Weekend read – Economics 999

July 31, 2021 6 comments

from Edward Fullbrook and current issue of RWER

“The world will not be destroyed by those who do evil, but by those who
watch them without doing anything” – Albert Einstein.

Falsification

Science tells us that humankind is now in a state far more perilous than any it has ever known, perhaps ever imagined, and that its cause is the impact that the economy has come to have on planet Earth. Meanwhile the daily news tells us that around the world there is rapid acceleration – at least as rapid as in the 1930s – of tyranny, racism and anti-democracy linked to the economy’s forty-year upward redistribution of wealth and income. 

We also know that the economy that has come to have these colossal negativities has been engineered, steered, and rationalized by the beliefs, policies, and teachings of an economics variously called “neoclassical”, “mainstream”, “orthodox” and “neoliberal”.  But it was never economics’ intention to lead humanity to the cliff’s edge. Quite the opposite: it was expected to lead humans towards better and better lives forever more. But for some time now science has been telling us that the opposite will soon happen, that the economy is now an existential threat to civilization.  In other words, never has a theoretical system been so thoroughly falsified as neoliberal economics. Read more…

The culture of consumerism

July 31, 2021 1 comment

from Neva Goodwin and current issue of RWER

Twentieth-century economics pretended to be a value-free science. Among the values in fact adhered to and promulgated are two that turn out to be especially problematic: the goal of economic growth, and the elevation of consumerism. Growth is a macroeconomic issue, while consumerism plays out on the micro scale of individual motives, choices, and actions. Mediating between these are business enterprises, especially corporations. These are the actors whose interests are served by the promotion of consumerism and the belief that economic growth is good – indeed necessary – for everyone. 

Read more…

#96 – Post-Neoliberal Economics

July 30, 2021 Leave a comment

real-world economics review

issue no. 96 – Post-Neoliberal Economics
download whole issue

The future: Thanks for the memories
Jamie Morgan

2

Of Copernican revolutions – and the suddenly-marginal marginal mind
at the dawn of the Anthropocene

Richard Parker

28

Post-economics: Reconnecting reality and morality to escape the Econocene
Richard B. Norgaard

49

What is economics? A policy discipline for the real world
James K. Galbraith

67

Beyond indifference: An economics for the future
Lukas Bäuerle

82

Growth through contraction: Conceiving an eco-economy
William E. Rees

98

Interrogating the holy grail of productivity growth
Jayati Ghosh

119

Changing role of neoliberalism across the stages of economic development
Richard C. Koo

127

Consumerism and the denial of values in economics
Neva Goodwin

151

Beyond the growth imperative and neoliberal doxa
Max Koch, Jayeon Lindellee and Johanna Alkan Olsson

168

Writing forward Georgescu-Roegen’s critique of Marx
Katharine N. Farrell

184

Three possible new paradigms

     Humanistic economics, a new paradigm for the 21st century
     John Komlos          201

     A future social-ecological economics
     Clive L. Spash & Adrien O.T. Guisan          220

     Oikonomics: towards a new paradigm in economics
     Andri W. Stahel          234

 

Economics 999
Edward Fullbrook

256

Board of Editors, past contributors, submissions, etc.

261

                   Please click here to support this journal and the WEA

My friends — you bow to no one!

July 28, 2021 3 comments

from Lars Syll

Dan-Ellsberg-edward-snowden

Edward Snowden and Daniel Ellsberg.
Bravest of the brave.

The delta variant is scary, but it won’t sink the economy

July 27, 2021 10 comments

from Dean Baker

In recent days, major fear has been evident in financial markets and elsewhere that the delta variant of the coronavirus will spread widely and be a considerable impediment to continued economic growth: On Monday, the Dow tumbled 700 points, for example.

At least based on trends we’ve seen so far, these fears appear to be unfounded.

It is highly unlikely that the delta variant will lead to shutdowns of major sectors of the economy, of the sort we saw last spring and summer. The basic story is that in the states where the variant is causing the most infections and deaths, governors and other public officials are resistant to taking steps to contain the pandemic, especially if they carry an economic cost. So most economic enterprises will continue to do business, if not always at full capacity.

These states may face a public-health crisis but probably not an economic one. Meanwhile, the states where political leaders have been more responsive to public health concerns have far higher vaccination rates, and therefore the delta variant is not likely to pose a major health threat. Businesses therefore will continue to operate at a brisk pace.

We should expect this strong growth to continue (although the 7.6 percent rate is higher than we can expect to be sustained). The increased spread of the pandemic due to delta variant may shave a few tenths of a percentage point off our growth path, but it will not reverse it.

Before looking at the economics more closely, it is worth getting some perspective on the health risk posed by the delta variant, because public health and economics intersect. I am an economist, not an epidemiologist — and much is still subject to debate among the epidemiological experts — but it seems clear that a vaccinated population faces relatively little risk, even from delta.

Read more…

Cherry-picking economic models

July 26, 2021 6 comments

from Lars Syll

cartoon-hand-picking-cherry-24380737How would you react if a renowned physicist, say, ​Richard Feynman, was telling you that sometimes force is proportional to acceleration and at other times it is proportional to acceleration squared?

I guess you would be unimpressed. But actually, what most mainstream economists do amounts to the same strange thing when it comes to theory development and model modification.

In Dani Rodrik’s Economics Rules — just to take one illustrative example –the proliferation of economic models during the last twenty-thirty years is presented as a sign of great diversity and abundance of new ideas:

Rather than a single, specific model, economics encompasses a collection of models … Economics is in fact, a collection of diverse models …The possibilities of social life are too diverse to be squeezed into unique frameworks. But each economic model is like a partial map that illuminates a fragment of the terrain …

Different contexts … require different models … The correct answer to almost any question in economics is: It depends. Different models, each equally respectable, provide different answers.

Read more…

new issue of Economic Thought

July 25, 2021 Leave a comment

Technology: being and belief

July 25, 2021 11 comments

from Peter Radford

E. O. Wilson was here before us when he said:

“We exist in a bizarre combination of Stone Age emotions, medieval beliefs, and god-like technology,”

The development and application of technology has, over the past three hundred years or so, lifted us out of the primordial economic problem.  I define this problem not just in terms of our ability to locate the energy needed to sustain ourselves, but also in terms of providing for ourselves in a relatively secure way.  Safety from predators was as much a problem for our ancestors as was the source of food.  The consistency of safety, food sources, and shelter was never assured.  We live in the shadow of this lack of consistency even today.  It’s almost as if we cannot quite believe our achievement.  We conquered the impress of nature and freed ourselves from the ancient fears that shaped our senses, beliefs, and instincts but have not yet shaped new ones more fitting to our prosperous circumstances.  We are lugging around a set of beliefs that are inappropriate and not at all helpful.  How can we decide what to do next if we are bedeviled by shadows of the past?  

That’s what Wilson is getting at.  And it’s what we often forget when we theorize about human behavior.  We are animals conditioned and evolved in a harsh context.

Read more…

Weekend read – Is human probability intuition actually ‘biased’?

July 23, 2021 6 comments

from Blair Fix

According to behavioral economics, most human decisions are mired in ‘bias’. It muddles our actions from the mundane to the monumental. Human behavior, it seems, is hopelessly subpar.1

Or is it?

You see, the way that behavioral economists define ‘bias’ is rather peculiar. It involves 4 steps:

  1. Start with the model of the rational, utility-maximizing individual — a model known to be false;
  2. Re-falsify this model by showing that it doesn’t explain human behavior;
  3. Keep the model and label the deviant behavior a ‘bias’;
  4. Let the list of ‘biases’ grow.

Jason Collins (an economist himself) thinks this bias-finding enterprise is weird. In his essay ‘Please, Not Another Bias!’, Collins likens the proliferation of ‘biases’ to the accumulation of epicycles in medieval astronomy. Convinced that the Earth was the center of the universe, pre-Copernican astronomers explained the (seemingly) complex motion of the planets by adding ‘epicycles’ to their orbits — endless circles within circles. Similarly, when economists observe behavior that doesn’t fit their model, they add a ‘bias’ to their list. Read more…

The real crises we are facing

July 23, 2021 8 comments

from Lars Syll

The fact that 21 percent of all children in the United States live in poverty—that’s a crisis. The fact that our infrastructure is graded at a D+ is a crisis. The fact that inequality today stands at levels last seen during America’s Gilded Age is a crisis. The fact that the typical American worker has seen virtually no real wage growth since the 1970s is a crisis. The fact that forty-four million Americans are saddled with $1.7 trillion in student loan debt is a crisis. And the fact that we ultimately won’t be able to “afford” anything at all if we end up exacerbating climate change and destroying the life on this planet is perhaps the biggest crisis of them all.

These are real crises. The national deficit is not a crisis.

Can a government go bankrupt?
No. You cannot be indebted to yourself.

Can a central bank go bankrupt? Read more…

While the global super-rich are taking joyrides in space

July 22, 2021 25 comments

from Lars Syll

The World's Billionaires 2021 Timeline: Musk VS Bezos

Instead of putting billions of dollars into space tourism for the chosen few, think of what that money could have done in saving our climate and helping the poor and suffering in the world. One can have nothing but contempt for these super-rich ego-boosting ethical morons. And as if this wasn’t enough, we have a totally uncritical media reporting on the events. What a disgrace!

Patent monopolies, corruption, and the new Alzheimer’s drug

July 21, 2021 1 comment

from Dean Baker

It seems that no one in policy circles believes that people respond to incentives. How else can we explain this lengthy piece in the New York Times on the process by which the Food and Drug Administration (FDA) approved Aduhelm, a drug for treating Alzheimer’s disease.

The piece details how the clinical trials designed to determine its effectiveness were aborted, since it did not appear to be helping patients. Nonetheless, the FDA worked close with Biogen, the drug’s manufacturer, to find evidence that it might be effective in slowing cognitive decline. The FDA ended up approving the drug over the unanimous objection of its advisory panel. (There was one abstention.)

Incredibly, the piece never once mentions the role of government-granted patent monopolies in this outcome. Biogen was very anxious to get the drug approved because it intends to take advantage of this monopoly and charge $56,000 for a year’s treatment. Read more…

To destroy neoclassical economics, aim at its heart

July 20, 2021 31 comments

from Philip George

In 1968 Axel Leijonhufvud in his book Keynesian Economics and the Economics of Keynes argued that what then passed for “Keynesian economics” largely misinterpreted the principal ideas of the “economics of Keynes”. In particular, it attributed recessions to downward wage rigidity, a view which brought it very close to classical economics.

In the more than half-century that has elapsed since then, “Keynesian economics” has not been purged of the polluting elements of neoclassical economics. Instead, neoclassical economics has spawned robust (or retarded, depending on which side of the fence you are) offspring: rational expectations and Real Business Cycle theory. The Great Recession struck a blow at neoclassical and new classical economics but their position in academics looks as impregnable as ever.

The reason, in my opinion, is that most attacks on neoclassical economics have been aimed at the periphery, not the core. The principal targets have been methodology and epistemology. A search on Google Scholar throws up more than 38,000 results for ‘Keynes neoclassical economics methodology’. Even if not all these are principally on the search subject it is safe to say that there have been a few hundred papers critical of the methodology of neoclassical economics. The same goes for the epistemology and ontology of neoclassical economics. A few hundred papers also argue that Keynes did not say that involuntary unemployment arises because of wage rigidity.

But, if I may be permitted an analogy, these attacks amount to holding up garlic to the vampire. Read more…

The drug companies are killing people

July 19, 2021 5 comments

from Dean Baker

I get to say this about the drug companies, now that President Biden has said that Facebook is killing people because it was allowing people to use its system to spread lies about the vaccines. There is actually a better case against the drug companies.

After all, they are using their government-granted patent monopolies, and their control over technical information about the production of vaccines, to limit the supply of vaccines available to the world. As a result, most of the population in the developing world is not yet vaccinated. And, unlike the followers of Donald Trump, people in developing countries are not vaccinated because they can’t get vaccines.

The TRIPS Waiver Charade

The central item in the story about speeding vaccine distribution in the developing world is the proposal put forward at the WTO last October (yes, that would be nine months ago), by India and South Africa, to suspend patents and other intellectual property rules related to vaccines, tests, and treatments for the duration of the pandemic. Since that time, the rich countries have been engaged in a massive filibuster, continually delaying any WTO action on the measure, presumably with the hope that it will become largely irrelevant at some point.

The Biden administration breathed new life into the proposal when it endorsed suspending patent rights, albeit just for vaccines. Read more…

Weekend Read – Econometrics — science based on unwarranted assumptions

July 16, 2021 Leave a comment

from Lars Syll

Machine Learning or Econometrics? | by Dr. Dataman | Analytics Vidhya |  MediumThere is first of all the central question of methodology — the logic of applying the method of multiple correlation to unanalysed economic material, which we know to be non-homogeneous through time. If we are dealing with the action of numerically measurable, independent forces, adequately analysed so that we were dealing with independent atomic factors and between them completely comprehensive, acting with fluctuating relative strength on material constant and homogeneous through time, we might be able to use the method of multiple correlation with some confidence for disentangling the laws of their action … In fact we know that every one of these conditions is far from being satisfied by the economic material under investigation.

Letter from John Maynard Keynes to Royall Tyler (1938)

Mainstream economists often hold the view that criticisms of econometrics are the conclusions of sadly misinformed and misguided people who dislike and do not understand much of it. This is a gross misapprehension. To be careful and cautious is not equivalent to dislike. Read more…

The concept of homeostasis

July 15, 2021 3 comments

from Ken Zimmerman  (originally a comment)

On the one side were those who believed that the existing economic system is in the long run self-adjusting, though with creaks and groans and jerks, and interrupted by time-lags, outside interference and mistakes … These economists did not, of course, believe that the system is automatic or immediately self-adjusting, but they did maintain that it has an inherent tendency towards self-adjustment, if it is not interfered with, and if the action of change and chance is not too rapid.

Those on the other side of the gulf, however, rejected the idea that the existing economic system is, in any significant sense, self-adjusting. They believed that the failure of effective demand to reach the full potentialities of supply, in spite of human psychological demand being immensely far from satisfied for the vast majority of individuals, is due to much more fundamental causes …

This begs the question, what is self-adjusting? Rather than go down that rabbit hole, I prefer to begin with a concept with a long and useful history that thus might benefit economics and economists—homeostasis. Read more…

The failure to start from real, concrete questions and issues in the real world

July 14, 2021 5 comments

from Gerald Holtham  (originally a comment)

The biggest problem, it seems to me, is not the tools that economists use but the failure to start from real, concrete questions and issues in the real world. Someone builds a model of a real situation. It may be useful or not but if it is ingenious it gets published. People then play tunes on the model; they seek to “generalise” it in various ways. We embark on a process of theoretical development for its own sake, increasingly divorced from the original problem and all too often from any real application at all. The usual destination is then sterility.
I have seen mathematical queuing theory fruitfully applied in the study of development aid and mathematical game theory successfully applied in auction design. The secret of success was that the axioms of the model were ad hoc – designed for a real, specific situation that was successfully analysed. Read more…

Is emerging Asia in retreat?

July 13, 2021 Leave a comment

from C. P Chandrasekhar and Jayati Ghosh

International observers still view Asia and particularly East Asia as the most dynamic economic region in the world, a perception that has been even more entrenched over the period of the pandemic. Certainly, if aggregate GDP growth rates in real terms (as shown in Figure 1) are anything to go by, there is no doubt that the region of East Asia has been growing faster than the world as a whole, and has even managed to maintain positive growth in the pandemic year 2020, when most other regions have stumbled or even collapsed. By contrast, South Asia, which earlier showed higher growth rates, was decelerating even before the pandemic and has since shown a worse decline than the world as a whole.

Figure 1: East Asia has performed better than the world economy as a whole 

Read more…

Deductivism — the original sin in mainstream economics

July 11, 2021 40 comments

from Lars Syll

Mathematics, especially through the work of David Hilbert, became increasingly conceived as a practice concerned with formulating systems comprising sets of axioms and their deductive consequences, with these systems in effect taking on a life of their own …

Confusion of sign and object is original sin coeval with the word.The emergence of the axiomatic method removed at a stroke various hitherto insurmountable constraints facing those who would mathematise the discipline of economics … In particular it was no longer regarded as necessary, or even relevant, to economic model construction to consider the nature of social reality …

The result was that in due course deductivism in economics, through morphing into mathematical deductivism on the back of developments within the discipline of mathematics, came to acquire a new lease of life, with practitioners (once more) potentially oblivious to any inconsistency between the ontological presuppositions of adopting a mathematical modelling emphasis and the nature of social reality.

Tony Lawson

To be ‘analytical’ and ‘logical’ is something most people find recommendable. These words have a positive connotation. Scientists think deeper than most other people because they use ‘logical’ and ‘analytical’ methods. In dictionaries, logic is often defined as “reasoning conducted or assessed according to strict principles of validity” and ‘analysis’ as having to do with “breaking something down.” Read more…

Weekend Read – Hockey Stick or Growth Illusion?

July 10, 2021 6 comments

from Asad Zaman

Most economists are committed to Friedman’s methodology which advocates a nominalist philosophy of science. Theories do not aim to discover hidden real structures which explain the observations. Instead, they aim to “save the appearances”: provide a good match to the observations. Although a small minority of voices has advocated a realist methodology – Bhaskar Roy, Peter Manicas, Tony Lawson, and some others – the vast majority remains unconvinced. One important reason for this is the Duhem-Quine thesis. Any given set of core assumptions about hidden reality can be put into conformity with any collection of observations by suitable auxiliary assumptions. Furthermore, the protective belt for core theory can accommodate any incoming stream of contrary observations. Peter Manicas in History and Philosophy of the Social Sciences has argued that the conclusion from this is that we should abandon the quest for certainty, instead of the quest for realism. However, his arguments are unfamiliar and ignored. Although I agree with Manicas, it is not my purpose to argue for realism in this post. Rather, I want to consider more carefully the consequences of the Duhem-Quine thesis – we can find an infinite number of essentially different models to fit any finite collection of data. Read more…