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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,…
Unchecked concentration of wealth is eroding US democracy | Real-World Economics Review Blog
As the world watches Donald Trump and Elon Musk publicly fight over the sweeping legislation moving through Congress, we should not let the drama distract us. There is something deeper afoot: unprecedented wealth concentration – and the unbridled power that comes with such wealth – has distorted our democracy and is driving societal and economic tensions. Musk, the…
Behavioural economics — devoted to ideas it is supposedly attacking | Real-World Economics Review Blog
from Lars Syll Behavioral economics is still ‘in a relationship’ with orthodox economics and, in a relationship, one makes compromises … We all know how stubborn the other side in this relationship is: standard economics will always ‘rationalize’ behavior wherever it can and will only recognize ‘irrationality’ when there is clear and convincing evidence of…
China now projected to grow three times as fast as the United States | Real-World Economics Review Blog
from Dean Baker The World Bank came out with its updated projections for economic growth for 2025. They showed slower growth for pretty much the whole world. The main factor in the slowing is the tariffs that the Trump administration has imposed on most of our trading partners, as well as their retaliation. Perhaps not surprisingly, the…
Madmen in authority | Real-World Economics Review Blog
from Lars Syll The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct…
How monetary myths conceal power | Real-World Economics Review Blog
from Assad Zaman Modern economics rests on a dangerous illusion: that abstract, universal laws—derived primarily from the European experience—can be applied across all societies, times, and contexts. This false assumption has allowed economists to present their theories as objective and value-neutral, masking the deeply political and historical foundations of economic life. In an earlier post Reclaiming…
The problem with equilibrium models | Real-World Economics Review Blog
from Lars Syll Economic theory is built on equilibrium assumptions. Perhaps this term once connoted the rest point of a dynamic process. But in modern parlance, an equilibrium assumption posits a relation between the beliefs and behavior of different agents without explicitly describing a process which causes this relation to hold. Competitive equilibrium assumes prices…
So-called reforms reinforced underdevelopment | Real-World Economics Review Blog
from Fidel Aroche Reyes and RWER #110 During the 20th century, many poorer countries adopted economic strategies for development. Europe experienced a rise in living standards; more recently, several Asian nations, such as China, Taiwan, and South Korea, have successfully overcome underdevelopment through focused economic policies, while most other Asian countries have made significant strides…
Big guns on trade: Ricardo via Malkiel | Real-World Economics Review Blog
from Peter Radford Wheeling out the big guns at last! It’s taken a while, but we’ve arrived. At long last we have an article in the Financial Times — our bastion of global financial goings-on — that explains David Ricardo to those who need to know. Better late than never. Even better: the article is…
Neoliberal economics — fiction based on absurd assumptions | Real-World Economics Review Blog
from Lars Syll ‘Rigorous’ and ‘precise’ economic models cannot be considered anything else than unsubstantiated conjectures as long as they aren’t supported by evidence from outside the theory or model. To my knowledge, no in any way decisive empirical evidence has been presented. No matter how precise and rigorous the analysis, and no matter how…
new issue of RWER | Real-World Economics Review Blog
real-world economics review issue no. 110, May 2025 download whole issue The 2024 Nobel Prize for Economics: an example of how conventional economics misrepresents realityTed Trainer 2 Why only innovations based on degrowth principles can stopfurther ecological and social destructionFelix van Hoften and Rob van der Rijt 10 Neoclassical economics drives…
China adds more than $400 billion to GDP in Q1, Trump loses $25 billion | Real-World Economics Review Blog
from Dean Baker Donald Trump is not very good with arithmetic, but that is not a reason the rest of us should not use it. The US economy shrank at 0.3 percent annual rate in the first quarter. This figure needs the usual caveats. This is preliminary data that may be revised substantially in the next two…
The sorry state of economics | Real-World Economics Review Blog
from Lars Syll Page after page of professional economic journals are filled with mathematical formulas leading the reader from sets of more or less plausible but entirely arbitrary assumptions to precisely stated but irrelevant theoretical conclusions … Year after year economic theorists continue to produce scores of mathematical models and to explore in great detail…
What Keynes meant by ‘We simply do not know’ | Real-World Economics Review Blog
from Lars Syll With the words ‘We simply do not know,’ Keynes describes in his General Theory what he calls ‘objective uncertainty.’ There is simply no way in which one can foresee certain events or developments because they are objectively unknown. The past does not predict the future. This constitutes a fundamental break with the dominant neoclassical…
A, belated, response to Wolf | Real-World Economics Review Blog
from Peter Radford It is a question of distribution. A friend of mine, here in Vermont, has disrupted my enjoyment of a pleasant spring morning by reminding me of what Martin Wolf says about populism. Specifically he referred me to pages 180-181 of the Wolf book “The Crisis of Democratic Capitalism”. I wish he…
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…