE team have been screaming about corruption…
The Greek myth that helps explain the failings of modern economics | Real-World Economics Review Blog
from Nat Dyer Readers of this blog will be well aware of the myriad problems with the mainstream economics that has dominated university and political life for the past few decades. As Lars Syll wrote here last month, too much of the profession "has since long given up on the real world" and is happy to…
Weekend read: Keynes’ critique of econometrics is still valid | Real-World Economics Review Blog
from Lars Syll Mainstream economists often hold the view that Keynes’ criticism of econometrics resulted from a sadly misinformed and misguided person who disliked and did not understand much of it. This is, however, nothing but a gross misapprehension. To be careful and cautious is not the same as to dislike. Keynes did not misunderstand…
The incredible cost of Bitcoin. | Real-World Economics Review Blog
Source AI is not what it is supposed to be. Inspired by my son, who attends higher education, I asked chat-GPT to write an article about the energy use of bitcoin in the style of my blog post series ´The real costs of making money´. Look here. Guess what: chat-GPT did not emulate my style…
Donald Trump is badly nonfused # 67,218: The story of supply and demand | Real-World Economics Review Blog
from Dean Baker Donald Trump is the world’s leading expert in getting things wrong and one thing he gets wrong bigly is the value of the U.S. domestic market. Trump seems to believe that our domestic market is incredibly valuable to the rest of the world and that access to it should allow him to…
In praise of government consumption | Real-World Economics Review Blog
DOGE, a new branch of the US government, does not escape the Iron Law of Bureaucracy. It is hiring. It´s also wrecking the US by trying to neuter almost everybody else working for the civil branch of the US Federal government. It reminiscent of the demise of the USSR in 1991. The USSR consisted of…
Donald Trump and the end of U.S. hegemony | Real-World Economics Review Blog
from Dean Baker One outcome of the Donald Trump clown show is that we can safely say the period of U.S. hegemony in the world has come to an end. His erratic policies and bizarre statements have undoubtedly convinced almost everyone that the United States cannot be viewed as a reliable ally, if not actually…
How evidence is treated in mainstream macroeconomics | Real-World Economics Review Blog
from Lars Syll ‘New Keynesian’ macroeconomist Simon Wren-Lewis has a post on his blog discussing how evidence is treated in modern macroeconomics (emphasis added): It is hard to get academic macroeconomists trained since the 1980s to address this question, because they have been taught that these models and techniques are fatally flawed because of the Lucas critique…
Building humane alternatives to homo economicus | Real-World Economics Review Blog
from Asad Zaman Introduction: As discussed in the post on Self-Knowledge: The Key to Understanding Society, the homo economicus model, central to modern economic theory, is deeply flawed. It assumes humans are purely self-interested, rational agents driven by wealth and pleasure, ignoring the profound influence of social relationships, emotions, and moral values. This collection of articles…
Social sciences — a plaidoyer | Real-World Economics Review Blog
from Lars Syll One of the most important tasks of social sciences is to explain the events, processes, and structures that take place and act in society. However, the researcher cannot stop at this. As a consequence of the relations and connections that the researcher finds, a will and demand arise for critical reflection on…
It wasn’t just flawed forecasts, dishonesty has also hurt economists | Real-World Economics Review Blog
from Dean Baker Ben Casselman has an interesting piece in the New York Times about how economists have lost standing with both politicians and the public at large. While he attributes the profession’s problem to flawed forecasts and arcane language, I would argue the problems go much deeper. There has been a major lack of honesty in…
Understanding society via self-discovery | Real-World Economics Review Blog
Asad Zaman If “to know yourself is the beginning of wisdom,” then modern economics might well be the pinnacle of folly. Its foundational assumption—that human beings behave like homo economicus, selfishly pursuing wealth and pleasure—has been repeatedly disproven by empirical evidence. Worse, it would be unwise for real people to act in this way. The self-centered pursuit of…
The greater stagnation. Some stylized facts. | Real-World Economics Review Blog
For about 150 years, productivity, ideally defined as output per hour worked or, less precise, as output per employed person or job, increased. And increased. And increased. Wars? Plagues? Winters of discontent? Productivity either kept increasing or rebounded almost overnight. Not anymore. At least, not anymore in quite some countries. Italy was the first. But…
Welcome to 2025 | Real-World Economics Review Blog
from Peter Radford Welcome to 2025. The first year of Trump 2.0. It promises to be fun — as long as by “fun” we mean chaotic or unpredictable. The dilemma is clear from the torrent of material flooding our various commentariat avenues. Take Janan Ganesh in Thursday’s Financial Times. He has written one of his…